Saturday, January 5, 2013

The Two-Legged Dog

This is an unbelievable dog named Faith that can walk on two legs!

American - English Idiom: "Have a dog in the fight"
Idiom Meaning - To have a stake in the outcome of the problem at hand or to opt out of being expected to assist.

Someone wanted to know my take on the outcome of Goldhog Day, so here it is.

First of all, I view today's (quote-unquote) "gold" market as a two-legged dog. It has only two legs of support: private support (what we could call "the paper gold bull market" or private demand for paper gold from mostly metals, commodities and currency traders and dealers) and official (CB) support. I don't consider the demand for physical gold to be a leg of support for today's "gold" market. It has been more like a baseball bat to the "gold" market kneecap for quite a while.

Think of it like this: The position that lends the most support to today's "gold" market is "long paper gold and short physical gold." This was the position of Western gold bugs during the early 90s—trading in their physical for paper gold:

Date: Sun Oct 05 1997 21:29
ANOTHER ( THOUGHTS! ) ID#60253:

The Western governments needed to keep the price of gold down so it could flow where they needed it to flow. The key to free up gold was simple. The Western public will not hold an asset that is going nowhere, at least in currency terms. ( if one can only see value in paper currency terms then one cannot see value at all ) The problem for the CBs was that the third world has kept the gold market "bought up" by working thru South Africa! To avoid a spiking oil price the CBs first freed up the public's gold thru the issuance of various types of "paper future gold". As that selling dried up they did the only thing they could, become primary suppliers! And here we are today.


The reason for "keeping the price of gold down to free up Western physical gold" was simply to prolong the $IMFS until the euro launch date. But once "that selling dried up" and the CBs became "primary suppliers", there was no longer a need to keep the price of gold down. At that point it was better if it went up!

FOA (8/22/01; 05:18:54MT - usagold.com msg#98)

The war between gold and the dollar has been over for a while now. The action, today, is between the dollar and the euro arena and this is what will break the price lock on gold. Leaving gold bugs with a lot of questions that ask why this: both systems will strive for a higher currency price for gold; one doing it because they have to; the other doing it because they want to! The casualty on this battlefield will be the world gold market as we know it.

FOA (11/3/01; 14:39:16MT - usagold.com msg#129)

…any massive rise in physical gold values cannot be priced into "derivative gold" without crashing the system… This paper gold market will be cashed out at prices far below real bullion trading…


When I talk about support for today's "gold" market, don't confuse that with price. Always remember that the ultimate supportive position is long paper/short physical. So it is possible to support "the market" at a low price by selling tonnes and tonnes of physical gold. Likewise it can be supported by buying "tonnes and tonnes" of paper gold, which tends to raise the price of "gold" and "stretch" the physical supply.

Again, the two legs of support are the "gold" buying public and the CBs. The actual "use" (hoarding) of this particular commodity (physical gold) is not supportive of today's "gold" market, it is a major threat. And when I put "gold" in quotes, that means all the various paper that tends to move together with the $PoG constituting the entire precious metals sphere as we understand it today. I'm not just talking about a strictly defined type of paper gold. It is also helpful to exclude physical gold demand when conceptually thinking about today's "gold" market since it is a threat rather than a supporting element of that market.

Even though I said not to confuse support with price, the rising $PoG is, in fact, the only thing holding today's "gold" market together. That is, the buying of tonnes and tonnes of paper gold which raises the price of paper gold thereby "stretching" the physical supply is the main action being taken by one or both of the two supporting legs (private traders and/or CBs) that is holding today's "gold" market together.

On 8/22/01 FOA wrote:

"Both systems will strive for a higher currency price for gold; one doing it because they have to; the other doing it because they want to!"

And this is what we, in fact, saw:

Wednesday, August 22, 2001 - GOLD AT $276
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600

Prior to that, "gold" had been range-bound for two decades.

Freegold!

FOA (08/09/01; 10:27:19MT - usagold.com msg#93)
"everything to do with a gold bull market"

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.

Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of monetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!


The new "world financial architecture" (to use FOA's term) or the "fully-fledged Freegold paradigm" (to use Ari's) will be "assertively rolled forth" only after these two legs of *support* for the old "gold" market are gone. Whenever that happens, I personally envision the price of "gold" free falling very low before trading is halted, but that will be only the effect, the climax of a chain of events or the denouement of today's (quote-unquote) "gold" market. So if we want any kind of advance warning, however brief it may be, I think we should pay close attention to the sentiment of those two legs of support.

And this is the basis of what I called my two "indicators", the FPI and Goldhog day. Those are just silly names that I made up to explain what I think could be a potentially predictive snapshot of the sentiment of these two very different legs of support. The FPI is a snapshot of private support and Goldhog day is a snapshot of CB support. And the timing of Goldhog day is based on a specific theory about the MTM practices of the ECB. This is why I said in my Dec. 26th post that it was just something I was "watching for the next week and a half. It could be a signal of sorts, but I wouldn't put too much stock in it." In other words, take it with a big grain of salt!

For the FPI (or Freegold Puke Indicator) I'm gauging the sentiment of a very narrow band of the market, a segment that we could call the "swing producer" of private support for today's "gold" market. Forget the permabulls (most of the precious metals community) and the permabears (most of the MSM and mainstream investment community) and look for technical traders who have been bullish on gold for most of the last decade but who are always on alert for the top, preferably someone with substantial influence and financial weight.

I have found a good bellwether for my own purposes in this regard, and here are some of the things he has been saying over the past two weeks (paraphrased):

"Gold sentiment is off the charts low right now. It will be interesting to see how low the HGNSI (Hulbert Gold Newsletter Sentiment Index) will go after Friday's (yesterday's) action."

"The more Turk and KWN talk, the lower gold goes. Gold is heading below $1,550."

"Gold sentiment right now is suicidal."

"10 years in gold is enough. I'm selling 100% of my gold over next 3 months."


He believes that the secular "gold" bull market of the past decade has ended and a new secular bull market in the dollar and the S&P 500 has begun. And that's why I said that my FPI had "fired".

It is impossible to know which of the two support legs were responsible for the rising price of "gold" at any given point during the last decade, but I think it's safe to assume that the private (trader) leg carried at least its fair share of the weight most of the time. But there have been a few instances of "support" that seemed counterintuitive or at least "eyebrow-raising".

I presume a fundamental difference of motivation between these two legs. The private (trader) leg supports the "gold" market when it thinks it can make a profit in currency terms. The official (CB) leg supports the "gold" market for a purpose other than profit. That purpose I presume to be the prolonging of the status quo in the absence of sufficient private (trader) support.

All of the instances of curious "support" that have raised my eyebrows occurred during or after the financial crisis of 2008. Granted, I have only been watching since 2008, but even so, there is evidence that this is when "it" began. Take the GLD puke indicator for example. Notice that they began in September 2008:



What makes the GLD puke indicator interesting is that the price of "gold" tends to levitate following a puke. I do realize that there are theories and explanations for why this happens and I'm not going to get into mine in this post. But I did want to point this out as an example of several instances of curious "support" that began in 2008.

The other three instances were the Nov. 2008 bottom in "gold" which I mentioned in my New Year's post, the June 2010 MTM snapshot described in this post and the mysterious "eleventh hour levitation" mentioned in this post. The latter two being associated with the ECB's MTM practices are what gave me the idea for Goldhog day last May.

To my mind there are three prerequisites for a valid Goldhog day. First, we must have a prior FPI firing indicating low private (trader) support, especially from the swing producers. Second, we need a gold price that's significantly lower than we'd expect it to be just prior to Snapshot day given the uptrend of the last decade. And lastly I think it needs to be either a mid-year or year-end Snapshot day, not March or September.

Last May my FPI fired and the price of "gold" was very low for the June Snapshot day which was still 45 days away. But then the price levitated into range by early June which suggests private (trader) support was more likely than official (CB) support, technically invalidating June 29th as a true Goldhog day. So yesterday was our first-ever true and valid Goldhog day!

Someone asked whether the ECB takes their snapshot from the AM or PM fix at the LBMA. The answer is that they take their own snapshot during the day. Sometimes it is close to one of the fixes while other times it is not. For example, last September it was almost the same as the PM fix. The PM fix was €1,377.278 and the ECB's snapshot was €1,377.417. But in June and March the ECB's snapshot was actually lower than both the AM and PM fixes. On June 29th the AM fix was €1,248.012, the PM fix was €1,260.448 and the ECB snapshot was €1,246.624, which is why I picked €1,246 for my Goldhog day prediction.

The actual gold fixes yesterday were €1,254.323 in the AM and €1,262.932 in the PM. We won't know until Wednesday what the ECB snapshot was, but I'm going to guess €1,257. It certainly didn't hit my low of €1,246, so I can't make a decisive call. But I can explain my take on it.

Here are all of the MTM snapshots beginning in 2008 along with the percentage of "gain" or "loss" from one quarter to the next, and also for semiannual periods:



Notice that yesterday was the largest quarterly "loss" by a longshot, which is significant. But I'm focused more on the semiannual periods because, as I mentioned before, there are indications that the mid-year and year-end snapshots might be more important to central bankers (for whatever reason) than the other quarters. One indication is the more frequent dips from quarter to quarter versus semiannual dips, and the other indication is that the two instances of "curious support" occurred at mid-year and year-end snapshots. So take it for whatever it's worth, but there it is.

If we had hit my low of €1,246 this time, notice that it would have registered as a negative number in the far right column, or a "loss". But it wouldn't have been the first one. There was another semiannual decline of -1.1% from January to July in 2011. But this time would have been significantly different from 2011.

The difference would have been that in 2011 there was a huge dip in the price between January and July. So even though July came in slightly lower, it still represented a massive levitation to get there. This time was the opposite. There was a huge rise between July and January so, even though it's flat for the past half-year period, it represents a huge decline (i.e., lack of support) to get to where it is today. Can you see the difference from a CB Snapshot day perspective?

But we didn't get there, even though we came remarkably close. I never thought that anyone would intentionally take the price down. My point, instead, was that if it did happen to fall that far without hitting even official (CB) support, that would be a significant indication to me in support of my other reasoning for 2013 being the year of the window.

As it turns out, the euro price of "gold" did find some support at €1,254. Was that official (CB) support or private (trader) technical support? To be honest, to me it still looks like the two "fundamental" legs of support for today's (quote-unquote) "gold" market are possibly gone. And as I said, normally I couldn't care less about the price of "gold", but I think that my "bellwether" might just be right, that the decade-long bull market in paper gold might be over. If so, look out below!

And if you think this whole post sounds like pure speculative gold-hog-wash, that's because it is! :D That's what you get if you want me to do timing. As I said, take it or leave it, but if you take it be sure to take it with a huge grain of salt.

So what's my take on the outcome of Goldhog day? I say it still looks like "game on" for 2013, Year of the Window!

Sincerely,
FOFOA ;D



____________________________________________________

UPDATE:

LBMA’s Best Gold Forecaster Hochreiter Says Bull Market Over
By Claudia Carpenter (Bloomberg) - Jan 7, 2013
(h/t Jeff)

504 comments:

«Oldest   ‹Older   201 – 400 of 504   Newer›   Newest»
Anonymous said...

Totp,

listen to ma bruvva poopie-j, join us in our...mm, compound, where all is 1000% stitched up alreddy, cast out yr doubts. This freegold jazz, it is in-evitable. The oracles they have spoken, ok it was a long time ago, but they did say it wud happen, so just believe man. Like a load of monkeys wiv a load of typewriters, Bill Shakespeare's plays will appen, it is in-the-evi-table. So rest yur brain, join us at the all-in-evitable lair(reminds me, has someone fed the JRgimp today).

Respec.

milamber said...

All,

I found a very interesting article today from the Korean CB governer.

The past year in retrospect, challenges and resolutions for 2013

I would love it if some of the more knowledgeable folks could take a look at it. And re-reading Go Go South Korea, is this the bosses way of telling everyone in BOK, that the times, they are achanging?

Or is this just fluff?

New Year Speech by Dr Choongsoo Kim, Governor of the Bank of Korea, at the Bank of
Korea, Seoul, 2 January 2013.

Some highlights:

… the various new policies attempted in several nations will inevitably bring about big changes in the existing order

What I am saying is that it is very urgent that we cultivate our capabilities and build up our capacity now for internalization of issues in the global economy. Monetary policy is no panacea, but there is no denying that its content is changing very rapidly.

In particular, we must not be trapped by the dogmas of yesteryear. Dogmas present other people’s philosophies and experiences, and may even already be obsolete.

we must depart from a domestic-oriented perspective. In an environment in
which we live in an open economy, we need to strike a balance between the
domestic and the global perspectives.

we must not continue to take a passive attitude of obediently undertaking only
our assigned tasks.

We should bear in mind that history has always found its way to new solutions in
response to crises, and has not returned to the past.

the post-crisis economy may also evolve to form a new paradigm of a state beyond our imagination.

There is an African proverb that says “If you want to go fast, go alone. If you want to go far, go together.”



Milamber

Edwardo said...
This comment has been removed by the author.
milamber said...

TotP,

Thank you for your reply. Would it be correct for me to characterize your outlook as something akin to John Mauldin's "muddle through" scenario?

Milamber

Edwardo said...

Pat wrote:

"Edwardo, I see where you are heading, but the trillion coin ( or teddy bear or magic flute, whatever ) is designed to be yet another attempt at spending with no consequence."

Agreed, but in devising this dunderheaded idea
they have, in essence, opened up the door, or, perhaps, it's Pandora's Box, to a genuine game changer. The monetary nostrum that dare not speak its name has now been firmly, if indirectly, uttered by officialdom. Put another way, we may be witness to a great and shining example of The Law of Unintended Consequences at work.

