Monday, February 11, 2013

Think like a Giant 2

"Think that I a fool, because I trade gold for thousands US an oz.?
You will think much on this in the future."

"Something that Big Trader or Another said a long time ago about trading gold off market in the thousands. Trust me, it's there somewhere way back in the pre USAGOLD days. It seems that gold was then and is today traded between countries, CBs, special accounts,,,,,,, at not only contract prices but in the "perceived prices" that would exist in a non-dollar world. Hard to believe? Don't be so quick to laugh. We are talking about gold traded in large amounts on the "possibility" of a no dollar reserve world,,,,,, gold moved from "under the skin" to "under the skin" so to speak. […]

Today, gold is worth far more than its traded contract price,,,, and has been for some years. […]

Listen to this and listen closely: "the real value of gold today is based squarely on the probability of whether the US dollar can survive as a reserve currency"! No problem, you say? Well, you may think a little different in a few weeks or years. […]

In some cases more than a few people have "done the math" and come up with some startling probabilities and possibilities. In some perceptions, it's a political certainty!"

In Legs there was a quote from Another that mentioned the "discount trade" in gold: "If gold rises above its commodity price it loses value in discount trade." In the comments under the post, Woland asked about it:

Woland said…

I have a question about the specific meaning of a phrase quoted in a paragraph by Another;

"[Central] banks do lend gold with a reason to control price. If gold rises above its commodity price, (me: cost of production) it loses value in discount trade".

My reading of this is that "discount trade" refers to oil sold BELOW the currency price OIL would otherwise demand, in return for gold being made available to OIL at a price far lower than would otherwise be possible, without the CB leasing/intervention. Is this the correct interpretation of the phrase?

(I am reminded of the old example by Another of $30 oil plus X amount of gold, then later the same $30 plus XX amount.)

January 18, 2013 at 11:08 AM

I responded to Woland with this comment:

Hello Woland,

My reading is that "discount trade" refers to the BIS deals in physical gold at a "discount" to the "future reset price", deals that kept the really big money wanting real gold from blowing up the paper markets and the "plan" to make it to the euro's birthday party. In the 90s, the "discount price" ranged (according to ANOTHER) from $1,000 per ounce up to $6,000 per ounce. This was a big discount on the "future reset price" of $10,000 and the real future dollar price of $30,000.

Of course he may have simply meant the low commodity price of gold when he wrote "discount trade." But I put the emphasis on the word value: "…it loses value in the discount trade." The value was the control it gave the CBs in managing the Giants. The wider the gap between gold's "price" and its obvious "value" the more room the BIS had to negotiate deals that would keep the Giants happy. Here, I'll try to make my case using ANOTHER's own words! ;D

First, let's look at the deal the Saudi's cut for themselves in the early 90s which you mentioned above. Here's how ANOTHER explained it:

Date: Sat Oct 18 1997 21:04

The Deal:

We ( an oil state ) now value gold in trade far higher than currencies. We are willing to use gold as a partial payment for the future use of "all oil" and value it at $1,000 US. ( only a small amount of oil is in this deal ) And take a very small amount of gold out of circulation each month using its present commodity price.

If the world price can be maintained in the $300s it would be a small price for the west to pay for cheap oil and monetary stability.

The battle is now between CBs trying to keep gold in the $300s and the "others" buying it up. In effect the governments are selling gold in any form to "KEEP IT" being used as 'REAL MONEY" in oil deals! Some people know this, that is why they aren't trading it,, they are buying it.

Not all oil producers can take advantage of this deal as it is done "where noone can see". And, they know not what has happened for gold does not change in price! But I tell you, gold has been moved and its price has changed in terms of oil! For the monthly amount to be taken off the market has changed from $10 in gold ( valued at $1,000 ) /per barrel to the current $30 in gold /per barrel still valued at $1,000! Much of this gold was in the form of deals in London to launder its movement. Because of some Asians, these deals are no longer being rolled over as paper!

First of all, they said they valued gold at $1,000/oz. in this deal and took $10 worth of physical off the market per barrel for a "small amount of oil." This was in the early days of the deal (c.1991). $10 is 1/100th of $1,000 so they were taking 1/100th of an ounce per barrel. In the early 90s the Saudis were producing about 9 million barrels per day. ANOTHER said that starting in 1991 they were taking about 20 million ounces of gold per year off the market through this deal. 20M ounces X 100 = 2 billion barrels of oil per year. Divide that by 365 days and it looks like the "small amount of oil in this deal" was 5.5M barrels per day, or about 61% of their production.

20 million ounces at $360/ounce would have cost $7.2B. At $1,000/ounce it would have cost $20B. 3.3B bbls of oil sold at $30/bbl would have brought in $100B per year. So let's say that they came to the negotiating table in 1991 saying that 20% of their production was "net-production" or surplus for which they needed a real wealth reserve (gold) in return.

There were two options on the table. To use ANOTHER's first example, they could lower the dollar price of oil from $30 to $25, but also price oil in gold at 1/400th of an ounce per barrel. Here's how ANOTHER put it:

What if the oil states offered to buy gold with oil, OUTRIGHT? No currencies involved. " We will produce flat out, all the oil you want. And, we offer this oil as payment, per barrel, to buy ( say? ) 25US dollars or gold priced by us, at ( say? ) $10,000oz.!"

The answer is very simple, the world would sell them gold for oil. I tell you now, this almost happened!

If that had happened, as ANOTHER said, anyone with gold would have gotten oil really cheap. And the gold arb would have immediately taken gold to $10,000 per ounce. The Saudis could easily exchange gold to cover their overhead costs and save their 20% excess without a problem. The problem for the CBs would be that the world would be off a fiat standard and back on a gold standard a decade before the euro's birthday party.

The other option on the table was, let's not rock the boat just yet. At $30/bbl, you want to save about $20B in gold each year. At current prices that would be 50 million ounces or 1,555 tonnes per year. But you saw what happened in the late 70s. Obviously you can't just go to the market and get that much—in other words, obviously the price of gold today is bullshit. Obviously it's going to have to reset at a much higher level someday, we'd just prefer that day not be today.

So let's see if we can figure out a way for you to take, say, 20M ounces, or 622 tonnes per year off the market as long as we can keep the price of gold low so as not to rock the fiat currency boat. We'll even underwrite (guarantee) this deal with our own gold (and we have lots of it!). From what you, the Saudis, obviously understand, this is an excellent deal for both of us, especially if the gold you get comes from someone else and not from our vaults. But either way you're covered. Deal done!

I guess we will never know the exact deal, but ANOTHER sure spilled a lot of details in his early posts if you look closely!

Now let's see what ANOTHER said about the discount trade in gold:

"As long as there is an open market for gold, it will not be allowed to trade above its commodity price! It has far too much value for that to happen. You see, in much the same way that a zero coupon bond trades at a discount to face, gold is traded for its discount of "money value to commodity price! Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future.


With gold discounted to its production cost and below, those that have it can trade it for its monetary value. Make no mistake, the BIS knows gold in the many thousands. The future "reset value" of gold is the key. "support the dollar with oil and the currency system works" "fail the currencies and the dollar will come off the oil standard and the BIS will reset gold to $10,000+ with many conditions. That is why they continue to accept the dollar as a reserve. If Japan or any other COUNTRY sells US treasury debt it's all over!"


The selling of old dollar reserves, alone will reprice gold in US$ terms of at least $6,000/oz! Its present interbank reserve value.


The $6,000 valuation of gold can only be true if currency deflation destroys enough dollars to bring it down to that range. Without deflation, the dollar will be devalued much lower than this (higher gold price)! Once the Euro is created and begins to effect world trade (late 1999 perhaps), the gold market will begin a transition as never before! I think it will be interesting to follow the politics of this change, yes?


When the battle to keep gold from devaluing oil ( in direct gold for oil terms ) is lost, the dollar will find "no problem" with $30,000 gold, as it will be seen as a "benefit for all" and "why did noone see this sooner"?


The true value of gold, as a monetary currency, in today's current US$ values, is over $30,000. If all currencies were destroyed, and gold only was used, this value would be higher. However, currencies will be used in the future, as today, only their value in trade will change. They will no longer be held as reserves, without gold at their side!

Okay, so if you've got really big money and you want to protect a large portion of it in physical gold, you've got to pay what to us shrimps would be a big premium. But to the true Giant it is actually a discount.

Imagine, Woland, that you woke up one day and discovered that you owned an oil field that would produce millions of barrels a day for the rest of your life. Would you consider that a windfall? In fact, that's exactly what it is. And with that windfall you will be able to raise your standard of living up to the greatest standard available to mankind in 2013. You will even be able to accumulate wealth on top of your unlimited "maximum consumption" binge. What a rare treat!

But what you won't be able to do is get the full windfall profit from moving your excess into physical gold that we shrimps can get. You already got your windfall. You simply have too much money to do what we're doing. If you tried to go "all in", you alone would drive the price so high that you'd never get the windfall you were after. Go ahead, try. Approach your local Bullion Bank and see how far you get. I bet you'll eventually find yourself in a private room somewhere in London receiving an education and an offer. What seemed like a huge premium when you walked in will feel like a big discount by the time you leave.

When ANOTHER used terms like discount (and even premium) in this context, I think he was usually referring to gold, and I don't think he was talking about the 10% and 20% premiums and discounts we shrimps are used to. I think he was talking about Freegold-sized premiums and discounts. Remember this fellow from the post?

"A proposal was offered to borrow in broken lots, 3.5 and 5.5 million ozs for resale. It was turned down. The owner offered to sell only, no lease. What turned heads was that someone else stepped in and took it all, at a premium!"

I wonder what premium he got. That's the same 9,000,000 ounces I mentioned later in the post converting it to 280 tonnes. Remember ANOTHER saying:

"Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

Think now! I wonder if this guy got "thousands US an oz." when he was expecting $310/ounce. Let's see, that was a $2.8B sale offer at $310. At $1,000 it would have been $9B. Yeah, I guess that would turn some heads.

Woland, have you noticed that in ANOTHER (THOUGHTS!) there are many times when ANOTHER gives brief replies to various people yet we don't always know the question that was asked or the context in which it was asked? Well, I added the link to the old Kitco archives to my list of links in the sidebar. It's called Early Kitco Forum Archive.

It's pretty easy to click over and find the comments associated with ANOTHER's answers, and I think it adds a new dimension to (THOUGHTS!). For example, here's a discussion about that 9 million ounce deal, but you wouldn't have known that's what it was about from reading only ANOTHER's side of the conversation. I included a little more of the discussion for additional context (and also just because it was interesting), so enjoy!

Date: Fri Dec 12 1997 22:18
sweat (To Anybody) ID#23782:

Is there any way to find out if the 9,000,000 oz. deal really happened?

Where might the trade have taken place?

Is this whole gold trading business really that much "cloak and dagger"?

Date: Fri Dec 12 1997 22:31

What is "cloak and dagger"?

Date: Fri Dec 12 1997 22:54
sweat (ANOTHER) ID#23782:

"Cloak and dagger" is an expression I would use for an action ( or trade ) done in great secracy.

My experience as a trader has taught me to value such things as
a ) time and sales - as reported on various exchanges
b ) open interest - as reported on various exchanges

The market always moves to size, you spoke of "making the turn". I would love to see documentation of a trade that size.

No offence intended, of course.

Date: Fri Dec 12 1997 23:08

You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich. Wars will be fought over the lack of “visibility” of these dealings.

Date: Sat Jan 10 1998 21:50
sweat (ANOTHER) ID#23782:

What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis? How much paper GOLD is out there ready to be squeezed? Do you think OIL will be able to collect what is owed to them?

Why would OIL not want some ownership of GOLD EQUITIES?

Date: Sat Jan 10 1998 23:13
Cmax (COMEX is only but a refernence to the value of paper gold, NOT physical.) ID#344205:

It is interesting to watch all these various reasons for gold’s fall…..but most are missing the REAL issue.

The fact is, that when we talk about the purchase of gold, we are really talking about two divergent things:
a. that of the physical metal……… ( money )
b. that of a paper derivative, an I.O.U., kind of like a dollar bill…… ( currency )

What ( and who ) determines the price every day of the gold market?

Obviously, everyone looks first to COMEX as a reference before adjusting their prices.

What does COMEX use?

Supply and demand determined by it’s participants, who trade in gold contracts ( er ah, derivatives? ) , gold leases, and options and futures ( er ah, derivatives of derivatives ) .

One point must be plainly put forward:
Gold contracts, no matter what they are printed on or HOW they are worded, they are merely DEBTS, nothing more than a simple I.O.U. There is nowhere near enough gold on the planet to satisfy all these I.O.U.’s ( debts ) that are outstanding…….. and they are the very antithesis of what acumulators ( hoarders ) of wealth find in the spirit of holding real gold ( money ) .

I find it so wildly insane that holders of physical gold, ( money ) , would allow their wealth to be sold ( or valued ) at a price that is established by the supply of FIAT gold. If this scenario was written into a novel, no one would believe it……. or one would read it only as a comedy.

ANOTHER said it quite well, in his comment that “there is no end to the amount of paper gold that can be created.” All of this FIAT supply has overwhelmed the REAL demand for physical, and most people believe that they REALLY have purchased gold, when they buy these contracts. As long as the majority of gold purchasers believe that their paper is as “real” as physical, the COMEX paper gold value reference will continue to drop.

I for one, no longer accept established paper gold values for the real value of gold. Just try and buy a substantial quantity of the yellow……and what do you see? 6 months ago, you could buy at spot. Today, one ounce coins have a premium of $14 over spot….and rising every day. Oh, and don’t forget that even when paying the “premiums”, one has to really work at finding the coins for delivery. Easier said, there is now a phenominal demand, but very little supply of physical. And yet we allow paper to determine gold prices. Gold has never had the brute demand as what we have today……yet we are told that prices are down due to lack of interest.

COMEX should now be looked upon as the animal that it really is……
A REFERENCE TO THE VALUE OF PAPER GOLD. It has nothing to do with the price of physical beyond suckering in the few ignorant to sell there physical for the price of paper.


CMAX: You are exactly correct! Follow your thoughts. good luck

SWEAT: What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis?
From 1991, appx. 20m/oz./yr., now it is more.

How much paper GOLD is out there ready to be squeezed?
Over 14,000 tons.

Do you think OIL will be able to collect what is owed to them?
It will come outright or thru the increase in value of metal owned after an oil for gold bid.

Date: Wed Feb 04 1998 20:09
kuston (followups) ID#273227:

Another - Did I misunderstand you posts last year? When you were promoting your gold theory last year - you stated silver and platinum would crash along with paper. I remember specifically asking this question just before I made a large physical purchase. Today, you are promoting world wealth will go into all physicals. I ask only for personal reasons. My physical collection has been going on for a long time, that's how I found Kitco many many months ago.

Date: Wed Feb 04 1998 20:04
sweat (ANOTHER) ID#23782:

Is it still possible that OIL will make a bid outside the BIS? If so, where might one look to follow this drama? How has the collection of physical progressed? Kitcoites have surmised RBA's 167 tonnes went to China or South Korea. ( Korean collection of 161 tonnes looks suspicious ) Any comments?

Date: Wed Feb 04 1998 23:23


Mr. Sweat,
If oil or the BIS bid for gold, you will know it ! In your terms,

" up front and personal"??

RBA's 167 tonnes ? No comment.

Mr. Kuston,
Please understand, that wealth will move into all forms of real assets as the destruction of our debt/ digitial currency system continues. When the currencies move to a final resolution, it will be the "marketplace for precious metals" that will die first! It is well known that gold will hold it's value above everything. All other metals could lose much of the value they gained prior to this meltdown! Remember, "when the currencies go to nuclear war, all paper and paper markets will burn"! Many hard assets will lose in the public mind as confusion will rule. In the thoughts of many, gold will perform!

The discussion above sparked an email exchange with a reader, the conclusion of which I wanted to share with you:

Hello XXXX,

Okay, now I think I see where you were going with this "top level approach". Here's what I think. At the highest level of wealth, I think the giants that understand gold have a lot less than 50% of their wealth in gold at today's price. At a Freegold price it may be closer to 50%, but I doubt they would book their gold at Freegold prices now, or even at the much higher off-market price they paid.

At that level, gold is merely insurance of sorts, even if they understand Freegold, and especially if they understand Freegold. The reason it is transacted at a higher-than-market price is so that the seller of the gold gets the future Freegold windfall now at the time of the sale, and the buyer simply preserves his current purchasing power through the transition. I'm only speaking very roughly, of course, since the higher prices mentioned by Another were not the full revaluation figure, but some number in between. So essentially the "Freegold windfall profit" is being split between the buyer and seller at the highest levels.

If you have, say, $20B that you want to put into gold, you can only do so in paper unallocated through the BBs. When the revaluation happens, as Another said, you will get your $20B in real gold at the new Freegold price. In other words, you buy $20B in unallocated paper gold today and then after Freegold you will have about 11 tonnes of real physical. Alternatively, if you want to take possession of your physical now, or have it allocated now, you are taken into a private room and given a very private education on the realities and constraints of today's gold market.

