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   401 – 504 of 504
byiamBYoung said...

@RJP,

http://www.youtube.com/watch?v=tgYuLsudaJQ

Cheers

costata said...

MF, Knotty Pine, byiamBYoung et al,

Thanks for the responses. Thanks for those links biamBYoung. There's some food for thought there. For example, the possibility that there were no real exports just book entries or transfers to Hong Kong to seed fund the market. A few snippets for everyone from that first link (published in 2003):

The introduction of individual traders, they say, would kill four birds with one stone, by invigorating flagging consumption, slashing the foreign trade surplus, trimming conspicuous foreign exchange reserves and easing international pressures on China to appreciate its currency.

Absolutely undesirable from an accumulators perspective:

Gold prices in China have risen more than 15 per cent since the Shanghai Gold Exchange started operating last October.

Then we have this (my emphasis):

In the initial stages, individual investors would create a market demand for 300 to 500 tons, according to analysts, and further growth would be gradual.

enough said...

http://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will-deutsches-gold-zurueckholen/v_detail_tab_print/7629600.html

translation via bing

FrankfurtDie has developed a new concept Bundesbank, where you wish to store their gold reserves in the future. According to information of the Handelsblatt newspaper (service output), this concept, which will be announced next Wednesday, foresees to revalue the local site, to store less gold in New York and Paris to hoard no gold at all.Thus the Federal Reserve also responds to a report of the Federal, which examines the financial statements of the Bundesbank and had recommended her to create a topical concept of bearing points and document.Currently, the gold of the Bundesbank stores according to their data, in New York, London, Paris and Frankfurt. Store in the American Central Bank fed 45 percent total 3,396 tons of gold in the Bank of England in London of 13 percent, the Banque de France in Paris eleven per cent and at the headquarters in Frankfurt 31 percent. This distribution should now change

Unknown said...

http://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

The wolf now sees that when the boy cries out this time, nobody comes. Now is the time strike.

byiamBYoung said...

From a CNN article so charmingly uninformed that it paints a stark picture of a complete failure to grasp the situation:

http://money.cnn.com/2013/01/14/news/economy/gold-debt-ceiling/

"Selling the gold could serve as an additional revenue stream without running up any more debt, which would relieve pressure on Congress to come to a consensus by March."
-Misguided CNN reporter

"Selling the nation's gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system,"
-(The Honorable) Tim Geithner

Cheers

costata said...

MF,

I have a great deal of respect for Bron but I think he underestimated China's gold reserves in his analysis. If memory serves me it was Woland who provided a link to a series of photographs of the Chinese army unit that prospects for gold. (My emphasis)

Between 1979, when the unit was established, and 2010, it discovered 2,269 metric tons of gold, more than one-third of the country's verified reserves, according to the unit. Once the gold is found, mining rights will be transferred to the local or central government.

http://english.people.com.cn/90786/7909352.html

I suspect that China's unacknowledged official sector reserves are somewhere around 4,000 m/t. Basically all of the gold they have produced since 1980.

One of the interesting things about the IMF rules on reporting gold reserves is that you can have two piles of gold sitting side-by-side and one pile can be "reserves" and the other may as well not exist until it is recognized as a reserve holding. I note the careful language in many CB announcements e.g. "the XYZ central bank added B m/t of gold to its reserves during [month]".

Cui bono?

I think we can dismiss most of this talk by the gold bugs and GATA of government intervention in the gold market that points to the Fed et al. IMHO look no further than the BBs, hedge funds and China. China's interests align perfectly with the status quo ($IMFS) when it comes to gold. It has been in everyone's best interests for gold to appreciate gradually.

It looks to me like a re-run of the gold/oil deal that Another explained. Instead of oil insert "high importer profits and artificially low inflation and a market for USG paper". There was only one way to pull this off - copy the Japan-US surplus model.

Bear in mind it was the Asians who almost blew up the $IMFS in the late 1990s. It would be a huge irony if they replaced the Saudi/ME oil producers in an updated version of the gold/oil deal. The PTB had the model and most of the infrastructure.

It would have also suited the Saudis. They had their gold stash already but as America's consumption of Saudi oil declined China's importance as a customer rose along with its oil consumption. Win-Win for all of the players.

The joke is on us Westerners yet again my friend.

Edwardo said...

Burning asked (in jest)

"Can't a corp be allowed have its synthetic portfolio in peace nowadays?"

Sure, as long as it doesn't go hideously wrong, at which point The Fed starts acting like they didn't know about the fungible nature of all those pesky reserves when you're rehypothecating in The City.

Well, RJP, do you think if we ask Citi Boy Jack Blew How Long This Has Been Going On that he'll give an honest answer? Me neither.

End of 70's tribute.

byiamBYoung said...

@Wil,

Been searching for this reported in english. Not a word, although many german links are easy to find.

Interesting that several hours have passed, and this apparently really important story hasn't made it into english yet. Just sayin....things are getting a tad wierd.

Cheers

Tyrannyofthepresent said...

Biju,

Thank you for those interesting qualifications. I wonder if there is a country in the world in which "google trends" does have any indicative value! The ones I have done account for some 80% of global GDP. I will watch the trend in India as internet users grow old enough to start buying.

costata said...

This report from the Perth Mint is interesting coming on the heels of the latest sales figures for the US Mint. I'll reprint the text in full since it is quite short (my emphasis).

Surge In Australian Kangaroo Demand
January 14 2013

There has been a surge in wholesale demand for Australian Kangaroo gold bullion coins.

Since being released on 1 October, sales for 2013 Kangaroos are 35% ahead of sales of 2012 Kangaroos at this time last year.

Combined sales of all 2013 Kangaroo denominations (1kg, 1oz 1/2oz, 1/4oz, 1/10oz) performed even stronger - up 40% on the number of 2012-dated coins sold at this stage 12 months ago.

We’re getting more interest from North America as well as Asia. In line with this week’s reports of strong physical demand in China, we’ve just secured major Kangaroo orders from distributors in Hong Kong, Taiwan and Singapore.

Compared to last year’s phenomenal Year of the Dragon, sales of 2013 Australian Lunar – Year of the Snake gold coins are not as strong.

However, demand for the Kangaroo and Lunar series combined puts us clearly ahead of this time last year.

We have also achieved greater market share. According to the latest quarterly data from Thomson Reuters GFMS, The Perth Mint’s share of the worldwide gold bullion coin market has risen from 7% to 13%.

The Perth Mint manufactures the Australian Government’s official bullion coin program. Our coins stand out from other bullion coins due to their superior ‘reverse proof’ quality and annual design changes.


http://www.perthmintbullion.com/au/blog/blog/13-01-14/Surge_In_Australian_Kangaroo_Demand.aspx

Anonymous said...


Wil,

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.