(Last year, the "gold standard" came up in conversation in connection with The Republican Convention, but seems to me to have been in a demonstrably different context.)

At the very least, here in The Land of the Free and Home of the Brave, we seem to be in the process of reenacting Winston Churchill's observation that, "You can always count on The American's to do the right thing, after they've tried everything else."

Tyrannyofthepresent said...

poodlejim,

Peace bruv. If ya reli wanted 2 talk proper on ere rite ya wud cud but ya dont wanna innit it fairly obvious tat ya can bludd but thinkin ur above sum1 just cos u speak proper lairspeak innit, safe

Tyrannyofthepresent said...

Milamber,

I'll read JM and get back to you. I have no idea exactly what will happen but just don't expect it to happen all at the same time, in any kind of organised way or with neat, packaged inevitability, because that is not the way things usually happen.

Instead I see a lot of separate unsustainable situations: fractional gold, derivative finance, resource flows to the west, fiat currency being used as a store of value, generous welfare, pensions, demographics, China and the US squaring up, the oil running out, shale and renewables starting to move and much much more. I can see a lot of different actors: pols, hacks, traders, bankers, central bankers, jewellers, Indian mothers, Chinese city aspirants, Arab conservatives, German industrialists, Ugandan oilmen, gun-crazed stackers, Belgian dentists with euro MTNs, gullible English boomers, rich, poor, squeezed middle, GenY wasters, kids and landed gentry... all trying to pull strings, get through, escape blame and end up in a good place as it all gradually falls apart.

Not sure what else there is to know in detail.

Motley Fool said...

Tyranny

I remarked here years ago that for every dollar that an individual( or amalgamation) has he has a vote.

The reality is that the most people have few votes, while some few have vast amounts of votes.

The reality is that most people do not have much say. They are of small means.

You may call this morally reprehensible, but it is also true.

TF

Anonymous said...

@Tyranny

My first paragraph was intended to mock your casual dismissal of the validity of freegold and thereby the value of this blog, not to imply any specific statement on your part.

BB paper gold is what freed up physical gold to flow where it was needed to extend the lifetime of $IMFS. RoW has been giving us free stuff in order to (a) buy time for the transition to a new monetary system and (b) get cheap physical gold (enabled by BB paper gold).

So this idea that a couple bullion banks could fail and that this would be "no big D" is laughable if you subscribe to any of the ideas presented on this blog, which clearly you don't. Also, please don't feel obligated to write me a novel in response to this because I very likely won't read it, just like I and most other readers don't read 99% of your verbose, stream-of-consciousness sophistry.

@poodlejim

LOL is that the best you can do? I'm sure I did a far better job mocking you (whoever you are).

Tyrannyofthepresent said...

Motley Fool,

Morally reprehensible? Naah, but grossly misrepresented. It is nonlinear and multiaxial. Money, knowledge, weapons, popularity, resources, notoriety, obscurity, respect... it all carries votes. Shifting sands, changing winds, fickle voters, Mexican standoffs. Ek moenie alles noem nie. Even poor Afrikaans can confer power.

Tyrannyofthepresent said...

Poopyjim,

For mockery, conformity and brevity, consider yourself unequalled.

Motley Fool said...

Tyranny

sure

and how do most people scale up on those against the big players combined weight? ....and ofc some of those have little relevance to altering economic paradigms.

TF

Aaron said...

Tyranny, question for you.

Which circumstance do you think is more likely to blow up the paper gold market; excessive demand for physical coming from the shrimps or inadequate supply of physical coming from the giants?

Unknown said...

Pat said,
"Game over then for exorbitant privilege, and I'm one who can't see USG ever giving that up themselves. It will have to be taken away from the enablers, not the addicted sicko himself."

It is the U.S. that will be the wildcard. Arrogant, unpredictable, hated, LOATHED.
It is the USG that earned all this, yet the people will bear the brunt of it.

And from my earlier comments regarding this reported US consumer demand spike for metal. Perhaps I should have asked, "Why is the US mainstream media beginning to rock the Reuters boat"?
Clearly, the Lemmings are taking their lead from the propaganda pulpit, but what is going on here?

There is cause, and there is effect, and in most cases the cause is "designed" to have the desired effect.

Is gold finally where it needs to be? Such that those who could make freegold happen are willing and able to "let it happen" shall we say "organically" (wink wink) with just a nudge??

Herb said...

Just a quick thought on the now-famous trillion dollar platinum coin.

It amazes me how programmable human beings are. If you grow up in Saudi Arabia your world view will probably be Muslim. In (most of) India probably Hindu. Even in the US, where access to info about other religions is easily available, little Christians will grow up to be big Christians, little Jews to be big Jews, etc.

Part of that programming is the belief in money. It takes early training to internalize the notion that a piece of paper with fancy pictures on it is the equivalent of things and can be exchanged for things.

The important things about the platinum coin ploy is that it eats away at that paradigm. It suggests that the basis of money is magical rather than rooted in some deep reality. In and of itself I don't think this will change anything, but it will plant a small seed of doubt. That's good enough for me. Baby steps are still steps.

Herb

enough said...

Edwardo,

I think you are onto something. The concept of the trillion dollar platinum coin will lead most to think, why not just revalue the gold reserves instead......

Submitted by Paul Brodsky of QBAMCO,

Speaking of monetary abstractionism, there has been recent talk of a fiscal gimmick called “The Trillion Dollar Coin,” in which a platinum coin valued at $1 trillion would be created by the U.S. Mint for the Treasury Department. Treasury would then rid itself of its pesky fiscal deficit in one fell swoop by simply keeping the coin on deposit at the Fed.

The TDC idea is a marvel of political imagination and public ignorance (and so it seems to have legs!). As with most clever illusions, the TDC is based on sound logical footing, one in fact we have argued in favor of: asset monetization. But there is a fundamental difference separating the Fed monetizing Treasury’s gold to devalue the dollar, followed by a re-pegging of dollars to gold at the higher fixed exchange rate (our idea), and assigning an arbitrary value to an asset no one else is allowed to own.

After declaring the coin to be worth $1 trillion there would be no market-based discipline. In its aftermath, twice or half the amount of global platinum could not be exchanged in the marketplace for double or half the amount of dollars. (It is reminiscent of the Weimar Germany scheme to back Papiermarks with agricultural land. Brilliant! Er, but how do its users exchange the money for the land?) Not only would it be difficult to value extant platinum, it would be almost impossible to value anything in the world (at least in dollars).

Once the coin were struck, it would become obvious to the global marketplace – producers, consumers, savers, investors and trade partners – that future global purchasing power would be left exclusively in the hands of the US Treasury. Treasury would be able to simply outbid everyone on the planet for everything.

We suspect the Japanese Ministry of Finance would soon mint a ¥100 trillion pair of chopsticks and put them on deposit with the BoJ. They could then purchase most if not all of the oil on the market today for future consumption! We are confident oil exporters would not raise their prices because they would have the magic chopsticks as collateral. And why wouldn’t all the world’s treasury ministries simply create priceless flux capacitors and use them to create all the taxes needed to self-fund their governments? (To do so Ben Bernanke would have to hand over its proprietary technology – the Fed “has a technology called a printing press…”)

Obviously, the TDC idea is a political ploy with a targeted mission: to rid the US Treasury of its debt ceiling, which is an increasingly frequent and embarrassing public reminder of government ineptitude. Everyone knows government-led de-levering is not a serious threat. However, the irony of the scheme and its MMT (Modern Money Theory, is espoused by imaginative economists technically proficient in double-entry bookkeeping and deficient in confidence that free marketplaces can provide accurate valuations) / liberal Keynesian promoters could not be more delicious. The scheme exposes the forty year-old charade, otherwise known as the global monetary system, better than any mind-exercise we have been able to come up with.

As we considered the plan, Hunter S. Thompson’s observation sprang to mind: “in a world of thieves, the only final sin is stupidity.” Though the TDC idea would work from an accounting standpoint, it seems awfully unlikely Americans and the rest of the world would let the US Treasury enjoy a very visible monopoly on fraudulent monetary accounting.


Edwardo said...

Thanks for supplying that, enough. I remembered a few days ago that I happen to own one one tenth of an ounce platinum coin. I would say whoopee, but...

And FWIW, I noticed that today none other than Jim Rickards tweeted on the subject:

"I don't take coin idea seriously at all, but I see some unintended consequences in the debate. Like pulling curtain off #WizardOfOz



holdinmyown said...

@anand srivastava

I pretty much agree with your post of Jan 8, 9:06 PM but the following caught my eye:

So if leasing is negligible, then the paper gold cannot be increasing in size. So the only way to affect the price is to buy or sell the paper gold.

Leasing is not necessary for printing of paper gold. The Issuer can offset his short with a synthetic long paper gold delta hedge. Of course the idiot savants that create this stuff don't realize that a hedge like this works very well but only as long as the correlations to the reference assets remain reasonably stable. It works until it doesn't.

Tyrannyofthepresent said...

Motley Fool,

I think there are two fallacies: assuming that the different forms of power are congruent, and always grouping the powerful while always isolating the powerless. The reality as I see it is mixed on both points.

How much power did Gaddhafi have in his drainpipe? How much power does a lottery winner have the day before the win? Can absolute military power, celebrity status or a popular mandate confer any monetary power? Can gold - assuming it confers power - be lost, stolen, confiscated, rehypothecated or obtained by fraud?

So the axes of power can work against each other.

Second question: who collaborates?

The orthodoxy here is - so it seems to me - that the powerful collaborate while the shrimps do not. Each individual shrimp has to weigh up against the combined might of the powerful. Clearly there is no contest. Is this a fair representation of the reality? History is stained with the gore of the powerful because they compete with, betray and destroy each other. Meanwhile the shrimps are *usually* easily herded - wrap your metaphorical imagination around that - but are sometimes armed and occasionally roused - there is no need to cite the obvious examples.

With the advent of the internet - which in its penetration to the bulk of humanity post-dates the genesis and thesis of this blog - the masses are now potentially albeit not actually aware. This is a huge novelty. Forcible control had in most places already given way to information asymmetry as the primary modus. If potential awareness becomes actual awareness anywhere in the world - the information asymmetry could begin to crumble.

So the next question is: in the absence of both brute force and information asymmetry, what happens to the parasitic concentrations of wealth and power? And once the wealth and power are scattered or their concentration attenuated, who then makes the rules?

Anonymous said...

Year of the window, indeed.

http://www.zerohedge.com/contributed/2013-01-09/russian-“black-money”-threatens-boot-cyprus-out-eurozone

Pat said...

Edwardo and Enough,

Good follow-ups, I am now more hopeful than I originally was that the TDC idea would expand the initial idiotic ( no, totally unethical ) idea into another realm. I may even allow myself a little cautious optimism.

I guess the one indisputable takeaway is that the notion that QE4EVA will just continue and we can muddle along and constantly have fiscal cliffs and debt ceilings in the news periodically ( Jay Rockerfellow on the internet: We should have never invented the damn thing )has been shown to be fallacious. So I'm on board that whatever endgame will be is sooner than later.

Motley Fool said...

Tyranny

"I think there are two fallacies: assuming that the different forms of power are congruent, and always grouping the powerful while always isolating the powerless. The reality as I see it is mixed on both points."

I didn't assume either.

However you do seem to be missing the plot in complicating things unnecessarily.

The focus here is that of wealth reserve asset, and choices pertaining to that.

Two powerful groups may be in conflict, but as regards preserving wealth they will each do what they see as in their own best interests.

In this regard my and your vote does not matter much, nor does say notoriety.

Yes the world is complex, but we need not overcomplicated things needlessly when looking at aspects of it and influences thereon.

TF

Motley Fool said...

Ps. It is not a matter of collaboration (though it may exist or not depending on the factions), it is a matter of self interest.

Tyrannyofthepresent said...

Motley Fool,

On the charge of complicating matters, I plead not guilty. I am just representing them as I see them. It is the human race that has complicated them, and they do not appear to me more complicated than in any other century or any other civilisation.

I just reviewed the blog to look for clues on the information asymmetry point, and found a number of wonderful exchanges between FOFOA and Bron, which are no doubt known to you, for example this from FOFOA:

“I suppose the alternative scenarios are that the CBs are not supplying physical because there is no actual shortage of physical in the BB reserve pool, or else that Another was a fraud and didn't know what he was talking about when he said, "they only lend their good name on paper, not the gold itself." Can you think of any others?”

to which Bron responded with this:

"I don't think Another was a fraud. As I suggested above, maybe circumstances have changed and now some CBs see the need (or threat) to support BB operations."

...

At this time I'm not seeing any desperation in the wholesale markets. As a refiner of 10% of the world's gold production (new supply), you'd think we would be courted by BBs to get hold of new physical flow if the existing above ground stock is increasingly in strong hands and not able to be coaxed out of hiding."

So Bron, with pretty good direct insight from recent times, speculates, as I did earlier but from his superior vantage-point, that "things have changed".

My point: evidence aside and given the time that has passed, that is the safest assumption. Power always shifts, things always change and, like it or not, things are always complicated.

It is a biological system. Why anyone would expect it to be simple or benign escapes me.

Jeff said...

It's difficult to tell what your point is. Could you avoid the turgid writing style and state if you believe the CBs are backing the BB's with physical? Based on what, Bron's statement that the BB's are not calling him for wholesale physical?

From that discussion:

FOFOA: If this is the case, and the CBs are lending physical to the BBs as you propose, then they are essentially converting paper into physical at paper's price. This is something that Another said the CBs would not do, because "the BIS and the major private gold holders know the total claims" which means they know the true value of their physical. Clearly they are not going to convert ALL paper gold into physical, so the game is to convert just enough to reestablish confidence in the system and stop, or at least slow down the "bank run."

