Monday, September 17, 2012

Gold hoarder dies alone - RIP Walter Samasko Jr.

Dead Nevada man's home filled with gold

CARSON CITY, Nev., Sept. 16 (UPI) -- A Nevada recluse left behind a stunning treasure when he died this spring -- officials say they discovered $7 million in gold bars and coins in his home.

Walter Samasko Jr. died in his Carson City home in May. His body wasn't found until June after his neighbors complained of the odor emanating from the house. That's when the gold was found stored in his house and garage, the Las Vegas Sun reported Sunday.

Carson City Clerk Alan Glover used a wheelbarrow to schlep the gold, which included coins from Mexico, England, Austria and South Africa dating to 1872, to his truck for the trip to a safe location.

The newspaper said Samasko hadn't worked since 1968 and was living off his investments, which included stock accounts of $140,000 and $25,000.

"Nobody had any clue he was hoarding the gold," Glover said.

Samasko, whose age wasn't reported, had no will and did not appear to have any close relatives, though a first cousin, substitute teacher Arlene Magdanz, was tracked down in San Rafael, Calif.

"Oh, my God. Oh, my God," she told a lawyer who was the first to give her the word about the treasure.

Gold worth millions found in Carson City man's house after he died

CARSON CITY — Walter Samasko Jr., a recluse, died at home in May, but his body wasn’t discovered until June, when neighbors complained of the smell coming from his house. There was only $200 in his bank account. But there was a $7 million surprise at home.

As the house was being cleaned for sale, officials discovered gold bars and gold coins stored in boxes in the garage and in the house. There were so many coins that Carson City Clerk Alan Glover used a wheelbarrow to haul the gold to his truck and deposit it for safekeeping.


"Nobody had any clue he was hoarding the gold"

Zenscreamer wrote, "Well, maybe his coin dealer did..... ;-)"

This reminded me of a great coin dealer story:

Very thank you – The Story of Mr. Chang's Gold

The following is an excerpt from a 2002 speech given by coin shop owner, Burton S. Blumert, titled "The King Doesn’t Like Gold, Never Has, Never Will – Unlike Mr. Chang".

The last small rally that gold enjoyed carried it to $306 per ounce (it has since fallen back to $290). One of the reasons given for the run-up was that new money was pouring into gold from Japan and China.

We don’t get much reliable information about those markets but I’ve experienced very strong inclination among Asians towards gold.

Which reminds me of my favorite Chinese customer, Mr. Chang.

I don’t remember when he first became a customer but it had to be a decade before 1974. He barely spoke English, and I’m not even sure he was legally in the US. He worked in food service at United Airlines, and his wardrobe was Shanghai c.1930.

We didn’t have much in common. His English was primitive and my Chinese non-existent.

The only thing we shared was his interest in gold and my desire to sell it to him. In those days we were prohibited from selling anything that could be considered a bullion coin. That didn’t matter to Mr. Chang.

There was only one coin he would buy and that was the US $20 Liberty Head coin. He was familiar with it from China and to him the Liberty $20 gold coin was gold and gold was the Liberty $20 gold coin. Any other gold item might as well be counterfeit.

Through the years I saw him almost monthly. He brought his paycheck, would negotiate price, and then decide how many coins he wanted. (The $20 Liberty cost about $50 each.) I would give him change against his check.

Originally, I was amused that he came with his own balance scale. It was made of bamboo with a plate at one end and a weighted rock at the other. It was designed to balance the $20 Liberty. If a coin failed, it was either shaved or counterfeit.

After about a decade I became annoyed with his scale. "Mr. Chang, when in heaven’s name will you trust me and not need a scale?"

He considered the scale just part of doing business, but he got my message and was embarrassed. Although his scale was present for the next purchase, I never saw it again after that.

In those days it wasn’t easy getting information about the gold price. There was no US market and the London AM and PM fixings were sometimes available on the radio but it often required seeking the financial pages of the Wall Street Journal to learn the value of an ounce of gold.

Mr. Chang followed the price very closely. He would call almost daily, and ask, "Wuddah prica London gol?"

Upon getting the information he would respond: "Very thank you," and that was that. There was never any doubt about it. It was Mr. Chang on the phone.

Then we didn’t hear from Mr. Chang for months.

"Has anyone heard from Mr. Chang", I asked? I was sure he was ill or worse.

Then one day there he was. "Wuddah prica London gol?"

I had answered his call and asked, "Mr Chang, have you been ill? We’ve missed hearing from you."

Dead silence.

How in heaven’s name did I know it was him, he wondered. Gold dealers are amazing, with wondrous perceptions. I guess he believed that every customer said, "Very thank you."

Mr. Chang retired. I don’t know if he had social security checks coming in, but his gold coins provided for his retirement. He came in as regularly as when he was a buyer. Only this time with one or two gold coins to sell. As he came in the front door, I noted he had coins in his hand, wrapped in tissue paper. He pretended he might be buying to keep me honest, but of course I knew that was not the case.

Then we learned from one of his old Chinese cronies that Mr. Chang had passed on. In fact he had gifted several coins to the friend who gave us the sad news. We dearly missed Mr. Chang, although "Very thank you" had become a part of the language in our office.

Some year or two later a young Chinese woman, whom I later learned was Mr. Chang’s grand niece, came in. She was an accountant and evidently had found Mr. Chang’s check stubs with Chinese characters on them breaking down how he had spent each check.

She was convinced there were gold coins some place and wondered if we were actually storing them. It was clear that she was not part of Mr. Chang’s inner circle.

She left rude and angered.

As if rehearsed, my employees looked at me and in unison we all said: "Very thank you."


I first posted this story a few days after Burt Blumert passed away in 2009. Here's the original post.



Max De Niro said...

So, I see there’s been some discussion on the morality of holding gold. In my view, holding wealth in gold is like not voting in a political system. This kind of behaviour is generally disparaged in democracies. However, the way I see it (and that’s the only important way – I can’t use someone else’s eyes), if there is no party which represents my views and they are all equally as bad, then I have no real choice and the vote would be meaningless.

It would be immoral to cast a meaningless vote. If enough people don’t vote, then it indicates some kind of rot in the system. It is a vote against the system, not for or against some individual party. This must be a choice for voters, for it acts as a check against the system becoming unrepresentative – it indicates, without some official voice, newspaper, politician, slogan etc, that there is a problem and it does so empirically and in an unbiased fashion.

If social pressure is used to force people to partake, based on some misguided sense of morality, then the system is allowed to build up dangerous characteristics and become overbearing and dangerous to the people, even.

Similarly, I see gold as a vote against the state of the financial system. It is essential to have a balancing mechanism which keeps the market honest. If people are socially pressured into partaking in the financial markets, then this allows the creation of dangerous asymmetries and enables the implementation of dangerous monetary and fiscal policies.

This is my view of where we are. Why should I be forced to put my savings at risk in a market that I see as falsely elevated by decades of misallocated capital, just because of some idea of community responsibility? Should I fall on my sword for the good of a populous which has created this situation through their own folly and short-sightedness? I’ll just say that I won’t, regardless of the morality; further, I believe that it is important that more do as I do, and that the homogeneity espoused by people such as Coppola is dangerous to society itself, not beneficial, as she believes it to be.