Not sure what you are trying to say. Europe is part of the 'West', isn't it? The Euro was engineered to work well in a global monetary system in which balances are settled in (freely floating) gold, and it was engineered to get along with the transition from the dollar to gold. The Euro zone has a balanced trade and a balanced capital account, and as long as they earn for their exports the same currency that they need for their imports, they will be fine in terms of their balance of payments. You see, the next financial crises will be balance of payments crises (of the same flavour that you know from various banana republics during the 1970s and 1980s). The Europeans knew this, and they acted to protect themselves.

How about the rest of 'The West'? Canada and Australia will take the in-ground gold and use it as a reserve, perhaps as collateral for loans, perhaps use forwards (not LBMA forwards, but direct promises by their governments) in order to support their currency if necessary. In some sense the fact that they still let their mines operate under the dollar system, selling freely at the London price, is analogous to the Europeans selling part of their hoard during the 1990.

The U.S. have been sitting on their 8000 tons for 34 years now without selling a gramme. They sure know that they will eventually need it. That leaves the UK, doesn't it? They have substantially less per capita and per GDP than everyone else, but they can always flee under the umbrella of the Euro - at least as long as they remain a member of the European Union. (Sometimes I wonder whether they do know this...)

So what's your 'Amero' good for? Nobody needs to pool any gold, do they? It seems that everyone has got an idea of what the world is going to look like, and most of them have prepared accordingly, don't they?

Victor

KnallGold said...

On N-TV (a german news channel), they say the Bundesbank will get the Gold stored in France back, lets see how this develops, surely big news if true.

Yes, France is in terrible shape economically, and that idiot Hollande wants 75% taxes on large incomes. No wonder the wealthy leave the country.

Last year there was a report about french tax agents working in Switzerland, trying to catch evaders. Swiss gov. said its illegal "but we can't do anything", yeah right, there goes the state of right.

I get the impression that we have anarchy developing, and a red green dictatorship forming. Some appear to use the chaos for their advantage.

At least the euro is table, actually even strengthening. 1.24 sFr./euro, used to be 1.20-1.21 for a long time. Finally some action after this frozen 2012...

Oh, and remember, CO2 is a toxic gas, lol... Seriously, I checked some books, the only toxic gas is CO and this is easily oxidized to CO2. Also known is a carbon suboxide, C3O2, that one is quite unstable, caustic and lachrymatory. In a sense its an organic molecule as its formally malonicacid-anhydride.

POG at 1680, world must be okay...

costata said...

VtC,

Your comment above to Wil crystallized something for me (my emphasis):

That leaves the UK, doesn't it? They have substantially less per capita and per GDP than everyone else, but they can always flee under the umbrella of the Euro - at least as long as they remain a member of the European Union. (Sometimes I wonder whether they do know this...)

And flee from their debts via a massive devaluation of the Pound against the Euro at the same time and still maintain their access to critical imports once they are under the "umbrella".

Jeff said...

Gold, renimbi, and the multi currency reserve system (warning, pdf)

http://www.omfif.org/downloads/Gold,%20the%20renminbi%20and%20the%20multi-currency%20reserve%20system.pdf

Jeff said...

If you were Germany, would you conduct a high security gold transfer before or after announcing it?

enough said...

IMHO,

the 2013 Perth Mint Gold Kangaroo image is one of the best ever with super detail while the 2013 Perth Mint Lunar snake is far and away the worst image in the series.......

the 2012 Kangaroo was a very flat image which had little to offer in th way of "charm". Looked like a stick drawing I used to do in elemetary school.....

FWIW, the only "ROO" I do not own is the 2012 and that is by choice. I have every other from 1986 onward.....

Thes factors may explain some of the sales data....

Bjorn said...

@Jeff.

I read most of that OMFIF report today after recieving a mail about John Butlers mention of it at financialsense. The Butler piece made it seem a bit FG-ish and so I was sorely dissappointed with the actual report. I´d be interested in comments from some of the serious misallocaters here. For example, have any of you heard of OMFIF before, and should they be taken seriously?

KnallGold said...

Jeff, difficult question! ;-)

Might have to do also with the Mali affair of France. Something's heating, plus we have the quasi revolution in Pakistan, an atomic nation.

As for the already buried idea of a 3 trillion platinum coin, I had the thought that the main purpose was to boost platinum prices which are now above Gold, for the first time since long. It surely shifted attraction, as the Copperfields of the world will confirm. Smart move.

Now time to load up again the yellow ;-)

Oh, and this happens when you load up too much Silver. Now that will be the final nail in Ag's coffin.

http://blouinnews.com/44279/story/czechs-elect-pesident-ballot-1st-time

Unknown said...

VTC,
http://robertmundell.net/economic-policies/gold/
See Mundell's presentation at G20 Conf, in China, March 2011. In slide 68 he begins talking about combining the worlds two largest currency areas to restore the mainstream of the world economy split in two by the Euro.

It is not "my" Amero, or my idea. These are the thoughts of others, much more directly involved than myself.

Others think the Amero is a stepping stone to this idea (or the Unitas) but they have far more patience than I.

When the music stops there may be some surprises regarding the so called official gold holdings of sovereigns, and I agree with Costata that China has much more than reported. Same with M.E.

The EU area gold holdings are nearly double the US. Combined with BRICS and ME that alliance would be surpremely, monetarily powerful -- US has it's military.

I still contend that the balance of power is derived from the balance of wealth, and when wealth is revalued so shall be the balance of wealth and power.

Central banks are reacting with much less poise than any gentleman's club I know.

The joke will indeed be on "us Westerners" (perhaps the furthest West?) and I do not consider the U.S. part of the Euro West ...

Unknown said...

Oh and BTW, the shrimple can't seem to get enough of eagles or kangaroos.

Even shit has value if 6,000,000,000 flies are after the same Turd.

Jeff said...

Knall,

Wouldn't the transfer be entirely symbolic anyway? As Victor frequently points out the US can't hold their gold hostage, and France is insude the currency zone.

Edwardo said...

Good point, Jeff. Da gold done gone to Deutschland.

Edgar said...

Splashed across MarketWatch: "Germany wants its gold back"

http://www.marketwatch.com/story/gold-futures-tick-higher-in-asia-trading-2013-01-15

Wendy said...

Canadians would strongly oppose any further integration with the US. We have come to clearly understand that when we make a deal with the US we get royally screwed!! Forget the Amero, it won't happen.

bBy, Jim Sinclair has noted this on his site.

Pat said...

Cute doggie to be sure, but I'm jonesing for the next post- tired of clicking only to see Stilts the Wonder Hund yet again. Especially as my spider sense is tingling....
2013- The Year of Fahrenheit 451.

Pat said...

Jimbo Sinclair sure is talking more and more like well, you know, a certain other blogger of note.

Anonymous said...

Curious to see the response of FOFOA et al. to the OMFIF document linked above by Jeff.

Edwardo said...

Include me in the group that thinks the OMFIF piece, a kind of carnival of normalcy bias thinking, was a big disappointment.