So if the CBs are now backstopping the BBs with physical gold to maintain confidence, the BBs themselves would know this because it is a change from the "CB certificates" that Another spoke of. In other words, it is a self-defeating process for the CBs.

Tyrannyofthepresent said...

Motley Fool,

On your point about "two powerful groups" seeking to preserve wealth, I would say more like two thousand individuals:

- Each group has individual members, self-protecting at the individual level. It is instructive to review resignations / new appointments and the actions of individuals. The "FleeceBook" series on ZH offers tiny snippets of the kind. Much, much more is out there - there goes that information asymmetry again.

- Ultimately all of them are dependent on and subject to legal systems (cf. the requirements for the formation of the Rothschild fortune in C19, Niall Ferguson and others) ... which in turn are subject to politicians ... who (in the West) are engaged with or dependent on the media/"democracy" circus. Elsewhere, with the armed forces. Plenty more on this (also on ZH).

So many players. Once again these are individuals whose interests are emphatically not aligned. The "phone hacking" and "Libor rigging" scandals and others in the UK recently have offered interesting examples of these players self-protecting, forming new alliances/betraying confidences, using power and ultimately falling or wobbling (e.g. DSK, Paul Tucker, even David Cameron).

- Geithner has just been replaced. King has just been replaced. Can their constituencies be expected to be identical to the previous incumbents? A year or so back, out of nowhere we have Draghi and Monti. Abe is a nationalist, pulling power back to the gov. Does that mean Japan won't play now?

- Even today, suddenly the Americans want Britain to kow-tow to Euroland. Who woulda thunk? There was us thinking they represented the two main blocs at loggerheads.

It is a complex, perilous, shifting picture, and we are engaged in the most hopeless speculation, albeit with richer data than any previous generation. We should at least use it all and maintain doubt, caution and an open mind, to avoid crystallising a future based on a small set of fixed expectations based on uncertain or outdated data.

Tyrannyofthepresent said...

Jeff,

If it is turgid, don't read it.

I quoted Bron because I took his POV seriously. Seems fair, in view of his vantage point. It doesn't mean I have to know 100% one way or the other.

Jeff said...

If it is pointless, don't write it. Do you have a view? If not, why so many comments? Bron at least has a position, which you equivocate on even as you quote him. Very odd.

Motley Fool said...

tyranny

the 'two' was for the use of my example. I did not literally mean two groups, there are hundreds, if not thousands of powerful entities.

tf

Tyrannyofthepresent said...

Jeff,

My view is simple and meaningful enough: there is doubt and uncertainty, risk and change. It was not addressed to you, though and is apparently unwelcome, so feel free to ignore it.

On your general dislike of my comments: if you are the moderator of the blog, delete them.

Tyrannyofthepresent said...

Motley Fool,

Thanks for the clarification. And to clarify the opposite,fragmented picture, there will of course be (shifting) alliances.

Jeff said...

Tyrranyofthecomments,

No worries; I wouldn't delete them even if I could. Let's leave them for posterity, especially the ones on silver.

Best

Tyrannyofthepresent said...

Jeff,

I was about to stop misallocating time.
One final question, since you mentioned "it":

Would you dare to write down here the highest physical exchange ratio of gold for silver that you ever expect to see on a more or less global basis, over, say, one week?

Here is mine: I am not expecting to see anything above the 135 or so seen in mid-C20. Ever again. And I would not be surprised to see 13.5 for a while, although probably not very soon. There it is.

Go on, I dare you.

Jeff said...

I could follow your lead and say 'it's complicated'. I really don't know what the exchange ratio can hit between now and the paradigm shift; I leave that to fast traders trying to maximize their conversion. I'm on record as saying that I expect silver to crash during the transition, never to regain even the current ratio. I believe FOA said something about 50 cent silver.

I commend you on staking out a clear postion, though. It gives us something to talk about. That's my favorite comment that you've made.

Tyrannyofthepresent said...

Jeff,

Thanks. I was hoping for thousands, but "never to regain the current ratio" is something for posterity.

Incidentally I am expecting silver to outperform a bit, then gold to outperform a lot during the "transition", then silver to outperform again and eventually to reach very high levels indeed in gold terms at the "landfill only" stage. That's enough prognostication to almost guarantee a big mistake. I prefer doubt and waffle, but each to his own. Out for now.

MatrixSentry said...

I'm sorry, reading Tyranny I am reminded how I came to the FOFOA blog in the first place, and why I stayed after discovering how different the blog was from anything else on the internet. I am also reminded why I read the blog for a couple years before reading the comments.

Some here could learn much from FOFOA, forget Freegold.

Knotty Pine said...

Another interesting article about Indians' propensity to save in gold.

http://lfb.org/today/indias-gold-mania/

Anonymous said...

its a GLOBAL PONZI.
Paper money abounds.
Escape is only through Gold or Bitcoin.

http://keysignals.hubpages.com/hub/Exters-Inverted-Pyramid

Gold Short Term Bitcoin Long Term
Good Luck

enough said...

"The reports of my death are greatly exaggerated"

says paper gold......

one last very convincing head fake currently in progress.....

how high you ask? maybe FOFOA's inflation adjusted high price of $2333

MatrixSentry said...

My view is simple and meaningful enough: there is doubt and uncertainty, risk and change.

Really? No shit.

Pat said...

Enough, todays "action" is only more FX volatility, paper gold up, yes, in dollars, paper gold in Euros virtually flat. However, all this FX volatility is yet another sign of possible accelerated move to endgame.

enough said...

PAT,

We shall see.....

My thinking.....The Commercials have covered nearly 100,000 contract shorts at the comex since 12/5......

Why would the "spiders" do that if they were planning, expecting an imminent paper gold collapse?

Let's see what fridays COT report brings......

enough said...

Commercial futures short interest reduction at comex

12/7 - 46,000
12/14 -3000
12/21 - 11,000
12/28 -13,000

my mistake only 70,000 futures contract short covered, not 100k

Tyrannyofthepresent said...

Knotty Pine,

Thanks, great article, paints the cultural backdrop well.

It made me wonder: if gold did suddenly become unavailable in the West for USD/GBP, how would the the Indian market respond? Would they suddenly stop selling gold for INR too? Or would their stockists continue trading for Rupees but suddenly stop selling INR for USD/GBP at any price?

Pat said...

"The wonderful thing about gold is that (other than those damned Chinese) many of the buyers are just as happy with the paper version as the real version. And while the real stuff is expensive to mine, and somewhat rare, the paper stuff turns out to be really easy to produce at essentially 0 cost, and has the virtue of being in unlimited supply."
On occasion a gem is produced in the ZH comments section.

Anonymous said...

@MatrixS

You said:

'Some here could learn much from FOFOA, forget Freegold.'

FOFOA said (back in 2008 re Madoff):

'First of all, let me say that this story is HUGE in my opinion. In fact, if it escalates like I think it could, this scandal could bring us FreeGold earlier than even Mother Nature intended.'

Also, he said:

'Here's to 2009, "The Year of the Wheelbarrow"'

Could you help us out with the learning points from these thoughts, apart from the obvious one of course?

Cheers.



Anonymous said...

Madeitup,

Nice baiting tactic, I think you could do a little better than that, though. I hope you didn't spend the whole morning looking for those quotes...

I've learned a lot from posts like yours. Thanks?

Am I Supposed To Let It By Again?

byiamBYoung said...

Madeitup,

Here's what I take away from those posts:

When you combine
-the fact that fiat currencies always eventually destroy themselves,
-the amazing series of steps our USD has taken toward its inevitable destruction
-the ghastly failure that brought the world the US exorbitant privelidge
-the bewildering proliferation of paper gold beyond any rational correlation with the actual metal, and
-the stockpiling of physical gold by giants worldwide

...it is easy to deduce that the transition is coming very soon. Every time it seems that way and then something delays it, an astute observer doesn't say ,"Well, shit. I guess we got it all wrong." Instead, an astute observer becomes even more convinced of the certainty of the coming transition, because even more evidence has piled up, and the rubber band has stretched even further than before.

Is that what you got from those posts?

Cheers


Unknown said...

Another wonderful post FOFOA. The clarity of your prose continues to impress. :-)

I have been attempting to be sanguine about the continued Wile-E-Coyote-off-a cliff situation that we all call the status quo, and I found it very helpful to see the structure of your thinking with respect to the support structure for "gold" that seems to be keeping the present financial structure hanging in the air. As the monetarists become even more ridiculous (magic coin anyone?), acting like universal gravitation is just a “good idea” rather than a law, it is wonderful to have a place to spend time with deep thinkers well rooted in reality.

The matrix will be switched off and reality will be revealed; this is not a matter of “faith”, but just inevitable fate. I have no interest in hurrying the event myself, and I don’t have any idea in whose interest it would be to do so; certainly there seems to be a collective will to resist gravity a the cost of reason itself if necessary. That said, I have become aware of the domino nature of experience: change one thing, and many other things change; choose one option, and many new paths become open. I patiently await the denouement of the “one thing” that opens the path to Crackwhoregold.

tintin said...

So, regarding ECB support of the current paper gold market:

Physical: as discussed many times, ECB stopped leasing gold many years ago. No involvement in the physical gold market anymore.

Paper gold: does ECB, or have ECB been buying paper gold to support POG?

Anonymous said...

For those interested in interpreting tea leaves re: FG Revolution!, here is some grist for the mill. Per Bloomberg, today, Jan 10:

"JPMorgan Chase & Co. (JPM) sold $35 million of one-year notes linked to the price of gold, the bank’s largest offering tied to the precious metal in at least three years.

The securities, issued Jan. 2, yield three times the gains of the price of gold in London up to 15.6 percent, with no protection against losses and all capital at risk, according to a prospectus filed with the U.S. Securities and Exchange Commission. The metal’s price increased 8.3 percent last year in London.

The bank sold $82.4 million of notes tied to gold in eight offerings last year, according to data compiled by Bloomberg. New York-based JPMorgan issued $27.8 million of one-year securities on Oct. 26, the next-largest deal since 2010, when Bloomberg began collecting comprehensive data on U.S. structured notes."

http://www.bloomberg.com/news/2013-01-10/jpmorgan-sells-largest-structured-note-tied-to-gold-since-2010.html

Sounds like the interest rate is three times the increase in the paper gold price. So, desperate move to sustain fiat through credibility inflation, or is JPM planning to have the last laugh when paper gold declines in value, and it pays an interest rate of zero? The total size of the offerings doesn't really amount to a hill of beans, but intersting the way they try to hook the purchasers of debt, nonetheless.


Woland said...

Sir Tagio; Ari wrote a wonderful comment a long time ago on
such "goldish" investments (and how he and his "crew" would
love to help work over any suckers willing to bite) Can anyone
dredge it up from the now vastly improved archives?

Aaron said...

Here ya go Woland.

Stepping through the looking glass

The Dow Theorist said...

Business insider talks about USD 20,000 gold. However, such price is reached in a gold bug way.

http://www.businessinsider.com/the-path-to-20000-gold-2013-1

Edgar said...

Japanese current account deficit EXPLODES to ¥222.4 billion, far above the expected ¥33.5 billion.

http://www.marketwatch.com/story/japanese-yen-tumbles-after-current-account-data-2013-01-10?link=MW_home_latest_news

Michael dV said...

I just checked out the page Aaoron suggested to Woland. Black Blade was a commentator at the top of the page. It reminded me the FOA once made a comment about Black Blade's Kalifornians swooping up someones energy...or something like that. I have gone through several of the old pages trying to figure out what he meant by that but never did learn the origin. Does anyone know what FOA was referring to?

Aaron said...

Interesting article TDT.

It is unfortunate the author Dan Amoss makes the same mistake all Austrians do. They have this deep seeded desire to return to fixing the price of gold which as you probably know can only end badly.

I also noticed a factual error in his article.

"Holders of gold own the crucial ingredient for a reset. And holders of gold mining stocks own in-ground gold supplies that could form the foundation of a future monetary system."

Holders of gold mining stocks do not own in-ground gold any more than Apple shareholders own a bunch of iPhones. Gold mining shareholders own a share of the business operating the mine, not the gold in the ground.

Pair this with his unfortunate conclusion that we should buy mining shares to carry our wealth into this new gold standard of his and you have a recipe for complete financial ruin.

And Dan finishes with one more short-sighted assumption.

"Any rise in gold prices above cash costs flows straight to the bottom line."

Dan believes that if gold comes back into the monetary system under a gold standard with a ~12x revaluation in USD, the mines will get to keep this windfall all for themselves. Doubtful.

Still, thank you for posting a link to the article. It's interesting to watch people's thoughts on gold evolve (or devolve) as this mess unfolds.

The Dow Theorist said...

Aaron,

I fully agree with you. This is why I nuanced "gold bug" perspective. Their fixation with mining shares and pegging the USD to gold is to behold.

Regards.

Edwardo said...

Hmm. Echoes from a confiscatory past

It's certainly getting interesting out there. Biden's about to make his "recommendations" to the POTUS on "gun control" and Obama's home state, perhaps better referred to as The People's Republic of Illinois, is going into overdrive with their already well oiled big brother act.

In the meantime, we have states like Wyoming attempting to move in a very different direction with respect to gold and silver and gun laws.

It does seem as if the nation may be in the early stages of coming apart.

Aaron said...

Hi Edwardo-

It's interesting your link points to SB3341 yet Rick Santelli over at CNBC is talking about SB3144 and both are from the Illinois Senate.

Two separate bills chasing the same consequence?

Aaron said...
This comment has been removed by the author.
tintin said...

