Someone suggested a post on arguments against Freegold. I thought it was a great idea, but then I couldn't think of any arguments that hadn't already failed. I've been at this task for four and a half years now, and I've read almost all of the 12 years' worth of archived debates and arguments (now missing) at USAGOLD as well as the random debates that pop up elsewhere and someone inevitably links them here or brings them to my attention via email. And yes, I feel like I've seen it all, but maybe I haven't. So here's your opportunity to present your best argument against Freegold.
A reader and supporter of mine, an American medical doctor and surgeon named Jeff Allen, once commented on his view of what it is that I do here and why this blog is "so striking to so many people." I wanted to mention this in the context of this post not only because I loved the way he explained my logical approach to Freegold and its necessary conclusions, but also because I think this is the only way you're likely to succeed at debunking Freegold if that's even possible—by presenting a competing premise through principles, expressed in precisely defined, non-contradictory concepts that are grounded in reality, which lead to inevitable conclusions that necessarily exclude those of Freegold even when viewed from a variety of perspectives.
So good luck with that!
I'm combining a couple of different comments here, but what Jeff Allen said was that "the defining attribute of an objective manner of thinking is the ability to--more deeply, the recognition of the necessity to--think in principles. To see reality as it is, then to grasp reality in non-contradictory conceptual form.
But thinking in principles will not succeed unless its elements--the conceptual terms in which the principles are expressed--are solidly grounded in reality. This is where the term "objectivity" arises. You best reveal your own appreciation for this fact by the manner in which you validate your unwinding of the concept "money."
This is not the way most people think, and this is why your blog is so striking to so many people. But it is only your fellow thinkers-in-principles who possess the capacity to respond in this way. Those who don't get it, including those commentators to which you refer, lack that capacity. Ayn Rand called these the "anti-conceptual mentalities." The anti-conceptual mentality has been fostered and nourished by Pragmatism, the philosophy which dominated U.S. academia the first half of the 20th century, and dominates our educational and political systems still today. We swim in a sea of Pragmatism.
All new knowledge is inductive. Deduction is secondary, and depends on the validity of one's prior inductions.
From whence comes your syllogism's major premise, "All fiat currencies are eventually worth no more than toilet paper?" Was it deduced from a prior generalization, or was it induced?
The answer, of course, is that it was induced. Your deduction merely applies that general knowledge to the specific case of the dollar. If your inductively generated major premise is not necessarily true, then neither is your deductively generated conclusion.
From what prior principle did Newton deduce universal gravitation? Newton's theory is the product of a grand induction, an integration of prior inductions made by Kepler and Galileo, based on observations of planetary orbits, and of the behavior of physical bodies on earth.
Freegold, too, is a grand induction. Your method of approaching the issue from a variety of perspectives, all leading to the same necessary conclusion, after precisely defining your concepts, is essential to a proper inductive process (which, by the way, the mere enumeration of swans is not)."
It occurs to me that TA-based and GSR-based gold and silver trading is probably an example of Pragmatism. I'm no expert on Pragmatism, but Wikipedia says it "describes a process where theory is extracted from practice, and applied back to practice to form what is called intelligent practice."
The "grand induction" (Jeff's term) that we like to call Freegold was not my grand induction. Nor do I think it was Another's. Another merely shared it with us along with some of its "necessary conclusions". Why did he do that? I don't know, but I have a few ideas.
As for the "grand induction" itself, I think it was a European group effort that teased it out in the 1960s and 70s leading up to and also following—and as a result of—the abrupt and predictable end to the Bretton Woods monetary system in 1971. I won't go into the details here because I want to keep this post under 100 pages, but the main point is that I didn't come up with it.
Freegold is just a name. I didn't come up with the name either. But if you don't understand what we're discussing and extrapolating upon here at a conceptual level, ignoring the convenient name, you're going to have a really hard time debunking it. In fact, I don't think you can, even if you do understand it. That's one of the most remarkable things I've observed about Freegold—that those who make the effort to really understand it on a conceptual level not only fall in love with its elegant simplicity and obvious inevitability, but they also start buying physical gold hand over fist. And again, that's only because of one of the "necessary conclusions" that are (IMO) irrefutably drawn from it.
I will temporarily and conditionally lift the ban on the five commenters that have been banished from this blog over the last four years so that anyone is free to take their best shot. But only for this one thread, and only if they behave. I will not put up with abuse, hate, spam or personal insults. In other words, Art, AD and anyone else are all welcome in this thread only, unless and until they abuse it.
But don't expect me to personally debate each and every argument. I'm not going to waste my time on arguments that miss the mark like poor Skippy, our "'A' for effort" dog at the top, or on those arguments that have already been dealt with. There is one argument, however, that I hope shows up to the party. And if anything worthy comes out of this thread, I'll add it below in the space between the lines for the permanent record.
Just beware that Freegold is much easier to dismiss on superficial grounds than to defeat on deep, logically-consistent conceptual ground. So if you really want to avoid becoming another evil gold hoarder, jerk, time misallocator and brainwashed cult member, you should consider simply dismissing Freegold on the surface-level ridiculousness of its necessary conclusions rather than taking up the challenge in this post. Forewarned is forearmed.
And finally, you can't judge the worthiness of your own argument. That judgment, like credibility, can only be made by others. As for what ends up below in the space between the lines, that judgment is reserved for me, but I will consider the opinions of others who I think understand what I think I understand in making any decision. ;D
Sincerely,
FOFOA
__________________________________________________________
__________________________________________________________
774 comments:
1 – 200 of 774 Newer› Newest»This should be fun.
byiamBYoung,
I left a final comment to you on the previous thread about the topic we were discussing. I didn't want to bring the discussion into this thread since you appear to have made up your mind but I had a final thought to share.
Cheers
FOFOA,
When you flagged this post in an earlier thread I thought you were talking about summarizing the contra-arguments yourself. On reflection I can see how hard that would be given your background with this endeavour.
Still I was hoping that this post would summarize some of the most often repeated contra-arguments advanced over the years so that we could direct newcomers here in order to try to cut down on the repetition.
Hopefully we'll see a new argument.
FOFOA
By word and by deed I can be counted as essentially in the freegold camp. I agree that the logic is simple, elegant and seductively compelling.
The one place I might differ is when you say (and I paraphrase) "gold is heading toward a freegold price", I prefer to say "gold is heading toward a very high price." So here we agree, debt failure will propel the gold price. My qualification comes from what I think is a healthy, questioning skepticism: that (again, paraphrasing) a "phase transition in gold valuation" will occur. My reservation from going all the way in stems from a concept applied in another context as "the cussedness of whole systems." My interpretation, simply, is that the system as it stands has so many forces, constituencies and agendas that this 'phase transition', as logical as it is, hits a headwind all the way.
Again, while I accept that a freegold valuation is possible, I'm reluctant to state that it is anything other than one of many other possible and perhaps more likely outcomes. In my view, there is no reason to believe that the money issue will be 'solved' any more than there is reason to believe any of a number of other pressing human issues will be 'solved'.
I posted a similar query in a previous comment to a previous post, but got no 'bites'. I would very much appreciate your thoughts on this. It was plowing my way through your blog years ago that clarified for me what money is and I thank you, again, for that.
I am still of the opinion that the zero sum solution of freegold may not be the only and therefore best solution.
However this is not an argument AGAINST freegold but rather an "enhancement" of it so I will withhold comment on this subject.
If I had to come up with a counter argument to FG it would probably be as follows;
gold is essentially exclusionary and is thus subject to the long term solution of many exclusionary practices are. Namely it is to burn on the cross of the masses demanding reform or in this case access to debt not based upon a fixed asset but rather than of faith based currency. Digital, flowing, managed and manipulated.
FG for all its solutions is a fixed number. It increases at a relatively fixed rate too.
Essentially boiled down to basics, people need to believe that they are important and consume based upon those patterns and theories put forth by Edward Bernays. If the system created by FG ultimately establishes a final winner and many losers I suggest that its only a question of time before the losers eat the winners. People will not buy into a system that is inherently exclusionary especially when it is fixed by ones holding of gold.
Serfs serve an important function until something overturns the apple cart. And something ALWAYS turns it over, sooner or later.
Yes FG can flow from holder to provider if the good or service has enough value but with the current holding of AU I don't see enough of a distribution across a wide enough base to have any stability.
Perhaps its 9 billion inhabitants beyond the control of a limited number of elite, or maybe it comes crashing down when Elon Musk manages to cash in on precious metal asteroid mining, or another game changer.
Those who claim that FG can solve all problems overlook the Hobbes' definition of human condition.
FG works until it doesn't.
clearly the argument has holes but I think it warrants some thought on how one would maintain FG as a standard when conditions change.
I am interested to see if anyone has a decent argument against freegold. The concept seems to be misunderstood more than it is challenged. Although I can't think of any myself, I have mentioned in the past that I wouldn't be surprised if the $IMFS have tricks up their sleeves that nobody sees. These tricks can't stop freegold, but indefinite deferment would accomplish nearly the same thing as prevention. Plus I also question whether “possible claims on it from the BIS” will actually stop the US from using its gold reserves to develop a new system similar to the Euro. The US seems like the type of country that gets out of checkmate by knocking over the game board
There are two things:
- Semantics
- Theory
The most confusion exists in the semantics. The usual culprit is hyperinflation. What is hyperinflation? Is that a currency that goes to zero, or is that simply high inflation, say 50% loss of purchasing power a year? I think that the semantics cause 95% of the disagreements, as people are not having the same idea of the meaning of particular words. This is not easy to solve, except by discussion (like this thread).
The theory is just that: a theory. Freegold is a nice theory, however with all theories it remains a theory until it is practiced. Freegold shares the same problem as the ideas of the Austrian School of Economics. We can reason that it would work better, but without having it implemented, it remains a theoretical exercise.
The biggest challenge there is, is the amount markets will be let free by the powers that be. Can you ever imagine governments letting go of the control of the oil markets, if they have the power to control it? In the same line, will governments have their citizens real freedom, and choice of wealth storage? If governments can control taxation, and are forced to make the choice of reducing their own flesh, or cut additional flesh out of their tax base, wouldn't governments rely to the latter method? Historically they are.
Just some thoughts to illustrate that Freegold works great as theory, however will have to operate in an environment that is highly controlled. How much control will be allowed? A theoretical question of course, as no-one can predict the future. Still I belief Freegold to only operate best, when governments/powers that be will allow the markets some freedom, a lot more freedom then exists today. I am a bit pessimistic on the return of more freedom to the market, as the first response of governments is still tighter control, and less freedom. Still a worthy cause though, as Freegold implicates freedom, and that is the very basis of a thriving society.
Hello Costata,
It was someone at Turd's blog who made the suggestion for this post to MF by email. I assume that the suggestion was for me to list out the unsettled arguments. That arguments against Freegold are unsettled is obviously a subjective valuation that I do not hold. So when I mentioned this post in the other thread, it was just going to be the picture and nothing else under the title. A challenge of sorts. That's why I asked if the picture sufficed (given the title of the post).
But please feel free to enumerate those arguments that were worthy of debate in the past. If it's a good summary I'll put it up in the post!
Sincerely,
FOFOA
This is a bit like playing pick-up sticks - the first one who moves is the loser who has written something silly.
Here are nevertheless some thoughts around the topic: If I wanted to refute freegold, I should first state what I think is the definition of "freegold". So what is it?
1) Separation of store of value from the medium of exchange?
Where? In a single country or globally? In individual countries (e.g. those that M called 'banana republics' in the discussion on the previous thread), they are already separate. For example, wages, taxes and groceries are denominated in local currency, but people save in dollar or Euro cash (procured in the black market if there is no legal market) for the long run, i.e. for large purchases or for the next generation. Good. So what we are talking about is separation of store of value from medium of exchange globally. Perhaps more specifically in the relationship between the U.S. and their trade partners.
2) The major savings vehicle is no longer debt, but rather physical gold?
This is saying something similar. And it adds the hypothesis that the store of value will be gold (if you reside in the U.S. it might turn out that it is you that ends up a 'banana republic', but others don't, and that you can simply use a foreign paper currency).
3) The U.S. dollar is replaced by physical gold as the primary international reserve, i.e. in particular for settling trade and capital imbalances, and that a new mechanism is established (spontaneously) that counteracts such imbalances in the future.
Since the discussion with Blondie a few threads ago, I'd vote for (3), and so this is the one I am trying to challenge. Well, I don't know how to refute it, but I have some comments.
...
Hello KindofBlue,
The "Freegold price" as you put it is a result of a binary change in function for gold, from one thing to another. A "changing world financial architecture" as FOA put it. It is not a fixed price, but it is a different general level in real terms solely due to a change in function.
We also have the gold bull market, which is the gradual rise in the price of gold that has occurred over the last decade at about 18% or 19% per year. This has occurred even while gold's function has not yet changed. Something is happening which is allowing/causing this to occur. I think that while it relieves pressure in one area, it increases pressure in another. I think it will reach a breaking point.
As Victor has been pointing out, for gold to keep rising like this oil has to keep rising along with it. While the rising gold price relieves some pressure on the gold market, the rising oil price increases economic pressure. Can you imagine $10,000 gold and $500/bbl oil without something breaking first?
Some people, even some who have been at my blog for a long time, believe that this "gold bull market" effect can continue indefinitely into the future, or at least for another decade or two. This view is inconsistent with the Freegold that I have come to understand. That we made it to $1,700 per ounce when A/FOA said we wouldn't make it past a thousand is interesting, but that's all.
Here's the FOA quote:
"This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this."
Sincerely,
FOFOA
A) Why hasn't it happened yet?
I'd split the world into the dollar friendly block (U.S., Britain, Australia, Canada, Japan, who else?) and into the dollar adversarial block (Europe, China) with OPEC as an opportunistic third.
The U.S. and Britain (at least their governments) have always benefited from the imbalances. Europe has paid for them. Japan, too, but that was not enough for them to disassociate themselves from the dollar friendly block. Why don't the others end the status quo?
OPEC could do it, but they may still benefit from the artificially low gold price.
Europe could do it. Why don't they? Their trade and capital accounts are balanced, and so they can afford to be rather indifferent to how the dollar is doing. Perhaps they don't have any significant gold in- or outflow either, and so they are also indifferent to the timing of the switch to gold? Do they have any incentive to delay? Are they also being overpaid, i.e. have a gold inflow? Don't know.
China could do it. Apparently, at least during 2001-2011, they chose to use the U.S. market in order to develop their industry. Perhaps they also feel they still have insufficient reserves. This may have changed in fall 2011 when they (apparently) stopped accumulating dollars.
So if many still benefit from the status quo, someone must be footing the bill. Who is it? Everyone who exports real goods and services and imports debt rather than gold. That would be China until 2011, and as of today still the resource exporters of the dollar block plus those oil exporters who don't buy gold.
OPEC will also one day fall into this group. (When the oil price cannot rise enough to compensate for the higher gold price without throwing the world into recession and/or providing too much incentive to replace oil by other energy sources). Then they'll have an incentive to end the arrangement. When?
B) How could it be delayed?
If you listen to James Rickards, the IMF will fix it by making SDRs the new international reserve. This would need agreement of the relevant trade blocks. Who might agree? Everyone who still benefits from the status quo, perhaps? I.e. see (A).
Nevertheless, the incentives for delaying will diminish, and so this would be an exercise of kicking the can down the road. But it might be able to bridge some period during which the dollar already suffers without handing over control entirely to gold. Provided they can still manage it and nobody panics. Likely? So far, the paper gold market has always survived.
C) Could it be avoided?
If the region that consists of North and Central America, would ever manage to become energy self-sufficient, the U.S, can simply play foul, let the dollar collapse externally and enact trade and capital controls.
The argument that even the U.S. will eventually embrace gold as the new international reserve rests on the fact that the U.S. will want to or even have to trade with the rest of the world (not only their immediate sphere of influence that cannot refuse to trade with them). Energy self-sufficiency would at least substantially diminish this need for interaction with the rest of the world.
Another can kicking exercise, but perhaps good for quite a long period.
Concerning (C), I think, that each one of OPEC, Europe, and China would be foolish not to trigger the transition to gold well before the U.S. are energy self-sufficient. That's an upper bound to the time left, no?
Victor
After reading many of the articles on this site I cannot offer any "reasoned" argument against Freegold.
However, in my many years on this planet I have had several strongly held concepts that were completely sewn-up and water-tight. Then out of the blue something came along that was completely unexpected and shattered them.
People rely on "facts" in their arguments not realising that "facts" are transitory and can only be used as guide posts.
I would be very interested to know what each individual on this blog expects to get personally from Freegold. I suspect it's not the same thing. This makes Freegold a bit like quantum physics where everything exists in a cloud of probability but not certainty.
Still until something new comes along it's the best we've got.
FreeGold will not solve fundamental problem of fiat system i.e. HI. It will not either stop boom-burst cycles. It is the best least restrictive system possible.
Hi FOFOA,
But please feel free to enumerate those arguments that were worthy of debate in the past.
Thanks I'll kick this excercise off with a few and try to complete the list over the next few days. Everyone is welcome to jump in with their own suggestions.
I'm also thinking of trying to put together a list of the weak/pathetic/silly arguments that are frequently advanced. (I'm tempted to call this The Anything-Rui-Says-List but Wendy would chastise me.)
There's a couple touched on in the comments above already.
1. SDRs as an alternative reserve currency to replace the US dollar instead of Freegold-RPG.
2. Variations on the "control" argument i.e. those in control of the present system or benefitting from the status quo can/will block the transition. This is also a candidate for The Anything R... (sorry Wendy) THE silly list depending on whether it's expressed reasonably or as a dark global conspiracy.
3. The infinite possibilities argument. This often arises in response to words such as 'inevitable' used in connection with Freegold-RPG (and US dollar hyper-inflation).
4. The Euro, EMU and/or the whole EU project will fail so there will be no alternative to the US dollar for the forseeable future.
I'll have to leave it there for now.
Cheers
Costata,
I was just about to post a version of what you said. I thnk a large portion of the objections will fall into your categories 2 and 3.
Many are too pussy to take a position and don't like to be seen to be wrong in public - come on, put that precious little inner child in the firing line.
If this is you, get off the fence and state a true personal opinion, don't be a wimpy little pseudo-human.
I don't know about you guys, but I'd love to see some superhero ride in and destroy our favourite pet idea right about now!