Here's my guess. Perhaps you are given two choices. $20B in paper gold as above and you suffer the same fate as everyone else in paper gold but you're at least guaranteed that physical at the revaluation price (11t), or you can take 22t now for your $20B. Let's see, that 22t option would be at a present price of $28K per ounce. So you're still likely to double your wealth if you take the latter deal and believe the story. But there's no way you are going to get the 370 tonnes that today's price says you should be able to buy.

But more likely than that is they simply say, look, you can't get more than 5 tonnes if you want physical. If you want paper gold, we'll take your $20B and give you the paper gold credits, but you can't have it allocated because there's simply not enough physical to go around. So let's say this guy gives them his $20B and also gets the 5t allocated. Come Freegold his paper gold will bring him 9.9t plus he'll have his 5t allocated for a total of 14.9 tonnes. See how that outcome is right in between the two choices above? And the best part is that this way they didn't have to explain Freegold to him, they simply had to explain the realities and constraints of today's gold market.

So now let's look at this guy's net worth. Let's say in Freegold his gold is roughly half of his net worth. 14.9 tonnes in Freegold would be about $26B, so let's say this guy is worth around $50B in Freegold. Maybe he's worth $40B today (pre-Freegold) because he's going to make a little bit of a gain (~25% gain overall) through the transition because of his choice to go after some physical gold. Today he only has 5 tonnes in actual physical, but in reality he has the equivalent of 14.9t because he put half of his net worth into a combination of paper and physical gold.

So, at $1,680, 14.9 tonnes is $805M, which represents only 2% of his current net worth. This is what I mean by insurance. The really big money cannot go deep enough into physical to get a windfall anywhere near what we shrimps can. It can only use gold as insurance to preserve what it already has, and with a little foresight, make a relatively modest gain.

Now, if we apply this across the board to those elites with $35T in net worth, 2% in real physical would be $700B or about 13,000 tonnes of physical, which sounds reasonable. But perhaps some of them have much more, like, for example, the Saudis. They could easily have 6,000+ tonnes alone (according to Another's figures), but even that is small potatoes compared to what they could have bought at market prices over the years.

Here is what the USG worried about back in 1973. It's from Foreign Relations of the United States, 1969-1976, V. XXXVI, The Energy Crisis, 1969-1974:

Saudi Arabia, Abu Dhabi, and Kuwait, limited by small populations, inadequate numbers of technically capable people and a dearth of non-oil resources, will not be able to increase spending on imports as fast as oil revenues mount. Nor could their gifts to other Middle Eastern nations even on a generous scale, greatly reduce this surplus of receipts over current expenditures.

Thus the foreign assets of the Middle East countries could amount to between $50–$80 billion by 1980 in constant 1973 dollars. At the upper limit these assets would be equal to about 60% of the world’s gold and foreign exchange reserves in 1972. The trends already in motion, if continued through 1985, would result in the Middle East oil producing states accumulating foreign assets that would be truly astronomical. Their assets would range from a low of $100 billion to as much as $180 billion by 1985, comparable to total gross U.S. foreign assets and to more than double net U.S. foreign assets.

Foreign assets of such enormous magnitude would inevitably be held in relatively liquid forms, such as securities and short-term instruments. The Middle East countries lack the industries and managers to make direct investments abroad on a really massive scale. Moreover, their buying up existing foreign companies would cause strong policy reactions.

In any case the Middle East oil producers would have unprecedented financial power. Discretionary use of such vast assets obviously has enormous potential for disruption of financial markets. Attempts to neutralize these assets through capital controls in producing countries might induce the producers to curtail output.

In an April 17 briefing memorandum, Saunders and Quandt reminded Kissinger of Yamani’s proposal for a special relationship with the United States (see Document 140), the “real purpose” of which was to develop closer strategic ties by binding the United States to Saudi oil, offsetting a short-term U.S. balance-of-payments problem by investing in the United States, and thus guaranteeing that the Saudis would not cut off the flow of oil.

The point here is that they knew, even back in 1973, that the Saudis essentially had gold cornered. The Saudis could, theoretically, have had 60% of the world's gold by the early 80s and probably all of it by the late 80s (and it's a good thing for them that didn't happen). But instead, someone worked out a deal and, by 1999, let's say the Saudis had 6,000 tonnes of physical amounting to maybe 4% or 5% of the world's gold at that time, rather than all of it or even 60% of it.

You see, the Saudi's windfall came in the 1940s when they woke up and found themselves sitting on top of the world's richest resource. Freegold will not be their windfall, they already got that long ago. Freegold will simply preserve it for them long into the future, perhaps even well past the end of fossil fuels. And that's kind of the way it is for any Giant at that level. If you're worth $40B today, you already got your "windfall" and Freegold is simply a way to lock it in and preserve it far into the future, it is not a way to multiply it many times over. The realities and constraints of today's gold market make that impossible.

There's plenty more that wealth at that level can do other than just hoard gold:

The point is that they don't hoard gold for profit. They do it to lock in the profit that they already made above and beyond their ability to spend it in their lifetime. And that's the way the gold market has been managed at this level. Sure, they will get some gain, some profit from the Freegold revaluation, because not everyone at that level is in gold.

So, yes, those higher prices are already here for the super-wealthy Giants, and always have been. That's what Another was trying to tell us. And this is my version of a "top level approach"! ;D


Hello Fofoa:

Wow! Thanks for a really comprehensive answer. The "back room" explanation was vaguely familiar, so I'm sure you're dealing with questions already asked and answered. Your email read like a personal post, and I'm going to go back and re-read it several times until I get it all. This bit...

"freegold windfall profit" is being split between the buyer and seller at the highest levels...

is a great explanation, of a more scrambled thought I had, but this...

they don't hold gold for profit

is a Goliath idea: nothin' like that ever entered my head before! Both concepts would be very bloggable, by the way. Thanks again, and all the best!



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enough said...

Gold Leaps Into Backwardation!

The April contract, which is not yet being “rolled”, fell into backwardation.

Aquilus said...

More "trollin' with FOA" that might give an indication of why "wealth" does not play the COMEX/LBMA:

"These goldbug guides (mentioned above) are mostly playing for a currency profit, not gold. The same is true of "in the ground" gold advocates. While their profits and loses grow and fall in line with most gamblers, slowly, these players are losing credibility as the paper markets out play these goldbug's net worth. As events they expect to repeat are rebuffed by massive "cash backed" selling of paper gold, the
expected "big" profits always fail to arrive. It's been this way for as long as Another said it would! Yes, something could change and send paper gold through the roof before anyone can stop it. If it does,,,,, good! Physical gold will do very well! But, I doubt these profits will ever be sent out as checks in the mail. Believe it!

Witness the recent long blowout of paper players on the comex? The so called "big traders" these guides thought were about to demand delivery. They were not the real "Big Traders" (I know) were they? If they were they would have demanded delivery even if the short side sold 500,000 contracts short. Even it they (sellers) drove the paper price down with empty sales! The reason these real gold advocates
(Giants) buy physical gold is because they are waiting for this dollar casino of a gold currency market to shut down. This reality will end in a locked, no delivery market! Once again, Believe it!

Truly, this recent move was long "little traders" wanting to make currency profits without the real assets to back it up. Nothing more. We will see more of this as it all comes to it's end. When the real gold run Another points to comes,,,,, no one will profit anything near the amounts physical gold advocates will.

Aquilus said...

All: understand the quote from FOA above.

Once you have made your fortune, and you are ALREADY wealthy, the "investing" and "growing" it has already been done. Or in the case of the oil-sheikhs, their "wealth multiplier" ALREADY happened when they found the oil.

Now that part of the wealth (not your daily expenses, enterprises, etc) needs to be put in LONG TERM STORAGE. At this point purchasing power preservation for the long term (generations) matters more than returns. This is the process that drives them to buy gold WITH THEIR LONG-TERM SURPLUS and this is why they have no interest in playing in the paper casino. They will get physical in bulk however they can understanding where the price of physical will be, knowing the paper markets are temporary. They don't care about the paper markets either way, if they exist great, if they don't great - no impact on them.

Is all of it at freegold-like prices? Sources tell us of mining financing deals, of delivery against contracts, but only for the ones that have something the world needs. Outside of these, it makes sense that bulk purchases would carry a premium when one tries to buy a significant percentage of the world's flow, doesn't it?

So what's there to conspire? It's just business. In everyone involved's interest. There's nothing illegal or mysterious about it if you put yourselves in their shoes. But it does take imagination...

So focusing on identifying, counting them, listing them is completely futile. It takes away from understanding the sound business reasons for taking those actions. That is what matters, not who or how many.

Understand their motivation, understand the places where and ways in which they can go about implementing their goals and you will gain the perspective you need.


MatrixSentry said...

Oh damn, who fArted?

Stupid question. The noxious one just can't help it, can he?

Archer said...

Thanks for the heads up, enough. The following bit of weirdness is for you, because, somehow, I think you might, how do I put it, appreciate it.

enough said...


I saw one of these in broad daylight in 2011. It flew right by me heading north, whizzing and cracking with green "lightning" shooting from it. It must have been smaller than the one in russia as I felt no serious vibration. But it seemed the size of a bus to me and it was close to surface. Not on drugs and here is proof. Coolest damned thing I ever saw......

TontoD said...

Thank you Aquilus

Indenture said...

Aquilus: You my friend are on a roll. If 'others' haven't been around lately you have picked up the slack.

Anonymous said...

From GEAB Feb 2013: google translate

GEAB N ° 72 has arrived! Global systemic crisis - Second half of 2013: Reality or anticipation of the collapse of the dollar causes the world to reorganize on a new basis

As well as the Euro crisis has pushed Europe to modernize and adapt to the challenges of the XXI century the economic and financial governance, the terrible crisis of the U.S. dollar will force the world to transform the entire governance structures world, starting of course with the international monetary system to calm the storm that is about to hit currencies

According to our expectations, this reorganization, which will begin to take shape with the G20 in September, will unfortunately be in a hurry because our team provides the first major frights on the dollar for the period March to June 2013.

A sentence of Antonio Gramsci (1) describes beautifully the long transition period we are currently experiencing dangerous: "The old world is dying, the new world and soon to appear in the chiaroscuro arise monsters." This period will finally be completed but the monsters still agitate.

Not surprisingly, one of the powerful factors that will accelerate the loss of influence of the United States on the world for oil. There is indeed in the last days of the petrodollar, a key element of U.S. domination. That is why we decided to treat at length in this GEAB the global issue of oil. We also GEAB Dollar-Euro-index and index to track more reliably the evolution of currencies in the current monetary storm. Finally we conclude as usual by GlobalEurometre.

Anonymous said...

In this public announcement GEAB N ° 72, our team has chosen to present the series of indicators of crisis brings to maintain its alert "global systemic crisis" for the period March to June 2013 as well as the anticipation of danger "islandisation" management of the banking crisis.

The indicators of crisis burst, or why we maintain alert March to June 2013
Last month (GEAB No. 71), the beam trends and indices announcing a disaster in the period March-June 2013 has further strengthened. This is the first "currency war" that takes political dimensions and undermines confidence that countries agree among themselves. We develop our analysis below. But there are also many internal clues that should alert about the United States.

In deciding to decouple the debate on cuts / tax increases and the debt ceiling (2), Americans have doubled the shock to come: there was only one late February / early March there is now another in May. This decoupling reveals a clear strategy of the Republicans. Certainly they exert maximum a showdown over raising the debt ceiling to fall further spending, but ultimately they will feel obliged to vote for the increase not be held responsible for the disaster that would follow a default ( 3). However the impact of budget cuts on 1 March, though certainly not painless, are not nearly as appalling and Republicans are determined to negotiate a significant reduction in the budget deficit under penalty of leaving the work stopgap cuts automatic.

Anyway, with these cuts in early March, and after a so-called "surprising" and largely ignored decline of U.S. GDP in the fourth quarter of 2012 (4), which may still think that GDP growth in 2013 Q1 be positive (except manipulate the numbers)? The decline is even more inevitable that some days were disrupted activity in the north-east by the blizzard Nemo and the flu epidemic was intense this year (5). This practice will apologize (6) when will justify a reduction in GDP in an economy that is officially restart. However the announcement in late April of a relapse of the United States into recession (two consecutive quarters of GDP) will be a small effect on the global economy.

Fortunately, a "dam" was constructed to avoid the waves rating agency Egan Jones, less biased his three sisters (one that has already fallen three times the rating of the United States to AA-), is prohibited 18 months to note the country (7), what a happy coincidence! And among the three major rating agencies, S & P sued (8), the one and only who dared downgrade the United States, second happy coincidence! Others have only to keep tile.

This "dyke" as futile as it reveals fears especially at the highest level in 2013 and is an indicator of more of the impending shock. It is in this context that we must read off at 1 January 2013 of the unlimited guarantee of current accounts by the Federal Deposit Insurance Corporation (9) (FDIC) assuring only up to $ 250K, are 1.4 trillion Dollars that are no longer guaranteed (10), which could conveniently avoid bankruptcy of the FDIC in case of problems ...

Anonymous said...

And apparently important players in global finance prepare too: huge paris down were taken for maturities up to the end of April (11), two Swiss banks change their status to their partners are more responsible for their own money on bank losses (12), Eric Schmidt gets rid of 2.5 billion Dollars of Google stock (13), etc..

But it is not only the markets prepare for the worst. The U.S. government itself seems to expect unrest and violence in many: first weapon he rifles its 7000 Department of Homeland Security (DHS) (14), then Obama signs Text for the mere fulfillment of Americans representing a vague "imminent threat" (15) to the chagrin of some of the U.S. public ...

Bank failures: Towards a "islandisation" of crisis management
Faced with this shock, our team believes that most countries, including the United States, will be closer to crisis management "in Icelandic," of not bailing out banks and let them wreck (16 ). We already have a preview with the liquidation of the Irish bank IBRC that gives ideas to many people: "How Ireland bank liquidated its burden in one night" as La Tribune (17) with admiration. This possibility appears increasingly as the solution in case of relapse banks, for the following reasons: firstly, it seems much more efficient than the bailouts of 2008-2009 judging by the recovery Iceland, on the other hand, countries no longer really afford new bailouts, finally, we can not deny that the temptation must be great for getting rid of leaders in a popular part debts and "toxic assets" that clutter their economies.

These banks "too big to fail" are indeed gavaged debts public and private western they pulled their profits and power. GEAB in the past, our team has already made the connection between a bank such as Goldman Sachs and the Templars (18), this order of soldier-monks of the thirteenth century which was outrageously rich on the backs of states and which King Philip the Fair ended, recovering their gold to the coffers of the State. You can read some trends along this line: the efforts of some states to force banks to separate banking and bank deposit (19) would in effect as of the first difficulties do not affect too much the second, in the Similarly, all trials which have rightly been some very large banks currently (Barclays, etc ... (20)) can also be seen as a way to get money from the banks to inject in State funds or the real economy ...

No officer of great country will probably not decide to "skip" a bank, but one thing is certain is that the motivation and the means to save the banks in difficulties will now have no connection with those set implemented in 2009. If any leniency might appear to TBTF, as Bank of America, which seems a bad way, it remains true that those responsible will be put to maximum.

But whatever the political management of this period, as we anticipated in GEAB No. 62 ("2013: end of the domination of the U.S. dollar in the global settlement of commercial transactions"), this new shock will accelerate loss of influence of the United States, including their ultimate weapon, the Dollar

RJPadavona said...

My favorite FOA quote is:

"Human society has from the very beginnings formed tribes and picked sides against each other. When we are not battling nation against nation, we jockey for position within our own groups. Right down to "me and my neighbour against the three houses down the street. As a tribe ,,, as a nation ,,,,,, as a group ,,,,,, our war is really a human problem with each other and always has been. In better context; the problems are in the way we use our laws and governments to gain advantage over the next in line."

In large part, this quote is my favorite because it reminds me of another favorite quote of mine by Pulitzer Prize winning biologist E.O. Wilson:

"Darwin in the DESCENT OF MAN probably had close to the right answer . . . He said that human evolution was driven in substantial part by group selection, that is, group versus group, inter-group competition, one group — tribe, clan, whatever it was — acting aggressively toward others, defending territory, acquiring territory, dominating if they can, enslaving if that’s possible."

I hold these quotes near and dear because they played a huge part in me dropping certain baggage that I carried regarding my studies of libertarian political philosophy and its obsession with individualism as the be all-end all in understanding human action. This kind of thinking restricted my ability to comprehend how the world works because it ignores the herd mentality that we all carry around deep inside us. The mindset that fuels the Superorganism.