For Costata regarding "capital flight from China":

"Not only are the flows of illicit capital much lower, but they are also less pernicious than the GFI study makes them out to be. The GFI study fails to distinguish the illicit aspect of flows (where tax and regulator avoidance are the main objectives) from outright capital flight (which emerges when there are expectations of crisis and a need to reduce one’s exposure to the country)."

",,,GFI’s statement that “social, political, and economic order is not sustainable in the long run given such massive illicit outflows” seems like hyperbole. Chinese illicit outflows are much smaller than the GFI report indicates and a considerable percentage end up back in China in the form of foreign direct investment."

Source:
http://www.piie.com/blogs/china/?p=2194&utm_source=Sinocism+Newsletter&utm_campaign=6fe79faf0e-The_Sinocism_China_Newsletter_For_01_11_2013&utm_medium=email

My comment: the errors and ommissions in GFI's "chinese capital flight" narrative, is it simply errors and misunderstandings, or intentional with ulterior motives?

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

Could be, Aaron, but, FWIW, my research indicates otherwise.

RJPadavona said...

Aaron mentions watching people's thoughts on gold evolve.

As y'all know, I deal with the public, so I'm in tune with "the man on the street". I have a habit of asking all my newlywed customers "You still married?". It's mainly just a joke. Something I say to break the ice and get my customer to start talking and hopefully he'll also start complaining about his wife. (BTW, for all you ladies out there, that's about 70% of why a man comes to the barber shop in the first place.)

Anyway, I asked a guy who got married a couple weeks ago that same question today. He held up his finger to show me his ring and begrudgingly said "Yeah, I'm just starting on this life sentence". I noticed the ring was pretty thick, but I also noticed the ring was made of silver. And then it dawned on me that almost every fella I've talked to who's gotten married over the last few years has a silver wedding band.

As a child growing up in a very rural area, I always remember my granny telling me "Boy, if you ever go to a big city, make sure and take off your gold rings and watches because they'll cut your fingers and hands off to get 'em". Now, to be fair, granny was mostly full of shit. For example, she never chewed tobacco out in public and she always sent me to the liquor store for her because she was afraid people from church might drive by and see her there. But she did understand value.

So it got me to thinking about how people's thoughts on gold are evolving. Then I remembered going in my uncle's pawn shop a few weeks ago and noticing how little jewelry he had in the showcase. It was the most pitiful selection I've ever seen in his shop. The gold is worth more as "scrap" than as jewelry nowadays.

The mental association of value has already started to change regarding gold whether we realize it or not. When the average young man decides to get married and can't afford a gold wedding band for himself or his wife-to-be, he realizes that today's gold ain't the same as the gold his parents and grandparents knew. They realize that you have to be pretty special to even own any gold in today's world. Or as readers of this blog would say, gold has moved into stronger hands.

On The Other Hand, There's A Golden Band


costata said...

tintin,

Thanks for the link to that critique of the GFI report. I was aware that it was flawed. I posted a comment about it and an extract from the report that IMO discredited their methodology because they exclude analysis of Hong Kong's role in China trade. I don't have an opinion on GFI's agenda.

There is a section of the article that you linked which I want to highlight because it seems to support Victor Shih's estimates of the capital flight (my emphasis). (I'm also aware of reports that the "hot money" flows have moved in both directions over the years.)

Once reexports from Hong Kong are included in the analysis, the hidden flows from exports decline to close to zero, even becoming negative in some years. The revised estimates are dramatically lower. Between 2002 and 2011, we estimate that the average of annual outflows has been of $78 billion—4 times less than the GFI estimate.

And please don't point out to me that I didn't highlight the point that the GFI was out by factor of four. As I said above I'm well aware that the GFI report is deeply flawed.

We do find a worrying trend on the import side (for China), reaching $192 billion in 2011, but it is still much lower than the total of $430 billion found by GFI. On average, the revised amount is still sizeable, around 2.2 percent of GDP, but nowhere near the catastrophic 10 percent of GDP found by the GFI report.

As above no need to point out how ridiculous the "10 percent of GDP" estimate is. However, 2.2 percent of China's GDP is not peanuts either.

One could argue that China also mis-invoices trade that goes through Hong Kong. But even adding a 15 percent rate of trade mis-invoicing on those flows, one still finds outflows over the last decade two-thirds lower than GFI’s $3 trillion estimate.

A mere $1 trillion cycling through a kind of dark pool of capital.

Not only are the flows of illicit capital much lower, but they are also less pernicious than the GFI study makes them out to be. The GFI study fails to distinguish the illicit aspect of flows (where tax and regulator avoidance are the main objectives) from outright capital flight (which emerges when there are expectations of crisis and a need to reduce one’s exposure to the country).

With respect to China, it is mostly the former. Capital round tripping is a major phenomenon in China. Funds leave China, enter Hong Kong or an offshore financial center, and then return to China as foreign direct investment. The motivation for this round tripping is to take advantage of tax benefits, greater legal protections, looser capital controls, and other special incentives offered to foreign investors.

In 2011, Hong Kong, the Cayman Islands, and the Virgin Islands accounted for 71 percent of Chinese foreign direct investment. The outsized role of these locations is a trend that has existed since the 1990s. Given the small size of these economies, the vast majority of these funds are coming from other countries. This includes foreign firms using tax shelters and round tripped Chinese capital.


Even at the levels reported by the Sinocism piece these estimates are not trivial numbers. The observation about imports ("$192 billion in 2011") also suggests that the flows have increased.

Motley Fool said...

Michael dv

Black Blade

:P

Lisa said...

Edwardo & Aaron

It seems to me that the SB 3341 in Illinois is an attempt to regulate businesses such as Cash for Gold. I have not seen that mentioned anywhere, but the following is a portion of the summary of the legislation:


Synopsis As Introduced

Creates the Precious Metal Purchasing Act.

Provides that a person who is in the business of purchasing precious metal shall obtain a proof of ownership, create a record of the sale, and verify the identity of the seller.

Provides that a person who is in the business of purchasing precious metal shall not pay for the precious metal in cash and shall record the method of payment.

Requires the purchaser to keep a record of the sale for one year or, if the purchase amount is over $500, for 5 years.


I unfortunately live in this state, and Wyoming looks like a much better place to be.

Anonymous said...

Sir Tagio,

if you buy this note, you are selling JPM a 1-year put option with strike at about $1930/oz. They (or some of their clients) could use it to hedge some $247.2 million of gold at today's price.

Perhaps one of their clients had purchased such a put from them OTC, and they are now trying to buy it back from their muppets.

Tyrannyofthepresent,

Would they suddenly stop selling gold for INR too? Or would their stockists continue trading for Rupees but suddenly stop selling INR for USD/GBP at any price?

Very good remark. It is the U.S. who will need to enact capital controls in this case, isn't it?

Victor

Wendy said...

RJP, I

Wendy said...

I meant to say, I would love an appointment at your barber-shop :D

tintin said...

Hi costata,
My contention is more about a judgement on China at this stage than dissecting numbers: there are forces or elements in the western political/economic/financial world (not you but US think tanks etc) who are more interested in casting a dark light on China with the intention to induce certain outcomes: as I said before, it is a war between two very different ideas.

When I saw such reports (capital flight, exodus of rich people, flower/colour revolutions etc), I knew instantly that the dark forces are at work. When the US/Western forces were defeated by Chairman Mao's PLA on the battlefields and on other fronts, they pinned their hope of changing China's colour on the 3rd and 4th generation of the PRC. What I am seeing now is concerted effort to "change China" the way they would like China to be.

Trust me costata, I know what I am talking about. And I can tell you that China will only develop the way 90% of the population will want it to, and that is for the CCP to lead China on its way to a more prosperous future, to the “great revival of the Chinese civilisation".

The CCP is the best and only option to lead China. There will be reforms. continued reforms based on China's reality and Chinese thinking. But these reforms will not be along the lines prescribed by the west.

So you see, your numbers probably are very accurate, but that's not where I am shooting at.

What I am saying is that to cast it as "capital flight", as "rich people fleeing China", is totally a thing in the minds of some.


Michael dV said...

MFool
I don't think Wesley Snipes was commenting on the blog in 1999....but who knows...

costata said...

tintin,

So you see, your numbers probably are very accurate, but that's not where I am shooting at.

What I am saying is that to cast it as "capital flight", as "rich people fleeing China", is totally a thing in the minds of some.


Perhaps the term capital flight is too emotive. I think we should talk in terms of capital outflows and inflows. You may be correct in thinking that the Western MSM and/or US think tanks want to set the agenda for China's development. However, pragmatism would dictate that capital flows where it is best rewarded (in various ways).

The numbers coming out of China don't add up. I'm talking about the trade surpluses, imports, exports etcetera. Also it's being noticed in many countries that there is a lot of Chinese money looking for investments in, for example, real estate.

If there are large capital outflows from China it creates the risk of depleting China's FX reserves. That is the main thrust of Victor Shih's analysis. That touches on one of the themes of the discussion here - reduced support for the $IMFS.

Anonymous said...

A friend in London tells me you cannot move for Chinese buying property.
They seem to be buying-up everything.

tintin said...

Costata,
"it's being noticed in many countries that there is a lot of Chinese money looking for investments in, for example, real estate."

This is true.

FOFOA's super organism (SO) is perhaps a good description. The SO that is China will evolve the way best suited for the SO itself. But it can do without the unwanted meddling from the hostile forces mainly representing the $IMF$.

Tyrannyofthepresent said...

Victor,

Continuing USD/INR trade, even at an adjusted exchange rate, would create the possibility for some gold still to flow into the US in exchange for USD. Depending partly on the relative valuation of oil and any govt action on flows of energy commodities to/from the US.

USD holdings and USD linked currencies also exist in a wide variety of countries, which would be variously affected by the gold/oil situation depending on their gold holdings, oil trade balances and other energy arrangements.

There are too many variables for me to resolve this in my mind in any meaningful way.

Jeff said...

RJP,

Just curious; how do you know the rings aren't white gold? You are probably right though. Gold jewelry seems to be moving out of reach for many.

The mass market jewelry stores here haven't had gold for a while, and pawn shops usually have the thinnest, lightest hollow gold pieces. Junk.

Pandora bracelets are popular with some; silver or leather, though you can get a leather one with a 14k clasp. I'd be ashamed to give such a gift to a child.

http://www.pandora.net/en-us/explore/products/bracelets

Next up, leather wedding rings?

RJPadavona said...


Wendy,

I'd love to have you there, but it'd probably have to be for the conversation, because I don't know the first thing about cutting long hair. Believe it or not, I actually do have one female customer, but she carries a wallet and wears a flattop.

Jeff,

Good question. Depending on how well I know them (I don't want them to feel insulted), I usually ask if it's silver. I suppose a few of them could've been white gold, but as you said, gold is moving out of reach for many, especially in poorer areas like where I live.

I guess it's kinda odd to think about it like this, but the poorer rural areas are already understanding the lower standard of living that most Americans are going to have to become accustomed to. #Frontrunning ;)

Tyrannyofthepresent said...

Saudi/oil watchers,

If est. total SA production is indeed around 180 bb as indicated here:

http://www.mnforsustain.org/images/oil_lisbon_laherrere_saudi_cum_prod_fig30.jpg

And if their gold target is around 200 moz and their effective buy ratio around 1000, as indicated you-know-where, meaning that by now they have only around 130 moz,

What is the best way for their perspective to play the last third of the game? Fast or slow?

Tyrannyofthepresent said...

PS re Saudi,

Sorry, this is a better one:

http://www.mnforsustain.org/images/oil_lisbon_laherrere_saudi_cum_prod_discv_fig31.jpg

And it comes from here:

http://www.mnforsustain.org/oil_forecasting_production_using_discovery_laherrere505.htm

It's a game theory question really, inspired by more misallocated time reading ANOTHER. I cannot decide whether a unilateral oil-for-gold bid is a reasonable and acceptable end-game or whether it represents tipping over the table (as we all know the other player really cares about chess and has the only gun in the room).

Jeff said...

Tyrrany,

What do you make of Another's statements that the US military is no threat to the saudis, and that those guns would be used to ensure freegold happens, rather than prevent it?

Motley Fool said...

Michael dv

Seems I misunderstood. I thought you had asked what the comment by FOA was referring too.

TF

LD said...

On the topic of gold jewelry, noted a new trend in Singapore - diamond pendant in glass.
Seems like a trendy way to make jewelry affordable by avoiding the use of yellow and white gold.
It is called Destinee in Glass.
http://www.leehwajewellery.com/



Unknown said...

Power to the Shrimple !! The 99% can be very powerful if they all herd in the same direction. The question remains, are they being consciously herded by the 1% or have they broken through the corral gates?
The complexity? Undeniable. Layers upon layers of mitigating, stabilizing, counterbalancing systems within a monstrous, aging system reaching the end of its timeline.
Gold represents a cleansing simplicity by contrast, but it won't be THAT simple.

Anonymous said...

Woland and Aaron,
Thank you for that link to Ari's article. I hadn't seen it. Good stuff.

Michael H said...

Many young married men I know have tungsten wedding bands.

(In case you're wondering, no they are not gold-plated)

Anonymous said...

Victor,
Thanks for that insight into the purpose or use of the JPM notes. I don't know enough about how these things work and appreciate the info.

Tyrannyofthepresent said...

Jeff,

I found the following.

Rhetorical question:
Do the oil states think our military is there to protect them or protect oil?
Implied answer:
To protect the oil.

Speculation (implies possibility, not certainty):
The world may well see the USA send the military into the Middle East just to ensure that this "deal" is not disturbed.

Question from Kosares (unanswered):
Is Europe able industrially to gear up its military defense industry quickly enough to replace U.S. protection?

Another is naturally more reliable when representing his own perspective, less so when speculating on the Americans' future actions.

