Wednesday, October 31, 2012

An American Horror Story

An American Horror Story for Halloween...

Dear Diary,

Today I awoke to the news that the dollar is no longer acceptable in settlement for the purchase of foreign goods from foreigners. This news was immediately disconcerting because I have hundreds of thousands of these dollars saved up over the past 30+ years, and I'm planning to retire soon.

The President was on all channels assuring us that this is not a big deal, and certainly meaningless unless we're planning to buy a foreign car or travel abroad. My dollars, he said, will still be "as good as gold" here in the United States. The US, he said, has the most important economy in the world, and the dollar is our currency. The government, he said, would not miss a beat. The government, he said, can never run out of money. Our dollars are safe.

The President said that this news today was only because of the international money speculators who, because they thrive on crises, help to create them. He said that these "speculators" have declared war on the American dollar. He said that this is extremely foolish because the American economy has the largest GDP and also because the American government can never run out of money.

So, in response, he has directed his people to halt all international payments except those deemed to be in the vital interest of the United States. And for those deemed vital, he said that any government agency can independently authorize payments of any size needed to keep the vital foreign goods flowing in. America won't be held hostage by either our own internal budgets or foreign currency exchanges, he said.

I'm not generally one to panic at anything, but even as reassuring as the President's words were, I started to panic. So after a little reflection I decided that I needed to call in sick to work and run out to stock up on a few last-minute necessities, just in case. What I found was deeply troubling.

Many stores were simply closed for the day, and the ones that were still open were overrun with people who, I guess, had the same idea as me. Most of the stuff on my list was already gone from the shelves. So I went back home to call my broker.

I've been talking about a dollar collapse and buying gold for weeks now. Ugh. And I've been reading about it for months, but I was so sure that this was just one of many possibilities. And even if it happened, all signs seemed to be pointing to 2014 or later, so I was goddam cocksure that I had plenty of time before making a big move. To my credit, I did at least have my broker sell all of my bonds and put the proceeds into cash and money markets, just so I could move quickly into gold on a good dip.

I called my broker to make sure it was still liquid, what with the news and all. He said it is, as long as I'm not planning an international transfer. Next I called the largest gold dealer in my state, the one that had been recommended to me. But he said that he is only buying today, not selling. He said he couldn't make any sales because his suppliers aren't quoting sell prices today to replace his inventory. He said I should try again tomorrow. I tried a couple more dealers and got the same run-around. WTF?

So here I sit, writing this pathetic entry. I'm not sure what comes next, and I am literally beside myself in confusion, dismay, dread, despair and regret. I cannot decide what to feel. I have this deeply foreboding sense that I really screwed up this time. I guess I'll just have to wait and see what tomorrow will bring. But I think I already know.

The dollar is crashing abroad and my government's response is going to compound the problem taking it to depths never before imagined in a global reserve currency. My retirement money is already as good as gone. It's not gone, but it is now trapped while being sapped of all real value. It is trapped because I waited one day too long, even though I knew what I wanted to do with it. This is the real world, and there is no reward for knowing, only for doing. I didn't do, and now I will have to face whatever reality delivers while knowing what I knew. What an absolute horror.


«Oldest   ‹Older   401 – 600 of 674   Newer›   Newest»
Franco said...

FOA: [By] changing international law such that no form of debt can force it's payment in gold!

Am I understanding correctly that freegold requires a change in the law that would make the leasing of gold undesirable?

Woland said...

If, by undesirable, you mean that gold which has been leased
may not be claimed in the event of a default, but only the
dollar value of that gold, then you are correct. However, in an
AG world, whatever dollars are recovered from default may be
used to purchase gold in a free, cash only marketplace, so in
that sense a lender will not forfeit the opportunity to own gold.
Under such circumstances, no one will lease gold, but it CAN be
used as collateral for a currency loan. In the event of default,
the gold is liquidated in a cash market to settle the currency
deficiency, but the lender can only claim the currency value
of what was lent, not the collateral itself. And nothing will be
more liquid than gold. For OTHER collateralized loans, the
collateral itself can still be seized to settle the deficiency.
My 2c

Jeff said...

FOFOA: In Freegold I imagine that these types of cash purchases will be explicitly allowed in gold, in order to collect the tax. Otherwise governments will run the risk of revenue lost to a black market. By allowing cash purchases in gold, the government can track and tax a certain segment of commerce that would otherwise go underground during a crisis. Much like the arguments for legalizing illicit drugs. But I wouldn't go so far as to call this legal tender. More like "allowed tender".

The credit deal, or debt portion of legal tender is the contractual protection offered by the court system. I imagine that this will not change. Courts will only be able to enforce settlement in dollars. You can't force a closed tractor factory to deliver a tractor it never made, but you can force it to pay the equivalent in dollars. You can't force a barren mine to dig up gold it never had in the first place, but you can force it to liquidate assets and pay in cash. In this way, gold will not be legal tender and will not trade as a currency as a means of price discovery.

DP said...

FOFOA: I like the idea that gold would be legally allowed for payment of debts, but could not be required to be received as payment. It has an elegance, does it not?

DP said...

FOA: In essence, the jump into the Euro is more based on a new currency that is more honest in dealing with our historic human dynamics. Let's try not lying to ourselves and admitting that gold alone in a currency will not remove our will to borrow and lend and therefore eventually defraud each other! Would it not be better to at least not shackle the money to gold. Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term. While removing the need for CBs to maintain fixed exchange structure through a dirty float against gold.

But, the most important aspect is in the escape valve gold would provide to developing countries with positive trade flows. Those that wish to settle their debts outside the currency arena using gold as a settlement. Or, if they wish, to buy gold in the open market with their trade reserves.

The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force it's payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force it's return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them in addition to general use demand.

The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way. Not to mention that it's sale as a commodity (outside it's money use) on the private level will be well taxed.

I'm unaware of anywhere today you can enforce the return of physical gold that is owed.

FOFOA: Imagine you paid in advance for a new tractor from a tractor company. But before it finished building your tractor, the factory went out of business. When you later sue the factory owners in court, do you think the judge will award you a tractor? Can a judge force a defunct company to cough up a tractor it doesn’t have? Of course not. This is why the legal system can and does only enforce legal tender settlements.

DP said...

FOFOA: Hello Bron,

On gold leasing:

I don't know where you got the idea that I have strict Freegold rules. I think you are putting more emphasis on this leasing thing than necessary. I guess it's understandable since your business involves borrowing gold. But as I have said, it is not a prerequisite of Freegold, but more like a natural consequence. The only prerequisite to Freegold is the collapse of confidence in paper gold. The leasing idea is about making a natural concept as clear as possible to the banks that might not get it. Keeping gold out of the business of credit money. Eliminating the lending of gold (or credits denominated in gold ounces) for monetary purposes in which fiat loans will do just fine.

Aquilus said...


Jeff's link above is the crux of the answer and comes from How To Dig a Hole To China

No change in law is really required as long as gold is not currency/legal tender.

Laws might (but might not) be needed to ensure that gold specifically cannot be used as currency. Those are the laws that FOA is referring to.

A court, even today, can only force liquidation and/or payment in currency/legal tender in the value of a loss, but no court will (even today) ask for compensation in assets.

Just as an example, even when contracting for gold delivery, if the other party does not deliver because they don't have the gold, a court would not force them to go find it. The court would allocate the amount of currency necessary to redress the damage caused to the affected party.

Same thing with international law - settlement between central banks will not be done in intra-central bank shipments of physical gold.

Rather the CB with the surplus can choose convert part of it to gold in the market, but without a "gold-window" at any CB in existence any longer.

Aquilus said...


Ahem, also, yes, what DP said.

DP said...

My apologies to all the Link Haterz out there.

I wish I could have found the time to waste on reinventing the comment.

DP said...

Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term.

This does not preclude the idea that it might bob & weave a bit on its way to the long term.

Motley Fool said...

A bit, sure. 15% no way. Sorry victor, FG isn't a gold standard. Same rules don't apply. :)

KnallGold said...

-Now I'm thinking about burning a $ note, symbolically, NOT - if you are a saver, you'll keep everything, still have many £ coins etc, though I burned a Cuban $ note for celebration of the fact that Freedom is still the most seeked value (and socialism is REALLY out of vogue). Well I placed the remains of the Cuban CB note in my cigar lounge, covered with a sticky plastic foil (sp?), quite stylish, but then, "Its a hell of a price to pay for being stylish!" (Clint Eastwood aka Dirty Harry).

I loved the Oingo Boingo back then (and still!), funny to find them again on FOFOA, lots of nostalgia coming up! Yeah the 80'ies were great, when music was still driven by melodies.

Front Man Danny Elfman was also known for making film music, particularly Tim Burton movies. Yeah I'm actually a "sad old Goth", it was also G word none dared to mention but we liked it to be totally against mainstream and commerce and still having the spiritual symbolism filling the holes of the prevailing atheism. An inner hunger never ceasing, if you've grown up in a catholic family.

-We are busy here preparing for winter season, good to be connected in the physical plane, many summer grasshoppers are starting to find out again.

-I was at the local coin dealer recently, looks like the market has cooled down considerably the last months, not too bad having a) stable prices (a more secure market for potential new buyers) and b) building a solid base for the next leg up which I'm smelling right around the corner, as we know the inherent instability, so please, psssst !

-As for the US elections, choose your side (not my style but this Gangnam style feels like Another mass phenomenon sprouting out of nothing, seen even the UN president having fun with it).


Unknown said...

I wonder which flavor of global corporatism the majority of sheople will choose today, strawberry or blueberry ??

Woland said...

a thought......

The Golden Rule: Love thy neighbor as thyself.

The Woland Rule: Know thy counter-parties as thyself.

It's 10 PM: Do you know who ALL your counter-parties


Anand Srivastava said...
This comment has been removed by the author.
Anand Srivastava said...


Let me put my perspective on Silver and Gold in India.

In India all gold purchased for Jewelry is in strong hands. This is meant for personal use for long term, possibly for children and their marriage.

Gold purchased as bullion is probably in weak hands, because it is being used as investments. Investors are weak hands.

In 2009, lots of people sold gold bullion, when the price of gold increased the second time. People thought that just like the peak before the crash it will crash again. And lots of people lost out. This happened in India. And yes all the gold sold was bullion not jewelry.

Now silver bought for silverware, idols of Gods or jewelry will be in strong hands, but silver bullion will be in weak hands.

In India nobody cares about the silver for jewelry. It is considered too cheap even by the poor :-). You might as well buy fake jewelry made of iron or tin. Yes some modern people buy it, but they are not buying it for its value.

I believe the same thing applies to the investor in China.

I also believe the same thing applies to people buying Gold bullion in both countries :-). They are not freegold aware. They are investors and by definition weak hands.

Jeff said...

foreign demand for treasuries:

LZ said...

I believe the same thing applies to the investor in China.

There was an article about a guy who bought 90kg in physical after the announcement of QE3. He said he buys and sells often. People in China watch gold and silver charts the way Americans watch stocks on CNBC. There are entire financial shows devoted to the precious metals, all relying on technical analysis. There are buy-and-holders here, most Chinese view gold as money, but there are also many traders. China is awash in a credit bubble and money looks for a home. With stocks down, many turned to the gold market. With futures and currency opening up, now that is also becoming more popular to trade.

Michael dV said...

It would be a major change of direction for Fofoa to engage Sinclair. He has in the past responded to Ackerman a few others but I assume these were part of ongoing communication between the parties. This site is devoted to the ideas of A/FOA, it is not devoted to 'spreading the word' or convincing others that they were prophets or had 'future vision'.
To me this is the most misunderstood aspect of this blog, that we somehow advocate. We are just a group who feel that there is a disturbance in the force and are trying to understand it. We are not like some chicken littles running around screaming 'the silver is falling, the silver is falling'.

sean said...

Choice quotes DP and great summary Aquilis, thanks...

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

Anand srivastava,

Adding to what you mentioned, Gold and Silver are very regional in India.

But I think Gold as Bullion is a very small market in India compared to Gold Jewellery market.

In the south India, Gold is very prominent. I know Christians(5%) and Muslims(12%) do not buy silver in India. Even among the remaining Hindus(75%), buying Silver is understood as buying Silver wares and small statues of God, but never Jewellery.

Comparing Silver to Gold, In my very extended immediate family(count 70), no one owns even one oz of Silver, but own several Kgs of Gold. Many also have Rold Gold/Gold covering jewellery, but never Silver Jewellery. As Anand said, people do not have high regard for Silver Jewellery, though I like it personally. The only Silver Jewellery worn are by kids as ankle bracelet.

Biju said...

The Phenomenon of Rold Gold/Gold covering jewellery has really picked up in India and I see the difference each time I visit family. Most mention the chain snatching/robbery as reason for buying these fake ones, some do it to project wealth in society beyond their capacity.

Michael dV said...

one annoying thing about the Chinese....when I visited I was not allowed to pay for ANYTHING!! I was visiting someone I had not before and I kept trying to pick up the dinner tab but I was always told 'next time'. I had no intention to have that happen but not knowing (I assume it is custom) made me feel like a freeloader.

Unknown said...

Silver? Gold? Which one got slaughtered to the tune of approximately 50% from its (not even) all time high of 49 dollars and change, and hasn't budged much since? I know that hurt big time, you (A)mazingly (R)idiculous (T)wat.