I've always thought that someone's ability to save was kinda an inherited trait. You're either a natural born saver or you're not. And while I still mostly believe this to be true on an individual basis, I heard something on National Proletariat Radio this morning that made me think a little harder about the saving habits of groups:

Behavioral economist Keith Chen of Yale University has recently published a study he claims concludes that people save more or less according to the language they speak........

He divided up world languages by whether they distinguish much between present and future tense.
He then compared speakers of those languages based on savings statistics.

He found “huge differences.”

For example, he found that people who speak languages requiring a separate future tense— English, Arabic, Greek, the Romance languages— are far worse at saving money than people whose languages don’t really distinguish between the future and the present, like Chinese, German, Japanese, or Norwegian.

After factoring in people’s education levels, their incomes, religious preferences, Chen found that the different-verbs-for-present-and-future people, were 30 percent less likely to have saved money in any given year.

By the time they reach retirement, these people will have saved on average more than $200,000 less than speakers of languages with no future tense.

In other words, depending on what language you speak, and if you wish to be a good little saver, it might be best to listen to your mama and don't talk to strangers ;)

This is a very interesting subject to me. I hope it is to others as well. One of the most profound linguists to ever grace us with his presence in the Comments section seems to have flown the coop recently, so maybe our resident linguist, Aquilus can weigh in on whether or not he thinks this study is bullshit or worthy of consideration.


Michael H said...

I admit I cringe every time I read that 'the economy cannot withstand oil above such-and-such a price'.

Price is just a number. Oil could cost $10,000 per barrel and the economy could be humming along just fine, provided $10k/bbl is still cheap relative to the rest of the economy.

So the real question is: what constitutes cheap (or cheap enough) oil? It is not price alone.

Unknown said...

It can never be overstated enough that our entire world is predicated upon the continuing abundant flow of affordable oil.

In the paper world all valuations, all futures, all stability depend on this.

In the physical plane all prices of the outputs of production hinge on this, relative to oil's inputs.

The question is not where we draw the line, but simply to understand the connection.

Even Michael, as you know:
Price is just a number. Oil could cost $10,000 per barrel and if it is ... $10k/bbl is relative to the rest of the economy.

Things will not be quite humming along for a few months. You have just described a tell-tale indicator of a post freegold transition. We won't get 10K oil without a reset.

And in the physical realm today ... a good time to test the coin shops to see what their stock is, and what premium ... and what new paperwork if any. Hmmm. That's about all.

It will be worth knowing. We are almost to $100 swings in paper gold within a 30 day period. Not quite, but close. I'd like to see more volatility than that.

But it is still a good weekend to shop for shrimp-gold. It may be on sale, though they may also be sold out.

costata said...

Hi DP,

Thank you. I'm still catching up with the rest of the comments but I wanted to respond to gary without further delay.

Hi gary (not the troll),

By "scrutiny" I meant we tried to construct a sound case to support the argument that, for example, SDRs could be used as an alternative to the Euro Freegold-RPG architecture. In regard to currency swaps I took the pro case and FOFOA took the con (pro Euro Freegold-RPG). Initially some of the arguments I advanced looked solid. We went at it for a week or so and in the final analysis I had to concede defeat. (This was one of the back channel debates.)

You wrote:
What I have been able to gather is that a number of scenarios may come to fruition prior to Freegold but the pathway has alternative routes - that may just make it take a longer timeframe. So, in essence, there is no one single, domino-toppling, event that will deter Freegold - only, certain, unlikely circumstances could delay it? So there is no 'required' event collapsing the thesis?

If there is we have not found it.

What I have only seen, over the years here, are economic events that are commented on initiating the inevitability of Freegold - not current events that bring into question a prolonged delay to Freegold. This bothers me a little.

It has bothered me at times as well. The problem in trying to discuss potential roadblocks is that some people tend to seize upon them for their own purposes and/or blow their importance out of proportion. It can unnerve and confuse newcomers.

So these days if I come across anything that looks promising as an alternative I tend to explore it privately until I feel confident that I can also show that it isn't insurmountable for the Euro project sponsors. To date no insurmountable problems have emerged. These investigations have produced a few bonuses in helping me to anticipate policy responses from the stakeholders in advance.

All in all I think it is probably better that other people raise the objections and provide the critique of the material here. The long term contributors to the blog can then spend their time in explaining the material and/or presenting counter arguments. I can't speak for others but I do comment when I see something that might delay the transition. But I have an underlying concern about doing this. It might encourage complacency.


costata said...


Thanks for the link. I'll look forward to reading that paper after I finish some work I have to attend to.


michael3c2000 said...

Enough, thanks for posting that. I read it earlier and watched the videos he linked. He has a different outlook on silver's short term, which is satisfyingly consistent with alternative, serious silver analysis like FOFOA, though not long term or gold oriented.
The Year of the Snake is lying hidden in the grass in plain sight of Giants and Trailhikers.
Although his focus is intentionally quite narrow and uses few indicators, it's refreshing because of the neverending, major misdirections and oversights in both major pro-silver arguments and anti-silver efforts, usually exacerbated by some fiduciary or political bias.
And since major (mainstream, DC and Wall St.) media has never been complete or objective, the real satisfaction is pursuing free press- blogs such as FOFOA, interviews and speeches such as by Robert Fisher, big, top hedge fund manager who HIGHLY recommended gold for the first time this month, research papers, statistics (e.g. Shadow Stats' John Williams and Hat Trick Letter of Dr. Jim Willie), tv and media spots such as Ray Dalio, Kyle Bass and Pimco's Bill Gross- all big, big names now recommending gold along with Jim Rogers, Jim Grant, Marc Faber etc.
In the last couple years we were allowed to post at the USAGOLD forum before it was shuttered, forum moderator and sitemaster Randall Strauss repeated several times, adamantly and without serious rebuttal, that to him, Freegold or some close variation was planned for in 2013 by the PTB, and he indicated that there were clear signs and signals indicating this would happen then, and that he could not divulge any more. There are several reasons for this IMO.
@Smeagol, Knallgold - Good to see you again! (along with Belgium and Aristotle) Has anyone heard from Miner49er, Randy(Town Crier) or some of the others?
- Mikal

costata said...

Michael H,

Given that oil and other forms of energy feed into all production and supply chains at multiple points they have a greater potential to raise or lower the general price level than other goods. It requires time to implement strategies to reduce the energy density of goods and services in order to offset higher prices. So a price rise must tend to feed into the production and supply of all unfinished goods and uncompleted projects at the point in time when the rise occurs.

If the price of lettuce rises it feeds into a limited range of consumption items aside from the lettuce itself and it has an infinitesimal effect on the general price level. If substitution is possible and lettuce simply becomes unsaleable at a higher price then the effect may be zero. Perhaps (counter-intuitively) it may even cause the general price level to fall if the substitute costs even less than lettuce was costing before the price increase.

ein anderer said...

All: May be I am valued as a troll, but my view of consciousness as THE prime mover of all what is happening in our civilisaton(s) is again triggered by this quote above: "The mindset that fuels the Superorganism". This mindset will get changed massively in the next months. Huge groups influencing the FIELD of consciousness SIMULTANOUSLY under ONE roof will reach threshold limits during june/july 2013 powerfull enough to change India as a whole. The more these groups are growing (and they will because of more and more money flowing into their direction) the influence will spread geographically to India's neighbours: Iran, China, South-East-Asia and eventually Russia, Europe, Japan. This will change the behaviour of the SUPERORGANISM specifically in these regions dramatically. You know, consciousness is not a product of brain activity. It's the other way round: C is existing INDEPENDENT of any brains as the UNIFIED FIELD underlaying all the major forces of nature. Brains are REFLECTING C as radios are reflecting the (modulations of) electromagnetic field.
The reason to tell you this is ONLY and ONLY to prepare this enlightened community here for changings near ahead which will influence the development of the global debt / currency crisis. In which direction? In the direction "of all good and no bad". Unified field upholds all the order and precision of the univers, it's "the home of all the laws of nature". So this shift of (world's) consciousness triggered by large groups influencing C simultanously will be in the direction of "more natural economy", more natural trading habits, less criminal / destructive motivations.
The date I give here is very concrete. So June/July is also from this point of view THE turning / transition period of our times.

burningfiat said...


The theory kinda makes sense. It is all about the Words (Between The Lines Of Age).

ein anderer,

Interesting theory. So you're basically saying the transition will take place in Asia first? I think that touches a bit on the old discussion of supply side or demand side (or both) as trigger...
I'm a bit puzzled about your concrete timing though. "June/July", what do you base that on?


Pat said...

Patience is certainly a virtue. Kudos to all posters from 400-419, Bravo! Now those are some excellent contributions. Special thanks to Aquilus, post-grad student emeritus for retrieving a particularly germane passage.

Pat said...

One caution. Within this excellent content we find a number of indicators towards very specific timing. I for one do not want to be disappointed by taking too much stock in them. However, is it interesting that at least to date, early in the year though it may be, paper Euro gold has seemingly lost support, as the sharpshooter DP has mercilessly pointed out. So the possible convergence of events noted in above posts bears scrutiny.
2013- The Year of Fahrenhiet 451

ein anderer said...

There seem to be concrete threshold figures which are needed to start consciousness (read: unified field) based social transitions: square root of 1% of given population size engaged in practising simultanously consciousness based technologies in one place (Journal of Offender Rehabilitation 36 (2003): 283-302). There is developing such a group in a place called "Brahmasthan" (geographical center of India). The size of the group is now 2'400. In summer 2013 they will reach 3'500 (= square root of 1.3 billion, size of India's population). Information is resilient.
Asia first? There are several big groups in South America too, but I have no resilient information about stability and growth rate of these groups yet.

ein anderer said...

And there is a bigger group in the US (Iowa) of about 700 (daily basis). Not growing today. For any visible effect on the USA the size of this group would have to be about 2.’000.

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

Speaking of names in support of gold, I see it has been reported that Soros has soured on "gold", referring to it as "The ultimate bubble."

If he was using the word ultimately, literally, and meant it was the final bubble, well, he MAY be correct with respect to the prospect of bubbles post freegold. But that interpretation of his use of the word in question doesn't fit upon even a cursory inspection, so I think Mr. Soros was using the word ultimately in the lay sense to mean that gold's ten plus year move higher was monumental or, if one prefers, epic.

As is too often the case with people of exceptional influence and/or power, one is left to view them as either incompetent or dishonest. I don't think Mr. Soros fits the former category, and, as such, would recognize that the behavior of "gold" over the last ten plus years does not qualify it as a bubble. For that, one would have needed to see, among other features, deep, and wide spread ownership across the investment community, a frenzied atmosphere of increased buying of anything and everything "gold" and a spectacular parabolic blow off move that concluded the move.

Well, there was certainly a decent move in '11, but it was hardly parabolic. As for the other components, they weren't in evidence. When compared with great manias of the past, gold just doesn't qualify. And, so, one must conclude that, here, at least, Mr. Soros is being disingenuous.

ampmfix said...


Very interesting indeed. I do speak 4 languages rather well (I mean how interiorized to my brain processes they are, not comparing to other people) and I am a different person under each, mostly when interacting with the people of each of those cultures. When alone I usually think (and count!) in the first language I learned. But it depends, for example, all my "economics" studies are in English, so when thinking about the issues of this blog I do it in English. I still remember that when young, my favorite language to flirt was French..., etc...

All this you point out about savings is certainly related to the famous dichotomy of what comes first, thought or language. It is not so obvious and there are two very distinct and respectable schools of thought. Personally I think language comes first in some areas, mostly the social ones, and tought in others, like interior visions. You can have ideas that are based on sensations, and need no linguistic support, but highly sophisticated ideas to communicate need a sophisticated linguistic base. That could also tie in to the rational (language) vs intuitive (no language) thinking...

This subject is somewhat touchy because we could endow cultures with bad attributes, depending on the language they speak. From that to totalitarian exclusion (in simpler words, racial hate) there is a very thin borderline...

Thanks for bringing up a very important concept!


ampmfix said...

One more unrelated observation: upon gold price going down yesterday I rushed to my dealer's website to buy some. First time ever in 3 years he has (or shows) 0 stock. Is it that he bought higher and is waiting for the price to go up to sell (he doesn't hedge) or is it that he can find none...?

burningfiat said...

ein anderer,

That certainly is the most alternative trigger for Freegold (and world peace?) I have yet heard of.
But hey, if that really works in favor of the June/July timing, you won't hear me complaining :D


burningfiat said...

Pat, Good things come to those who wait.

That could be the motto for Freegold, now apparently also for this comment-section :-)

ein anderer said...

"Time will tell" ;)

Just read here
From Another: " the destruction of the present currency system will be preceded by the total unlinking of all gold for currency trading" "gold may find a price of $50US/oz or $50,000us/oz, but the truth will not be known as an open market" " yet gold will find an increase of value of biblical proportions"

I have a question: After Freegold transition - would it be still posible to sell gold bullions if one is in need of currency to make one’s living?
Who will be eager to buy at a "biblical" price?

ein anderer said...

How to format a comment (italic, bold, Hyperlink, quotation color)?

ein anderer said...

My "Time will tell" corresponds to the "June/July" window.
World Peace? Hope I am allowed to give you at least two sources which could help to answer your question:

David Lynch & physicist John Hagelin about "Peace from the Quantum Level":

A collection of published studies on the theme:

burningfiat said...

ein anderer,

use <b> at the start of bold section and </b> at the end. Use i instead of b for italic.

use <a href="link">link text</a> for links.

It is all basic html. Does someone know where there is an official blogger guide for this?

Now, who will buy at biblical prices? People with saving-needs of course (aka people with (large) surpluses). The "biblical price", in the minds of us now BG (before Freegold), will have absolutely no impact on gold's usefulness as a savings medium AG (after Freegold-transition). In fact it will be more useful, because it takes a much smaller amount in weight to store the same amount value, equivalent to some basket of everyday consumables.

Thanks for the links ea. I will have a look!

Bjorn said...

More anectdotal evidence about C4G drying up. I saw this on facebook today:
"Thought to share with you one thing that happened to my girlfriend the other day. We sat and had dinner when suddenly the phone rings and she answers. Turns out it was a telemarketer who sat and called around and people bought gold and silver. Old jewelry and more. She has never had any contact with one of those companies so they are now calling completely cold customers."

FWIW I think the old paper dog has got one last jump left in those wobbly legs. Of course if it falls below 1525 I´m wrong and will be breaking out the champagne...

Biju said...

I see that lot of folks here are happy to see paper gold price crash and usher in freehold. I am not eager for that, even though I grew up in a "currency for spending and Gold for saving " environment.

- will be scared to death to see Paper Gold price crash down below $1000/oz,
since I have some good wealth in Gold.
- would not be able to accumulate more if freehold happens sooner.

Bjorn said...

Well yes, although I don´t actually think I will sweat it if/when the POG crashes (that´s how brainwashed I´ve become I guess), I too would like to have more time to buy more. But on the other hand I´m just really sick of the current system, and the sooner it ends the better IMO.

One Bad Adder said...

ea: - what will happen (re: $50K PoG) is a tektonic shift in personal value assumptions from current $-centric to Au-centric ...driven by a (blessed) return to basic common sense.
The evaluation (rather than $50K / Oz) might then be better expressed as c-0.00064g / $US.
In Dec 2005 with AAPL @ c$70,one would've been pretty sceptical about a $500 price prediction as well eh? ...however! where I go for cut / paste HTML btw.

One Bad Adder said...

...whatsmore ea: Because something is "currently" valued at $500 (using the AAPL example) doesnt't necessarily mean there is/are a seller(s) at that price.
the proverbial AAPL (above) could well run to $1000 without1 share changing hands.

Knotty Pine said...


Regarding your comment about savers: I learned to be a saver from watching and listening to my father. He taught my sister and I to avoid debt like the plague. Definitely old school. Sometimes I wonder if I take it too far. You can't take it with you.

I think here in the US it's pretty simple. For most of my adult life (I'm 52) this country has been on a debt-fueled consumption binge like the world has never seen. There is some evidence that personal savings rates have been improving but I suspect this is due to people paying off the mountains of debt accumulated during the latest bubble.

Maybe some of it is due to personality. I am not a risk taker so I would be unlikely to use debt to speculate with or take a chance at opening my own business, etc.

The irony is that while I bitch about the empire of debt I am aware that my job has benefited greatly from it. I help rich people take care of their expensive (debt fueled?) toys.

Thanks for the link. I found this in the comments under Dr. Chens' article about savings rates in the US.

Edwardo said...

Trader Dan on the latest backwardation chatter.

One Bad Adder said...

Biju wrote: -
- will be scared to death to see Paper Gold price crash down below $1000/oz,
The operative word "crash" Sire seems to be the issue here.
We're currently in a downward price meander which is NOT conducive to an imergent FreeGold environment (sadly)
To managements credit (given begrudgingly) the impression being created is that with each and every liquidity add, $PoG / S is the Laggard - the "winners" being Stocks, Bonds etc.
No doubt the Market is still in "Flight to Here 'n Now mode and it'll be interesting to see how long this farce can be maintained. For now tho, the Status-quo crowd is in control IMHO.

enough said...