Facts:
- 2003 / Death of chess board kicker 1

- 2011 / Death of chess board kicker 2 - destabilisation of our chess player's immediate neighbours requiring intervention.

Incorporating the above, back to our game in 2012/13/14.

Tyrannyofthepresent said...

Jeff,

Sorry: kicker #1 died in 2006, I forgot he managed to survive 3 yrs after "shock & awe" began.

Pat said...

Hmmm
Euro paper gold red numbers for today, last 30 days, last 6 months and past year. Now @ 1241 below FOFOA target of 1246. Yes, didn't get there on Goldhog day, but still, things that make one fo Hmmm.
http://goldprice.org/

Edgar said...

Paper eurogold just fell of cliff. Now at €1243 and going down...

Knotty Pine said...

Re RJP's comment (haven't heard that song in years)

In my job I deal with 2 different types: Youngsters fresh out of college with barely a pot to pee in and older, retired folks of some means.

Generally (as one might expect) the younger ones are much more open to the concept of Freegold than the older group.

What I find interesting is that the young folks are the only ones who seem aware that big changes (troubles?) are likely coming our way. The old codgers believe that if we could just get rid of those damn Democrats/Republicans everything would be fine.

Concepts like "Peak Exhorbitant Privilege" fall on deaf ears with the older group. As the great american philosopher Bocephus once said "Old Habits Like You ($IMFS) Are Haaaaaard to Break".

BTW one of the retired gentleman has been buying phys gold for years but still views it as an investment (in spite of my constant badgering). He will probably sell when Fox Business tells him the gold bull is over.

Woland said...

If there was ever anything to restore confidence in the dollar,
it certainly WOULDN'T look like the SIGNATURE of the proposed
new Treasury Secretary, Jack Lew. (rhymes w. Magoo) Have a look.

byiamBYoung said...

A signature can tell a lot about a person. Lew's signature tells me our new treasury secretary is someone who is recklessly overconfident.

It looks like a string of zeros...Hmmm. Maybe he could sign the bills at the end of the denomination?

Cheers

Biju said...

Euro price of Gold now below last July 2012 - EUR 1,246.62, now at EUR 1242/oz. getting real nasty.

Peter said...

Yes.

This euro, it be strong in gold.

Unknown said...

@ duggo

I see the top 10 richest Americans are worth $346B according to Forbes. The top 10 richest Hong Kongers are worth $131B. Not bad for a city. And almost all of them are primarily real estate developers. The concentration of wealth here is astonishing. Chinese love real estate.

Pat said...

I think there is mounting evidence the probability of paper gold going the way of the dodo is increasing exponetially.

2013- The Year of Fahrenheit 451

Edwardo said...

Thanks, Lisa, for your take on the Senate Bill in Illinois.

FWIW, my wedding band (of none too recent vintage) is platinum. Excuse, I think I hear Treasury calling.

On another note, my but the action in "gold" continues to be rather curious.

Woland said...

Paul Brodsky's latest missive from QBAMCO hit my inbox about
an hour go, entitled "Macro Polo", so it should be up at Zero
Hedge by days end. I'd say it's worth a look, as it explains in a
novel way the inflation/deflation conundrum which so many
new arrivals here have difficulty. If it DOESN"T show up, I'll try
to post a few fragments.

Michael dV said...

Fool and anyone else interested....Fofoa sent me this link explaining the comments that appeared in the early blogs about BlackBlade and his Kalifornians sucking up other peoples energy...had to do with
Enron and the California utilities, Gov Gray and other actors:
http://en.wikipedia.org/wiki/California_electricity_crisis

I'm not sure why the commentator BB got blamed ...maybe he was from California? ...in the energy business?...a pirate?

Tyrannyofthepresent said...

VtC

Not sure if you are around today, but spotted this from you in mid-2012:

"Finally, August 2011 might have been some sort of a panic. Perhaps some of the regularly buying giants were close to losing their temper. Hence the huge pukes. This may give you an idea of a threshold at which people become nervous."

From my Gold:Brent review the last couple of days I had noticed the very high ratio at that time despite the high gold price. Another would have said: "these are bad days in gold". It made me wonder whether perhaps somewhere more gold was bought because the ratio seemed inclement (to an oil seller who did not care about the price). Those are not people who frequently change their approach.

I was unaware of the GLD changes but had also seen at the time the perturbations in lease rates/GOFO (saw them also at the time, have watched it for years). More of a dip, but I knew already then that dips precede spikes / may be attempts to avoid them.

No doubt in the six months that have elapsed, all this has been worked out and discussed, but I wondered whether you had given it any more thought. Thanks.

KnallGold said...

POG: Perfect close!

dragonfly said...

@Michael dV - funny that, when I saw your first post about BB, I went straight to wiki to give you the backdrop. BB (oil geologist) was an esteemed poster in the early days. He really outed himself when he took great pleasure in the plight of CA, before everyone realized how they got Enron'd. He went a bit quiet sometime after that - busy in the oil fields and doing marshal arts, so he said. A very bright guy, but ideologically blind. One or two of us took him to task, either there or across the river at Thaigold's early site, but I don't think the Enron revelations really registered with the fan base over there at USAG. Just an arrogant punk, imho.

dragonfly said...

clarification: really registered vis a vis all of BB's previous posts on the issue.

Michael dV said...

Thanks for that bit of history John Fry.
That comment was a mystery to me and I remember going over pages of blog entries trying to find anything related to BB with no luck.

costata said...

duggo,

I'm hearing the same tales. Something is stirring (and I don't think it is my imagination).

Cheers

costata said...

h/t MacroBusiness blog

http://ftalphaville.ft.com/2013/01/11/1333092/the-great-eurozone-yield-convergence/

Malone points out that “Core Global” yields — being an average of 2, 5 and 10 year paper across Germany, the UK and the US — have jumped from circa 60 basis points to 100bps over the past five months, while “Club Med” has contracted to 25obps.

And this will be an interesting test case for the treatment of future "bailout" recipients:

Aid for the third-smallest euro nation will test policy makers’ commitments to hold the 17-member currency bloc together and avoid more sovereign-debt writedowns after they called Greece’s restructuring a one-off. The workarounds may put most of the burden on bank bondholders and possibly depositors.

Shared losses will be essential to win approval from German lawmakers, even at the cost of sending financial markets “a very bad message,” said Guntram Wolff of Bruegel, a Brussels- based research organization. “It will be impossible to get funding from the Bundestag to bail out depositors of Cypriot banks.”


http://www.bloomberg.com/news/2013-01-10/bondholders-in-crosshairs-as-merkel-travels-to-cyprus.html



Unknown said...

Guns and gold, guns and gold.
Shrimp are going guns and gold.
Just like in
days of old.
Men with guns will take your gold.

Unknown said...

G'Daffy had - oil and gold
Highest grade - so we're told
He was Daffy
wouldn't fold
Men with guns did take his gold

Anonymous said...

@Tyrannyofthepresent - “I can see a price rise, but how - in the short term - does this drive the price of gold in USD to five and a half digits or lead to any period at all without a valid physical price?”

Good question with ‘two’ fundamental parts. Gold’s value relative to paper could easily go to $50K/oz or higher under various hyper-inflation scenarios. So could a dozen eggs but if the gold needed to buy a dozen eggs doesn’t shift there will be no relative gain in value of owning gold over a chicken farm.

Enter the second part. One scenario is that governments the world over will actually ‘encourage’ a rising price of gold in order to soak up all the excess liquidity that still remains from any debt they can’t or won’t default on. Outright default being a more likely scenario for the Euro zone BTW. If you hold physical Euro’s than sure come on in and get your ECB gold, have a nice day. Those holding Euro Bonds on the other hand will need to take it up with those they loaned the Euro’s too in the first place, next customer. The US on the other hand is already primed for hyper-inflation because of the $ reserve currency status and unlike the Euro currency the issuer/debtor are the same (i.e. a single sovereign nation).

Regardless, all Central Banks will use some combination of new currency issuance, interest rates, debt default and releasing CB gold into the private market to help stabilize prices on significantly more important forms of lesser wealth (i.e. food & energy). Higher prices for gold will extend the life of the CB ammunition. Some of us in the private market with physical gold will also sell in order to extinguish debts (i.e. deflationary) and diversify into lesser forms of wealth. Count me as one of those. Even Freegolders need to remember that gold is still part of the physical world even if it is the king of SoV.

This is also why having some fixed long term debt held against a physical asset you can extinguish at any time with the free flowing dollars in a hyper-inflation scenario is a way of ‘locking’ in a relative shift in value (i.e. stuff/oz). For example, paying off a house with 5oz of gold sounds pretty good to me. It’s all part and parcel with a diversification scenario in which you may forgo a 100% of the gain in some very narrow can’t lose scenarios like a Freegold purest would have you believe in order to cover nearly all other scenarios.

Anyway, to the extent that governments are successful at promoting the PoG over other forms of lesser wealth will present yet another opportunity to play an artificial ratio in terms of energy. This is why I’ll trade 1oz of gold for 500oz of Silver all day long; it’s all about the energy. If you don’t have the space then consider Platinum, 25/1 sounds really good to me. In the end energy is what anchors gold to the world of stuff. Play this ratio and you’ll do just fine.

I also think post paper collapse, net producers the world over will have a much higher affinity for ‘all’ forms of SoV like gold than they do now in the paper world, i.e. Freegold. The collapse of the paper world will also poison the well of the easy money camp for at least a generation with the crowning jewel being all the various public/private paper IOU ponzi schemes being run with regards to retirement (i.e. intergenerational wealth transfer). Give me excess energy today for more energy tomorrow? Won’t happen unless a new form of energy comes along IMHO. You’re much better off storing your energy in physical, compact, and easy to carry form like gold. Fresh Eggs, not so good.

In short, at some point, one way or another, the world of energy and the world of paper will reconnect. That you count on. Then again Star Trek port replicators could be just around the corner. So place your bets.

Anonymous said...

Tyranny,

if you take a look at these two charts

Gold/WTI
Gold/Brent

you might think that it is gold/Brent that's being kept stable (at 15) rather than gold/WTI. Makes sense because Brent determines what Europe and Asia have to pay.

I am not sure the spike in gold/Brent in August 2011 is particularly remarkable - of course, if gold is up, then gold/Brent is most likely up, too.

Why would someone buy more (gold) in this case? I'd guess that OPEC can buy only less when gold/dollar is up.

Victor

Edgar said...

Gold/WTI looks fairly stable to me over the decades: http://1.bp.blogspot.com/-vwdWyby1Lvc/TlB0BIfKKfI/AAAAAAAAAJI/nOrUR3U__AM/s1600/Gold%2BOil%2BRatio%2B40%2Byears%2B1970%2Bto%2B2011.png

Tyrannyofthepresent said...

Victor,

I completely agree on Gold/Brent and more or less ignore Gold/WTI (since the two have diverged).

In that same thread someone else was talking about the GOFO/lease rate perturbation in late 2008 - of note another period when the ratio was unfavourable for oil sellers/gold buyers.

My assumption that the buyers of physical gold can easily buy more is based on Another's suggestion that they are exchanging crude for gold via USD at a rate of 1:1000. This is a form of agreed restraint and means that they are only spending a tiny fraction of their income stream. This allows them to ramp it up.

Having seen an orderly rise in both oil and gold USD prices at 0.25 log/yr for 12 years now, which Another/FOA did not expect, I am toying with the idea that this is evidence of an intentional slow revaluation over the last 30 years or so of Saudi's last significant reserves. My question: who benefits from a sudden revaluation? Some have used the "surprise" or "they get more" arguments, but my view is that those doing this are looking for a stable transition. That is assuming that they are CBs, pols and oil guys with limited weaponry. China may be messing up the party.
Their view as I imagine it: there has to be a revaluation, but let us minimise the social damage / lamp-post risk. There will be some arbitraging / shifting in flows anyway due to the repricing, so why not allow them to happen gradually rather than all at once.

Tyrannyofthepresent said...

spaul67,

I liked your comment so much and in so many ways that it cannot be the virtue of the post - it must be confirmation bias.

I am really interested in the slow transition, since so many interests with power would benefit (cui bono).

The idea that the CBs would be willing to use a proportion of their reserves to smooth the transition / limit the damage after a shock is not exactly the consensus view here, to put it mildly. But why could they not equally well do so beforehand, particularly if all that were required were a modest tithe on their reserves to feed oil producers' modest demands? As you say, creditors of all kinds of paper can be made to whistle, as long as the process occurs piecemeal, and whoever has told lies can swing.

Clearly other strategies like getting the plebs to pony up their bracelets and the Indians to buy gold bonds rather than bangles, could reduce the need for this. These strategies generate substantial amounts of metal. It is a manageable shift overall, of the order of only perhaps ten thousand tons over the entire post 1971 period - it just needs to be coordinated and the collateral effects (silver?) managed.

The slow rise that we have seen seems to indicate that this is what they are doing. They could be there in 20 years.

Tyrannyofthepresent said...

Those who have RTB and RRTB in its entirety,

Can you point me towards the best and fullest discussion of slow (like 30 yrs) vs fast transition? Or is that discussion also a future event? Thank you.

dragonfly said...

Lead on ToP, clear the brush, Donner Pass and Hotel California dead ahead. It's refreshing to consider some broader views on this transition thing. Could it be there's more $IMFS/BIS/China/.. cooperation than we were/are led to think?

BTW, when the Fed throws that ball-of-twine here in the states, who will be there to catch it? Will Jack 'n Jill be stuck in the bleachers, watching the government field every position on both teams? FOA told us the story about future home-sellers waiting years to make their sale, and raising their price along the way. Does that still make sense? Riddles to the left of us, jokers to the right...

Tyrannyofthepresent said...