I'm just not holding my breath — you have no game.
Hello Victor,
In your first comment I thought you were heading into the conceptual realm, but then your second comment surprised me with the pragmatic. Let's start with US self-sufficiency. This alone would end the dollar reserve status because the US would either stop running a trade deficit or would start running a trade surplus. How would US self-sufficiency translate into an extension of the post-Bretton Woods dollar standard? Perhaps we could reinstate Bretton Woods and let the gold start flooding in again like the 1920s, only this time it would be LBMA paper gold flooding in at the floating XAU currency exchange rate for unallocated JP Morgan ounce-denominated credits? :D
Back to the conceptual which you hinted at in your first comment when you mentioned Blondie. That is an interesting discussion/argument which you briefly mentioned. But I don't think it's an argument against Freegold. In fact, I'm not even sure that you and I would end up in a disagreement over it.
Blondie's statement was that, in Freegold, gold will not be the "savings" vehicle but will instead be an "investment". And by "savings" he meant that gold will not be a "store of value" (under his subjective projection of objective value) because it will float in real terms. He also said that currency will become the savings vehicle in Freegold because, with gold now functioning properly, currency will finally fulfill all three modern monetary roles, MoE, SoV and UoA. I think he's correct (with regard to the short term and saving for nominally expected purposes).
You have since extended his argument to envisage foreign CBs hoarding euros as the international reserve for settlement purposes and that the ECB could simply buy gold on their behalf (essentially).
Again, I don't think this is an argument against Freegold, but merely an argument against the "necessity" of what you perceive to be one of my "necessary conclusions". But I actually favor the organic savings aspect of Freegold, as described in Macrofreegold'nomics, in which trade imbalances are settled by billions of individual net-producers and the CBs use gold, not so much for settling international trade and capital imbalances as for managing their product, their currency, by buying and selling gold in a way that ends up being countercyclical to their organic savers, thereby dampening disruptive but natural cycles.
As far as whether gold is better described as a store of value or as an investment, I'll just defer to A/FOA (aka "my baggage", h/t Blondie) and say that gold is simply wealth. From here:
"Gold is not money, not currency, not an investment, it is wealth."
Sincerely,
FOFOA
FOFOA, the best shot I can give at you, is taken your very own words on "HOW IS IT DIFFERENT". Let's look at your essentials on how and when you think the world will/has arrived at "Freegold":
Stable physical-only supply
Stable, wide, awake and global demand
The end of captive savings
The end of gold traders
Unambiguous ownership
Supply resumes its role in fiat interest rates
The return of prudent lending standards
The return of capital ratio relevance
The retreat of Socialism
The reversal of regulatory capture
Meritocracy
and adding other IMHO essentials from your posts/predictions:
nationalization of mining (which is curiously actually contradicting with the conditions you listed above)
no taxation on gold (CGT,VAT,duties...)
Now, everybody can do his very own reality check on those FOFOA requirements/predictions. For me personally, it is hard to give even one single check for a prediction on one of the above.
Greets, AD
P.S. So far the issues about FG vs. the politcal/social environment. Regarding the technical/economical pricing (which is actually a completely different topic), I made a very long and detailed argument over at MF's blog, when it comes to the flow from mining diluting the hoarders/dishoarders flow.
FOFOA
"Can you imagine $10,000 gold and $500/bbl oil without something breaking first?"
Right. Everything - in the US, anyway - starts breaking down above $5/gal gas -- $10/gal, forget it. And I mean everything, the food system, etc..
I guess the argument stated another way would be that they'll separate because they have to! Strong argument.
Thanks for the clarification.
BTW you got a respectful mention in The Thunder Road report posted at ZH (page 20)
http://www.zerohedge.com/news/2012-12-10/inflationary-deflation-creating-new-bubble-money
The only argument against freegold is imo human stupidity.
There is no telling what may happen if enough men behave irrationally as they are bound to do when the economic hardship get's too though.
Then again, it may be argued that this will only delay freegold.
Hello AD,
That list you spit out like Beelzebub ejecting an extraordinarily long hairball is not a list of essential requirements for Freegold's arrival. It is a list of logical consequences that will naturally flow from Freegold after arrival. Do you really not even see the difference? Or are you attempting to obfuscate the obvious difference?
Regarding this:
"I made a very long and detailed argument over at MF's blog, when it comes to the flow from mining diluting the hoarders/dishoarders flow."
While long and detailed is nice when it is written well in easily understandable English, is it possible for you to *briefly* summarize that particular issue you took up with MF over at his blog? That might be an interesting argument for this thread if you could present it well.
Sincerely,
FOFOA
Rien,
perfect description, almost nothing to add. And if not a guide, history can be at least some indication. It's really funny to read LvM in the 1920s, about that socialism can not work... So 100yrs. later we have arrived to some global super socialism.
I wonder how the Romans felt 2000yrs ago, probably there also have been doomers and freegolders around with their predictions that the failure is pending and just around the corner... anyway it took >200yrs. to get that thing over in a long lasting decay that maybe nobody noticed overall.
Greets, AD
I'm not familiar with the free-gold concept. Is there a primer somewhere?
It's hard to argue against something you agree with but here's an attempt.
Different people's in the world are different. China and India I can see fitting right in with Freegold. But we seem to have to hit the US with the standard of living stick to get them there.
Pragmatically, I'm hazy on some of the details, like how mining will be done. Here we have a small problem as the gold price rises.. 99% of us don't have gold, and already, many workers here could go on the dole and take in ~10 grams per week panning, better than some wages, even in non-free gold prices.
So somewhere between here and freegold, won't our government has to hand out enough gold to stop many people dropping their real jobs and heading to the nearest gold stream. And our Gov is in the US supporter boat, with low gold reserves.
Will Gov. "hand out" gold in other countries? To e.g gold held by citizens per capita, e.g in countries with little alluvial gold.
These might be boring practical points, that can be solved, but it's all I've got, to be honest.
PS has anyone mentioned the end of the Myan calendar yet :-)
Hmm.
There is the idealistic argument, that Freegold is too good to be true, that I think AD touched on.
There is also the EOTW argument, in which this knowledge is lost. Say a crazy zombie virus or global thermonuclear war.
Those two arguments could be added to the list I suppose.
TF
FOFOA,
I am aware of what your point is, anyway:
"It is a list of logical consequences that will naturally flow..."
yes, sure. Like I said, everybody I guess is free to have his own judgement on such stuff, that's what you call real life experiences.
And as Rien pointed out: human behaviour has absolutely nothing to do with logic. So your point argueing about logic in that context is IMHO really weak.
Regarding mining pricing mechanisms, so to sum it up:
The basic idea of FG is, that gold serves as a debt extinquister/final payment for "useless" fiat currency surplus in the savers camp. If flow of gold/imbalance continues in one direction the fiat price is lifted higher and higher in the debtors currency zone, due to the shrinking amount of gold in the debtors zone, but on the other hand reducting the flow in terms of weight. That's what you refer to as a battery (BTW, nice picture), that is more and more charged but never reaches 100%, towards the end the transfered energy gets infinitesimally smaller and smaller (<=energy, thats the physical weight flow).
So far the perfect FG clean room theory.
Now the real world: Mining! Today and probably the next >20yrs. miners will always have an almost constant output in terms of weight. But probably (slightly?) increasing in terms of weight by higher prices (higher prices in terms of purchasing power).
So on one hand we have the infinitesimal weight approaching zero, the FG mechanism for the denumeration of the fiat currency, on the other hand we have the constant weight flow from the mines. We have TWO pricings: one from the savers/spenders hoard/dishoard flow and the other one coming from the mines. The miners are competing against each other therefore having a tendency to push towards an equilibrium just above mining costs (<=in terms of purchasing power). But this equilibrium is just in the other direction of the hoarders/dishoarder ones.
We have two competing equilibriums: Weightflow decreasing between currency zones at increasing fiat prices (<=Freegold) versus weightflow increasing at competing mining costs with tendency of being pushed down (<=Mining).
To sum it up, just like your RPG guru Robert Zoellick said "gold is too cheap....(in mining)".
That are the real world fundamentals. Sure, now you can come up with some la-la-land stuff, like does not matter, since "giants bankrun" due to breaking futures markets, every saver will run, HI, the breaking IMF, nationalizations and all that other assumption you paint to fit your picture (basically all the same stuff you hear from the silver crowd as well). You're free to do so, fine, I stay with the real world. And looking at the mining fundamentals my prediction is a continues 3-6 increase price of gold in purchasing power until it reaches equilibrium with inflation.
Greets, AD
Michael Smith
Check out the links and got to "Ron M's Air-Friendly PDFs" and look for JR's suggested reading list. That is the closest thing you will find to a primer.
Warning, it's about 400 pages.
TF
Rasta,
On a conceptual level I agree 100% with Freegold. However:
I am a bit pessimistic on the return of more freedom to the market, as the first response of governments is still tighter control, and less freedom. Still a worthy cause though, as Freegold implicates freedom, and that is the very basis of a thriving society.
Like you, my stomach (non-thinking instinct) has a very hard time squaring the diminishing freedom we see everyday with the anticipation of this sudden free market/non intervention explosion.
I can best describe this contradiction by thinking in words like collapse, paradigm shift, step function, etc.
History has many examples of the situation getting uglier and uglier on the ground for the common man, and then all of a sudden: SNAP, the oppressing force over-extended itself and collapsed.
I don't see Freegold as an end to all oppression, just monetary oppression/ignorance.
/Burning
Hi AD,
Is it not fair to say that, today, demand for gold is satisfied in the main (say 90%?) by paper? And also that almost nobody today wants gold in the first place?
So let's guess that, today, in a year there is demand for ~1500mt of physical gold (again, most demand for "gold" being satisfied by paper transactions), and there is, say, 2400mt of mine supply (which you indicate is likely to remain broadly constant going forward, perhaps rising slightly if the real price of gold rises to make more mine reserves economic to extract). Great, no argument so far.
But if you can see the paper markets for gold being wiped out, even if we ignore the notion almost everyone will suddenly want gold after all, this means a ~10x increase in the currency demand for physical gold rather than paper. This is as I say without anything else changing except the people who already buy "gold", switching to buying GOLD instead. So let's say for now the price didn't change (yeah, I know! :-) ) and we now have 15000mt of demand for physical, from the same shortlist of people with the same currency to exchange.
OK, so now you point at the supposed currency price of this physical gold 40x Freegold-shark-jump, and this gets that 15000mt and turns it instead into only say 375mt. Oh my! Suddenly we can all see the bubble collapse after all! :-(
Except the math so far only takes into account the same small set of people interested in gold today. Which I foresee widening to, well, perhaps "everyone"? I'm afraid I don't have any numbers to apply here to the 375mt from our latest step in the algo; you'll need to run your own sliderule over this bit. But my napkin right now has a number that is significantly greater than 2400mt on it.
And the miners? They're all loving it right?
Congress believed that the projected huge redistribution of income from energy consumers to energy producers would not be fair.
energy -> gold
Cultural Salience
Introduction
There is a school of thought according to which, after a radical transition in the global economic system, gold and gold alone will be a uniquely prized asset for wealth preservation. This is the first in a series of essays in which I will address some of the principles adduced in that school of thought to support such an extreme and unipolar future. These include: cultural salience, wealth density, a high stock to flow, slow primary expandability, propensity to lie still or be held in strong hands, propensity to be held by the rich, low price volatility relative to other assets, official support, e.g. by the European Central Bank or other central banks, hardness as money, propensity to become a numeraire, Veblen and/or Giffen behaviour and lack of practical utility. These are interrelated or even enmeshed in a complex web of interrelated ideas. As a result, each one will sometimes be mentioned when discussing the others, but I shall attempt to address them essentially one by one.
Salience
One of the factors expected to both generate and sustain this expected system is the expected future cultural salience of gold. This is expected by its proponents to be overwhelming, leaving no room for other elemental, nonmanufactured assets such as silver, except as "mere commodities", a status which is expected to afford them little scope to appreciate in relation to gold.
More at http://tyrannyofthepresent.wordpress.com/
DP,
"Is it not fair to say that, today, demand for gold is satisfied in the main (say 90%?) by paper? And also that almost nobody today wants gold in the first place?"
yep, that's basically the same as the CrashJPM silverbug argument....
All those evil fraudulent naked shorts of the banksters...
I bought my gold now averaged in total at ~1000€ which is probably just 1.2 above mining costs, not perfect but okay. What makes you think that I will buy gold regardless of paper vs. physical at fifty times mining costs? To support some shrimps to cash out?
Guess why I bought gold? Because a) in Germany completely tax free and b) on all other assets the government steals from you. If silver, platinum & paladium would be VAT free, those stacks would definitely be bigger than today (9%,2&,2%).
So in FOFOAs "logical" final stable end game paradise, I would never ever buy or hold gold. If that list "HOW IS IT DIFFERENT" FOFOA pointed out, would be the final result, in that perfect capitalist world of meritocracy I would never ever hold a single gramm of gold and drop any precious metal immediately against fiat or stocks.
Greets, AD
What if "the stroke of the pen" was prohibitively difficult to implement? Debt, therefore, could be denominated in gold.
Perhaps that's an argument against the permanency of Freegold, rather than its inevitability.
Here is may argument against freegold: To get there requires final run on the bullion banks, and there is no certainty that is going to happen. The collapse of the paper market has been prophesied for decades, but it hasn't happened yet. Why not? Part of the reason may be that nobody knows for certain how much gold is really out there. LBMA is still very opaque. Part of the reason may also be that the biggest institutional investors, the ones with the power to move mountains, are not set up to take physical gold delivery. When they go into panic mode they run to bonds. There is no sign of that changing anytime in the forseeable future.
Don't get me wrong: I agree with the idea that it is better to be a decade early than a day too late, so I own some physical gold -- enough that if the theory turns out to be true I will be fine. But I am not holding my breath for the financial earthquake that will imminently usher in the new freegold monetary system. Which is to say I am a believer, but not an "all in" member of the cult.^^
What if the US could get its government deficit back below its trade deficit, and its patsies kept stacking the bonds? Couldn't this prevent HI and keep the game going indefinitely?
Here are my critiques. I don't have any theoretical arguments against freegold that I'm aware of, I think the ones below all qualify as practical arguments against.
I'm talking about theoretical or "pure" freegold below. I do believe we could have a system that would look a lot like freegold in the future, but it would be messy enough that freegold purists would criticize it (think of the arguments over whether a country is really a free market) and others would claim it is not freegold.
My understanding is that freegold involves some psychological shifting of what assets society projects the concept of savings onto. For example, I assume many people here, such as myself, never thought of gold as savings 10 years ago.
Beyond currency "collapse" relative to the price of gold then, there is also a (psychological) collapse in assets available for savings. The theoretically high freegold price (freegold taken to the extreme) occurs when there are almost no other assets considered a store of value.
The value of savings swings wildly in relative value; we saw the Dow/gold ratio move from 1 to 40 in a single lifetime. I believe there is a fundamental component of human psychology that causes these types of shifts in relative value to occur and no system can fully control psychology. The system either fails (bubbles still occur) or it works (bubbles never happen); if the latter people eventually believe they do not need the system and return to the former. Under theoretical freegold, this natural volatility is transferred to the gold price.
If that is the case, the high gold price under freegold is not stable. I don't think there can be a transition to this type of freegold, rather it is the Event Horizon, the temporary Schelling point that the global economy pivots across into a new monetary future. Freegold can exist on the other side because, but the price of gold will be extremely volatile and tied to social mood.
It follows then that freegold has always existed in history, during wartime and societal collapse. It appears we are moving into another similar period of history. Freegold always is always there when you need it.
When I imagine a high price of freegold persisting into the future, it is under a monetary regime captured by the savers because beyond political control, freegold also requires mind share. If "pure" freegold did exist, it would not last more than a generation or two, as human nature overcame the lesson of history once more.
I am a long time follower, and generally buy into the Freegold thesis. With that caveat, one kick I may take at the ball would run as follows:
Freegold essentially represents a recapitalization and restructuring of the system. One of the common metaphors used to describe this is in terms of a fulcrum and load; the final value of the gold stock comes to roughly resemble the vaporized value of paper promises currently held as savings. Gold thereafter represents the stored value in the system. Yet if gold is to store real value, it too is a promise; a promise that the other net producers of the world will be able to produce a surplus and that they will choose to save in gold. I can follow the focal point argument, but Freegold also contains a potentially optimistic argument that 1) net surplus will exist and 2) that enough confidence in the future existence of a surplus will also be maintained to enable cohesion.
Betting against the ingenuity of humanity as a whole has so far been a losing bet in every circumstance over the long term, but there are also examples of short term disruption. I believe that there is every opportunity for those two conditions to hold, but I also perceive a real chance that we have collectively done some deep damage to both our social fabric and to the capital stock of the planet and are careening towards a more comprehensive social breakdown and reorganization, at least in the west.
If either the loss of 'imagined' wealth stored in debt savings leads to a loss in confidence in general or to violence, or if a traumatic shift (e.g. hyperinflation) leads to a (temporary) drop in productive capacity or trade, then many of the dynamics which drive freegold could potentially reverse; not permanently but for a scale of time in excess of what we posess to wait. Can we not imagine a breakdown where necessities outrun gold; that is to say: does there have to be anything revalued on the other side of the lever? Could a more general breakdown arrive, including heavy discounting of any future, and prevent the emergence of freegold for some indefinite period of time even if it is ultimately inevitable.
AD, re: twoe equilibriums
Mining supply in the last 10 years does not seem to bear out your assumption. Mining costs are closely following the price of gold. Miners are still not making "loads" of money.
I personally am rather taken with the peak oil concept. Which will also cause the price of mined gold to go way up.
This an excellent excercise, with many fine arguments. It is truly playing the Devil's advocate for the Devil is truly in the fiat.
There are a couple of arguments, far too long for a comment post, that I have toyed with.
But most of these do not exactly replace freegold as the "next" IMF$, rather they extend the status quo past my lifetime, which is a distinct possibility.
A debt based system requires parabolic growth. Parabolic growth at this point in time could only be created by an invention or development of revolutionary proportions. I mentione this in a former post and it was considered outlandishly off-topic, but in essence still understood.
100 years ago, NO ONE could have grasped the concept that people from all over the world would be discussing concepts like these real-time through an interconnected world wide communication web, for "free".