TristramBoris said...

AEP joins the debate - and calls it a "watershed moment"

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/9804444/Bundesbank-to-pull-gold-from-New-York-and-Paris-in-watershed-moment.html

Herb said...

The one thing I am sure of is that any big upward move in gold is going to seemingly come out of the blue. It will not relate in any way to a "known unknown" like the outcome of the debt ceiling farce.

Ore em' said...

Wendy, as a fellow Canadian at the exact opposite end of the country (more or less), I can 2nd your sentiment re: Amero.

I recall when the loonie was trading at 60 cents to the dollar, there was talk of adopting the USD. This was not well received.If you couldn't convince us then, you won't convince us now.

It is one thing to have a free trade agreement, as that is a complicated, difficult to understand and somewhat obtuse subject to the average citizen.

But the loonie? People understand the loonie, and they intrinsically understand that giving up our money would be akin to giving up sovereignty. They may not understand why, but they know enough to know that it wouldn't be in our best interest to let the US control our money, which is how the Amero would be viewed.

It's also a much simpler issue than NAFTA, and it appeals to the heartstrings of every Canadian on a far baser level. I can almost see the tear-jerking Canadian-pride anti-Amero youtube videos already.....

Unknown said...

Whether or not there are alliances and consolidations among monetary areas has little to do with "the people".

And what these unions or alliances are called will depend on "image value" and focus group studies more than any true understanding of their intent.

After all, when have the people agreed with their governments in times of crisis? Did the German people agree with Htler? Did the American people? Did they agree with Roosevelt?

And please, don't misconstrue the actions of central banks as mistrusting each other. They mistrust the governments of their peers ... and their own.

In the final analysis, while we can stoically analyze the actions of monetary players, it is a moral conundrum that we face.

Freegold may come ... and soon ... but will it truly change the world for the better? Not for many generations I suspect.

These central bankers have lost control - of a world that once held stock in honor. We can say that they have confidence, in their ability to maintain confidence, but the world of stability and trust and honor has run away from them.

Their governments are truly mad with the lust of fiat, and the power they acquired through the peoples descension to it.

So in the end, Freegold has a long way to go, to correct the madness of fiat.

Edwardo said...

This little snippet from Jim Sinclair who was quoted in the AEP article.

"Don’t kid yourself. If the Bundesbank confirms this tomorrow, it is a much watershed event as De Gaulle’s demand for conversion. If the Germans do confirm tomorrow at the press conference then I will tell you the real reason why they are doing it.

Geithner’s parting shot may have back fired big time."

byiamBYoung said...

Wil,

"Freegold may come ... and soon ... but will it truly change the world for the better? Not for many generations I suspect."

You are probably right, based on what I have gathered. Freegold will be a reset, and a big one, but it isn't a panacea.

If you hate the old system, you'll probably hate the new (freegoldy) one, too.

Cheers

Anonymous said...

Wil,

See Mundell's presentation at G20 Conf, in China, March 2011. In slide 68 he begins talking about combining the worlds two largest currency areas to restore the mainstream of the world economy split in two by the Euro.

Nonsense remains nonsense, regardless of who repeats it.

Jeff,

Wouldn't the transfer be entirely symbolic anyway?

Yes, but this may be the point. Weren't we discussing the potential end of paper gold support just one thread ago?

Victor

Anonymous said...

@byiambyoung

Yes, I think there's a little too much optimism regarding the aftermath of the switch to this more equitable system simply because of the adjustments that will be required, the dislocation, and misallocation of resources that will have to be corrected. It's going to take a long time.

Where I work for example, I see a bunch of washed out bureaucrats with no useful life skills who are going to be forced to adapt to a brave new world where you have to actually give in order to receive instead of getting magic funny money for make-work. It's not going to be pretty for them.

FOFOA said...

Quick question: Has anyone noticed a trend of layoffs lately? Two people close to me have been laid off within the last 30 days. The second one was just today. Both were highly qualified professionals with many years on the job. Both were earning six figures. Both were women. Both were laid off with little notice other than rumors. Both were laid off along with several others at the company (group layoff, so not about individual performance). Both were medium-sized corporations. And one of them, believe it or not, was a job in DC, although not a government job.

So I was just wondering if anyone else has seen anything similar.

Delusional Investing said...

A company in Melbourne recently went into administration because the US parent went under. Merry Christmas 70 staff.

http://www.dissolve.com.au/insolvency-news/tech-firm-hyro-placed-into-voluntary-administration/

As of December 21, Hyro’s parent firm in the USA has delisted its stock from the NASDAQ. Previously in September, the company laid off 300 staff. The collapse also affects the Australian subsidiaries including a group of companies sold by Hydro to Kit Digital last year.


costata said...

enough,

Thank you for your observations about the Perth Mint offerings. If your views are shared by other customers it may explain some (all?) of the increased sales and market share. Given the strong sales figures from the US Mint I don't think it explains this statement from the PM:

We’re getting more interest from North America as well as Asia.

Cheers





costata said...

Bjorn,

I agree with you about the OMFIF paper. BTW John Butler has also disappointed me on this Tier 1 gold misinformation campaign. I would have expected him to have the kind of contacts who could have made him aware that it was never a proposal to make gold a Tier 1 asset but rather a Level 1 liquidity buffer.

I read several documents and extracts from papers about this issue and without exception they referenced Tier 1. So that's my excuse for being taken in. But if JB has no better sources than us I think it calls into question his value as an analyst.

costata said...

Hi All,

Re: Currency blocs

I wouldn't bet the farm on people supporting national currencies over currency blocs after the US dollar collapses. If the Euro sails through this unscathed then I would expect that the ASEAN nations would be paying close attention. The HI of the US dollar and the end of the single reserve currency experiment may shake a lot of people's faith in national currencies.

With the Asian financial crisis of the late 1990s burned into their psyche it may spur the Asians to accelerate plans for a common currency across the free trade zone they intend to launch by the end of 2015.

I also have to support Wil Martindale on the subject of Mundell's views on currencies. Mundell hosts a private, invitation-only conference at his villa in Italy (if memory serves me, every two years) that discusses one topic - a single, global currency.

Mundell is absolutely in favour of currency pegs as a preferred option for currency management. (This infers that he likes currency boards as well.) None of this is radical stuff if you delve into economic history And it is not in conflict with the Freegold-RPG architecture. IMVHO the Euro was a critical step toward a larger goal.

If you read the A/FOA archives it should be readily apparent that protecting international trade was a major theme of their writing and a key objective of the Euro Freegold-RPG architecture. FWIW I think the ultimate goals of the sponsors of this project are to get all governments out of the money creation "business" and to destroy mercantilist faux-economics once and for all so that trade can flourish.

PS. If anyone is interested in learning more about mercantillism this is a good overview to kick off your investigation:

http://en.wikipedia.org/wiki/Mercantilism

MatrixSentry said...