It seems gold backwardation was short lived....

friday close.....

February 2013 $1607.50
April 2013 $1610.30
June 2013 $1611.60
August 2013 $1613.30

One Bad Adder said...

This is your Au Futures Backwardation driver Ed... Full-Stop - $IRX.

Gold 'aint Corn ...OR Contracts.

Edwardo said...

Speaking of stocks, FWIW, what I am looking at indicates they are set to take a breather.


Yes, I'm familiar with your thesis. Vamos a ver.

RJPadavona said...


I'm glad you enjoyed that article on language. I figured some of you Europeans would find it interesting since most Europeans I've known speak multiple languages. I guess you could say I was stereotyping for thinking such a thing!

As you've undoubtedly noticed, I'm not all that politically correct so I don't worry too much about those "touchy subjects". There's just some things (like saving) that certain groups are culturally or genetically predisposed to do.

What's great is when we can acknowledge it for what it is, try to change it if we don't like it, or move on and just laugh about it ;)


Great comment! You summed up the theme of FOFOA's Debtors and Savers in a nutshell. We are all benefiting from savings and/or debt at any given time in our life. What's important is the proper amount of balance between the two, which is what FG will bring to the global monetary system.

PS: Our fathers would get along great.

Aquilus said...


I wonder if based on their language, the San Bushmen People save or not? Hmmm..

That was a great example of a guy in academia desperate for a subject to publish about so he can keep his job. Although funny, he's full of it .

As you can see in that link, plenty of both types of languages in the top saver nations. So I'm with McWhorter" (the guy at the end of the original article )

Thanks for the laugh,

RJPadavona said...

Thanks Aquilus!

As you know, I always value your opinion. I struggle with English, so you're a much better authority on this subject than me.

Hopefully Mr Chen is tenured just in case his boss at Yale subscribes to Comments :)

Anonymous said...

I bet he feels like an Elephant , shaking his big grey trunk for the hell of it.

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

Thinking about One Bad Adder's comment,

"We're currently in a downward price meander which is NOT conducive to an imergent FreeGold environment (sadly)"

... causes me to reflect upon the inherant duplicity of our derivative world, in which reality challenges every meaning with it's diametric opposite.

Take debt for example. It is an asset when repaid, yet a liabilty when defaulted. Asset or liabilty - pure opposites.

And yet the foundation of the world's reserve asset depends solely upon the perception of one, vs. the other.

To wit, one person's understanding of "the debt defaulting" is another's understanding of "the debt not being allowed to default".

The power in that system lies in that debt slaves are never bailed out yet lenders always by default (political decision).

Take gold and paper. Pure opposites by even the most liberal interpretation. Yet treated as one and the same.

So back to the falling price of paper gold. Is it affirmatively NOT conducive to freegold, or is it COMPLETELY conducive to Freegold ?

In our amazing derivative world of competing alternate realities (one game for shrimp, one for giant) two opposite conclusions do make perfect sense, depending upon your perspective.

As paper gold loses credibility it should fail, but in dollar terms?? After all what is denominating paper gold is the same derivative that is failing.

I fully expect, as Another has said, that paper gold is "going down", and do so as the dollar premium on official trade rises parametrically.

We shrimp "will never know it's true value as it races past $10,000 /oz and all trading halts."

My friends, what Another may have been trying to tell us is that we never did, and don't, know gold's true value in interbank "Giant" terms.

Perhaps also that once gold is allowed to trade freely there will no longer be one price for giants and one price for shrimp.

In that day, as he said, "we will be on equal footing with the giants".

Unknown said...

"and TO do so as the dollar premium on official GOLD trade rises parametrically". (sorry)

Aquilus said...

@RJP I struggle with English too :)

I also am glad to hear that my comments from yesterday helped. With that in mind, I would remind all that my comments just show the perspective I gathered through reading this blog and the archives (I am still going through those). Therefore, if you find this perspective valuable, please don't forget I owe it to our host, so hit that "Donate" button every once in a while.

Now just my 2c on comments (This might seem harsh, but tough love is sometimes best):

1. I have seen a lot of "lurkers" here state that they learn a lot from people that try to disrupt the conversation flow ("trolls").

Let me just tell you that personally, I do not respond nicely when someone takes the attitude "I discovered this obscure (and irrelevant) area and because I think it's so important, if no commenters here want to disprove it, that means that your perspective is full of s..t and you're all a bunch of morons for not seeing it."

For the "lurkers" that can't wait for one of the regulars to "enter the ring", I want to give you this thought: have you considered that the "regulars" are not here to provide a free education to any of you?

Have you considered that the "regulars" have busy lives, jobs, families, etc. just like the rest of you?

Have you considered that putting together the information for an intelligent comment, searching for relevant quotes, gathering the links, formatting, etc takes a lot of time and effort.

Have you considered that every time, the responder has to balance taking time to do that versus doing something else in his/her life with that time?

So with that perspective, you should understand why a lot of the chaff comments go un-answered, why a lot of repeat questions get links and quotes, why if you're unwilling to follow, read and understand those links and quotes, you will get a less-than-friendly audience next time...

For all who think you're going to be "educated" from the comment tidbits without reading the blog articles, my friends, you are SORELY MISTAKEN!

These comments only "educate" AFTER you have gathered a solid understanding of the subject at hand by RTFB (Reading the F...g Blog). Not all the blog, but enough to ask intelligent questions about what you've read, not the other way around, ask us why this blog is not the way you think it should be.

Our host (FOFOA) put a lot of effort into the material in these posts - more than I will ever dedicate to this subject - so you should focus on that first, not the verbal sparring of the comments...

Hope that makes some sense to you...

2. To the folks that think they will be shunned or labeled "trolls" when asking questions

Given what I said above, on the other hand I do not mind answering questions on if/where certain information has been discussed, if certain topics have been covered, discussing new links/information that provide(s) relevant information, etc.

You will notice that if you don't show up with "guns blazing", you will get very polite answers: either direct or pointing to previous conversations.

If however, you show that you're not willing to consider those directions and keep repeating the same thing the tone will change.

Remember, none of us OWE you an education.

Speaking for myself, I love when people gain the perspective and get those AHA moments of understanding. That's why I comment.

But show me you're not willing to even consider the perspective of what I'm trying to show you, and I will drop the conversation faster than you can say "troll" (smile)

And that's my rant for tonight.

Good night all. RTFB and don't forget to tip the host every once in a while if you enjoy this hangout (smile)).


Knotty Pine said...

Thanks RJP,

I enjoyed the link to your previous comment. I'm guessing that the vast majority of the US centric superorganism has never seen a real rainy day nor can even conceive of one. Hopefully we all survive the coming flood!

Victory said...



No that's what I would call real 'Backwardation!'


Victory said...

...'now' pardon

Motley Fool said...

Excellent comment Aquilus.


costata said...


I second MF above. Perhaps we should describe ourselves as volunteers. Maybe that would get the message across.


PS. Come to think of it, I don't need to "perhaps". From now on I'm going to describe the long term contributors as volunteers.

Unknown said...

I wonder (though it's certainly not an original thought) if we will first see a divergence between Ebay and Comex ?

Unexpected company delayed my in-town coin shop visit, so I strolled on over to the bay. It's been years now since I bought coin (they do pass quickly these days) but though I always did better at the shop than any Ebay final bid, I do not recall a $150 premium over spot as being the norm.

As trading stopped on Fridays, and the spot price remained static, bidders did drive ounces to $1750 and (well) beyond all day for all sorts of common coins.

I don't suppose there's a numismatic premium of $150 on, say, a 1986 to 2013 gold eagle coin over a Perth mint 1 oz. bar which one can buy today for $1642 (though I was never granular in comparing something I perceived as such an incredible bargain over its true value as to really care).

But minor price differences aside, eBay is most certainly a real marketplace for real gold with shrimp bidders setting prices in a very vigorous fashion (as compared to the paper price setting machinations of paper traders and the issuers of paper gold).

I wonder if we shall see a growing divergence between these two "markets", one being a truly free public market in shrimp gold and the other being a grossly manipulated market in shrimp paper gold. They do both set a final bid on somrthing as shrimpy as a single ounce.

All paper gold of course being "shrimp class" in the end, as no giant trades for physical on the paper markets, if trading at all, the two markets do seem to me to be qualitatively comparable.

I may just pay more attention to this in the coming weeks.

Polly Metallic said...

I haven't been watching eBay lately, either, but I think prices there are representative of what buyers who do not live anywhere near a coin shop will pay. Of course there are some people who apparently don't think to look for a coin shop or coin show near them. Also some people think an eBay sale is more private than buying from a shop.

I like to periodically watch the bid ask spread on both silver and gold and the amount of diverse product available to get an idea of supply and demand. For quantities in a reasonably large size I check Tulving since they're a major wholesaler. For shrimpier sizes I check Provident, Gainesville, SilverTowne etc.

tEON said...

As I stated I have read the FoA 1600 PDF - and had many moments of being impressed by the prescience. In particular it was the advice to avoid paper gold including the mining shares. Boy, was this correct. I know only two Gold analysts that also advocated avoiding the miners (I now count both as friends). Almost the entire mainstream gold community pundits, have mistakenly, touted the miners - most as they have an 'axe to grind' supporting their own newsletters, advertisers on their sites etc. What I found interesting about FoA was that he could not have envisioned the rise/advent of the ETFs popularity for paper gold trading - which has more than blossomed.

While reading Another (Thoughts), I can across this (my comments are in BOLD):

Date: Sun Nov 02 1997 23:06

Question by JTF:
"I think a period of inflation followed by sudden deflation would be far more likely for certain of the world's currencies. This is already happening in SE Asia. I cannot believe there will be no inflation or deflation. "

ANOTHER's response :

"JTF, At this moment in time and space, the price of oil in US$ terms is about to roar! (the Crude Oil Price - domestic/nominal - went from $18.64 in November 97' to $87.02 December of last year) It will crush the Pacific Rim and South America (It did not). It will drive the US$ sky high in terms of other major currencies (USD went from .8535 in Nov 97' to $1.1703 just 4 years later, NOTE: I believe this data was vs. the Euro) but the dollar will collapse in terms of gold! (November 97' Gold was $314 / December 12' Gold = $1660) Short term interest rates in the USA will be driven thru the floor (ZIRP) much the way they have been in Japan from the early 90s. This will be done to combat a imploding equity market (more aptly - and eventually - the housing market). Long government bonds will almost stop trading as their yield soars from the oil price fears of "inflation"! Because of today's "new digital paper markets" this entire act will be played out in 30 days or less (?). Yes, you are right! During that time we will have inflation and deflation."

Curious - was 'Another' simply betting on 'inflation'? His timing was off - but in some areas he was way ahead... incredibly impressive as this was over 15 years ago!

Firstly, the Pacific Rim HAS NOT BEEN CRUSHED and although short term US rates were driven through the floor his long term bonds prediction (aka will stop trading [meaning long term rates go up and the int. rate curve steepens to the point where no one will buy long term bonds]... is a huge error. He has missed the interest rate derivatives complex.

I am still impressed by much (ZIRP, PGA, paper dismissal etc.) and will continue reading. Yes, FoFoA - I am still here :)

ein anderer said...

@burningfiat & One Bad Adder:
Thanks for helping out with HTML.

Thanks for your vision regarding the post FG age.

OBA: "Because something is "currently" valued at $500 (using the AAPL example) doesnt't necessarily mean there is/are a seller(s) at that price."
Ok. And will there be a buyer? Do you agree with burningfiat who is sure that there will be no problem to SELL?

No problem with reading the posts before asking in the comment sections. But sometimes a short comment helps to understand a read post - esp. for people of other native language. Many thanks for that always!

@Will Martindale & all:
"We shrimp "will never know it's true value as it races past $10,000 /oz and all trading halts.""
As far as it was possible for me to understand I think that these very early pre trail documents give a fine glimpse how things are going on "behind the doors". Thanks to Victorthecleaner.

@Will Martindale:
"Also some people think an eBay sale is more private than buying from a shop."
At least here in Germany the tax administration is looking very carefully into ebay activities. Sells of greater amounts (limits are purely subjective) are handled as taxable business: also if you sell only the whole stuff of your dead parents or so.
On the other hand it is legal here to buy in a coin shop without showing an ID card up to € 14’999,00 PER DAY. If the coin shop is trusting you you could buy for much greater amounts: You will get several anonymous invoices, each one for a calendar day.

ein anderer said...

At the horizon: Free trade between USA and Europe. German citizens are in fear of genetically engineered foods and other lack of quality issues. BDI, the voice of German industry, hopes that there will be no restrictions" whatsoever.

ein anderer said...

The german Minister for Economy, Rösler, gives backup to BDI: "no restrictions".

One Bad Adder said...

@ea: The point I was trying to make was that "in the new FreeGold paradigm", rather than thinking of "selling" gold, it'll be thought more as "buying" Dollars - yes?
In that time, rather than "selling"(Au) for Dollars, you ...and the rest of us will be "selling" Dollars like men possessed ;-)

@will: The "downward price meander"(lower $-lows - lower $-highs) indicates to me that there is still some value to be had "by SOME" in these here PaperGold markets.
Rest assured my friend, EVERY last Oz of Physical Gold tied up in allocated, unallocated, ETF etc. has an ultimate beneficial owner. WHEN the $PoG DROPS ...and no-one is there to support the price, we'll know all these owners have finished tagging ALL the Phyz ...and the birth of FreeGold will be nigh! ...FWIW!

Unknown said...

I have always considered an online transaction more traceable than my old coin shop sales where a carbon receipt was all that was recorded for both parties, without my name even on them.

In my game plan, gold must drop below USD 1250 before I really feel compelled to source them for a final few ounces (if I even can at that time).

Polly you are way more attuned to this than I am, it was just a random thought that ebay does represent a completely public, completely FREE market in shrimp gold, even though the bidders are not "free" yet in their thinking, as all final bids do end relative to the paper pricing mechanism, due to supply.

Unknown said...

Oh, I do wholeheartedly concur there.

Here is a tasty tidbit of "giant" thinking from a trail re-reading that seems ominously close, in ways, to what I perceive unfolding upon the layer du jure of the global political onion:

"our Euro creation spawned this new high world oil price (shrimp get an ethanol dilution to boot) from currency competition and that's beginning to bite the weekest financial structure (USA) and some thing is indeed changing!

We have completely agreed with the ECB policy, in that they see the EuroZone as the stronger (in overall economic function) between them and the USA. Stronger, in that they could handle a short term dollar oil rise if it lead to Euro settlement. In fact, the recent 1/4 point cut by the ECB, as opposed to the several cuts by the FED, is enforcing that note of distinction upon producers as the FED will and must cut much further (they have). They (the FED) now risk exposing that their purpose of lowering rates is an effort to save the bookkeeping side of it's derivative bloated financial structure (no doubt here), not rebuilding of the US economy at all.

All this, in an effort to slow the dollar killing effects of sharing the currency reserve function with the EuroZone (or simlpy sharing it at all). Only one step in the complete loss of reserve currency altogether. We will see this spelled out as they pump dollar reserves from now on, over and above any possible economic need . The result will be a slow and steady slide into higher and higher price inflation inside the US (masked by many adulterations, substitutions, shortings, deceiving packaging, etc... all discussed here before).

The pressure may be pushing toward a colossal "transition" of financial power later this year as the Euro begins it's final stage of EMU; the distribution of circulating Euros. Once complete, EuroZone economic dynamics will lead them to no longer need Dollar reserves for international use or the backing for their currency. A fact not lost on China and other major dollar holders. If events proceed as expected, they (EuroZone and or China) may just discard these assets as worthless. Especially given that with the US running a tremendous trade deficit, dollars cannot return on a "net / net" basis without plunging it's exchange rate to nothing! Perhaps it's worth further watching how our long bond treasury paper is sold ahead of the fact! (comments here anyone ;0)

Unknown said...

With all this in the background, we now feel a disruption in the force (old line from star Wars movie). The recent BIS meeting may have set the stage for an eventual monumental change in the way gold is traded, owned and valued. The very fact that a major portion of the US gold stock has been changed in status in a way that would allow it's movement (ownership); means that the US has now entertained the same position as England is doing regarding gold and the EMU with Europe. We (the US) are preparing for the destruction of the dollar's gold world. In this, some players will have to be saved (with real gold) if the dollar is to have any existence at all in the new Euro reserve function.

At some point, our dollar denominated paper gold system will crack and plunge in value as it's credibility to be converted into real gold is destroyed. In the process taking down most of the gold industry. An industry who's stock equity value is daily market to and closely follows said dollar gold system. In time, we will all understand the currency supporting function and the industry killing nature of a Free Gold price. As it's surging value more than compensates the dollar's lost value in the hands of foreign CBs.