What lies ahead is similarly famtastic.
Will the current system survive me? That is the relevant question, moreso than what other alternatives can be supplied. I simply cannot imagine them in my current earthly paradigm, except for the one purely evil too long to explain one.
Another time maybe, gotta go hunt down some more ways to grow my fiat to pay off my debt.
Ho hum ... will it ever come ...
Oh, and another thing: Currently 25% of the worlds resources are used by the US. As the US get's closer to its "rightful share", the surplus in savings will dwindle in the US. This means that the price of gold mining will likely go up in USD as the average US citizen will need to pay more for the resources used in gold mining.
"Is it not fair to say that, today, demand for gold is satisfied in the main (say 90%?) by paper? And also that almost nobody today wants gold in the first place?"
yep, that's basically the same as the CrashJPM silverbug argument....
All those evil fraudulent naked shorts of the banksters...
:-D
And there was I thinking I was pointing to the demand side wanting paper, thinking it's as good as physical. Turns out I'm Max Keiser after all - who knew?
So you (and everyone else) see a Freegold-shark-jump in the price of gold and you sell it to hold currency again like the good old days? We can reinflate the credibility bubble of just-failed currency as a reliable long term store of value - great! Until some bright spark realises, hey this gold's a buy again!
As you've rightly said, what imbecile will sell their gold for currency unless they have a desire for some other end that they must briefly go via currency to obtain? Well, there's the currency manager.
The Cultural Salience of Gold and Silver
Introduction
There is a school of thought according to which, after a radical transition in the global economic system, gold and gold alone will be a uniquely prized asset for wealth preservation. This is the first in a series of essays in which I will address some of the principles adduced in that school of thought to support such an extreme and unipolar future. These include: cultural salience, wealth density, a high stock to flow, slow primary expandability, propensity to lie still or be held in strong hands, propensity to be held by the rich, low price volatility relative to other assets, official support, e.g. by the European Central Bank or other central banks, hardness as money, propensity to become a numeraire, Veblen and/or Giffen behaviour and lack of practical utility. These are interrelated or even enmeshed in a complex web of interrelated ideas. As a result, each one will sometimes be mentioned when discussing the others, but I shall attempt to address them essentially one by one.
Salience
One of the factors expected to both generate and sustain this expected system is the expected future cultural salience of gold. This is expected by its proponents to be overwhelming, leaving no room for other elemental, nonmanufactured assets such as silver, except as "mere commodities", a status which is expected to afford them little scope to appreciate in relation to gold.
On one popular website that espouses this view, the concept of salience as defined by Thomas Schelling is set out using the example of a pair of New Yorkers who have to meet at an undefined time at an undefined location in the city on a certain day. A large proportion of them chose noon at the information booth at Grand Central Station, demonstrating the salience of that time and place. http://fofoa.blogspot.co.uk/2010/12/focal-point-gold.html
The salient value thus described is a modal value. More than this, it is an extreme modal value, which stands out disproportionately from the data set. Any modal (largest) value in the set will pass the above test and will be selected by the largest proportion of subjects. What the discussion fails to mention is that salience is the result of high significance. It is a scalable rather than a binary quantity. A modal value can become even more significant and thus more salient. A modal value which is only marginally modal can also lose some of its significance. Like the tide receding it can then allow another value to become the mode. With further change, that value can then become salient in turn. So salience is merely the result of a history of changes in relative significance. If changes in significance create salience, they can render it stronger or weaker and can obliterate it. If given or theorised salience is assumed not to be subject to such changes, then it is being adduced a priori as somehow "necessary". In that case it not susceptible to any rational discussion, nor can it be supported on rational grounds.
More on my blog at tyrannyofthepresent.wordpress.com - I wanted to avoid long or multiple posts but will post the rest if anyone wishes. My name links to the blog.
I'd like to identify one strand of counterargument that I like to call the "World's Fattest Man" gambit, already used by DelusionalInvesting and others.
Sure, this guy might live a fit and active life if he does a few P90X videos and starts eating blended vegetables and chia seeds. He might not need to be winched from his hospital bed if he finds a billion dollars and a mad scientist with nanotechnology capable of combusting his fat and unblocking his arteries. I mean, anything is possible.
On the other hand, a doctor might consider these scenarios unlikely and therefore unhelpful when evaluating a diagnosis.
The US debt and deficits, the global balance of trade, derivatives, the paper gold market. They are like the world's fattest man: too bloated to ever return to normal without painful and dramatic change being enforced upon him.
DP,
"So you (and everyone else) see a Freegold-shark-jump in the price of gold and you sell it to hold currency again like the good old days?"
That is the most difficult part to consider...I'd rather spend time thinking about that, than reading the bible of the church of FO(FO(A))..
I think I will take my initial paydown off the table, just to please my worried wife, not to look stupid just in case prise falls again, additionally I will load quite some monster trucks with silver at poopyjims 1:10000, the rest will probably stay in gold ;)
Also it depends alot on the overall political scene at that period of time. What is a private island in Greece worth, when you are taxed 200% property tax per year and have a starving rioting burning country around you?
We'll see, greets, AD
Also it depends alot on the overall political scene at that period of time.
Yes. Not everyone is content to just be a saver and keep working to earn a crust forever.
I'm thinking property will probably be bombed out soon after a reset, personally. But #LetsSee...
Greetz ;)
DP
"and keep working to earn a crust forever"
jep, and that's also a point some Eurogold-Chearleaders seem to neglect. At a certain point of taxation, work becomes worthless. Like 75% income tax in France combined with property tax, you must be really really stupid to continue to work.
So for me basically if after the next election the Socialist/Green/communists will introduce property tax+higher income tax+higher CGT and probably also a basic income guarantee, for me that's it: I will not sell my company, I will just simply close it for the fun of it and move to Galt's Gulch,
"I'm leaving it as I found it. Take over. It's yours." - Ellis Wyatt
Greets, AD
So we decide it's not worth our while to do that lovely work any more, and this leaves the lovely work still needing to be done by some other lovely person. Maybe they come off welfare and the tax requirements to keep them all alive are reduced. Weeeee!
We should all move to Galt's Gulch ASAP, stop piling up those useless lines in the sand for no good reason. Not to do so makes us all jerks, keeping other poor creatures out of jobs.
Prost! :)
The biggest misconception I see is the one where people believe the $IMF debtor faction somehow has control. They don't. The status quo appeared stable prior to 1933 and 1971, and then it was gone. All that illusory wealth will go in a flash of light; nothing left but the crying.
Question 1
It seems that post-$IMFS, the US would have to win trade advantages more honestly. The USG (and other governments) would likely need massive amounts of capital to create technological/energy dominance (Richard Duncan suggests they create/borrow this money now, but they obviously will not).
In Freegold, the USG will need massive investment in, say, shale infrastructure. In this scenario could they penalize citizens for saving in gold, forcing them to invest in the next energy boom?
Question 2
After a reset how would populations know that the price of gold is going to remain steadily high? If governments told us who would believe it?
Wouldn't it just look like an insane bubble - causing a huge amount of gold/jewelry holders rush to their local Cash4Gold shop to cash in?
Hi Lord Sidcup,
In Freegold, the USG will need massive investment in, say, shale infrastructure. In this scenario could they penalize citizens for saving in gold, forcing them to invest in the next energy boom?
If there are investments that really do add up, there will probably be no shortage of gold-holding investors, looking to gain a return on their capital rather than merely a return of it. Why would the government forego tax income in order to encourage something that is likely to happen without any interference anyway?
Wouldn't it just look like an insane bubble - causing a huge amount of gold/jewelry holders rush to their local Cash4Gold shop to cash in?
Stimulus you can believe in - and no debt hangover!
So the government taxes you on sales of gold, and this just sets the bar higher on what you will consider a productive investment.
FOFOA: One of the things I have found that people have a hard time grasping is that ALL savers will want to be in gold after the transition, even though it won't deliver ANY real gains like we've had over the past decade. This is a difficult concept to wrap one's head around. People seem to think that they are in gold only for the big 30-bagger revaluation and then they'll want to find something else in which to put their little dollar soldiers to work earning a yield. Either that or they imagine that Freegold will be an environment of perpetual real gains for gold holders. It will not.
Freegold will be simple purchasing power preservation, and you'll love it! No gain, but also no risk and no loss. That's what savers need and want. And most of us are savers whether we admit it or not.
DP,
"So the government taxes you on sales of gold, and this just sets the bar higher on what you will consider a productive investment.
interesting thoughts approach. How the other way arround: gov. taxes purchases of gold? What would that do?
And this also leads us to one of the FOFOA predictions and the topic of this post: "no no no gov. will not tax gold, gov. is reasonable, since they know that this will hurt the reasonable FG economy..."
are you kidding me?
Greets, AD
-Just beware of the false prophets which come with names like scientific logic...
-Liked what "Arts and Decay" sang in 1989
Black for anarchy
Red blood we bleed
Gold for no system we need
http://www.youtube.com/watch?v=qVsz4CI9C8w
-And a nice pic here:
http://www.masterfile.com/stock-photography/image/400-04202670/3d%20illustration%20of%20blue%20lock%20with%20golden%20key,%20over%20white%20background
Cheers,
KG
It is very difficult to tax gold when it is not registered gold. Still, for large purchases it may be possible because it is increasingly difficult to do anything without the govt knowing about is.
If they decide to tax gold, the black market will soar though...
Rien,
just look at what's going on in Europe.
In the name of money laundry, terrorism and tax evasion, you are a subject for investigation if moving >10000€. That's the FACT already TODAY, guess what they will do when gold comes into play and they dont like it!
Greets, AD
Ha! You have made a deadly mistake by allowing the true hard money ninjas back in to debunk your fallacious freegold ideology! How can your freegold withstand the burning light of hard money truth? I submit that it cannot, for the following reasons:
1) THE ELITES WILL NOT ALLOW FREEGOLD TO HAPPEN
The elites. It is all about the elites, and what THEY want. These are words to live by. Sheeple will always save in what big daddy G tells them to. Meanwhile, the elites will hoard the gold. Probably they will abscond with it to the moon. This is how it always will be.
2) WE WILL DESCEND INEXORABLY FURTHER INTO TOTALITARIAN COMMUNIST HELL UPON COLLAPSE
In accordance with #1, the ELITES want a ONE WORLD CURRENCY and to turn the entire globe into surveillance state hell and all that entails: forced labor in soviet-style work camps, soylent green, drone bombings of dissidents, etc. It does not matter if G is unable to fund itself through ignorant savers saving in gov. debt! Gov. will grow bigger anyway! IT IS THE WILL OF THE ELITE.
3) GOV WILL TAX/CONFISCATE GOLD
In accordance with #1 and #2, gov. will never allow sheeple to have anything of real value even if freegold does happen & gold does become int'l reserve! They will just take your gold and keep sending it to China to preserve the welfare state, while sending the middle class to FEMA work camps. Welfare mommas will keep their flatscreens and food stamps while freegolders & the middle class will have their gold confiscated/taxed and get sent to the mines to work. That's why MINERS are the real play here, since the mines will benefit from a lot of free labor, not to mention low cost leverage to dollar-price-ah-gold!!
4) FRACTIONAL RESERVE BULLION BANKING IS ETERNAL
It simply cannot be defeated as it is run by the ELITES! If the BB's need reserves, USG will simply bomb some backwards country and take their gold. Simples.
That's just 4 points and I'm only getting started! The main thing is this: you freegolders just don't get that it is the power-hungry elite and what they want that matters, not any of this stuff about the superorganism, focal point, Occam's razor, logic, reason, blah blah blah etc. It's all cloak and daggers, drone bombings, controlled demolitions, aliens, and gold-plated tungsten! FREEGOLD = PWNED.
Greetz,
HMS
Hmm. Looks like this thread may break the comment records.
We shall see.
While searching for a quote source, ("Every revolution carries
within itself the seeds of its own destruction") I came across
a speech on the history of the "republican form" of Govern-
ment, from the time of Solon. It details the strains which arise
within democratic, as well as the republican form of Government.
It was written by Robert Welch, of the John Birch Society, a
great hater of both the evils of Communism and Democracy, as
well as an enthusiastic friend of the republican structure.
We know that we are living in the end time of an experiment,
which began in 1922 at the Conference of Genoa, as a result
of the destruction of WW1. It became crystalized in 1944 with
the first GLOBAL fiat currency in world history, the US $,backed
by gold for external settlement. The destructive seed was
first articulated by Robert Triffin in 1960. This much, I think,
constitutes our shared consensus.
The question which arises is this: Freegold undoubtedly will
constitute a "revolution" in that it will never before have
existed as a monetary system (since a global fiat system and
a free floating reserve asset untethered to that fiat has
never existed). If this is true, is the dictum false? Or is there
some seed which, in time, will reveal itself to be the one which
dooms this revolution to be overthrown? If no such "seed"
exists, will it be the first time in history?
BTW, HMS;
soylent green WAS the first fully democratic food - of the people,
by the people, for the people. Greetz
AD Re: Tax and europe.
They can target money since at one point or another money has to move through the banking system. Gold has no such need. FG even less.
However, looking at europe, the fact that anybody is still living in Greece is testament to the fact that a large portion of the Greek economy is in fact black. Despite efforts to bring this out in the open. With FG, the black economy in places like Greece would dwarf the white economy. And imo northern europe would follow that example. Nobody I know likes being taken advantage of. Given the opportunity they will evade taxes.
"So the government taxes you on sales of gold, and this just sets the bar higher on what you will consider a productive investment."
interesting thoughts approach. How the other way arround: gov. taxes purchases of gold? What would that do?
Well, if people want gold but can't tolerate the purchase tax on it, I guess they might try to negotiate payments to themselves in gold? #RuiWetsPants
In which case G loses tax not only on the small purchases of gold forming the surpluses/profits, but also on the much larger preceding economic activity that avoids going through the accounts. Oops.
Hmm, so I searched for "Bernard Lietaer" in this blog but nothing...even though...While at the Central Bank in Belgium (National Bank of Belgium) Bernard implemented the convergence mechanism (ECU) to the single European currency system..and freegold seems to attach particular importance to the EU...(or, am I wrong?)...Either way...the ECU sounds very serious...I arrived at deliciously outlandish central banker, Mr. Lietaer, after reading this article in the Harvard Business Review: http://blogs.hbr.org/cs/2012/11/the_economically_out_of_date_n.html So just click through to Youtube from here (http://www.ericgarland.co/2012/12/10/belgian-punk-revolution/) if you're interested to watch the other bits (no pun intended) of his lecture...What am I asking? Well, this chap seems to be advocating a type of Bitcoin insofar as he enjoins us to consider the idea that a global economy of 6 billion people linked to a central bank franchise of around 200 or so States impervious to serious competition ..may be sub-optimal...so what say you, freegolders? Is the Belgium central banker onto anything? Did the Harvard Business Review interest you? Also, FOFOA, did you ever say your thoughts on that thing Mot checked out? He thought it was worth a watch!
http://en.wikipedia.org/wiki/Bernard_Lietaer
Michael Smith: I agree that FOFOA RPG-Freegold PDFs for Offline Browsing privided by matrixsentry is the place to start. I would look at it as a great novel that a friend recommended and you thought, "Why not. I'll give it a try".
The above link will take you to 'JR’s Suggested RPG- Freegold Reading List' which is a .pdf file.
Just a note.
One of the positive things to come from my(now completed) wandering to another camp was a discussion with a certain polite and reasonable individual, who said he would look at the FG case and try and debunk it as regards silver.
He has informed me that he thinks he has succeeded in doing so, and has the first of many posts in a series up to address all relevant points.
I, for one, will look at the arguments made with a open mind.
I notice he has linked his first here, at his blog http://tyrannyofthepresent.wordpress.com/
So, that is just some background and info. :)
TF
Rien,
maybe.
In such case, Freegold has failed: Gold would had become medium of exchange and club med falls into the dark age of bartertown.
Again, regardless on how you look at it: A clean FG outcome is not in the cards.
Greets, AD
P.S. For such case I am hoarding Sourvereigns and Napoleons...
In such case, Freegold has failed: Gold would had become medium of exchange and club med falls into the dark age of bartertown.
Yes - I agree that's quite an incentive to the government not to tax purchases of gold. Or to reverse it pretty quickly if they were stupid enough to try it.
For such case I am hoarding Sourvereigns and Napoleons...
Yes, legal tender coinage FTW! Right, Peter?
Hmm, I just started reading your post. (I posted my questions as soon as I got here). And I like Richard Rorty, who was a self-described pragmatist, so I feel a necessity to speak up a bit now.
Now, your friend wrote that
"The anti-conceptual mentality has been fostered and nourished by Pragmatism, the philosophy which dominated U.S. academia the first half of the 20th century, and dominates our educational and political systems still today. We swim in a sea of Pragmatism."
1-you just prior to inserting this comment made mention of the importance of definitions, and seeing as this person is applying one word to describe 50 years in the "educational and political systems", your source in this regard seems a bit lacking, particularly in consideration of the fact that asking to "define" pragmatism is perhaps similar to asking a person to define "definition", insofar as the term "pragmatism" is so commonly understood it seems almost vacuous to try and 'over-intellectualize' the (i hate to say this word!) "semantics" of it - even more so when you could argue the word derives meaning from being able to see the practical use of something for a presumably GOOD end (i.e. good in the moral sense of the word), adding a particularly ironic twist to this bitter flip of confusion...but moving on...
We are told by the learned Doctor before he deconstructs what makes things "grounded in reality", or more precisely how to speak of such things in terms that he finds agreeable to his way of thinking, that Rand mentioned "anti-conceptual mentalities." Perhaps he was thinking of what Rand said when she said "Definitions are the guardians of rationality, the first line of defense against the chaos of mental disintegration" ... A lovely, timeless piece of prose that certainly rings true to my ears, but in a way that is also equal to the idea spoken by Richard Rorty, the leading pragmatist philosopher (of the 21st, by the way, not 20th century)...when he said that...often times..for something to have real meaning... it has to be
"synthesised by a concept before it works"
Quote taken from this interview @ 27
https://www.youtube.com/watch?v=kMwdZZANr3o
Furthermore, Rorty was particularly noteworthy for being a moralist, you know, arguing that humans can rise above indifference to the sadness or happiness of others...not an altogether bad idea, I should say...when one considers how human hubris has lead to some quite undesirable outcomes recently (see my random blog post for more on that - the post with the blue car http://goldendgate.tumblr.com/page/3)
Anyway, although I am no authority on this blog, it seems fairly indifferent to questions of morality...but nevertheless I will post in his great honour, the final lecture Richard Rorty gave to the Law School of The University of chicago...I would encourage freegolders to listen to it, even though it is somewhat complex, moving along at fast pace...it should be easy enough for anyone to casually listen to, enjoy and appreciate afterwards...how practical!
http://uchicagolaw.typepad.com/faculty/2006/04/rorty_on_posner.html
I Haven't edited this post because I doubt anyone will seriously consider it, but thought it's worth writing anyway!!