FOFOA,

As a consequence of my 20 years of employment in the airline industry, I would argue that the airline sector is a very sensitive barometer of the larger economy. Both aspects of airline consumer demand, discretionary and non-discretionary business travel, drop aggressively during recession. Additionally, the airlines are extremely capital sensitive and survive on razor thin margins. Industry analysts estimate that the airlines involve over 90% of the economy in one way or another.

With that said, let me say that there has been zero growth in the industry since 2000. In fact there has been significant downsizing as the industry has been forced into a consolidating mode in order to survive. Within this larger trend, we have seen a general airline industry recovery from the bankruptcies of the early and mid-00s. The bankruptcies and the resulting mergers have solidified balance sheets of the survivors.

The surviving airlines are largely the legacy airlines, Delta, United, and American (merging with US Airways soon). These airlines are very old and the people that work for them (especially pilots and flight attendants) are old as well. There is a major mandatory retirement wave that is about to hit the pilots (age 65) and the flight attendants are quite elderly by historical standards. Retirements are largely absorbing the staffing reductions brought on by downsizing through consolidation. Without these retirements the airlines would be laying off thousands.

In the short term, Delta has delayed planned hiring that would have maintained our current footprint in the face of impending retirements. I see this as equivalent to layoffs. Delta is paying off debt and focusing on the balance sheet. I think the recession within a depression is on and the management sees it in advanced bookings and their leading economic indicators. Of course the ongoing circus in Washington isn't installing confidence in future prospects.

I laugh when I hear talk of sustained economic recovery. It hasn't happened in airline industry and I therefore assume it hasn't happened in the overall economy. Management gets it and they are battening down the hatches. I think CEOs all across the US are doing the same. The ongoing tax increases, Obamacare costs, and climbing food and energy prices are going to kill any nascent recovery that has been going on since 2008.

If the USG actually intends to bring on a depression with a hyper-inflationary exclamation point, they couldn't come up with a better plan. A divided US Congress where one side wants to increase spending and increase taxes, the other wants to increase taxes and decrease spending. If the republicans didn't want higher taxes they certainly wouldn't have acquiesced on the fiscal cliff. Lets see, raise taxes dramatically and cut spending. Both sides will crater the economy.

2013, Year of the Window. Indeed.

Zebedee said...

Boral lays off 700 jobs today.

BUILDING products maker Boral will shed 700 jobs as part of a major restructure aimed at helping it weather the effects of Australia's gloomy housing market.

http://www.perthnow.com.au/news/breaking-news/boral-to-cut-700-jobs/story-e6frg133-1226554825973



Pat said...

Peak cash leads to yet more layoffs if biz doesn't pick up. It won't.
Check Baltic Dry Index for another barometer; flatlined dead.
http://www.zerohedge.com/news/2013-01-15/golden-age-us-corporations-ending-sp-500-cash-has-peaked-and-now-declining

Unknown said...

I agree with Costata that Mundell in a no-nonsense individual, right in ine with Duisenberg et al. Thay are indeed parallel to freegold and antithetical to fiat. Mundells grapguic representation of gold in the slides I refrenced is very well done and quite instructive (not hours of reading here) to anyone trying to frasp this anew.

Poopy has said:
"Where I work for example, I see a bunch of washed out bureaucrats with no useful life skills who are going to be forced to adapt to a brave new world where you have to actually give in order to receive instead of getting magic funny money for make-work. It's not going to be pretty for them."

Holy Christ my friend, you have just described PERFECTLY the typical government job, and sadly, many private sector jobs as well(associations particularly) that are layered upon layers and layers of parasitic beaurocracy that grow up around any profitable enterprise that actualy produces something of value that the organic market desires.

GOD HELP US that an honest man, who through hard work, diligence, skill and virtue, builds a company that is ethically profitable, for that will be the target of taxation, insurance, legal protection, regulation, professional advocacy, security and privacy services, reputaion protection services, advertsisng, branding, marketing and a host of 3rd party agents upon the layers of those parasites, all sucking the lifeblood of the business away until it's final source of revenue is financing, then subprime financing, then derivatives, and then they have you.

Not that some of these services are not a positive ROI, but many represent Poopy's dilemma, which brings us to FOFOA's abservation.

This horse crap has been self-correcting for years now. I suspect it has been acceerating due to what we all see and talk about here - the harsh intrusion of reality.

What is sad Poopy, is the ridiculous reality of self-importance these bloviating buffons have created for themselves, to make this busy work seem viable, and when you look them in the eye, and call them on it, you will be given a nice severance, as I was, to help them feel more comfortable about their purpose and worth in life. Because knowing you are right, and knowing deep down what is coming, their only comfort is denial, and your presence will disturb that, and you must need be gone.

And with that 401 K liquidated, you willnever have USTs stuffed up your ass sideways, but rather you will take that fiat and buy true wealth with it, at a ridculous "price" that makes the 10% hit a gift from Uncle Scam rather than a token payment.

And that my friends, is how the end of a beaurocratic, centrally screwed, oligarchical corporatist fiat timeline plays out.

I do believe the next major bailout of the fiat derivative casino will break "the house".

Unknown said...

But ... not before my half-blind ass completes a single accurately spelled and punctuated sentence.

Anonymous said...

A must read.
I don't know if anyone else has mentioned this but the article on "Misunderstanding Gold Demand" by Robert Blumen is one of the clearest articles regarding the "price" of Gold I have ever read.
Thanks to Bron's blog for pointing the direction.

Here is the link:- http://www.financialsense.com/contributors/robert-blumen/misunderstanding-gold-demand

Woland said...

In Oz, University of Western Sidney is shutting down its economics
department. Not laying off, shutting down. Happened about six
weeks ago.

Edwardo said...

FOFOA,

Coming to the employment question from a very different angle, the stock market, which, admittedly, is grotesquely distorted in its functioning, can, arguably, still be seen as something of an economic barometer. With that in mind, at least according to one well respected analyst, Tom DeMark, about to experience a multi-month decline. I can't say I'm on board with that notion just yet, but I do note that there is a classic Dow Theory divergence between The Transports and The Industrials.

KnallGold said...

Layoffs, yes I read daily about layoffs in the thousands. Locally, businesses just close. But the most insecure job is currently those of bankers, in my cigar lounge in Basel they report also of group layoffs.

Handwork, physical economy survives only with all kind of tricks.

I'm getting the feeling that we entered a free fall in economic activity. Only booming market is real estate. What I also hear from is the crisis in the big pharma, worked for Ciba-Geigy (then Novartis) for a long time, former boss there invented Diovan in 1989 which might have been the last blockbuster (patent expired now).

Now they employ thousands of workers and essentially, nothing big comes to market anymore, it just is bought from other companies. When walking through the large there campus I see most buildings full of people sitting in front of a computers. Production has gone mostly east.