When the time comes, I’ll be all for participating and supporting a healthily organised system. For now, it is sick, and the lack of an effective doctor means that I need to quarantine myself, for the good of everyone.

Max De Niro said...

If it is your view that we should pile into stocks to support the community, then fine, that’s your opinion, and I encourage you to act on it. This is how the human machine moves forward. Different people, with different opinions acting on those opinions.

However, don’t force your opinion on others using subtle and powerful social arguments. Humans are very susceptible to arguments such as these and logical reasoning often goes out the window when faced with such a barrage.

Like religion, I’m happy for you to believe what you want, but don’t try and force my kids to believe it.

If we neuter this important mechanism, human intelligence through diversity, by social pressure – the views of some, powerfully projected onto others, effectively enforcing the subordination of their own views, then we become a dangerously homogenised society.

Analysis of the behaviour of complex systems, in mathematics, shows us that a stable system is a diverse one. We need to have the free ability to act on our ideas, so that we can as a greater human community, safely evolve and develop. Any system which becomes too dominated by certain ideas becomes vulnerable to total collapse. A pressure valve is required.

By manipulating peoples’ opinions through social pressure, you shut off the pressure valve. That makes you far more dangerous to the system than me – the pressure valve.

Anonymous said...

When talking of moral “commandments” I like to quote Ayn Rand (from Atlas):-

“A moral commandment is a contradiction in terms – but if I was to speak your language I would say that the only commandment is “Thou shall think”.
The moral is the chosen not the forced, the understood not the obeyed.
The moral is the rational, and reason knows of no commandments”.

(I hope I got this right because I’m quoting from memory – but you get her gist).

Anonymous said...

@Frances – do you have a view as to how the world economic landscape will look (say) 5-years from now? Business pretty much as usual – or perhaps something very different?

It takes a lot of courage, knowledge and confidence to go out on a limb and make a bold call. What’s yours . . . ?

Max De Niro said...

I think that whilst Rand had some interesting ideas, I think that she was also very warped and twisted by her experience of Communism. She had a fundamental lack of understanding of true human nature, which led to her being quite extreme.

As a result, I think that any mention of her, especially in quotes, tends to drive a wedge into a discussion rather than promote the free exchange of ideas.

Phat Repat said...

Interesting observations on how a minority opinion can influence overall direction. Hmmm...

From the article:
"Once the minority opinion reached 10 percent of the population, the network quickly changes as the minority opinion takes over the original majority opinion..."

Michael H said...

victor, JR,

(response to previous thread about $-oil prices)

It appears to me that, prior to the launch of th Euro, higher $-oil prices were good for the US in the sense that it was 'less bad' for the US to pay higher $-oil prices than it was for the rest of the world.

After the launch of the Euro, the same holds true, as long as oil continues to be traded in dollars. Rising $-oil prices gives an incentive for the ROW to abandon the dollar as the oil pricing mechanism.

Woland said...

Hello Phat:

Very similar (20% - 80%) to the Parteo Principle. BTW,

In a fascinating paper by economist Alan Kirman, "Ants,
rationality and recruitment", based on repeated field
tests (with real ants) the observation of random
"chaotic switching" between identical food sources was
observed. The 80/20 ratio of use prior to the switch
was observed as well. The maths are above my pay grade.

Phat Repat said...

Hello Woland:
Yes, good stuff that PP. And used quite a bit in SW work as well.

And, I never do math in public. ;-)

Anonymous said...

Another selfish saver dies alone. So shall it always be with evil gold hoarders. If he had invested in local businesses, he would have died surrounded by doting grandchildren, unicorns, and puppies.

JR said...

It appears to me that, prior to the launch of th Euro, higher $-oil prices were good for the US in the sense that it was 'less bad' for the US to pay higher $-oil prices than it was for the rest of the world.

Yes, with a range of "dollar pricing". The US printed the $ paper and other countries had to earn it, so as long as oil was priced in dollars, it is cheap to the US (largely irrespective of the $ price). So as long as its a dollar price, its largely cheap dollar oil (from the US's perspective). The currency price does not really matter when the currency it is priced in is the currency you control, regardless of the currency price it is basically always cheap to you as the one who controls the currency.

That is cheap oil to the US - dollar priced oil, " a currency price that allows a country to operate it's economy in a competitive way." The US consumer economy was built on cheap oil (aka oil priced in dollars):

Date: Sat Mar 21 1998 15:59


The world economic need for oil has build our modern financial structure as an upside down pyramid, on oil! Every business, asset, debt, currency and army is "priced in currency terms" that reflect a "full supply of cheap oil"!

But, what is cheap oil? It is defined in two terms, a currency price that allows a country to operate it's economy in a competitive way, and, in another real commodity price that allows producers to value their product as an asset, not subject to the valuations of the world economy, gold.

From this standpoint, one can see the value of managing both oil and gold. For the oil field owner, operating in a "oil consuming" country, there is no value in this form of management! But, from an "oil producing" country, holding world class reserves, a low USD price offeres all the advantages. It produces an ever "dependent" economic system, that, "in real terms of need" "upvalues all inground reserves" with a far higher "future need". That "future need", as expressed in a drive "to maintain current asset values ( dow jones ) " creates the political drive to manage oil prices!


After the launch of the Euro, the same holds true, as long as oil continues to be traded in dollars. Rising $-oil prices gives an incentive for the ROW to abandon the dollar as the oil pricing mechanism.

Yes, but a falling price kills the system. Checkmate.

FOA (6/4/2000; 21:26:34MT - msg#25)
The Trail is getting Hot!


The Fed cannot raise rates high enough or restrict reserve creation enough to slow the US economy without cascading our financial markets.

Michael H said...


"Yes, but a falling price kills the system. Checkmate."

So now the question is: how high $-oil price will the ROW tolerate? Would they be set off by a price level, a rate of increase, or a rate of acceleration? (i.e. 'position', 'velocity', or 'acceleration' of the price, to make a physical analogy)

Maybe none of that really matters, but only the relationship between oil and gold prices.

Chris Cook has predicted a speculator-driven oil price crash; I wonder if such a scenario would be allowed to play out, and if it did, how that would affect the oil pricing mechanism. Perhaps such a crash would be short-lived enough to not matter for the bigger picture.

Indenture said...

Keiser Report: Collateral Transformation

This reminds me of Dr. Frankenstein's Laboratory and on the table instead of a conglomeration of human body parts there are worthless Securities being stitched together just so the Doctor can proclaim, "It's Alive!"

Michael H said...

victor posted a long-term gold in Euros chart:

to go along with his USD-gold chart:

I have a couple of observations:

1. Unlike the USD-gold chart for the same period, the Euro-gold price is pretty much constant between 2002 and 2005. Actually, the gold price in Euros was pretty flat from the first Euro fixing in 2000 until mid-2005, while the USD price declined from 1999 to 2001 before making a U-turn and starting to climb.

2. The peaks and troughs of the Euro chart seem better-behaved than the USD chart. For example, in 2008 the USD trough was 68% of the peak, while the Euro trough was 82% of the peak.

2a. The biggest correction for Euro-gold was 2006, not 2008.

2b. In this latest correction, USD-prices dropped to 81% of their peak and have not yet recovered, while Euro-gold prices dropped to 87% and have already made new highs.

TLT said...