TF
Many thanks for not only having an open mind yourself, but encouraging others to have one too, and of course for mentioning my piece despite my posting it earlier than I had said. I would have posted it here in full, but the system would not allow it.
I hope that this was just a mere coincidence but I couldn't login for some past days. Anyway, accidentally found great analogy in history, while Romans barely debased the gold currency, the real hyperinflation flare event had been channelled through HI in silver denarius, their basic currency. Another tidbit revealed that small hoard of 33 gold coins (roughly four unces of todays bullion) excavated on parking lot in 1970s in one of the provincial capitals (Serbia now) has been linked to a wealthy family in that city. One can deduce from it that even few oz. goes a long way.
"I agree that's quite an incentive to the government not to tax purchases of gold. Or to reverse it pretty quickly if they were stupid enough to try it."
can you name me any tax that has been introduced with a reasonable incentive for the government?
I can only think of the VAT about 100yrs(?) ago, besides that, G doesnt f*cking care if something is reasonable or you consider it reasonable to be (e.g. they rather increase suppression on the working people in order to raise social benefits).
Since club med existed they never paid income or VAT taxes => with a major growing shadow economy. Did the government draw any smart conclusions or actions? Not that I can think of the last 100yrs.
Greets, AD
Well, I didn't really mean I thought "they won't tax gold purchases because you and I might think it was unreasonable and they are after all just cuddly teddy bears being always nice to us good old boys" ...
... but, rather, "they would quickly discover more of the benefit they enjoy from their own fiat'n'taxes system would disappear, than just what extra they thought may be obtained through taxing gold purchases".
It would be counterproductive to them.
I still think it's much more likely they will take it from the easy target of the miners.
AD, I see no problem in having trades being conducted in fiat and gold at the same time. I do not think that would necessary invalidate FG. Using gold for payment (even now) is simply a form of barter. It does not relate to FG.
But it could be a detraction for governments to the point that they would want to abolish gold barter since it generates no revenue for them.
I personally think that the advantage of FG could become evident even to a govt. And as such it could well be accepted, even if it is used in barter.
My "fear" is that people will simply not understand the FG concept. FG, to an extent, seems to require free thought as well (sovereign citizens). I cannot put my finger on the connection as of yet. But somehow I have the feeling that without a near abolishment of govts FG will not happen. As I said previously, people as a mass are pretty stupid.
DP,
you mean like the german government, who bribed and obliged their people to save in PIGS debts?
Oh, wait a minute, the friend of the cancellor of that time was the master of all ponzi schemes and the new european multi billionaire....
Installing the ESM looks also like a great idea...
"Back to Mesopotania by BCG" sounds also like a really clever idea...
For far to your argument of "G's recognition of what is counterproductive and what is not".
Greets, AD
One of the difficulties in addressing arguments against freegold is that there is no clear definition of what ‘freegold’ is. As such, usually arguments ‘against freegold’ are really arguments ‘against what someone thinks is freegold’ which might not be the same thing.
At the core, I see freegold as:
The return of gold to its international settlement and reserve function between CBs, at a floating price.
Following from that core, the follow-on effects would be:
- The return of gold as a tradeable wealth asset independent of currency.
- The end of the US treasury bond’s role as the world reserve asset.
- The use of the Euro as the world trade currency, to replace the role of the US dollar.
- The end of gold banking and lending
- Very high currency price for gold
I can think of arguments against some of the proposed follow-on effects (including some not listed above). But the real crux of the matter is: will the UST live on as the world reserve asset? And if not, what will replace it? Everything else flows from that.
***
(I forget if I have posted this before and am repeating earlier comments)
The USD is called ‘the world reserve currency’, but as ANOTHER would say “that is a bad meaning, for it does not what it says”. The USD is the ‘world trade currency’, and the US treasury bond is the ‘world reserve asset’. These are two different roles but are connected. If the USD was no longer the world trade currency then the USTs would have no use as reserves, and if the USTs are no longer accumulated as reserves then the USD will hyperinflate and thus will not make a good world trade currency.
I think this is why there is so much confusion as to what the future role of the Euro will be: it will replace the dollar as the ‘world trade currency’ but not as the ‘reserve asset’.
***
Woland,
The question which arises is this: Freegold undoubtedly will
constitute a "revolution" in that it will never before have
existed as a monetary system (since a global fiat system and
a free floating reserve asset untethered to that fiat has
never existed). If this is true, is the dictum false? Or is there
some seed which, in time, will reveal itself to be the one which
dooms this revolution to be overthrown? If no such "seed"
exists, will it be the first time in history?
I think the dictum will turn out to be correct and the ‘seed of doom’ will be included in freegold. But, the seed is likely to come from an unanticipated change in the real economy which makes the underlying monetary system obsolete. From our vantage point, it is impossible to know what such an unanticipated change might look like. The gold standard functioned for hundreds of years, and I would expect a freegold system to have a lifetime of similar order of magnitude.
Rien: But it could be a detraction for governments to the point that they would want to abolish gold barter since it generates no revenue for them.
I don't know that they could really "abolish" gold barter - but they could easily, however, unequivocally state in law that which is already self-evident to any thinking person: any trade contract denominated in anything but currency cannot be enforced by a court. This may be enough to put most people off?
AD,
Maybe if the German sheeples had a clearer idea what an alternative might have been, things could have turned out differently?
"OMG! He just said 'this time it's different'! :D "
MichaelH: One of the difficulties in addressing arguments against freegold is that there is no clear definition of what ‘freegold’ is. As such, usually arguments ‘against freegold’ are really arguments ‘against what someone thinks is freegold’ which might not be the same thing.
OMG YESS!
I think this is why there is so much confusion as to what the future role of the Euro will be: it will replace the dollar as the ‘world trade currency’ but not as the ‘reserve asset’.
OMG YESS!!!
My main problem with freegold is the extreme prices envisioned:
We know the old Zimbabwe youtubes of people needing to dig for 0.3 grams every day to survive.
Well, 0.3 gms per day is roughly 1/100 oz, or with 55k/oz pz POG around 550$!
I don't know about the rest of the world but this is more than the typical engineers daily salary here in sweden. A price of gold which makes it more profitable for a significant part of the highly educated wash the rivers for gold is not a sustainable price imo.
More likely for my is a lower price, but a significantly increased supply, that in the end makes the total "market cap" for gold comparable to the one predicted by freegold.
/Bluefire
Michael H,
Excellent comment!
The return of gold to its international settlement and reserve function between CBs, at a floating price.
Is that enough to define Freegold though?
Lots of CB's already hold gold as a MTM reserve asset, but we do not have Freegold yet...
Isn't there supposed to be something about paper gold and physical gold going separate ways in the FG definition also?
But yes, critics will have to answer this one convincingly:
Will the UST live on as the world reserve asset? And if not, what will replace it?
tyrannyofthepresent,
From your post:
Occasionally, when the past significance of other metals such as silver or platinum is mentioned, the objection is made that the future will not be like the past. A process of evolution is said to be taking place. This is all well and good, although the risk of falling into the trap of asserting that “this time is different” always beckons. Nevertheless, those who insist on the future salience of gold despite the past must acknowledge that they are choosing the second option. They are setting aside the past. They must therefore abandon evidence of present salience (since it belongs to the past) and provide evidence of the new factors that will generate cultural salience in future or eliminate the cultural salience of silver. In that situation they can no longer use salience as a premise. Instead they must seek out new premises.
I will turn the table. The issue is not whether and how ‘the future will be different from the past’ with respect to the metals, but how ‘the future will be different from the present’.
In other words, I see the present, being the nearest form of the past, to be the most important consideration in predicting the future.
In the salience example given, that of Grand Central Station at noon, imagine if we repeat the experiment and ask participants when and where they would meet, but add “and by the way, Grand Central Station has been closed indefinitely, and is unreachable”. What locale would participants chose then? Would they say “well, since GCS is closed, I’m sure a new station is being built, so we’ll just meet there”? Or would they say “since GCS is closed, we’ll meet at our second-best current choice”?
If we look around today, most assets are in currency-denominated bonds, especially USD-denominated. If we asked people where they would park their wealth if the USD was no more, would they say “well, then a silver currency standard would be built so we’d put it there”, or would they say “well, gold is currently the most liquid and deep wealth reserve asset outside of currency, so we’d just use that”?
Finally, the concept of salience relies on there being only one outcome. Not “gold and silver” (or as Chris Martenson put it, goldandsilver), but rather “gold or silver”.
Unless, of course, your argument really rests on the assumption that there will no longer be fiat currencies around, and silver will be necessary for transactions. This would be an entirely different discussion.
burningfiat,
Is that enough to define Freegold though?
Lots of CB's already hold gold as a MTM reserve asset, but we do not have Freegold yet...
But gold is not currently used as the international settlement medium between CBs.
But gold is not currently used as the international settlement medium between CBs.
Yes.
Netting this out to almost zero with physical gold transfers between the CBs would, I suspect, pretty quickly make a mess of paper gold.
Why not silver?
I point out that the Washington Agreement doesn't mention silver as being a reserve asset of central banks. Gold has already been chosen. Just an observation.
Michael H and DP,
Maybe it is a bit of a chicken and egg discussion...
What would we call an environment where the paper gold market had separated from the physical gold market (Private demand had broken it maybe. I hope we agree that CB's only make up a fraction of the real physical gold holders), but CB's still hadn't begun to clear balances in physical gold?
Do you think such an environment is even possible?
bluefire> I very much doubt the idea that a gold digger in Zimbabwe (or amazonia etc.) was ever paid full price for the delivery of roughly excavated 0.3g per day. Most likely they got only a fraction of the ticker price, the rest ended up in the higher chain. That being said, many of the "debt based monetary system reset comming soon" camp people place the interval of revaluation between aprox. factor of 16-32x, more cautious folk or proponents of longer can kicking contest see a temporary plateau of 4-7x revaluation for say 2015-2020 timeframe before the next-final push. So, FOFOA is only fitting on the already "agreed" upper limit, the divergent philosophies about the origins and function gold based world putting aside.
Moreover, we need from the ground info, there is a new reality within the teutonic countries of the EU, you can visit every major city and trade bullion at special desk at prominent place at all the major bank branches, plus other franchise outlets active in several members states. There is no VAT and liberal ammount of 15k cash payments no paper trail. A bit odd? Definately, there is something brewing, and I call it let the top ~10-1% of population stack up the gold, the doctors, lawyers, midsize business people (the top 1% has been ready already - no need to placate them more). So, after the reset as always these very people, the top ~10% gears of society will be the backbone of the new financial regime (incl. law and order) and it will be meant as "irreversible" vis a vis possible violent social upheavels. Well, it may work that way or not in those turbolent times. But it seems like a plan in execution now.
BF,
You mean if the CBs stood aside, watching people within their zone begin passing their currency through gold (among other things), faster and faster, at higher and higher prices as less and less weight changes hands while it moves into the stronger hands, but at higher and higher prices? I guess I'd call it uncontrolled hyperinflation?
I reckon it would be better for them if they chose to sell gold into this demand and drain their currency from circulation. This might well help restore the tightness in the supply/demand balance of the currency and help quell the demand for gold. i.e.: they regain control over the hyperinflation and prevent the whole system of trade from coming completely undone at the seams. Which is what was about to happen in 1981 if Europe hadn't chosen to provide that structural support until they had a system in place for the world to run into from the dollar. An alternative system, in case anyone has yet to notice, based on gold and not goldandsilver.
burningfiat,
What would we call an environment where the paper gold market had separated from the physical gold market (Private demand had broken it maybe. I hope we agree that CB's only make up a fraction of the real physical gold holders), but CB's still hadn't begun to clear balances in physical gold?
That's a good question. I think the answer flows from the answer to a different question, which would be, "who would 'break' the paper gold market, and why?"
Private demand? I don't see breaking the paper gold market as in the interest of private demand. Or any demand, for that matter: the paper market works to the advantage of those who are accumulating gold. Until a stampede starts, that is, then it is "every man for himself".
Another way to look at it is that the paper and physical gold markets will only separate once there is market specifically for physical gold. What/who could create this market?
A third angle is: what is paper gold good for? Under what conditions would it no longer be 'good' for anything? My answer to this last is: paper gold is good for hedging currency exposure, and is no good once either a) the currency you are hedging no longer functions for trade or b) the hedge reveals itself to be inadequate or incapable of paying off when it is needed.
Chris Martenson on "goldandsilver":
The Difference Between Silver and Gold
Often people ask me if I hold goldandsilver as if it were one word. I do own both, but for almost entirely different reasons. Gold, to me, is a monetary substance. It has money-like qualities and it has been used as money by diverse cultures throughout history. I expect that to continue.
...
I hold gold as a monetary metal. I own silver because of its residual monetary qualities, but more importantly because I believe it will continue to be in demand for industrial uses for a very long time, and it will become a scarce and rare item.
(I do not necessarily agree with all of Chris's points, but it is noteworthy that he agrees that gold and silver are different and should be considered separately)
DP,
Agreed that that is what would happen!
Michael H,
Another great comment:
Another way to look at it is that the paper and physical gold markets will only separate once there is market specifically for physical gold. What/who could create this market?
The ECB/BIS fraction presumably?
The return of gold to its international settlement and reserve function between CBs, at a floating price.
So, maybe I'm just nitpicking at some irrelevant causality but isn't the instigator of all this then:
"ECB/BIS fraction will create a physical gold only market at some opportune time!"
Then this is the sentence that should be disproved.
I mean, in your interpretation it is solely up to ECB/BIS to make Freegold happen!
IMHO this brings us back into conspiration territory, as that sentence is hardly falsifiable. Because who can prove when these secretive entities will go for the trigger? You can't prove that they will, you can't prove that they won't!
Logically, I'm much more a sucker the argument that $IMFS is unsustainable because of savers will at last wake up when they have been subjected to negative real rates for too long (onebadaddergeddon?), and pushes the current system to its inevitable conclusion by choosing another thing to save in (phys. gold).
Does that make sense?
"I own silver because of its residual monetary qualities, but more importantly because I believe it will continue to be in demand for industrial uses for a very long time, and it will become a scarce and rare item."
Jerk!
burningfiat,
"ECB/BIS fraction will create a physical gold only market at some opportune time!"
Maybe. I phrased my last comment the way I did because, while I see this as the likeliest outcome, there is still 'chicken and egg' factors to it. As in: what constitutes an 'opportune time'? That aspect would not necessarily be totally in the ECB/BIS's control.
The way I see it, events will play out that will make it more and more difficult for the status quo to continue, and, way past what we would expect to be the breaking point, the ECB/BIS will step in. They will step in, not to destabilize the current system, but to re-establish order to what would quickly be devolving into chaos.
who can prove when these secretive entities will go for the trigger? You can't prove that they will, you can't prove that they won't!
Time will prove it out, one way or another?
Hi All,
I believe freegold is inevitable in the current $IMFS context. So I don't believe it can be refuted/debunked. I do have two observations, the first, already touched upon...
1. The event (currency crisis) that will mark the start of freegold may be much further off than we anticipate simply because the sheeple are completely oblivious to monetary reality and will remain in the system (velocity won't spike) even in the face of high inflation. So we'll see. It's obvious to us, but...
2. And this is where I break out my tin foil hat - yes, even beyond freegold. Oil plays such a big role in Another's Thoughts... That gold trading essentially clears the energy market was the big sack of brans spilled from the LBMA, so how would freegold be affected if we didn't need oil anymore? Delayed? Lower freegold price? I'm just saying there's a lot of suppressed patents/tech out there, and I think freegold might play out DIFFERENTLY in a world with free energy. Lot's of people believe the technology exists to free us from oil...
Still, the world existed before the industrial revolution, and reserve currencies have collapsed before oil, so Thoughts? ;)
They will step in, not to destabilize the current system, but to re-establish order to what would quickly be devolving into chaos.
FWIW, +1
Michael H,
As in: what constitutes an 'opportune time'? That aspect would not necessarily be totally in the ECB/BIS's control.
Great way to see it. "Opportune time" will perhaps be determined by the private market after all?
In other words I prefer an interpretation where ECB/BIS has smelled the coffee and will be along for ride to support the newly emergent system (what else can they do?), but they will not be prima causa for Freegold...
$IMFS own inconsistency is what in time will kill itself and usher in Freegold. It is easier to prove that endless saving in endlessly debased paper is unsustainable.
Hi All,
I believe freegold is inevitable in the current $IMFS context. So I don't believe it can be refuted/debunked. I do have two observations, the first, already touched upon...
1. The event (currency crisis) that will mark the start of freegold may be much further off than we anticipate simply because the sheeple are completely oblivious to monetary reality and will remain in the system (velocity won't spike) even in the face of high inflation. So we'll see. It's obvious to us, but...
2. And this is where I break out my tin foil hat - yes, even beyond freegold. Oil plays such a big role in Another's Thoughts... That gold trading essentially clears the energy market was the big sack of brans spilled from the LBMA, so how would freegold be affected if we didn't need oil anymore? Delayed? Lower freegold price? I'm just saying there's a lot of suppressed patents/tech out there, and I think freegold might play out DIFFERENTLY in a world with free energy. Lot's of people believe the technology exists to free us from oil...
Still, the world existed before the industrial revolution, and reserve currencies have collapsed before oil, so Thoughts? ;)
Walter Sobchak,
FWIW, +1 for your name being Walter Sobchak!
Once upon a time there was a city called Babylon. Under construction a tower "that hyddeous strength//sax miles or more it is of length". Mankind's focal point. God coming down, confusing the language. Building impossible, project abandoned.
