Monday, April 22, 2013

Euro Conversion


One of the things I often do with this blog is to attempt to decipher some of the tougher concepts expressed by Another and FOA. I try to get into their heads and figure out what they really meant so that I can rephrase it in a way that (to me at least) is easier to understand.  This is one of those posts. 

The following question came to me via email from "Solitary Monk" who took his name from a comment left by Woland referring to the fact that he had "preserved our 'Library of Alexandria' from destruction" with the AFTER (THOUGHTS!)  archive. Another contribution from SM was the "threshold levels of understanding" concept which first appeared in this post and seems to be more relevant with each passing day:

I think that there are "threshold levels of understanding" required to 1) buy, 2) hold until the transition begins, and 3) hold through the transition. Each requires a greater level of understanding. I can see from your writings that you know some people will make it through 1) and 2), but not 3). I've been working for a long time to prepare myself to get through 3). Your blog posts are one way to help with that.

Even though he has not commented on the blog, Solitary Monk has been on the Gold Trail since 1998 (15 years now) and he obviously enjoys quiet contemplation followed by insightful emails which he leaves up to me to decide whether or not to use them on the blog. So I figured I'd go ahead and answer his email with a post.  I'm sure he won't mind.  ;D  His words are in red, FOA is in blue and I am in black:

Hi, FOFOA,
 
There is one part of the gold trail that I have never fully understood. I do understand it conceptually, which is all that is really necessary, but it’s been bugging me for years. And now, it might not be that far away.

As we already clearly understand, paper gold markets tank, paper gold loses credibility, there is a rush for physical, and then there is no more physical available.

Next comes the part where I don’t completely understand the details. But conceptually it goes like this:

With no more physical available, there is a rush to exchange remaining dollar gold loans for euro gold loans which puts downward pressure on the dollar, upward pressure on the euro. The dollar exchange rate tanks. Hyperinflation here we come.

Perhaps you can enlighten me? And I’m sure your readers would find an FOFOA-style explanation of all this of value as well since it’s what’s coming right after gold goes into hiding.

Following are quotes from the trail regarding this. I have bolded certain parts and added some questions in red.
 
Solitary Monk


== == == ==
 
FOA: Perhaps, "this new gold supply", it was for the purchase of "time".

If oil was about to go off the "dollar reserve standard" and allow pricing in all currencies, and "the physical gold currency" was to be the most economical way to purchase, then I would say, "time was a valued purchase", yes? It is in this "purchased time", the world finds the creation of a "new reserve currency". The dollar, is today, strong in nature of a low gold price. Tomorrow, it will be the Euro that will find strength in a low gold price! Perhaps, these dollar "gold loans" will be called in to become "Euro gold loans"? "Gold priced in the thousands of USDs does not change this currency, it changes your perception of wealth"

SM: What makes a gold loan a dollar gold loan or a euro gold loan? My understanding is that you are owed gold. So, where do dollars and euros come in? As best I can figure it out, it means nothing other than the jurisdiction in which the loan was made. If it was initiated within a euro country, it’s a euro gold loan. Otherwise, it’s a dollar gold loan.
 
Also, note the use of “will be called in.” It’s not entirely clear to me who is demanding what. As best I can figure out, the holder is demanding gold, and the counterparty, aided by the powers that be in the US at least are saying “No, you cannot have gold and, in fact, we are going to force you to take dollars.”

Hello SM,

Great question for a post!  "Will be called in" tells me that the lender is calling in the loan to force immediate repayment, or in the impossibility of repayment, perhaps restructuring the terms of repayment.  Yes, the loans were denominated in gold ounces, that is to say that one troy ounce of gold (XAU) was the unit of account.  But what was actually lent was dollars, and what must be paid back in extremis is dollars.  It is a basic principle that you cannot force repayment of a physical item, just like the tractor analogy with the shuttered tractor factory.  Suppose a mine is destroyed by collapse or landslide, or it simply goes bankrupt.  Which brings us to who most of these gold-denominated debtors were. 

It was mostly the mines. The second largest group was hedge funds. But most of these loans are closed out now, while they were very common when FOA wrote the above. Even so, I think this "euro conversion" is worth exploring because it may still be applicable to the LBMA paper gold market, at least to its European customers. ;D 

The loans were from the BBs to the mines and the hedgefunds, and, on a much smaller scale, to the gold fabricators and industrial users. But in order to resell these notes to the East and to Oil who like their physical, the CBs stood behind them with their gold leases to the BBs. That guarantee gave the paper the credibility it needed for buyers who actually wanted the physical from the mines. A lot of those CB leases have been unwound now as well, although some do remain on the books.  So those could certainly be restructured with euro as the ultimate payment instead of dollars. 

Imagine we have the collapse of the paper gold market and the BBs still owe X tonnes to the CBs. In extremis, they can only pay back those loans at the cash equivalent of the price of gold.  But they were the ones who set that price of gold in their now-failed paper gold market. Do you think they can get away with paying back the CBs at the defunct low price of $200/oz. now that their market has failed to deliver? 

I don't think so. I think the CBs would reestablish a physical-only market pretty quickly and that market would establish the cash price at which the BBs could retire their obligation to the CBs.  Meanwhile, the dollar would be collapsing which, in reality, means an extreme shortage of dollars.  No matter how many dollars the BBs could get a hold of, the FPOG (Freegold price of gold) would be outrunning them, making repayment impossible and restructure or default the only remaining options. And with their creditor being their new overlord, restructure becomes the only option if they want to keep operating. 

So how is this good for the euro and bad for the dollar?  Well, if you need dollars to buy something or service a debt, this is usage demand, and this adds strength to the dollar, no?  Think of poor countries with IMF loans, and the effect of having oil and other commodities priced in dollars. These are both dollar-positive, are they not? And so through conversion, dollar demand is reduced while supply remains, which will be dollar-negative and euro-positive as the outward flow of dollars (from the US) turns inward. 

This will also be good for the BBs, because euro will be in plentiful supply while dollars will be in short supply (which is the case when a currency is collapsing in value), and gold will be stable in euros while it is anything but stable in dollars.  And the UoA for the loans is gold ounces, so that means the amount owed will be stable in euro while it was previously skyrocketing in scarce dollars.  A win-win for everyone involved.  Well, almost everyone.  ;D

== == == ==

One day soon, this "paper gold item" may lose it's "integrity from oil" by way of "competition" from a new reserve currency! In that day, "paper gold" will rush to become "physical gold" as "dollar gold contracts" rush to become "Euro gold contracts". You see, the value of the gold lost from the Euro CB sales will return in the form of a "Euro strong in gold". The "gold reserves" held for the EURO will offer strength, but it will be the total destruction of the dollar gold market that does make " this currency go home"!

I assume, but don’t know for sure, that “paper gold” means unallocated gold, and “gold contract” means a gold loan and a right to future delivery.

This paragraph seems to imply that this will lead to dollar spending in the US, but the mechanism isn’t clear to me.

I think that "integrity from oil" means that the GOR (gold oil ratio) will depart its 67-year range (of between 9 and 29) in dramatic fashion.  If we look back over 67 years, "paper gold" was simply dollars before 1971 and today it's mostly LBMA unallocated gold-ounce-denominated accounts.  And it is the convertability of this "paper gold" that has kept the GOR in its range. 

With convertibility gone, "this "paper gold item" may lose it's "integrity from oil" by way of "competition" from a new reserve currency [that offers the reestablishment of credible convertibility]."  Does that first sentence make more sense now? 

"In that day, "paper gold" will rush to become "physical gold"..."  This part is pretty self-explanatory.

"...as "dollar gold contracts" rush to become "Euro gold contracts"."  Just like I said above, if you are either party (creditor or debtor), you would rather have your loan payable in extremis in a stable, knowable amount than a crazily rising, impossible to achieve amount, no? 

And, once again, all of these dollar-denominated trading accounts outside of the US do require actual Realdollars (US base money, either cash or liabilities tied directly to the Fed or through a US bank with an account at the Fed) for clearing, even if not for every single transaction.  This principle lends strength to the flow that can be described as Realdollars heading outward from the US while real goods and services head inward, aka the trade deficit.  So the conversion of this need for dollars to, instead, a need for euros for clearing, will contribute to the reversal of that flow I just described. 

Think of every transaction as one side being the traded commodity and the other side being the money.  Even in currency trading, one currency is the traded commodity and the other is the money.  Today, the USD is the "money" (or the denominator) in most of the global markets.  This requires real US dollars for clearing.  So imagine the simple change of using a different money, and what impact that change will have on the flow I described above.  It will make the current glut of homeless dollars want to "go home" as FOA said.

Here's a short paragraph I found in a
tutorial that explains how the dollar is the main axis of most transactions today. This adds demand for dollars everywhere in the world:
In EUR-USD, the first currency which is Euro is the commodity and the second currency which is USD is the money. When you buy EUR-USD, in fact you pay USD to buy Euro. No matter in what currency your forex trading account is. You can have a trading account in USD, GBP, CAD or any other currency. When you want to buy EUR-USD, your broker changes your trading account capital into USD and then pays that USD to buy Euro. This is how it works. Any trade in forex market has to be done through USD. US dollar is the main currency and is the axis of all transactions in the forex market. Any currency pair that you buy or sell has to be done through USD. However, all of these process will be done automatically and you just need to click on the buy or sell buttons.

 == == == ==

Initially, they built the Euro with little talk of gold, all the while building a paper gold market that is dollar settlement based. By increasing the Gold Trading Market with paper gold, it not only drove the gold price down, but gave these contracts credibility as they could be settled in a strong dollar via gold. The hook came when they suddenly wanted gold as part of the reserves for the Euro! Now the BIS just stops supporting the London market with Central Bank gold loans and sales. By the time for the Euro to debut , gold starts to rise through the $360 area, there by breaking the entire dollar based paper gold market! Every oil state, and anyone else that is holding paper gold, will try to first exchange it for physical. After that guess who will be waiting with a brand new hard world reserve currency, ready made for converting dollar gold loans into Euro gold loans!

So, it sounds as if the euro block will facilitate / encourage this conversion. Just trying to be helpful?

Yes, it does sound like that's the plan!  Helpful?  Sure!  Why not?  To me, being "strong in gold" means being relatively stable in gold such that physical redemption/convertibility is possible anywhere, at any time, by anyone.  And, once again, most of these "dollar gold loans" are already closed out.  So now I'm thinking more about the massive amount of paper gold, backed by complex derivatives held by the BBs. 

Let's look at that last sentence a different way:

After that guess who will be waiting with a brand new hard world reserve currency, ready made for converting dollar gold liabilities/credits into Euro gold liabilities/credits!

As the paper gold market fails, the derivatives backing the BB's gold-ounce-denominated liabilities will fail to be able to bring in (buy) the metal required for redemption. Say the paper market stops trading at $250 per ounce.  There will be ounce-denominated liabilities that still exist, and they can now be settled for $250 instead of a real ounce because, like I said, in extremis you cannot force repayment of a physical item.  But will they all be closed out in exchange for USD250?  Perhaps not. 

Here's a better alternative for everyone involved.  Remember that if repayment becomes impossible, then the alternatives are restructuring or default.  And if the banks want to keep operating in the new system, restructuring becomes the only option.  So, even as the paper market dies at $250 per ounce, the real price of physical gold will be much higher, and the operators of the new system know this.  So perhaps they would rather not let the BBs cash everyone in a currency that gold is running away from when they could be cashed out in a currency that is "strong" (stable) in physical gold. 

The new gold price in dollar terms will be soaring as the USG is printing like mad, but the euro price for an ounce will be stable.  So even in the time it takes to cash everyone out in dollars, the amount of real gold each cashed-out customer could buy on the physical market is diminishing quickly. That's what happens when a currency collapses/hyperinflates.  On the other hand, you could lock in everyone's physical Freegold purchasing power on a moment's notice by converting all of those USD250 liabilities into EUR liabilities at the going exchange rate of that moment. 

Think of it like this:  The moment the paper market stops trading, physical gold is now $55,000 and you have 220 "ounces" in your BB trading account.  Each of those "ounces" is only worth $250 now.  If you could get that cash fast enough, you could buy one single ounce on the new physical market. But it takes time for them to cash everyone out and for everyone to go buy that physical. And during that time, the dollar is collapsing.  So your physical gold-denominated purchasing power is going to decline rapidly from a single ounce, to 3/4 of an ounce, to half an ounce and so on. 