John Fry,

Thanks. Not so much leading, just trying to follow. Specifically trying to reconcile Another's wonderful insights + the superstructure built on them with the ensuing 13 years of facts. Delayed Parousia -> new eschatology? I will be very surprised if the minds here / tangential to here have never addressed this important issue - I have just been unable to find the debate via Google or my searches, despite trying quite hard.

Or as I said, if you have it in the future I would like to listen.

Biju said...

One question to any Europeans here

- if paper Euro price of Gold crashes, will Europeans buy or sell physical Gold ?
- any idea of the likely composition of Gold in possession of Europeans - paper or physical. Do Europeans prefer physical ?

I know the mindset of Indians. If price crashes in local currency they buy more and buy less when it rises fast.

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

Here's a link to the QBAMCO article that Woland referenced earlier, found at Jesse's Cafe Americaine:

http://www.gata.org/files/QBAMCO-MacroPolo-01-2013.pdf

Here's a great little nugget in it:
"Exhibit A is the noticeable loss of pretense among global monetary policy makers and market observers that unprecedented bank reserve creation (QE) is directly stimulative, and yet it remains in full force. The rationalization sold to politicians and the public seems to be that de-levering banks will ultimately lead to a new round of credit expansion, which in turn would create nominal economic expansion. This idea is not without merit. It is reasonable to expect nominal output growth stemming from asset and price inflation. But is this sufficient?
No. Lost in the equation is wealth. Not wealth as in “wealthy” but wealth as in purchasing power and resources. The combination of abstract money, political economics (the art of back-testing juicy rationalizations), and emerging resource-rich economies with the temerity to be aspirational has created a global economic environment in which measuring wealth is quite a challenge. The fundamental question facing anyone with excess purchasing power today is: how am I supposed to store wealth or increase it if I can’t define it?"

Knotty Pine said...

Hi Biju,

Do you see any truth to this article? Are traditional gold purchases (weddings, celebrations, etc.) a separate issue to saving in gold? If gold price in rupee rises will Indians turn to silver as a savings vehicle?

http://www.mineweb.com/mineweb/content/en/mineweb-silver-news?oid=169649&sn=Detail

Motley Fool said...

Tyranny

I do not know of an extensive post dealing with that topic, perhaps because it is insane.

I know there are some shorter references to it, but could not direct you there.

Do you seriously consider the muddle through option as viable? US debts continuing at their current exponential growth rate and nothing happening? Perhaps the US paying off their debts with the help of gradual inflation combined with growth over a 30 year period? Seriously?

TF

Unknown said...

Thanks MF :-) You put it so much better than I would have.

Gabriel said...

probably obvious, but I just came upon the realization that 8100 metric tonnes of gold in US possession, would quench the overall US debt of about 14 Trillions, with a POG of 55K$.
interesting...

Tyrannyofthepresent said...

Motley Fool,

I will take your word for it that no discussion has taken place.

Clearly it looked in 97 and 98 as if "this year has to be the year" - and also in subsequent years. Why was it not? None of the prognosticators were/are stupid or indulging in empty speculation.

Something has changed and I want to know what it is.

Woland said...

Hello Tyranny; (I hope you don't mind the nickname)

You might go to a little passage entitled Homeless Dollars,
by miner49er, which you can find at USA Gold Hall of Fame,
5/6/03. Personally, I do not think that the slow "strategy" is
insane, but rather that at SOME point, an event, whether it be
endogenous to the system or an external shock, will render ANY
strategy unable to function further. When the tide is coming in,
even King Canute is helpless. (Fofoa has a post, Homeless
Dollars, containing the passage)

milamber said...

TotP,

This was my attempt at discussing why the "system" can last longer than seems possible.It continues through the comments over the Jeff & Aaron debriefs.

Milamber Comment

I would be interested in any thoughts you might have concerning same.

Thanks,

Milamber

Edwardo said...

Thanks, Sir Tagio, for providing the link to QBAMCO's excellent epistle. I would strongly suggest to the authors, were I in a position to do so, that the following idea...

"An honest public conversation would acknowledge the current situation and likely lead to a consensus to default implicitly through inflation."

would swiftly lead to conditions that would make it impossible to carry out further implicit inflation aka a soft default. Once something has been named and admitted to in such a way the cat is really out the bag and out of one's control.
In any case, I'm biased to think that matters are already beyond our control though the evidence of such a loss of control has yet to clearly manifest.

Motley Fool said...

Tyranny

We have discussed why it has lasted this long extensively. And. Yes, making it happen as slowly as possible is preferable. However. There are limits to how long one can do that.

External support for the dollar seems to have now ended. This was the key in stalling the collapse. No likely candidates exist to take up the slack, excepting the Fed, who have stepped up to the plate, yet that is no solution, as it is an internal support.

ANOTHER and FOA did not foresee Chinese support, in that regard they failed in their predictions. Yet, we can be said to be where we were at the time of their ruminations, with Chinese support having been withdrawn.

Do you see another nation in the position to step up and also willing to do so, to carry the dollar for another few years?

If not then muddle through is done, and all that is left is hastened steps towards a cliff.

TF

byiamBYoung said...

MF,

THis is slightly OT, but related to your comment,

"ANOTHER and FOA did not foresee Chinese support, in that regard they failed in their predictions. Yet, we can be said to be where we were at the time of their ruminations, with Chinese support having been withdrawn.

It appears that China has fortified certain major infrastructure against nuclear and chemical weapons attack.

http://freebeacon.com/war-preparation-indicator/

This, plus the rapid accumulation of physical bullion of late feel a lot like hastened steps toward something...maybe a cliff.

Cheers

Anonymous said...

@Tyrannyofthepresent

I agree with you that it’s not in best interest of those printing or holding dollar reserves to have those reserves suddenly have zero purchasing power. Likewise the security arrangement that the USA has with Saudi Arabia is very important for ‘both’ nations and thus is the foundation of the world’s current paper ponzi paradigm.

The black swan remains in my mind though; a serious war in the Middle East in which the oil flows are almost completely stopped for a year or two. This scenario would result in an immediate reduction of about 30% of the worlds oil supply coupled with the US dollar being worthless to buy oil outside of that region and thus much of anything else because energy is the foundation of pretty much anything of value. To say all hell would break loose in the world’s current leveraged paper ponzi re-hypothecate world we live in today is an understatement.

I hope that you are right and we make a nice leisurely thirty year de-leveraging stroll where we can put the baby boomers ponzi scheme out to pasture and make some gradual transition to a Freegold world (i.e. Pre 1920 world monetary paradigm), but as one that likes to cover my bets I can’t take my eye off of the serious possibility of the black swan above.

At present the world seems hell bent on packing even more water behind a cracking dam. As such the size of the black swan keeps getting progressively smaller every year. So as a result the level of the disruption required to bring it all down keeps getting less and less.

Reminds me of the dam burst scene from the movie Force 10 from Navarone.

http://movieclips.com/vzTEN-force-10-from-navarone-movie-the-dam-bursts/

Looks like a couple of Freegolders on the hillside :)

byiamBYoung said...

Tyranny,

"Clearly it looked in 97 and 98 as if "this year has to be the year" - and also in subsequent years. Why was it not?"

The euro came into existence on 1 January 1999, and didn't get officially adopted by many of the EU countries until 2002. That's probably the big reason why 1997 or 1998 were too early...there was no viable alternative currency waiting in the wings.

byiamBYoung said...

NIce clip, Spaul67

0:51 "I told you ...It's only a matter of waiting..."

:)

Jeff said...

A slow(er) transition, of the type where status quo is maintained as long as possible, was discussed:

[FOFOA]Yes, this is possible. It would require a cost/benefit analysis at the highest level of international central banking as to how much physical gold to "spend" in order to buy a little more time. And we are talking about supplying physical during a run, not certificates, so this would be a new and different undertaking. And as I have speculated in previous posts, there comes a time when the cost of "more time" rises exponentially.

And by Randy Strauss:

"[Randy Strauss]The central banks of the world, throughout their long history, have more or less developed the requisite infrastructure and ample experience in the fine art and science of gold storage and allocation transfer. Therefore, not only is an alternative to the dollar available for the store of value role, it is readily available with no significant timeline to accommodate the practice. To be sure, many central banks have already in place the mark-to-market accounting structure to accommodate (and benefit from) the significant upward revaluation of gold reserves as would be expected to occur through the dollar-to-gold transition.

Various policy signs over the past several years had indeed pointed toward 2010 to be the watershed point in the international monetary transition, but the depth of the current commercial banking crisis likely argued strongly for a delay under the thought that calmer waters would facilitate a better transition. As such, the existing infrastructure and policy is largely in place at the present time, so a timeline for this store of value transition can be every bit as short as that for invoicing — essentially, no time needed for flipping the switch.

But in light of the current crisis and some of the policy efforts underway to restore calm to the commercial markets, it looks to me that the new timeline for significant transitions is mid-2013 consistent with the current policy talks driving the permanent European Stability Mechanism to that timeframe, but with that said, it could be set into motion at any given moment between now and then, and between your breakfast one day and breakfast the next.

Edwardo said...

Spaul67 wrote,

...it’s not in best interest of those printing or holding dollar reserves to have those reserves suddenly have zero purchasing power."

It's also not in the interest of China to have the U.S. around messing up their big plans in mother Africa.

It looks to me like the ante is being upped and therefore the urgency to pull the plug on the present system which benefits the U.S. more than anyone else.

Ore em' said...

I mentioned Galmarley in a thread a few weeks back, they are the Rothschild holding company that owns BullionVault.

My original comment related to their name, which is a portmanteau of Galbraith, del Mar and and Smitley who wrote about popular financial delusion. Del Mar was monetary historian, and is quoted in this excellent article on monetary history, written by Paul Tustain.

http://www.galmarley.com/FAQs_pages/monetary_history_faqs.htm

The reason I post this is that there seems to be a large overlap in what he is saying and what FOA said before him. He also says a lot of things that could just as easily be written by FOFOA. So does anyone have any thoughts on him and bullionvault?

Naughty Slumdog said...

Motley Fool
“The reality is that the most people have few votes, while some few have vast amounts of votes.
The reality is that most people do not have much say. They are of small means.
You may call this morally reprehensible, but it is also true.”

Damned true. If you have time and interest, have a reading at one very good book on the topic: The Dictator’s Handbook. My view on public affair get clear after that one … and MONETARY POLICY is definitely a PUBLIC affair, while WEALTH is a PRIVATE affair ….

Some relevant links
http://www.amazon.com/dp/1610391845
http://www.guardian.co.uk/books/2012/aug/19/dictators-handbook-de-mesquita-review
http://online.wsj.com/article/SB10001424053111903703604576584933251186542.html

Naughty Slumdog said...

Call me an ignorant, but the gold market changes are set almost entirely by traders/brokers/speculators/investors. Such guys are trying to make a buck out of gold price FLUCTUATION within a finite period of time. They do not regard gold as a saving/money/store of value, but rather a commodity worth investing at a particular point in time and selling it at a profit at right time. My perception is that people who regards gold as a reserve/saving/money/store of value do not act so swift to change the price in the market, or are too small to influence the market.

Save all discussions about Freegold and IMF$, that what I got:
Any bozo can tell you that in a competition there are very few winners, but not bozo asks himself why the stock exchange is different, as there almost EVERIBODY win!
Even a not very smart guy can tell you that there is some trouble in the GLOBAL financial system, so you do not have to be particularly clever to keep a part of your savings safely OUTSIDE the financial system … And the most easy safe and comfortable way to protect part of your savings is to keep some physical gold.

Anonymous said...

@ Ore em
As Paul Tustain owns 44% of BV are you saying Rothschild owns the other 56%?

@ Naughty Slumdog
How much "physical in your hand" do you consider is enough to protect your savings?
Is it:- An amount to live for 10 years as you do now ? Just as an example.

What do others consider as the target amount(weight) of "physical" to own as a continuation of their present life-style and for how long.
I would consider 500 oz as a bare minimum for 10 years.

Naughty Slumdog said...

@duggo

it depends how much one can save. If you have savings worth 10 years of consumption you are a lucky guy!

What I had in mind is a percentage of your savings, like having 50% in phisical gold, 20% in blue chips and 30% in bank deposits. Stuff like this, you know ... even if you do not believe FG, it is still a balanced and prudent portfolio.

ampmfix said...

duggo,

I am satisfyied with gold at 5000€/oz (minimum maintained), 1oz per month for the next 50 years, so 600oz. Scale up or down accordingly to final Freegold price and long term inflation.

byiamBYoung said...

duggo/ampmfix,

I can only hope that you are wildly overestimating.

Cheers

Motley Fool said...

byiamBYoung

I don't think they are.

I suspect the answer will always be, more than I presently have.

Given different phases in life, different income potentials, different countries of residence and related opportunities, I think the answer will wildly differ, nevermind different purposes.

I take those to be answers of those close to retirement, who have the blessing and foresight to be able to purchase gold at this juncture. It is the only way such answers make sense to me.

TF

Anonymous said...

We can discuss Gold and finance until we are blue in the face. The intellectual dissecting can be interesting if not too long-winded. The penchant for intricately turned phrase with complicated wording can though be tedious (see, I almost did it myself).
Freegold seems to be gathering momentum outside this blog and the "reset" is a juicy thought but it hasn't happened yet and may not for a long time. Better to operate in the "now" rather than the "might be".
My thought above is based on practicality. What are Gold savers wanting to achieve? Have they a plan? Is it for retirement? Is it for a hedge? Is it for some event or maybe to buy a property? Or is it the lottery ticket for the "reset".
For what it's worth I look on the regular saving of Gold as putting a month's present day earnings into my reserve. If you get into the habit it's surprising how the months can build without effecting your day to day living. If you are fortunate you can gain a month every two months but it doesn't matter if it's every six months that you get that reserve month under your belt as long as you have a system.