Ever since, we feel the curse of Babel: (mis)understanding. "Alas, how easily things go wrong//'t is hard to watch in a summer's night//one word too much and a kiss too long//and there follows a mist and a weeping rain//and things are never the same again." Even lovers complain.
God sending down his son 2300 years later. Misunderstanding everywhere: loving misunderstanding, ignorant misunderstanding, deliberate misunderstanding, malevolent misunderstanding. Mission ended in a mist and weeping rain and deliberate torture & pain. Ain't it sad? (Rumors of resurrection?)
God to visit earth after another 2300 years, or any time soon? To do away with any and all misunderstanding, cross-purpose, double language, double dealing, newspeak, twist and shout, arrogance.
Looking forward to discuss FreeGold with all of you again. Just plain language for us all! Wishing you well--Louis Boer.
Once more thing:
While the UST might be 'gradually phased out' as the world reserve asset, the USD as the world trade currency cannot; it either serves this role or does not.
As the UST is phased out as a reserve asset, the value of the USD will suffer. Eventually it will reach the point where the ROW sees the advantage in abandoning the USD as a trade currency, and the Euro will replace it. I think this point would relate to how quickly the USD is devaluing against oil.
Walter,
If say, today?(smile) a new/old technology was shown to exist that would have the potential to replace oil as a primary fuel source within a few years, I think we might see a reaction from someone...
Victor said:
"C) Could it be avoided?
If the region that consists of North and Central America, would ever manage to become energy self-sufficient, the U.S, can simply play foul, let the dollar collapse externally and enact trade and capital controls.
The argument that even the U.S. will eventually embrace gold as the new international reserve rests on the fact that the U.S. will want to or even have to trade with the rest of the world (not only their immediate sphere of influence that cannot refuse to trade with them). Energy self-sufficiency would at least substantially diminish this need for interaction with the rest of the world.
Another can kicking exercise, but perhaps good for quite a long period.
Concerning (C), I think, that each one of OPEC, Europe, and China would be foolish not to trigger the transition to gold well before the U.S. are energy self-sufficient. That's an upper bound to the time left, no?"
I would agree with VTC and we could apply the concept he discusses to a potential source of free energy.
Also, a few(BH,BF) have mentioned placer mining. I've stated before that when FG hits, we're gonna see one hell of a gold rush on every single gold-bearing watercourse on this planet...
I do think more needs to be discussed on this concept. There wont be enough man power to police every single creek and river. I have a few ideas on how it may play out...
I've seen this arg a few times:
If oil is needed, countries would just swap gold for oil. Why go to the trouble of buying the evil euro then oil????LDO
@Walter Sobchak
1. The event (currency crisis) that will mark the start of freegold may be much further off than we anticipate simply because the sheeple are completely oblivious to monetary reality and will remain in the system (velocity won't spike) even in the face of high inflation. So we'll see. It's obvious to us, but...
As VtC said a while ago, these events will occur in spite of the sheeple's love for fiat currency; there will never be a flood into hard assets. And the outcomes we are talking about here do not at all hinge upon that. I would posit that hyperinflation is a producer-driven outcome, and the bigger producer you are (think China, oil), the bigger your "vote." Most people are consumers. As such, they have no influence over the medium in which producers store their surplus production.
So the sheeple are essentially irrelevant. They will be blown along by the winds of fate, living paycheck to paycheck as they always have. Only when it's far too late will the sheeple flee their currency en masse. And some won't even do it then; they'll keep thinking of the world with their currency as the center, that it prices everything. I suspect this was the cause of zero strokes (h/t TF) in Weimar Germany - people are literally unable to abandon this notion of their currency pricing things.
jojo: Exactly! Why use the evil fiat currency called the Euro, created at will by the bankers, to buy oil?
As Weimar was invoked here, there is a great graph from id "Davos" at ZH, presenting the 1920s HI in terms of possible entry points timing for a common man, noble man, and semi-giants. The similarities are rather striking, early pickup phase, followed by calm, little dip and then liftoff. Perhaps current calm waters at ~$1.7k floor mimic that example as the last opportunity for the poor people jump on the bandwagon in any meaningfull fashion, i.e. in grams/oz. not tiny fractions of grams. I'm not proficient with adding pictures here so lets try it:
http://imagesize.financialsense.com/https://lh3.googleusercontent.com/o_0F1bKqQXe1mA-StIpFnmtG84aTT3qMF7F6v_HHK5KSlVoVcwT8yfFatwmyRHVaZBviu0oz3ZydoDjI6ds3gjDtTRAuVl40KyuLgzsRnr-iS9tW
Michael H; As they say on talk radio, "Thank you for taking
my call". BTW, I agree with you. The evolution of technology,
an economy and the currency regime that serves both is, in
the long term, unknowable. A 100+ year life seems a fair
bet.
Because oil plays such a key role in the "three legged stool"
of - oil / the US $ / gold, in the writings of Another/FOA, it
is entertaining to imagine what the effects of a sudden new
energy technology might imply. One thing that "pie in the sky"
dreamers seem to consistently ignore is what happens to
the global capital structure (based exclusively on the suddenly
replaced technology of oil), when it is rendered obsolete.
Think of all the DEBT underlying those hundreds of millions
of cars,plus the trucks, tractors, diesel engines and the
industries that supply and support them. A rapid transition
would be a nightmare far worse than any peak oil scenario!
Just my 2c.
post script: I was reminded of St Augustines famous, "Lord,
grant me chastity and continence, but not yet!" re: the above.
Woland,
I like pie:) It would be initially a nightmare indeed for certain people... and so will HI. It is what it is. If the two events happened to coincide, then it may be more of a bad dream.
Retrofitting (if possible) existing systems, would maybe offset losses in other areas, among other aspects. The fact is, in the end, free energy would change the world in some very positive ways. Literally change the world. It may be "pie in the sky" thinking to some, but it's visionary to others.
Ive been reading FOFOA since 2008 and was convinced that FG was coming, at least until this summer.
Around July, I learned about "Edward Leedskalnin" and what he achieved. And how he claimed that "our science/physics doesnt work the way we think it does."
I then started investigating more about what he could have meant by that statement. And came across this video:
http://www.youtube.com/watch?v=dVUU3p5iHMA
So all this said I have now come to the conclusion, that the IMF$ has been kept alive all these years in order to bring the world population to collectively witness something together. And FG was just a backup plan if the IMF$ ever got out of hand.
The important thing is that world population and civilization are intact for what is coming, not whether it's operating under IMF$ or FG.
If by salience you mean short-term immediate obviousness, and if the minds you are considering in the present are those of asset managers in Western financial centres, then I would concede that a concept labelled 'gold' probably does occupy that place within the very narrow universe labelled 'precious metals'. But is it really physical gold that is salient in this way, or is it a financialised form? And for how long will such people have any significance? Will they, as custodians of other people's money, survive the collapse of counterparty risk? And why should their idea of what is obvious matter at all to the vast mass of humanity?
Zach,
You got all that out of Coral Castle??
And do you think it unwise to hedge for a FG future anyway?
What about the practical implications of the revaluation of gold? For example, if an ounce of gold can buy you a luxury car, or ten ounces can buy you a nice home, won't people with a gold tooth or gold jewelry get killed in the street? What about the marketplace being flooded with fake gold coins/bars?
Also, is it possible that with a high enough price of gold, a technology could be devised to transmute another metal (like platinum or mercury) into gold? After all, it's all just protons, electrons, and neutrons, no?
Hello Sleeping Village:
Reviewing my comment and your response, I would revise my
statement in the following way: We already have sources of
energy free for the taking, and have for thousands of years:
wind, the flow of water, in some places geothermal. These are
not "pie in the sky". Neither are photovoltaic, heliostat gener-
ated, biodiesel, (whether from algae or other biomass), or
other technologies with which I am unfamiliar. What is, in
MY opinion not up for discussion, is the way in which society
will react to a sudden, disruptive extinction of an enormous
commitment to an existing capital structure on whose very
existence so many livelihoods depend. Rather, I expect that
the existing capital investments will be allowed to retire
after their useful lives have been largely realized. That's my
opinion. I certainly respect your aspirations; I simply doubt
that the path we choose to follow will treat as orphans all that
presently exists. Cheers.
At some point technology will render both gold and freegold obsolete. Our economic systems are built around the idea of scarcity, and nanotech will consign that to history. SO while i agree with the concepts posited here, it is taking much longer than i thought.
And even without nanotech, 1000's of times more gold exists in the ocean than has ever been mined, suspended in minute quantities. Anyone works that out gold as a store of value is finished. Also applies to asteroid mining, one decent sized asteroid has about 10 trillion dollars worth of Au.
88...good year :)
So, like, ten ounces of gold then? Oh, wait, HI not here yet...
Franco,
Transmutation via LENR:) check. Doing it on a large enough scale to make it worth the effort. No, not yet anyway. Besides, it's not the stock of gold that matters, it's the flow.
I guess we wont be flashin' tha bling. No more of these "grills" or whatever that particular "culture" calls them;) If you think about it, it's no different than the way things are today in certain areas. People have been robbing others forever... I doubt that will change.
Woland,
I hear ya, my friend. I think you know I was talking about a revolutionary form of very inexpensive energy. Of course, all that other "green" energy stuff would be obsolete as well...
Anyway, if such a thing were to become available today, I don't think it will care about existing capital investment and/or disruptive extinction of an enormous commitment we may currently have. It is simply evolution and it comes down to survival of the fittest. If it works as good or better and is much less costly to operate, people will choose it, the world will adapt. The winner wins.
You're right, it basically couldn't happen over night, but it could certainly happen much quicker than we might think. Think of it this way; each and every part of AD's Monster Truck will be utilized, aside from the engine and fuel delivery system - which is what I meant by retrofitting - and then a new type of engine and fuel system installed. Rock 'N Roll. Jobs created via recycling of IC engines, and on and on.
Oh, a lot of pain will be felt by oil producers. Big time, considering we only use like 30% of oil for actual products and we burn the rest. Again, a new technology is not gonna care, it just is what it is and nothing more. Our thirst for energy is insatiable, and choices will be made for us by events that may or may not happen. A wise man once said something along the lines of... the cheap dollar price of oil(energy) allowed a lot of great things to happen in our world. I see a future much the same, but just without oil:) A little short-term pain during the transition, sure, but a much greater benefit in the long-term.
Thanks for the conversation:)
fnord88: Regarding gold in the ocean, you should check out the Wikipedia article on gold. Here's a quote:
"At 10 parts per quadrillion the Earth's oceans would hold 15,000 tonnes of gold.[69] These figures are three orders of magnitude less than reported in the literature prior to 1988, indicating contamination problems with the earlier data."
15 000 tons, that's just a drop in the ocean(!) compared to the total quantity ever mined. Supposing it could all be extracted at once, it would amount to a few years' worth of mining at present rates. A nice bit of loot if you can get it, but hardly a game changer.
US energy independence; no need for oil? As if.
Hi all.
I’ll take FOFOA’s kind offer as a chance to elaborate my »doubts« a bit clearer (hopefully).
First: Please know that I am NOT against Gold in any way. Actually FOFOA inspired me to change all my store of wealth from silver to gold. (Yes, I am a 100 percent man, with a low 6 figure Euro »wealth«.)
Second: I do not hesitate one moment to believe that the global financial system will go through a huge transformation very soon. (Some indian »jyotish« astrologers [jyotish is the old indian astrological discipline] say that in 2016 the Dollar will loose it’s role as global reference currency; the U.S.A. will then get divided in several smaller states. So also from this point of view the scenario is quite clear.)
Third: I do not hate our financial system. It has great advantages in comparison to earlier times (which, on the other side, were not so in need of a global financial system). But …
Forth: I am absolutely not a friend of all these bets and fictional transfers of those who are eager to earn money only by shifting some figures on their screen: These childish activities must and will end some day.
Now my argument. It is actually an argument of FEAR that Freegold (as far as I understood it until now) will NOT show up.
For this it would be nice to quote FOFOA from one of his kind mails to me. He wrote (hope it’s ok for you, FOFOA, to quote this one time from a personal/private mail):
»Freegold is simply the void left when the avalanche comes down. Think of a snowpack on a mountain. Its growing weight (it‹s still snowing) and its melting connection with the mountain is the deterioration in the current system. Gravity will bring it down even if we are all sound asleep at that time. No consciousness required. That‹s how I see Freegold. It is »what‹s left« when »what is« fails. Freegold is the actual mountain once gravity brings the avalanche down.«
In this picture I understood »snow« as the huge imbalance and mismatch which is evolving in the current financial system: AND the growing awareness and fear of the people that this system will fail.
Both – the inconsistencies of »the system« and the awareness of the inconsistencies – are a double stress to the system: one from within itself, the other from »outside« (although we all are in a way part of the system too). This stress is packing more and more snow on top of the mountain: until the avalanche comes down, suddenly …
(Part 2)
(Part 2)
Now think of this fictional (!) scenario:
Out of whatever reasons all our awarenesses of this situation would grow very fast. We would begin to react. We would begin to counteract in such a bold way that we start to believe: »We can manage this crisis.«
What will be the effect? Would not fear become less? And when fear would become less would not people stop holding so much of their wealth in gold? Would they not start to put again their wealth into the market? And could that, slowly, slowly not help the system to recover again? Not totally, sure, but at least so far that the pressure is not dangerous anymore?
My fear is: That we get to a situation, let me say similar to the 1950s, 1960s, where at least in Middle Europe fiancial affairs seemed to be stable and »healthy« (in comparison with our times now).
What would be the overall effect? The »snow« would evaporate slowly, the snowing would become less: and the hidden golden mountain would keep its converage -- may be for hundreds or thousands years.
»Ok« you say, »where is the problem then?«
There would be at least a personal problem for many people. Because their ozs of Gold would loose value. To say nothing of ANOTHER’s vision of »55.000 US$ per oz« or so.
And that would be a pitty ;) because some of these people plan to do something good after Freegold multiplied their wealth.
To get it to the point:
Is our collective consciousness able to anticipate the mother of Freegold (a giant collapse of global financial system) – so that we »cure« the system as far as it is possible and thereby HINDERING Freegold to get to be born?
Sometimes it seems as if Merkel & Schäuble are trying exactly this: To reform the system so that it has NOT to go through any transformation at all …
OK. My head hurts again.
At this point, I am thinking that Balvenie single malt scotch will replace gold as the true reference point reserve.
It has that same transient quality of oil. It does not lie very still in my "vault". Rather it is consumed in the heat of fire.
Cheers!!
Agree with Franco, to me the biggest problem is envy and jealousy, anybody known to have gold will be hunted down. So what do we do now, start backing off saying "actually I sold most of it last month...".
ampmfix> fairness in life on this planet is a very vague concept, probably most of the metal hoarders of this forum will be wiped out in the scenario of high end revaluation with factor 32x or more, either by some gov./taxman scam, increased chaos-criminality after the reset etc. Most likely only from the pool of the well connected of today (.gov, .mil, banksters, criminal syndicates) will maintain enough of safe perimeter around them to benefit from such bold revaluation, complete system reset. There is a reason, stash after stash from ancient periods pop up here and there. Simply, desperate people of desperate times never returned home in one piece to enjoy their squirly pack. Obviously, your milage may vary, but in nature there is certain ratio of predators vs. pray, meaning to be prepared is often not enough. Good luck to all.
bluefire: Your worry about every human rushing to find gold and ending up in a Zimbabwe gold pit reminded me of Jack London's 'The Call of the Wild'.
The Call of the Wild is set in the Klondike during the 1897 gold rush. Learn more about the gold rush below.
On August 17, 1897 gold was discovered in Bonanza Creek, a tributary of the Klondike River. By 1898 about 30,000 prospectors had rushed to the area to try their luck at panning for gold.
The gold mining towns of Skagway and Dyea quickly began to grow. These were tent cities where miners loaded up their supplies for the over 600 miles of trails to the goldfields. Skagway was at the head of the White Pass Trail. It was founded by William Moore who had been a steamboat captain. The White Pass Trail lead out of Skagwag. It was steep for the miners with their equipment. More than 3000 pack animals died on this trail.
Dyea was three miles away for the head of the Taiya Inlet. The Chilkoot Trail lead miners out of Dyea to the gold field.
Most miners spent three months packing their equipment up the trail. Once prospectors hauled their equipment to the lakes, they built or bought boats to float it downriver to Dawson City. This was approximately 560 miles away. By 1898 Dawson City had 18,000 people.
Men will do crazy things, won't they? Just a small hike for a shiny rock. Carrying just a little bit of weight through a little bit of snow up a little bit of mountain. In Alaska. Crazy I tell you. I wonder if people were killed for their gold?
tyrannyofthepresent: Salience. After the fall of the $IMFS what will oil trade for?
/SleepingVillage/,
The fact is, in the end, free energy would change the world in some very positive ways.
One point made by Richard Heinberg in his "The Party's Over" was that the discovery of oil was, for the time, essentially the discovery of 'free energy'. As you say,
Our thirst for energy is insatiable
***
While I don't believe in any of this technological utopianism (the coming singularity, free energy, nanotechnology, whatever), should any of these come to pass it would actually be hugely gold positive. After all, gold is a call on the productive capacity of our society, and anything that increases said capacity increases the value of gold.
What actually is potentially gold negative is peak oil, since it would reduce the productive capacity of our society and thus reduce the amount of 'stuff' that gold could be exchanged for.
Keep in mind that 'gold positive' and 'gold negative' does not imply 'pro-freegold' or 'anti-freegold'.
***
Let's not be too hard on poor Skippy. It's not his fault that he was assigned an arbitrary and meaningless task.
MH,
I just see a further, um.. out there timeline and a new and different "party". The next step in the evolution of energy.
I concur, free energy would be gold positive:) I can't help but to imagine the things we could do without the constraints of EROI, etc. If FE were to arrive tomorrow, then I do think someone would pull the trigger on this shit-show(IMF/dollar debt savings) we're currently fumbling through. I applied VTC's comment (c) on energy independence, to the arrival of FE as a bit of a thought experiment. The oil producers/gold accumulators would have no choice...IMO.
Well, so far I haven't seen a solid argument against FG. Lots of good thoughts on some of the other trails we might encounter post-FG, though.
Good stuff:)
Speaking of induction, I've slowly been making my way through "The Logical Leap: Induction in Physics"
http://www.amazon.com/Logical-Leap-Induction-Physics/dp/0451230051
It is more than just physics, as it touches on the philosophy of how we know that which we "know" once we have induced it. The Newton reference is more relevant than Jeff may know.