Edgar said...

I have another one for you, Art: which one went up the most since 2000, Apple or Gold?

Anonymous said...


Please don't respond to the escaped mental patient. Its posts will be deleted on sight. How many times do I have to say this? Hello.

Don't feed the fire. Thanks.

Unknown said...

Hello, SV.

Quite right. Message received.

Unknown said...

Living is easy with eyes closed
Misunderstanding all you see
It's getting hard to be someone
But it all works out
It doesn't matter much to me
Let me take you down ‘Cause I'm going to Strawberry Fields
Nothing is real
And nothing to get hung about
Strawberry Fields forever

Or, will it be blueberry fields ?
It doesn't matter much to me ...

Pick your favorite flavor of global coporatism -red or blue.

Anonymous said...

Thank you, Duke, and thanks to the rest of you in advance:)

Bad Company

RJPadavona said...


Speaking of someone feeding the fire.....

I've been digging that Atomic Rooster you posted a week or so ago. Your knowledge of great music truly makes you a wealthy one.

"But I say, spend your time in the company of truly wealthy ones, see how they make gold lie very still!"

And here's an excerpt from an email I sent FOFOA a while back:

PPS: Please interview Sleeping Village. He's got to be the grooviest
motherfucker on the planet!!!

Dude, your fans have spoken. Make it happen. Hopefully we'll be able to see your face through all the fuzz.

Oh, and we might even want to hear your thoughts on the mining industry in Canada..... where it's colder than my mother-in-law's love ;)


Holly said...

Hello all

I am new to the boards and have some questions about freegold. I have read the "Return to honest money" blog post as well as parts or most of a few other posts, but I feel if I had some nagging questions answered before I kept going I would more easily absorb what I was reading.

I am having a hard time with the concept of to monies. One acting as a preservation of wealth and the other acting as a medium of exchange. How would Von Mises's regression theorem apply to the 2nd money, which is not convertible to gold. I understand how the current fiat dollar came to be since it's roots can be traced back to gold, but how will another money arise out of this next crisis that is fiat? Is there an expected hard money phase similar to what the US used to have followed by the inevitable fiat which stems from it?

I do not understand why hard money would be a bad system. All debts are denominated in gold. Banks can loan out gold they have on reserves and their depositors know this and understand the risks involved. I would envision checking accounts being 100% reserves and savings accounts varying according to the depositors risk/reward tolerance. What is wrong with this financial system?

To arrive at the value of gold being ~$30k-70k in a freegold system, are you simply replacing all of the actual paper wealth in the world and replacing it with gold? How long do you believe gold's value has been suppressed? It appears thought out history gold has never has that kind of purchasing power, and gold could not have been suppressed throughout history.

I am coming from a hard money side of the equation, but you guys appear to be very knowledgable and I am open to learning new ideas about what has and what will happen. Thanks for the help!

H. M. Socialist said...

@Hard Money Holly

I do not understand why hard money would be a bad system. All debts are denominated in gold.

Do not listen to the LIES of these freegolders! Hard money is the most perfect system! Defaults and bank runs are a small price to pay for the benefits of hard money, which are many. I just can't think of them right now. BBL


Michael H said...


Your comment covers much ground.

On this one point:

To arrive at the value of gold being ~$30k-70k in a freegold system, are you simply replacing all of the actual paper wealth in the world and replacing it with gold?

See, for example, How Can We Possibly Calculate the Future Value of Gold?.

On How long do you believe gold's value has been suppressed?, see perhaps victor's How Credit Suppresses the Gold Price (with Alice and Bob.

For good general reading on the concept of money try Moneyness.

Phat Repat said...

@Michael dV
I have had the same experiences. I have been told it is because I am a foreigner, a guest, and I should just enjoy. I'm okay with that though I do feel uncomfortable too. I don't believe anything is expected in return, at least I have never felt any pressure in that regard. Of course there may be ulterior motives. But when they're spending close to $500 for a bottle of premium rice wine, who am I to complain? ;-)

It's strange but I suspect many people don't realize how wealthy the Chinese have become. I bump into billionaires on a regular basis. Of course that's denoted in RMB, but still some very wealthy individuals. Good for them.

Holly said...


I know you are just posing as a hard money guy, but I really would like to understand your position. In a hard money system why does there have to be defaults and bank runs?

Here is my idea of a free market hard money system. Lets imagine a bank does 100% reserves for checking. Idle money not being used anywhere ready to be used at any time(no problem there). Let's also say they have a 50% savings reserve. The bank has the right to loan out up to 50% of what you put in savings. You would also agree that in order to access your savings, you have to request a withdraw 10 days before removing your gold from the bank. Could the bank loan out 50% of your money and lose it all? Sure, but those banks would not last long and the "winners" would prevail and provide a stable system of loans and savings. Banks could have any sort of reserve system they want and they could also have private insurance against bank runs etc. In a free market system banks could do whatever they want. The point is, if they run out of gold, they will be ruined and their depositors are toast(well their depositors now own the loans and whatever collateral was provided, if any).

Right now obviously depositors do not care what the banks do with their money. The riskier, the better, since the FDIC covers all deposits, what is there to lose? In a fed-less free market system, this would not be the case.


thanks for the help. I will be sure to read those.

RJPadavona said...

Hey Holly,

Why is hard money a bad system?

It's not so much that it's a bad system. Theoretically, it would work, if only those pesky humans would just stick to it. See, IF is a big word. IF Mama Cass would've given Karen Carpenter a sandwich, they both might be alive today ;)

What's incomplete about the Austrian/hard money school is that their way of thinking about human action is short-sighted. One of the most human of all actions is to desire the most amount of output while applying the least amount of input. This is at the heart of why fractional reserve lending will eventually evolve out of any monetary system, regardless of how "hard" it is. Bankers, politicians, and the people love free shit, so they'll always gravitate toward a system where they can obtain "something for nothing".

Freegold is just how our monetary system will evolve based on what has happened in the past and the fact that the power structure will always follow the path of least resistance. Freegold is what you end up with when we've went from hard money (classical gold standard), to semi-hard (gold exchange standard and Bretton Woods), to a pure fiat system (what we have today).

Governments and central banks still hold massive tonnage of gold as national assets. When simply printing currency no longer allows them to kick the can down the road any longer, the national gold can be revalued (at a much higher price) as a result of a true physical gold market being established out of the paper gold wreckage. This allows them to shore up the asset side of their balance sheet. This is the path of least resistance our "leaders" will take that I mentioned earlier.

Freegold is not about advocating any system. It's about taking what we know about the world AND about human nature, and applying this knowledge toward determining how the next monetary system will evolve.

Like you, I arrived here via the hard money school of thought. The revelation that humans desire easy living (and therefore easy money) was essential to my comprehending that a system of two monies is where we are headed. IMO, this is where the Austrian school falls short in their understanding of human action and their desire for a hard money system.

Hard Money: Too hard for humans!

Michael dV said...

The American Horror Story begins tonight. I believe we are now on a road to Euro style socialism from which we will only depart when the wheels fall off. I am very disappointed in the Obama win but at least now conservatives will get less of the blame for what is coming...apologies to all the nonUSA folks and apoliticals out there for the interjection of opinion but I put a lot into these elections and it appears to little avail.

costata said...


A lot of people here at some earlier time were in the hard money camp or at minimum spent a lot of time investigating that camp's theories and claims about their system.

In your comments above I see you trying to reinvent the wheel and describe how you see this operating. Instead, why not point out the authors and books you learned your hard money concepts from. Some (many?) people here may have read the same authors/books.

This way we can clearly understand the system you are favouring and address that system specifically. Trying to create your own description isn't working for me.

Motley Fool said...


This is a good starting point, I think : The debtors and the savers . It's on point for what Michael H was saying.


Holly said...

Thanks everyone. If it is more of a human problem than a mechanics problem, then I totally understand the argument.

I don't understand though how simply revaluing gold will shore up balance sheets, unless you say the fiat will remain as is after the hyperinflation hits, which is what is puzzling. If fiat goes hyper, then why would ANYONE, ants or giants, sell their gold for any amount of fiat?

From my relatively short time on this subject, my thoughts are this... after HI, we will go back to a hard money standard and simply drift away from it over the next 100 years or so, like in the 20th century. One cycle after another and gold is revalued each time at the end, resetting everything.

Thanks again everyone. I know I have much reading ahead.

JR said...

If fiat goes hyper, then why would ANYONE, ants or giants, sell their gold for any amount of fiat?

Probably because it (the particular fiat) is not going hyper (assuming it ever was), nor is it expected to do so over the time frame the gold holder demands the fiat for (aka the time it takes to by the stuff the gold holder wants).

JR said...

VtC wonders how could a country like the USA could go back to a gold-backed currency again --->

Cliff's Notes - OMG they can't!

"Everyone knows where we have been. Let's see where we are going!"

Michael dV said...

I just reread VtC's piece referenced by JR in the post above. It gets clearer each time and is an excellent critique of Rickard's position. highly recommended if you have not read it.

Anonymous said...

@ anand srivastava November 6, 2012 8:04 AM

I liked your thoughts on Gold and Silver bullion plus jewellery.

In my many travels I found that in the Middle East and India the idea of jewellery being a store of wealth is normal. In Dubai you buy Gold by weight not by artistic merit.

In the "West" I don't think there is the same mentality. If you bought jewellery in a London shop I'm sure you would not offered it's true value if you tried to sell it back.

I do get your point about Gold and Silver bullion (especially Silver). I think in the West Gold coins serve a similar purpose as jewellery does in the East.

I realise now that I was a weak hand when holding Silver bullion. I quickly sold when i realised I might be backing the wrong horse. I now buy Gold coins and see them as a store of wealth that can be sold piece by piece in the future if all of my other sources of income turn to dust.

I now consider myself a stronger-hand but not wealthy enough to be a real "strong" hand.

Anonymous said...

@ Phat Expat

I like you comments about China and their wealth.

Some years ago I took two delegations to China, The first time I went the place was unbelievably full of bicycles. The next time I went most of the bicycles had disappeared and replaced by just as many cars.

I don't suppose I would even recognise the place now.

LZ said...

If fiat goes hyper, then why would ANYONE, ants or giants, sell their gold for any amount of fiat?

Because at the end of hyperinflation may be hyperdeflation. People made fortunes in Wiemar Germany going to cash one month before the new currency was issued.

Jeff said...

FOFOA: Yes, we will have a grand deflation... denominated in GOLD! It will be brought on by all the same factors the deflationists correctly recognize. The failure of debt, the winter cycle, etc... And it will look the same as they imagine. Depression, unemployment, falling prices (when priced in GOLD), black and white pictures, etc...

Now you might ask, "What's the difference between a deflation denominated in gold versus dollars?" Well, there's a huge difference to both the debtors and the savers. In a dollar deflation the debtors suffocate but in a gold deflation they find a bit of relief from their dollar-denominated debts. And for the savers, the big difference is in the choice of what to save your wealth in. This is what makes the deflationists so dangerous to savers.

The deflationist equation, if properly applied, always leads to the conclusion that the best things to save are cash and Treasuries. And some (not all) deflationists even apply their formula to gold (because they believe it will behave like a commodity) and conclude it must crash to around $200/oz during their deflation. So they warn their readers to stay away from gold.

Can you see how one little flaw in the numéraire can make an analyst very dangerous to your bottom line?

ein anderer said...

What’s happening with your Blog? There where some jewels …

DP said...

FOA: An "inflationary depression" is in the cards -- a "price deflation" doesn't have a chance!

Unknown said...

No more delicious bass.

Michael H said...


One more point on the 'projected value of gold'. The change from today's price to the projected price is only partially due to 'suppression', by which we mean the presence of gold-denominated credit aka unallocated and fractionally-reserved gold accounts.

The bulk of the revaluation will come from the change in function of gold.

As for value comparisons of gold through history, keep in mind that the ratio of goods and services on this planet to stocks of gold has likely never been higher than now.

Woland said...

A nice couple of comments over on Cullen Roche's blog. They
have a distinct Fofoa reader flavor. OK. So which one of you
guys is responsible? (nice work)

Michael H said...


From my relatively short time on this subject, my thoughts are this... after HI, we will go back to a hard money standard and simply drift away from it over the next 100 years or so, like in the 20th century. One cycle after another and gold is revalued each time at the end, resetting everything.

If this was how things were going to play out, then the big 'event' would have happened starting in 1971. But it did not. We had some inflation, but the USD continued as the world reserve currency, and continues to serve in that role today.

How was this achieved?

Flow Addendum

and also

Peak Exhorbitant Privilege

They key is that the USD is not the world's reserve currency through the actions of the US alone, but rather serves at the whim of (and only with the continued support from) the rest of the world.

The answer to why we didn't get hard money then, is the same answer to why we won't get hard money now. Preventing hard money was important enough to the ROW that they were willing to give the USA 'free stuff' for 40 years.

Phat Repat said...

Happy to share. It's changed substantially for me too. Your observation about transportation is correct. And when you consider they pay about the same for gas as the US does, well, somebody is making coin. :)

Also, if you see people driving around in BMWs, Porsches, Ferraris, etc... Well, they paid about twice (or more) what it would cost in the US. There are plenty of high end cars around too. And, since financing is not so common (yet), most of those vehicles were paid for in cash. For a normally conservative Chinese, many driving high end cars don't tint the windows, to show off just a bit. ;-)

Phat Repat said...