If, on the other hand, the BIS/ECB and the BBs agreed to do the euro conversion, there would be no rush. You (as a BB customer) would still only get a single ounce of physical for your 220 "ounces" of BB credits, but at least you would now be locked into that full ounce and the BBs could cash everyone out at a more leisurely pace since I'm sure there will be plenty more pressing concerns at that moment. 

How could this conversion be facilitated by the ECB?  Easy!  Print the new euro for the banks in exchange for their derivative "assets" which are mostly dollar-denominated. The next step, I guess, would be to unwind and liquidate the derivatives.  The banks are getting a great deal here, so the ECB could easily instruct them to liquidate them on behalf of the ECB and return the proceeds in EUR. This would put further downward pressure on the dollar and upward pressure on the euro. 

Of course there would be some loss and the result would be a net-increase in euro base money.  But the ECB could easily mop that up with a small sale of Eurosystem gold.  Like I said, I have no idea what the actual stock of these BB ounce-denominated credits is, but let's say it's 10,000 "tonnes".  Divide that by 220 and you get 45 tonnes, and let's say the derivative loss is 50% from the time of the euro conversion until liquidation.  Divide 45 tonnes by 2 and the Eurosystem would have to sell about 23 tonnes to mop up the extra euro that were created by the conversion. 

Today the Eurosystem has about 10,800 tonnes, so the cost of the conversion would be about 0.2% of its gold, wholly absorbed in real terms by the revaluation.
 
== == == ==

Euro Zone based derivatives will be supported through limited gold delivery or with Euro cash. Both will be seen as a mountain of credibility in the storm that is coming. Let's face it, if you held a Euro gold contract for 100 ounces and only ten ounces plus Euro cash are delivered, that settlement will be worth a fortune in today's terms compared to a hyper dollar world.

I think I basically explained this one above.  But he does say "limited gold delivery" is an option in addition to Euro cash.  "Limited gold delivery" would mean paying off the BB liabilities in ounces rather than euro at the new Freegold rate, so in my back-of-the-envelope calculation above, that would mean 45 tonnes, half of which could hopefully be recouped by the liquidation of (what was previously) 10,000 "tonnes" of correlated derivatives. So it's essentially the same thing.

== == == ==

The modern financing tool we call the "gold carry trade" is now becoming the poison that will kill this market. The demands of gold lenders to return their "at risk" positions are creating an atmosphere where no amount of physical gold exists that can supply the outstanding paper claims. Great blocks of gold are now lent into the markets at 4% or greater, where once 1% was considered a good return. As each new group of lenders enter the market they are followed close behind by former lenders demanding their gold return. Fear begins to grip those who were once bullion owners as they now became paper pawns. Each new demand for "full allocation" creates yet further demands to borrow. The supply of new lenders grows smaller and smaller as the possibility of default increases.

The ECB moved to block any further erosion of the Euroland position.
[This was written just after the Washington Agreement. I think that is what this refers to but I’m not sure.] Most certainly, all world gold contracts denominated in dollars [denominated in dollars???????????????] would have gravitated towards Euro conversion to best advantage the EMCB gold stocks. Indeed, in a brilliant move they have blocked that escape and doomed the dollar gold market to collapse from non delivery. The ECB can now effectively support its gold commitments thru either bullion allocation or Euro settlement. By marking to the market their gold reserves they will contrast the advantage of a dollar gold market collapse no matter what form it takes. Weather discounting of paper gold from non delivery as derivatives are sold in mass (plunging dollar gold price) or a complete run for delivery (what we are seeing now) that leaves 95% of the market shut down and still holding paper demands ( paper gold priced in the many thousands. prior to lock up), the Euro will gain reserve backing.

Yes, I'd say he was definitely referring to the WAG.  He's talking about a chain reaction where, as one paper gold holder (creditor to the BBs, remember, paper gold is a BB liability) demands allocation, the BBs have to borrow physical from someone else, creating a new paper gold holder.  The CBs were the ultimate "lender of last resort" in this chain until the WAG. 
 
I think I explained well enough above what he meant by "denominated in dollars".  In extremis, cash is paid.  But what cash?  Any cash?  No, I think it is probably legally limited to the "money" that priced the commodity that was bought, sold, lent or borrowed.  This is no problem as long as all the various currencies are stable and freely tradable, just like the tutorial I quoted above said:
 
Any currency pair that you buy or sell has to be done through USD. However, all of these process will be done automatically and you just need to click on the buy or sell buttons.
 
But in a crisis where the markets aren't functioning properly, this ease of exchange will break down. At that point, if you don't have the physical gold, you're better off being owed "gold-ounces" to be paid out in euros rather than than in dollars, because the euro will be in full supply and stable in gold while the dollar will be in short supply and rapidly declining in gold. 
 
Now when he says they "doomed the dollar gold market to collapse from non delivery" he's talking about cutting off the lender of last resort.  So the chain reaction will simply continue until there's no more gold to be allocated.  And then he says that by marking their gold reserves to market they positioned themselves for the collapse of the dollar gold market.  The collapse being from non delivery.  Once it collapses, its price is no longer real.  So at that very moment, because of the ECB's MTM rule, the ECB's price of gold will be the physical price, whatever they say it is, because they can make that market! 
 
He says, at this point, "The ECB can now effectively support its gold commitments thru either bullion allocation or Euro settlement."  Of course this happens at the new physical price, because that's now the price!  And any "dollar gold liabilities" can be converted to "euro gold liabilities" at the current exchange rate between the currencies at that time which will lock these liabilities back into gold in real terms.  Sure, they will have devalued, but they won't continue falling in real terms along with the dollar. 
 
And finally, when he says "the Euro will gain reserve backing", I think he's simply referring to the natural strength and stability the euro will have versus both the dollar and gold.  Yes, the euro will devalue against gold, but that's not really a devaluation of the euro.  It's simply a revaluation of the gold reserves, and that is another way in which the euro will gain reserve backing.  Its reserves will have been revalued. 
 
Additionally, as I mentioned above, the Eurosystem will probably sell some gold into the market as part of this euro conversion process, and that will put downward pressure on the (newly revalued) price of gold which will make the euro stronger in gold. 

== == == ==

What of all the gold contracts being settled in Euros? You bet! And the DRAW here, is that the ECB marks its gold market to market with the process, later, extending to using "official" gold deals as the market price, not the paper LBMA. When push comes to shove, they will settle
Euroland gold notes at the official gold price, "in EUROS"! They can do this because their currency holds exchange reserves in gold that adds value as gold rises. The extra Euros printed to supply this demand will only fill the dollar void and be represented with gold reserves. When the dollar "paper" price starts it's "final" dive into the pits by discounting it's present credibility, it will drag every contract holder with it. This risk is real and will fuel the drive that demands a new Euroland physical marketplace.

Here he mentions the "official gold deals" that will be used to MTM gold once the paper gold market fails to deliver.  And I think the most important thing to keep in mind is that, when he talks about paper gold that was formerly traded in dollars being settled in euros or physical, he's talking about the new Freegold price.  If you had paper gold of any kind, you will still lose due to the revaluation.  But with the euro conversion you will not lose any more than the amount of the revaluation, whereas if you are (in the US?) holding dollar paper gold it could easily go to near zero by the time you are cashed out in dollars and try to buy some gold with those dollars. 

Perhaps the LBMA will fail to deliver on demand at $1,200, or $907 instead of $250, and that becomes the settlement price.  Say it happens at $1,200 and the revaluation takes it to $55K in real terms.  If you thought you had 46 ounces, you'll be cashed out at about 1 ounce.  So why would the ECB want to do this rather than letting all Euroland paper gold holders suffer the fate of the dollar?  Well, gold is to be an important part of the new system, yes?  Need I say more?

== == == ==

This first run will be a benefit to Euroland as they will be called to cover the needs of many other nations that once depended on dollar based assets. But later, the world will have a reserve currency and gold to trade with and against each other. The Swiss must free up their gold by selling it for Euro reserves (in a round about way, I'm sure). In the end, weather they join the EMU or not, the ECB will eventually absorb most of the "need to sell gold" as stress becomes apparent. This settlement of many of the Euroland gold loans in Euros, will not in any way make gold less valuable. Indeed, it will keep gold liquid in the face of an initial "lock up" in contract settlement.

Perhaps this is why Euroland will facilitate conversion to euro gold loans?
 
Sure! Perhaps the "gold in hiding" period will be less than a day, at least in Euroland!  ;D

== == == ==

If you read my recent reply to Strad Master, then it should become apparent that William F. is not declaring war. Rather he is continuing a policy that will allow the US dollar to destroy itself. By inflating the paper gold markets into uselessness, the US has removed the only vehicle that added enough value to our dollar currency to keep oil prices in check. Now that the Euro is clearly separated from our dollar system and able to make good on its physical portion (convertible) of gold debt, we are off to the races. Oil will rise until one of the currency systems fail! With the weak nature of the US debt situation, real world price inflation will break the dollar economy first. It will also break the dollar gold system through physical demand. It will force a dollar cash settlement for failing gold banking contracts in place of physical delivery. This process will create a cascading default that literally shuts down all paper gold markets. In the meantime any perceived weakness in the Euro will be countered in a soaring physical gold price. This sudden strength in Euros will allow settlement of all optional (physical or non- physical) gold loans in Euro cash instead of dollar cash.

No question was included with this quote, so I'll just let it stand, except to remind you that this "optional" settlement in euros rather than dollars will be at the new Freegold price after converting  from gold to dollars at the crashed LBMA price, then from dollars to euros at the euro-dollar exchange rate at that time, then back to gold at the new Freegold price in euros. 

== == == ==

Your position is based on current context. This drama will appear different as it unfolds. US inflation will be driving upward, its economy slowing and our Fed printing like mad. This very trend is currently on track as we and others have been pointing out. No one thought that Allan would embark on such a confidence killing rout and it is the bankruptcy of American financial policy that is driving this. The dollar is at the end of its timeline and our expansion of derivatives was but an effort to save the system for a while.

Let's see; you have a gold loan on the books, physical supply dries up forcing a premium on metal over contract gold, the contract and futures markets freeze up and your asset in the form of loan paper is worth zero. Then the ECB in conjunction with the Euro faction of the BIS offers to restate the now worthless gold loans into Euro denominations and you are going to walk? Where? To the US?

In this context, the next reserve system is saving a portion of assets that were already destroyed by US special interest. US policy destroyed before the fact as much as the US printing presses destroyed the dollar gold ratios in 71. Think again, my friend.


Again, no question came with this quote, so I'll just make a comment.  I think it is unlikely that the paper gold market will trade all the way to zero.  Trading will have to be halted at some point and cash settlment executed to wind it all down.  We obviously don't know when or at what price this will occur.  But there are three main exchange rates that will come into play here. 


The first is the $POG at which trading is halted.  The second is the EUR-USD exchange rate at the time of any euro conversion of Euroland-based claims.  And the third is the new Freegold (revalued) price of physical in euros.  We could play with various guesses here and see how you Eurolander paper gold players will fare versus the ones elsewhere who'll be left dangling with dollars.  But if we just use my back-of-the-envelope calculations above, you Europeans could get somewhere between 1/40th and 1/220th of what you thought you had, as opposed to getting close to zero.  Not so great either way, which is why it's best to stick with physical, even in Europe! ;D

== == == ==
 
--Now--:
A process is in the works to change our dollar / gold relationship again, after derivatives were inflated beyond use. Now, even the price of gold can no longer be captured on a par basis between derivative gold paper and real physical gold as the preceived value of gold is soaring. Once a super currency inflation breeds super price inflation; the derivative markets will begin to fail their hedge purpose and their trading value. These asset themselves will become the real risk.

Dollar supporters have no choice but to "NET OUT" at even any derivative hedge that may risk the system. That is, "Net Out" in a way that completely voids their risk transferring purpose as they are settled in dollar cash "no matter what effect inflation is having on the currency's value or your other dollar assets! Remember, the financial world today turns on dollar assets that are hedged; not just pure bare holdings! Block the hedge markets from performing and the dollar itself is unseated.

Make no mistake, every official rule and regulation ever written for currency crisis management involves not only currency profile assets, but also gold profile assets. With this concept in grasp; it's easy to see, with gold derivatives so widely used in current dollar support functions today, why they will be impacted as part of the paper mass.