The only problem with saving in gold is that once you understand the financial system and the reason why to hold gold, you become sceptic.

Therefore, probable many feel alone, as most start to not care about what the media says. Then, daily common social talk becomes indigestible.

Probably, the guy started buying gold way before 1968. Some good onces in the pocket and today, US$7 million - in dollars terms.

Anonymous said...

The Engineer,

Indeed it is a problem, at least with me. I can no longer watch the news without being disgusted. Virtually all economic discussion and debate, even from the "honest money" Austrian camp has become painful to listen to, and even more painful to participate in.

The problem is that we Evil Hoarders now can decode the Matrix. Now we stand in disbelief that nobody else can see the cheap charade that once was so convincing to us. That puts us out of sync and we must put on an act to just fit in with the other copper tops. It would be quite easy to slide into the life of a hermit.

Thank God for good beer and the Harley Davidson motorcycle. At this point I find enjoyment and satisfaction in pursuit and enjoyment of both, as well as others that appreciate the pursuit as I do.

BTW, quite a few bikers own physical gold. I have had the most intelligent conversations with bikers that look like they have more common with ZZ Top than someone well versed in economics.

Woland said...

A propos of nothing in particular, except for the beautiful
picture at the top of this post, Tulving has both Johnson
Matthey and Royal Canadian Mint kilo bars for sale at "spot".
For how long, I do not know.

Can you say IN-TES-TATE?? (hint: it's not a highway system)
I sure hope FOFOA doesn't need to do a post on GET A FREAKIN'
WILL!! If you don't you will make the MMT'ers and Cullen Roche
very happy, as it all goes back to your Uncle Sugar, the Man
with the Golden Arm. Gree... ,er, Cheers.

JR said...

Hi Dante,

7. When you hear the initials “JR”, you do not associate it with the TV-series that is back on the air again. Instead you associate it with some dude from USA who is order of magnitude more brainwashed by FOFOA’s writings than you are.


TLT said...

@ matrixsentry

Agree 100%.

When I first started to study the financial system, I was anxious to talk to everyone, specially because I have many friends that are economists. When I realised that most people didnt care, I was lost.

The economists are the worst. I dont know what they study in college. The only one that actually knows a little more is a marxist.

The Austrians are a great "advance" in a world dominated by keynesians, but they miss some crucial points.

Now I really try to ignore my thoughts in social events, but its hard. I have done my part and bought the gold I could afford. Went out of my petroleum engineer job and now trying to find something to fullfill one's mind in a deep and sad world were happiness is actually a challenge.

I really wanted to know more about our gold-millionaire friend and his reasons to stop working and saving in gold.

Cheers for us evil gold hoarders!

Anonymous said...

@The Engineer

And then after the transition, we will either have to be very secretive like our deceased friend (RIP), or face the specter of fake friends, distant relatives, and other hangers-on, showering us with false praise, shady business propositions, etc. in the hopes that we'll let a little gold flow their way.

Hermitage & isolation appear to be the answer, both now and later. Ain't life grand? :D

Anonymous said...

Michael H,

it was 'less bad' for the US to pay higher $-oil prices than it was for the rest of the world.

Sure. It forced the others to run a trade surplus with the U.S. just because they needed dollars in order to pay for the oil.

And the 'second derivative' as well: If you have to run a trade surplus with the U.S., your own currency shouldn't rise too much. So you had to monetize dollars (accumulate dollar reserves and print your own currency in turn) in order to suppress your own currency so you were still competitive. In other words, you had to import a good share of the U.S. inflation.

Rising $-oil prices gives an incentive for the ROW to abandon the dollar as the oil pricing mechanism.

Well, if you are an oil consumer, then you pray for the producers to switch to Euros (or whatever else is viable). But if you are an oil producer, you just watch the gold/oil ratio, don't you?

Chris Cook has predicted a speculator-driven oil price crash;

I think this would work out only of the Saudis wanted to crash the price or at least if they tolerated it. This summer, it didn't play out as anticipated by Chris Cook, but as far as I understand, the excess inventory is still around. So should there be an attack on Iran, they might crash the price rights at that moment. Just as they did in January 1991.


Michael H said...


"But if you are an oil producer, you just watch the gold/oil ratio, don't you?"

True for regular inflation, but not hyperinflation?

In other words, even oil producers need the currency to be stable on a long enough timescale so they can cover their costs with the proceeds of the sale.

KindofBlue said...

This quote yesterday in a zerohedge article:

"We estimate that Fed purchases will take out about 60% of monthly MBS production."

Questions (for anyone with a nuts/bolts understanding of this market):

What exactly is "MBS production" and what does it mean that it continues on a "monthly" basis? MBS's are still being created?

I understand debt failure and the bailout of such, but I'm trying to get my head around the implication of ongoing 'production' on a 'monthly' basis.

burningfiat said...

RIP Walter.

Another reason to own gold rather than silver:
- You're clearly a nicer buddy (or body) to the G-men who come and haul your wealth away: $7 mill. in gold: ~ 120 kg, in silver: > 6 metric tons.

Now, over a year has passed since FOFOA's original article-series on bitcoin. While the arguments presented then was close to flawless from a rational perspective (IMHO), bitcoin is still hanging in there with regard to uptrending use. On that note a maybe overlooked bonus of bitcoin:
- If you're an anti-social reclusive hoarder like this lot: Surprise the G-men with a hoard of bitcoins beside your body: Weight: 0.0 kg, G-men chance of confiscating your bitcoin hoard: ~ 0.0%



Dante_Eu said...

R.I.P. Walter Samasko Jr.

There was a saver if there ever was one.

Regarding morality and judgment. I try to live by 3 simple sentences:

1. The only one I can change is myself.
2. Who am I to judge other people?
3. What gives me right to do so?

It is not easy and I need constantly to remind myself. We are 7 billion on this planet; that’s 7 billion personal stories, each one different from the other. Do whatever makes you happy as long as you don’t hurt other people, regardless what everyone else thinks.

On a cheerier note, I have some more material. Enough for, like 2 new lists. Yes, I know it’s sick, but can’t help it; it just pops up in my head. I guess I’m on a roll. :-)
Some signs already mentioned here. Some that only can be found in northern Europe (way, way up north). Nevertheless, I think you’ll enjoy it.

Nice lyrics in that song. But the melody at the end…makes my head hurt. :-)

JR said...

"But if you are an oil producer, you just watch the gold/oil ratio, don't you?"

True for regular inflation, but not hyperinflation?

In other words, even oil producers need the currency to be stable on a long enough timescale so they can cover their costs with the proceeds of the sale.

If you are an oil producer you look for a currency that allows your excess production 9savings) to be converted into gold. That's why you watch the gold/oil ration. When the currency price of gold goes up but the currency price of oil doesn't keep up with oil's rise, you are selling your oil for less gold so you look for another currency that gets you a better deal on gold.

Date: Sat Nov 01 1997 23:55

The act being played out now is much larger than the business of "find the gold in the ground"! In the world today there are only three assets, gold, oil and currencies. The paper currencies, so long admired and accepted are now in a war of self destruction. They will consume each other in an end battle of "I'm the last man standing but have lost all use as a unit of value". Each nation state is trying to add a "kicker" or "premium" to it's trading paper as a means of buying oil. This does not mean any country will go without oil, they will have to work with "oil priced at a value rendering them uncompetitive". National stock and bond markets do not like this kind of news!