Innovation appears miniscule, just same crap again. Results from a decade of combinatorial chemistry are millions of impure compounds in low mg. quantities. Hurdles for bringing new medications to market are very big, fodder for hundreds of lawyers must be produced first.

Huge salaries for Novartis International, always top bonuses. But those productive in labs earn, well, good, but bonuses are mostly smaller. Artificial economy, here we are!

Personally, I have a couple of very good ideas, well, already existing, which could be good for millions but starting a business? In 1990, we said it takes 300millions for research, another 300millions for process developing/clinical and again 300millions for marketing.

As a positive, Ernesto Bertarelli will reopen the closed Serono facilities and start a new research center in Lausanne/Geneva. There is so fertile ground in pharmaceutical research.

Midnight Gardener said...

I think this might be relevant to our lives and maybe even to Freegold: http://usawatchdog.com/guns-protect-honest-people-catherine-austin-fitts/

If not, I'm sure someone will be quick to let me know.

Mike

Anonymous said...

FOFOA,

Maybe you were asking specifically about the US? But there certainly have been layoffs here in Sweden in the last six months or so, and they keep coming. It's been long expected, of course. We've been somehow floating above the general European misery until now, but it was bound to catch up with us sooner or later. We are heavily export dependent, and if our customers are struggling, then of course it will impact us. Also, we have a homegrown problem in the form of a massive housing bubble which is just about to start deflating, so there will be much worse to come.

Latest layoff report I heard was on Monday, when SKF (ball bearings etc) announced they would cut staff by 2 500, focused on Western Europe, as part of a program to move more of their production to Eastern Europe, Asia and South America. It's still unclear how many of the 2 500 will be here in Sweden, but it will certainly be a substantial part.

In total (as heavily featured in the political debate between party leaders this morning), some 66 000 people here in Sweden were given notice in 2012. That's out of a total workforce of somewhere between 4 and 5 million.

Anonymous said...

The German gold repatriation has been made official by the Bundesbank. In total, they will bring home 300 tonnes from the US until 2020, plus all of what they have in France. The aim is to have 50% of their gold at home (up from 31%), 37% in the US (down from 45%) and 13% (unchanged) in the UK.

Lagerstellenkonzept Goldreserven (in German)

KnallGold said...

On the Buba Gold, its mentioned repeatedly on N-TV. They also reported that the USG said "oh, but this will take time as we store the Gold in pallets!", no joke.

Jeff, symbolic, maybe. Although I'm wondering if the security issue of the bars in the USA has Another angle to it. You know, the west coast is one Big One EQ away from the next Fukushima, you can do the rest of the math ...

To make matters worse, well, it can't get any worse than extinction of the human species within 100 years, there is a big old Kali mine in the upper part of the Rhine, near Basel in Alsace/F. Stored there is the "collected wisdom" of the chemical industry, thousands of barrels full of Cyanide, Arsenic stuff, Mercury compounds, war gases etc..

The mine is held together with wooden pieces (sp?) as it appears to sink down. I saw this in a report on the German/French channel Arte. Its called Stocamine.

http://www.badische-zeitung.de/elsass-x2x/giftmuelldeponie-stocamine-gefaehrdet-das-grundwasser--39605429.html

Out of sight, out of mind. Human stupidity appears limitless, on contrast to Hydrogen, to borrow from a line from Albert Einstein. I could give you dozens of syntheses to make new pharmaceutical etc. compounds with nitrile/cyanide. The law of abundance...

Close to Basle is also a nuclear plant, Fessenheim, the oldest in France. The upper Rhine is know to be an earthquake zone, as is Basel. The Big One there was in 1356, mg 6-7. Fessenheim is built for about 5.7. Again, you can do the math, while POG sits at 1680 worthless $'s per theoretically limitless worth ounce of Gold...well lets say 16.8 trillions ;-)

Motley Fool said...

Angloplat want to lay off 14,000 locally and are meeting heavy political resistance.

http://www.zerohedge.com/news/2013-01-15/platinum-overtakes-gold-south-african-mining-problems-return

TF

Anonymous said...

+1 @Wil Martindale

What is sad Poopy, is the ridiculous reality of self-importance these bloviating buffons have created for themselves, to make this busy work seem viable, and when you look them in the eye, and call them on it, you will be given a nice severance, as I was, to help them feel more comfortable about their purpose and worth in life.

Yes, I can confirm this. USG employees for the most part have a very high opinion of themselves and do not understand their parasitic nature. If you attempt to point this out you will see some scrunched up faces say, "But I work hard!!" And it's true - the job is in fact difficult, but it's also pointless and in many cases actually harmful. Occasionally I'll send an article to some colleagues along the lines of "Hey guys, look at how the 'work' we're doing is destroying the real economy! :D" and I won't get any responses.

And yes ultimately it seems much of the USEconomy is based around parasitism, with actual production and entrepreneurship being further crushed and disincentivized with each passing year.

+1 @matrixsentry very interesting to hear your take on things.

On the layoff front, I'm sure it won't shock many of you that USG appears to be doing just fine as far as I can tell. However, that doesn't mean we haven't suffered our share of austerity - my agency's office supplies budget was cut in half back in 2009 (OMG are you really telling me I have to pay for my third writing pad myself?). Also, HVAC is now turned off on Sundays when no one is there. Outrageous.

Woland said...

I'd like to share the following quote, made on Fox News,
by Rep. Greg Walden, chairman of the National Republican
Congressional Committee, on Jan 8, 2012:

"The last thing we need for Treasury to mint (is) a new coin
made out of platinum that would weigh, BY THE WAY, Neil,
44 million pounds if it was tied to the value of platinum
like gold had to be tied. I mean, it would sink the titanic."

Perhaps this sort of "thinking", along with instability in S.A.
platinum labor relations, has led to the $100 run up in
futures of platinum, closing th gap with gold futures. If
so, a "shorting opportunity" is perhaps in the cards?

Unknown said...

It appears that the German repatriation is somewhat blown out of proportion. They had announced months ago that they were repatriating something like 50 tonnes/yr. over three years, so doubling this to 300 by 2020 is actually a deceleration. That amount should have been brought home by 2018 at that rate.

It could be that the intent is to gradually bring it all home at a pace the holders can handle without causing too much commotion in their scramble, and it could be that they are testing the water to see how quickly their gold comes home and at what quality.

DP said...

"The last thing we need for Treasury to mint (is) a new coin made out of platinum that would weigh, BY THE WAY, Neil, 44 million pounds if it was tied to the value of platinum like gold had to be tied. I mean, it would sink the titanic."

Heheh. Guess they missed why it had to be platinum huh? ;)

DP said...

Still finding it incredibly funny that just about everyone (even AEP!) was desperate to exercise their inner conspiritard over OMG teh Fed-bustin Buba gold repatriation!!!

Jeff said...

Duggo, that article reminds me of this.