@Michael dV
Your concern about the US going down the Euro Socialist path is unwarranted, IMO. The American people would be quite fortunate if it was anything like the Socialism the Germans had. Though I am hopeful for the US, there is quite the overhang of debt, dependency, and rules/regs that need to be cleared first; and once those band-aids are ripped off the rebuilding process can begin. FG anyone?

Anonymous said...

@ Woland

As suggested I went over to Cullen Roche's blog. After reading some of his replies to comments convinced me never to have him as a financial advisor.

Anonymous said...


Is there some way that each comment could have a number so that referring back to a previous comment could be made easier?

Anand Srivastava said...

duggo: Use the link on the date/time below the message.

somanyroadsinvesting said...

Recently been rereading some of the old posts that. Really like the Credibility Inflation and Debtors & Savors.

One thought popped into my head in reading the Credibility Inflation post. FOFOA and FOA seem to make the argument that it was the expansion of the $IMS financial system and credibility in investment mkts that absorbed all the new dollars so as to not cause major price inflation. Seems plausible but I also saw a good presentation by Paul Tustain from Bullion Vault which makes a compelling case that it was the computer chip which allowed major increases in productivity that lowered prices so much as to counteract the monetary inflation, ie. prices would have actually fallen were in not for the monetary inflation but combined, prices had modest increases. But now we have reached the maximum benefit of the CPU and cannot wring out any more gains from it.

I have seen this argument before from some people who say to bet on gold is to bet against technology and efficiency gains that result which will counteract and inflation on the monetary side.

Any thoughts?

Not sure if this was posted already but saw this inflation/deflation debate on the Peter Schiff Show:

Thought was pretty good. Seems to pretty much jive w FOFOA view on hyperinflation. Prechter still sticking to his advice of holding physcial dollar bills in your mattress and the Dow going down 90% in NOMINAL terms. I guess anything is possible but listening to the interview his arguments sound weak. When pushed by Schiff he basically said oh the govt will just repudiate the debt vs using the printing press. Seems bizarre.


Woland said...

Hello Fofoa;

I'm kind of excited about something. So here's a question?
What's in a name? What if a name is just a name (in a different
language) for something else. And what if that something else
refers to a "substance". A very important one. That's a fun
puzzle, huh? Cheers.

Anand Srivastava said...


Betting on gold is the wrong way to look at it.

Gold is the last option.

First you spend the money on whatever you think you need now.

Then you spend on buying things that you need tomorrow.

Then you invest into things that you think will pay off in the future.

The remaining you put in gold.

The gold option is only for those that do not know how to invest. Yes such people are the majority :-).

If you know which technology company will give you most money, invest in it. Don't buy gold.

Buy gold only according to your understanding. I guess the understanding refers more to other things, as gold is a no-brainer.

somanyroadsinvesting said...

Thanks Ananda for the response but I dont think you really addressed the issue I posed. FOFOA and FOA said that the inflation in the credibility of mkts absorbed the new flowing dollars to prevent price inflation. Others like Paul Tustain argue it was the micro processor and related efficiency gains than reduced prices dramatically and cancelled out the otherwise price inflation from the monetary side. 2 different views on what happended.

As far at the 'bet', you can look at it however you want. For the price of gold to go up there need to be more buying pressure than selling pressure. If prices in general are declining to efficiency gains though new technology then it would be logical to assume there would be less interest in gold. I was not making any comment on investing in technology companies.

Jeff said...


FOFOA: The problem with the gold standard was that the 'store of value' was not allowed to float against the expanding 'medium of exchange.' It was still good for alert savers to hold the 'store of value' during these times, because ultimately the 'medium of exchange' would have to be devalued. But during long stretches of time there was no movement in the trading price of the 'store of value.' So within those limited time brackets, even the saver of physical gold was being cheated by the socialist expansion of the 'medium of exchange.' Thus FOA's term, "hard money socialist."

So even a "gold backed" currency does not fully prevent this problem. You see, the problem seems to be that whenever the currency and its backing are presumed to be the same thing, the savers get screwed. During the gold standard the dollar and gold were presumed to be the same thing. Today, dollar-denominated debt is presumed to be the 'store of value' to the dollar's 'medium of exchange.' And even gold is not allowed to float freely today because it is traded in a type of expansive paper market that is a reflection of the old dollar.

It is a fallacy to think that making the currency to be equal to some physical backing item will keep it honest. It never has before, in the long run. And the second fallacy is the belief that for a currency to be honest that the backing item -- the 'store of value' -- MUST be distributed by the printer himself. During the gold standard the US Treasury was a one-way gold window distributing the 'store of value.' Today, the US Treasury is a one-way debt window, distributing the 'store of value.'

How about an honest and fair currency backing that can be bought ANYWHERE from ANYONE? How about an honest and fair currency backing that is NOT considered to be the same as the currency, in quantity or quality? How about an honest and fair currency backing that FLOATS in price against the 'medium of exchange' scrip money at all times? How about an honest and fair currency backing that performs its "savings" function even over relatively short periods of time, not just during the fiat devaluations that come along every few decades? How about an honest and fair currency backing that will not collapse whenever the fiat collapses, but will actually do the OPPOSITE?

Is this not much better than some silly backing assumed to be the equal to the scrip money at all times, handed out by crooked politicians with ever-increasing rules and flow restrictions?

Anonymous said...

@ anand srivastava

" Use the link on the date/time below the message."

I have been doing that but it's cumbersome. Numbered comments would be far simpler.

DP said...

We could try emailing Google and asking them if they would mind changing the way Blogger works for us?

Motley Fool said...


Perhaps you forget the argument that cheap oil made the progress of the last say 50 years possible. Increases in technology certainly helped. It's not a either or argument. Many factors contributed.


Anonymous said...


Thanks, bro. It pleases me that you dig the tunes I share. Music makes my world go around, and I like to keep the music going around.

Yeah, I'm one of the two FOFOA mentioned that doesn't have a webcam and mic, haha. Shit, I don't even have a cell phone anymore. Old school is better. I do have a studio mic and a few instrument mics, though. I'll have to see what I can come up with. Thanks for the vote of confidence.

You said the magic word - Fuzz!

Fuzz alert!

The other fuzz:)

Anand Srivastava said...


I don't think the present is a very good indicator of what should really happen.

Gold stores the excess production of people. If people are making more money it should attract more money, and thereby increase in value.

If production increases due to technology, the prosperity should be reflected in the price of gold.

Unfortunately, in the presence of paper gold, the gold does not indicate anything, its price becomes irrelevant.

It is quite possible that the high advances in technology, allowed the IMF$ to continue for a lot longer, than it would have.

It doesn't seem to me that the two opinions are very contradictory. But anyway it was ultimately the willingness of producers to support the current regime which allowed it to continue. Also they willingly supported it because it did give them some benefits. China may have given a lot of money to the USA, but it has improved its own standing in the world because of that.

Anonymous said...

Posting after a couple of years reading and ground observation if you will, what a ride!

Isn't it possible that the efforts of generations culminating in the late 1990s, who put this "pre free/libre gold" floating EUR into reality has for whatever reasons geopolitical or sheer unluck later passed the car keys to vastly incompetent or compromised generation of rulers of the EU-universe as we know them today? Given the fierce economic war environment, mistakes and traps like emerging 2speed EU or further fractioning of the whole project - can't discount that in that case the freegold will remain an unborn baby, then we are left with asians and their timing/priorities might be say a decade or more away from here..

That being said some form of upward re-evaluation of gold in the real domain is quite probable and around the corner. More to the point, what about "right timing" tools and methods to determine the time to jump off that yellow steamer in the future? The timeline presentations and logic as shown by the goldbugs like Turk or public-act/speculators Maloney seem solid, e.g. plotting dow/oz or meassuring it against M2, interest rates, homes/rents, crude etc. This topic has not been addressed here for a long time, as others posted before - it's silly to meassure it against currencies, but always no follow up suggesting and or discussion on other "reliable" sets of methods, which is kind of strange, when so many of you fofoans claim checkin in that flashy Allin Elvis motel. I'm not in position into such bold move and it's not about greed, but at least aiming for the conservative top should be part of the talk..

In either case we are looking into opportunity of $7k-15k/oz in the abortion scenario of rehased goldstandard or twice/triple/.. that rate in case of euro freegold.

However as voiced many times before, given the "hight time" of our global civilization (shift of labor to asia, peakoil, environment destruction, overpopulation) I kind of doubt the "simple operation" of exchanging for real assets after FG won't be that hassle free as here theoretically imagined/wished upon.

Naughty Slumdog said...

Golden Dawn know nothing about ECB. They have a problem with emigrants. Yes, you are right, they are not the extreme right you see in western Europe, they are much worse, they beat Pakistani in the streets. Similar to what was back in ’30 and ’40. And if they have a problem with somebody from EU, it is Germany they have a problem with. But it’s fair game, germans share the fine feelings toward greeks. Germany has a well managed extreme right and has a much advanced way to contain immigration (non-desirable muslims): (

Leave small things aside, boy-oh-boy, do we really have a credible union? Does it deliver the promises?
There was already an ugly precedent with Maastricht criteria. Now was reloaded with the “Pact for Stability”. Now look what they committed: “The rules mentioned under paragraph 1 shall take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes. “. There are three month to the expiration of the deadline, who has actually done something? Hard to say, it was a glorified marketing tool for EU Bonds.

And because the poliical path failed, they put ECB to do the job. Which is not correct, as management of distressed assets, be they public or private, is not the job of a bank, even more of a central bank.

This is the big threat to euro, not the FED.

byiamBYoung said...


"Everyone knows where we have been. Let's see where we are going!"

I've read that line at least a hundred times. It only now clicked for me what the devil it meant. I'm dense it seems, but ultimately penetrable.

Thanks for diligently reposting the essential crumbs from along the trail.


Naughty Slumdog said...

Thanks for the comment. ECB selling USD for gold, that would be a financial Pearl Harbor !
I somehow perceive that the two big boys, US and EU have a different value proposition for the bonds buyer. US bet on certainty of growths, that would somehow catch up with the flow of bonds issue, along with persuasion of foreign nations to grow more credible by increasing their USD reserves. The perpetual growth model at significant rates is questionable, that weakens the US case.
EU preaches the stability of area and reputation of Nordic/Western EU. The bondholders will preserve the value as inflation will not be severely checked in EU. The current EU model guarantees in my opinion a better return to bondholder, due to low inflation and commitment to deleveraging plus current healthy balances with other economies. The weak part of EU is the credibility of the political organizations and pain they put on public.
You cannot entirely separate this from the financial area.

Money/currency is ultimately a public facility. Along with roads and schools, it facilitates the wellbeing of the population in the respective community. Being something of public interest, it consequently needs to be orchestrated/managed by the rulers of the public space, which are the politicians. Politicians mandate ultimately the experts, that hands-on tackle the matter and advice on complex issues. But make no mistake: there are the politicians that are in the driving seat. No matter how good and sound the design of currency is, if you have poor politicians, sooner than later they will bastardize/sodomize the currency. And what would be the alternative to politicians ? It is obscure for me how somebody fully independent can be appointed in CB circumventing completely the political arena. Bear in mind that such fully independent person should still be held accountable in a way or another by the beneficiaries of currency, no matter how the complex the matter is.

Naughty Slumdog said...

Currency/money is some public facility, has value only through public acceptance. It is a convention: in case individuals decide to discontinue the convention, the currency vanishes. The “safety” of money came from the strength of the consensus around the convention. If the currency is of powerful nation, it is credible. If came from a weak nation, it is insignificant. Money/currency itself is not much. Bank deposits and pension funds are perceived as very safe because they are backed by public authorities, not by their intrinsic value, unlike gold, that is backed only by its sheer value.
I read “debtors and saver”. Somehow I was bitter, as I perceived that the author favored the hard money camp. Hard money camp is typically the people that HAVE the wealth, and want to protect their CURRENT WEALTH against changes. The HARD money camp, advocates of “slow flow”, are not interested in rapid multiplication of wealth, that inherently would mean spilling over wealth to the others. The soft money camp DON’T HAVE WEALTH, and are indifferent to the destruction of PAST STORED WEALTH. The past wealth stored in money/currency is eroded in the process of “fast flow” of money, but due to the higher number of transactions, more wealth lands to the people that previously did not have so much money/currency wealth. Such mechanism is a matter of negotiation and arbitration in some forum, and such a complex things should be explained in a transparent but simple enough manner to all users of currency. It is not who is right or wrong or who is wrong, who has virtue or not.
The currency needs to deliver it’s functionality, that is to assist facilitate the economy for the wellbeing of most of its users. Too little currency is harming on short run. Concrete case are Greece and Spain, where depositors sent their deposits to safe harbors, such as Switzerland, US and Germany, starving with cash the banks and the economy, not only the governments. Greece is now in some sort of spiral, when the GDP goes down and down and understandingly the debt to GDP ratio has no chance to improve for a rather long time. There is some risk that such pattern would be seen in all EU, if the public debt contracts the economy too much. Nobody really likes lots of public servants, but should not be forget that they are consumers as well. The whole catch is not to let them starve, but to migrate them to value adding jobs, that are difficult to be found in a recession period.
Oversupply of money/currency means hyperinflation, I have already shared my experiences with such wicked environment.