Inflation? We are not speaking of currency price inflation here. This is currency "destruction" because my national IOUs are being devalued by cheap oil supply problems!

As was said before, the real gold market that most people invest in is gone! Any gold trading paper will evaporate in the heat of fire now starting to burn. I tell you now, when the currencies are at nuclear war, GOLD WILL NOT TRADE

JR said...

Hi Dante,

The original is too hauntingly pretty to emulate - homage = redone.

Tortured genius - "There is a devil, and he knows my name"

TLT said...

@ poopyjim

Yes, and now, when we try to talk a little, show in what path the financial system is going, so they can think on their own, they don't care.

Later, they surely will want a piece of the cake, even though we are the lonely ones taking all the risk.

A twisted world indeed.

Woland said...

We all know about paper gold, right.
paper silver? Check
Paper steel??? WTF! via Zero Hedge;

"Chinese banks and companies looking to seize steel
pledged as collateral by firms that have defaulted on loans
were making the uncomfortable discovery: The metal was
never in the warehouse in the first place".

Perhaps the ghost of Billie Sol Estes still lives, and is giving
seminars in China? I would think that steel would be
easier to check on though than, say, anhydrous ammonia.
Plus ca change.......

Lisa said...

Link to Woland's reference above:

And a few quotes from the article:

"One of the key stories of 2011 was the revelation, courtesy of MF Global, that no asset in the financial system is "as is", and instead is merely a copy of a copy of a copy- rehypothecated up to an infinite number of times (if domiciled in the UK) for one simple reason: there are not enough money-good, credible assets in existence, even if there are more than enough 'secured' liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well; however, the second the system experiences a violent deleveraging and the liabilities have to be matched to their respective assets as they are unwound, all hell breaks loose once the reality sets in that each asset has been diluted exponentially."


"We now know that this has been happening in China with the most critical component of its economic growth miracle: steel. We will soon discover that all other assets: stocks, bonds, commodities (including gold and silver) and finally cash (think deposits) have been comparably rehypothecated and criminally commingled. The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to "inflate" away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal"

Hey Dante Eu -Maybe Tyler (#18 in your second list)is the ZH Tyler :)

Puggle said...

That dude is my uncle. Please send the gold to Seattle in a wheelbarrow ASAP.

One Bad Adder said...

Poor 'ol Walter ...RIP.
Were it not for the "unusual" discovery of his stash, his passing would've gone completely unnoticed.
Hundreds of "Walters" ...inevitably unsung, pass away on a daily basis - it's a sign of the times ...unfortunately, and indicative of the Fear / Greed mentality the world is currently enthralled with.

Good prose Max - mine eyes concur.

One Bad Adder said...

@KindofBlue - I'll take a stab at this (which is ONLY referring to your request ...and as such may be out-of-context)
I think it's referring to Mortgage-Backed-Securities that new mortgages are bundled together and "sold" as securities (generating an income stream) ...into the Market.

Indenture said...

Puggle: good one....
Lisa: thanks for the link

KindofBlue said...


One would think that after the recent crisis that the quality of these new loans is superior than when the housing bubble was inflating. Why would the Fed need to buy those recent, higher quality mortgages?


Tommy2Tone said...

When I read this post I couldn't help but wonder how many Ohh Zee's went missing into the pockets of whomever opened his house and was involved in cleaning that up.
No the Guv got all that gold??? That sux. (yet they mention the cousin...just taunting her??- Haha, you coulda had $7 million dollars)

I also think this "recluse" with a house full of gold is the exact picture the Frances' of the world envision as a "hoarder". The evil, useless, hoarding.
To think of all that cash that Walter could have sat on. Instead he wastes it by buying gold. He would have been better off giving- I mean investing- his cash to local businesses...err, besides the gold broker who just bought more useless shiny rocks.

Myself, I would have found a youngster, ideally, to educate and pass it on if I didn't have an heir- why let the Guv get it when I die?

Many many thanks for BOTH those links JR. Awesome song. I can't decide which I like more and haunting is a great description of the original.

Tommy2Tone said...
This comment has been removed by the author.
FOFOA said...

I just updated the post to include the great story of Mr. Chang's gold. H/T Zenscreamer

One Bad Adder said...

@KindofBlue - to take our mind off GOLD for a sec (as hard as that may be;-)- the "problem" that caused the Sub-Prime house-of-cards to tumble was ONLY essentially confined to the (let's say) the BBB-rated securities ...however, a dropping tide lowers ALL ships and, as we know the Market was left with a sour taste in it's mouth relative to the entire MBS "industry" ie: the AAA's down through the lesser-primes and ultimately to the SP's.
New MBS paper being generated is (apparently)still a little on-the-nose so Ben Bank etal are picking up the tab least, if what your correspondent suggested is correct, to the tune of 60% of the newly created stuff / month (equivalent).

Phat Repat said...

Don't know about you but this line makes me suspicious:

"...hadn't worked since 1968 and was living off his investments, which included stock accounts of $140,000 and $25,000."

That's quite a long time to not be working... And to have that much gold? Yeah, the G-men are going to be real thorough with this. Don't get too excited just yet cousin. ;-)

But the key statement in the article, and the reason he maintained such a stash is:

"Nobody had any clue he was hoarding the gold." Bingo.


One Bad Adder said...

@KindofBlue - ...and thereby trying to re-establish a "closer" relationship between mortgage rates and their already "twisted" medium and long-term T-paper.

One Bad Adder said...

Boy, let me tell you, 10 years ago I was amazed at how tptb were able to smooth out the various wrinkles as they appeared in the Market-place therefore these current goings-on simply leave me awestruck!
Take eg: the almost daily $PoG rallys at the NY open ...after a (sometimes) precipitous price-drop in HK and London.
Take those days as your lead folks for sure as eggs they are the harbinger of BAD things ahead - IMHO.
Paper covers Rock? ...yeh Right!

Phat Repat said...

Yes, h/t to JR; moving song... And an even more moving story. There is always hope.

RJPadavona said...

"Walter's standards are incredibly high because he knows yours are too."

Giants walk in the footsteps of Walter.

J said...

JR said: "If you are an oil producer you look for a currency that allows your excess production 9savings) to be converted into gold." and fighter jets.

KindofBlue said...


So this QE is support for the 'product' of the MBS industry, as opposed to the mortgages themselves? This is an important point as -- assuming the paper is relatively good -- the banks would simply carry it themselves. As far as I know, Wells Fargo is still holding my mortgage created in 2011 and intends (they say) to hold to maturity.


Aquilus said...


It's not about MBS specifically; it's about ensuring enough base money is injected to cover the US Gov deficit. Remember the USG spends base money only, not credit.

That base money must come either from the Fed, from support from foreign CBs, or from savings inside the US from real production (not stock market appreciation - that's just asset appreciation - no new "money" enters the market there).

As for MBS, that type of debt in pension plans, and financial institution balance sheet is the most susceptible to losing value. As such it is a good target for purchases, swapping a depreciating asset on someone's balance sheet with fresh base money.