Modern derivative usage involves gold derivatives and a new evolving crisis policy management will function somewhat the same as in 1971. It will arrive as some "net out" policy directive and universally abrogate all gold delivery options as part of the package. Any gold derivative that is used to support dollar currency exchange rates will be reworked to implement cash settlement against all claims for international currency derivatives written for gold.

What is a “gold derivative that is used to support dollar currency exchange rates”? Any liability of a US bank, perhaps?

It seems to me like he's talking about gold derivatives used to hedge non-gold investments, perhaps even bonds whose value is tied to interest rates, as it has long been assumed that gold moves in the opposite direction.  If you buy a bunch of Treasury bonds at today's low interest rates (which supports the dollar exchange rate like when China buys Treasuries), you might be worried that interest rates could rise destroying the present value of your bonds. If that were to happen, you'd expect gold to rise, so you might hedge your large position in bonds with gold derivatives like COMEX futures options or something with a low cost and a high payout if the low-probability event happens. 

The problem is that those hedges can only perform like an FDIC sticker that gives you confidence in your position, but cannot perform in real terms if what you worry about actually happens.

Further

Is it no wonder that Euro Banks have no fear from writing short gold paper. Because the entire Euro money profile is in the background for them. Running in parallel to and not in conjunction with the current dollar system. Any Fed policy that must break the risk transferring dynamic of derivatives, to protect our US banks, will open the door to the ECB's dumping IMF protocols and using the Euro alone as their sole reserve currency. This will immediately shift all dollar derivative plays onto the market, dynamically devaluing our dollar in the process. The ECB would then be cashing out holders of their gold loans in Euros as dollar physical gold prices spike and paper gold prices plunge.

I guess the "IMF protocols" must be at least part of the reason that dollars are the axis of most transactions today. So what he's saying is that if the Fed is forced to do anything that jeopardizes the hedging functionality of the derivative structure, the ECB will be forced to abandon this protocol and allow its banks to start using euros as the axis of transactions. And if this happens, then it would cause the unwinding and liquidation of all dollar derivatives as the banks frantically scramble to switch them to euros. As I already mentioned above, this would not only put downward pressure on the dollar, sending dollars "home", but it would do so "dynamically" as FOA so brilliantly put it.

Higher still; we climb

Of course, the big difference is that Euroland will encourage a physical only market price that, in turn, also floats Euro gold values to the sky. All in an well balanced effort to replace the massive dollar asset base it lost. In this; the Euro will become the first currency block that functions as a local reserve, yet under scores its image with huge non- monetary gold assets. Is it no wonder that EuroLand citizens will be buying gold as much for its prospects to rise as for its ability to be a wealth savings. In this it will hedge the future remains of a dollar failure and its impact on the world system.
Great paragraph!  I hope someone in particular is paying attention. ;D  

If Mr. Huge EuroLand bank owes the ECB system gold worth 100 million in current gold deals;
[why does the bank owe these to the ECB system?] with each 1,000 euro rise in gold he finds himself able to settle in less received physical gold. In a true "cashed out" transition of currency reserve hedges, each ounce of contracted gold owed could be reduced many times. Every player in the gold system, that is caught with their pants down, will rush to be a part of any Euro workout. Indeed, for every major player that was long the gold loan system, for the purpose of buying gold, cash outs in Euros will offer the only return. Official players in the oil sector would eventually be receiving American gold (but that is Another story).


SM asked why the bank would owe gold to the ECB system.  This would be a bullion bank that had leased gold from one of the Eurosystem CBs.  As I mentioned earlier, there are probably less of these leases outstanding today than there were when FOA wrote that, but we can't know for sure since they removed the lease cap from the 2009 WAG renewal.

And here, in this last paragraph, he makes it clear that "any Euro workout," any "cashouts in Euros will offer the only return."  It won't be a great return, because you will have missed out on a once-in-a-thousand-years revaluation and the opportunity of a lifetime, but it will still be better than holding a "dollar gold contract" while the dollar circles the drain.  ;D

Sincerely,
FOFOA
 

411 comments:

«Oldest   ‹Older   201 – 400 of 411   Newer›   Newest»
Ender said...

Sir Motley Fool,
You wrote “I presume you making an appearance implies you find the current market dynamics to be of interest.” – This is a good statement to explore.

To this great open forum, I would love to hear your ideas regarding what’s changed recently and why it’s important.

Nickelsaver said...

Ender,

Thank you and forgive me. Far be it for me to correct you, but rather to offer clarification for the less initiated reader. For you words do carry much weight, as they should.

As for what has changed, perhaps it is that the "people" are becoming increasingly more aware, such that those who have been aware are now starting to bring to a close their open positions in front of the crowd.

Dante_Eu said...

@Ender:

Yes Sir, I hear you loud and clear!
I know you and FOFOA are not one and the same, I just found those anonymous comments funny. BTW, I'm glad to see you comment, there's allways something to learn from your thoughts.

Gold as money, wealth, currency or even trading vehicle? Maybe all of mentioned depending of ones time preference ie. how long one plans to hold it.

In any case, I see gold as freedom. Freedom to dishord my own savings when and how I see fit. I wish I had discovered that before the financial crisis, but hey, there's time and place for everything.

Pat said...

What has changed? Let's start a list:
- MTM Euro gold below the 1246 mark and twouldst appear the "legs" of support withdrawn
- ABN defaults on gold delivery
- GLD puking virtually daily for a good spell now
- Not MSM news, but the blogosphere is lit up with the story of paper gold. Oh and that Canada broadcast expose
- Germany not getting her gold back toot sweet but having to wait
- Swiss folks petition to audit their gold
- WHAT ELSE?

Dante_Eu said...

@Pat:

- Cyprus ie. "Your wealth is not what your money say it is!"

Pat said...

- more and more swaps not involving dollar
- China and others not buying UST

Nickelsaver said...

Pat

Japan devalues Yen

Dante_Eu said...

- Freegolder Jim Sinclair coming out of the closet. :D

byiamBYoung said...

Physical gold demand surging

Tommy2Tone said...

Don't forget Basel III- was that the music stopping?

Jeff Snyder said...

@Pat,
Here's another "news item":
JPMorgan Accounts For 99.3% Of The COMEX Gold Sales In The Last Three Months
http://www.zerohedge.com/news/2013-04-26/jpmorgan-accounts-993-comex-gold-sales-last-three-months

Victory said...

According to the World Gold Council's latest publication the breakdown of physical gold ownership is as follows:

Central Banks; 30,100 tonnes, 17.3%
Investment; 34,700 tonnes, 19.9%
Other (industrial I assume?), 24,800 tonnes; 14.2%
Jewellery; 84,600 tonnes;48.6%

Question: Jewellery seems like a category that would have a significant amount of weak hands were there to be a rapid revaluation to $50,000 in purchasing power parity. 10% of this group rushing to sell gold at the 'Cash for Gold' shop seems reasonable. That would be 8,460 tonnes of supply.

I remember seeing a post somewhere discussing why this would not cause the newly revalued price to fall substantially, if anyone knows it can you please point me to it?

thank you

-v

messianicdruid said...

"Gold is a sapling, silver is an acorn."

I don't remember where I first heard this {maybe here}. Can anyone offer a better comparison of the GSR than this?

One Bad Adder said...

OK - last chart I promise ;-)... This one shows the relationship between $IRX and SnP 500.
One gets the feeling there's a "stealth" advance going on with $IRX Parity this time around ...and SnP is on the verge of realisation of same.

Lets watch!

Michael dV said...

Victory
I would guess that a very significant portion of 'jewelry' was purchased, with careful attention to weight and carat, by Indian, Thai and Chinese women. I would guess that, next to giants, these are some of the very tightest hands.

ein anderer said...

Question:

What does this mysterious COMEX "open interest" thing mean?
http://goldchat.blogspot.de/2013/04/comex-stock-drawdown-single-most.html?spref=tw

Michael dV said...

Ender
If you have not been following the blog closely I'll fill you in:
In December fofoa suggested that the ECB might not show an increased POG at its annual 'mark to market' reporting. This did in fact occur, for the first time in 12 years there was no last minute levitation of the POG and the ECB showed a decrease of that asset on it's balance sheet.
Then fofoa suggested that 2013 might be the year that official support of the gold market might be withdrawn and that this could herald the onset of freegold.
Over the past 4 months we have seen a flat and then sudden decrease in the POG. We have watched as the GLD inventory has steadily fallen, suggesting that various parties wanted their gold in physical form. The entities which had been profiting by holding their gold in the ETF were now deciding that it might be best to end that activity and keep their gold in a not profitable allocated way.
All this has the hive humming as we wait to see if the current market collapses from lack of physical supply and then, under the authority of some large international organization (the BIS perhaps) we might see a physical only market at a much higher price emerge.
In other words, some of us are over excited as we wait for the thing which has kept us here for years....freegold!
The writing and ideas of our host are superb and I find it well worth the time and effort but the idea of an obscure set of bloggers getting it right when EVERYONE else got it so wrong is amazing! The Thought that we might benefit significantly, personally is not trivial either. So... we watch this market together...with great enthusiasm.
...but I am certain you knew this.

ChrisF said...

@ Pat

Re: What has changed?

- Financial institutions' derivatives have priority in bankruptcy over depositors. See Dodd-Frank and MF Global.... etc.
- G-20 legalising the 'bail-in of depositors' procedure for SIFI in the event of imminent failure, which gets to be decided by regulators.

Combining the above two points one can see the 'Cyprus template' evolving all over the G-20. Personally, I have no way of evaluating or knowing the derivative exposure of my SIFI, so I remain extremely nervous of being subject to a possible bail-in. No wonder physical gold in possession has recently become more fashionable globally.
No reporting of the above (to my knowledge) in the MSM makes me even more concerned ... clearly, depositors are quietly being set up to bail-out the bankers, again. I am sure that giants see this and are taking action.

Jeff Snyder said...

The author in the zerohedge article on the amount of gold sold by JP Morgue in the last 3 months refers to GLD as a "coat check" system.

"The GLD works much like a coat check. Unless you think checking your coat constitutes a real transaction of some kind you shouldn’t think of changes in the GLD’s gold holdings as sales. They’re not. When you check your gold into the GLD you get shares (like a claim check). Where it gets wierd is you can sell these claim checks to nimrods who seem to think they’ve bought your coat, but aren’t actually allowed to wear it.

What nobody seems to appreciate is that every share of GLD is allowed to be sold TWICE (long and short, and it’s really important to understand that). If you’re foolish enough to doubt me (and foolish enough to short gold), go short GLD shares and see if anyone knocks on your door demanding gold. Saying the GLD is 100% backed by gold is a bold face lie because they’re can be twice as many shares in play as gold backing them, which means GLD shares may be only 50% backed by gold before any rules are broken."

Really fascinating article.

Bright aurum said...

@ One Bad Adder
So, when (not if) IRX hits rock bottom we either have SPX stalling and eventually crashing or it is hallo happy hyperprinting; a meltup)?

byiamBYoung said...

Down again, to 1083.05 tonnes in GLD

Sam said...

@Ender

The Hobbit was released and a GIANT dragon captured a huge hoard of gold. The powerful dragon does not spend this gold but instead lies very still on top of it. The gold is seemingly useless and priceless to the dragon all at the same time. Everything to follow is a derivative of the impact this movie has had on the general publics view of gold

Victory said...

Michael dv,

@ $50,000/oz in purchasing power parity I could argue that point but I won't I'll even concede it since in my example I used 10% of jewelry holders as weak hands....so there you go 90% are strong hands.

But I'm not arguing that this potential jewelry weak hand puke would significantly depress a post revaluation $PoG. An 8,000 tonne puke would still be only about 13% of public and private bullion holdings and a 13% secondary stock offering would not necessarily cause said stock to decline so long as those current owners still value the company to the same degree.

I thought there was a post about this somewhere?

-v

MatrixSentry said...

Another 7.22 tonnes of gold bullion leaves GLD for parts unknown.

That is roughly 7 pallets. 232,123 troy ounces. 580 LGD bars.

The demand for physical continues. It would seem the path of least resistance for paper gold continues to be down.

Roacheforque said...

There seems to be an incredible thought migration process toward the Thoughts of Another underway.