So for me currency is a tool. Can not produce wealth be itself, but it can facilitate or alienate wealth. It should be managed with wisdom and prudence, not to cause grief and pain to its users, because this is opposite to its reason to exist.

Jeff said...

All those who want to sell the top (but aren't greedy) need a formula. A secret sauce. What's the magic 8 ball say? 2333?

FOFOA: Fair warning to all gold bugs who don't understand Freegold

I'll make a prediction right now. As we approach and surpass $2,333, other high price predictions notwithstanding, you'll read articles from all of your favorite gold bug writers making the comparison with the 1980 peak. And if the ascent is anywhere as vertical as it was back in July and August, that comparison won't be lost on a single gold bug. No one wants to miss the top like so many did back then.

So when it starts to fall after a vertical rise, and it will fall, no one will be thinking about those other high price predictions. Instead, they'll be thinking "get out now, just in case. I can buy back in later and make a profit." This group will include all paper gold traders as well as a good portion of the "physical" gold bug community. And because of the "specialness" of that number, $2,333, there won't be any paper gold buyers trying to catch the knife, so it will fall hard. Possibly too hard. No one wants to be that guy who bought on the way down in 1980.

This could potentially be the final shakeout of weak physical hands, because there will be plenty of strong hands catching that physical even though physical buying won't stop the price from falling. Unfortunately for a few long-time gold bugs, the lack of a fundamental and foundational understanding of a much higher value could see them liquidating at the worst possible time in all of history. And that would truly be a shame. At least I have given fair warning. I'm not predicting that this is the way it will play out. Only that it could. And being aware of this possibility has value if it gives you strong hands at a key point in time.


Anonymous said...

Jeff> if your comment & repost was targeted at my questions, thanks - but as explained above I'm not a goldbug and even most of golbugs today won't be selling before north of $5-7k, the edifice of this civilization and its instituions has been severly compromised just in the recent few years after 2007/8.. Simply, people smell the rotten corpse within and the "weak hands" argument doesn't apply as it used to be in the times of unquestioned faith in the system and its figureheads.

Secondly, as expected possible future low balling towards my questions - I specifically said I'm not interested in currency ratios BG/AG and such, but rather some more nuanced discussion about these switch/change assets timing tools and ideas. There are little gems or idea spring boards to further research to be found inside the tech analysis of some of the goldbugs afterall - we can't just discount all their observations.

In any case, I'm glad for the discussion around this very topic that has taken place under this blog entry and also in those few recent ones. I gather there is some sort of mental block to go into further detail, perhaps one has to take the best out of the both worlds: fofoa and goldbugs. For some of you here that might sound preposterous, off the rocker or what have you, but it is indeed complementing the big picture, at least for me.

DP said...

Looks familiar

Michael dV said...

I do see how the monetary system we have contributes to some of the socialistic tendencies of politicians. If waiting for freegold to fix them is the only solution then we could be in for a long wait and much political mischief. I am mostly saddened by the lack of choosing liberty over safety. I know times are hard but folks here really don't seem to place self reliance on the level I wish they did.
There are many people who are horribly disappointed along with me. The fact that we must now be governed by the candidate that was chosen by voters who think Obama is 'like-able' is maddening. I have never seen such a divide in the USA and I have been voting since the 70s. It seems the majority of those voting for Romney were 'intense' in their level of support while the Obama supporters offer somewhat non-serious reasons for giving him their vote. This divide is dangerous because those of us who lost will likely be forced to doing things we don't want to do. (taxes, guns, Obamacare, how large our Slurpies can be).
Fortunately for the country we probably won't see riots as the only ones threatening to riot were Obama supporters but I do see the potential for withdrawal from the political process which might accelerate our slide.

Unknown said...

The more public goldbug community leads a cheer on every spike and apologizes for every dip like they're ... wait for it ... paper chasers at heart.

I think that "mineset" tries to appeal to the larger spectrum of understanding so much, they lose sight of the idea that ones life savings is not a fleeting moment to cash out on at the right peak.

For myself, I hope I die a quit, peaceful death some day far in the future, and that life savings will not have been needed to survive against the tyranny of fiat fascism.

It is my hope that it can survive me so that daughter can avail herself to it, if it comes to that.

It's just a dream I have. By nature I'm more realistic, but gold helps me have that dream.

Unknown said...

Sorry Michael my comment was meant for DP contextually, but on the whole election thing, I don't think the American president can make much difference against global senior capital (as Damon Vrabel would put it).

Neither candidate was a wildcard. You'd need a Kennedy for that, and he'd be dealt with.

I think as long as global fascism, trilateralism, corporatism, call it what you will, goes on, the likelihood of back to back terms is strong. If the American president doesn't rock the boat too much for the first 4, he'll get 4 more. It's cooked in.

Woland said...

Hey DP;

Ain't I seen that chart somewheres afore? Sure LOOKS familiar!

Wendy said...

4 more years of an Obamanation. Not that it matters much who won.

Apparently Romney won the white middle class male vote, but totally blew it with women, immigrants, non-white americans and young voters.

He struck me to be almost as dense as bush!

Anonymous said...

Duke Ellington said...
"Silver? Gold? Which one got slaughtered to the tune of approximately 50% from its (not even) all time high of 49 dollars and change, and hasn't budged much since?"

Oh, it has budged since. Up to $37 at one point. But yes, it has been noodling around and going nowhere for the past 1+ year. Just like gold. And it is destined to take out all old highs and soar far beyond, just like gold. It is a volatile baby, both up and down. Everyone knows that.

Gold is less volatile, but is far from stable. From $1900 and change last year, back to $1550. And before that, the big meltdown of 2008: from $1000 back to $700. And in '06, as I'm sure you recall, from $720 back to $560. And, for that matter, the big run-up to $330 in the immediate post-Washington-agreement days of 1999, then falling back to $280. Then from $315 down to $270 in 2000.

Of course, none of this bothers those of us who know the score -- the destiny of these metals. Every big correction is followed by a new leg of the bull, driving ever upward.

The best days are still ahead. It's a wonderful ride. Enjoy it!

Anonymous said...

Speaking of the big meltdown of 2008: at the time I was frequenting a doomer/survivalist type of forum, and I started a thread with a title something like "If you've been looking for a good gold entry point, NOW is it!". That was when gold was $100 or $150 off its high, and dropping. I took a huge amount of heat for that, when gold continued to drop. But no one who bought and held for a year had any reason to complain. And of course today, $850 gold is just a distant dream -- a fantastic bargain, never to be seen again. That was also a terrific time to buy silver. It touched something under $10, briefly, in 2008.

Edwardo said...

Axel Merck on the ECB and The Fed.

byiamBYoung said...

Sorry to bring the room down, but here is my somber take on this surreal election.

We are witnessing the result of a complete takeover of the common American mind. The American population apparently can no longer make decisions based upon fact, but are, instead, driven by herd mentality. The herd has run headlong into the whirlpool. The launch sequence has been initiated.

Today, half of the population depends upon the government to get by, day-to-day. The feedback loop has begun. There is no logical way to exit this loop without the whole system buckling.

The fiscal cliff is going to bitch slap the small businesses of America, and clock the productive citizen, as well. The economic engine of America is going to dry heave convulsively, and with each spasm,
more citizens will be thrown into chaos.

We live in amazing times. The wealth effect of the fed's monetary policy is folding like a dollar store umbrella.

I just hope this moves quickly, like ripping off a band-aid. If it is a slow sink into the murk, it will hurt many more people.

On a brighter note, I finally have cell coverage at my home.



Anonymous said...


I think most readers here are disappointed (though hopefully not too surprised) at the collective's latest cry for more socialism, bread & circuses, etc. However, I hope none of you are taking Bronco Bama's victory as hard as this guy:

Starting early this morning, I am going to un-friend every single individual on Facebook who voted for Obama, or I even suspect may have Democrat leanings. I will do the same in person. All family and friends, even close family and friends, who I know to be Democrats are hereby dead to me. I vow never to speak to them again for the rest of my life, or have any communications with them. They are in short, the enemies of liberty. They deserve nothing less than hatred and utter contempt

I strongly urge all other libertarians to do the same. Are you married to someone who voted for Obama, have a girlfriend who voted 'O'. Divorce them. Break up with them without haste. Vow not to attend family functions, Thanksgiving dinner or Christmas for example, if there will be any family members in attendance who are Democrats.

Edgar said...

Considering that COMEX longs can be forced to accept paper in lieu of physical, do you think that in fact eBay is a better place to discover the price of bullion?

Wendy said...


with your last comment in mind you should have a look at Jim Sincair's website and "trader Dan's" commentary today.

If in fact this divide is true, life does not look good for the US.

I am concerned for us (canadians as well)

Anonymous said...

MMT. AD posted this link at the Foolish Perspective, and DP tweeted it around.

... hyperinflation is the government sector taking over the entire economy ...

These people are really cool.

Leakages: Savings, imports, taxes.

This house (Congress) can afford to buy anything that is on sale in the US.

The ECB took away the keyboards of the EUR-17 countries.

The Euro countries play by a different set of rules [compared to the US]

When they [Euro countries] go out in the bond market to borrow, the markets know they are users [rather than issuers] of the currency and want a premium for the additional risk. They don't do that when they lend to the U.S., to the UK, to Japan.

Bernanke: Of course we do whatever Congress tells us to do.

Weimar Germany was a very special situation. They printed their own currency to buy gold and foreign currency with it. The day they stopped this, inflation went back to zero. [FOFOA: The dollar will be killed in the real plane...]

Exports are always real cost. Imports are always real benefits.

High interest rates contribute to inflation. Low interest rates tend to reduce inflation.

The rest of the world wants to export to us. Let them do it.

Look at Japan ... If general Mc Arthur had gone to Japan right after WW2, and he said, "okay, we won the war. We have got more nuclear weapons here... Let's cut a deal. You send us 2 million cars a year for 60 years. We are not going to send you anything." Everybody would have said you can't do that to these people. That's outrageous. But what has happened for the last 60 years? Japan has been sending us 2 million cars a year, and we have been sending them nothing. This is the biggest case of war reparations in the history of the world. They think they are winning...You want to optimize your real terms of trade

It doesn't make sense to stop using unemployment to reduce inflation and start using unemployment to protect the exchange rate.

Right now the rest of the world is begging us to take more of their stuff.

They cannot possibly realize how right they are ....


Anonymous said...

and the best one:

Didn't Iran or someone else stop accepting dollars for their oil? It doesn't make any difference.


Cottonbelt said...

As we float along this golden river re: ‘this surreal election’, Blazing Saddles always helps put things into perspective …

Hedley Lamar: "My mind is a raging torrent, flooded with rivulets of thought cascading into a waterfall of creative alternatives."

Or perhaps the modern day political tollbooth via Taggart: “Somebody’s gotta go back and get a s***-load of dimes!”

Back to puzzling through FG et al ...

Jeff said...


Fiscal cliff = government crashing its lifestyle = not gonna happen. They will make some cosmetic cuts, some cosmetic tax increases, all backloaded for ten years from now, and party on.


FOFOA: No, price discovery will be through physical delivery only. Price discovery will be strictly on the cash market.

When I buy gold from my dealer face to face (the only true cash market), he quotes me a price based on his ability to replenish his stock immediately. Usually he phones his supplier and receives a current quote. This will be the price discovery mechanism. Each gold dealer will rely on his most trustworthy supplier. And that supplier will rely on his supplier. And so on. This will create a network of gold dealers that will monitor the flow of Freegold in and out of the system. If the price is too low, then no gold will be flowing in and too much flowing out. If the price is too high, then everyone will want to sell and there will be no buyers. This global network of gold dealers will efficiently set the physical price based on immediate physical restocking after any purchase.

Anonymous said...

I agree 100% with Jeff. The Fiscal Cliff is nothing more than Fiscal Theater to entertain us and assure us that very important people are working on incredibly important things. The illusion is what matters because it's simply demanded by the Sheeple. They want to be told that a.) the situation can be successfully resolved and b.) it can be resolved using someone else's dime.

The politicians have articulated that the train wreck can be fixed, both parties with their own magic elixir. When it is time to deliver, a drama must ensue to distract us from the sheer simplicity of the matter, politicians of either stripe are utterly full of shit. They are either delusional like their constituents or they know exactly what they are doing, take your pick.

The truth is very inconvenient. The problem can and indeed will be resolved and it will require a near 100% contribution of paper wealth from every citizen. For those with no wealth, their contribution will be a severely restricted access to their future productivity in the form of credit. Try getting elected while articulating that message.

Both parties know that the falling over the FC will crash our economy and the Free Shit Army will then come after their asses. Not going to happen.

Edwardo said...

Yes, indeed, poopy, the angry white male is angrier than ever. Here's another AWM, who is, I believe, known to some of the denizens of this blog. FWIW, Mr. Norcini and I agree that the U.S. will eventually break into smaller parts, but then large national entities, especially empires, tend to.

Anonymous said...

duggo said...
"My main idea with Silver was that I was going to make a fortune overnight.... I still think Silver is held by weak hands or maybe buy people like me that think that Silver is going to make them richer overnight."