This is all my time permits right now for a comment. Hope this helps,


P.S. What we really learn from this QE action is simply that the Fed could not find any more support for the dollar from foreign central banks and had to intervene itself. As simple as that. MBS is just the initial vector for injecting base money; others might be added later.

One Bad Adder said...

@KoB - WF will no doubt have the deeds tucked away somewhere but in all probability your repayments are bundled with many others and add to the "income-stream" of those 3rd party Institutions Aquilus alluded to.)

Anand Srivastava said...

The funny thing is that the Bond Buying exactly equals 1 Trillion per annum which is the budget deficit. So FED does not expect any other country to buy any Treasuries in the near future. We are now at the beginning of the End.

How long now?

Mark said...

He must have purchased at under $50 that's a lot of gold. 32 oz in a kilo. I estimate roughly 4400 ounces. :)

J said...

Go Go South Korea..They still have a long way to go

SEOUL, Sept. 18 (Yonhap) -- South Korea ranked 40th in gold holdings as of end-August, up three notches from two months earlier as its central bank purchased the precious metal to diversify foreign exchange reserves, data showed Tuesday.

South Korea's gold holdings reached 70.4 tons valued at US$2.98 billion as of end-August, accounting for 0.9 percent out of the country's total foreign reserves of $316.88 billion, according to the World Gold Council, an international body that offers key information about gold.

The Bank of Korea (BOK) bought 16 tons of gold in July, the third purchase of the precious metal since the central bank bought it in July last year for the first time in 13 years.

The BOK's move came as the bleaker economic outlook and the protracted eurozone debt crisis raised investors' appetite for safe assets. Gold is also viewed as a way to hedge inflation.

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

PayPal suspends domestic Argentinian transactions

KindofBlue said...


So the market can not, or will not, buy the MBS from a pension fund at a satisfactory price and they therefore sell it to the Fed. The MBS now sits on the Fed balance sheet whilst the pension fund pays obligations and/or purchases treasuries (or some other investment)? That portion that the pension fund pays out in obligations then represents the new infusion of base cash into the system, yes? This is the mechanism that injects fresh cash?


Your belief is that WF is only administering the mortgage, not carrying it?

Thank you both.

Michael H said...


I assume you're in the US; try this:

To see if either Fannie or Freddie owns your loan.

"administering" the mortgage is usually referred to as "servicing", FYI.

Mortgage 'servicers' have a totally different set of incentives to mortgage 'owners'.

JR said...

Exactly Michael H,

2 key points. The MBS purchases are:

1) focused on new issuance, and
2)only GSEs: Fannie, Freddie or Ginnie.

NY FRB Agency MBS purchase FAQs:

On September 13, 2012, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to begin purchasing additional agency mortgage-backed securities (MBS) at a pace of $40 billion per month. The FOMC also directed the Desk to continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities as announced in June and to maintain its existing policy of reinvesting principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS.

The FOMC noted that these actions, which together will increase the Committee's holdings of longer-term securities by about $85 billion each month through the end of the year [...]

What types of agency MBS will the Desk purchase?

Agency MBS purchases will likely be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market because these securities have greater liquidity and are closely tied to primary mortgage rates. The Desk may purchase other agency MBS if market conditions warrant. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for purchase.

JR said...

So late to the game but Perception vs. Reality Open Forum:

Researchers at Johns Hopkins School of Medicine

Psilocybin, the drug in “magic mushrooms,” helps many people become more open, creative, and curious after they take a single high dose, a new study shows.

Ordinarily, researchers say, after age 30 personality is a pretty fixed part of who we are.

When people do change their stripes, it’s usually in the wake of significant life events that cause emotional upheaval, like marriage, divorce, or getting fired from a job.

Researchers say the new study, which is published in the Journal of Psychopharmacology, is one the first to show that a drug, when used in an experimental setting, can alter personality long term.

Specifically, the study found that psilocybin affects a dimension of personality called openness. Openness relates to the ability to see and appreciate beauty, to imagine, to be aware of our own and other people’s feelings, and to be curious and creative.

Personality, after the age of 25, is relatively stable, and if anything happens, openness decreases across decades, just very slightly, but generally people become more rigid and less creative,” says researcher Roland R. Griffiths, PhD, professor of psychiatry and behavioral sciences at the Johns Hopkins University School of Medicine in Baltimore. “And this is showing an anti-aging affect if you will, on openness.”


We are all connected - does appreciation of this beget tolerance and understanding?

"Magic mushrooms" are known to bring on an intense psychedelic trip, and psilocybin, the mind-altering chemical in the mushroom, is believed to help treat certain medical conditions. But new research suggests the drug may actually alter people's personalities for a long period of time.

Researchers from Johns Hopkins University School of Medicine gave one high dose of psilocybin to 51 adult study participants and found that 30 of them underwent measurable personality changes that lasted more than a year.

The aspect of personality that changed is known as openness. Openness, the authors wrote, "encompasses aesthetic appreciation and sensitivity, imagination and fantasy, and broad-minded tolerance of others' viewpoints and values."

The 30 subjects whose personalities changed became more open after the psilocybin session.

Lead author Katherine MacLean, a post-doctoral fellow, said participants completed a personality questionnaire before the study began, about a month after the study and then again 14 months later.

The people who became more open also had a "complete mystical experience," while the others whose personalities did not change didn't have a similar experience.

"The mystical experience has certain qualities," MacLean said. "The primary one is that you feel a certain kind of connectedness and unity with everything and everyone.

People also feel very joyful, MacLean said.

The study authors and other researchers who study the effects of psilocybin say the findings are very significant and have potentially huge implications for the use of the drug for other therapeutic purposes.

"Personality is assumed to be stable by the age of 30," said MacLean. "There may be small changes over time, but openness tends to go down with age. Older people tend to become less interested in exploring and trying new things."


JR said...


Our opinions and preconceived notions often get in the way of seeing things as they are; we all bring our own baggage to the table.

The active ingredient in psychedelic mushrooms decreases brain activity, possibly explaining the vivid, mind-bending effects of the drug, a new study finds.

The decreases were focused in regions that serve as crossroads for information in the brain, meaning that information may flow more freely in a brain on mushrooms. The findings could be useful in developing hallucinogenic treatments for some mental disorders.

"There is increasing evidence that the regions affected are responsible for giving us our sense of self," study author Robin Carhart-Harris, a postdoctoral researcher at Imperial College London, wrote in an email to LiveScience.

"In other words, the regions affected make up what some people call our 'ego.' That activity decreases in the 'ego-network' supports what people often say about psychedelics, that they temporarily 'dissolve the ego.'"

Quieting the brain

Psilocybin, the chemical that gives mushrooms their trippy properties, has long-lasting effects beyond the initial high. A recent Johns Hopkins University study found that a single experience with psilocybin in a controlled environment can alter personality long-term, making people more open to new experiences."


Perhaps getting out of our own way is the often biggest challenge:

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."

JR said...

I'm needing less restraint before
I'm needing to hit the lights and close the door
I'm fine, I'm fine cause I'm...

Dripping in this strange design
None is yours and far less mine
Hold the wheel, read the sign
Keep the tires off the line
Just relax, you're doing fine
Swimming in this real thing I call life
Can I bring a few companions on this ride?

I'm feeling, my heart's not beating anymore
I'm feeling. it's alright, this happened once before
I'm fine, I'm fine cause I'm...