This particular line of perception is being driven home in ... the very mechanism to delineate foreign held Euro money assets. Assets that will explode in numbers as our busted paper dollar gold market drives these institutions into Euro financing arrangements. These new, increasing, non expansive assets will be balanced by their system's surging gold price and exported bullion from other nations. A process that in part allows the US to adjust it's gold ownership just to stay in the game."

This was written long ago, but aren't certain aspects of this scenario playing out in full force today? Perhaps in a bit more slow motion than previously anticipated ?? but that, after all, is the hallmark of any well managed retreat ...

Polly Metallic said...

For totally private sales and trades people also do business around here on "Craigslist." You do have to be careful though not to get mugged.

Flore said...

burningfiat said...

Wauw Flore,

Just awesome to see that classic Another-quote right there, smack on the front-page of JS's site... Who wodda thunk?
Good job!

Flore said...

Its a small step for freegolders.but a giant step for Sinclair

Indenture said...

"My perception is that as separate self-sufficient beings, gold has no utility, but that as part of a larger interconnected human super-organism gold has the highest utility.

Not all value is available from others.

Perception and perspective are everything, and though they are of infinite value, they can be hard to even give away sometimes. " Blondie

milamber said...

Many thanks to all the participants in this thread. I have some comments/questions that I will post later (if I don’t solve them myself by RRTFB), but I did want to pass along this article.

For those that are looking for evidence/confirmation of the front lawn dump, or the mechanics of how the US sacrifices the currency to save the system, go read Gretchen Morgenson’s latest at Don’t Blink, or You’ll Miss Another Bailout

The front lawn dump in all its glory. My favorite part is the end,

Walker F. Todd, a former official at the Federal Reserve Bank of Cleveland, warned:

“...If the central bank starts releasing binding legal claims for nominal compensation, it looks like just one more element of the secret or back-door bailout of the banking system.”


p.s. this is the site I use when I need to grab code for comments:
How to post a link in blogger comments

KnallGold said...

Wolfgang Schäuble, read on a teletext site on German channel ARD: "Wechselkurse müssen sich frei bilden".

KG: Guess that also aplies to that yellow reserve currency, hmm - er hat FreiGold gesagt, imho. He said FreeGold!

Won't take long to figure that out I guess...


milamber said...

David Kotok of Cumberland Advisors just sent this out. I have cleaned it up for formatting reasons. No content changes. My emphasis added.

Gretchen Morgenson & NY Fed
February 17, 2013

Gretchen Morgenson deserves five radiant gold stars for her Sunday NY Times “Fair Game” column, "Don't Blink, or You'll Miss another Bailout" (New York Times, Sunday Business Section, page 1, February 17, 2013). This is a must-read addition to the weekend.

Gretchen reports on secretive decision making at the NY Fed. She has ferreted out a deal that is obscure and was hidden until court documents provided the clues. I will leave it to readers to spend the six minutes needed to learn of these revelations.

But let me add a second document to the reading list. You will find it as an attachment to the June 5, 2008 press release of the Fed Board of Governors. That release announced the approval of the terms by which Bank of America acquired Countrywide. Remember, Countrywide was the first Fed primary dealer to get into trouble. Bear Stearns, Merrill Lynch, and Lehman came later. Also, remember that primary dealers are approved by the NY Fed; they deal directly with the NY Fed. Also remember that the Fed issued a special approval in order to induce Bank of America Chairman Ken Lewis to take Countrywide. The file linked from the June 5, 2008 press release recites the entire approval order.

Lastly, remember that Timothy Geithner was president of the NY Fed and vice-chair of the Federal Open Market Committee at the time of the June 5, 2008 decision. Also, note the present silence of the NY Fed, as Gretchen has reported.

In due time, the Fed's minutes of this period of American monetary history will be revealed. In due time, more and more of the legal issues will be settled and documents will become available. In due time, we citizens will learn more and more about how our system actually worked and what decisions were actually made and by whom.

The greatness of America includes the constitutional right of a free press. And that means we have terrific, inquisitive and insightful journalists. Gretchen Morgenson is one of them.

Again, Gretchen's column is found at .

For the Fed's June 5, 2008 press release, see
Fed's June 5, 2008 press release

For the PDF attachment to the press release, see PDF attachment.

We advise that you read footnote 13 which recites how Bank of America gained approval to exceed 10% of the deposits of the United States. Here is the operative sentence:

“Therefore, the provisions of the Riegle-Neal Act prohibiting the Board from approving an application to acquire a bank if consummation of the acquisition would result in the applicant exceeding the national deposit cap do not apply to the present notice to acquire Countrywide Bank and the other nonblank subsidiaries of Countrywide.”

Please recall that this order opened the Pandora’s Box of “Too Big to Fail.”

Happy weekend reading.

David R. Kotok, Chairman and Chief Investment Officer


KindofBlue said...

Mr. Sinclair is now quoting Another at his website.

I was following Sinclair for years before I came across FOFOA (2009) and found it interesting to track two parallel lines of thoughts on gold: one as a trader and the other more historical/theoretical. I always wanted Jim's take on the post "More Than Meets the Eye", for instance.

Perhaps now my (our) curiosity will be assuaged.

milamber said...

@ Knotty Pine

Agreed on Empire of Debt. The three Bonner/Wiggins Books:

Financial Reckoning Day
Empire of Debt
Mobs, Markets & Messiahs

were very influential to me when I read them back in 2008.

Now though, after finding FOFOA and understanding Triffin’s Dilemma , I think that they miss the mark when they portray all of the leaders as dumbos. I agree with them that leaders can (and) do stupid things, but they don't really get at the core problem of the International Monetary System. And if you don’t understand that in the current IMS, the dollar debt (US Bonds) is how people the world over hold “wealth”, then you are missing a big part of the picture.

The larger question (and why I hold physical gold) is if (when) that debt defaults (or is saved through a front lawn dump), what do you want to have your savings denominated in?


milamber said...

Robert’s bringing in the Orca analogy, I find very interesting.

I think it boils down to how you denominate (hold) wealth.

If you are a western trader (and let’s say you are worth billions of dollars, or you control billions of dollars) and you DON’T view gold as wealth, then for you, trading and denominating your wealth in dollars (and in partial ownership of publicly traded companies) is all you have ever known.

And it obviously has worked out well for you (you after all control or own Billions of Dollars).

As long as the dollar functions NOMINALLY, then you are going to do OK and you don’t have to worry about those crazy gold bugs who say that you should own physical gold.

The question though that every dollar investor (and saver) has to ask, is how long can the dollar function nominally? How long will the ROW use the dollar as the settlement for oil (and other) trades?

In other words, how long will the ROW denominate its wealth in the US Dollar?

If you think that it will go on in perpetuity, and that the US will be able to go from a $16 Trillion dollar debt to $32T, then $64T, etc and nothing much will change, then I wouldn’t worry about acquiring physical gold. And I think that there are western (big Money) traders who view the world that way who don’t view gold as the ultimate SoV. They view goldish products as a trade. Nothing more, nothing less.

But if you think that the current structure is coming to an end, then physical gold acquisition should be something that piques your interest.


Unknown said...

sss...too much wordses flying about...let's go, what's this, precious? An actual QUOTE from !nother, right there...on Jim Sinclairses page! Musst cut and passte it here now, yess! ~8-)
"Jim’s Mailbox
February 17, 2013, at 12:26 pm
by Jim Sinclair in the category Jim's Mailbox | Print This Post Print This Post | Email This Post Email This Post

Jim Sinclair’s Commentary

CIGA Patrick’s contribution to your learning:

Theoretical on the surface but if you will cast aside your opinions and dwell on the concept, theoretical transforms itself into hard reality. Read this a few times before you dismiss it. Assume in this example the one ounce of gold was sold not for $300 but $1600.

Date: Sat Apr 18 1998 19:18

[...] In this modern world, the current value of every asset is formed by a relationship of gold/currencies/oil. This cross relationship is the “very basis of our modern world banking system”!

Through this basis, all currencies are given value as the local government treasuries hold US$ as reserves. The US$ is given backing as it’s government is guaranteed, that all crude oil, worldwide, will be settled in dollars. An oil reserve backing, if you will. And, the “value” that the “future supply of “currency traded “oil” imparts to the world economy, is guaranteed by an “INTERBANK paper gold MARKET” that values “physical bullion” in the Thousands!

I’ll let Another explain:

But, how can this be, you ask? It is done, “right before your eyes” and we see it not! I ask you, if you have one ounce of gold, and sell it on the market for $300, it is worth $300, yes? Now, what if CB hold one ounce of gold, and sell it twenty times, that one ounce is now worth $6,000, no? The difference between you and CB? The persons that hold “interbank” IOU for gold, value it at the multiple of leases/sales made against reserves. This leverage, it is held for performance on bank part. The BIS, it force performance, on any economy! You ask Korea about gold, yes?

This is why oil can take a small amount of physical gold out of world supply, at current “freely traded”, “managed prices”, and hold it at a many times valuation. That is what gives this “new world gold market” much value in trade at high levels. Look even at your “Comex”, and divide the daily volume by the “eligible stocks for delivery”. That number ( perhaps three million ounces divided by 150,000 stocks, deliverable, times the spot close gives close, real world price of physical, $6,000. It follows close to paper trade on LBMA.

You see, “physical gold is of much greater value than public traders can move it for”! In your world, this cannot be, but it is, and will show for all to see in your time."

Unknown said...

The FED makes an offer you can't refuse. Bet on U.S. debt, and if it defaults we will print up a bailout to back your bet.

I'm not sure why they don't just take out a full page ad in the NY Times it's so fucking obvious.

The "dump" will never be on a "systemically important" front lawn, you can put all your chips on that outcome.

But there is a price to pay for this swollen balance sheet, and when it comes time to pay the piper (BIS) it won't be paid in paper.

costata said...

h/t JS MineSet for the link to this interview:

I think the following extract explains two very important issues in simple terms. (Issues that should be of interest to the discussants here.) Firstly he outlines the core of Robert Mundell's strategy for central bank currency management using gold as the reference point. Secondly the interviewee (David P. Goldman) explains why gold is so successful in communicating information about prices.

None of this will be news to many of the long term participants at this blog but I think the value is in the clarity and simplicity of his explanation. (My emphasis)

L.S.: However, you support a commodity price rule for monetary policy connected to gold.

D.P.G.: Yes, sure.

L.S.: Could you explain the concept behind that and why you support it, please?

D.P.G.: This is an idea that was advanced by Robert Mundell, but actually it goes all the way back to David Ricardo’s idea of the gold standard. Robert Mundell, of course, is the father of the euro and the father of supply-side economics, he’s a Nobel Prize winner, and he has been the most prominent economist advancing this idea; he has talked about it for roughly the last thirty to forty years.

The idea is pretty simple: to create some kind of objective market-based rule which would limit the ability of central banks to create money and to debase their currencies, or on the other hand to act as a break against deflation. In other words: to use market observations of auction prices that reflect expectations of the overall price level in order to correct central bank errors.

There has been an enormous amount of debate for centuries now about what the criterias should be for central bank money creation and how important that is. Mundell’s argument is that the quantity of money is much less important than the way the market responds to central bank increases in high-powered money or in bank reserves and how that affects expectations of the price levels. So central banks should listen much more to the market.

And gold among all the commodities probably gives you the purest signal about future price expectations. There is a very simple reason for that: the amount of gold in stockpiles is many times – 25 to 30 times – annual consumption. So a change in desire to hold gold as an investment is a much more important determinant of the gold price than changes in current mining supply or changes in current consumption of jewelry or industrial applications.

If you use copper or platinum or bauxite or other commodities, the stockpiles are extremely low relative to current use. And you also might have a technological change or an economic slump or a big increase of demand which would drastically affect the prices. So it’s much more difficult to interpret price signals from industrial commodities as an indication of expectations about the future price level.

Gold gives you much better information. So it certainly has pride of place among all commodities as an indicator of expectations about the price level and as a guide to central bank activity.

That idea of a commodity-based standard which is to create confidence in the market place and to correct for central bank errors is the core of Mundell’s concept. I think it is an extremely good idea and I firmly believe monetary management in general would have done much better if we would have followed Mundell’s view and not the guess work of central bankers.

tintin said...

Please note that the increase of 9.35% is in WEIGHT, not dollar value:

In 2012, consumers in China bought a total of 832.18 tons of gold, 71.13 tons, or 9.35 percent, more than the figure of 2011, according to the latest statistics released by the China Gold Association on Saturday. (Xinhua)

China produced 403.05 tonnes of gold in 2012, making it the world's largest producer for the sixth straight year, according to previous data from the association.

Unknown said...

I wish Sinclair had said:
So a change in desire to hold gold as
"a wealth reserve asset" (rather than an investment) is a much more important determinant of the gold price than changes in current mining supply or changes in current consumption of jewelry or industrial applications.

Until the paradigm is shifted from "commodity" to pure "wealth reserve" (or reference point monetary asset) people will not quite understand the thinking of giants and how it impacts their lives.

An investment is something that "puts your paper to work for you", and yet all paper is nothing more than a futures contract awaiting default.

Gold is payment in full.

Preaching to the choir I know, but JSM still breathes life into the prior paradigm as do all paper traders. They can only see one side of the argument - today's fiat paradigm.

In today's fiat paradigm, men unworthy to judge pick winners and losers. Unworthy winners are bailed out, and worthy producers are left to default.

This is the U.S.A. of today, production is hollowed out and a true depression is masked by "systemic bailouts" of a paper house.

Only gold is worthy to judge. It alone holds mams end desire to possess without letting him abuse the means to that end.

ein anderer said...

Seems to be quite FG relevant.

Edwardo said...

costata, you have an uncanny knack of posting pieces that I consider posting, but then opt not to. All the while I have a feeling that it's something that is catching your eye. What can one say but, Viola!

The one tidbit in the interview with Mr. Goldman that really caught my attention was his comment about TIPS and Gold and how their lockstep behavior slammed the door shut on the idea that gold has acted as if it were in a bubble.

Clearly the Mundell reference has a lot of relevance here, as do the stock to flow comments.
Of course Mr. Goldman didn't put it as succinctly as that, but one takes what one gets. It would be more than a little refreshing if one of these gold gurus would directly comment on Mundell's role in constructing The Euro, MTM, and the meaning of MTM. And with that I say...

+1 Wil.

DP said...

TIPS yield (inverted, left scale) vs. $GOLD (right scale), 01/01/2008-> #JustForFun

Gold underperfoming inflation expectactions?

DP said...

Non-inverted TIPS yield

Jeff said...

"Gold holdings in exchange-traded products shrank by the most in seven months as data in the U.S. added to signs that a global economic recovery is strengthening, eroding demand for haven investments"

FOFOA: So buyers large and small, get in line to get your gold. Because we have no way of knowing who will be the last in line to get cashed out. What we have here is an explosion in the bullion banks' physical leverage factor, not through an increase in lending this time (the lending is actually declining), but through customer withdrawal of reserves, with no physical backstop. Even a bank with a conservative leverage factor can experience a bank-busting, system-crashing run. Public confidence is the only thing that stands in the way. This is how a classic bank run runs.

Anonymous said...

Isn't there a bit of selective reading going on here? Looking through the interview with DPG, surely this bit also stands out?

"That’s why I say that the emergence of gold as a reserve instrument or actually a gold standard of any kind is extremely unlikely for the foreseeable future – the politics simply aren’t there."

Edwardo said...

A fair and good point, Borjesson. My response is one should substitute the word politics for the word deserve in this clip.

MatrixSentry said...


I suppose that might mean something if Freegold was coming as a result of a political process. It is not. It simply will happen when it happens, regardless of political support in favor of systemic change or the status quo.

ampmfix said...


I am too thick for your last comment, could you please explain the relationship between people selling ETFs (no mention there of redemption in physical) and the FOFOA comment: "So buyers large and small, get in line to get your gold. ... This is how a classic bank run runs." They seem opposite to me. Thanks.

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

"the politics simply aren’t there".
For testing my FG understanding I also would say: What politics say or not say is irrelevant in this context. The emergence of FG is (again: as far I understand it today) the result of the giants loosing trust in gold (ETFs and Fonds).
As soon they are loosing their trust in the Dollar too, what is left? Silver? No chance. The needed room for stock keeping is not existing. And the silver paper market is also in danger. What will happen to Silver (physical) if it’s paper market comes to chrash? Buildings? Yes, may be partially. But they need an asset which can be sold easily if they need money again. Art? Same as buildings.
What is left? Gold. But physical.
That’s my humble understanding so far. Corrections are welcome.
The main point seems to be: We talk of GIANTS. What the shrimps are doing, thinking, hoping: not relevant.
As the insider ANOTHER wrote already 17 years ago: The value of gold on the street (coin sellers) is one thing. The money paid for gold in London’s backrooms as soon you are asking for millions o oz’s is another thing.