As an investment, isn't freegold (gold to $50,000 or $100,000, instantaneously) the ultimate get-fabulously-rich-overnight idea?

Best trade of the century (of the millennium? of all time?), if it comes to pass.

DP said...

I think the dollar requires a balance of fear between: "OMG austerity I better save!"; "OMG QE I better spend!"

So soon we have to find out - will they accept austerity, or just spend their way out of the problem.

Gentlemen - place your bets...

DP said...

If "OMG austerity" goes away and people stop "leaking" money out to their savings (evil hoarders!!!)... what happens to that MMT model of "let's have the G meet every month & decide how much new money to spend into the system"? Pretty sure the G will always want to keep spending, and without the leaks they won't be able to.

I suppose it will be up to the exporting nations to keep their fingers in our hole. They love lapping up all our flowing vital juice, and we love letting them do it. #DoubleWinning!

Bjorn said...


DP said...

KnallGold said...

Cool down my fellow Goldmeisters, with that painting black. Here's a nice Knall with a good local colorit, this will make your day (play it loud, as Twisted Sister used to say ;-)

It was a former Cigar production building from 1883, a piece didn't go down but they had to use a bit less explosive (150 kg Plastit) as they wanted to use it for further training.

Health, Wealth and Love,

costata said...

I may be out of mind but I find this very funny:

Jeff said...

Edwardo, I agree with your AWM conclusion about a US breakup, but for different reasons. What holds the gigantic, diverse US together is the magic dollar, not shared beliefs. Take away the magic dollar and those permanent cultural, regional differences reassert themselves. A breakup doesn't have to happen immediately post-Freegold, but I see it as likely at some point. I wouldn't call it suicide, just evolution.

Woland said...

Good morning to all;

I would like to share a discovery with the group. This will
require the confirmation and approval of our host, without
which I am honor bound to remain silent. I will leave it at
that for now, or, if need be, indefinitely. Cheers.

Anonymous said...

@Wendy, Edwardo

Thanks for pointing me to the Norcini piece.

I disagree with him to some extent because I think most republicans do not truly want real freedom or an end to socialism either. I think my parents are typical republicans. They always vote R, and give lip service to limited gov. However, they also are against any cuts to social security (they paid into it!), medicare/medicaid (can't turn people away!), and the military (that's the one thing we should spend on!).

For what it's worth I am a proponent of secession. The old south indeed has little in common with us Yankees, culturally or politically. If secession happens as a result of USD hyperinflation, all the better. I don't think there would necessarily be any bloodshed - how would any war be funded at that point?

If there is a conflict, the north would lose. All the motivated fighters would come from the south. I can't imagine anyone in the north would be gung-ho about fighting against secession, particularly not your average young whitey who has been subject his whole life to this feminized PC culture, told he's an oppressor, and actively discriminated against in the job market. I'd sure be sitting that one out, and wouldn't let my brothers partake either. So the north would only have mercenaries, and wouldn't be able to pay them, nor would there likely be any political will to pay them come hyperinflation.

Edgar said...


I cannot imagine any giant doing business with the COMEX (or any buyer other for that matter). The type of dealer network you described seems to only way to go.

ampmfix said...

Costata, that is very hilarious, thanks, both the translation and the content: "the sword cannot be defeated!" ha!

30 years ago I and a friend made a personal cult of bad movies, so bad they were a work of art (that concept caught on much later, yes we were very advanced kids, I read yesterday that a new fad in France is that boring stuff is superchic, same concept), so the worst movie goes full circle and is actually the best!

Among those, really bad kung-fu movies were extraordinary, and Scifi ones too.

You made me laugh for a change!! ;0)


Anonymous said...

I am mildly surprised at the number of people expressing disappointment that Romney did not win. Mostly because I assumed that most of the people who post here are on to the two-party scam and don't look to the "savior state" (Chs. Hugh Smith) to actually do what at this stage of human affairs (peak resources) ought be done. (See, e.g., Dimitry Orlov's sardonic essay on the "collapse party.") I know this is not a political blog and we try to look dispassionately at events unfolding to understand the coming change in the world's MONETARY system, and do not discuss OTHER necessary or inevitable changes, but FWIW my own leanings on THAT subject have nothing to do with REFORMING the current system and which party is most likely to implement the changes that will improve our society. I confess that I am with Morris Berman's assessment, that our goose is completely cooked, that Americans have been inflicted with a mortal wound pretty much from day one of this country, and all that's left is for people to be dragged by the forces unleashed - their very own propensities - kicking and screaming in utter infantile denial to the inevitable downfall. For those unfamiliar with Berman's work, here is a good overview:, and here is a good interview of him on RT by Thom Hartman:

Frankly, I think Berman's work - which focuses on the American character or mindset - meshes well with FOA's view that when the monetary collapse comes, it will "crash our lifestyle" in a big way. We don't talk about what that really means or portends here because it is beyond the purview of this blog. However, personally - and I absolutely intend NO slight to this blog by this statement, because Fofoa's writings and the people who post here have given me an understanding and peace of mind that I would never have achieved otherwise - but I have children, and I spend more time thinking about what the post-crash world is going to look like than I do about freegold. I don't assume (nor do I believe that others who post here are so naive or simplistic as to assume) that if I (they) have some gold, it is all going to work out just fine somehow. I pray I never have the disease of the rich (excepting perhaps those old families with true multi-generational wealth, who are more wise about the vicissitudes of outrageous fortune), that wealth will permit me to live and travel within a special bubble world unaffected by and unconcerned with the horrors and misery around me. For one thing, as a shrimp, I'm pretty sure I'm going to be in the trenches where all the action is.

Indenture said...

US Break-Up Map

Anonymous said...

poopylover, Edwardo, Wendy, re: my previous post, Berman also thinks a regional breakup of the US is very likely. Poopylover, you might be interested to know that in Berman's latest, Why America Failed, Berman makes the case that the old South's culture and vision of the good life constituted the only real challenge ever made to the North's hustling mentality, and that one of the results of the North's victory over the South is that the "scorched earth and scorched soul" policy the North used against the South (Sherman's march through Georgia) became the model the American Empire has applied abroad ever since. Everyone has to have a "democracy" just like ours, and everyone really wants it whether they say they do or not!

Anand Srivastava said...

I think Douglas Adams expressed it best in Hitchhikers Guide to the Galaxy.

"Presidents don't have power, their purpose is to draw attention away from it. "

Jeff said...


Don't send a Russian to draw a US map. TN and the Carolinas would go with the south, the upper Midwest would go with the NE, and the central midwest would split between the SE and SW. NW wouldn't join with SW/Azatlan, and would stand alone. How did I do?

Edwardo said...

Hi Jeff, and other fellow "big break up" commentators. Despite putting a link into Mr. Norcini's post, my view only converges with his in that we agree that a breakup is in the offing. The timing is uncertain, to say the least, but I would say that the dollar, and its healthy condition, is not the sole linchpin holding the union together. Of course that thesis will be tested in due course, but, suffice it to say, that if all it took to bind groups of disparate peoples scattered across wide territory were a healthily functioning MOE there would have been vastly less upheaval and conflict across the ages. As always, we'll see.

Indenture said...

Jeff: This map is the one that circulated the widest but I agree there is no way North and South Carolina go with the Northern Zone and who is going to tell Texas where they should be.

Anonymous said...

@Sir Tagio

Yes, while it is not usually talked about here, running in tandem with our farcical monetary system has been the cultural and intellectual decay of this country. These problems are going to have to be sorted out. The South, in my opinion, with their rebellious nature, fiercely individualistic attitudes, and loyalty to God over the state, has fought the encroachment of this decay to some extent.


My thoughts exactly, no way TN and the Carolinas would be part of the Northeast in a split.

Also, the south coming under the influence/control of Mexico? Don't count on it.

Indenture said...

Priming the Masses

Anonymous said...

Great bet over at ScrewTape Files

Hope they're right as I've just sold a house but haven't got the money yet to buy Gold.

Edgar said...


Yeah, I'm still waiting for the cash settlement price to be at $10,000 "imminently" as predicted by many pundits over the course of the bullion bull market.

Anonymous said...


I cannot bear the suspense any longer. I am sooo curious. If you'd consider getting in touch, please feel free to drop your email address into the contact box:


Anonymous said...

Sir Tagio said...
"I am with Morris Berman's assessment, that our goose is completely cooked, that Americans have been inflicted with a mortal wound pretty much from day one of this country, and all that's left is for people to be dragged by the forces unleashed - their very own propensities - kicking and screaming in utter infantile denial to the inevitable downfall."

That's a lovely one-sentence summation of Berman's (excellent) work.

My beef with Berman is that he tends to be a tad too negative, thinking that recovery from our collective madness is *impossible*. It is not impossible, just extremely unlikely, within (say) a 2-generation timeframe.

Dark Ages America - Berman's blog:

Woland said...

Hi Victor:

Despite the exceptional respect which I have for your great
contributions to both this blog, and to the greater understanding
of freegold via your own blog, in this case, I must defer to Fofoa
as the person who will vet, analyze and otherwise determine
the validity of my choice. I say this for many reasons, first of
which is my gratitude to Fofoa for all his efforts over these past
four years. I made a personal commitment that this was how I
would proceed, and there is no going back. So, a few days or
weeks longer can't hurt anyone against the background of 15
years, or 4, if you only count this blog.

Let me end with a joke, which illustrates something about God.

An old man way praying to God. At the end of his prayers, he
thought he might ask a favor. So he said, "God, if I might ask,
is it true that to you, a million years is but a day?" and God
replied, "Yes, my son, to Me a million years is but a day".
Then the old man asked, "I have heard it said that to You, a
million dollars is but a penny. Is this true?" and again God
replied, "Yes,my son, to Me a million dollars is but a penny."

Well then, the old man asked, might I have a penny? To which
God replied, "Certainly, my son - just a minute."

I think we can all relax for a few days. Unlike me, most of
you are not old men.

Michael dV said...

I didn't have time to get drunk on Tuesday night so I did it last night. I find Ann Coulter to have the wickedest tongue since HL Mencken. Yesterday she did an interview and concluded that we have past the tipping point and that the country is lost. I tend to share her sentiment.
Laura Ingram who did the interview told Ann she was just depressed and that the conservative/liberty cause was worth continuing to fight for.
I am feeling like Ann today. I have been active in contributing to House and Senate races through the Club for Growth. They have help elect many good pro economic growth and pro liberty candidates. Most of the ones that won have continued to vote the way they said they would and most have histories in State legislative bodies to prove they will vote as they speak. It has been satisfying. I am not certain I will continue such efforts.
What difference does it make when ultimately the ninnys get the final say because they find someone like-able or because they find some sound bite that the media has blown out of proportion to be decisive.
I may just sit the next few out and let the country go where it apparently wants to go....left. It is so much easier to tax the rich rather than get some bennies cut...and I know that the situation is hopeless...maybe hyperinflation will be fun, watching the suffering of the voters. Too bad I am not sadistic. I wonder if that is a trait that can be developed.

costata said...


Glad you enjoyed the clip. I understand the appreciation of stuff that is "so bad that it's good". Ed Wood movies for example.

On another note I want to draw everyone's attention to this graph comparing inflation over the period 1209 to 2009 and 1900 to 2009.

(BTW the reason I monitor Jim Sinclair's site is because he has a big network and they turn up a lot of interesting material. It's not because I agree with all of his views.)

Take note in that graph how contained this turmoil in finance is to the past 100 years. It reflects IMO the changes in both the monetary regime and fiscal policy and the structure of public finance.

If we focus solely on money we can learn a lot. If we broaden our investigation to include fiscal matters (taxation, finance/banking, trade etc) I think it offers a richer mix of data from which to draw conclusions and make projections.


A candidate for the most insightful comment of the year:

..a drama must ensue to distract us from the sheer simplicity of the matter, politicians of either stripe are utterly full of shit...

I too agree with Jeff about the role of gold dealers post-transition. Gold will be exclusively a forward market. Today's price will be based on tomorrow's physical supply to restock the dealer. Paper trading is an indicator of emotion rather than price discovery.

I can't find the comment in this thread where it was suggested that Obama's re-election is going to kill the oil pipeline from Canada. I'll take that bet. I think the pipeline is "On Like Donkey Kong" or Obama will be Kennedy II (or Nixon II - a political "assassination"). That oil is too important to the USA to be allowed to make it's way to China.

The show goes on.

somanyroadsinvesting said...

Listened to this recent podcast on Hyperinflation. The professor studied every known hyperinflation and even found some ones never before discovered. Was an interesting discussion. In regards to the US he doesnt think hyperinflation is a risk now, said when the time comes the fed will suck the liquidity out.

He also makes an interesting pt that people are focused on the growth in the Fed balance sheet which he calls 'state' money, but really only accounts for 15% of total broad money (refers to some M4 number). So while 'state' money has gone up(tripled since Lehman) it has been more than offset by decline in banking and shadow banking money creation so he actually makes the argument is the fed has actually been weak in their response when in context of overall broad money aggregates. And broad money creation has been anemic.

Edwardo said...