Dripping in this strange design
None is yours and far less mine
Hold the wheel, read the sign
Keep the tires off the line
Just relax, you're doing fine
Swimming in this real thing I call life
Can I bring a few companions on this ride?

Woland said...

Hello JR. Sometimes something is just toooo irresistible.

A while ago, there was another JR with some ideas about
the use of chemicals to alter personality. He was USAF
Brigadier General Jack D. Ripper. (got his namesake from
some famous Brit.) He was deeply concerned about the
fact that the Soviet Union had been using "fluoridation of
the US water supply" to pollute the precious bodily fluids
of Americans. (presumably this would lower our resistance
to their evil designs, or diminish our manhood.)
So my question is, do we want to just add these mushrooms
to the water supply with the fluoride, or make it optional?

(for the younger followers of the blog, JDR was a character in
Dr. Strangelove) Cheers.

KindofBlue said...

Thanks Michael H & JR

I feel I understand the 'big picture' but am trying to better understand the nuts/bolts of how the mechanism works. This has been helpful.

Dante_Eu said...

Hi everyone,

Due to time constraints my new 2 lists, with signs, will be delivered next week. Bringing it to total 40 signs. Why 40? No idea, it seems to stop on that number. It’s on the conceptual level right now, but I can reassure you:

It will be sight to behold.

I suspect someone put a mushroom in mine coffee:

It Takes A Fool To Remain Sane

Be patient\Dante :-)

JR said...

General Jack D. Ripper: Nineteen hundred and forty-six. 1946, Mandrake. How does that coincide with your post-war Commie conspiracy, huh? It's incredibly obvious, isn't it? A foreign substance is introduced into our precious bodily fluids without the knowledge of the individual. Certainly without any choice. That's the way your hard-core Commie works.

Group Capt. Lionel Mandrake: Uh, Jack, Jack, listen... tell me, tell me, Jack. When did you first... become... well, develop this theory?

General Jack D. Ripper: [somewhat embarassed] Well, I, uh... I... I... first became aware of it, Mandrake, during the physical act of love.

Group Capt. Lionel Mandrake: Hmm.

General Jack D. Ripper: Yes, a uh, a profound sense of fatigue... a feeling of emptiness followed. Luckily I... I was able to interpret these feelings correctly. Loss of essence.

Group Capt. Lionel Mandrake: Hmm.

General Jack D. Ripper: I can assure you it has not recurred, Mandrake. Women uh... women sense my power and they seek the life essence. I, uh... I do not avoid women, Mandrake.

Group Capt. Lionel Mandrake: No.

General Jack D. Ripper: But I... I do deny them my essence.

Woland said...

JR: You know how much I appreciate your work here. Glad
to see you had the expected humorous understanding of my
childish observation. Like I said, sometimes, you just can't help
yourself. Cheers.

Anonymous said...

Yes, JR, psychedelics can be very useful tools. Not toys. Interestingly, much of our music has been directly or indirectly influenced by various psychedelic compounds. You guys may have noticed most of my links to songs certainly are! haha! My rather large vinyl collection is dripping/swimming with/in it...

There's a Forty Second River We Must Find

Sherlock said...

Just passed my 1 year anniversary reading this exquisite blog, and decided to post due to the ‘openness’ links provided by JR. (Many thanks!)

I’m likely younger than most of you, and my knowledge of the financial world has largely come from reading and researching topics espoused herein (kind of coasted through college, just enough to be employable). I’m very appreciative of the analyses provided and the time senior posters take to explain complex concepts. I have no idea where else I could learn this valuable insight, because I’m certain Central Banking was not in the curriculum at the school I attended.

I wanted to post because, as mentioned in the mushroom articles, personalities are pretty well cemented by the late 20s (unless the individual undergoes some type of life-changing moment). I’m approaching this age, and most of the people I associate with are of this age or older. I’ve noticed recently, in various discussions with friends and co-workers, a tendency to staunchly combat ideas that don’t correlate to the normalcy they’ve grown accustomed to. (lack of openness, imagination, acceptance of change) Interestingly enough, the most dynamic discussions don’t involve politics, but rather money and the current state of the $IMFS. (They don’t call it that, to them it’s just ‘the economy’…in fact they really don’t know much about money, how it functions, who controls it, etc., which probably explains what follows)

The discussion the other day centered around the Republicans’ mention of a gold standard. My two friends, one a patent attorney and the other an environmental specialist, know that I advocate purchasing and securing physical gold as a means of saving. (I’ve got binders full of FOFOA, FOA, A, ZH, QB, etc. articles that have helped shape my opinion.) Immediately, they ask if I would be in favor of a standard. ‘No, it wouldn’t work,’ I reply. ‘So if it’s not the gold standard you want, what is it you do want?’ they inquire. ‘Freegold. It allows gold to float freely; currencies are then priced in terms of gold.’ While they contemplate this momentarily, I can see I should prepare to defend my statement. ‘Okay, so what exactly does that mean? Why use gold, why not something else?’ I attempt to explain as briefly as possible. I can tell neither has the appetite to really explore this (because we just vaporized some green, in a different manner than the ‘Honorable’ John Corzine), but are willing to grant me several minutes. ‘Gold has been used for millennia as the extinguisher of debt, payment in full. It is in finite supply. It doesn’t have any industrial or practical purposes outside small amounts of jewelry…and storing value.’

At this moment, my somewhat intoxicated environmental friend asks, ‘Why not use something everybody needs to store value…like water?’ I explain, ’You don’t want to utilize a resource or something that can enable you to create economic benefits, you want something that is largely non-usable, but valuable because everyone accepts it as such. It could be anything, diamonds, snowballs, seashells, petrified bear turds…but it’s not, because gold was chosen long, long ago.’

Cont'd below

Sherlock said...

The lawyer begins to rant about how stupid it would be to trade gold between countries, ‘So, we get a bunch of goods, and if we have a deficit, we ship them gold? Why not just give them paper like we do now? The paper has value that people accept.’ My eyes light up. ‘Because paper’s value can be diluted, much like is being done right now. Wise traders would not accept too much of your paper (or digital units), and would require something that maintains its value. Paper’s value, like most items is subject to the supply. Conceivably, you could have an infinite amount of paper, therefore the value of one unit would be 1/infinity…essentially no value. But’s supply on Earth is limited by the amount present on meteorites which crashed here approximately 2 billion years ago. Gold is formed from supernovae explosions, and cannot therefore be diluted infinitesimally.’ At this point, they both look at me as if I’ve transformed into a quadricorn. The discussion begins to deteriorate as the effects of the aforementioned vaporized material begin to set in.

Apologies for the lengthy post, almost there. My reason for sharing all this is the fact that despite little to no knowledge on the subject, these friends are not open to the idea of an alternative replacement to the dollar (aside from using water, which my lawyer friend correctly pointed out, ‘…is absolutely absurd’). Even when presented in a logical way, they have already determined what value is, and assign all value to the current system they’re in than a theoretical one in which they may one day find themselves. It may be the transition from practical to theoretical systems that presents an opportunity for a change in openness, because I think we’d all agree the transition will be a drastic, life-altering event, for everyone! (That is assuming there is a transition…I’m open to the idea of this ship continuing to float, but rationally can’t make the argument for it.)