We see it in the myriad of quoted anachronisms and FreeGold-like explanations coming from all sorts of sources, some surprising. I've noticed this for a while now.

The cogs of GreeGold have been turning all along, it's just that we intuitively sense we are getting closer due to the compaction of trigger events all deftly cited above ... by a group I might add, who cited them more accurately, quickly and to the point, than any group of idiotic commentors in the vast array of supposedly "sophisticated" sites where we get things like "fuck Bernanke" or "buy gold bitchez".

Whether or not, or how much more such trigger events will unfold in short duration remains to be seen.

Truly with each new outrage like Cyprus, or the record short term take-down of paper gold, we ask ourselves, "how can this not be the final straw"?

And yet the system holds, by threads of CONfidence, spun by the spin-masters for their paper charade.

These threads will not hold. Despite the manay tests of their strength which have proven them tenuous over the many years, they could break tomorrow just as easily as a year from now.

Time now to consult the flower of understanding for a deeper perspective as the week end calls the rutting brutes to their watering holes.

Anand Srivastava said...

Victory

I would think that investment part would be the weaker hand. In India, there is a lot of negative sentiments to selling gold, that is why they take loan against it, even though it is financially wrong thing to do.

Yes the new generation might sell though.

After revaluation, there will definitely be a much higher flow for the first few years. But the demand would also be exceptionally higher. Lots of pent up demand from giants.

byiamBYoung said...

GLD hasn't been this low since September 15 of 2009.

Michael dV said...

Victory
no doubt many will want to enjoy or need to cash in a few chips and many will likely see the reset and fear that like a bull market it will soon fall.Lets not forget though that this is a reset of necessity and the CBs will not be selling and the Saudis will likely keep spending as before.
I guess I could visualize some initial drop in POG after reset but I think it bounces back to the equilibrium level quickly. Who knows how it will happen or what the first few months will look like.

Michael H said...

Jeff Snyder,

The author in the zerohedge article on the amount of gold sold by JP Morgue in the last 3 months refers to GLD as a "coat check" system.

Mark McHugh. Where have I heard that name before?

http://1.bp.blogspot.com/_cvdgPlEKW9k/TRBAScH1w5I/AAAAAAAABkw/ziqC5DlZqG0/s1600/comment-816663.jpg

(That was addressed at FOFOA, btw)

From this post

http://fofoa.blogspot.com/2010/12/kicking-hornets-nest.html

Sam said...

nice catch Michael H

PS said...

ALL: back when Another appeared (15 years ago), gold "production cost" was estimated around $300/ounce give or take. These days it is widely repeated as around $1200.

(Good ol' "mythbuster" BRON might have a solid opinion on this: )

Has production cost *really* quadrupled in the last 15 years---or do us "gold bugs and advocates" simply always "conveniently round up" the assumed production cost close to spot? ;)

Of course the less is "produced" of the stuff / the higher "production" costs, the better for us.

tEON said...

@PhilS
Why not simply look at the price of Oil? It has more than quadrupled... in nominal terms.
http://inflationdata.com/Inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm
Also, if you listen to buys like Embry/Turk - Gold is always increasingly harder to mine as decades go by. I wouldn't argue with 4X...

lola said...

Hugo Salinas Price has found a solution.

How to get the US economy going again

http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=212

milamber said...

@ Sir Ender,

Good to see you again.

"The end game will continue as long as man (the ants of the world) continue to ignore physical gold metal. As it stands today, man values paper. When this consciousness changes, so too will the value of the base of our monetary system."

Are we seeing it now?

Milamber

milamber said...

Warren has a must read up at Screwtape Files regarding GLD (if you've been following along Bron, KD, VtC, etc)

http://screwtapefiles.blogspot.com/2013/04/catching-up-on-slv-and-gld.html


My questions:

"veritable craploads" equals??
"generally accounted for" equals???

Milamber

tEON said...

"The end game will continue as long as man (the ants of the world) continue to ignore physical gold metal. As it stands today, man values paper...."

Hmmm... a billion Chinese and almost a billion Indians certainly aren't ignoring physical Gold. In fact, many were lining up to get it before this latest price drop. Not that I think ants (shrimps) are a hugely contributing factor to FG. Maybe Western 'man values paper' would be more accurate... but it's a mighty big world.

Unknown said...

The paper gold market is a casino in which the future redeemability of gold in dollars is bet upon. Nothing more.

Human beings do not even need to be involved. It is truly a "virtual" market for dollar price movement denominated in physical gold.

Golds denomination of future dollars is the only factor upon which physical gold is even used, as a thought of "this much gold will be worth this many dollars at this point in time".

The thought is what is being traded, not gold.

When you ask for "your" gold, you will be "cashed out" with thoughts of the repayability of the debt of others.

Those who trade in derivatives will be paid in derivatives.

This we know from the flower of understanding *

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

"I would love to hear your ideas regarding what’s changed recently and why it’s important" Ender

Cyprus and the ECB's direct implication that banks are not where wealth should be stored. But I thought MF Global was a big deal so what do I know.

Ender said...

Sir milamber,
That is a good question. I would love to see your observations.

From my point of view, this last run in the price of gold exposed that there is a new level of strong hands in the game. Strong hands expose where people’s confidence lies. As we all know, confidence is what holds a currency together. One ounce at a time, we’re seeing more people turn to metal, but they do not – yet – understand what will unfold because of their actions.

I love FOFOA’s Lessons from a monk above. All these principles have great value. One seems applicable to what I see here:

Patience is a virtue.

Ender said...

Sir Indenture,
What is the observed difference between Cyprus and MF Global? I’m sure there are differences that are worth investigating.

byiamBYoung said...

[Handful of popcorn]
Munch munch munch
[Handful of popcorn]
Munch munch munch...

Indenture said...

Ender: Do you mean difference in solutions or the causes of the problems? Or are we talking about something much broader like wealth is not what it appears to be?
My observed difference is MF Global was a small warning and Cyprus was a larger warning of the dangers of storing your wealth in the wrong place.

Tommy2Tone said...

[Reaching for some of byiamBYoung's popcorn]
Munch munch munch
[Reaching for more of byiamBYoung's popcorn]
Munch munch munch...
:)

Jeff Snyder said...

Michael H,
Thanks for bringing that to my attention. Whoa!

milamber said...

Sir Ender,

I do hope you are right!

And yes patience is a virtue. I am always complaining that I don't have enough time to cultivate it! :)

I would like to think we are seeing it. But then again, I have been duped in the past. :( Meaning, I would have said that Oct 2008 was IT. But yet (for whatever reason) the CB's of the world decided that the (1971) current $IMF version of the IMS would live.

At least a little longer.

Why?

I am not invited to those meetings. And Not knowing the reason, chafes me considerably.

I suspect it has to do with IMS stability and a flavor of "the devil we know is worse than the devil we don't know."

Aristotle (through FOFOA) has posted some thoughts that 2010 was it, but then the European Gov't (NOT EURO) debt crisis finally blew up & now the transition might be planned for 2013.

Is that correct?

Again, I don't know.

I do know this:

GLD is acting unlike it has in any time in its existence. Is that a function of arbitrage based on a declining gold price? I don't think so, but again, I don't know.

I like FOFOA's earthquake analogy answer to the question of is this it.

If you wait for the final confirmation to prepare, it is too late. But if you prepare too early, you may miss some other opportunities.

I will take that opportunity cost...

I do think as long as the OECD masses continue to support the current paradigm of storing their wealth in Dollar related debt (And since all currencies derive their value based off of the USD$, then all wealth stored as someone else's debt falls in this category), then No, the consciousness will not change.

HOWEVER, MF Global told Commodity brokers, your money is not what you think it is.

Cyprus told EU "savers", your money is not what you think it is.

What is the next "tell" And who will feel its wrath?

So maybe we are at the brink...

Personally, I am trying to figure out what inventory levels in GLD are telling us. If the BB have plenty of unencumbered physical gold with which to satisfy redemption requests, then it is smooth sailing ahead. GO MMT! Lines in the sand FTW! FOREVER!!!!!

But if for some reason the ROW doesn't want to collect lines in the sand as their SoV, then, as FOFOA puts it, we will have one HUGE punctured equilibrium and I am betting that EVERYONE will understand the FUNCTION of gold, as they stare in disbelief at the price.

One thing I do know:

That which can't continue, by definition, won't.

Milamber

Dante_Eu said...

Speaking about patience, I remember seeing this on jsmineset:

1.) It took 206 years to accumulate the first Trillion in debt (1776 to 1982).

2.) It only took 5 years to accumulate the 2nd Trillion in debt (1982 to 1987).

3.) It now takes less than 1 year to add an additional 1 Trillion in debt.

How long before additional 1 Trillion takes 1 month? Or additional 1 Trillion in 1 day? 1 hour? 1 second...

Now I understand why FOFOA once said that he could envision all debt of the US (14 Trillion at time?) in one single coin.

But, on the other hand, as a friend of mine put it:
"You are old school, the debt doesn't matter (as before)."

ie. if you can service it the principal doesn't matter.

Well I guess, he's right for the time being. But when it starts to matter, the eye blinks and the debt is no more. :-)

PS said...

Well, to quote ANOTHER:

'Even fifteen years have passed from a time that many said, " this dollar has the weight of debt and will fall soon". It has not, it did not!'

Written --don't laugh-- fifteen years ago ;D

We watch this new GLD market together, yes?

Dante_Eu said...

@Phil S:

Well, some lost souls may read these comments in 2028 and laugh at us. :D

We watch, Yes! ;-)

PS said...

Oh it will be a sight to read 2028's fofofoa.. ;)

Dante_Eu said...

Phil S.,

Talk about Fractals and Infinite resolution

**Warning** People who get motion sickness might not like the above link. :-)

Edwardo said...

Milamber wrote,

What is the next "tell" And who will feel its wrath?

The revaluation of physical gold is, by an order of magnitude or three, the biggest tell of all when it comes to the (fast growing) realization that "your money is not what you think it is." Unfortunately, it's not really a warning because when it happens it will be too late to respond. Unlike the small earthquake that was MF GLobal, and the substantially larger one that, for example, Cyprus, constitutes, the immediate aftermath of the death of paper gold will pull everything paper into the event horizon of the black hole.


Unknown said...

In "games of chance" one is always at risk. The IMF$ is a global game of chance, and as long as your wealth is held within it "in a public way" it is at risk. Especially in a game so rigged with interestrate collusion and price fixing from on high.

You gotta love Der Shpeegles shpin on it: sovereigns need only to "reach" for the assets of the citzenry to excercize their power to reduce debts.

So all citizens are "players" as they all benefit equally by the proceeds of this global game of chance, where winners win and losers lose.

There is no theft or confiscation involved. It is merely a matter of "reach".

How inspiring.

This we grasp from the flower of understanding.

Woland said...

Fofoa has said for quite a while that he "doesn't do timing". A
wise decision, given the complexity of factors involved. The Chinese,on the other hand, have for quite a while used the
observation of "unusual animal behavior" as an indicator of
impending earthquakes, with some notable success. Which
leads to the question, what sort of "unusual human behavior"
might be an indicator of an impending financial disruption.

One possible candidate (could) be a change in the quantity
(greater) and quality (more strident) of propaganda directed at
the western (US) investor. For fun, I've started a collection of
choice examples of these efforts, and sent a favorite to Aquilus,
who found it entertaining. The most recent example might
provide a similar experience for y'all. via Business Insider;

"Gold could collapse just like Bitcoin did." greetz



tEON said...

..."unusual behavior" might be an indicator of an impending financial disruption.

It has been reported that dogs are 'more frequently' urinating on the corners of financial institution buildings ie. banks... could this be the sign? It must be... I've noticed it myself with my Husky...

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

Business Insider (who aren't, as will be demonstrated, insiders at all) are so close and yet so far. Had they only included the word paper in their quote so that instead of saying this:

Gold could collapse just like Bitcoin did.

it said this:

Paper gold could collapse just like Bitcoin did.

The publication's title might be correct.

Of course, understanding that there is a world of difference between the thing and its derivative doesn't make one an insider, but such knowledge could reasonably be said to be a necessary but not sufficient condition for making any such claim.

KnallGold said...

-enough traps set north (so pssst...), new government in Italy. Onward, my friends!