Hi Costata,

Isn't that what we would expect to see given the rate of industrialization and concomitant population growth planet wide over the last one hundred and ten years. In the meantime, can we remotely trust that accurate data was available from, for example, the 14th century?

costata said...

VtC et al,

Part 1/2

I don't agree with the analysis of the writer of this article but he does a good job of summarizing the key points. In my opinion the main thing to draw from Draghi's speech and the press release is that the ECB has reached the limits of the measures they can take.

In my opinion they will continue to protect the Euro of course but they won't implement any more quasi-fiscal measures. It is now solely down to fiscal policy to deal with the problems in the EU.

And the point I want to make is that the measures and fiscal policies dictated by the economic theories these folks are following guarrantees that the politicians will fail to achieve their stated ambitions of fostering growth.

A long period of economic stagnation lies ahead of the EU and a number of other countries who are following these policies.

h/t to Victor for getting this right about generating inflation in countries where the ECB deems it to be necessary in order to hit their overall target of 2 per cent inflation. But I think the place to look for the impact is here (my emphasis):

He stated he was satisfied with the OMT’s effects even though it had never been enacted. He went on to say that he OMT had stabilised TARGET2 balances, improved foreign flows and unfrozen the unsecured debt markets as well as allowed Italy and Spain to finalise this years planned debt issuances.

Now let's look at a couple of economic theories that will guarrantee stagnation in a number of economies around the world. Interest rate targeting is a ridiculous way to attempt to "manage" an economy. Regardless once you hit ZIRP it can't be used even if it could do some good. But their hands are tied for this reason (my emphasis):

The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels, thereby contributing to an adequate transmission of monetary policy to the financing conditions of the non-financial sectors in the individual countries of the euro area. It is thus essential that the resilience of banks continues to be strengthened where needed.

IMO official interest rate policy will remain biased toward low rates for a long time to come.


costata said...


Part 2/2

Another flawed economic theory that guides these so-called "neo-classical" economists is that wage demands precede "inflation" in prices (my emphasis):

Over the policy-relevant horizon, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain moderate. Current levels of inflation should thus remain transitory. We will continue to monitor closely further developments in costs, wages and prices.

This theory is called NAIRU.

In monetarist economics, particularly the work of Milton Friedman, NAIRU is an acronym for non-accelerating inflation rate of unemployment, and refers to a level of unemployment below which inflation rises. It is widely used in mainstream economics. It was also introduced as NIRU (non-inflationary rate of unemployment) in Modigliani – Papademos (1975).

The Reserve Bank of Australia hearts this theory big time along with interest rate targeting. The EU policymakers are applying the same theories.

Over here they think that if inflation expectations are rising the correct policy response is to raise interest rates with the aim of generating unemployment and making employees afraid of losing their jobs so their wage demands are moderated. Thus preventing a "wage price spiral".

If inflation is too low then you drop interest rates and shuttered factories will magically reopen and jobs will reappear. Because these economists "know" their theories are correct they gather statistics that "prove" their theories are correct.

So it appears these theorists will continue to focus on prices and ignore the underlying causes. I have looked in the mirror and the problem is .... that dickhead economist on the television screen behind me.

costata said...


I don't think the data for the period 1200 to 1900 needs to be highly accurate because the contrast is so stark. Also there are a few accurate data points going back hundreds of years in Europe.

For example there is a house in the Netherlands where every sale going back hundreds of years has been recorded. It tracks inflation very closely if you smooth out the boom and bust spikes.


Your comment at November 8, 2012 4:44 PM above highlights yet another failed economic theory that in my opinion will bring ruin to several countries before this is all over. he actually makes the argument is the fed has actually been weak in their response when in context of overall broad money aggregates...

Here's the big fail in this monetarist/neo-classical thinking:

In regards to the US he doesnt think hyperinflation is a risk now, said when the time comes the fed will suck the liquidity out.

The only way to "suck the liquidity out" is to exchange debt for the cash (liquidity).

It is this kind of analysis of the money supply which led Mervyn King of the BOE to claim that there was a "shortage of money" a while back.

Sorry DP old chum but these "City" folks actually understand how this works and they are content to let it play out regardless. The following extract is from a completely different discussion about debt cancellation but it shows that the City boys understand how currency management works (my emphasis):

By contrast, the impact of a de jure (rather than a de facto) debt cancellation would be principally to signal to the currency market that sterling could no longer be regarded as a store of value. This is because this de jure cancellation would impede the Bank of England’s ability to re-sterilise the monetary base at some point in the future. After all, this policy would introduce the possibility of some future government being unwilling to provide monetary instruments – in the form of term debt – that the Bank could have used to effect monetary policy, thus impeding its ability to pursue its mandate.

Perhaps all of the talk up thread of America breaking up and Obama's re-election has brought out the doomster in Uncle costata but I felt a strong resonance with MichaeldV's comment earlier about throwing in the towel.

costata said...

What could possibly go wrong?

Take a look at the graph from Merrill Lynch/BofA below this extract.

And for those who still don’t think we have a bond market bubble, just take a look at the net fund flows in the last few years (bonds vs. equities).

The graph shows cumulative flows since 2006 into bonds and equities. Positive $767 billion into bonds and negative $572 billion into equities.

I'm going back to my cave now.

byiamBYoung said...


"Perhaps all of the talk up thread of America breaking up and Obama's re-election has brought out the doomster in Uncle costata but I felt a strong resonance with MichaeldV's comment earlier about throwing in the towel."

Yes, I beleive I understand, and that is my current mindset as well. My post, way upthread, lamenting Obama's victory, was a (ham handed) attempt to note that we have reached a critical mass here in the USA.

We now have a voting majority that is on board the freeshitpalooza party bus. From this election forward, the only solid campaign strategy is to promise more and more free stuff.

The producers will be further demonized, and class envy-driven policy will act as a boot on the throat of small to midsize business. The economy, already at stall speed, will continue to deteriorate.

I don't see a reversal strategy. A Romney win might have held back the inevitable long enough for more of the population to wise up and prepare. That didn't happen.

I am hoping that, now that we have breached the tipping point, that the collapse will come quickly, so we can push forward to a new paradigm with a minimum of suffering for the unprepared.

In other words, rip the bandaid off quickly, rather than slowly pulling out every tiny hair along the way.

Prepared people may watch with detached amusement, but down here in the trenches, our loved ones are due for a lot of suffering. I wish there was a way to prevent that.

A rapid transition might work toward that end.


byiamBYoung said...


Please consider just not posting.


Lord Sidcup said...

Hi Victor

Thanks for the Mosler/Kelton link.
Very interesting.

And thanks fellow commenters for keeping this thread delightfully free of all the tedious and pointless Obama/Romney chatter.

costata said...


I was about to reply to your comment when I noticed that the village idiot (ART) had slipped in another comment. Actually it gave me a much needed laugh.

Cheer up - the herd is always wrong.

We now have a voting majority that is on board the freeshitpalooza party bus.

They are betting that this bus can continue to run. Since it simply cannot they are on the wrong side of history. What percentage of the population actually voted?

Here in Australia voting is compulsory. They fine you if you don't cast a vote in any election you are entitled to vote in. As a result it's probably a better indicator of people's attitudes and feelings toward politicians than US elections.

I think we have a ways to go but it's America that will ultimately be the big winner from this default. The key is to be positioned correctly to get through to the other side and IMO to have a sense of what is likely to unfold and equally what is not likely to happen. "Forewarned is forearmed" as my Grandaddy used to say.

Easy for me to say I know sitting on my butt on the other side of the world. I hope you and your family come through unscathed.


Butt-hurt MMT said...


You are so close to really understanding the magic of magic money tree!

In regards to the US he doesnt think hyperinflation is a risk now, said when the time comes the fed will suck the liquidity out.

That's right - the Fed has many high quality assets, like sub-prime MBS and T-bonds, which would be eagerly lapped up by the investing public as soon as the Fed decides to remove liquidity, especially during a panic!

Also, USG can always sell bonds (which would likewise be lapped up) or raise taxes to drain reserves from the system. Therefore, NO RISK OF HYPERINFLATION OMG!

He also makes an interesting pt that people are focused on the growth in the Fed balance sheet which he calls 'state' money, but really only accounts for 15% of total broad money (refers to some M4 number). So while 'state' money has gone up(tripled since Lehman) it has been more than offset by decline in banking and shadow banking money creation so he actually makes the argument is the fed has actually been weak in their response when in context of overall broad money aggregates. And broad money creation has been anemic.

You're doing great! It helps to avoid thinking about the physical world when you try to understand magic money tree. Keep your eye off that massively oversized government and the associated structural trade deficit. Instead, focus ONLY on money supply.

Remember, base money is qualitatively the same as these broader money aggregates! So paying a debt back through printing is JUST AS GOOD as when someone has to produce something in the physical world to get the base money to pay back that debt! Buying debt with printed money doesn't reduce the value of associated debt instruments at all!

Duh! If you don't understand that, you don't know how the monetary system works!

byiamBYoung said...


Interesting about the compulsory voting. I never knew that. In the USA, I'd hope there would be a way to weed out the imbeciles, though. We seem to have a bumper crop of them.

Yes, I agree that the USG will likely rise like a phoenix from all the mayhem. Go figure.

Unscathed is unlikely. I have tried repeatedly to get my family and friends to pick up a little gold as an insurance policy. I've been generally rebuffed. Sadly, the people I love are heading into the storm with no reserves, no preserved wealth, and no clue.

I thank you, though, for you kind words.


Edgar said...


I think you are too optimistic proclaiming that "a long period of economic stagnation lies ahead of the EU and a number of other countries who are following these policies."

First of all, half of Europe is in a Depression, not just stagnation.
Secondly, history has shown us that countries do not follow these policies for very long. Eventually, default or devaluation will happen with or without the collapse of democracy and the rise of dictatorships.
In Europe, it will NOT be different this time.

Edgar said...

A lesson from history:
In 1933, on the eve of the London world conference, the U.S. dollar was devalued against gold and the gold standard was irreparably damaged. Six countries, France, Italy, Switzerland, Belgium, Poland and the Netherlands, tried to rescue the gold standard and formed a "gold bloc". Vain in hindsight, because from the gold bloc three countries fell rapidly for off: only France, Switzerland and the Netherlands remained.
At 24 September 1936 the French Government informed Colijn of the Netherlands it planned the devaluation of the franc, but the Netherlands would not. In a communiqué of 25 September, the Dutch government said that "they share a monetary policy that remains unchanged." It was not until September 26, when the Swiss franc was devalued, that gave the Netherlands unequal struggle. On 28 September, Colijn in a radio message told the Dutch people that the government was forced to abandon the gold standard.

Edgar said...

Back to the present:

Greece shares the hard (Gold standard style) Euro with Germany and Holland. How long do you really think that will last? Back in the 30's, it took Holland 3 years to finally relent...

byiamBYoung said...

Couldn't resist, just this once.


Prior to growing said brain, what shall I use to consider said growth?

costata said...


Bear in mind I was referring to the EU not specific countries in the EU.

I was convinced that this would be the case: ..default or devaluation will happen.. I'm now wondering whether this is correct.

In part it's the resistance to defaulting that is causing many of the economic woes in the EU. It has been illuminating for me to see how effective the creditors have been in forcing countries down this path called "austerity".

This extract is from a piece by Axel Merk that I'm reading at the moment (my emphasis):

It is important to note that despite all the concerns surrounding Europe, the euro is not trading at parity to the U.S. dollar. In fact, the euro has held its value relatively well. We believe one of the reasons for this is the fact that the Eurozone as a whole has a broadly balanced current account.

In contrast, the U.S. has a massive current account deficit, meaning the U.S. is reliant on investment from abroad simply to stop the dollar from falling. As a result, the U.S. is required to generate economic growth to attract capital from abroad. The euro doesn’t have this same pressure.

The fact that the Eurozone does not need to import capital is very important. Just like Japan it can limp along with some very bad fiscal policies for a long time without it destroying the currency.

And recall that transcript of the speech by Christian Noyer which was linked in a recent thread. If it's true that the overall Eurozone is going to have a positive primary balance by the end of the year then that has to be taken into account as well at some point by the bond market.

Michael dV said...

It has been said on this site that whether the USG actually has the gold it claims to have will not matter. It has occurred to me that the lack of such gold could effect the behavior of some politicians and that well before any collapse they could make a play for physical. If they do I agree that GLD would be a likely first grab. If I see that I'm definitely taking it out of my sock drawer and getting it hidden really well and off property. It is not clear to me at all how the government will behave going forward. I occasionally find something on Youtube and suddenly I'm sucked into and I get all riled up. I personally have had the chance to hear Senators and Congress critters discuss the economy and as a whole they are as clueless as your uncle Bob. Somewhere in the back rooms of DC however there has to be folks who see clearly what is coming. If they get ahold of the wrong ears there could be silly mischief...even it it does not make freegold sense.

Edgar said...

I'm not so sure about Japan, as they have become a massive importer of energy (oil, gas) almost overnight due to the rejection of nuclear energy as a result of the tsunami.
Consequently, their trade balance might worsen if they cannot sell enough "Toyota Corollas" to offset the imports.

RJPadavona said...

Whoa! I take my eyes off Comments for a bit, I come back and folks are talking about secession and Blazing Saddles! This blog is finer than snuff.