Anonymous said...

Hey, Sherlock

Welcome and thanks for sharing. Don't forget to remind your lawyer friend that it's a confidence game and once the confidence in (certain) paper is gone, it is game over for said paper.

Sadly, some of life's greatest lessons come at a cost...

Gone, Gone, Gone tells a story

Tommy2Tone said...

I will attest to the mushrooms magic.
I prepared and consumed my first dose after my thirties were gone...
I missed that type of reckless youth. I say reckless because the stereotype is of kids abusing these drugs in order to "party". Which is totally totally wrong. IMO

I read and read and read before my wife and I decided to sequester ourselves for a weekend.
That trip, and you would discover why that is an apt description, is one of the BEST times I've experienced on this planet (and out of it ;) )

Truly remarkable and it left an impact on us both for weeks. By impact I mean, I contemplated it, thought of it, "felt" it for weeks. I DO feel it changed me (us) in positive ways. (I swear it made quitting nicotine easier... I was a little bit into quitting when we embarked)

We have consumed mushrooms just 3 times total and it's been about 2 years. We are working up to another trip in the nearer future.

Mushrooms and the superorganism...

Here's a related book:
DMT: The Spirit Molecule: A Doctor's Revolutionary Research into the Biology of Near-Death and Mystical Experiences

Vain Saints said...

The FOFOA thesis of savers vs. debtors seems to resemble very much the Max Keiser thesis of Savers vs. Speculators, but this is somewhat in conflict with the paradigm posited by Catherine Austin Fitts of "The Crowd that is Above the Law" vs. The People Under the Law.

The Fitts distinction is real and must be reconciled with the Keiser thesis, otherwise the Keiser/FOFOA Thesis must be overturned.

This is to say, who are the people above the law? Are they both savers and speculators, or are they concentrated on one side or the other? Or are they above both the savers and speculators and manipulating both?

My feeling is that it's more in line with the third option. Savers vs. Debtors is too natural a conflict not to be manipulated, and the Owners have a way of exploiting every natural source of conflict.

Ultimately, I suspect Overclass remains in control, and there is little reason to believe that market forces, or any other forces, should play out naturally.

Tommy2Tone said...


My FIL last night said to me:
"You can eat and get rid of your stored food now."

"oh yeah, why's that?"

"Because, didn't you hear, the government is going to start printing. They are going to print money and inject it into the economy. In 3 years or so the economy will be thriving again."

He's mid to late 60's. He's dead serious.
He and my MIL think we are beyond foolish for storing food and silver (ha, just kidding:)- gold).
They honestly believe the dollar is fine, the country is fine. My wife asked him why, he replied because it's the USA.
She asked him, why not print the money and just pay off the debts directly?
"Because it doesn't work that way, you have to inject it into the economy first" (WTF???)

Oh, and he's actively selling gold at Cash N Gold.
Refuses to offer it to us first.

Strange days.
Most peculiar momma!

sean said...

Nice comment Sherlock. I think your friends, like most people, are exhibiting "normalcy bias".
The cool thing about emergent properties, like the super-organism, is that their existence and function absolutely doesn't doesn't depend on our ability to perceive them. eg: individual ants (presumably) have no real perception of the colony they contribute to, or why they are doing various tasks, and yet the colony can "decide" things like to suddenly move to a new area one day.

What they need is something to help them break them out of the matrix, so they can see things are not always as they perceive.

"What I learned from LSD - Dr. Oliver Sacks"

Dante_Eu said...

The cool thing about emergent properties, like the super-organism, is that their existence and function absolutely doesn't depend on our ability to perceive them.

Godd@m, you are stealing my unpublished signs.. :-)

Dante_Eu said...


You welcome!

....My eyes light up....

That's the moment you are accused of having Asperger's syndrome. Happened to me A LOT! Not, that there is anything wrong with it. :-)

Sherlock said...


Thanks. I'll point that out, but as you can imagine, he's plenty confident in (t)his system and sees nothing that will change it.


It's interesting you mentioned 'The Spirit Molecule,' as it's one of the books I'm currently reading. Other 'openness' type books to consider are: 'Food of the Gods' by Terence McKenna, 'Breaking Open the Head' by Daniel Pinchbeck, and a personal favorite, 'The Evolutionary Mind: Trialogues on Science, Spirit, and Psychedelics' by TM, Ralph Abraham, and Rupert Sheldrake.

I think society (America especially), discounts the positive effects of these experiences. It saddens me, because psychedelics helped establish the person I am today. I threw off a ridiculous amount of baggage (strong religious upbringing), after an experience. It allowed me to view the world in a light that was previously hidden. I became more empathetic, less selfish, more appreciative, less entitled, more aware of the needs of others, less judgmental, etc.

The follies of our government seem limitless, but Schedule 1 status for psychedelics retarded human evolution by 4 decades.

burningfiat said...


Nice stories jojo and Sherlock!

I like this convergence of the FOFOA forum on the topic of first reality and perception and now of hallucinogens.
In some strange way it fits well with my previous partly tongue in cheek prediction of Freegold transition of 2012-12-21.

PS. It is mushroom season now, at least here in the northern hemisphere. Happy trips!

Anonymous said...

LOL my vision of the FOFOA readership is hilarious. Renegade motorcyclists, a barber with a penchant for raunchy humor, an assortment of pot-smoking mushroom-ingesting hippies, charity workers, zen philosophers, and combinations thereof. Did I get that right?

No wonder no one takes us seriously. XD

Pat said...

Plus, miserly recluse hoarders who die alone and unloved; pidgen-English speaking Chinee; and someone named Poopyjim.

Dante_Eu said...

@poopyjim & Pat:

LOL..Oh, the about diversity...LOL

Where are all Central bankers? Still in the closet?

ampmfix said...
This comment has been removed by the author.
Rui said...

It's been more than a year and people are still hanging onto this debtor / savor stuff.

Perception: Debtors and savers can co-exist.

Reality: They can co-exist as much as robbers and their victims can co-exist.

If I borrow 10OZ-gold worth of paper money and later return the same amount of paper but worth only 9OZ after being depreciated, then who's taking that 1oz of loss? That loss is still there. It does not disappear. That much you can be sure.

The producers are taking the loss b/c their income is in the form of paper money. When that money has 10% of the value inflated away, they lose 10% that they could save. A loss is a loss, it does not go away. So ultimately it's the savers getting screwed by the debtors. That kinda relationship is more like robbery than co-exist, isn't it?

Here is how you can right that wrong easily: Transact in gold. So you wanna borrow 10OZ gold? Then you have to return 10OZ, plus interest. That way debtors can no longer get off easily with a paper shenanigan, which gives them incentives to quit being net-debtors and do sth productive so that they can earn an income instead of borrowing it all the time.

ampmfix said...
This comment has been removed by the author.
Motley Fool said...


If I borrow 10 oz worth of paper being worth say $600,000 and return 9 oz worth of paper being worth inflation + say 2%, eg $700,000, who loses what?

Here is another thing to contemplate. If you today lend out $100k and it is repaid with inflation + 2%, do you take a loss?


Dante_Eu said...


If you save, for the most part, in gold, why does it bother you if currency depreciate? Let those who make fiat loans worry about that.

And don't shit on yourself, we are all consumers (debtors), 99% of us...only 1% true savers (producers).