There are occasions where once one sees the rules which define the world as we can measure it, all previous explanations are laughable. It is why I've been a silent observer here for years.
Robert wrote:
"Part of the reason may be that nobody knows for certain how much gold is really out there."
It's not the stock, it's the flow.
"When they (institutions) go into panic mode they run to bonds. There is no sign of that changing anytime in the forseeable future."
There may be no sign, per se, of that changing, so much as a warning that it will, and relatively soon.
DASK, For what it's worth, I thought yours was a well constructed epistle regarding a particular set of conditions that would, in the abstract, stymie freegold
@ampmfix
I'm in the camp that the fear and envy will be solved by the PoG crashing to zero first, and everyone claiming they sold at a loss
@Bluefire
I think we are making a similar point.
After thinking about it more, I don't think the gold rush to the streams isn't such a problem.
IMHO, the worst case is that the alluvial gold will run out in ~2 years as a gold rush of people search it out (wrecking some nice streams for the immediate future).
I hope that governments will devise smarter strategies to avoid that. E.g. just give some equal amount of gold to every citizen. That might make the engineers think twice about heading for the streams.
Out of interest, our Gov has already trialed something similar. In response to the 2008 crisis, every Aussie recieved 1500 AUD ~ 1 ounce in fiat PoG. I doubt many bought gold.
But I feel that a skippy (myself) has is perhaps sailing through the air NEXT to the bike tyre (again, damnit!)
Edit above: I don't think it is a problem
Skippy,
We have a lot to discuss in a desert near(er) me.
You know, it's entirely possible that FOFOA is THE most knowledgable person in the English speaking world when it comes to gold, and that he is also wrong...there seems to be a very parochial track on which discussion occurs within here, so that outside points of view tend to be derided with condescension or just simply dismissed out of hand....so I will stop posting....unless someone has something interesting in response to what I placed above...Best Wishes
@/SleepingVillage/ looking forward to it :-)
Indenture,
That bit of Jack London reminded me of this video.
And this talk about a new rush into panning for gold reminded me of one of JR's comments a couple of weeks ago:
Colorado county considers banning panning for gold after 'uptick' in prospecting
"Prospectors during widespread Gold Rushes in the 1800s are credited with settling land and developing commerce in several Western states, including Colorado.
However 200 years later, officials in one Colorado county say amateur prospectors panning for gold on county land have become such a nuisance they are considering banning the practice.
9News reports officials in Larimer county say they will vote on banning widespread prospecting next month after a significant increase in panning.
"There's certainly an uptick," Dan Rieves, visitor services manager for Larimer County, told 9News. "There's rangers that we've had out in the field who have been working here for 10, 15 years that have contacted more people out prospecting in the past 18 months than they have in their entire career."
The vote would lead "minerals" to be added to a list of things that already can't be removed from county land. Officials say the county is not anti-prospecting, and may consider setting up specific prospecting zones or times in the future if the ban is passed.
"We're really just trying to put that regulatory structure in place, and kind of slow things down," Rieves told 9News."
This blog is, as Jimmy Rogers would say, bad for my health! I just read the final paragraph of the post on my way to finding a link I posted here earlier and read that
"you can't judge the worthiness of your own argument"
!?!??!??
?
May be that whole idea about the scientific method is just pointless, then? This screams hubris, this comment, that "only I can judge the worthiness of your argument, not you!" This is almost to claim a monopoly on reality...remarkable! Truly remarkable!
Alister,
gotta check your ego at the door, my friend:) I'm pretty sure I've made some of the most "outside" points of view in this whole thread. I don't expect everyone to accept and agree with my views. That's the beauty of words and opinions, you can take them or leave them. Your call. Sometimes it's best to let them simmer, see what happens.
Fuck that cult bullshit wrapped in a fancy word. It's a cult when we actually drink the golden Kool-Aid and catch a passing comet.
Until then, we're discussing something we've studied and discussed for some time and happen to have similar views on. Why else would someone stick around? Seriously. Think about it.
The whole "cult" thing bugs me about as much as "but,but, but you can't eat gold!"
Why is FOFOA asking his audience if his blog forum is an echo chamber of yes men? Probably because FOFOA is very smart! AU Revoir!!!
FOFOA,
I caught that article, too. Interesting, but pretty tough/almost impossible to enforce when gold's worth 50K/oz.
Which then leads to other possibilities... Try to control alluvial gold sales? I can pour my own bars and even make some damn jewelery if I have to - The making jewelery part might not be pretty, hah.
Hire 80000 enforcement agents to police the waters? No excuse for not being able to find a job! While they're taking payoffs from the miners;) Better pay them good.
Certain laws don't mean much to certain individuals. Often the type that could handle fishing for placer gold.
A guy could make a killing selling pans,pumps, highbankers, dredges, etc to miners. Much like all of the previous gold rushes...
Mining the miners.
Hello Alister. Your posts in this thread are devoid of meat IMHO. They are homework assignments - "go here," "read this," etc. In my view, you are nitpicking non-issues instead of addressing hyperinflation & freegold. And now it seems you've resorted to insults/ad homs.
If you want people to respond, make it relevant and condense it.
Example, this:
Anyway, although I am no authority on this blog, it seems fairly indifferent to questions of morality
is accurate i.e. freegold theory does not rely upon moral principles. So if I am not interested in questions of morality, why should I bother visiting your link? How is this relevant to freegold?
WOW, this is an amazing post FOFOA. I haven't read all the comments yet but I will. I often scroll through alot of comments on this blog, but in this post I will read all of them. Honestly, hats off for this FOFOA, it really shakes out the skeletons :) and fears!
I agree with /SleepingVillage on gold panning, it might be impossible to totally enforce in this part of the world. Doesn't mean enforcement won't help, though. As you say, in gold rushes hardware suppliers are said do better than primitive gold miners etc (source: Deadwood). Because:
1. The amount of gold in weight you'll get today throwing in you job and looking for is pretty decent, because few have been doing for a long time.
2. This won't be the case in the freegold rush because primitive techniques (that you and all the others can get away with) uncover the easily found gold quickly. The yield falls off quickly and most might go back home worse of than the hardware store.
If in the worst case many throw in their jobs they might find the gold fields empty in 1-2 years, and they have little gold.
costata,
+1
I am very happy to see you again AD
I'm going to try to add a few to the list of contra-arguments that have been put forward in these pages. The first four are repeated below the line.
5. Another and Friend of Another were wrong in some way. For example in their timing or predictions and that invalidates all of their claims and arguments. A variation on this theme is the argument that so much time has passed since A/FOA posted that their material is no longer relevant to the present.
6. Even if the gold revaluation anticipated by the "Freegolders" occurs shrimp gold holders won't be allowed to retain their windfall. It will be taxed, confiscated, stolen or in some other way the windfall will be denied to them. So even if the Freegolders are right it is irrelevant to everyone except those with the power to remain above the laws that control the lives of ordinary citizens.
(Note: In some ways argument 6 is merely a variation on argument 2 below i.e. the PTB will screw us.)
7. A combination of currency swaps and bi-lateral trade agreements will make trade settlement in gold unnecessary. The US dollar can be sidelined without requiring a replacement reserve currency or gold. (I don't think this one got as much attention in the comments over the years compared to the others but it was an active back channel discussion with FOFOA at one time.)
Now for one on US dollar hyper-inflation.
8. We are in a debt deflation that is/will cause a depression or Japan-style "lost decades". None of the neccessary pre-conditions are in place to generate hyper-inflation which is caused by excessive printing of money.
And we can't forget our old pals the gold bugs and the and-silver bugs.
9. All fiat currencies fail and ultimately so will the current crop and the world will return to hard currency in the form of gold and-silver. Thus the Euro (and the Freegold-RPG architecture) will fail along with other fiat currency systems. (This argument is almost always combined with arguments about the evils of fractional reserve banking and/or debt based money systems and so on.)
....................................................
1. SDRs as an alternative reserve currency to replace the US dollar instead of Freegold-RPG.
2. Variations on the "control" argument i.e. those in control of the present system or benefitting from the status quo can/will block the transition. This is also a candidate for The Anything R... (sorry Wendy) THE silly list depending on whether it's expressed reasonably or as a dark global conspiracy.
3. The infinite possibilities argument. This often arises in response to words such as 'inevitable' used in connection with Freegold-RPG (and US dollar hyper-inflation).
4. The Euro, EMU and/or the whole EU project will fail so there will be no alternative to the US dollar for the forseeable future.
FOFOA,
at the conceptual level, I have this point: If the ECB sticks to what they told the Asians (I definitely want to take Christian Noyer seriously), they will keep inflation just below 2% annually. In this case, the Euro would be a perfectly convenient choice of store of value for all countries whose currency hyperinflates. Blondie made this a fundamental issue and said that the Euro would be all three: medium of exchange, unit of account, and store of value (while gold would have to do something else in order to regulate international trade and capital flows).
Firstly, I don't think this contradicts much of what you said. If others (say Brits or Americans) suddenly buy the Euro as a store of value, then the ECB will have to sterilize this brutal inflow of capital. Eventually, they will have to do this by purchasing gold (the Swiss National Bank can buy Euros, but what can the ECB do? Who else is there besides the Euro who is much bigger and can be used as a shock absorber? - Only revalued gold). So in effect, the private sector might buy Euros, but the ECB would have to do the gold buying on their behalf. In other words, the ECB would act as the global gold market maker. If I believe Noyer, then they are at least taking this possibility seriously.
How would US self-sufficiency translate into an extension of the post-Bretton Woods dollar standard?
It wouldn't. It would just mean that freegold would not arrive in the U.S. any time soon, even if the rest of the world uses gold as the new reserve and the Euro as the new trade currency.
Here is an analogy. For the Euro zone, it is important that they have a balanced trade and a balanced capital account. The Euro zone can coexist with any world trade currency as long as they receive for their exports the same currency that they need for their imports. This way, the Euro zone can just watch the transition from the dollar to gold, but they do not have to rely on any specific timing. Can the U.S. get into a similar position? Not as long as they are a substantial net importer of energy.
If the U.S. can achieve a balanced trade and a balanced capital account, they can simply deal in Euros with gold reserves externally, and domestically do whatever they please, just as they did in 1933-1968/73. Do people realize how socialist this was? Their own citizens were not allowed to own gold, but the government would sell the people's gold to any foreigner who presented them with paper dollars? (until 1968 to foreign private entities). In other words, the government treated foreigners much better than their own citizens...
Just because of this history, I wouldn't rule it out that they might do it again. Ultimately, it is the dependence on energy imports that prevents them from repeating this exercise.
Victor
jojo,
I've seen this arg a few times:
If oil is needed, countries would just swap gold for oil. Why go to the trouble of buying the evil euro then oil???
You write 'if oil is needed'. Well, if you need oil, you use dollars, don't you? So if this is no longer possible one day, then the dollar is already on its way out as the world trade currency. How is the paper gold market going to look like in that situation?
The first one who has a large liquid market for physical gold is going to have a head start as the new oil currency, no? That would be an incentive for the ECB/BIS to move rather swiftly. In the long run, the network effect will still give an advantage to the incumbent (even if this was not the Euro), but eventually the currency with the largest trade volume should win. This would probably end up being the Euro in any case.
Finally, a remark on silver.
If you visit TFMR, you quickly notice one meme of the silverbugs. Small investors will buy so much silver that the banks and governments will fall. It will be the people who demand a hard medium of exchange: silver.
Well, how did the hyperinflation 1922/23 in Germany end? Did the masses demand a hard medium of exchange (silver) and when the government didn't give it to them, they overthrew the government. Then, a new government, elected by the people, ended the hyperinflation by introducing hard money?
No. This is not what happened.
This time is clearly different...
Victor
BH,
I have a claim where we could dig a few yards a day, by hand, and end up with 1- 3 grams a day. This is gold that has never been touched... and is on the low end of the spectrum of possibilities. Many, many, years of that type of ground(bench ground above water/old channel) in my area. Get on bedrock and things can get much more interesting...
A team with a dredge can find ? ounces a day in the right creek. Now, there's only so much of the active, current watercourse you can dredge before the gold is gone, if you clean it good with the dredge. It is currently not easy to obtain permits to dredge here, but like I said earlier, certain laws don't mean shit to some folks.
I want to add one more to the list. It was prompted by the comment from Alister that poopyjim responded to at December 11, 2012 8:37 PM above.
Anyway, although I am no authority on this blog, it seems fairly indifferent to questions of morality
In some ways argument 10 is a non-argument that crops up frequently but it applies equally to the discussions at this blog.
10. The Euro Freegold-RPG architecture is doomed to failure because it doesn't address X problem, Y problem or Z problem. (Problems that it was never designed to address in the first place.) In a similar vein many of the discussants here are "indifferent" to a lot of issues that some readers feel we should take positions on e.g. EU politics, morality and so on. Basically any issue the critic feels strongly about.
I have no idea about gold, sure. I guess the gold price will rise massively because smart people say so and most importantly due supply & demand vis a vis paper tickets, as to hyperinflation who knows, I am not about to pretend I can foresee the future...Prepare for the worst hope for the best I dont see a need to indulge in long winded reasoning to you guys for my thinking about gold..
Yeah, i am telling you to consider views separate from the main subject of this blog, may be not so horrible considering there's probably over 1 million lines of writing on Gold...Am I not allowed to post about non gold thinking?
See this article points to my above ideas so well:
Glaxo’s China head - presumably an extremely intelligent person - actually says to a worldwide publication...quote...
“Traditional medicine has been practiced for thousands of years but it has always been based on clinical experience and not so much on clinical evidence like Western medicine”
Now, this distinction is ridiculous! The person has implied - intentionally or not, who knows!? - that "clinical experience" & "clinical evidence" are mutually exclusive, or at least slightly different, which is INSANE! Each relies on the other....My point about this freegold stuff is, sure, FOFOA is clearly some kind of genius, and this seems like the best authority on Gold I've seen...but swaths of the old intellectual edifice are literally falling away because markets like truth and so much of "modern" thinking is backwards in its relation to truth....but then, to not think that scientsits at the moment are all amazingly smart and on the spot with what they are doing is "out there" thinking, apparently...the idea that man cannot rule nature is "cute"... the belief that the BIS will not be influential or important in a few years, outlandish! Well, maybe not
http://www.bloomberg.com/news/2012-12-11/ancient-chinese-cures-seen-helping-drug-maker-pipelines.html
SV, awesome. They say dredging here also isn't worth getting the permit.
Hello AD,
I'd like to paraphrase (and hopefully simplify or clarify) your argument from December 11, 2012 2:54 AM because I think it is worthy of some discussion. I understand what you are saying about "competing equilibriums", but I think we can make it a little easier to discuss by zeroing in on the crux of your argument. So please let me know if this covers it:
You are talking about the supply and demand of/for gold at a much higher "Freegold" (real) price. The supply, as you point out, comes partially from the mines and partially from dishoarders. But the main difference between the two is that the supply from mining is "sticky" (relatively constant or resistant to change) in weight terms.
For simplicity, let's say that mine supply is 2,500 tonnes per year, a "constant weight flow from the mines" as you say. The problem is that while this supply is weight-denominated, the vast majority of demand is currency-denominated, a point I stressed in Fallacies:
"But gold demand is overwhelmingly in currency terms. If you need a tonne of gold, what you really need is $50,000,000 worth of gold."
2,500 tonnes per year coming out of the mines at $1,700 per ounce, if it is all put up for sale, requires currency-denominated demand of about $137B per year to maintain that price. But 2,500 tonnes coming to market at $55K per ounce would require currency-denominated demand of $4.4T per year to maintain that high (real) price. And that $4.4T amount is over and above whatever demand is necessary to match dishoarding of privately owned gold by past savers.
$4.4T in constant dollars (real terms) is a lot of global net-production to expect, right? So for the $55K price to stick, we'd have to expect one or a combination of a few conditions to be true (and yes, I do understand that you do not expect the following to be true, but I do): Either some predictable force would naturally reduce and restrict the amount of gold being pulled out of the ground; or not all of the gold being mined would be put up for immediate sale; or else the magnitude of currency-denominated real demand (after adding or subtracting for the first two conditions) is not an unreasonable expectation. Or, as I said, a combination of all three.
Does this resemble your argument? Is there anything you'd like to add?
I know you argue that mining supply will increase rather than decrease if the price is so high. Why would it increase? Who would receive the windfall profit from the 40X difference between the cost of mining and the price received at market? Who has the strongest claim on a windfall profit from gold that is still in the ground? And lastly, what's the best use of that claim (depending on your answer to the previous question)?
Like I said, I think your argument deserves some attention. :D
Sincerely,
FOFOA
Michael H
My previous response did not make it clear that it was addressed to you because it was sent from a phone, so apologies if this appeared rude.
You assert the salience of what I assume to be financialised gold for people who I assume to be asset managers, as an immediate replacement for their investments in USTs, and you insist on removing all time-momentum but basing the assessment on a snapshot of the present.
This is an extremely limited set, but I will concede that they currently control a lot of wealth flow. Salience is in the mind. Not everyone's mind is the same. I am aware that the two limiting factors: 1) will they go into precious metals at all and 2) is gold the salient precious metal *for them*, have been very thoroughly addressed here for years, so I will leave them aside, other than to say that financialised silver assets are in fact commanding rather large influxes in the last few years.
As I set out in my blog post, however, the picture as regards long-term cultural salience is much more mixed. I would add that the current situation in which the attitudes of this small group distorts the global human asset allocation is - at least if history is any guide - unsustainable. It is just another case of financial repression, although in this case driven by this tightly-knit group with their herd mentality.
There is, however, another side to this. They are playing with other people's money. Just as they take fright as they doubt the integrity of the USG and the backing or value path of USTs, they themselves are intermediaries.
Whose money are they playing with?
If the USG, USTs, even the USD are called into question, it is impossible to believe that Mrs. Watanabe, Herr Schmidt, Phil Jones etc. will not call into question their allegiance to this parasitic class. Indeed there is some evidence that they are already beginning to take matters into their own hands.