I agree with Jeff. Don't trust a Russian to map out secession borders in the US! That said, I do think we might see some sort of breakup in the future, but I doubt the South will actually go through with a formal secession unless firearms are banned or confiscated.

What I actually foresee as the most likely scenario for the near term in a FG world is simply political decentralization. We'll be forced to due to the fact that the Exorbitant Privilege will be gone and the federal gov't will be limited to what services they can provide based on how much taxes the citizens are willing to pay. There's just not enough agreement on that in this country for it to function on the federal level if we actually have to pay for it. IMO, there's no better way to do this than on the state and local level. If you don't like what your state or municipality is doing with your tax dollars then you can vote with your feet and move where like-minded people are. Surely out of 50 states, common ground can be found among us.

On the way to and from work on Wednesday I was listening to NPR. Almost every news story was about how the election was impacted due to changing racial and cultural demographics. These changes are occurring in certain parts of the country more so than others. It's not racist to admit that people get along better with others who look like them, talk like them, and share the same culture and customs as they do. Just look at areas where people are free to choose how they assimilate: church, neighborhoods, barber shops, etc. Humans naturally self-segregate along racial and cultural lines when given the choice. Not always, but most of the time.

So, as the demographics of America continue to change, I expect sections of the US to go their separate ways and amicably divorce themselves from each other. At least politically, if not by official borders. Hopefully we could still get along enough to remain in a currency union with each other. Sharing a common currency and remaining good trading partners makes for more peace than anything else that's been tried throughout history. Wait, where have I heard that before? ;)


costata said...


So from your comments at November 8, 2012 8:10 PM and November 8, 2012 8:15 PM you seem to me to be perceiving this situation within the Eurozone as something similar to the external trade/currency war of the 1920 to 40 period.

If so, what are the parallels and what are the differences?

Michael dV,

Don't let your despondency about the political scene cloud your thinking. If the politicians seek Treasury input on confiscation they will be told that it would accomplish precisely nothing.

Having more gold would simply reduce the benefits of devaluation of the US dollar. Who is going to recommend that to Congress? China? Japan? Somehow I don't think they'll be invited to the conference call.

costata said...


Point taken about Japan today in relation to their trade balance. Neither the Eurozone nor Japan can afford to carry a significant trade deficit. As long as the Eurozone is in surplus or balance their problems are internal.

FWIW I agree with you if you think Japan's problems are swinging from internal to external at present.

Michael dV said...

it is the irrational behavior I worry about...and that seems to be all I observe...these guys can't even cut 1% in spending yet talk like they can improve the is crazy talk and I worry about crazy talking people doing crazy only hope is that they are as ineffective in plotting mischief as they are in planning. Obama does not like the wealthy and people with gold are by definition rich ...right?
I fully follow the freegold thought on how things must work out in the long run and I believe they will. but..remember how long it took for a system that was dysfunctional from the beginning, the Soviet Union, to finally fail...most of my lifetime...may I should get drunk again seems to at least temporarily improve my mood if not my attitude.

costata said...

Michael dV, only hope is that they are as ineffective in plotting mischief as they are in planning..

LOL I think you're on the money here.

On a serious note, what makes you think the Soviet Union was "dysfunctional from the beginning"?


The village idiot is growing tiresome. Best not to encourage him I think.

costata said...

Re: Japan

I would imagine that the market would react before 2016 if the current account turned to deficit as the analyst quoted below predicts. (My emphasis)

The current account surplus has fallen from a peak of 3.3 trillion yen in March 2007, with the nation posting trade deficits in 10 of the last 12 months.

Only the income surplus, the current account portion that includes earnings from overseaseeee investment, is preventing Japan from falling into deficit, which would require overseas funding to service the world’s largest public debt.

“The trade balance is worsening, mainly because of the deterioration of exports,” Shirakawa said. “The current account will turn to a deficit, possibly in 2016.”

Motley Fool said...

Perhaps ART is a banker paid shill. It would explain his persistence as well as his trying to get us to sell our gold for silver.

costata said...

Actually come to think of it I was "beyond stupid". The very next comment beyond the village idiot's latest remark.

costata said...


Perhaps Motley Fool is a banker paid shill trying to discredit ART by accusing him of being a banker paid shill.

Motley Fool said...

Wouldn't the reverse also be possible, seeing as he is the one that accused of us being paid shills. It's a common tactic is it not?

I say the burden of proof lies on him to prove he is not a banker shill. This selling gold for silver thing seems like a serious clue. The bankers would love that.


Perhaps costata is a banker paid shill, working in collusion with ART to discredit the fool. :o


Motley Fool said...


You are aware there are three markets the bankers participate in, yes? ( of course you know your masters schemes)

The COMEX market, OTC market and the physical market.

The only one your banker bosses allow us any insight into is the COMEX market, which is a much smaller one than the OTC market.

Your nefarious plan to get people to buy silver by having a large short position in COMEX is working like a dream. (The sheep never think about the unseen markets do they)

This fool isn't fooled. I will not be sheared like a sheep with silver.


Anonymous said...

costata and others,

I wrote that the inflation/deflation rates fluctuated quite a bit during the time of the gold standard (when gold functioned internationally). Just today, the FT showed this chart:


from the macrobusiness article: but he [VtC: Draghi] did add that there was no way he could provide and ex-ante promise that the OMT would provide reductions in borrowing costs for Spain, something Rajoy has been looking for.

Exactly. Lowering borrowing costs is not the issue. The ECB will starve the political system of liquidity. Once the governments retreat, the private sector will eventually fill the gap. It just needs some time.

costata: A long period of economic stagnation lies ahead of the EU and a number of other countries who are following these policies.

I don't think so. They are clearing the malinvestment from the system. Of course, nobody can predict exactly when they will reach the bottom. But I am now waiting for good news from Ireland and from Portugal. If you take a look at the various current accounts

you see that they are turning the corner.

What do you think will happen if people see that the Euro periphery have reached bottom and slowly start to grow (ex Greece perhaps). While at the same time the U.S. is exposed as ungovernable with the Fed printing the shortfall and then some.

Over here they think that if inflation expectations are rising the correct policy response is to raise interest rates with the aim of generating unemployment and making employees afraid of losing their jobs so their wage demands are moderated. Thus preventing a "wage price spiral".

That was the journalist, not Draghi. I don't think anyone (including Draghi) thinks that inflation after 2000 was driven by wage increases. And Draghi never said so. IMO inflation has been mainly driven by government overspending or by mindless creation of consumer credit (some countries specifically).


Greece shares the hard (Gold standard style) Euro with Germany and Holland. How long do you really think that will last? Back in the 30's, it took Holland 3 years to finally relent...

You are missing the key point here. During the 1930s and still on the gold standard, everyone had to suffer deflation while the system deleveraged. This is different with the Euro. The Euro is not a gold standard. Yes, it is harder than the US$ or sterling. But it is softer than gold (just take a look at the gold/Euro chart).

The key difference is that the ECB can print some money and bail out some bad debt in order to prevent consumer price deflation. But they can still subject the system to the deleveraging, just without the damaging chain reactions. They only clear the malinvestment from the system, but they don't push the productive parts over the cliff. Yes, it doesn't look pretty in Spain of Greece. But this is because in Spain, some 25% of the working population used to work in residential construction. In Greece, apparently, a good share of national income was paid out by the government, just using borrowed money.

This will stop one day. If the ECB would print like mad, or if these countries went back to their own currencies, they would first hyperinflate, and then the malinvestment would be cleared from the system anyway.

As FOFOA said, if you think that austerity riots are ugly, wait until you see hyperinflation riots.


costata said...


This may be important. Another domino falling. Possibly worth sounding out your FX contact.

According to Reuters, which has compiled the data on its own FX dealing platforms, "daily spot foreign exchange trading volumes... fell by 23 percent in October from a year earlier.

Reuters reports that the decline was to a major extent driven by "frustration with high-speed computer algorithms operating on the major dealing platforms."

Manipulating commodity, bond and equity markets is one thing. Making the FX market (more?) dysfunctional would be treading on some very big toes. The kind of thing that could persuade the PTB to consider nuclear options.

costata said...

Motley Fool,

Calling someone a "fool" who calls himself Motley Fool has to be the lamest "insult" imaginable IMHO.

costata said...


Thanks for the links. What point are you attempting to make with the FT chart? Does it concern prices or overall money supply?

That's very good news about the current account positions of Spain and Portugal for the Eurozone overall. It suggests these countries are moving down the track in their structural adjustment from external borrowing to internal borrowing. It ringfences the debt problems from an EU perspective.

If these governments default it will be on their own citizens rather than external creditors. If they don't default they will have to continue the "blood from a stone" austerity measures that have contracted their economies and try to achieve a primary balance surplus large enough to pay interest/carry costs.

This isn't a growth strategy for an economy. It's a restructuring of the economy sometimes referred to as an "internal devaluation".

This passage you highlighted wasn't the journalist. It was me.

Over here they think that if inflation expectations are rising the correct policy response is to raise interest rates with the aim of generating unemployment...

Under normal cicumstances this is how the mainstream economists view inflation. Hence the use of interest rate targets to try to influence the behaviour of lenders and borrowers. Under ZIRP conditions the usual policies don't operate so can't speculate on Draghi's views based on his actions.

Clearly the ECB and other central banks appear to perceive inflation and deflation solely in terms of prices.

Clearing malinvestment? There's a lot to discuss on this issue.

Anonymous said...

Speaking as a novice in these matters I wonder if someone could clarify why there seems to be so much heat produced by JP Morgan and their Silver "shorts".

I see in a previous comment:-

"JPM is a BANK and they are short millions of ounces of silver that they neither produce nor have."

Could it be that the JPM "shorts" are just facilitating hedges put in place by Silver bullion dealers and other people who deal in physical Silver who want to cover their inventory?

Isn't there a long for every short?

Hasn't this "Evil Empire" thing got out of hand when really all we are seeing is just the market trying to make as much profit as it can by buying AND selling?

costata said...


The "heat" is a result of the belief by many silverbugs that Comex longs can force delivery on the shorts. When it is, in fact, only the shorts who can force delivery. The silverbug "judgement day" theory is that one day longs will descend on these Comex silver "naked shorts" like avenging Angels and cause a price explosion in silver.

They ignore the fact that the rest of the silver markket (OTC etc) is opaque and that, as you say, there could very well be a long for every short. In short, these naked shorts are most likely neither short or naked. (Sad news for the SLA folks who imagine Blythe Masters in her birthday suit.)

I must go back and take a look at the series Brother John F did in response to Uncle costata's silver open forum. I was too busy at the time to view it. Anyway I appear to be in good company now that BJF has given the Screwtape crew the divine, moving finger treatment.


Motley Fool said...


Yeah. I was quite amused. How will I ever survive such an insult to my dignity.


Motley Fool said...


Don't worry about my 'profit' being lower. I understand that silver is a smaller market, I understand it moves up more than gold during normal market moves.

Allow me my choice and the consequences thereof, if you are the freedom loving harm money socialist you purport to be.


Ps. Ofc I disagree that silver is where it's at. But, I also will allow you your choices. ;)

elgrilo said...

In case somebody missed it, the ECB announced new designs for the euro banknotes based on the Europa myth.

They will start by replacing the 5€ note in May 2013 and eventually replace all banknotes. The final design is a mistery as only some security features have been shown. The old ones will cease to be legal tender but they don't say when.

costata said...


Haunting music:

Edgar said...


I know that the Euro is not a gold standard. However, many aspects of the Euro area are similar to that of the gold standard such as slaving countries together with wildly different trade balances and the money flows from "weak" to "hard" countries (Target2).
The point I was making is that countries never will stay in deflation/austerity mode for long. Eventually they will devalue/default.

P.S. How do I use italics?

DP said...


DP said...



Anonymous said...

Hm, I'm really not sleeping well these days, even that hitchcockian-fofoan image of glassware humanoid in free-fall from "An American Horror Story" has made into my dreams this early morning. The cumulative force of post election bad news momentum surge circling towards the final drainage event for those last weeks of 2012 or perhaps early 2013 - can't be brushed away. I sense it almost in physical way, yet I can't touch my funds before feb 2013 or so. I'm afraid this might easily turn into "An European/Asian Horror Story" for people just locked into cash or stocks for whatever reason beyond their control. Well, there is always this element of bit of (un)luck and timing in our lifes. And somebody has to loose afterall. Sincerely, I don't envy you others already Inn, but please on that blistering cold night don't forget toast with fine wine in direction of us petty and unlucky ones of this sad world.
/depression off

Edwardo said...


Regarding Japan externalizing what has heretofore been an internal issue. I would say that what you said stands a good chance of being a very big understatement since Fukushima is no where near being dealt with properly. On that dismal note, I see that Japan just had another shaker in the last day, though thankfully it was a mild one.

Woland said...

Good morning:

I've got a favor to ask of the old USA Gold forum scholars.
It concerns a kind of strange quirk for an otherwise quite
brilliant person (FOA), that being the repeated misspelling
of simple words, spelled as they "sounded", but not as they
appear in the dictionary. I vaguely recall that he said some-
thing about it being a result of his "having lived in so many
different countries" , and that it had in some way affected
his mental process. Does anyone have a recollection
similar to my own? If you could post the relevant link I
would be most grateful. Thanks

Dr. Octagon said...