-Europe consists of more countries than EU, like Iceland and Switzerland. Adding more diversity (and competition ;-) . Other colors of money, where it matters, are functioning also as good with a FGMTM regime. Wondering if Britain, where (admittedly very nice) colors matters most, would there have its least painful entry opportunity? Just a thought play...

-this we recognized now: immigration never produced added value, just expansion. So its a relict of the past globalisation/excess growth paradigma which failed.

-what changed? IMHO the most important is the mainstream recognition of the paperGold story

-And if the ETF was (was!) 50% fractional reserve Gold banking, what comes next? 100%? Hmm, ooops ;-)

-and listen to gary's dog (lol, and not the humans who also went out to the emptied sea before the tsunami. Animals otoh went to the mountains, Another point to da animals)

-Good week!

PS said...

"this we recognized now: immigration never produced added value, just expansion. So its a relict of the past globalisation/excess growth paradigma which failed"

Not sure what your point is with the above regarding FGMTM? Sounds like the short-sighted/narrower-view/tribalist "hartgeld/AdF" crowd rather than the more "holistic" and decidedly NON-anti-CB/non-anti-EUR (just anti-$IMFS) FG crowd to me? ;)

PS said...

How about you study "Another (Thoughts!)" and Friend-of-Another ("The Gold Trail") first, Art? See ya in a month or 3?

PS said...

"Just because bankers aka Freegolders"--so little understanding of the subject matter presented here. Note, "Freegold" is a short-hand for "a global free market for physical gold" -- physical only, free-of / unencumbered-by "paper gold". Paper gold including ETFs, options, futures, and "gold-backed" (but ultimately always fraudulent) fiat currencies. Think about it -- fiat that isn't backed by a fixed exchange but freely convertible and floating to gold depending on how "strong" or "soft" said currency is or is perceived -- isn't "fraudulent" money. It's not "sound" money either, it's just honest, allowing gold its proper role of "pricing currency" (rather than "currency pricing gold", which Another taught and showed is dishonest and impossible).

Dante_Eu said...

@Art:

Because gold is too valuable to be used in day-to-day transactions.

Gold as:

Short time money => Bad
Long time money => Good

Also, loans should not be enforced in gold. Debtors don't like that (harder to pay off) and soon enough guillotines would be rolled out.

Hence, compromise => Freegold

PS Nice to see you not swearing for once. :-)

PS said...

"Absolutely NO reasoned argument offered to bolster his position" --- just confirmed: Art is a troll.

We have pages of pages of "reasoned arguments" right here on this blog. RTFB or go back to your last-century "gold-backed currency" crowd...

Tell me: what is NOT to like about a fully free physical-only gold market? I'd rather NOT have some "monetary authority" set the price of gold any longer.

PS said...

In other words: "FreeGold" is just the only possible/realistic way that gold can finally be set free from any kind of fractional-reserve games.

Why do you hate this goal or idea, tell us?

Dante_Eu said...

I'm only human Art, no hard feelings I hope. ;-)

Also, it's much easier to go with the flow than against it.

Pat said...

OK Art so we are all idiots here, cool, we get it. Why are you here when you by now no one cares what you think? I have lots of disagreements with certain theses at blogs on all sorts of topics, I never go there. Are you a masochist, what possible rationale would you have?

PS said...

Oh I get it, Art wants the world to go back to settle all trade in physical unencumbered gold coins. Well, that's a cute concept but that's not the FreeGold concept and you won't convert any FG advocates for this idea. Digital currencies are very convenient in today's world of day-to-day commerce across the globe, the freedom to exchange our excess fiat into physical gold for long-term wealth preservation (and the rest of the world slowly evolving "back" into this noble habit instead of "saving in fiat debts") is quite marvellous. Fiat from our view only becomes a problem when fiat debts are used as "assets/savings", which creates all kinds of banking frauds and derivatives-houses-of-cards, or when fiat is declared to be "backed", because such backings are always abused/diluted by governments.

Fiat as a mere book-keeping/accounting entry for commerce and global trade at the speed of light, (freely-trading physical) gold for wealth preservation. Again, what's not to like?

MatrixSentry said...

Keep feeding this idiot and this blog will belong to the Troll.

PS said...
This comment has been removed by the author.
ciaoant1 said...

I've noticed an interesting pattern in Germany's behavior:

First, they asked the FED to give them [some of] their gold back, by the year 2020.

Then, they accepted Basel III being pushed back to 2019.

Now, I read an article on Spiegel (http://www.spiegel.de/international/germany/berlin-says-it-will-keep-up-to-800-soldiers-in-afghanistan-after-2014-a-895371.html) where is states that Germany will keep some soldiers in Afghanistan for a few more years (they originally intended to withdraw by the end of 2014).

Germany obviously doesn't show much enthusiasm about NATO's campaigns, because they are intended at preserving the dollar's status quo - Iraq traded oil for euros, Iran wants to do the same, Libya wanted a gold dinar as means of exchange, so the Americans are campaigning against them

But the Germans were not really warm to this idea, because they obviously have different plans about the dollar and the euro.

But now they are supporting NATO's campaign for a few more years, they are pushing back Basel III, etc.

So, maybe this is not the year of the window? (no offense, just making conversation).

I also have a question for those who are more knowledgeable than me on the subject:

I've been researching on the Keystone pipeline, and I came across some tweets from some of the people here, who I follow, and they where talking about that pipeline, and how its route is "strange" (I didn't understand why though, my English is not that good). So, if it's not too much trouble, could someone explain to me why this pipeline is so important and "strange"?

Thanks

PS said...

WTF. We don't care if you use official fiat or Bitcoins or Seashells for your commerce. We only sit here to ponder whether, when and how physical gold may or will evolve to become the world's ultimate primary store of value, rather than fiat debts as is the case today. As for what is used in trade and commerce, we do not wish to impose any preference whatsoever. Other than saying: the EUR was designed for physical-gold and a freely-trading store of value (supporting rather than suppressing it), AND fiat debt will come out of fashion as a long-term store-of-value. End of discussion.

Again, what the market or the govt chooses as the medium-of-exchange --lines in the sand, seashells, ameros, whatever-- none of our concern in these circles. Cheers.

Dante_Eu said...

@Art:

I presume you are from USA and I seriously doubt you have been to any other country in the world.

Here's one example:

There is many countries in Eastern Europe which do not use € (harder currency relative to their) but their own softer currencies like Koruna, Tolar, Dinar, Kuna, Forint, Leu etc.

In those countries you get paid in softer local currency, pay your bills and then, what's left, you exchange to harder currency (€) in order to save.

Now, before the financial crisis, many people in those countries took house and car loans in swiss franc (hard currency). Those people got crushed, I mean crushed, because swiss franc appreciated big time against their local currency.

Now, you should suggest that those eastern europeans should take loans in even harder currency ie. GOLD?

Do you honestly see any pattern here, and if so, why do you think guillotines are mentioned?

PS said...

Art--last time, or you really are a troll. It's not FOFOA's mission to campaign against (or "forbid") the use of gold in day-to-day commerce and trade. But we simply assume with the "revaluation" we expect that no one would trade their precious for a loaf of bread and a glass of whiskey, when "worthless paper" seems like a better deal. And the baker or barman can channel his excess income easily and FREELY into GOLD for his life savings and wealth estate. Thanks for listening, now feel free to study the Gold Trail or ultimately dismiss the idea if you don't like it. We're not advocates or activists here, we only discuss the evolution and return of physical gold as a wealth holding. Thanks.

PS said...

ciaoant1 you're right, the "official" preference for the "window" may be a few more years off---perhaps to "reconcile/settle the South-European debt crises"?

But all bets are off if paper gold implodes, as we know.

I wouldn't mind another few years of accumulating physical precious at these firesale prices, if only they can last. Too bad I'm lining up together with 3 billion Asians thinking the exact same!

Polly Metallic said...

Please folks, let's not interact with people who are here only to be disruptive. I was enjoying the exchange of ideas brought up by Ender's question of how things were changing. Now my emails are being bombarded with the same old nonsense protests and arguments we have covered here before. If it were a new person it would be annoying, but for a repeat disruptor, it's more than just annoying.

Anonymous said...

Re: derivatives

Since mentioned by Michael dV, and ChrisF, earlier on this thread, let me post here, for your information, that the European derivatives trading is being changed with new regulation now under discussion in European Committee,as part of what's called "European Market Infrastructure Regulation", or in short, EMIR.

This regulation extends to the whole European Union, including UK.

Lots of lobbying is ongoing, but in effect, all derivatives in European banks will have to go through central clearing parties.

The big change is that most derivatives are going to be treated as two separate legs, and so, netting exposure of both legs will not be allowed.

One of the big issue with this is, exactly because netting will not be allowed, huge collateral is going to be required on the total gross exposure, that's on each of both legs. This would create a huge need for cash, to post on margin for holding the derivatives.

My impression so far is, with this regulation, European financial institutions are being discouraged to hold derivatives.

It's very much a question of where the derivatives holders should get the large amounts of cash required for margins, And once held as margin, who will be in control of such cash on the margin account. So it could mean a big cash drain once the rules come into effect.

Since I've not seen EMIR mentioned on any finance blog, nor much documentation is available online so far, I'm posting it here for if you were interested.

Kind regards.

Dante_Eu said...

@Art:

"I do not believe that people who cannot afford houses or cars ought to be enabled to buy houses and cars."

Those people could afford the loans in the beginning but because the loans where denominated in harder currency (which appreciated against theirs) they got in trouble. That was the problem, not that they lost the job or didn't make enought money.

Let us agree that we do not agree and I yield back the balance of my time.

lola said...

Art,

Simply take a sailboat to East Malaysia and swing in the trees with the orang utan. Soon you will forget the object of your obsession.

Until you do that, you will remain at best an ignorant and gutless sycophant.

ChrisF said...

Raymond,

Thanks for your comments on EMIR. The proposal sounds excellent as a way to reduce our risks of being bailed-in due to a collapsing chain of OTC interbank derivative deals.

Anand Srivastava said...

Lets not feed the troll.
He doesn't even know the 3 functions of money. Without that base freegold is impossible to understand.

Nickelsaver said...

No use arguing with a fool who is in denial of the reality of Gresham's law. For if two currencies circulate together, the bad will drive out the good.

That is, unless the gubament decrees them equal. But if it decrees them equal, then weight is irrelevant, in fact the difference between them is irrelevant.

And there is no use arguing with a fool that doesn't understand the concept of double entry accounting. For every action there is an equal and opposite reaction (even if it isn't readily visible).

To argue with such a fool would be akin to arguing the earth is round, despite his unrelenting assertion that it is flat.

Nickelsaver said...

Anand

I totally agree!

tEON said...

What imbecile would freely exchange his VALUABLE goods and services for "worthless tokens" knowing that any second these "worthless tokens" could become not acceptable as payment for valuable goods and services - because fiat is intrinsically WORTHLESS as FOFOA himself stated?

Unfortunately you are describing almost the entire planet... and yes, Art - we, here all find it ridiculous, but you'd be better off accepting reality than trying to change it. It's a losing battle, but if this is the one you wish to fight - you are preaching to the choir. We already know about Fiat currency, doncha think? You know what happens in Hyperinflation, Art? They just keep tacking zeroes onto the paper money (or postage) and people still don't get it... as their wealth evaporates. Try to accept things as they are - you will be much more at peace - than assuming the world will be enlightened. Won't happen, buddy... I'm so sorry. It's a hurdle most in the Gold community cannot come to grips with... you included.

Ender said...

Sir Indenture,

MF Global customers were profiled as investors – people willing to take a risk. When you take a risk, you should expect to lose. The end result: Confidence maintained in the system and nothing really changes. A similar idea was applied to the Cyprus crises as we were told that only black market Russian mobsters stood to lose.

But, there was a slight difference between the two events. In the first event, the rules were known and remained unchanged. In the second event, we were introduced to new rules. Someone willing to share the key new rule and what it means with regards to how to save a currency?

Ultimately, new rules - new game. It’s really that simple.

As with any new game, it takes the players a little while to figure how they need to play. How are they playing? What actions have changed? We witness and observe the actions of others. How are they adapting to the new rules?

There are so many questions! And things are taking an interesting turn.

Good day!

Indenture said...

Please don't feed the trolls the sign read in Sanskrit

Ender: "Someone willing to share the key new rule and what it means with regards to how to save a currency?"
The ECB didn't print Euros to fill the balance sheet of the Cyprus Banks. I believe the Cyrus Banks would have been allowed to fail.