For such people, the "salient" precious metal is not built on such short-term concerns as availability electronically and in size, or the existence of well-trodden relational tracks within the City of London. It will be based on all the factors that support Freegold - which I am only just beginning to address - but above all they are likely to want physical possession. We are talking about a wealth asset here, not a currency. They will be guided in their choice of physically held wealth asset by all those factors, not least of which is its long-term cultural salience in their culture. To imagine that the worried fathers and grandmothers of the world who are trying to protect their assets all think like disgruntled bond traders at UBS or HSBC would be a grave mistake.
As for those fathers and grandmothers, as well as reviewing their long-term heritage, I am monitoring their month-to-month queries about where to put their assets when the lights are switched on, using "google trends" in enough languages to cover most of the world's financial wealth (except China and Japan, where I have to use other methods).
I can reliably inform you of two trends in the minds of those people - and we are now firmly talking about the present:
1) It is a mixed picture globally
2) The growth rates for queries concerning silver and queries concerning gold are approximately the same in both 1 year and 5 year time frames
3) Silver is increasingly outperforming gold.
All very short term, of course.
Costata your list with answers would make a nice post.
Arguing against hyperinflation I have seen this one:
If inflation starts to pick up, the FED can simply tighten and force USG to address its deficit.
A lot of people completely against gold and even those who own it now make this argument:
Gold will bubble and fall just like in 1980.
Those completely against it think it is a bubble now, those who own it and think it will bubble are looking to sell to some suckers at $2500 an oz.
In response to my comment "Part of the reason may be that nobody knows for certain how much gold is really out there" Edwardo wrote: "It's not the stock, it's the flow."
I should have been more precise. What I meant was "nobody knows for certain how much gold is really out there ready to flow at or around the current spot price." Anecdotally we hear that "gold lies very still" and "physical is in strong hands" but it seems really hard to quantify. Apart from FOFOA's observation about banks building larger vaults (presumably to hold more allocated gold) are there any clear signs that the LBMA is stressed?
Hello Alister,
You seem very high-strung. I think you need to relax a little. Is something in the world stressing you out?
What troubles you more about my blog: that I speak, or that I have an audience?
What I stumbled upon back in 2008 was peace of mind during a stressful time. You should ask Indenture why he's still at my blog after four years. There was a time, not even two years ago, that was quite stressful for him because of a decision which he credited to me. He has since recovered from the stress and now has a new and improved—in fact, an outstanding and remarkable—perspective on everything. So do many others here. Matrix Sentry is another one. If you're curious why I have an audience at such a simple, free and outdated blog, talk to them.
Sincerely,
FOFOA
A PIIG
way before coming here I believe most of us realized that the idea that the Fed could do anything significant was seen as incorrect. One of the first realizations that wakes people up is : "holy shit, there is NOTHING the government can to to get out of it's debt problem".Sure the Fed could attempt to sell instead of buy treasuries but then there goes funding for the government. All here realize that the reason we misallocate our time and read about economics at 2 AM is that we are in a time of great trouble.Our system is in collapse. There would be no immediate push to freegold if paper was functioning as a store of value. Bernacke might believe that he can stop inflation in 15 minutes (I do not think he does believe it) but not many other serious thinkers do (at least those free to speak the truth.)
FOFOA,
nice to see that you are open for some technical arguments :)
The problem is, the numbers you put up to start the rough overestimation (which I dont want to question, it is just about the working principle as we hopefully agree), are only a static snapshot of the situation of today.
But in a tendency towards an assumable 100%-perfect-Freegold-environment these numbers should dramatically change, so the static snapshot numbers of today would not apply any longer at all. So IMHO therefore the "4.4T approach" is not usefull.
Let me give you another approach of mine that I consider more reasonable: Let's just assume that Freegold is no different from today, except that gold is more recognized/handled as the focal point of saving reserves.
Therefore let's assume (just some numbers to start from) that today we have a flow from the dishoarders to the hoarders of 1400mt (e.g. where I get all my old coins from), already smaller than the mining! Remember that is the weight as the "final payment" for the hoarders today. That is the more important number to consider (since we do know the mining with the opposing price equilibrium)! How will that number develop over the future? If you can draw me a curve of that with absolute scale, I might can give you the final price of FG ;)
According to FG, if the physical plane setup does not change (e.g. due to new alternative energies, wars, famine, political turnovers, nations defaults...) that curve would reach some form of equilibrium tendency towards zero in an perfect FG environment.
Now, what does the constant mining supply do? It will heavily put an offset to that curve upwards in terms of weight flow, thus effecting the final price in ratio to the two opposing flow.
Greets, AD
The old joke about the entrepreneur, the accountant, and the economist walking down the street when they see a $20 note on the ground. The accountant sees it and says "Look, a $20 note". The economist says "Can't be. If there was, someone would have picked it up already." The entrepreneur scoffs at the economist and picks up the $20. The economist says "See, I was right".
If the Freegold hypothesis is true, it requires that the world's largest arbitrage opportunity has been available for 20 odd years. Can a market be that inefficient?
Also, it requires that this arbitrage opportunity has remained sufficiently secret throughout that 20 odd years.
Would we not expect those in the know to let their family and friends in on opportunity, who would let their family and friends in on it?
In probably terms, the likelihood of such an opportunity surviving so long seems very low.
Disprove the membrane...well, FOFOA is a liar ;-)
http://fofoa.blogspot.ch/2010/05/open-letter-to-emu-heads-of-state.html
Best Regards,
KG
P.S.: If somebody has a problem wrapping his head arround my argument or maybe I explained it not well enough, make a heuristic on Ben&Chen's Island:
Add Bono to the island. Bono is a hungry fish loving jerk in another valley. He manages to dig one gold coin out of the ground every 100days eating 200 fish in the meantime (but also excepts funny lines, just as Chen). He passes by at Ben&Chen's island once in a while trading gold into fish (or equivalent lines to average out needed fish in case he is taking a vacation).
I guess it is obvious that until (or in case) Chen has not starved in the "end game" Bono will do affect the rest of the trading ratios (fresh fish vs. lines vs. gold coins).
Greets, AD
Costata> speaking of your list, why you are pushing such a black&white portrait for the #6. In fact, I doubt anybody said gold revaluation will be in the end irrelevant for shrimps because of the worsening security and .gov schemes so why bother. To the contrary but with caution. The history is richer than b&w schematics on this topic. The basic message even from the FG converts (with B plans) like me is simply, it's not healthy to believe that even superfast "overnight" systemic changes won't affect the reality plain at least temporarily for the worse. The FG switch will likely result even in super optimistic scenario that for a couple of months some commodities going off the market at various places (perhaps incl. medicine, food, some raw material even related to energy production) etc. And that means chaos "lite", societal turbolences and what have you on top of the current misery. Only fool shrimp would be publicly trading even 1/10oz at that time of unsecurity. Moreover, there could be additional huge black swan event during this period of dust settling, prolonging the necessary time of keeping low profile beyond the capacity of little shrimps, and such easy pray might be parted with their stash at that point. History is not a smooth and clean alpine swiss highway with well lighted forwarning traffic signs but more like an offroad track with fallen trees, hidden sharp rocks and deep mud fields.
FOFOA et al..
The question of 1) increased mine flow and 2) sustained savings rates are very interesting ones for freegold.
At 55k/Toz a lot of sources would be viable that are not currently so. On the other hand, it has been well established that mine output in terms of ore/day is tightly correlated to a logarithmic function of ore volume (and is fixed on construction). Vastly increased reserves at lower ppm only lead to slight increases in output rate (but massive increases in processing volume and energy use); it should in theory be possible to do this calculation for gold; I have seen some reasonable calculations along this path from a colleague that estimate that somewhere around a doubling to tripling of mine output is the maximum logistically conceivable if all known deposits went into full bore extraction, using their total claimed resources. This could only happen after a long time lag, and would have other environmental and social consequences.
With regard to placer gold, current output is around 7 million grams per day. At 0.3g/day per placer, could one imagine 21 million panners on good rivers without hitting severely diminished returns? I think not.
The question of sustaining 4.4T in net savings inflows is more interesting. But I would attempt to view this through the lens of leverage (e.g. confidence) in future GDP. at current GDP, all paper savings are worth a multiple of about 3 times output. Real GDP growth is about 2% / year in a fairly unbroken trend, e.g. about +1.3T / year. Times your factor of three that already exists and 4.4T is not unreasonable, but would have serious implications for investment flows... an interesting thought excercise indeed.
The argument that "no one wants to pull the trigger" is weak.
In this day and age, it is very easy to be anonymous. It would be trivial to finance and organise a viral and mainstream campaign that made enough people Freegold aware that it would crack the system.
Yet, this hasn't happened. Why not?
Alister
I just wanted to comment that I found your suggestion that we need to expand our horizons and that we have no other interests beyond the two topics of the blog, freegold and hyperinflation, to be both hilarious and presumptuous.
Just because we only discuss those things here does not mean we individually do not have other interests or other spaces where we discuss other ideas.
TF
Dear Mr. Bron,
Based on your comments (generally, ie, "sell at the top"), it seems that you do not subscribe to the Freegold theory, despite spending many hours reading this blog. If this is true, I'd be very interested to hear why you do not.
DI.
Delusional, I guess you missed the target here. Your questioning of slow/"unnoticed" FG onset is rather similar as questioning why not everybody in america in the 20s made fortunes on the prohibitions deals like the crime syndicates or the Kennedy family etc. Or why only few ran to cover under the gold umbrella of Weimar HI, there was only few months window as I showed in that graph. So, the fact we are still on borrowed time this huge shift is more telling about the large scope of the event than anything else. You could have chased a lot of stuff a decade or two earlier, tech bubble, emerging markets after the soviet bloc crash, china etc. Now there is nothing on the horizon.
Simply, there are always trend makers, and when the timing is right vis a vis historic setting as tectonic shift, bit of luck, animal guts feelings and what have you, some will go ahead "at the expense" of others.
Yes, it is true, I am a different animal since a certain peace of mind came upon me a few years ago as a result of this blog.
I want to remind newcomers here that I never read the blog comments for the first couple of years. In fact, I didn't bother with the comments until the light bulb actually came on. On reflection I am glad I didn't bother. I think it allowed me to examine FOFOA's content untainted by baggage and biases other than my own.
I am a big fan of the scientific method. As such I have constantly measured the Freegold thesis against competing ideas. To date I have found that it makes the most sense in the world that I observe. The end. It is not that I believe that Freegold is the end of the discussion, the question answered, problem solved. It is simply that I find it to be the very best description of where we are likely headed. Until a better thesis is presented I will stick with it.
The thrashing about in the comment section is mostly tedious for me. In fact, without the excellent writing of FOFOA and some of our other brilliant contributors I would not bother. Way too much dancing around the issue and chasing phantom insecurities.
I have read the entire blog, many times over in fact. I expect others to do so as well. Life ain't easy, and is said to be a bitch at times. It's a bitch that there is so much content to examine for the newcomer. I feel for you. But I strongly believe that the question of whether you can adopt the Freegold thesis will not be answered here in the comments section. The question will be answered in your study or some other place conducive to calm silence, where your mind can do the necessary work in an environment free of distraction.
I think the comments section reaches its true potential when it is used to clarify points salient to the Freegold thesis. Someone who does not understand a point comes here and appeals for clarification. Contributors then respond. This goes back and forth until the point is addressed in a satisfactory manner. The question of whether the thesis is correct or is acceptable to the reader needs to be settled elsewhere. If the reader decides Freegold fails then I would expect the reader to compose a post outlining the deficiencies. I would expect some back and forth, then if the reader is still unconvinced I would expect that they would pack their baggage and head out in pursuit of the truth. I do not understand the need to linger here.
The purpose of this blog is to examine Freegold, not to convince people that Freegold is a valid thesis. I for one will not engage in the futility of trying to sway someone to Freegold. I believe that type of heavy lifting needs to be done by the individual alone. Any time someone mentions religion, cult, faith, or any other nonsense that spews forth to camouflage the real issue, the fact that the reader cannot refute Freegold or offer a superior thesis for review, I simply move on.
Naturally I find this thread to be void of anything interesting as far as content goes. While it is mostly civil so far, I think the potential exists for it to devolve into the worst type of discussion where everyone pulls out their dirty laundry for everyone to see.
I haven't seen anything interesting yet, but I will keep reading until the next post just in case.
BTW, I strongly believe that a reasonably intelligent person can achieve full understanding of Freegold on their own by reading the compendiums found at the Ron M's Air-Friendly PDFs link. Those who refuse to do the reading or cannot understand Freegold enough to either adopt or reject after doing the reading really need to think long and hard about changing their focus to something other than gold or silver. I believe they lack the "wiring" required in order to preserve their wealth utilizing precious metals.
Delusional Investing,
Why pull the trigger now as opposed to accumulating more gold to better your position after a transition?
If you look at the charts of mining supply you will notice that during the great fall (roughly 1980-2000) the POG declined while mining supply increased greatly.
On the other hand since the 12 years where gold prices increased about 6 times, the supply has been rather stable.
Even when we take into account that opening a new mine takes 7-10 years (the current run is 12 years old) that seems odd. It becomes odder still if we look at the earnings of the gold miners. They must surely have gone up dramatically yes? Well, no, they did not. Sure some of the older mines produce a handsome profit, but thus is not valid for the whole sector.
As such the argument that higher prices will surely flood the market with new mined gold cannot be sustained.
So here's your opportunity to present your best argument against Freegold
For the record, I do subscribe to Freegold. They were my best arguments against Freegold and they were crap, but hey, I took a shot.
Freegold - Never before has such a simple concept made me feel so stupid.
@Jojo,
"You got all that out of Coral Castle??
And do you think it unwise to hedge for a FG future anyway?"
Sorry, my statements were not against FG. IMO FG is inevitable.So yes I think people should save in gold rather than paper. Its just that the materialist (philosophically speaking) mentality here makes people believe that FG will be much better than the IMF$.
And it wont.
Even Another or FOA said that if you dont like the IMF$ system then you probably wont like the next system.
I have never seen or heard of a man building something with simple tools, single-highhandedly, (at night) the size of Coral Castle.
And this man, that I have no reason to disbelieve says, we dont understand the science/physics of the world we live in.
So Another/FOA saying that Im not going to like the future system, since I dont like the system now. And then someone who has built a giant rock castle at night, by himself, with simple tools, telling me that the science/physics I know of, are not correct.
It just gives me pause to check my perceptions of the reality I live in.
This video series really does a good job at explaining a lot about our perceptions and reality imo.
http://www.youtube.com/watch?v=E8BZ3VhX3YI
Bottom line is, that I dont think FG is going to be the main event like many here believe. It was only setup to keep things flowing forward. To keep a real global reset from happening, so our perceptions and realities wouldnt be hugely disturbed, other wise we might start to perceive things differently.
I think the peace of mind that comes with an understanding of Freegold can only be maintained as long as you can hold onto your physical.
It could be said that the only thing better than being poor in this current regime of global corporatism is "looking poor".
I have accomplished the latter, but am heading toward the former as the oncoming loss of confidence has clearly affected my customer base.
When a businesses customer's hide in the cave with their fiat and roll the rock over the entrance, one must depend upon a "second coming" to place bread on the table.
Let us hope it comes soon.
Delusional Investing said: "In this day and age, it is very easy to be anonymous. It would be trivial to finance and organise a viral and mainstream campaign that made enough people Freegold aware that it would crack the system. Yet, this hasn't happened. Why not?"
Indeed. Why not? Perhaps the system is more resilient than we have come to believe. It survived longer than Another, FOA and FOFOA expected. I know these days FOFOA doesn't do timing, but back in "First Post" on August 23, 2008 he took a stab at it: "When will we get 'there'? In my view it could be as soon as a year from now or as long as four years from now." Obviously he changed his position. Fair enough.
But we all wonder why it hasn't happened yet. And the best answer we can come up with is because nobody wants to pull the trigger. Fair enough. Certainly some big players like China would like more time to buy up what they can. But even if that is true, there are enough individuals involved in the gold trade that if the system was at risk of seizing up, you would expect more rumors to be leaking out -- the type of rumors that lead to bank runs. Even if the BIS and ECB don't want to pull the trigger, even if China doesn't want to pull the trigger, even if the other central banks don't want to pull the trigger, even if the bullion banks want to keep this going as long as possible, you would think that there are enough opportunistic individuals in these institutions whose personal finances are not so correlated with their employers, that they would be buying up physical and advising friends and family to do likewise. You say: "That would be using inside information, and that never happens!"???
If all hell was anywhere close to breaking loose, the rumors would be flying, the market would be drying up, and it would become a self-fulfilling prophesy. But it hasn't happened yet, and from where I stand, I do not see it happening anytime in the forseeable future. Of course there are plenty of people who say they believe it will be any day now (like the interviewees at KWN), but they have been saying that for a long long long time.
I say the "nobody wants to pull the trigger" explanation is weak. I think there is more physical flowing at these prices than we collectively realize.
Also I have to say thanks to FOFOA for everything. I havent commented here much since you took the blog comments off of anonymous posting, but Ive followed and have shared your blog with quite a large number of people over the years.
Your blog and ideas have transformed my way of thinking so much. Looking back it would be hard to recognize myself and my way of thinking/perceiving back in 08/09.
Many of your posts have helped transform my thinking, and helped me think in a deeper broader way. The post on fractals really helped me understand what Jesus Christ was talking about when he was saying that He was in the Father and we have to be in Him and Him in us.
And how we could be created in Gods image, but not be exactly gods ourselves, but more like children of God. And how God can exist both finite and infinitely.
That post has helped me get to the point I am at today of not only getting the FG concept, but of getting at what is really going on in the world.
You have been given an amazing talent and I am glad you have chosen to use it this way, and not to chase after jobs or money that provide an income that society thinks you should have, but that dont give you the opportunity to operate using your talents.
Keep up the good work, man!
in todays times, when lots of things are more and more difficult to grasp due to their exponentially growing complexity, I guess some people feel some relief and security in turning to esoteric-la-la-land, leaving not just only their baggage, but their brain as well at the door.
I only hope such bias has not already infect reasonable goldbugs...
Greets, AD
P.S. @ZachB, that video has lots of BS, since quite some associations only fit not due to mathematics but by random: e.g. 360° to devide a circle is just chosen by random, there exists also a angle definition of 400 devisions, the gradian. So applying primes to such random choices is just simple nonsense.