FOA 04/25/99:

Truly, the fact that gold is traded worldwide, in such huge quantities, completely negates the current dogma that it is just a commodity. As the Privateer web site has said often, gold is barely even moving in price. I ask you, why would any investor be buying or trading gold in these huge amounts if it wasn't part of a currency financial asset? They certainly are not buying it to sell to the jewelry shops, are are they?

"The latest net clearing statistics released by the London Bullion Market Association showed a 6% recovery in activity in March from the depressed levels of the previous month, with an average 28.5 million ounces (886 tonnes) of gold being transferred each day."


Notice they said "transferred". Now, any rational person will conclude that they are not placing 886 tonnes on ships and planes. Obviously they are talking about warehouse receipts for physical. Again, the world is not producing this much gold chain to justify 28 million ounces, a day in sales!

Woland said...

I like to think of that coin in terms of the 1 ton proof
Kangaroo minted by the Perth Mint. It would take 2000
of them to make change for the platinum coin (at present
futures prices for the metals). Thank God for seignorage!
(so much more convenient)

Pat said...

OK, how about a caption contest for the pooch pic until we get a new post.
"The two legs of paper gold? I'm sorry, that dog just won't hunt"

Placidus said...

From the post above from FOFOA, who first quotes the trader:

"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".

The viewpoint of the trader appears enigmatic in that he/she views a secular bull in the dollar AND the S&P 500. I thought that in today's economy the dollar strength implied a drag on stocks. Can these occur simultaneous? Moreover, a secular bull in the dollar is not consistent with a hyperinflation or loss of confidence. The only scenario I can envision that might be consistent with this trader's crystal ball is a transition into early hyperinflation in which stocks respond by taking off, followed by an 'event' in which the system snaps and there is a panic into the dollar, followed closely by a panic into physical gold as the paper market in both stocks and $POG continues to get crushed. This 'event' would herald the arrival of Freegold. Unfortunately, the hyperinflation event would not be over for the dollar at this stage. According to my understanding of FOA and FOFOA, the US would/will attempt to defend its currency by shipping higher-priced physical overseas.

Perhaps I am wasting my time thinking about the meaning of this trader's take on things... but I am trying to make sense out of how a (1) bull market in stocks and (2) bull market in the dollar can be reconciled with a 'year of the window' scenario.

Indenture said...

Question: How much gold did Germany 'pledge' to the ECB for inclusion in the Euro Zone and what percentage of their overall gold is it?

Caption: "With two legs of paper gold all I can do is piss on everything in front of me."

DP said...

Caption: None shall pass!

Woland said...

And we have a winner! Mr. DP, care to say a few words.......

Anonymous said...

Wow, job losses, and 2 of them at the same time. Nope, that's the first I'd heard of job losses anywhere in the world, breaking news indeed, I am shocked.

Well spotted, good to see someone so on the ball. Is this perhaps a sign that freegold will happen this week?

DP said...

Woland,

Thangya. Thangyameramushhh.

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

Placidus,

Don't spend another minute on the trader's take. It's errant. Even if I wanted to pretend, as a trader might, that TA, especially long term chart formations, are predictive, (which they can be) then the pattern "gold" has been in for approximately the last year and a half is a giant sideways correction that has evidenced hardly any price deterioration. To put it succinctly, it's bullish. This is especially so when one's time horizon is measured in years.

Robert said...

The theme of FOFOA's latest is timing, so I cannot resist a comment. Today I read John Mauldin's latest, where he quotes Barry Ritzholz for saying the following:

"The deficit scolds have been warning for years that hyperinflation is imminent. I have been hearing these ominous warnings my entire adult life. 'This is unsustainable! Inflation is about to explode!' But inflation has been rather tame, and we are not experiencing anything remotely like hyperinflation. They keep using that word 'unsustainable,' but with all due respect to Inigo Montoya, I do not think that word means what they think it means."

I can certainly understand Barry's sentiment, though I disagree with his conclusion. I think the key is focusing on his words "my entire adult lifetime" -- as though that is a long period of time. Is it? We have been uncharted territory with the USD for 42 years now. Is that a long time when it comes to a global reserve currency? Is that a long time when the $IMFS is the first worldwide experiment of its kind? Is that a long time when you understand the story of the USD's strength in 1971 and the development of the petrodollar system over the 1970s and 1980s?

Though I do not agree with everything I read on this blog, I credit FOFOA for teaching me something about history and perspective, especially with the analogies to earthquakes and tsunamis. And that's why I never grow tired of all of the hyperinflation warnings. Once you stop trying to time things and instead stay focused on the big picture (ironically, the name for Barry's blog!), you have a very different perspective. Like the swimmers out in the deep water who see the ankle-deep people on the shore (the traders) kicking up water at each other: "What in the hell are they doing?" I'll never get that picture out of my head.

Knotty Pine said...

Here is a sure sign the $IMFS is slipping away!

http://www.youtube.com/watch?v=RClq3ObFdME

Naughty Slumdog said...

Guys, did you spot this one ?

"While they are not likely to breathe fire in 2013, the inflationary dragons lurk in the “out” years towards which long-term bond yields are measured. You should avoid them and confine your maturities and bond durations to short/intermediate targets supported by Fed policies."

http://www.pimco.com/EN/Insights/Pages/Money-for-Nothin-Writing-Checks-for-Free.aspx

Tommy2Tone said...

wow. just read a few comments backwards (err.. from latest post backwards, not reading them backwards :) ) and some of you are kinda talking about stuff that's been giving me a hard time lately- work. (lol).

Here at my work, we just got called in 2 days ago to the surprise news that the guy in the office next to me is now the executive director (temporarily* -yeah right, gov. jobs here- should be permanent).
Anyway, the office hasn't been the same since. Most are gossiping quietly cube to cube- who's gonna go for his old job when they post it?? WHo will go for that one? (union "shop" too. joy joy)
yada yada.
When this much excitement isn't around, it's all "hey, I'm thinking of refi'ing my house..." or "hey, what stocks are you in right now? You think this fund is better?? Bonds. You should all be in bonds (say the "smart" ones).

Point is, it's business as usual it seems. They have no clue what's coming. Forget trying to explain my position.(although I still embark on that route once in a while for those I like- only to get the conspiratard looks.)

It's tiring. I feel I'm the only guy around that notices the water draining fast out to sea.

On down days, this allows the thoughts of "well, maybe this IS all conspiratard stuff?" to creep in and hang about. The "maybe I should be taking on debt to better my education to be able to grab an opening above mine like he did next time one opens up" kind of thoughts.

Maybe it's the dread of winter but there's been more of these down days lately for me than I care for (after discounting "Fun With Ex Wives" of course :( ).

Can it really be that EVERYONE is so blind??

Yes. It can. I still come to this conclusion. Regardless of how unbelievable that may sound.
There's a metric ass ton of stupid people (insert Clevon's family tree it seems.

It's not just work either. I just spend the majority of my time there outside of home. This feeling of being the only one or one of a very small number of persons to have an idea of what kinds of changes are coming seems stronger now. That is to say, I don't really recall feeling this way so much a few months ago...