Lisa said...


My take on Jeff's comment:

The Bloomberg quote said "gold holdings" in exchange traded products shrank - which I interpreted as the gold puke Victor mentions. So physical gold is being removed from GLD.

This seems perfectly consistent with the FOFOA comment - get in line and get your gold, since it is disappearing. Those at the front of the line will win, those at the back of the line, not so much

ampmfix said...

Thanks a lot Lisa, now I see it.

ein anderer said...

A derivatives meltdown will play out almost instantaneously, which is why they keep pouring money into Greece because a default of even one small insignificant country, no matter how small, could be the Black Swan (Lehman Bros.) that everyone fears, because it sets off a chain reaction of defaults."

Sherlock said...

"It was completely fruitless to quarrel with the world, whereas the quarrel with oneself was occasionally fruitful and always, she had to admit, interesting."
-- Soren Kierkegaard

Echoing some of the OG posters in regards to repetitive questions, most about timing. One can't predict the end, and it's very difficult to satisfy others this theory has legs. But that's not (y)our or FO(FO(A))'s responsibility. A lot of new comers want to be convinced, they want someone of authority to tell them, "This is what you should do." They won't get that here, and I think it irks them.

FG discussion is tantamount to self-reflection and introspection. It takes special attention and focus, it isn't done quickly, and the end result varies widely. You may not like what you find, you may not agree with the evidence, you may form your own opinions which are contrary to others, and you may write off the whole thing as rubbish. Many contributors have spent countless hours adding value to this blog, please don't distract them with questions that are unknowable or show a complete lack of personal interest in the subject. Read the posts, read the archives, then start working through comments. When you're stuck on a subject, or don't understand a relationship that's explained in a post, try the search function, as it was likely something that caused others to stumble.

Anonymous said...

h/t Mortymer or arms dealing like a giant, or perhaps fighter planes and oil never flow in the same direction:


farmersteveg said...

Know you're busy, you've probably already addressed this, but I have begun reading your beginning blogs and have the following question. You stated early on that you thought the decoupling between gold and paper gold would occur when gold reached approx $5,000 and then Freegold would emerge. You obviously feel different now. I also have come around (after losing my ass betting on higher prices) to believe a collapse is more likely to cause decoupling than a blowoff. How/why did you change your mind ??
(I am currently very grateful to you, one day soon I'm gonna be richly rewarded for your insights)

Polly Metallic said...

Since many posters here also read Jim Sinclair and have noticed that his views are evolving more toward s Freegold perspective, I wanted to check some notes I made after listening to him speak after a shareholder meeting in 2008. Hereare some of my notes:

Due to the vast size of US dollar debt, the only course of action presently is to inflate our way out of much of the debt. This is what we are experiencing currently with the ballooning M3 money supply (no longer reported by the gv’mnt). But the dollar can’t be allowed to devalue too far, get out of control, and a Weimar Republic situation evolve. As noted in Point # 3, the game is to make money (profits) in paper, then to convert to hard assets before fiat money collapses.

The mechanism that will eventually halt the continued devaluation of the dollar will be what Jim calls the Gold Certificate Ratio. If I understand this correctly, once this financial mechanism is instituted, it will be a ratio relationship between US gold holdings verses the amount of US dollar debt held by overseas entities. (Jim was asked how anyone knows just how much gold the US actually holds, and his answer was that it will be whatever we say we still own, as it has not been audited in years, and will never will be, but this will be accepted.) The ratio will not be tied to interest rates as in the past, but to the money supply. While the amount of debt may not be fully transparent, Jim seems to feel that it can be estimated accurately enough, and that a contract will trade on global exchanges that is based on the gold/debt ratio. This financial vehicle will arrest the decline of the dollar, as the price/value of gold will change to reflect changes in debt levels. He believes that the price of gold will remain reasonably close to whatever price it is trading at when this new policy is instituted. The price may range from $50 to $200 an ounce, either way, which is potentially a range of $400/ounce, but at a projected price of $1650.00/ounce when this happens (or higher) this is still a pretty high gold price. The main point being that this mechanism insures that the price of gold doesn’t drop off a cliff as it did in the 1980s. It will remain reasonably stable and quite high.

Jim states that it is in the interest of the people who hold vast sums of dollar denominated debt, with no practical means of unloading it all, to eventually stop the dollar’s decline and to resussitate the dollar to improve the value of their dollar holdings. His target for the institution of the gold certificate ratio is around .52 on the USDX index, and he believes that the dollar will eventually trade back to around the 72 to 82 level.

One of the most interesting things Jim said during this segment of his speech was that he has talked to many people in high positions in business and in the economy that agree that what he has outlined for us is going to happen. He went so far as to say that a few individuals have sanctioned his speaking on these subjects, saying “go ahead and talk about it, it’s coming.”

One Bad Adder said...

@Polly: Several years ago I analogised JS as a Cormorant - living in the air (Dollar world) but drawing his sustinance from below the water (Gold world)
When "feeding" he'd take a look around (under-water) and report back to the "air-world" what he'd seen.
Jim seems to be able to dive quite a bit further nowadays ...but essentially he's still a Cormorant ;-)

One Bad Adder said...

"Off-the-reservation" ...somewhat.
The "THING" with Gold and Money might be summarised thus: -
Money mimics Man(kind) ...whereas Gold mimics God.
Money (Fiat) is born (into debt) lives and dies and as such (similar to Man) it has a TIME component.
Gold (24K) OTOH (due to it's unique Suite of Properties) is TIMELESS in that it will be "the same" across millenia.
Gold Futures will (in time) be revealed as the ultimate Oxymoron ...FWIW.

Unknown said...

"Despite being weeks away from the start of the driving season proper, gas prices - at the pump - have been surging recently. With premium now over $4 nationwide (over $5 in SoCal - up 25 days in a row), this is the most expensive gas has ever been for the second week in February despite gasoline being relatively well supplied.

Gasoline futures have ripped higher as unplanned maintenance, refinery closings, and rising crude oil prices (seemingly more central bank liquidity-driven than middle-east tensions) have impacted wholesale price expectations (and thus retail)."

I would comment on the above, but find it unecessary. Perhaps even redundant?

Anonymous said...

FOFOA, excellent article once again.

This crystallizes in my mind what I’ll call the savers dilemma which is inescapable in any fiat system (including the Euro) as articulated by Daniel Amerman’s articles;

In short its clear from his articles how a fiat system in combination with the tax code effectively steals wealth from ‘true’ net producers ‘regardless’ of what they choose to save in, including gold. This confiscation of wealth begins at birth with generational debt, continues through life via income, sales, property and capital gains taxes and ultimately even after death with estate taxes. And they wonder why the savings rate is so low? Let’s see consume now and receive the full benefit now, or save and have between 50-100% confiscated later, assuming you live long enough to enjoy any of it?

Replace the world Matrix with Fiat in the clip below;

Anyway, this is why the fiat system is preferred by governments of the world and thus why the governments the world over will support it over a Freegold system ‘if’ given the choice. Under a Freegold system the savers of the world would finally have a true SoV outside the ability of their nations to steal from, would they not? Is that not the “good news” of Freegold for us net producing shrimp? Finally a SoV outside the clutches of our ever expanding spend thrift governments?

Thus if Freegold does arise it will only be out of total desperation on the part of the governments the world over would it not? The only scenario I can think of that would be sufficiently dire would be that gold needs to flow in order for critical trade. These trade goods in turn are absolutely required in order to keep social order. Hell hath no fury like a parasite scorned.

The giants hold gold because they know that from time to time the world monetary system collapses and then reforms using physical assets that are unambiguously held and mobile of which gold as king. I would also add that giants by definition operate outside of the net production confiscation system enabled by fiat. Hence how they became and remain giants over generations and why absent Freegold or Bill Gates like growth rates we little net producing shrimps will remain shrimps as well.

The question I have is this, what maintains Freegold for the long term even if the governments the world over allow it back into the core of the global monetary system likely out of complete desperation? Will it not be ejected ‘after’ the crisis has passed thereby enabling a return to the theft enabled by fiat?

It seems to me that the government and the parasites that keep them in power will want to go right back to fleecing the net producers ASAP. What choice do they have? I mean after all those Obama phones aren’t going to pay for themselves, and baby daddy needs a new set of high end sneakers. I see very little incentive for the TPTB letting us slaves go anytime soon. My guess is that the parasites that keep the giants and their handlers in power now outnumber the net producers by at least two to one if not more.

I guess what I’m trying to say is that Freegold sounds like it would be the dream of every net producer on the planet and therefore is also a nightmare to all parasites as well, is it not? By what force will this day of freedom ever come about even if I buy into the notion that this hope of freedom looks a lot like Freegold?

Knotty Pine said...

Nothing to see here folks..... move along please!

costata said...

Hi Edwardo,

I suspect that "connectedness" often occurs among the long term contributors here. I agree that Goldman's point about gold and TIPS was apposite.


I don't think it's a case of "selective reading". I selected that extract from the David Goldman interview because I thought he made some good points on two topics that are highly relevant to the discussions here.

He's entitled to his opinion on the political feasibility of a gold standard. I may add a further comment about that interview.


Beer Holiday said...

Wow, that David Goldman interview was amazing.

I thought his point about a gold standard was straight forward. A gold standard is infeasible today. IMHO freegold has never represented a gold standard, the opposite - the separation of gold from fiat currency.

The thing that really excited me about Goldman's interview is that it is a perspective that is in agreement with freegold. Even more exciting is that it resonated with the Bernanke/Ron Paul conversation

- Gold is not money, it's an asset
- Gold is useful as insurance against tail risks, really bad outcomes
- Gold is held by central banks as a asset because of tradition (it's what we chose?)

I think the Bernanke/Goldman have different words for a perspective similar to freegold.

Anonymous said...

Thanks for the many responses! But I still think there's more than a bit of selective reading involved. Either this Goldman guy is credible, or he isn't. If he is, then you can't just discard his statement that gold as a reserve instrument - which is needed for Freegold, unless I've completely misunderstood something - isn't going to happen in the foreseeable future. Or else he isn't credible, and then you can't really pick the cherries out of the interview that are sort of in accordance with Freegold, and brandish them as support for the theory. Doing so would be the very definition of confirmation bias.

ein anderer said...

As far as I remember your question "what maintains Freegold for the long term" is answered by FO((FO)A) like this: The trust in paper currencies will be destroyed so thoroughly before the onset of FG that the giants AND the shrimps will not go into paper gold again for a very long period of time. FG will be a kind of historical event like a huge earthquake influencing the thinking and believing of many generations to come.
How to find such quotes of FO((FO)A) even with modern search engines if you don’t know exactly which words you have to search for? "Long term"? "Trust"?
I think this is one function of forums like this: that the long term readers/contributors help a bit the new comers. Because they are reading very long and over and over again they have already in mind what and where the main points are.
Sure: Everybody should read the old post anyway. But this takes a lot of time. And we seem to reach the climax of the financial crisis now very fast.

ein anderer said...

United States gold reserves held by Federal Reserve Banks (September 30, 2012).
Now the question is: Are there US gold reserves also somewhere else? Because Silver Doctors calculated that these gold reserves mentioned above equals only to 466 tons. Where are the other 7,500 tons?

burningfiat said...

ein anderer,

I found ~4500 tons here:
Fort Knox

Does anyone want to give it a shot w.r.t. the last ~3000 tons?

burningfiat said...

Hey lookie:

Status Report of U.S. Treasury-Owned Gold

I think the mystery is solved. Most of the remainder is in Denver and West Point! The rest is working stock at the Mint.

burningfiat said...

Oh, BTW forgot to mention: That SilverDoctors article was pure shite.

There are so many errors in it. Like:

Why is this so significant? As anyone with a simple calculator can discover, the Treasury department has just inadvertently admitted that rather than the official 8,133.5 tons the Treasury reports as the US’ official gold reserves, the Treasury’s actual physical gold stores at the NY Fed are a measly 466.57 tons! No wonder it will take the Bundesbank 7 years to repatriate 300 tons!

Factual errors en masse:
*) The audit was only for FED-held (but treasury owned) gold. How do they conclude anything regarding the sum total of Treasury gold?
*) What does 466 tons have to do with German gold? German gold was not included in this audit.

Ok, I'll stop now. I was just blown a bit away by that lazy piece of sensationalism. :D

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

Bjoresson said,

"But I still think there's more than a bit of selective reading involved."

Obviously I can't speak for costata, but, if you want to get technical, there were, at most, two bits of "selective reading."

However, some of the analysis made by the interviewee contained what I would deem observations of facts, while other were not. Let's, for example, take the one data point that I chose to highlight, the tracking of Tips and gold (as not being indicative of a gold bubble). One can look at that data and see that it is valid. I suppose we could still quibble (though not very well) with the idea that it means gold's rise has not been indicative of a bubble, but the assertion about the two tracking together is, in the main, correct.

As for politics deciding on gold being used as a reserve instrument, well, that strikes this (selective) reader as being far more in the camp of an opinion being rendered than a statement of cold, hard, fact. Are we certain that politics is behind the advent of physical gold becoming a reserve asset? Has politics had anything to say about the aggressive acquisition of physical gold by a plethora of (key) CBs across the planet over the last several years? No. Will it, therefore, be the realm politics that then decides the ultimate fate of CB hoarding of physical gold?
Alas, the interviewer didn't delve into the thinking of his interviewee's thinking, but, for my own part, I don't see anything like a fact on display with respect to the idea that regional politics will determine the outcome of what has been, to date, a global phenomenon?

So, while I do, again, concede that there was some selective reading, or, perhaps, more accurately, selective highlighting, of the ideas presented in the interview, it does not then follow that some of us have necessarily engaged in confirmation bias.

KnallGold said...

To the poster who had difficulty to spot bottoms in POG, its usually when we cry the end of the paperGoldmarket. Not sure if it happens again or if the bottom falls out this time.

But Silver is green now and starts to outperform, usually a sign Gold will follow. Maybe the last parabolic rise to 2333 and then poof!?

ein anderer said...

Thanks a lot. Means 365 fewer clicks for SilverDoctors per year ;)

Beer Holiday said...

Another thing that I liked about the Goldman interview is the great explanation of the link between sovereign debt default and a rising gold price.

In the interview of former Aussie PM Paul Keating posted previously by Costata is the quote "you'll see this in the price of gold - the real risk of a US default"

Edwardo said...

Stewart Thomson weighs in.

Here's a key quote,

"Gold is going higher, much higher. It’s going higher because government treasury departments are moving away from quantitative easing involving bonds, and towards QE involving gold."

ampmfix said...

IMHO some ideas in the Goldman interview are the nemesis of Freegold, like:
"The Japanese according to reports that we have seen over the last months are expected to increase their reserve holdings of US treasuries by between $ 400 and $ 500 billion per year, as they intervene in the market to weaken the yen (MY COMMENT: LIKE CHINA IN 1999??, ARE THEY KICKING FREEGOLD AWAY FOR ANOTHER 10 YEARS?). Now, there are other ways to weaken the yen, and so the buying of that much US treasuries suggests to me that the Japanese still consider themselves pretty much as part of the American sphere in a monetary as well as in a military sense (MY COMMENT: AND SO FEEL MANY OTHER COUNTRIES...). Japans Prime Minister Abe has called for an alliance between the United States, Japan and India to contain China. This is a very popular theme among some American strategists as well – you read about it everywhere. So the idea that Japan would shift its reserve position – which is huge – away from the United States and towards some kind of Asian bloc is politically impossible. It’s completely unforeseeable in the existing constellation of world forces. That’s why I say that the emergence of gold as a reserve instrument or actually a gold standard of any kind is extremely unlikely for the foreseeable future – the politics simply aren’t there."

That is to me the biggest threat against Freegold, USA ww leadership in monetary politics and military (too many countries look up to the US still).

How to debunk this?

Kieran O B said...

FOA's take was Japan would accumulate some gold for when SHTF. They can support the dollar and delay that inevitability, for how long I don't know.

Michael dV said...

Japan is certainly our most devoted client state. There are many other ways that precipitations can occur however. A list might include the SWIFT system going wrong as Iran brings gold into the market place in a different kind of way. A black swan event cripples the system. A major player decides that today is the day. The whole world goes (remains?) in recession and changes are forced.
I'm working on my own list of possible disruptive events....but gotta go to work now...

Edwardo said...

ampmfix asked,

"That is to me the biggest threat against Freegold, USA ww leadership in monetary politics and military (too many countries look up to the US still). How to debunk this?"

I don't think it needs debunking, because it's not relevant. Ponder the following:

China, in their position as the world's fastest growing economy, a super producer, by definition, were able to successfully kick the can when they decided to "play the game" and save in U.S. sovereign debt.