Possible arguments that may obstruct Freegold:
- the BIS, finally, do not support it
- there is no gold, finally, at central banks vaults
Possible questions that may obstruct Freegold:
- how can we live with high oil prices?
- how can Freegold solve the problem of existing debt?
- in the transition phase (gold price chart in the ‘shoeshine boy’ post), how can the ECB financial statement survive when it is quarterly revaluated with a low or nonexistent POG?
Robert you say the reason "that nobody wants to pull the trigger" is weak, at the same time say you can see why China, ECB/BIS and bullion banks would not.
Your argument is that some private individual would, can you give me a more detailed version of who exactly(their wealth and buying power)?
A PIIG, what causes a bank run? Rumors start to circulate that the bank has no gold, and if the rumors are perceived to be credible, depositors turn up en masse to withdraw their gold, and Voila! there's your bank run. The wealth and buying power of a single depositor makes no difference. It is their collective response that brings the system down. The key is whether the rumors are perceived to be credible.
These days there is no shortage of rumors in the PM blogosphere proclaiming that the banks have no gold, the system is way overleveraged, and the collapse could happen any day. But they are not perceived as credible, at least not at the moment.
Do you know anyone who works at the BIS? The ECB? Anyone at LBMA or any of the member banks in London who is involved in the bullion business? The Chinese Central Bank? Or any other institution where people involved in the day to day physical trade in gold can see what's happening in the market, when it tightens, when it loosens, and who understand why? You and I might not know those people, but they are out there. And I guarantee that at least a few of them have loose lips. And I guarantee that at least a few of them have connections to people who have the power to trigger the avalanche. When these people start telling their friends and family to buy physical, it's all over.
You know how stocks trade up or down before news is released? It is hard to keep a secret. If the entire system was really as fragile as we think, those in the know (who know a lot more than we do) would be talking, and Freegold would be upon us.
Tyrannyofthepresent,
My previous response did not make it clear that it was addressed to you because it was sent from a phone, so apologies if this appeared rude.
No worries.
If by salience you mean short-term immediate obviousness, …
salience: The quality or condition of being salient. (not too helpful)
salient: Strikingly conspicuous; prominent. See Synonyms at noticeable.
So ‘salient’ means ‘sticking out like a sore thumb’, and is a quality of the object. The ‘short-term obviousness’ comes from human psychology: the classic experiment is when subjects are asked to choose one square out of four without communicating with other subjects, and if the subjects choose the same square then they get a prize. If three squares are blue and one is red, which one will subject choose?
(As an aside, as to the question of ‘why can we only choose one’, see perhaps this long piece by Mencius Moldbug)
… and if the minds you are considering in the present are those of asset managers in Western financial centres, …
Not at all. These are ‘the minds’ I am considering, in no particular order:
- Central bankers
- Oil producers
- Those with large amounts of personal wealth
So ‘western asset managers’ might fit under the third category with respects to their personal wealth, which is often quite large, but as you point out gold is not a ‘western asset’ and so they will not have an effect in their ‘management’ capacity.
You assert the salience of what I assume to be financialised gold for people who I assume to be asset managers, as an immediate replacement for their investments in USTs, and you insist on removing all time-momentum but basing the assessment on a snapshot of the present.
I assert the salience of physical gold for a) people who control the real economy and b) people who manage currencies, as an immediate re-direction of their surplus flow away from USTs, and I insist on removing time momentum previous to the early 1900’s and instead base the assessment on the events of the past 50-odd years.
… above all they are likely to want physical possession. We are talking about a wealth asset here, not a currency.
Exactly! Now, say Mr. Billionaire Hedge Fund Manager decides to buy some metals to possess. He decides he wants 100 million USD in physical assets. This would be almost 90 tons of silver or slightly under 2 tons of gold. Provided he wants actual possession and is not happy to leave it in a vault, which would he choose?
To imagine that the worried fathers and grandmothers of the world who are trying to protect their assets …
Unfortunately, what the ‘worried fathers and grandmothers of the world’ do won’t be of too much consequence. Really, that group’s immediate reaction will be to run into any and all physical goods – hyperinflation! They do not collectively control enough assets to really affect what will be chosen (which is not to say that their actions will not have any effect, because the decision to flee into physical goods will force the hand of the currency managers).
2) The growth rates for queries concerning silver and queries concerning gold are approximately the same in both 1 year and 5 year time frames
When choosing a wealth medium, this is not a democracy. It doesn’t matter what 99% of the people on this planet think, only what 99% of the wealth thinks.
AD,
I have not watched that video, but your comment about "360" being chosen at random is wrong. It was chosen by the Babylonians due to the number of factors that it possesses. The reason why no one uses the gradian is because it has fewer factors - 400 was chosen to conform to the metric system. The most natural measure of angle being the radian, of course, due to its innate connection with the circle constant - pi.
And then there is this mathematical problem, you can win 1 million...
http://de.wikipedia.org/wiki/Riemannsche_Vermutung
Wow, let's summarize the "arguments", which unless I'm dense are just what ifs not really arguments:
- alchemy
- sea water gold
- fear
- FG too good to be true
- BIS and BB's have no gold, not really
- free energy
- nanotech paradigm shift
- some god spiritual mumbo jumbo
- aliens, fuck me, aliens
I'm sure I missed some. In Sales talk, an open probe vs. a closed probe can be very dangerous in a sales call, as the potential customer can go anywhere with the question, including a thousand rat holes.
There have been a few good erudite logical questions thrown in as well thankfully.
I am hopeful that a few of you will provide some feedback on
the following question, because I cannot come to a definitive
conclusion on my own. Back in September 2008, as I have
said elsewhere, a remarkable exchange occurred in the
comment section between Ender and Fofoa. I personally found
it to be revelatory. A very brief excerpt follows, regarding what
the group of banks belonging to the Federal Reserve system
do with the interest (their profits) on their loans;
"If you earn a hundred bucks, can you not spend it the way
you want to? There is nothing better than investing in your-
self, or keeping your investments in top shape - new roof,
new paint, new plumbing, cheap gold, cheap wheat."
We have spent endless hours here at Fofoa explaining the
intricacies of the "paper gold" world, both in its relation to
bullion banking, as well as maintaining the favor of oil as
the "no switch" currency. We have said NOTHING about
"cheap wheat" cheap chicken, cheap copper, cheap coal,
cheap ANYTHING, where the "price discovery method" is
the EXACT same "paper settlement only" derivatives
controlled mechanism that sets the "perceived as real"
paper price of gold. Of course I recognize that, unlike
gold, there is no such thing as egg or corn banking. That
is not relevant to my point.
My question comes down to this; When the time comes
that gold goes into hiding, and the real physical versus
the paper price diverges, shutting down the paper market
for gold, and thus discrediting its function as a price dis-
covery mechanism, is it possible for the same derivatives
mechanism to remain a CREDIBLE control of the "perceptions
of value" for all of the "other" commodities? (for, unlike gold,
they will still BE commodities) It is this question, as well as
the implications you may see, for which I would appreciate
any thoughts you might have.
(my personal first impression is that, for Freegold to function
optimally, true price discovery cannot just be restricted to
gold)
Robert I don’t disagree with what you write,
If there was word that was perceived credible by a large enough number of people the game would be up. You don’t even need large numbers just a few people with enough wealth that perceived the story credible.
The story shared by another is not the kind of story that a mass of people can be easily convinced of. What does someone at the LBMA earn and how many very wealthy people can he convince of his story?
It is just as plausible to me that this inside information could stay limited to quite a small number of people. How much pressure could they put on the system? It would seem like small change compared to the Saudi’s or China if they decided to do so.
Woland,
We have 'cheap chicken', 'cheap copper', 'cheap etc.' because we have cheap oil. Thus it all comes back to FO/A's 'triumverate' of oil/gold/currencies.
Of course I recognize that, unlike gold, there is no such thing as egg or corn banking.
I think that is the key. There is no fractional reserve corn.
is it possible for the same derivatives mechanism to remain a CREDIBLE control of the "perceptions of value" for all of the "other" commodities?
During a chaotic transition period, no, but that's only because the underlying currency will be unstable.
I think once stability can be returned to these paper commodity markets (even if it means denominating them in a different currency), then they will continue to serve their function, which is not really about price discovery but rather risk hedging.
10. The Euro Freegold-RPG architecture is doomed to failure because it doesn't address X problem, Y problem or Z problem. (Problems that it was never designed to address in the first place.) In a similar vein many of the discussants here are "indifferent" to a lot of issues that some readers feel we should take positions on e.g. EU politics, morality and so on. Basically any issue the critic feels strongly about.
Freegold-RPG doesn't save the whales! It does not multiply the loaves and fishes to feed the poor! How can you freegolders be so callous and indifferent? I am through with you lot!
@AD,
Sorry you didnt get anything out of that video series. Ive always thought the ideas of people that could float giant rocks at night were worth listening to and understanding.
Oh well, to each his own perceptions I guess.
Woland,
Further to the above: in addition to cheap oil, we have 'cheap chicken' and 'cheap corn' because of US agricultural subsidy policies.
So this is a way in which 'profits' are 'reinvested' to achieve cheap food.
While the futures commodity markets will continue due to their risk hedging function, it is debatable whether the 'cheap food' subsidies will live on.
Tyrannyofthepresent: "As I set out in my blog post, however, the picture as regards long-term cultural salience is much more mixed. I would add that the current situation in which the attitudes of this small group distorts the global human asset allocation is - at least if history is any guide - unsustainable. It is just another case of financial repression, although in this case driven by this tightly-knit group with their herd mentality." Now this is how you insult a group of people. It was done with style, manners, and a known punch line. Notice there were no capital letters and the sentence structure kept you wanting more until the end. Bravo. Tyran, I enjoyed your post on your blog however I don't agree, even with thousands of years of history, that silver will be used a store of value by Central Banks.
Delusional Investing: "If the Freegold hypothesis is true, it requires that the world's largest arbitrage opportunity has been available for 20 odd years. Can a market be that inefficient? Also, it requires that this arbitrage opportunity has remained sufficiently secret throughout that 20 odd years." How can a two tier gold system have been kept secret since 1971 when the convertibility of the dollar to gold was ended?
Indenture,
FWIW, I believe the phrase "this tightly-knit group with their herd mentality" refers to the group "western asset managers", and is not meant to be an insult to those here.
@Woland,
As I understand it, the paper gold market is not just a hedging or trading mechanism yielding price discovery, but a means by which the banking system generates large amounts of liquidity, by leveraging off of collateralized/hypothecated gold. I think Michael H hit the nail on the head when he described the paper corn and other daily-use commodities markets as, primarily, hedging vehicles. As far as I understand it (not far, admittedly), unlike the paper gold market, these other paper commodity markets are not used to generate oodles of liquidity in the system based on hypothecated goods to, at a minimum, avoid a deflationary collapse in asset prices and, even better, generate the perception of "growth" or inflation needed to sustain credibility, and thereby obtain (and continue) "buy-in" to the existing monetary system. The collapse of the bullion banking/hypothecated gold market will thus trigger a huge, cascading collapse in liquidity, as in "all paper will burn." This also explains, again, as far as I understand it, why the price of gold in dollar terms or purchasing power would soar as against other commodities.
In other words, the supposed "price discovery mechanism" for gold is a completely different animal than the "price discovery mechanism" for the daily-use commodities. It is reasonable to believe that the disruptions or effects of collapse would not be the same. Again, I think Michael H hit the nail on the head.
Pat
Thanks for the laugh. I should mention that some of those would not in fact damage freegold, but simply push the price of gold higher, such as free energy.
Also, you forgot humanity being wiped out. That would definitely stop freegold. xD
TF
Robert,
you wrote.....
"If all hell was anywhere close to breaking loose, the rumors would be flying, the market would be drying up, and it would become a self-fulfilling prophesy"
Your remark is logical but IMHO and experience incorrect. The more obvious an outcome is, the more interested powers will attempt to convince you that this outcome will not occur.
For example, I have owned shares in a jr. gold mining company for over a year, Galway Resources and I have a large position for such a "risky" venture. The reason was that it was "obvious" to me that this company would be bought out by a neighbor, AUX (Eike Batista).
Why? look at this map.....
http://www.galwayresources.com/i/pdf/Plan_Map_Galway_Ventana_07122012.pdf
See the strips of land (green) that run right throught the center of AUX's glory hole? There was no way for AUX to efficiently mine their property without owning these strips.
Then in early 2012 all Galway's drill results ceased after clockwork like results had been issued monthy for years. No comment for mgmt. Then the AGM for 3/12 was cancelled. Then in august Galway was able to borrow $10mm from BMO at prime + .5% please look at the carefully, not +5% but +.50% and unsecured!!!! No jr. gets these terms...
It was obvious to me, a "nobody" with no information on the ground, what this meant. But the share price did nothing. It even fell to it's multi year lows !! How could this be? It was so obvious what was happening. Yet some powerful player was smashing the shares, especially at the close everyday. I bought more and more....
Even the "smart money" was dejected. Sprott sold over half of his 2mm+ share position in the weeks prior to the buyout.
How could an efficient mkt not see what was happening when I could. How could the price discovery mechanism fail dismally? I questioned my logic and thought I must be missing something.
Just a few weeks before the buyout, the stock wss near 52 week lows and only a few days before trading was halted did the share price begin to gallop.
Then in november the news that was so obvious came. All the clues were indeed correct. Aux buys Galway for a nice premium ($2.05 C$) plus spinouts. Aux had guaranteed the $10mm loan to Galway. I am sure it was Batista'as agents that had capped the stock virtually up to the announcement. Scaring out "smart money" and managing the expectations of shareholders for a buyout price.
This merger was so obvious that it HAD to happen yet powerful interested parties fought tooth and nail to make shareholders doubt their convictions. And it worked, but not with me.
The paper gold mkt is thin. See how stops can be run on a daily basis. Waterfall price declines and rises. IMHO it can be managed as easily as a jr. gold miner.
Moral of the story is, keep to your convictions. The logical and obvious will occur even if the "mkt" tells you otherwise. There will be virtually no warning when it occurs as that's exactly how the powerful interests want it. E
Another FG FAIL argument:
TPTB set the price of gold, not the market:
If somebody read Goldwars by Ferdinand Lipps, you can easily see how a complete country, probably one of the most free transparent democracies in the world, Switzerland, was easily been seized from their gold without anybody saying a word.
But to the fellow swizz people reading here, I say: You can be proud of your country now stacking german bonds and dollars up to infinity, have fun, thanks for supporting Angela and club med :)
Greets, AD
Hi Michael: It's my position that the futures markets, which
began their 19th Century life as a risk hedging operation, have
over time evolved into a perception management operation. We
both can agree, I would presume, that just as there is a 60 year
supply of gold, unlike corn with a "once a year" one year supply,
so there is, like gold, an endless supply of stocks, bonds,
mortgages, real estate etc. for which no "natural" hedger should
exist. You know Goodhardt's Law; "When an index serving as a
measurement of some level of output or value becomes a target
of policy, it loses its usefulness as an indicator". I think you are
right that there is still some hedging going on in the ag futures,
but further, I think Ender was using "wheat" metaphorically, as
I was as well. In fact, I would go so far as to say that today, I
really have no idea of the "free market" price of anything. Every
price, from the interest rate on down the chain, is linked to
every other price, each in turn influencing, and being influenced
by the others. When so many of these "prices" are in fact the
targets of policy decisions, whether public (USG) or private (the
FR group of Banks), and then one (gold) goes AWOL, can the
mechanism retain credibility? By the way, I like your idea of
ag subsidies being one means (among many, post the Boskin
Commission) of managing inflation perceptions. Cheers.
Woland,
I like your idea of ag subsidies being one means (among many, post the Boskin Commission) of managing inflation perceptions.
It goes much beyond 'inflation perceptions'. Could Chinese workers live on $1/hr if there were no subsidized rice imports from the US? Would Mexican workers put up with sweatshop conditions if they could instead earn a living growing corn (which they cannot because they are being undercut by subsidized imports)?
Indenture and Michael H
Michael H was completely correct. I was referring to the boys in the City, to whom (if present) I offer my humble apologies to them for splashing the dirty secret of their group dynamics across this blog. But also to you, Indenture, because my phrasing was unclear enough to allow you to take umbrage at it. No offence was intended to anyone here.
Michael H
Thanks also for your excellent points above, which I think will deserve a quiet hour and a glass of wine of their own. Central banks, oil producers and wealthy individuals should present me with some psychological challenges.
I know already that I agree with your point on 99% of the wealth, although I will be adjusting the value of global USD cash and bond holdings downwards before looking through these people to see if they have the potential to become uniformly gold-obsessed.
VTC wrote:
"Just because of this history, I wouldn't rule it out that they might do it again. Ultimately, it is the dependence on energy imports that prevents them from repeating this exercise."
That's funny, well, not really, because I would say that precisely because of this history it won't happen again. But, if it does, the response to it from a large portion of the citizenry will not be remotely cooperative. All it is going to take for the cover to be ripped right off of American's relative docility (in the face of ever greater corp/gov skullduggery) is some genuine, true blue, hardship.
Edwardo,
All it is going to take for the cover to be ripped right off of American's relative docility (in the face of ever greater corp/gov skullduggery) is some genuine, true blue, hardship.
And in this hypothetical scenario, who do you think will be the recipient of Americans' ire?
Michael H: Excellent points, and thank you. If I may offer an
off topic "treat", via the WSJ: At the BIS meetings held every
other month:
"On Mondays, after the dinner of the 18 member group,
(formally known as the Economic Consultative Committee)
the bankers adjourn to a larger group of central bankers at
a large round table on a lower floor of the BIS building,which
is shaped like a rook chess piece".
Another: "It is asked that a dollar be strong in gold? It is
done. These many years gold price is lowered. Brokers say,
"we bring gold down" and "our judgement be correct". Know
them not their work was a bidding for the central banks.".....
...."It is asked for another "knight" (my quote marks) in the
game? It is done better. A powerful queen comes for our
use, this new Euro. Now they ask this Euro to be strong in
oil. It will be done!"
I just couldn't pass up the coincidence of "rooks", guys.
Cheers.
Indenture,
That one is easy. In a procedure identical to what occurs today, oil will trade for money, which regardless of its form will then immediately be spent on whatever the producer desires to use or possess, or perhaps not if for some reason the producer wishes to possess the money itself.
Post a Comment
Comments are set on moderate, so they may or may not get through.