Knotty Pine said...

My perspective is very simple. I tend to think in the present and currently the only sensible way to save IMHO is physical gold. My "strategy" is simply to buy as much PG as I can afford now with excess production. I rejected the idea of a 401K/IRA as a savings vehicle long ago. Saving in USD (other than what I need short term) is senseless.

Tyrannyofthepresent said...

Motley Fool, Woland, Milamber, Byiam and spaul67,

Many thanks for all your posts and sorry for slowness in replying, too much time misallocation going on. I will be reading through them all. It really is very helpful to me in trying to form my own integrated view (even if it is different from some of yours). Sorry also if I missed any!

Tyrannyofthepresent said...

Woland,

Many thanks for the reference to the Homeless Dollars post - a very good read and it all seemed plausible up to the point where he says: "At some point critical mass will be reached, and the dollar contract markets for gold will no longer be able to contain its price as market perception on a large enough scale discounts paper parity with the real metal accordingly." There's the rub. What "point" and how to measure it? That is the point where a few beautiful friendships have already ended on this blog. Could paper gold go on longer than we think? And how can we know the dynamics - via the physical/paper gold traders who post in silverbug land? Difficult one.

Milamber,

I have re-read the whole long and complex dialogue that you had with people here in those two debriefing posts. It seems to me to boil down to whether or not the US can / would benefit from preventing hyperinflation by force. Perhaps even to whether or not a US hyperinflation represents the failure of US society and global power.

I would tremble to make any comment on either of those points on this blog, since it contains a huge amount of very intelligent comment on that subject, some of which I have not read (at least in the last year or two, and memory like a sieve). I would agree, however, that a US hyperinflation starting from its current influential status would be at least unprecedented.

Your premise that the US would do everything in its power to prevent a HI and thus also to prevent Freegold and keep its functioning printing press and Ex. Priv does seem to make sense. The question is: just how much is in its power? I would imagine having major oceans to both East and West could well prove helpful. Give me a year or two to think that one through! Oil autonomy? A long way off. Invasion of Saudi Arabia, home of Mecca? Horrible. Surely even Freegold is better than that.

But I will say no more on that subject until I have read a lot more about it, both on here and elsewhere.

Nevertheless, I keep thinking that the Roman denarius was effectively worthless in metal terms for how long before the empire properly collapsed? 180 years? One way or another they did maintain that Ex. Priv. by force, having effectively hyperinflated, while others went onto something like Freegold. If I remember correctly.

Anyway, thanks for the pointers: that was really good stuff.

Tyrannyofthepresent said...

spaul67,

I agree on both the desirability of the slow plan and the likelihood of a black swan. It is difficult to work through the detailed scenarios (I did try but wrote too much nonsense and gave up). Suffice it to say that some geopolitical and high energy prices *could* shake things up enough for the USG to hang on to their functioning printing press, although perhaps without the ex. priv. Who knows, perhaps they would go for that? But I am going to read the main HI material on here before saying any more, because better minds than mine have already engaged with it.

Tyrannyofthepresent said...

byiam,

Thanks for that, I am a bit more up to date with the first 10 years of non-Freegold; working now on the next 10 (?)

ampmfix said...

BY,

I think one cannot overestimate enough future unknown needs, like illness for example.

I need very little myself, mostly the happiness of my family, and I am trying to teach them not to need too much material stuff! (not being too successful yet though...).

Tyrannyofthepresent said...

Motley Fool,

Summarising your two responses: 1) the first 10-12 years have been extensively discussed (my summary: it was China). I agree. 2) postulating another 20 years is crazy.

As per my other responses, I am off home territory and don't want to start bloviating here (thanks Costata), although may do so on my own blog.

But here are some of the headings I will start looking at - NB I am not making assertions!

- What are USG's priorities? e.g.:

Individual decision-makers:
- Avoiding societal meltdown (lamp-post risk)
- Maintaining personal wealth etc. (Maslow's hierarchy)

Corporate:
- Maintaining military/geopolitical status
- Maintaining governmental / control structures
- Maintaining ex. priv.
- Maintaining functioning printing press
- Maintaining national standard of living
...

What resources are available?
- Intelligence (I am assuming they know everything we know and more and probably everything just about everyone knows)
- International standing +/- cooperation with Europeans, with Islamist producers (since the latest shift in ME policy)
- Military capability (+/- scalable down to loss of ex. priv. conditions)
- Methods of soft social control domestically + globally e.g. opinion control, power over the Internet etc.
- UST gold and domestic gold both above and below ground (regardless of who holds it)
- Potential to destabilise other power centres if these are threatening

My questions will be: 1) would they want to prevent HI/Freegold and then 2) can they achieve it?

I know you have all made up your minds, but I haven't, so will be reading a lot more. Thanks for your help thus far!

Tyrannyofthepresent said...

PS Motley Fool and others,

If you can think of any other resources that the USG may have and may be relevant to attempts to maintain hegemony, I would of course be grateful. Since posting the above already springing to mind:
- control of domestic legislation / legislature
- control of domestic resource allocation via financial regulation / taxation

It also occurs to me that if it really does become a question about the USG's capacity to maintain its global status, there are probably hundreds of other places where it is being discussed, so I will be hunting and again would be grateful for tips/nudges. These questions are really independent of what happens to gold, although obviously relevant to it. Thanks.

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

UK bank sits on a pot of €235m in Irish gold


BANKRUPT Ireland owns six tonnes of gold, the bulk of which is held at the Bank of England, it has been revealed.

The Central Bank of Ireland said the value of its gold holdings was €235m last time it checked. This represents just over 1 per cent of its total investments.

A spokeswoman said the Central Bank was a party to the Washington Agreement on Gold, which recognised gold as an important element of global monetary reserves.

She said the Central Bank had not entered into any lease arrangements regarding any of its gold but would not provide specific details of its storage arrangements with the Bank of England.

"A spokeswoman said" and "it has been revealed" doesn't lend much in the way of credibility. Anyway, I thought I'd share.

Ore em' said...

@duggo, you wrote:

"As Paul Tustain owns 44% of BV are you saying Rothschild owns the other 56%?"

I am just going by what wikipedia said, which linked to this article on their investment:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7842235/Lord-Rothschild-fund-joins-World-Gold-Council-to-put-12.5m-into-BullionVault.html

Victory said...

Milamber, &Y,

thank you

-v

Woland said...

Hey Aaron;

I wouldn't touch that headline with a 10 ft shillelagh!! Talk about
mixed metaphors. I just hope the Dork of Cork doesn't see it! If
he does - watch out.

Aaron said...

HA! Nice one Woland. I didn't even notice until I re-read it just now. Too funny.

Lisa said...

Interesting charts from Nick Laird of Australia, in a KWN article showing potential amounts of gold currently held by China.

Laird describes the 4th chart as depicting the "view over 80 years showing the parabolic nature of China accumulating gold, especially since the year 2000."

While the charts are somewhat conjecture, they fit nicely with FOFOAs explanation of why China supported the UST market from 2000 to 2010, and show China accumulating much larger quantities of gold than officially reported.

byiamBYoung said...

Tyranny,

"Nevertheless, I keep thinking that the Roman denarius was effectively worthless in metal terms for how long before the empire properly collapsed? 180 years?"

I'll admit right up front that my knowledge of history of the Roman empire is extremely limited. But I couldn't help thinking that had the world during that time been the digital, viral fishbowl that we have today, that time to collapse would have likely been abbreviated by quite a bit...maybe 179 years? :)

Cheers

Tyrannyofthepresent said...

Gold market watchers,

Is there any action at all that would simultaneously cause:
- reduced paper gold mkt size
- increased physical availability
- reduced price
... without weakening the link?

Tyrannyofthepresent said...

Byiam,

If it was stealth/deception, much shorter. But it was pure force - death penalty for price rises / unauthorised money use / even job. changes (to avoid unprofitable jobs). Visit Pompeii - surprisingly modern. Fast food everywhere.

byiamBYoung said...

Tyranny,

Sounds like I have some reading to do!

I'm not sure even the Obama administration could get away with death penalties for job changes ;)

Maybe this time is really different? ;)

byiamBYoung said...

Tyranny,

BTW, I visited Pompeii. You are correct, it was, to use your words, surprisingly modern.

That was one hell of a black swan there in Pompeii, though, eh?

Cheers

Unknown said...

TOFP,
- UST gold and domestic gold both above and below ground (regardless of who holds [claims upon] it).
(my brakets)

The BIS will hold claim upon it, through the balance sheet debt of its proxy, the FED. No matter. Another thought "a war will not come of it" and so that was thought well through.

Perhaps Another felt that the FED, and all other central banks under the BIS SYSTEM will eventually come to an agreement here, about the role of the Treasury's gold uder the new system.

This book keeeping's a bitch though. Before we could just print up the necessary journal entry.

byiamBYoung said...

Tyranny,

I would put coordinated misinformation on your list of tools the US gov't has at their disposal. As an example, just look at the Kabuki dance at the Fed about stopping the ongoing asset purchases. Not going to happen, but they are sure putting that "possibility" on the table in very public fashion. And our embarrassing US media parrot the meme faithfully.

Speaking of swans, I'm reminded of an analogy that gave me a clear vision of our precarious state. I'll paraphrase it, because I can't remember where I read it.

Imagine stacking six blocks on top of each other. Relatively simple.

Now imagine stacking 60 blocks. Still just as possible, but a fair bit trickier.

What about 600? Again, still quite possible, but the risks of a catastrophic collapse begin to loom very large. The slightest miscalculation could bring the entire structure crashing down.

6000? 60,000?

It is possible that the US can keep the game going for quite a while, but the players controlling the levers will need to be ever more precise and we no longer need a big fat black swan to trigger the collapse (HT spaul67). A teeny black cornish swan could be all it takes.

Is there a list anywhere of the possible black cornish swan events that could act as the trigger? If not, someone should compile one.

Maybe we could call it the "Waterfoul effect" (smile)

Cheers

byiamBYoung said...

Uhm, Waterfowl.

Tyrannyofthepresent said...

Wil and ByiamBYoung,

Thank you!

michael3c2000 said...

Gold has been undervalued for decades. Competitive currency devaluation is global and ongoing debasement.
The existence of QE, Operation Twist, repos and other measures is icing on a fully decorated cake.
US unfunded liabilities and other off books and off budget debt also is underestimated. Future transfer payments, pensions, health care and entitlements spending puts US debt over 200 trillion, not counting uncleared worthless OTC derivatives that have been monetized and marked up as valuable collateral, Obamacare costs or M3 which was once part of public reports.

michael3c2000 said...

Some of you noted your increasing awareness of China's preparations for this or that or something. Besides hedging their dollar exposure, which has been physical gold, mines, resources and other global investments, and planning for large scale development and trade in Asia and Europe (and BRICS).
What is this hinting at, or just something distinctly cautious China style:
http://www.shtfplan.com/headline-news/they-are-getting-ready-no-obvious-reason-for-why-chinese-rice-stockpiles-jumped-400-massive-boosts-in-dry-milk-iron-ore-precious-metals-imports_01092013

michael3c2000 said...

http://www.usagold.com/cpmforum/2013/01/12/222374/
This bank hasn't been very receptive to the "g" word in a long time.
The PR(public relations) use of announcing to the press- $2000, which they're aware is a (distracting) emotional trigger and a purely irrelevant fundamental price objective, is sensationalism and a grudging admission that gold is, or was, or will be when they say it will.

costata said...

Hi Lisa,

Thanks for the link you posted up thread to those charts from Nick Laird. They are very interesting. Good find. I think everyone should take a look at them.

I want to draw attention to the chart titled "Chinese Gold Production Plus Net Imports". Let's assume for the sake of argument that Laird's data is correct. Take note that between 1980 and 2000 China had no gold imports. They apparently relied on increasing local production.

From 2001 onwards gold imports rise every year with the only exception being 2003 when they appear to have exported gold. Cumulative gold imports then describe an increasingly steeper rising curve to the present.

At the end of 2001 the USA allowed China into the WTO "club" despite the fact that China wasn't in compliance with WTO rules for membership. It was quietly announced a few days after 9/11 that China's WTO ascension would proceed and by December they were in.

Up to 2001 China had only held around $50 billion in US dollar denominated debt (of all types) in its reserves. This was not explained by suddenly increasing trade surpluses. China had been running a trade surplus with the USA since (if memory serves me) 1986 and the holdings had been around $50 billion for many years.

From 2001 China's purchases of USG debt (and agency debt) accelerated dramatically each year until it began topping out around the middle of 2009 (if memory serves me). Hence the argument that China provided the central pillar of support for the $IMFS that extended its timeline by a decade as many here assert.

So I'm wondering if 2001 marks the first year of China hedging its exposure to the USG paper in its reserves through gold imports. There's no net benefit in using local production as a "hedge". They were going to get that gold regardless.

To offset future losses on their USD denominated reserves they needed gold imports from the rest of the world (ROW). In effect those imports represent a hand off of China's future USD losses to the ROW distributed among countries according to how much under-priced gold they exported. (And BTW Yes MF as an Aussie I'm pissed off about how much of that tab we picked up as I imagine you as a South African.)

Now I'm left with a puzzling issue from looking at the chart. What happened in 2003? Why did China export some gold? Does anyone have any suggestions on possible correlated events that could individually or cumulatively indicate causation?

PS. I just remembered that China made its last report on its official sector gold reserves to the IMF in 2003 and then stunned observers by announcing a 400+ m/t increase in 2009 (if memory serves me). I wonder if there is a link here as well. I'm wondering if that announcement was, in reality, the return of some reserves lent, swapped or used in some other manner in 2003?