Woland said...

"Feed me, Seymour. Feed me all night long." - a little flower

Anonymous said...

ciaoant1,

So, maybe this is not the year of the window? (no offense, just making conversation).

But then we have this:

Bundesbank, gold locations
Bundesbank, gold transactions

This is the first time that any central bank publishes a complete record of their gold holdings and transactions. And what can you see? The took 950 tonnes from London to Frankfurt around 2000, they converted some 700 tonnes of swaps and unallocated to allocated in 1997 (now do put this into the context of Another's original postings!). And they are now fully allocated.

Let me also remind you of MF's interpretation of the gold repatriation discussed here.

Sound like someone is getting rather impatient.

Victor

byiamBYoung said...

@Woland,

What's that in the shoppe window? The flower of understanding?

Victor The Cleaner said...


Apologies, broken link. MF's interpretation of the Bundesbank request is here

Victor

tEON said...

They want to keep fiat the medium of exchange.

No, Arthur - 'they' (we) have no say in it. Neither do you. Awaken. Freegold anticipates it (paper) will remain the MoE - that is a huge step from 'wanting' - although you must admit the transition would be less drastic. You zealously desire Gold as currency to equalize the playing field. Very noble, if shortsighted. Since you've read the Blog - remember this one?
"If you hated our last one (Financial Architecture), you will no doubt hate this new one too".

You are free to disagree. You expect Gold to become the MoE. Freegold doesn't. Freegold sees AU as the SoV. Let's see how this plays out... if you are right - you may come back here and gloat. Deal? Good day.

Michael dV said...

Show me one place where anyone ADVOCATED ANYTHING!!!
This blog is about observing and trying to position ones self to be in the right place when giants walk.
No one (of consequence) here is pushing a cause.
THAT is what makes one a troll here....claiming we advocate. That point has been made enough times that anyone persistently claiming otherwise has serious mental issues. These issue will not benefit by logical response nor with the flower of understanding...maybe thorazine...

Edwardo said...

Ender wrote:

MF Global customers were profiled as investors – people willing to take a risk. When you take a risk, you should expect to lose. The end result: Confidence maintained in the system and nothing really changes. A similar idea was applied to the Cyprus crises as we were told that only black market Russian mobsters stood to lose.

One should expect the possibility of loss of some or all of one's capital when one deploys that capital in the arena in which investments are made, namely the market itself. That is not what occurred in the case of MF Global which is an object lesson in un-prosecuted criminality of well connected individuals by compromised officialdom. Such is the state of play in the U.S. at this time.

As for confidence being maintained in the system in MF Global's wake, I don't think we can know to what degree, if any, confidence has been maintained or lost as a result of MF Global, just as we can't know in any quantifiable way how the pillars of stability were impacted, or not, by, for example, Bernie Madoff's treachery.

My sense with all of these events is that they have a cumulative effect, and some, such as the Cyprus affair, appear to have much deeper and long lasting effects than others, but the mere fact that we are still speaking about MF Global tells me that its contribution to agitating the fingers of instability should not be underestimated where "the system" is concerned.

byiamBYoung said...

@Edwardo,

I understood the comment to mean that in the case of MFG, the money lost was invested, not placed as savings. Agreed, Corzine got away with theft (or so it appears). But the concepts of money placed at risk vs savings tucked (supposedly) safely away still hold, theft or not.

Cheers

byiamBYoung said...

@Edwardo,

Re-reading (RRYFC), I think I missed your point, with which I tend to agree.

MF Global, regardless of the facts, created an angst in the (investing) community. Some of that angst is a contributor in the cascading decline in confidence in the $IMFS.

Sorry for not digesting your comment more completely before posting.

Cheers

MatrixSentry said...

For those who address the Troll directly by name, you really should not. For the obvious reason of course, but really for another reason as well. FOFOA will delete this disturbed individual's posts on sight. Your posts will look curious to a fellow reader because they will be addressing nothing but a phantom, thin air. Therefore the only person that can benefit by acknowledging the Troll is the Troll himself. Our visitors are left scratching their heads, your time will have been wasted, and the Troll says "mission accomplished".

I think FOFOA would be wise to delete not only the Troll's posts, but also the posts that respond to him. Eventually people will simply ignore him until his posts are deleted.

Unknown said...

The did change the rules for Corzine's debacle, from a commodities to a securities ruling but as brother Young has said, it was done more to impute loss credibility due to "investment risk" ...

Today, and not so long after MFG, we see a "public" (read fishbowl) announcement / opinion that savers in fiat are at risk of their financial institution's solvency.

There is no pretense that you are "gaming" your money, there isn't even an interest rate gain for "saving" as no element of the system wants fiat to sit still and pretend it is wealth. It must perpetuate debt as a means to retire debt, an illogical task, born to fail.

And yet, it is one thing to say that a securities speculator could lose money, but for a savings account holder to lose money in order to make the bank's "investment" losses whole implies that the holding of fiat entails much more systemic risk than simply "losing value to inflation".

You see, you are paying the banks debts as a penalty for holding their fiat. If you would just use it all, and borrow more, there would be none to take, but you save it, so they take it to retire someone elses debt.

Soon all "debt" will be "taken" to retire "someone elses debts" - including yours. Think upon this, and what it truly represents.

It is a lost cause, for only gold can retire debt, but MUCH dollar debt will be recycled in a hyperinflationary tornado before this is called to action.

A debt based system promulagates and rewards debt, not savings. A savings based system promulgates and rewards savings.

Simple differences for a simpler time. Which is the better system? Which the more sustainable. How it is achieved?

Take men and their fiat out of the equation and let gold be the judge of worth.

The world will be a happy place ... more in harmony with the *flower of understanding^.

Unknown said...

Would you guys care to evaluate a plan of mine?

I live in the USA and have a small holding of gold. Should freegold occur, I would like to use my increased wealth to pick up some land in western Washington or western Oregon in the mountains/forests to build a very small (200 or 300 sq ft) cabin.

With most Americans probably scrambling to find a way to make ends meet with the value of the $ falling precipitously, I'd think there would be a lot of bargains. And with the largesse offered by freegold, I would have the money to get a deal.

Is this a good idea? Do you think there will be a lot of good deals in the wake of freegold by people looking to eek value out of whatever they can?

Indenture said...

Victor: Thanks. Someone has finally just come right out and said, "they (the Germans) are now fully allocated".

So now we wait for China and Russia?

byiamBYoung said...

@Darius,

I can't speak directly to the wisdom of your goal, but I will tell you that I share the same intent.

I purchased a small amount of acreage in Eastern North Carolina, and plan to build a few small (200-400sf) cabins, for my family to always have somewhere to go.

Post revaluation, I'd suspect that by the simple virtue of your having stored wealth, you could likely snatch a bargain somewhere from someone who wants to sell out.

My guess (no better than anyone else's) is that much will feel the same after the dust settles, except for the fact that savers will have a newfound appreciation for the SOV value of gold. And, of course, that the early adopters will enjoy a substantial windfall (let's hope the PTB don't concoct a way to tax it away from us!)

Just hang on until the whole reval thing is over. You know, strong hands and such...

Best of luck.




Aaron said...

Darius Caergrim

Two comments:

This little cabin of yours...great idea! However, you will not be buying bargain basement land parcels with your gold. Your job is to find the right time to trade gold (allocated wealth) for fiat (unallocated wealth) to turn that fiat around and purchase your land (allocated wealth) ;-D. Pick the wrong time and all of your effort will have been for naught.

Do you think there will be a lot of good deals in the wake of freegold by people looking to eek value out of whatever they can?

Yes, I think so. There will be good deals by people looking to eek value out of whatever they can, deals you will be able to take advantage of if you have the cash on hand. Me? I'm not looking at those dollar deals available during the transition. I look beyond the horizon to the good deals that will seem like four alarm fire sales when valued in gold by weight! That's the time to buy land. After the dust settles. Of course if you have already bought your gold and have copious amounts of cash on hand with no need to spend it, go bargain hunting I say!



Ender said...

Sir Wil Martindale, byiamBYoung,
I agree, technically, rules changed i
the MF Global situation (along with many others) but fundamentally the game remains the same. Whether it’s good or bad, that is a topic for another day.

The game changes when the fundamental concept of saving currency comes into question. Believe it or not, people are being faced with the question: What do you save? How do you save it?

This, my metal headed friends, is on the table today in a visible way. We have all known the answers for years, yet the concept is new to even the brightest of minds.

The reaction to this change is starting to show up. Giants have sat very still for many years. What I see is a gentle stirring of the ant’s nest so the ants do the work as all Giants simply watch. Remember, gold must flow in order to find value.

We will know that this ‘guess’ is on the trail if the rules for saving gold are supported rather than undermined – in the non-dollar denominated world.

Remember, years ago, oil was told to not save Euros. That would probably be good advice for us ants.

Good day.

Ender said...

Sir victorthecleaner,

No matter how much gold any currency holds, value is found by what circulates rather than by what sits still.

And, I look forward to reading more of your research.

Ender

Unknown said...

Thanks, byiam and Aaron. I appreciate the input you two have given me.

Unknown said...

Good Sir Ender,
Your words reveal wisdom. Clearly, you have been along that part of the trail alongside which the flower of understanding blooms.

As we walk the winding trail, we truly are sustained by the richness of these mind flowers.

Indenture said...

Wil, I would politely remind you that repetition is not needed. I have heard your botanical descriptions and they are noted.

byiamBYoung said...

Sir Ender,

You said,
"What I see is a gentle stirring of the ant’s nest so the ants do the work as all Giants simply watch. Remember, gold must flow in order to find value."

Trying to understand this statement, I think of the gold flows I see every day.

I see weak hands surrendering their gold for (significantly below value) cash, and I see savers scooping up gold bullion at a premium over spot. Physical gold is flowing amongst the ants.

Or are we talking about a different class of ants?

Cheers

byiamBYoung said...

@Indenture,

Yet, one can never get one's fill of Ultimate Spinach. Fiber for the soul.

Rock on, Brother Wil.

Cheers

Franco said...

There is currently an article on the Chris Martenson website where someone who is some sort of precious metals dealer explains that there is an over-the-counter market for gold where transactions, large transactions happen at prices considerably higher than the paper gold price. That is the first time I hear that outside of this blog.

Anonymous said...

Mmm, Ultimate Spinach:)

Try it with a bit of Wild Butter

Electric Prunes to keep ya regular? - Might I suggest a yummy Chocolate Watch for dessert...

Ender said...

Good byiamBYoung,
Unlike FOFOA’s fine article on giants, my view is that giants make currencies and have relatively no need for gold. Whether or not there is gold hoard held by a CB, all that really matters is that the currency continues to function. That, I’m sure we’d all agree is where the value is.

And, as we all are seeing, currency must not be saved. If it can’t be saved, some small part will find gold metal. My point is, in order for the giants to see their currency function; physical gold must flow in that currencies economy. It is each little transaction for physical that proves the currencies worth. Thus, if the political will of the currencies economy hampers the metal for currency transaction, that currency will be found wanting – it will not function. It will not be able to complete. It will be discarded.

It is good to see bullion transactions happening – this shows that our currencies are still alive!

Now let’s see which currencies honor the concept that strength will come from the flow of gold.

JC said...

This article with GSR analysis, which also appeared on Zerohedge, has an interesting conclusion.

"The gold-silver ratio has the potential to rise to heights never before seen. The reason is that major crises encourage hoarding and flight; and it is much easier to flee with a million dollars in gold than a million dollars in silver."

http://worldcomplex.blogspot.ca/2013/04/gold-silver-ratio-in-phase-space.html

The Zerohedge comments have quite a few silverites up in arms and not ready to dis-hoard their industrial metal yet, I wonder how much longer they will wait.

Indenture said...

Ender: Poking the ant nest encourages the tiny saver to scurry and find somewhere else, somewhere safer to store their wealth. When critical mass is breached the $IMFS will collapse under it's own weight and the Giant can remain in his comfortable chair still holding the stick.
Have we witnessed a larger stick in use and not yet noticed it's effects?

ciaoant1 said...

@Victor The Cleaner:

Thanks for the response, it is a good way of thinking.