Perhaps it's just my own mid life thing. I told my wife I think I'm in a mid life crisis and I'd be shopping soon for a corvette and an 18 year old girlfriend. Or maybe I'd just get a new chessie for duck hunting. I offered her the choice. She chose the vette and girlfriend :(

I'm just grumpy and bitchy I guess. Thanks for letting me vent this here.

I really really hope this change comes in the next couple years.

Pat said...

Jojo,
I disagree somewhat to this " There's a metric ass ton of stupid people ". I rather think people are ignorant; I believe our education system, our MSM, our plutocrtas like it that way, and do everything in their power to keep it that way. St. George Carlin has a lot to say about that. They are not stupid( incapable of learning ), but of course some are purposefully ignorant, to be sure. Our current world is more like Brave New World than 1984; the proles are distracted by gewgaws, sports, religion, TV, movies; Republicrats vs. Democans, Yankees vs. R. Sox, black vs. white, Muslims vs. Christians, Us vs. Them, pretty much anything but insightful pursuits of knowledge.
I myself don't know if I'd be much better off without the blogosphere, I had the same upbringing, schooling,social environment of "those" people, I am not even sure in retrospect how I broke out. I'm just glad we have this site and others so when we question our own sanity we have at least some other like minded folks to bounce off our thoughts and ideas. I have one, one, friend who sees the world as I do, and we often say we would be happier if we too had taken the blue pill.
Ignorance ( not stupidity ) is indeed bliss- until the reset of course!

Ender said...

Hmmm...
http://www.jsmineset.com/2013/01/16/germany-reacts-to-the-retiring-treasury-secretarys-parting-shot/

Ender

Tommy2Tone said...

Ha, speaking of work, check this out:

Work. American Style.

Tommy2Tone said...

Pat-
You are right.
And I too have had the same blue pill discussion. I wish I could meet people like you in my neighborhood.

Tommy2Tone said...

I hope we don't find out Jim lost his job ;)

Tommy2Tone said...

geez, last one. I'm supposed to be on radio silence anyway.

What a great way to spur spending (and future economic numberz??) by stirring up the gun issue.
See all the stories of how sold out everything gun related is? (and will be for quarters). Gotta get them people spending.

And/or, what is really happening behind the scenes while everyone is so busy with the right hand that's reachin around on gun issues??

Pat said...

Yeah, Ender, just about to post that. Anxious to hear "Free Golders" thoughts. Jimbo is at odds with certain theses I take it, but mostly in lockstep with thinking here. Would love to hear where he varies from the trail.

Polly Metallic said...

From Jim Sinclair:
My Dear Friends,

I respectfully disagree with most of the explanations given today on the why of German actions in gold. My understanding is that the causal event of this notification actually came from the actions of the US Exchange Stabilization Fund and the long term plans to strengthen the euro.

I have published a chart from Patrick showing the extreme change in the ratio of gold to fiat currency presently being held in reserve by Euroland.

First you need to understand what the Exchange Stabilization Fund is and is not. It is an account at a major gold bank in the name of the Exchange Stabilization Fund. This fund can legally trade in gold and does. The President of the USA and the Secretary of the US Treasury run this fund. Those two managers by law are permitted to designate another manager if they wish. The fund can trade long or short, borrow or lend anything. Basically this is a an account that can legally do anything it wants whenever it wants in secret as the year end statement can easily be brought to only benign activates by warehousing all the trades.

Their broker is quite an expert in that strategy to wash year-end positions for clients.

What occurred as I am told is an act in Germany in reaction to a parting shot from the retiring Secretary of the US Treasury via the Exchange Stabilization Fund.

When gold traded at $1918 it was setting up for a challenge of a very important round number, $2000. The sell off was a product of long liquidation in an anticipation of $2000 in a fast market. Gold did fall on its own weight into the $1800 area, however the body block at $1800, $1775 and $1750 was a product of the Exchange Stabilization Fund operating as an account of a major Gold Bank. Seeing that, this gold bank went to the short side for the account of its hedge funds and not wholly owned trading arm. This gold bank issued a public statement that the gold market was dead as a doornail, finished and completed.

On the level of central banking there are no secrets. The long term plan for the currency war between the euro and the dollar is a derivation of the Free Gold Thesis. That means a significant change in the percentage of fiat currency versus gold at market value held by Euroland as reserves. This thesis has a target for cooperating Asian central banks for gold holdings at no less than 15% at market value. I question some of the thesis of Free Gold thinkers, but much of it has been in my writing for more than a decade on what the end game recovery will look like.

I am told that the parting shot to break gold’s back by the Exchange Stabilization Fund was considered a direct attack on the Euro strategy for what the end game recovery will look like. The Free Gold thesis requires significantly higher gold prices to work and to elevate the euro back in reserve by choice category.

The German reaction was not political but rather a direct warning that they could demand return of their gold just like DeGaulle of France did in the 60s by making a direct and immediate demand for conversion of the US dollar holdings into Gold.

A major central bank will not insult another major central bank unless it is an act of financial war. It has not come to that yet, but it is not that far away. It is 2015 to 2017 and not 2020.

The reason that gold is relatively firm after the media leak and release on the night of the 14th is that I am not the only person who knows the real story. The price of gold will go to and beyond $3500. Gold will be market to market by the majority, if not all, major central banks. This will balance the balance sheet of the many and major debtor nations and will provide the platform for recovery after unwinding.

Respectfully,
Jim

Flore said...

2013..year of the MSM freegold

Polly Metallic said...

Sorry, I didn't see that someone had already posted a link to this article from Sinclair. I just received the piece as an email notification.

Sherlock said...

Ore em'

Many thanks for the following link!!

www.galmarley.com/index.htm
posted January 12, 2013 at 5:42 PM

The monetary history article was fantastic!

Ender said...

As most of you are aware, the framework that empowers the Freegold Concept was established years ago. For some reason, the designers thought that the common man would actually be smart enough to drive gold’s function allowing the CBs to not take the blame for the transition. This has not happened. Behind the scenes, there has always been the option to buy gold openly (in the western world). I still do not believe the Western CBs will openly buy gold, but I do believe they intend to make the common man aware of gold.

People must value gold. Westerners generally only see it as an investment. It must be seen as wealth. Education is what is needed. My guess is that the education we will all get is that the fed is not all powerful – you can fight the fed.

Good day.

Ender

Sam said...

Westerners also expect to see bubbles and corrections. Combined with media propaganda, it will be interesting to see how the western public reacts to a major drop in the value of paper gold.

Placidus said...

@Edwardo,

Thank you for your thoughts on the TA for $PoG.
I think I agree.

It is interesting to observe the western public's slow change in perception toward gold. Perhaps a continued march toward higher $PoG
(driven by ... the superorganism?) will produce broad acceptance. Then perhaps the Freegold idea will be ... obvious to all/most?

milamber said...