Tyrannyofthepresent said...

Motley Fool and others helping me with the "slow burn" idea...

Via the hyperinflation/deflation post, obediently to the debtors/vs savers post, where I found this.

"Today we are living the end of the longest stretch of time in which "the easy money camp" has been in power both politically and monetarily. For a century now they have been easing our money more and more. And for those of you obsessed with the "emerging" NWO and One-World Currency... surprise! You've been living with it for 66 years now. ... This latest push for central control and massive deficit spending by the "easy money camp" is simply the blow-off phase right before the long awaited collapse."

Where it strikes me that this century of easy money more or less coincides with democracy. And that the "let's all live within our means" party in Southern Europe coincides with a democratic deficit.

So, temporarily accepting the premise that the democracy/easy money link is valid, I am off to look for material on why democracy now has to come to an end. I did have a look at gold/democracy failure on my blog back in November - positing a longer time scale - but it was not exactly a technical analysis, as I know that some of you have seen.

So off we go.

Tyrannyofthepresent said...

PS on democracy,

My post from Nov 14 is here

So what I am looking for is something different from that.

As with all my output, it comes with a speculative bloviation warning.

MatrixSentry said...

Tyranny,

Why are you looking so hard to reason a slow burn in the dollar? It seems to me it is right out there in front for all of us to see. Hasn't the USD lost 97 cents of purchasing power in the last 100 years? That's pretty damn slow IMO.

It is also of note that the devaluation over time has not been linear, but exponential. It is true that mathematically we never reach zero value, but instead we approach it asymptotically. With this view we could "slow burn" for eternity. However, the value of the dollar will not be determined by an exponential equation in the end. Instead it will be determined by human beings who find utility in its use. Nature is real clear about the ultimate outcomes associated with exponential processes.

You won't find much traction around here trying to pin down the time dimension. It is sufficient for us Brainwashed Time Mis-allocators to know that we are closer to the end than the beginning and we are accelerating to that end.

What does that mean to you? I have no idea, it is a subjective call. What it means to me is that I expect to see the dollar redefined within the time that remains in my productive life. For me that is 15 years. The wealth I hold in reserve will have to be called upon at that time and sustain me until the end of my life. Can I point to a mathematical equation that says the dollar as we know it is done within 15 years? Nope. But I can use my eyes to see and track the changes occurring. I can then balance what I am seeing with my accumulated life experiences and education.

I look at this Freegold thing from many different angles. One of those angles that some find appealing, and quite frankly I cannot quibble with, is to bypass the question of what can preserve wealth, and instead identify what cannot. Process of elimination. During the "slow burn" many things have been able to store wealth. So many things in fact that even non-things like debt have done a satisfactory job. Far easier to find something that works in that environment as opposed to something that does not. Times have changed.

Most of the things, and all of the non-things, that have worked in the past don't work so well anymore. So while I am waiting for the certain redefinition of the USD, through the process of elimination, I have determined that physical gold has the best shot of preserving my stored productivity because it is the last "thing" standing. That is enough in order for me to act to safeguard my reserve.

I do not trade for growth or yield. I think traders find this blog to be quite frustrating. I can see why. Physical gold does not lend itself to trading, certainly not in the modern era with flash trading. It fulfills its best purpose by staying very still. A trader is concerned with time on a short scale because the value of his trade is so dependent on it. A trader cannot ever really "get" Freegold because to do so will transform him into a saver instead of an investor, especially when he understands how little amount of gold is needed. A trader would be far better suited over a Turd's site and paper would be the preferred instrument.





Motley Fool said...

costata

Yep, I'm pissed off too.

Unfortunately those figures of Laird are not accurate in one aspect at least that I know of, gold imports via Hong Kong, as Bron has demonstrated at his blog.

Nevertheless I do agree that China holds a substantial position in physical, perhaps in the area of 4000 tonnes, which amusingly is the figure Rickards thinks is sufficient for China to let the chips fall where they will, based on the simple reasoning that China's economy is about half the size of the US and hence they would want half as much gold, an argument that could easily be disputed.

Interesting conjecture on 2003, I would also be curious to hear other views.

TF

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

Tyranny

You may find this relevant to your latest inquiry : How to End the Income Tax and the IRS .

I am dubious of your proposed linkage "democracy/easy money". So perhaps the above is of some use to you.

Don't forget that Freegold is not easy or hard money, it is something else, a blend if you will.

TF

Ps. Missed a parenthesis. >.>

Motley Fool said...

costata

It seems my initial glance at those charts were too cursory. Laird seems to have taken into account at least some of the cyclical gold movement between China and Hong Kong.

I know that their not so quite official but still public goal is to own more gold than the US. If we take these figures at face value as you suggest they seem to be well on their way.

@michael3c2000

Thanks for that link. Very interesting reading.

TF

Woland said...

Good morning boys and girls;

I think we're getting close to a "tipping point". How would I know?
Well, it's not unusual for comedians to make fun of public figures.
Usually their targets are politicians, but any well known figure has
always been fair game. But now we have something new - a very
public figure (Paul Krugman) chastising a comedian (John Stewart)
because HE (Stewart) made fun of Krugman's support of ..............
THE PLATINUM COIN! But seriously folks....... can ya break a trillion
for me?? (hey FoNoah, wonder what Gerry coulda done with this?)

(sorry, had to get that out of my system)

Knotty Pine said...

Costata
Do you think the opening of the SGE (Shanghai Gold Exchange) in late 2002 played a role? The priority early on being high volume (short term loss/long term gain). BTW thanks for your reply last thread re hazards to sudden FG revaluation in India.

http://www.lbma.org.uk/assets/4b_shen_lbmaconf2003.pdf

PS pg79-81

Unknown said...

Clearly, for China to hedge their USD (reserve debt accumulation) exposure, gold is a natural. Their history (Khan era) assures it. 2003 could be a reporting lag, it's not that big of a deal over a decade, the trend is clear.

And yes, I love this:
'for those of you obsessed with the "emerging" NWO and One-World Currency... surprise! You've been living with it for 66 years now.'

But do not mistake that the intention of Mundell, in the Amero, is not some NWO conspiracy currency. That, like the hyperinflation everyone has been "waiting for" has already occurred. There has never been a currency unit hyperinflation like the present race to debase, and the after effects of price shock will be staggering when all paper currencies collapse RELATIVE TO GOLD.

What the Amero is actually designed to be (IMHO) is a last ditch effort to pool the West's gold into a single competing reserve to give credibility to the developed nations exchange rates as compared to the BRICs.

Consolidation and balance was always the overarching theme. When the music stops there must be a balance of global wealth such that the currency wars do not actually operate as traditional wars where one camp (easy) is decimated by the other (hard) and to the victor the spoils.

At least that is what I read between the lines in Mundell's recent writings.

Kudo's to the chap that pointed out that bullionvault (sic Roth) material on that old frames based site. The history of China during the time of the Khan's is quite instructive.

Toward the end of that piece the view is very much similar to that of Another, or some other member of the BIS board of directors.

Tyrannyofthepresent said...

MatrixSentry,

Many thanks for your response and for the insights into your own perspective and restricted time-frame.

You commented:

"You won't find much traction around here trying to pin down the time dimension."

This contrasts almost perfectly with my perspective.

Since my search is for greater and deeper insight into what is in fact going on, I am finding *tremendous* traction on this truly unique website from the generous and insightful comments people are making. Milamber's "thread" on war to which he referred me is a good example. I suppose you may have meant "traction" in terms of some kind of influence or approval, but that does not interest me.

As for "trying to pin down the time dimension", well my perspective is that I am trying not to pin it down at all, certainly not in the sense of "it must be this year", but rather to open it up.

Two facts:

My father's family came from Eastern Europe and were aware of dangers facing them (they were Jews) but unsure of the timing. They got the timing right, and here I am bloviating to prove it, unfortunately perhaps for you.

For two years of my own life I was forced by sickness to lie on my back for a completely unreasonable proportion of the "time", and was unable to work. Luckily for me this coincided with one of the most interesting periods ever in the development of human economic and financial affairs, so I began to study it as widely and fully as I could and it gave me huge pleasure.

Now happily back at work (which luckily has always afforded me privileged insights into the view of policymakers and other rich individuals, although I will not claim to have CB or BIS knowledge), I still enjoy watching, understanding and predicting. Gold and silver are only a part of that and of all things I am certainly not a trader, nor interested in paper or the turds thereon.

Nevertheless as you proved from your reference to imagined graphs (axes: value and time), when it comes to understanding the world of men, time is always of the essence.

Unknown said...

Thanks to Ore'em for this:
http://www.galmarley.com/FAQs_pages/monetary_history_faqs.htm

And I found this perspective refreshing also:
http://www.galmarley.com/FAQs_pages/other_things_to_know_faqs.htm#GATA and the Gold Conspiracy

Tyrannyofthepresent said...
This comment has been removed by the author.
Unknown said...

Of note re: galmarley
The history FAQ appears to have been completed quite recently as it references policy as recent as a month ago.

The GATA FAQ may not have been updated since 2003. So not everything is up to date. There's that time thing again.

Tyrannyofthepresent said...

Motley Fool,

Thanks for that link. I will have a good look at it. As for the easy money / (well actually, deficit spending) vs effective democracy premise, I am just holding it for a while.

It actually came from someone who observed precisely that parallelism at the Member State level at a recent European policy forum I attended and there was widespread agreement, but sorry, can obviously offer no further details or verification.

Tyrannyofthepresent said...

MatrixSentry,

Forgot to mention this important sentence in your reply:

"But I can use my eyes to see and track the changes occurring. I can then balance what I am seeing with my accumulated life experiences and education."

What an excellent sentiment, beautifully put. I found it inspiring. There is so much in that short sentence - observation, change, balance and wisdom. Thank you.

byiamBYoung said...

Costata,

"From 2001 onwards gold imports rise every year with the only exception being 2003 when they appear to have exported gold. Cumulative gold imports then describe an increasingly steeper rising curve to the present."

I found this article that describes a changing attitude toward gold during 2003, and referred to a steep rise in the price of gold since the Shanghai gold exchanged opened in October of 2002, opening up free trade in gold for the first time in China.

http://www.chinadaily.com.cn/en/doc/2003-09/25/content_267390.htm

I also see here that a considerable amount of official focus during that year fixed upon a landmark free trade agreement with Hong Kong in June of that year.

http://www.chinadaily.com.cn/en/doc/2003-06/30/content_242040.htm

Seems that China also made great progress in relations with India in that same time.

None of this fully explains the dip in 2003 gold purchases for my small brain, but I thought it might help put one of our keener China watchers on a significant trail.

Cheers

Biju said...

Knotty pine said

Do you see any truth to this article? Are traditional gold purchases (weddings, celebrations, etc.) a separate issue to saving in gold? If gold price in rupee rises will Indians turn to silver as a savings vehicle?


Knotty Pine,

This article is Bullshit as far as I know.
- Indians buy Gold, if price goes up, they buy in grams.

- Buying Gold during weddings/other functions like Baptism,Ear peircing, etc is same as saving.

- Also there is a culture of Gift giving, if my relatives offer Gold earring for my daughter's Birthday, I am expected to return the favor is same kind. The chain keeps on continuing.

- This article initially talks about Punjab in North India, I am not familiar with Culture there. But as far as I know, Silver Jewellery will be only for fashion designs and not for savings.

- Silver is bought only as utensils(glass, plate) and small statues of Hindu Gods. No other use, to my knowledge.

Biju said...

Previous comment I meant
- Also there is a culture of Gift giving, if my relatives offer Gold earring for my daughter's Baptism, I am expected to return the favor is same kind. The chain keeps on continuing.

Knotty Pine said...

Thanks Biju,

The article contradicted everything I have read and your perspective is greatly appreciated.

Edwardo said...

A now for a brief announcement from The Fed. What it means may (or may not) be more than a little difficult to discern.

burningfiat said...

Edwardo,

I hate it when The Federal Reserve Board or other governmental organs interferes with my large synthetic credit portfolio and losses pertaining thereto.

Can't a corp be allowed have its synthetic portfolio in peace nowadays? LOL! #wealth

Tyrannyofthepresent said...

Biju,

Not sure if you are interested in the statistics but I did a Google Trends the other day for "buy gold" and "buy silver" in India, and it was still 4:1 in favour of gold. It was actually 5:1 eight years ago so still overwhelmingly in favour of gold, albeit shifting slightly with the high prices. I did look for regional differences but nothing obvious; perhaps a little more interest in silver in the north generally.

Only English language. Generally people here are not interested in this sort of thing because it only reveals the interests of ordinary people; perhaps in India it is a little more pertinent.

The equivalent for Saudi Arabia (home of Another?) is 1:0 (that's ZERO interest in silver). It is an outlier.

Biju said...

TofP,

Google trends is used by Rich people who have access to computers and also "buy silver" could be based on their using "internet" and reading "internet news". I would not put much value on that google trends in India unlike USA, when it is the non-internet using older folks who make decisions and buy Gold.

Gold is better to hide black money. The amount of Gold in India, I think is truly an unknown black hole.

Biju said...

TofP,

I also checked the google trends for India for "buy Silver" and "buy Gold". As you can see from the state map, they are both highly concentrated in 2 states which has 2 big IT hubs (Bangalore and Gurgaon). So these searches must be by IT guys/gals searching in their office. Karnataka is a small state population wise and it has no business having an outsized Gold/Silver purchase, but it can have an outzied search because of Bangalore.

I will neglect this statistic, because Gold buying decisions are done by their parents.

RJPadavona said...

In keeping with the tradition of the cutting-edge and innovative ideas here at this blog, I hereby recommend we start referring to the new US Treasury Secretary as Jack Blew.


RJ

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