Bur how about this: Maybe Europe+China+Russia want to delay for a few more years, in order to complete some importnant projects. For example, Russia and China are currently building h huge energy pipeline, that will transfer 25% of Russia energy reserves to China (http://rt.com/business/transneft-espo-oil-asia-807/).

Furthermore, China would probably like to create a "Chinese middle class", so that someone will start buying all these products that China has been exporting to the "Western consumer" up until now. The western consumer is dying, so they will have to make some changes like the one I described.

Anyway, we will watch this gold market together, no? :-)

PS: Any thoughts of the Canada-USA pipeline? Why is it such a controversial subject?

Thanks

Attitude_Check said...

This may be considered heresy to some here, but I think the Euro fumbled free-gold, but the fumble has been picked up by China. The problem is I don't know if the Chinese have the big picture that Europe had. I don't think it changes the primary shift to Gold as the global store of value, but it will shift some of the details. I think when the UK didn't enter the Euro as planned, bringing the LBMA trade inside the EZ, the Euro free-gold vision became unimplementable. The Europeans are fighting a strategic retreat, looking instead to the SDR as a $-reserve replacement, with Gold as a prominent component, along with a few BRICS currencies to try to prevent a full-on Free-gold solution that will leave Europe with a much reduced global influence.

byiamBYoung said...


Another article where some "business insiders" dance right up to the edge of saying something useful, but ultimately fail to put the final pieces together.

"While the gold sell-off has prompted some buying from consumers, it has resulted in 'panic selling among ETF holders,' writes Joe Weisenthal at Business Insider.

In recent days that the outflows from ETFs have been 'massive, offsetting any demand from physical,' he added."

Motley Fool said...

Ender

What has changed and why it is important.

Hmm. A tough question to be sure. The only constant there is is change, and we have seen much of it. The tricky part is sorting the important from the unimportant in contemplating such.

One thing of interest to me is the wider dissemination of the ideas we discuss here that I see from various sources, even though incomplete and non-holistic.

Another thing of interest to me is the noticeable change in public perception, which you remarked on yourself. It is not a complete U-turn yet, but one does see the tide turning.

Also it seems that weaker hands are being weeded out, if I look to scrap supply. This has long been an important source in addition to mining.

So many things of interest, who can know which all the most important bits are. :)

TF

Pat said...

AC, interesting conjecture on the Euro to be sure. I myself have baggage, and would prefer a trail to FG that is completely independent of this fiat or that fiat. But I recognize I have that baggage.
I do know that the world removing the USG exorbitant privilege, and forcing USG to live on production ( or gold! ) not paper printing is a big part of the trail though. One of my AHA moments was when FOFOA pointed out how the reserve currency forces the "lucky party" issuer to run trade deficits. One unintended consequence of being able to get free stuff is the gutting of our industrial base; the sooner FG the better not for our sake but for the country and world for that matter.

Unknown said...

Pat: Good point about the trade deficit. People act like the exorbitant privilege has been good for Americans. It hasn't been good for us at all. It has been great for multinational corporations. For us, it has just eroded domestic industries and robbed us of our ability to generate wealth.

Nickelsaver said...

"This may be considered heresy to some here, but I think the Euro fumbled free-gold, but the fumble has been picked up by China."

Currency separate from the nation-state:
Euro=Yes, China=No

Gold reserves marked to market quarterly:
Euro=Yes, China=No

Currency pegged to USD:
Euro=No, China=Yes


Sorry, think again!

Pat said...

GLD puke...

OK, OK, anecdotal and 2 degrees of separation from Kevin Bacon ( a guy I know knows a guy that is REALLY REALLY connected ) but I am seeing this kind of reporting many places. It does appear the ubers want their physical, now.

http://truthingold.blogspot.com/

Anonymous said...

It’s clear that world’s largest currency zones have issued far more IOUs of one form or another than can be possibly converted into the physical world at ‘present’ prices (IOU/stuff) even out past 100 years of future production. Thus why ‘all’ paper will burn, it’s just a matter of how at this point.

Using gold at a floating price exchange reserve to fiat is monetary system that is available to ‘all’ currency systems, not just the Euro. In fact this is exactly how Freegold acts as both a spur and brake global trade eliminating Triffin’s dilemma correct? Basically price equilibrium is Stuff Nation A=FiatA = gold =FiatB = Stuff Nation B. Net stuff flows in the opposite direction of net gold.

In addition what happens to all those Euro loans and socialism IOU as the Euro transforms from a soft to hard currency? My guess is that two things will happen. The first was already demonstrated via Cyprus, the EU will just steals the money, that was easy. After that path of least resistance is exhausted the debtor nations will just leave the Euro altogether and just default on their Euro debts and go back to their own Freegold based local fiat.

Which then begs the question; if the next monetary system looks a lot like it did up and until 1922 a floating gold exchange Euro becomes a currency without a nation? So what nation do I use the Euro to trade with exactly? If the answer is you don’t the Euro is nation less proxy for gold then I say why not skip the middle man and just let Freegold be Freegold?

said...

Where do you guys see the gld holdings so quickly?

byiamBYoung said...

Luke,

Here

Cheers

One Bad Adder said...

@BA: - There seems to be a distinct "4-6wk lag" with DX relative to $IRX which bodes well for the SM's ...short-term.
Todays Auction result is consistent with the $IRX downtrend and from hereon out "things" get interesting.
BtC Ratio today is 4.86 which is as high as I can recall.
There "appears to be" a point as $IRX approaches parity where DX (perhaps anticipating Zero Yield) reverses trend ...which is anathema to the SM's and should herald an SM rout.
$PoG will again retreat ...but I doubt this next retrace will be "IT" either.
FWIW - Let's watch.

One Bad Adder said...

spaul67: - The "thing" with the Euro is that it does have the ability to morph into a Global Fiat world reserve currency that is (or will be) ...as-good-as-Gold in a transparent fashion.

In the world of tomorrow this (digital transfers etc) will be seen to be far more "practical" than Nation-State Physical Gold transfers.
Back in '01 (when it became apparent a "simple" transition to FG was not going to happen) I was one of the few "Anti-Euro" Freegolders ...and remain so today ...however it (Euro) does have a "Plan B" in it's back pocket the likes of which isn't available to the "other" Bloc ...IMHO.

Roacheforque said...

I am looking at 1 oz. gold eagles on eBay right now, and with an hour left to go the soonest ending 1 oz. eagle auction is bid up to $1639 with over 40 bidders.

While eBay is not the consummate price discovery mechanism for anything in the physical plane, it nonetheless IS a real-world, unencumbered FREE market for commerce (unlike the paper market for gold).

I distinctly DO NOT recall seeing $150-200 premiums per ounce over spot at any time during an eBay check against spot since I began randomly and occasionally checking it sometime in 2009.

In fact, I was always able to buy gold from my local shop for LESS than eBay, presumably due to the final value fees which all sellers must pay.

APMEX is selling 10ths for $188.00 BIN on eBay and yet private bids for random late dates are beating that in the bidding.

Roacheforque said...
This comment has been removed by the author.
One Bad Adder said...

In the mean time, reports of FreeCurrency Bitcoin demise (up yonder) appear to be a "bit" premature.
...and what with pretty well every Fiat Currency regime doing their darndest to chase all-and-sundry off their particular reservation, you'd have to think BTC's future is quite rosy. Added to that with > 10% equivalent of the float being traded in the recent downturn, the weak-hands would now essentially be out-of-the-game methinks.

Michael dV said...

Just bought some Pamp 1OZ in Las Vegas today. $1540. They were asking over $1600 for AEs and supply was running low. They report brisk silver sales as well.

Anonymous said...

What if FG doesn't happen but gold is just repriced to fix balance sheets? To start another credit cycle.

http://www.zerohedge.com/news/2013-04-29/qbamco-precious-metals-and-coming-great-reset

enough said...

Dear Extended Family,

"Due to cancellations, there are now approximately 20 tickets left for the first Q&A Session on May 18th. If you would like to attend this session, you must email Anna Stoerzinger at anna.trx.jes@hotmail.com.

next is the funny bit......

"There are approximately 40 seats left for the second SHOW on May 19th."

"Tickets for the May 19th SHOW are available below."

It's the JS traveling show !!!

Cirque de Sinclair LOLLLLLLL :-) !!

Anonymous said...

Good sirs -

Can someone address this short treatise/comment on Martin Armstrong indicating deflation is coming and gold is, eh, meh...:

"Martin Armstrong has a different view of gold. He has been deep in governments for many years and he knows how bureaucrats think and how policy is created. He is an economic historian as well. His computer software allows him to monitor the multi-dimensional dynamics of the global economy. With this in mind, I wouldn't just shun his opinion. TPTB don't care about the people, they just want to keep their system going. They'll never allow a gold standard because they don't want their borrowing and spending habits to ever be curtailed. Martin Armstrong below...

The dollar rose between 1980 and 1985 on the fears that the USA would default creating a two-tier monetary system with red dollars externally and green dollars internally. The US national debt hit $907.7 billion in 1980, $2.125 trillion by 1986 and $3.2 trillion by 1990. The correlation sold by the gold promoters is you buy gold because the national debt is rising, OK. Between 1980 and 1985 gold fell from $875 to $292 with the debt more than doubling. The dollar soared forcing the British pound to collapse from $2.40 to $1.03 yet the interest rates fell by 50%. One-to-One correlations do not exist. It is multidimensional and never just plain and simple. It takes a computer to calculate all these relationships. It much more complicated than that. Consequently, opinion will get you nowhere close to consistency.

So can gold and the dollar rise together? The answer is YES! It depends entirely upon the dynamics of the mix. Gold declined with higher interest rates at first between 1980 and 1981, then continued its collapse as the dollar then rallied into 1985. But capital was fleeing Europe moving from Eurodollar deposits to domestic dollar deposits during 1980-1985. Gold was collapsing from an overbought position hyped-up on the whole inflation debt nonsense. Yet there was an exploding national debt with DEFLATION! Amazing.

The potential rally in the dollar is simply due this time to the political instability in Europe and Japan. The rising dollar will create the global economic recession, fueling further Draconian laws, higher taxes and further DEFLATION caused by an economic implosion that the gold promoters cannot see because they do not want to see. The further GDP declines globally, then less tax revenue garnered making governments more aggressive in search of money resulting in attacking the citizenry. Go too far, we end up with the Mad Max scenario.

This is how Rome fell. The rule of law collapsed. The citizens lost all rights. Taxes soared and it got to the point people began to just walk away from their property setting the stage for serfdom and the Dark Ages..Hopefully we will run out of time cyclically and still have something left at the end of the day.

If you keep listening to the gold promoters, you will be playing with your coins, fantasizing how rich you will be, when either the soldiers come searching door to door as they did with this Boston event without search warrants on the premise it is a national emergency to gather all the wealth, or you open your door and there is no place to spend your coins. Is Rome repeating again?"

byiamBYoung said...

Diabolitio283,

To me, MA's words above seem to be a bit of a hysterical shotgun blast with little true empirical value. He is leaping from one notion to another, and doesn't appear to consider much true economic history from the period of the 80's forward. It borders on gibberish.

Even in the murky economic waters through which we currently wade, facts are available, and act as our signposts. Or at least they should.

If you consistently adhere to facts instead of hyperbole, you will keep a straighter course.

My opinion, of course.

Cheers

byiamBYoung said...

Diabolitio283,

A quick re-read, and it looks like I mistook the above words for MA's words, when in fact they are not. My mistake.

I can't help but grin when I read this, though:

"His computer software allows him to monitor the multi-dimensional dynamics of the global economy."

Really? Does it pick lottery numbers, too?

Again, facts are out there, and they are compelling. Use them to guide your decisions.

Cheers

moneymaverick said...

http://www.cyprus-mail.com/bank-cyprus/new-bank-cyprus-converts-portion-uninsured-savings-equity/20130429

Bank of Cyprus said yesterday it had carried out a conversion of uninsured cash deposits in the bank into equity, one of the conditions of international lenders to offer the cash-starved island financial aid.
The process, known as a 'bail-in', made depositors in the bank pay for its recapitalisation, after the institution was hit by massive losses from its exposure to debt-crippled Greece.
Bank of Cyprus, the island's largest bank, said it had converted 37.5 per cent of deposits exceeding €100,000 into "class A" shares -- nominal price €1.0 -- with an additional 22.5 per cent held as a buffer for possible conversion in the future.
Another 30 per cent would be temporarily frozen and held as deposits, the bank said.
A spokesman for the bank said he was not authorised to say what the percentage corresponded to in cash terms. The precise recapitalisation needs of the bank will be concluded at the end of June.
The bail-in, including the dissolution of Cyprus' second-biggest lender Popular Bank, is part of attempts by Cyprus to find €13 billion to shore up its economy.
The European Union and the International Monetary Fund are providing a further 10 billion to the island, one of the euro zone's smallest economies.
Cyprus' parliament was due to vote on the bailout on April 30. The EU and the IMF were expected to disburse a first tranche of aid to the island in May.