Japan, may be a big economy, but, by just about everyone's reckoning, the Land of The Rising Sun are clearly headed in the opposite direction. Were there such a thing, they and France would, arguably, be the clear front runners in the national Darwin Awards sweepstakes. I think one could argue that Japan might be accelerating the process whereby gold becomes the planet's recognized reserve asset since, when their economy crosses the HI threshold-which doesn't seem far off from the vantage point of a growing number of reasonable analysts- it won't be good for U.S. Sovereign debt.

ampmfix said...

Thanks all for your replies. Surely if Japan and others go into HI, they won't be a threat, but my issue is: how long will they be able to keep buying US debt, 1 year, 2, 3, 8...? It seems that some people here agree then that Japan's HI is not far, and hence we get closer to a definite time-line for FG!


Franco said...


This is nothing more than my opinion, but in regards to other countries ramping up their US debt purchases and therefore postponing the demise of the dollar, it looks to me like that train has already left the station. The Fed is now adding $1 trillion per year to its balance sheet in treasuries and "agency" debt. Ain't nobody gonna step up to the plate and take that away from the Fed. There is no going back to the good ole 2000s. "Alea iacta est", the die has been cast.

Dante_Eu said...

Seriously, You don't have to be Giant to understand gold. Today, it's really simple.

On one side: Debt denominated in fiat currency that is and will be created "ex nihilo ad infinitum". Out of nothing to infinity. It's in everyones interest.

On another side: Physical gold, courtesy of mother earth, in limited amount. Limited and stable, even though it's been around for (on and off) like 6.000 years.

So, if you are a saver, which side You gonna be on?

Simple is as simple does. :-)

Unknown said...

Goldman reperesents the typical mindset of the banker/trader/investor. He keeps coming back to government's inability to manage it's finances, which leads him to at least understand gold's utility as a risk hedge, but fiat mismanagement is not a "feature" of governments, it DEFINES them. It is central to Freegold.

Of COURSE TIPS are in a bubble (all paper is), but Goldman (foresaking his very name) cannot imagine a world where TIPS fail, this world of MFG and Sentinel, and yet when AAA rated paper fails, as in 2008, it is bailed out with ... wait for it ... PAPER. Really Goldman, is the USG "lawsuit" against the rating agencies anything more than another paper charade?

Gold NEVER defaults.

As for selective bias, we who follow Another must accept the tenet that ALL paper will fail: currencies, bonds, contracts, securities, stocks ... ALL. It is written in stone BECAUSE of governments inability to manage fiat ... BECAUSE of the very nature of a deb-based system, that it MUST collapse under the weight of it's own self-imposed expansion. It is as mathematical a certainty as the sinking of the Titanic once the 4th bulkhead was breached.

As for China's tiny gold base, let us reprice it to one million USD per ounce and neasure again. There is NO amount too ridiculous, no dollar amount too "high" to denominate the only monetary asset on planet earth that never defaults in ass-wipes.

And so come the comparisons to any other commodity (which gold is NOT). Yes, commodities are true. You will always eat "food" and it will always "fill your belly" but what amount or kind of paper will buy it after the reset? Only paper that is strong in gold will fill the bellies of hungry dogs when the lions stake their claims.

This Goldman lives and dies by the very system that is coming to an end, so his vision is clouded by self preservation bias. When governments appropriate HIS wealth, as in a funny TIPS "rule change" like we have seen politically in Euroland with gold backed bonds, his view may change.

The only question that remains is "who's" paper mismanagement has enough gold behind it to brake its flow?

Edwardo said...

Preach, brother Wil.

Unknown said...

Yes, my brethren the paper WILL burn!

RJPadavona said...

If you boys wanna get right with the Lord, you just need to put a little more soul into it ;)

Aquilus said...


Your words:
"The Japanese according to reports that we have seen over the last months are expected to increase their reserve holdings of US treasuries by between $ 400 and $ 500 billion per year, as they intervene in the market to weaken the yen (MY COMMENT: LIKE CHINA IN 1999??, ARE THEY KICKING FREEGOLD AWAY FOR ANOTHER 10 YEARS?)"

Let's follow this thought down the rabbit hole:

Bank of Japan (BoJ) does QE (creates yen) and buys Treasuries in whatever amount.

What does that mean?

They cannot buy Treasuries with yen, so they must sell the yen and buy dollars in order to give those dollars to the US Government(USG) for its Treasuries (technically more likely to the Primary Dealers, but for all intents and purposes it's the USG)

So a bunch of dollars were taken out of the FX market and "sterilized" by being given to the USG where they "died" (since they cannot be spent on goods, commodities, services, etc and therefore do not create dollar inflation).

On the other hand, a bunch more yen appeared in the FX market, therefore "weakening" the yen (vs the dollar).

So far, what can be better?

Do you get the feeling that I'm about to drop the hammer on all this kumbaya goodness? Good! Here comes:

Unlike China 2001-2011 (and Europe before that), Japan now has a TRADE DEFICIT. So any dollars it "sterilizes" are not dollars that were "supplementary" and had to be dealt with.

Oh, no! This is "new liquidity" that doesn't sterilize the dollar sewage, ummm sorry, dollar excess coming out of the USG and going to the rest of the world (RoW) !!!

Those excess dollars going from the USG to RoW are still happily skipping around, looking for a place to go.

And if the surpluss nations don't buy Treasuries to sterilize them, then those dollars will be entering the real world, buying real stuff.

In the process this is raising the dollar prices of things just like they would have if Japan never bought Treasuries - because Japan's buying WAS NOT RETURNING THE USG surpluss dollars back; it was simply creating new liquidity.

Does that make sense now why a DEFICIT nation doing QE does not affect the death spiral described by FOFOA in "Exhorbitant Priviledge"?

Interesting perspective these FO/FO/A people have given us to look from, don't you think?


Anonymous said...

@Aquilius "In the process this is raising the dollar prices of things"

Except the dollar price of things is not rising. No inflation to speak off. 4 years plus of the USG being responsible for the trade deficit but not a pip.

FOFOA has pointed out that it will be USG spending at the margin in the physical plane that will be the trigger for inflation, yet despite the USG being more exorbitant than ever, we see no inflation. What gives.

FoNoah said...

Aquilus - you're the Man!

ampmfix said...


Thanks very much, that detailed thinking is where I get lost usually. I will try to think harder (and not make you guys loose your time with me) next time...

Thanks again all.

FOFOA said...

Hello an ANT and Dec,

You wrote: "FOFOA has pointed out that it will be USG spending at the margin in the physical plane that will be the trigger for inflation…"

Sorry, but I find it hard to sit quietly by as the poor conceptual understanding of others is being attributed to me. I never said that. I said (using your words) that "it will be USG spending at the margin in the physical plane that will…" turn a run-of-the-mill Argentina/Icelandic-style currency collapse (devaluation) into a full blown Zimbabwe/Weimar-style in-your-face balls-to-the-wall honest-to-goodness wheelbarrow-style hyperinflation. There is a subtle difference. Inflation (your word) and hyperinflation (my word) are not the same thing:

"You see, hyperinflation is exactly like deflation. The only thing hyperinflation has in common with inflation is part of its name. Other than that it looks just like a deflationary depression. In fact, it IS a deflationary depression, with a different numéraire! Just look at Zimbabwe a couple years ago. Other than the fancy wheelbarrows, it looked just like a depression."


MatrixSentry said...


Except the dollar price of things is not rising. No inflation to speak off. 4 years plus of the USG being responsible for the trade deficit but not a pip.

Oh really? In what sense are you asserting this? It seems since you referenced dollar prices rising, you may be referring to dollar price inflation. If so, I wonder how you would reconcile the escalating prices for fuel and food, the most essential expenditures in my life as well as everyone else. The government itself admits, via their cooked numbers, that there is a steady 2% consumer price inflation rate that excludes these "volatile" consumables.

If you are referring to monetary inflation, what measure of money are you using to say there is no inflation going on? Or perhaps you mean that there is no "high inflation" going on, either price or monetary? If so, I would argue that there is plenty of both, certainly more than the government's tortured equations report. Everyone's measure of "high inflation" is different and depends on how they use their money and for what duration they intend to hold it.

Maybe you mean no hyperinflation? If so, I would say you are dead wrong about that one. The hyperinflation has already occurred, we are just waiting for everyone on our level to realize this and act accordingly. We are waiting for those who know that the hyperinflation has already occurred to remove the legs of support for the hyper-inflated dollar. The inevitable effect of hyperinflation is still in the future and will come in the form of a massive re-valuation of the dollar against the plane of goods and services.

So my point is that your statement is kind of loaded and I have to guess what you may be trying articulate. On face value it isn't intuitive and I cannot reconcile it with what I observe.

MatrixSentry said...


I am glad you chose to respond. The only sense I can make of Ant's comment is that he is saying that there aren't any effects of hyperinflation being observed yet. I am guessing because he is uses the word inflation, which is a whole different animal and has little to do with what he attributed to you.

It is my hope that even if we can get the terms straight and agree on what we are trying to talk about, that his position is something more than the assertion that something is amiss with the hyper-inflationary outcome meme because it hasn't happened yet.

Anonymous said...

Thanks for the comments,

FOFOA apologies for misquoting. I understood perhaps incorrectly the from the Inflation/Hyperinflation post that you expected some of Gregor's hot inflation to show up initially which would then begin the hyper feedback loop. Quote FOFOA "I agree with Gregor that "hot inflation" is coming whether you like it or not, for all the reasons he explains and more.

I understood that this hot inflation would (i)cause necessary loss of confidence (ii) be taken hyper very quickly by the USG addiction who will be not be outbid.

The post also states that we would should watch closely the price of those things the government spends on like fertilisers, medicines, oils etc for price increases. However, as I don't see any significant change in prices I was triggered by Aquilius saying "the rising dollar price of things"

So in summary, I understood the following sequence of events, USG Deficit Spending, trigger hot inflation, quick hyper feedback loop.

My point then being that this USG spending does not seem to cause hot inflation yet and one would expect something to show up.

@Matrix Sentry, regarding inflation I am discussing price not monetary. Is the point not the delta change. We could you John Williams stats or the official CPI, however, do either show any significant delta in the last couple of years?

A currency collapse is a loss of confidence in the currency. What is the magic trigger:

Is velocity ever going to pick up, is it needed?
The USG deficit spending,
The FX Market
More bailouts and debt purchase at par.
What triggers all those dollars to come rushing home.
A combination of all the above?

FOFOA said...

Hello an ANT and Dec,

What I meant was not that USG spending contributes to the hot inflation, but that it turns it into hyperinflation. The term "hot inflation" came from Gregor and so did the purported causes. There could be others as well. But if we only get price deflation in the things the USG buys, then you are correct, the USG can spend whatever it wants forever without consequence! ;D


Anand Srivastava said...

I would think that is an argument against Japan buying up Treasuries. As to buy treasuries you have to give dollars to the US, which they don't have being in deficit.

They might be just talking about buying 500B USD for buying up whatever they needed with printed Yen. So yes Yen would end up in US :-). This would be like reverse of what we would expect. Creating more USDs in the world market.

MatrixSentry said...


Is velocity ever going to pick up, is it needed?
The USG deficit spending,
The FX Market
More bailouts and debt purchase at par.
What triggers all those dollars to come rushing home.
A combination of all the above?

Of course velocity is needed. A velocity of zero means that the USD is seen as the ultimate wealth reserve or it is seen as worthless. We should know by now that both instances are impossible. We will always have a transactional money that must have some value and it will be impossible for this money to preserve value or wealth over the long term.

Will the USG ever balance its budget, considering all current expenditures and future promises and entitlements?

Will the FX market ignore the hyperinflation of the USD over the last 40 years and sign off on hyperinflation into perpetuity?

Will there be more bailouts of insolvent entities that threaten systemic implosion of the global monetary system? Will there be more QE when insufficient numbers of savers show up to bid on hyperinflated USDs?

What triggers all those dollars to take on velocity? All of the above. Unless all of the above can be seen to continue into perpetuity. So it is just a matter of time. I think a reasonable person, if forced to wager, would bet that we are closer to the end rather than beginning of the process considering the extraordinary measures being taken to simply keep the system from imploding.

The exponential nature of the problem says we are accelerating to the end, not merely tracking a linear trend. I look at how the dollar has hyperinflated since 1971 and I conclude that an equivalent percentage (and more) inflation will occur within the time frame I am concerned about, 15 years. Will the world tolerate this further hyper-inflation of the USD? I think the answer is obvious when you consider what kind of credibility the USD and the USG would have to conjure into existence.

Anonymous said...

Thanks MatrixSentry. FOFOA has clarified my misunderstanding, i had misread that the USG was to cause hot inflation by deficit spending which did not make sense to me, hence my strange velocity not needed statement. Clearly FOFOA only meant that USG is the taking it hyper part & not hot inflation.

Still my response to Aquilius stands on US $ price increases. So far there has not been much. Perhaps with the deflationary forces in play this thing is going to balance a lot longer than one might think.

Unknown said...

I think there are several relatively recent phenomena which mask inflation (though they are curiously inter-related).

First, consumerism. We must acknowledge that the pedastal of consumerism upon which the pillars of the global economy have been propped have risen to an unprecedented level of exaltation.

I cannot fathom in (relatively) modern history a time when the world's producers and consumers were so outrageously imbalanced (thanks to the US exhorbitant privilege - USEP). Therein lies a competitive price sensitivity which all the technologies and deceptive practices of the corporate state are focused upon.

And then we have the global anonymity factor, which contributes to the "horsemeat" economy.

Before long you'll be reading about 12-13% ethanol in gasoline, not just horsemeat in frozen lasagna.

With the improvements in productivity that technology affords, along with the economies of scale of globalism (offshoring/outsourcing), and with the barriers to ethical production removed, the dollar's hyperinflation (yes it has already happened indeed) has been kept in check as regards price. Therefore price inflation has been partly mitigated, partly masked.

What is interesting about inflation is the FEDs repeated mantra of inflation expectations. In the fiat world CONfidence is so critical, the fact that we are even having this conversation could lead to engines warming at drone central.

Indeed, when the CONfidence collapses, so shall the fiat, and that will be the trigger to hyperdrive.

JoyOfLearning said...

An interesting interview that I thought might be interested to some freegolders here: . Usually Gold money is more on the hard money, but the interviewer seems pretty open minded about the new perspective on international trade offered, and it even seems like the interviewee is also relying on an Another-like insider for some big infos. Interesting perspective and one that seems to me to be not incompatible with some of the ideas developed here. What do you think?

Edwardo said...

As I see the quoted price of paper gold slip lower and lower with each passing day, I'm reminded that CONfidence may disappear very quickly since a gold puke of a certain size has the potential to cause a run on physical. At that point it is game over for the $IMFs. When I ponder that, concocting all sorts of fantastic scenarios conducive to bringing on freegold seems a tad superfluous. It's not that some outlier event won't act to initiate a physical only market, just that, all in all, we might be better off betting on Occam's Razor than a Black Swan.

Pat said...

It's not just horsemeat. Cattle are fed corn, not grass, beef is ( full of antibiotics also- a not-so-nice extra ) of poorer quality. There are rampant examples of inflation everywhere when you look; smaller packages, same or higher price; cheaper ingredients; gasoline hello! etc.
Inspect closely; quantity and quality degrading in many many products.

Pat said...

DP, now you've gone and done it. Euro paper gold down 5% in 30 days. Shotting a poor crippled dog, oh the humanity, uh I mean the caninity.

Unknown said...

I think all these comments are quite good and do paint a cohesive depiction of reality.

Joy, the Jim Willie interview (despite being wonderfully "kirbyesque" as regards the interest rate swap grip on ZIRP) is to me quite "spot" on (pun not intended).

I have always thought that these paper gold traders do see the view from the trail, but have simply abandoned the effort to bring that view forward into the mind of the "westerm investor".

And frankly, I don't blame them. Willie and Kirby do walk the trail, the only difference really is that they both believe the US Treasury gold to have been squandered, whereas some of us here believe it's the US hold card to actually unleash freegold.

That idea, in my opinion, is a "wild card" not a a hold card.

We shall see. We can only speculate on the truth in a world so dependent upon deception to function on CONfidence alone.

I like his recognition of the USG's perpetual foreign war's impact on capital flight and wage inflation (in the 80's). That hasn't been talked about enough but it's, as they say, "water under the bridge" now.

Unknown said...

Despite the bizarre dependence upon variagated oscillators and inverse flux capcitors tracking the paper gold game, here's another wacky paper trader speaking in tongues ... the tongue of "Another".

Edgar said...

Euro POG now at €1186 and sinking! Maybe time to declare paper gold dead once and for all?
Long live bullion!

Biju said...

Aquilius ,

I disagree - Japan buying UST as a deficit nation will cause yen supply to increase and dollar supply to be destroyed causing yen to fall in FX market. Eg if dollars being bought by Japan is $50 B / month and their trade deficit is $5 B/Month, there is leakage of $5 B dollar /month causing dollar inflation , but still they are able to sterilize $45 B/month.