Rui said...

@ Motley Fool

Looks like blogspot ate my comment away so we've lost the context here unless blogspot could somehow bring my post back.

Regarding "who loses what", if I borrow 10OZ then I should return 10OZ. Now if the 9OZ is worth 700,000 at the time I return, I should pay roughly 777,777 back to make it still worth 10OZ.

If we are fully repaid at true inflation adjusted amount plus a fair interest then we don't take a loss. The problem is we never are under a FIAT system, which why I don't believe CBs will ever give the public an honest gold price as references so long as they are in charge. They have a conflict of interests in play.

Rui said...

@ Dante_Eu

We cannot save the income we have not received, can we? As long as that income is in paper form, it's under the paper depreciation assault.

As for "we are all consumers", you are right. We are born to eat, drink, consume energy and so on. We do consume a lot but we have to produce as well b/c no one in their sane mind would let us consume their product for free. We have to pay for that so the more we produce, the more we can pay for, the more we can consume and thus the higher living standards we can enjoy. We have to be producers one way or another.

Dante_Eu said...


That train has gone long time ago. You, just have to accept that and go with a flow. Maybe it is hard for you to see. Nevertheless, in fact, it's in your best interest.

Motley Fool said...


You are falling under the mistake of thinking that gold keeps it's purchasing power absolutely. I also once had that thought.

Perhaps it would be easier if we spoke in other tangibles in example. If you make a loan of $10,000 worth about say 1 ounce or 500 loaves of bread, and receive in return say $12,000 a year later, worth now about 0.9 of an ounce or 600 loaves of bread, what have you lost?


Dante_Eu said...


Also, we mortals, consume >90% of currency we receive. <10% is saved so why make it harder for us self?

And it's not like in 40 years of work you never expect pay raise.

Woland said...

It happens that, for reasons not convenient to enumerate,
I receive Paul Brodsky's latest essays via email. It usually
happens that they also appear around the same day over
at Zero Hedge. For those (few) who care to take a look,
the title of the current piece is, "Perspectives on gold's
parabolic catch-up phase". Paul is a reader, and to some
extent a follower of FOFOA, so his take coincides, in part,
with what we "kool aid drinkers" believe, but there are
some differences as well. Enjoy, if the spirit moves you.

Rui said...

@ Motley Fool

"If you make a loan of $10,000 worth about say 1 ounce or 500 loaves of bread, and receive in return say $12,000 a year later, worth now about 0.9 of an ounce or 600 loaves of bread, what have you lost?"

I've lost 0.1 oz which is equivalent to an extra 66 loaves I could have purchased had I not made that loan.

You are right gold does not hold its absolute purchasing power. It should not. Gold as money is a yard stick to measure the price of all the goods in the market. If we have abundant supply of goods then gold's purchasing power goes up. If we have a short fall then down it goes.

And that's why it's all the more important we want the productive people, rather than consumptive one, to have access to money. That way they produce more and supply more to the market so that everyone's money can buy more goods and therefore up goes everyone's standard of living. The more for the productive people and less for the consumptive ones, the better.

Rui said...

@ Dante_Eu

"And it's not like in 40 years of work you never expect pay raise."

That is when the pay raise could keep up with the inflation rate, but can it?

If we own stocks we would not mind a split. It inflates every stock holder's shares evenly so we are not losing. Paper money printing is stock dilution. Bankers and politicians dilute our money and then give it their cronies at everyone else' expense.

Michael H said...

"And that's why it's all the more important we want the productive people, rather than consumptive one, to have access to money."

Like the guy who needed a 500-loaf loan to fund his productive enterprise that would have allowed him to repay 600 loaves, but you wouldn't loan him the money for it?

Michael dV said...

from the Woland referenced QBAMCO article (also today at ZH)

the Fed would purchase gold with newly created US dollars, which would bring the ratio of USD-denominated credit-to-base money back into line, thereby de-leveraging the system.


Were a USD devaluation and re-pegging to occur as of the end of 2014, following 2 ¼ years of $40 billion monthly MBS debt monetization, we estimate our Shadow Gold Price would approximate $15,000/ounce.

So we see that while they (Paul and Lee) follow the WAY it falls apart, they still wind up with a fixed gold to dollar ratio (which I assume they see the USG defending). they get there not by a market finding a value for gold at the margin but by considering the total amount of gold (held by the USG) and the sum of all dollars.
I'm not quite clear how they relate the government selling gold into the market (which if done at auction or by bidding might deliver a surprisingly different price than they get by the method mentioned) and the 15k ain't freegold

Phat Repat said...

Ventured over to Zero Hedge to view the piece recommended by Woland to find this:

Tungsten-Filled 10 Oz Gold Bar Found In The Middle Of Manhattan's Jewelry District

Hmmm... Good thing I can 'only' afford 1oz and below. :)

Rui said...

@ Michael H

"Like the guy who needed a 500-loaf loan to fund his productive enterprise that would have allowed him to repay 600 loaves, but you wouldn't loan him the money for it?"

I may or may not. There might be a business offering even better return so that I could invest my money in that business for more gains. It's no different from gold bugs putting money in gold over other investment. There could very well be some "500 for 600" business in the market but the return is not as attractive enough as gold at this point so GBs skip them. Once gold is revalued high enough that there's not much room for further gains then the money will naturally leave for other business that looks more attractive.

So we see that market has its own mechanism to direct money to different sectors. We don't need to step in with some "price stability" central planning or artificial credit injection. All we need is keeping our hands off and let market work.

J said...

Russia gives USAid the boot

The United States Agency for International Development (USAid) has announced it will close its offices in Russia following an order from the authorities there to cease operations.

The Russian government gave the US until 1 October to close the mission.

USAid has worked in Russia for two decades, spending nearly $3bn (£1.8bn) on democracy and other programmes.

USAid shuts down Russia operation

Motley Fool said...


"I've lost 0.1 oz which is equivalent to an extra 66 loaves I could have purchased had I not made that loan."

Good criticism.

So a year later 66 loaves would be equal to $1320, which means the amount that would have to be paid back would be $13,320 for breakeven, and more to make it worthwhile.

I admit my example is exaggerated, but at some return percentage it becomes worthwhile to make the loan. And that is exactly what one function of gold should be, to help distinguish bad loans from good ones, so only the most productive uses of capital is allocated loans.


Anonymous said...

Here is a delightful little piece from our favourite deflationist “Mish”.

Here’s a snippet:
*** So if you think as I do, that Obama and Romney are bad choices for America, then please go ahead and write-in "Mish".
Unlike the others, I pledge to spend zero dollars on my campaign, I pledge to bring all the troops home, I will end collective bargaining of public unions by decree (reversing what President Kennedy did by decree), and I will get rid of Ben Bernanke, appointing someone who will work out a plan to get rid of the Fed entirely as well as eliminate fractional reserve lending.
Those are things a president can do, without support of Congress, and I will do them if elected. If you like that platform, please write-in "Mish" in November. ***

So, in similar vein I urge all our American friends to write in FOFOA in November, in the hope that even a handful of votes might get a mention as well. (And I invite FOFOA to write his manifesto in a similar format to Mish, just for fun and for the enjoyment of all of us here at this blog)

Cheers - FONOAH

Post a Comment