ENDER!!!!!!!!!!

5 yrs later & I (and Woland) are still pondering this exchange:

Hm… I think ‘a’ real message in his words was along the lines that - your money is not what you think it is and it doesn’t work like you think it works.

FOFOA, what is more valuable – gold or fiat?

Only after exploring this question will you see that the US treasury will NOT adopt Freegold as an acceptable possible solution. The only way in which the US treasury will consider this is if the entire world conspires against it and forces it to happen. Can this happen? Once again, after exploring the above question, you will see that other states will also NOT push this avenue in hopes of becoming the next ‘king of the hill.’ But, the eventual outcome is Freegold or ‘death by a thousand cuts’. Ultimately, it is the people of the world that must stand for Freegold and that will take time.

Time is what we have. How do you view the question?


Ender FOFOA exchange Sept 2008

Good to see you in the comments again!

a debrief soon?

Milamber

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

Ender wrote:

"People must value gold. Westerners generally only see it as an investment. It must be seen as wealth."

Given that gold, physical gold that is, has risen at an average annual rate of approximately 19% over the last twelve years, one wonders just what it will take, short of something freegold spectacular, to inspire the populace to value gold in the manner I presume you have in mind.


In the meantime, Robert mentioned Barry Ritholtz and his steadfast view that he can see no evidence of hyper-inflation. I am sure he can't because he continues to look in the wrong place for it, and he conceptually hasn't cottoned to the fact that the hyperinflation has already occurred. What hasn't yet happened is the dreaded ill effect from the extant hyperinflation. All those trillions of dollars have already been printed and they are "out there", but, as yet, they have not run en masse and in earnest for the relative safe harbor of what our esteemed host has dubbed "the physical plane."

FoNoah said...

@ JoJo +1. Now you know exactly how Noah felt all those years ago.

Stay focussed my friend: build your Ark.

Anonymous said...

+1 @Edwardo

IMHO only a collapse will change the sheeple's perception of gold. Even if they could somehow be made to shift their perception pre-collapse, such awareness would precipitate the collapse before most could prepare accordingly. No easy way out.

Woland said...

I have heard rumors, ( and one should NEVER repeat rumors)
that a special guest in LV "might" have something in common
with the originator of Exter's pyramid. That something would be
the letters E--er. Is this true? Who can tell? Yet, hope spring's
eternal in the minds of men. I'd love to meet Mr. Exter. And I'm
afraid one day I shall. In the meantime, a near substitute will have
to suffice. Cheers!

Wendy said...

Perhaps I am just daft .... I've been reading Jim's site everyday for about 6 years, and it's been only very recently that I've detected a "freegold" twist to his writing every now and then.

so I find this remark kinda curious:

"I question some of the thesis of Free Gold thinkers, but much of it has been in my writing for more than a decade on what the end game recovery will look like."

Edwardo said...

You weren't alone, Wendy, in finding that remark curious. It struck me as disingenuous.

M said...

God Damn... Why 7 years ?

"What is news is that courtesy of the supplied calendar of events in the Buba statement, it will take the Fed some seven years to procure Germany's 300 tons of gold. This is the same Fed that, in its own words, holds some "216 million troy ounces of gold" or some 6720 tons, in its vault 80 feet below ground level." -ZH

300 tons in 7 years ???????

Anonymous said...

My sense is that Mr. Sinclair has only recently adopted a "Freegoldish" tone. I have been reading his blog daily since 2004. He certainly has not been writing about many of the Freegold concepts that he says have been out there for the last 10 years. I do not hold this against him. In fact it encourages me that someone of Sinclair's stature and maturity acknowledges an awareness of the Freegold concept and actually uses the term Freegold.

I mark the change in his thinking when he acknowledged that he had drastically underestimated the future price of gold. I also noticed that his emphasis on TA and charts took a back seat around the same time. Something changed his view of how gold will function as opposed to how it has functioned in the past. IMO, that something was a perusal of this very blog, likely a result of curiosity arising from multiple references provided by his readers. I have written to both him and Martin Armstrong regarding Freegold.

This blog is getting noticed.

M said...

@ matrixsentry

Good post. I wasn't aware until today that he actually uses the term freegold.

I'll check the last time he's been on KWN but he's never said it on there.

Has his tone on mining stocks changed much ?

Unknown said...

I think what is most notable from Sinclair is his reference to the Exchange Stabilization Fund, which I mantioned several times here in conjunction with JPM, and the FRA fiasco cited by Eric DeCarbonnel and Rob Kirby.

These guys are absolutely correct in pointing out the the ESF (with a little help from Summers) has efeated Gibson's paradox through the use of interest rate derivatives.

The 55,000 dollar question is: Do the rest of the BIS banks realize (and accept) this as part and parcel to their ongoing support of the dollar?

I think Jim would say NO, based on what he has inferred.

But as I said before the entire thing is blown out of proportion. This simply isn't newsworthy based on their prior announcements.

What I find newsworthy is the change of sentiment within the MSM. There is far too much "conspiratorial flavor" to the usual output of the Reuters propa-mill, and the Lemmings are rushing into coin.

It's almost as though the trigger for freegold is being pulled by the "house of gold" (giant holders) to reign in the fiat chips.

Something in the air?

Herb said...

In one of his books on futures trading, Stanley Kroll said that boredom should not be a reason to liquidate a position. I suspect that some of the bearishness on gold comes from individuals who just aren't getting enough psychic juice from this extended sideways market.

I think Kroll was absolutely right. The fact that consolidations are boring doesn't mean that they are a harbinger of things to come. IMHO the issue regarding fireworks in gold is entirely a matter of "when" rather than "whether."

Aquilus said...

Public service to email comment subscribers: New post is up.

dragonfly said...

@matrixsentry - JS was posting at Jim Puplava's site for a year or two prior to creating his own. That period was kind of a hoot because he was going all bonkers over $354 gold and the derivative bomb it was going to set off. Maybe he'll reveal what that was all about some day. I always wondered what came between him and Puplava, if anything. Lots of Harry Schultz via JS type interaction back then as well. Anyway, shortly after he started JSMineset, around the time he had a bunch of us faxing him charts we'd analyze, and he'd comment on and fax 'em back, someone (pre-CIGA) asked him if he'd read the Gold Trail and A/FOA. He said yes he had and that he hoped it didn't go there. A very short and terse, one-time response. He's never said a thing about it again, until his recent comments. So, he has known about it all of these years. A person doesn't forget the Gold Trail, especially a man like Jim Sinclair. I'd appreciate a link to the chart by CIGA Pat that Sinclair referenced, if anyone has it, because it sounds like it's related to something I've been wondering about when comparing ECB financial statements. Something appears to have changed pretty dramatically over there. Maybe if Belgian is reading here, he could bring us up to speed on that. Much appreciated in advance. Back to the bleachers.

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