When a surplus nation buys UST with dollars gained by exports, there is no dollar leakage and entire thing will be destroyed at FED with just a " line for Chen "

MatrixSentry said...

"Gold" is heading for major support at $1530. The consolidation pattern in place says support will be there, or will it? Have the conditions present over the last year and half changed? Maybe the lyrics by Nancy Sinatra, interpreted through the eyes of a recent FOFOA reader, might hold the answer...

You keep saying you've got something for me.
something you call love, but confess.
You've been messin' where you shouldn't have been a messin'
and now someone else is gettin' all your best.

These (Legs) are made for walking, and that's just what they'll do
one of these days these (Legs) are gonna walk all over you.

You keep lying, when you oughta be truthin'
and you keep losin' when you oughta not bet.
You keep samin' when you oughta be changin'.
Now what's right is right, but you ain't been right yet.

These (Legs) are made for walking, and that's just what they'll do
one of these days these (Legs) are gonna walk all over you.

You keep playin' where you shouldn't be playin
and you keep thinkin' that you´ll never get burnt.
I just found me a brand new box of matches yeah
and what he know you ain't HAD time to learn.

These (Legs) are made for walking, and that's just what they'll do
one of these days these (Legs) are gonna walk all over you.

Are you ready (Legs)? Start walkin'!

Gold, better get some before the Legs finish walkin'.

Anonymous said...

Today's homework: Call local coin shop as to whether gold eagles are available. I would wait until after 2pm when the Fed minutes are released. This could be a major spike down.

ampmfix said...

Bought some Phils today just before it came down, as usual... but, hey, it's physical!

On inflation examples (in my areas):
- Aluminum foil of greatly increased internal diameter.
- Thinner and also larger internal diameter toilet paper.
- Blue double disposable razors last 1-2 shaves instead of over 4.
- Instant cofee has larger granules so less coffee cups per bottle.
- Margarine tastes worse than ever (what on earth vegetable oil do they use!??!).
- and so on...

Unknown said...

They've fucked with the Splenda too, my taste buds never lie.

We're getting close to hundred dollar moves in 30 days. Not volatile enough for me, but getting there.

Paper goin' DOWN.

KnallGold said...

-OBA, I hear you on JIM ;-)

-Japan: forget, they are close to being wiped out from their nuclear disaster

-new Pope: not so important where he is coming from, rather where he is going to! "Duell" ~2 days agoon N-TV, between Volker Beck (Green Party) and Karl Jüsten: now that is exactly how a new Pope should talk!! Guess if Karl is so eloquent with in German that he is also good in other languages. Haven't known him before so I haven't more details. Certainly there is a fire in his words which has catched me, guess I'm not the only one.

Not sure on the inner workings of the Vatican and the election process ie whats necessary to fullfill the qualification. Haven't heard the others speaking yet to see if a similar fire is there.

Maybe an African for successor in the UN (with its health etc focus), unfort. Mandela is quite sick. But I'm sure there are others to be found. That would make the FGteam full.

-Have some TA/FA on POG, it appears a dilemma/paradoxon is developing, but dilemmas are always to be solved with Occams' chainsaw (borrowed from Dr. House ;-). More Thursday...

Edgar said...

I was shocked at the prices at one of my two local supermarkets:

For instance, $2.78 for a cucumber. Or the tiny bottles of Bonne Maman fruit preserved for $4.99.

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

If you read the views of the would be Pontiff from Africa you will find that he is a perfect candidate for the position, holding, as he does, some absolutely retrograde ideas about issues that are central to the condition of The Catholic Church. In the meantime, I'd like to propose that, where organized religion is concerned, The Catholic Church, specifically, The Vatican, may be the ecclesiastical equivalent of paper gold.

KnallGold said...

Small add to that 13 strangeness discussed on a FOFOA site, coincidentally they shot M13 today, a bear in the Swiss alps (canton Graubünden) which got a bit too close to humans ie lost his anxiety.

M13 the Bear is Dead...

Another 13eenie thing, The Cult made a song called No 13, not one of their best, but good text.


Bjorn said...

There is a disturbance in the force! Quoted price on Tavex rose as dollar and "gold" were both falling against the krona.

I´m almost starting to get sucked in to this "this is it" state of mind. Must.... stay.... skeptical....;-)

burningfiat said...


Yeah, saw the uptick too :)
Let's wait and see if there are more of these (waiting for multi-day premium increases). Maybe it was just a small reconfiguration in the matrix...

Last time I saw delivery problems at Tavex was in august 2011, when $PoG was in the 1850+ range (Euro-price ~44€/g) and rising, but of course delivery problems can also occur at the low end.

Todays Goldilocks paper-gold price window constantly narrowing: "Not too high, not too low"

Get you some while it's low, but most importantly get you some while we're in range!

ein anderer said...


The best analytical framework explaining today’s system is described in “Currency Wars” by Jim Rickards, published in 2011. The author explains how complexity in our system has risen to the point where it shows unique characteristics, the most important one being that the propensity for catastrophic failure is an exponential function of complexity.

In simple terms, it means that, when the system doubles in size, the instability goes up tenfold. It means as well that it requires exponentially increasing amounts of money (debt) to keep the system growing.

The framework is revolutionary in that it perfectly describes today’s reality.

Today, governments need more and more debt to generate the same amount of GDP. We need to borrow more only to stay in place but at the cost of a huge (almost certain) collapse of the system. But more importantly, the problems have become so huge that there is no longer a Lender of Last Resort big enough to bail anybody out.

The longer this process goes on, the faster and more severe the collapse will be. Suppose the final collapse strikes in 2013/15. By then, the system will have grown so complex, and the amounts of debt will be so huge that there will be no way to control it - the crash will take on a life on its own.

End of quote.


Dr. Octagon said...

Aquilus (and ampfx) - I'd like to add to your discussion of "The Japanese according to reports that we have seen over the last months are expected to increase their reserve holdings of US treasuries by between $ 400 and $ 500 billion per year, as they intervene in the market to weaken the yen"

Japan has stated that they intend to weaken the Yen, and printing Yen to purchase Dollars is a direct way to do that. As we all know, when China did this (and Europe before them), they took those dollars and bought treasuries with them, as a net-exporting country has little need to spend those dollars. But in the quote above, it states that the Japanese "are expected" to increase treasury holdings. I'm not sure about where that expectation comes from, maybe it's because that's what countries usually do? But what else could Japan do with those newly bought dollars, as a net-importer, other than buy US treasuries?

Here's a possibility: One of the big recent changes leading to Japan's current trade deficits is the need to import energy, due to their nuclear reactor shutdowns. Printing Yen to buy Dollars to weaken the Yen, coupled with a need to buy energy for power production (paid for using dollars), seems like an awfully nice coincidence to me. I'd expect that the result of such a policy to show up initially as higher energy prices rather than general price inflation.


byiamBYoung said...

Following a hunch and looking for potential signals of future action, I started tracking active gold auctions on Ebay. It took a while to filter it down to a search that gave consistent results. Ultimately, I searched for Gold, filtered to show only American buffalo, Canadian Maple leaf, South African Krugerrand, Austrian Philharmonic. This indicates how many auctions are active for this set, but does not track prices bid.

That produced very good results. Routine visual audits of all reported results turn up less than 1% non-gold auctions, so not bad as a dataset. I have been compiling results, gathered at regular intervals throughout the day, for a little over a month.

I think a lot more data will be needed to establish a meaningful trend, although the graph has an interesting trend at the moment. If you want to see the results, see the link below.

Graph Here

The way I figure it, a move from 650 to 715 may or may not mean anything. But a move from 700 to, say, 300 would say quite a lot…

ALso, does anyone know an easy way to automate this sort of Ebay search? The data collection and recording is really only taking a few minutes a day, but it would be fun to just sit back and watch it hum along.


Indenture said...

So when's the next 'Mark to Market Party' for the ECB?

burningfiat said...


Thanks for your work.
Nice data-point. So in conclusion: No stress in the shrimpish physical market yet.
I have a nagging feeling that it will be too late to take any action, once Orcas go in and sweep up the crumbs on the Ebay table. I somehow doubt it's a leading indicator (but would like to hear the arguments)...

Michael dV said...

Today we are seeing a significant drop in the gold price. It is down $34 as I write. It has continued to fall from an early drop overnight which extended into NY trading.
Even if today is not the beginning of the real thing, today I got the feeling of what it will be like: One day we will realize 'holy shit, it is happening'.
I suppose it is like evangelicals waiting for the believe it is coming but somehow never expect it to actually happen.
....and yes...holding THROUGH a period of low gold prices will be the hardest part.

Ken_C said...


Is there any reason you chose not to include the American Gold Eagle in your search?

Anonymous said...

this isn't paper burning, it's just the shorts stop hunting

Polly Metallic said...

Yesterday Tulving had some pre 1933 xf gold coins. Today they're gone. They also had 90% dimes/quarters and 90% half dollars. Today they're sold out. Physical supply seems quite low at this wholesaler and a significant amount seems to disappear on any large price drop.

DASK said...

Could also just be dealers taking it off the table until after what they perceive to be a temporary stop hunting dip.

byiamBYoung said...


I included it in early searches, but threw it out because it seemed to draw too many non-gold auctions, muddying up the data. No other reason.


Once I understand better who all the sellers are, I could advance some theories of what the data specifically might tell. Not yet, though. I only know that all physical gold going into hiding can't happen before this chart plummets.


One Bad Adder said...

This MAY well be it ...but the Fiatmeisters have a lot of tricks up their sleeves.
DX-80 ... which is where they like it, has just been breached and if this continues (upward) it'll indicate they've (a) lost it ...or (b) are consiously giving up on managing it.
If (b), $IRX will (again) drive down and threaten Sub-Zero ...Gold OWNS Zero ...FWIW!

One Bad Adder said...

Unfortunately (YET!) FiatSilver hasn't shown any tendency to out-perform FiatGold.
This would of necessity be a precursor indicator of systemic dysfunction / meltdown ....methinks.

Polly Metallic said...

The bigger wholesalers don't withhold product on a price dip. They are typically hedged and plan on resupplying at a lower price. I got an email from Apmex today proclaiming the 90 cent price drop on silver and encouraging people to buy it on sale.

M said...

Im going to the Bullion Bank tomorrow.

COMEX options exp is on Monday the 25th so from now til then, I'm going to buy 10 or 15 ounces of gold.

Should be interesting to see how many ppl are there and what they have in stock.

Polly Metallic said...

"Once I understand better who all the sellers are, I could advance some theories of what the data specifically might tell. Not yet, though. I only know that all physical gold going into hiding can't happen before this chart plummets."

I'm not sure eBay would be a telltale marketplace. I would imagine that only bullion in size will dry up before markets shut down. Somehow I envision eBay sales limping along with Joe Dinnerbucket selling his few coins, but sales prices would move higher and higher as premiums increase, indicating panic buying and supplies dwindling.

Polly Metallic said...

Interesting post regarding the "end game" from Trail Guide 8/26/2000. To put things in perspective, note that London P.M Fix of gold on that date was $273.65.

Can we look to the breakup of operations at the London Bullion exchange as the next
signpost along the trail? -------

Several outcomes:
Look for paper trading to slow further, physical becomes rare

or paper prices surge in a super run then quickly shut down as physical prices run away

or paper open interest surges as shorts try to cover before more players come to know about the condition of the markets.

or paper prices plunge to less than $100 as all physical trading stops. Then markets shut as physical prices leap

Hill C said...

Am I reading this right? GLD just puked 1.6%!

byiamBYoung said...


It's not just Joe Dinnerbucket selling there. In fact, the sellers appear to be predominantly coin dealers. Even APMEX sells there, and a lot.

I don't envision the whole "gold goes hiding" thing evading those dealers.


Hill C said...

Yea, I am pretty sure we just lost 20+/ton.

Anonymous said...

@Hill C

I believe you are correct; we have a GLD puke of 1.57%.

Hill C said...

What is funny is there are over 38/ton standing for Feb delivery. Question is:"Who is Draining the GLD?"

milamber said...

January 28th 2011
Tons of Gold in GLD:1224
Closing price $1319/oz

February 20th 2013
Tons of Gold in GLD:1299
Closing price $1588/oz

GLD may be puking, but it is still getting resupplied as necessary. Chart that I just did:

GLD in Tons

Or put another way, GLD can withstand (from an inventory perspective)65 more days of 20 TON pukes. Obviously, when the paper gold system finally implodes, it won't be a nice little constant 20 ton daily puke.

But important to put 20 tons in the context of 1300.


Anonymous said...

The 20.77 tonnes puke of today (1.57% of inventory) is, of course, an official "GLD Puke" according to Lance Lewis.

It is bigger than the one on May 22, 2012, but not as big as three pukes in August 2011, each more than 24 tonnes.

If May 2012 is any guide, paper gold will surge by $80/oz on Friday next week or on the following Monday. Also, you will hear about "rumours" in the Financial Times that the BIS was buying gold for some unidentified clients.

If you don't get the surge and don't hear anything about the BIS, it is going to get more interesting.

Brent oil is at $115.60 for a gold/Brent ratio of 13.6 which is still comfortably close to the apparent target of 15.


Anonymous said...

I like when GLD pukes!

hope we see the day soon when it has the equivalent of an Ayahuasca-induced purging and the revelations come.


Biju said...

Regarding Aquilius comments, I made a small event chart showing how a Deficit nation can buy UST and still not cause dollar inflation, if another net producer picks up the slack.

This is assuming Japan buys $50B US Dollars/month, prints corresponding Y50,00/month, buys UST worth $45B/month and
uses remaining $5B USD /month to a net producer who picks up the remaining slack of $5 B UST/month. In this way there is no excess US Dollar, but yen gets trashed.

Since Japan is like a satellite of US, and also trying to create some inflation, this is a route Japan may take.

Michael H said...

Keep in mind that the purchases by the BoJ have a JPY-denominated target amount. Should the JPY weaken against the USD, the amount of treasuries in USD purchased by the BoJ will drop.

Unknown said...

Things could get interesting in the next couple of weeks.

Aquilus said...


I am not ignoring you, I just don't have the time to compose a good response with details. I truly admire your drive - nice chart. I will only point out that in my original post, it's not what Japan does, but rather what happens to the moneygoing from USG to the other producers. Japan just acquired Treasuries, so other states don't have to acquire that portion, great. What do the other states do with their extra dollars if not buying Treasuries? Because it's those dollars that need sterilization. Sorry if I'm not as clear as usual, it's the best I can do for now.

Dr Octagon,
Good points. I'll address that when I have some time.


Biju said...

Aquilius :

While USG spends the cash received from primary dealers and puts it into economy via Fed expenditures/ salaries/ entitlements/military etc, at the same time, Japan is removing the same amount of USD from the system and finally gets destroyed at FED. So net there is no dollar inflation.

This was the neat trick USG did for the past decades while all UST buyers/producers experienced inflation. Countries like Japan who were net producers for several decades were able to buy UST as well as have a strong internal bond market to withdraw the yen printed locally corresponding to the received USD.

Biju said...

So Japan did not experience inflation locally also. But looks like now they want
to go in the other direction - induce yen inflation but at the same time, soak USD and destroy it by buying UST. The Yen and it's bond holders are going to be sacrificed ? While saving USD. Maybe they will trash yen and but I don't believe they will be competitive because they are importing(oil/raw materials) a lot to enable export.

Biju said...

Aquilius said
What do the other states do with their extra dollars if not buying Treasuries? Because it's those dollars that need sterilization.

If Japan plans to buy $500 B/ year and USG have $1 T/year deficit, I think the rest of countries can pick the slack of say $300 B UST, then FED can expand it's balance sheet by $200 B / year. So as per this calf only this $200 B/ year causes the hot inflation - nothing serious in my opinion.

Herb said...

I agree that the term "hyperinflation" is confusing in relation to the term "inflation." I think calling it "currency collapse" would do the trick.

FOFOA said...

Hello Herb,

Currency collapse is a good description of what happens relatively frequently, destroying pensioners, those living on a fixed income and anyone who saved boatloads of currency-denominated crap while the rest of the economy makes simple adjustments and quickly moves on. But wheelbarrow-style hyperinflation is what happens when the government issuing the collapsed currency believes that it is more important than the international market that collapsed its currency in the first place, and this belief affects everyone, not just the elderly. The fact that it's hard to imagine it happening in America is not a good enough reason for me to give up the term in favor of a milder one. ;D


Edgar said...

Today is the first time since September 13, 2012 that the GLD tonnes in the trust declined below 1300! From a technical perspective, the trust seems to have gone into terminal decline.

See also:

Unknown said...

It's always difficult to understand which stream of time you are standing in ...

"When the coming paper illusion price of gold is destroyed, sending its trading price way up and way down, several times, before shutdown,,,,,,,,,,,,,, the thinner paper markets of lesser metals will be absolutely devastated."

Especially in a world where fundamentals no longer exist. Or do they??

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