@elgrilo - The new Euro notes reminded me that the US is still sitting on a giant pile of new $100 notes. Having a newly redesigned and printed currency ready to go in two of the largest currency zones may be quite convenient.

@dieuwer - It seems it's a lot easier for a country such as Holland, France, etc to un-peg their existing currency from the gold standard, than it is to issue a completely new currency, as would be required with today's Euro. If Greece had the option of unpegging the value of a circulating Drachma from the Euro, they probably would have done it already. Leaving the Euro is much harder than leaving the gold-exchange standard.

Jeff said...

Trail Guide

(1/18/2001; 7:26:19MT - msg#: 45842)


Hello all! Some of my friends (and apparently many readers) often ruminate on why I am so fractured when writing. Often giving the impression of rambling on, not to mention a poor english structure, spelling and grasp. Someone asked, "Your not that way in person, so why such a literary style?" I'll try to answer what I did strive to explain once some time ago.

My full grasp of english is somewhat poor. But, that's because of a mental structural problem induced by a worldly exposure. With that simple reply, I'll leave it to your best imagination'sability, to decipher (smile).A better reply, though, would be; it's just my way of following a format introduced by Another

In other words, in his words to me with my (words added) -----"one should not tell readers (his) exact knowledge, position in life, or what (other's) thoughtsshould be. Such (talk) extols the self and lessens the reason pursued. (Rather,) let anyonethat will listen, think your Thoughts (thru), seldom exposing (them) to (your) fully concludedpoints. They (people) gain our understanding on (their) own terms, in (their) own way, in (real)events, over time". He often said; "we are not (here) to prove things, my friend, time will do(that) for us. It (time) will (also) expose (our) standing in world of Thoughts" and "is it notbetter to stand (in) a crowd and speak softly to (the) nearest ear" and "truth (is) never hiddenor (not) exposed, it (is) simply not reasoned by exposure to understanding".

Woland said...

I'm saying my hail Marys to St. Jeff as I write this. Thanks!

Phat Repat said...

@Michael dV, et al
I appreciate your concern for the direction of the US but I believe "We the People..." have the means to change course without breaking apart; in fact, those that suggest a break up have ulterior motives.

From JS Mineset:
"The most substantial development hides in Weed.

The national egg is slowly cracking, a heads up, from David Madisonstyle.

Remember the Russian economist that predicted the USA would break down into various United States versus the US Central Government? How could that happen? Well, here are the seeds planted for the conflict called nullification."

Full article here

Michael dV said...

the one that springs to mind is his substitution of 'bought' for 'brought'.
I do that sometimes too and I have no such excuse.

Michael dV said...

The communist system was never going to work. It went against human instinct and was entirely driven by ideals and personalities. This doomed it from the beginning. It was forced to use coercion and this simply does not endure.
Yesterday I was listening to Terry Gross do an interview with an author last name Applebaum. The author is the wife of a diplomat in Poland and she has a book about the period of 1944 to 1952. It details how the commies failed at first to get popular support democratically and how they ad to resort to torture, murder, secret police, and infiltration of organizations at every level of society.
Totalitarianism never has popular support and never produces economic success. These are the reasons I see the communist experiment as doomed from the start. They should have quit when they were initially rejected by the vote but the fervor of those with a near religious mindset and Stalin's personality would not tolerate rejection.

Edgar said...

@Dr. Octagon

It seems it's a lot easier for a country such as Holland, France, etc to un-peg their existing currency from the gold standard, than it is to issue a completely new currency, as would be required with today's Euro."

Actually, it is not difficult at all. Don't forget that euro banknotes have a serial number that corresponds to the country where the note was issued. For Greece, the serial number starts with Y. Also, one side of the euro coins have a national design.
Thus, Greece could "declare" the "their" euro currency will henceforth trade at a discount to the rest of the euro currencies and print as much of "their" euro banknotes as needed.
Tough luck for anyone outside Greece that owns Greek euro coins and banknotes.

Anonymous said...


I know that FOA has family overseas. Would you like to know which country this is? ;-)


ein anderer said...

For german speaking people: Der goldene Schwan

Edwardo said...

Costata observes:

"Calling someone a "fool" who calls himself Motley Fool has to be the lamest "insult" imaginable IMHO."

I would add that it's the most unimaginable insult imaginable.

Motley Fool said...


If the evil bankers exist, they love nothing more that people buying silver (ok, that's not quite true, people buying paper money with their hard work must be #1 in their books, but silver is a not too distant second).

I think silver is a great industrial metal, and on the fundamentals of technology going forward and lack of readily available above ground supply, as well as irrecoverable uses thereof, it has a bright future.

I just don't see it being 'money' ever again.

It is better to plan the future on the realities, rather than on our hopes and dreams.

Silver as money is a dream.

A nice dream though, as the intent is truly Good.

Dreams are for fantasy though, reality is for living.

If you haven't noticed, at this blog we discuss what we think will be the reality of the future. We try to keep our dreams to ourselves, as we recognize that for what they are.

A honest society using gold as money (and perhaps Real Bills)...a wonderful dream.

Silver has no future in monetary reality. This is why we put it down. It won't be worthless, it's a great commodity, but money? No.


Motley Fool said...

Ps. You are free to disagree with our assessment, and hold silver. Each man must make his own choices. We simply appeal to reason. If you do not find our reason sufficient then keep the silver, like Wendy does, it sure as hell beats paper money. :)

Anonymous said...


Why are you still talking to the escaped mental patient? I'm really curious why you would bother? You will never have a rational discussion with him, so what's the point? His shit gets deleted and it looks like you're the "escaped" one talking to some entity known as "ART" that is an ARTifact of your imagination:)

I'm not dissin' ya, my friend, just wondering.

For a while I thought it was a manufactured character, but he's way too batshit to be useful.

Edwardo said...

Oh, and speaking of disunion,
this looked interesting.

And on a somewhat different note.

Rules? What rules? We don't need no steenking rules.

Hat tip JSmineset.

Motley Fool said...


Insanity is doing the same thing over and over again and expecting different results. - attributed to Einstein

We have tried not feeding the troll. It hasn't helped.

I tried trolling the troll yesterday, which was fun, and seemed to have some effect, as I sensed some weakness.

So now I am simply using this momentary lull in defences to try for a honest discussion.

I know I am probably wasting my time, but hey, it's only a few minutes, and it is my time to waste.

Sorry to the rest of the board for having to witness my futile effort.

I don't mind looking insane, or the fool...if you haven't noticed. Getting ego out of the way is part of the reason I chose my name. It is a constant reminder. Ego serves no purpose when one is aiming to learn.


Anonymous said...

Alright, man, whatever works for you. Maybe you could encourage him to visit your blog:) That could be fun.

I stand firm on the tactic of ignoring him completely, and not even bothering to read his posts until he attempts to lose the crazy. I enjoy and appreciate an honest attempt from whoever has something to say here, but ART goes all wacko on issues we've put to bed long ago. Boring, lame, disruptive, counterproductive...etc.

Carry on as you wish, though. Nobody is forcing me to read any of it.

It's a Long and Lonesome Road

burningfiat said...

MF and /SV/,

I don't mind looking insane, or the fool...if you haven't noticed. Getting ego out of the way is part of the reason I chose my name. It is a constant reminder. Ego serves no purpose when one is aiming to learn.

Besides your thinking+putting_thought->writing skills, that is why we respect you so much :)

Lonesome road or together?

BTW: /SV/, I agree on your assessment of ART!

costata said...

Hi Edwardo,

It's not looking good for Japan from several angles. I note also that the BOE has decided to start remitting interest on government paper like the Fed has been doing since 1943. It's like watching one of those "funniest home videos".

You sit there thinking, They aren't going to do that. No they wouldn't. No way. Then it's wow They did. They actually did it. Wow what a jerk!

I feel the same way about this incursion by HFT into the currency market. You have these jokers trying to scalp 1/10th of a cent on transactions putting the most important market in the world at risk.

How big is the roster of enemies these guys are seeking? The BIS, governments of every stripe, the oil industry etcetera, etcetera. Lotsa luck with that boys and girls.

Motley Fool,

I think the way to go with the insult development thing would be something like "you're not smart enough to be a fool" or something in that general direction.

You've got any criticism about consistency covered with the "motley" part of your tag. So no joy there for the aspiring insulter.

Michael dV,

Regarding the Soviet Union, I take your point about it containing the seeds of its own destruction. It's interesting that it survived for such a long period and performed as well as it did economically (for example) given the constraints and limitations of their system. A tribute to the survival instincts of homo sapiens perhaps.

burningfiat said...

Many prominent members of the gold community insist that gold is going to appreciate massively because of a huge flood of investment dollars will flow into the metal over the next several years. They may very well be right, and we at GBI certainly hope so. But we can see things developing differently as well. We believe that a massive revaluation of gold denominated in dollars can happen quite suddenly, almost overnight. But not because of any sustained long term demand for gold, but simply because owners of metal simply withdraw it from sale, sending the stock to flow ratio to infinity. This is why understanding gold’s stock to flow ratio is so vital.

(h/t zerohedge which usually censors sentences containing FOFOA in articles from GBI, though not this time it seems. Likely because there were no FOFOA references in GBI's original article this time...)

Edgar said...

Not very nice of the FED/BOE to send the Buba bad-delivery gold bars. Maybe the Buba as a warning signal should take delivery from GLD for a few $B.

burningfiat said...

Just one more quote to bring home the Freegold inspiration in above article:

It’s useful to understand the concept that dollars bid for assets. When dollars bid to buy a stock over and over (high velocity) the price goes up. If all dollars stopped bidding for AAPL the price goes to zero. In reality, dollars value Apple stock. Gold is a unique asset in that it denominates, or values currencies. Dollars don’t bid for gold. Gold bids for dollars.

Now, read it yourself :)

Anonymous said...

No matter what kind od gold revaluation takes place, but how long the amazonian rain forrest survive the final attack of ilegal/grey market gold miners under such scenario? It could be over in less than 10yrs..

Goodsalt said...
This comment has been removed by the author.
Anonymous said...

Goodsalt> seems someone is keen to push/punish Germany into expedient action, which might not be welcomed by Germany/EU at the moment.

costata said...

Good article by Chris Puplava comparing demand/pricing in sovereign debt and corporate debt. I have a couple of comments about timing the resolution of this slow motion train wreck which I'll place after the extracts. (My emphasis)

Money is pouring into highly rated U.S. corporate bonds at an even faster pace than Treasury debt, according to fund-tracker Lipper, as buyers clamor for investments perceived as safe that typically also yield a bit more than Treasurys.

A shrinking supply of top-rated debt is also driving investors toward the highest-rated U.S. companies. That demand has driven up bond prices and pushed down yields.

....According to Credit Suisse, the share of world-wide government debt rated triple-A has fallen to 39% of the total from 58% in early 2010.

Corporate bonds "are definitely the new safe havens in this world," said Fer Koch, director of U.S. credit strategy at Credit Suisse.

One of the reasons I nominated the period January 2013 to the end of 2015 as the timeframe for the transition is the rollover of government debt required in this period. Over half of all of this outstanding debt has to be rolled over in this period according to research I have seen.

This decline in the supply of AAA sovereign debt from 58% to 39% is going to make a difficult situation even worse. A decline in perceived creditworthiness tends be like a self-fulfilling prophecy.

I'm also mindful of Armstrong's public-private confidence model highlighting a major turn in mid-2015. We also have Strauss-Howe generational theory indicating a turn somewhere toward the end of this decade.

A little food for thought.

Edgar said...


the article by Chris Puplava shows that people are still piling into bonds, regardless of the adjective ("corporate", "sovereign").
Wake me up when people are piling into gold and OUT of ALL types of bonds.

Edgar said...

In fact, the most insane thing you can do right now if buying long term bonds with yields close to zero.
Do you really want to have fiat money delivered to you in the future with the purchasing power of today??

Phat Repat said...

True, but bonds aren't being purchased for yield, they're being purchased for 'security' and in size. It's not the shrimps that are buying these bonds.

costata said...

VtC et al,

Outstanding paper by John Butler here:

He makes the case far better than I could about the reasons why so-called austerity (as practiced) isn't ultimately going to work in the way that some parties imagine. Basically the philosophy behind "austerity" is no more sophisticated than cutting off a kid's allowance to discipline their bad behaviour.

Once the government hits the debt wall they have to cut to achieve a primary balance ASAP and then negotiate with creditors or institute a genuine, deep restructuring of the economy and government + taxation system in particular. Fiscal policy has to shoulder its share of the burden.

(The paper is probably a bit unfair to old JMK since guys like Krugman seem to pick and choose the parts of "Keynesian economics" they employ and mix it with a lot of Marx and Friedman and anyone else who supports their ideological leanings.)

Edgar said...

@Phat Expert,

You don't get it. And forget the yield, it's close to zero anyway.
I maintain my point that ANYONE who is buying bonds today is losing their ability to maintain purchasing power in the future.

You think giants are buying bonds?? Yeah, right! NOT!!

The scared shrimp are indeed the ones buying the bonds. The investment data clearly shows this as the majority of treasury bonds are owned by the public in the form of 401K funds.

«Oldest ‹Older   401 – 600 of 674   Newer› Newest»

Post a Comment