One Bad Adder said...

D283: - Your correspondent isn't that far from nailing it re: transiting to a full-blown Deflation ...BUT, his view of Gold "in those times" is skewed. As BYoung quipped, borderline gibberish...IMHO!

tintin said...

gold is hot over there (Just need to see the photos): http://gold.jrj.com.cn/2013/04/28191015266429.shtml

Dante_Eu said...

Barbarians! :D

tintin said...

Hi everyone,
reading through Fofoa's Euro Conversion, I got this thought popping into my head: the US/UK propaganda against the EURO since the Greek crisis, are they not doing their pre-emptive strike against the conversion?

Woland said...

Can you see Parker Brothers raiding the homes of the Monopoly Game
owners in search of those orange, one sided $500's? I think they would
choose an "easier" method.

Hill C said...

Is Cyprus' gold part of the bail out package today? I am a huge believer in Freegold, however, if Cyprus sells its gold at market (and it is confirmed), this is not positive for Freegold. Cyprus will have been stripped of its wealth and gold will not have been used to recapitalize their system. Does anyone have the details of the vote today?

Dante_Eu said...

Talkin' about debt earlier, to put it into perspective:

US Debt - Visualized in physical $100 bills


PS April 30, 2013:
U.S. plans to pay back 35 billion:

U.S. to pay down debt -- first time since 2007

PS2 Does US government read my comments on FOFOA's blog? :D

burningfiat said...

Hill C,

Even if Cyprus have to part with some of their gold, that doesn't mean that this gold will not be used to recapitalize the system. Now it will just be on the creditors balance sheet instead. All things equal, this means they are in a position to forgive more old debt...
But yeah, I follow you, it must suck for Cyprus to part with their gold at todays prices. OTOH I would like to see that happen before I actually believe it will.

But seeing Cyprus on the edge like this, could very well serve as a warning for the rest of us. It's only the gold in my hands on the day of the transition that matters. Up until that day you have to be able to service your debt and monthly living expenses to not part with your stuff/gold. What is going on right now is like a race where the net. producers are separated from the non producers. This goes for both nations/giants and ants alike... Well, it is not like that race hasn't been going on for millennia, but it definitely feels more important with the death of $IMFS closing in...

/Burning

Attitude_Check said...

Nicklesaver,

Your assessments are all correct, but your conclusion is naive. Just because the Chinese have pegged their currency to the $ (the present reserve currency), doesn't mean that will continue when the $ is no longer the reserve currency. China has been actively writing bi- and multi-lateral trade treaties enabling international payment in local currencies, bypassing the $. Additionally it is no accident that China now owns the LBMA -- even if trading goes on in London. It is exactly because the Yaun is an arm of the state, and state politics that China can more rapidly implement a free-gold solution (at least a free-gold-like solution). However it will not be to primarily serve international trade but Chinese political power.

I'm not saying this is a good or preferable outcome, only that from the time of Another to now, how things appear to be changing

PS said...

"China now owns the LBMA" -- they do? How so / since when?

byiamBYoung said...

Dante Eu,

From your linked article:

"At the same time, the Treasury said Monday it would likely have to borrow a net $223 billion in the July-September period."

I will gladly pay you $35 billion on Wednesday for a tranche of $223 billion today... There! We have turned the corner and have paid down our debt :D

A fresh coat of paint from a borrowed bucket, on a collapsing building.

Cheers

Dante_Eu said...

Why can't I as private citizen get Grace Period of 6 years? Why is only government allowed to do that?

Also, where do I sign to govern someone? :-)

Attitude_Check said...

http://www.bloomberg.com/news/2012-11-29/hong-kong-bourse-wins-approval-for-2-2-billion-lme-takeover.html

China now owns the LME not the LBMA

Attitude_Check said...

My error stating that China owns the LBMA previously, but ownership of the LME has some significant implications for the LBMA.

https://www.lme.com/pricing-and-data/pricing/lbma-precious-metals-prices/

"...The LME distribute gold and silver spot prices and forward rates on behalf of the London Bullion Market Association (LBMA)...."

"...The London Metal Exchange is the world centre for the trading of industrial metals – more than 80% of all non-ferrous metal futures business is transacted on our platforms. In 2012 this equated to:

$14.5 trillion notional
3.7 billion tonnes
159.7 million lots

A member of HKEx Group, the LME brings together participants from the physical industry and the financial community to create a robust and regulated market where there is always a buyer and a seller, where there is always a price and where there is always the opportunity to transfer or take on risk – 24 hours a day.

Investors value the LME as a vibrant futures exchange but also for its close links to industry. The possibility of physical delivery via the world-wide network of LME-approved warehouses makes it the perfect hedging venue for industry and provides a benchmark price they trust.

The Exchange provides producers and consumers of metal with a physical market of last resort and, most importantly of all, with the ability to hedge against the risk of rising and falling world metal prices.

It’s what we’ve been doing since 1877."

Anand Srivastava said...

HillC

You might want to read the following
http://www.telegraph.co.uk/finance/financialcrisis/9990325/Cyprus-gold-sale-profits-must-be-used-to-pay-back-ECB-orders-eurozone.html

Mario Draghi, the president of the ECB, has told Cypriot government that money from the gold sale cannot be used to reduce public debt but must be used to help pay back €9.1bn in emergency liquidity assistance (ELA) given to the central bank of Cyprus.

Draghi says that the money obtained by selling the gold can only be used to pay off the loan. It cannot be used to reduce the amount that needs to be raised by Cyprus.

In effect he is telling Cyprus govt, that there is no point in them selling their gold.

How else should he tell them, don't be stupid and don't sell your gold?

And the journalists thought that he was forcing the Cyprus govt to sell off its gold :-).

Attitude_Check said...

Interesting find in my search regarding LBMA and LME. Another is referenced from about 1997. Is this a missing part of "the gold trail?"

http://www.gold-eagle.com/cgi-bin/htsearch?restrict=;exclude=;config=htdig;method=boolean;format=builtin-long;sort=score;words=GRAND%20AND%20%20LBMA%20%20AND%20EXPOSE;page=1

One Bad Adder said...

Where the Currencies Rubber meets the Road - Todays 1Mo T-Auction ...grinding downward to Zero @ 4.93 Bid-to-cover.

Hill C said...

anand srivastava

Thanks for that. I will sleep much better now. If Cyprus' gold was sold at market, it would confirm a much longer wait for the revaluation.

Dante_Eu said...

Hill C,

Everything you need to know about Cyprus CB is that its governor's name is:
PANICOS Demetriades!

I swear! :D

Hill C said...

Anand srivastava

One more point to Draghi's position stated above:

"Mario Draghi, the president of the ECB, has told Cypriot government that money from the gold sale cannot be used to reduce public debt but must be used to help pay back €9.1bn in emergency liquidity assistance (ELA) given to the central bank of Cyprus"

The ECB can provide an ELA "against adequate collateral" and only to "illiquid but solvent" credit institutions.

Would Draghi's statement indicate that the gold was used as collateral for the ELA since the proceeds of a sale would have to go to the ECB as part of the ELA? If so, do we know how much of the collateral was provided by 1) the banks legacy assets and 2) by gold to get to the €9.1bn? It is probably impossible to figure out but I was trying to "value" the gold portion of the collateral.



Edwardo said...

Color me skeptical based on the reports I've read.

Victory said...

http://www.zerohedge.com/news/2013-04-30/cme-chairman-gold-“people-don’t-want-gold-certificates-they-want-real-product”

CME Chairman On Gold: “People Don’t Want Gold Certificates, They Want the Real Product”

I'd be skeptical if I hadn't seen it with my own eyes. FOFOA, thoughts?

-v

Dante_Eu said...

Sometimes one finds real gems on ZH:

Weasel: "Invest with my company and this is what you will get" *shows brochure with a stack of gold bars on the cover*

Muppet: "Wow, I get all that gold!"

Weasel: "No, the brochure."


:D

Roacheforque said...

Months ago, when I mentioned the (then) record sales of USM gold coin (mid Feb?) the price of paper gold was still in that 1600 USD rangbound area, coming slightly off a year lus 1650 range.

I was not sure then, which of the many AH HAH moments could have awakened the shrimp. But they were awakened.

And I remember Another saying "as the price rises supply tends to dry up" which is somewhat antithetical to what we see happening today.

But as paper gold chases reality in an effort to maintain credibility, what have we truly seen?

The paper price came down enough to draw shrimp to physical as if swarming to kelp. It did not seem to affect the physical delivery price much for long.

Perhaps we again look at the present in expectation of a future that already happened. Another's dilemma is well played out in the gradual rise from $200 to 1900 while the paper price still held strong credibility as the "true price of gold".

And I think it was drying up all throughout this time as Ender's giants (the 1% of the 1%) stood for redemption first in line.

These are giants like China, Russia and India on the public side.

Today the flow to redemption far exceeds the flow to replenish suppy of paper claims. So the run has been well underway for years. What we see now is an accelerarion of that run to where it's visibility becomes more transparent.

So again I say, the shrimp will walk hand in hand with the giant toward a single purpose, when the currencies fail both.

They too are "locked together for value" as the MoE for Giant systems to remain well lubricated is also the shrimp wage which feeds the debt replenishment cycle.

More than likely, rather than anticipating the panic yell of "there is no physical" to end this current regime, we might look for a syncratic thought, "these dollars do not meet my needs anymore".

I think it liekly that Giants may have that thought about the same time as shrimp, though one begets the other in full complimentary fashion.

Happy Hump Day !!



Knotty Pine said...

@Edwardo,
This energy self-sufficiency meme does feel a bit like a sales pitch. Journalists seem to be jumping on the bandwagon rather than asking difficult questions. Then there is this news from New Mexico.


The beat goes on.

One Bad Adder said...

Yes Wil (from Another account) ...something like that!

byiamBYoung said...

Wil,

That other account...it wouldn't be in the Cayman Islands, would it?

On that note,

Some in Connecticut are getting nosey

Cheers

Edgar said...

CME Chairman On Gold: “People Don’t Want Gold Certificates, They Want the Real Product”

Looks like he implies that gold certificates (paper) is no longer as good as physical, discrediting the CME and COMEX in one blow.
Bullion bank run?

You better hope that the number of coats in the cloakroom cover the number of tickets, for it would be unfortunate if they lost your coat.

Hobgoblin said...

Ah the glorious sounds of troll silence........and comments. ;)

Unknown said...

Indeed Br'r Young the only paper trail to my holdings is this "obscure little blog" in comments from a wacked out Wil too poor to have any gold but who talks it up in delusions of grandeur.

Actually, I think I may have had an epiphany from Ender and related snippets out in the infosphere.

I think there could be Giants who hold much gold and worry for it's safe return, but above them, the 1% of the 1% have no such concern, and even less physical.

At the highest levels of wealth Giants do not manipulate the dollar price of gold, but rather, they help insure the flow of it to the most profitable (for them) economies.

I was impressed by the idea of these Giants protecting "use value" of their currencies with physical gold as a means to assurance depending upon flow, location and possession.

There could be a whole other level of strategy in PHYSICAL gold far above the level of manipulation of paper gold (currency "price" of it) wherein the object of the manipulation is to move physical to the right location and in the right amounts.

It can be said that this in fact is the integral role of the BIS, but giants of this size ARE the BIS for all intents and purposes.

I will have to let these new thoughts brew awhile to se if they connect up to other thoughts as the ole brain-puter attempts to rationalize all relevant data.

Ender said...

Sir Will Martindale,

Good thoughts. As with any new way of thinking, look for supporting evidence in every news article that you read. Basically, when you’re perspective considers the value of the function of currency, other actions make more sense.

The movement of metal has been very important since Another introduced us all to his thoughts. Many have watched this closely, yet haven’t thought deep enough to understand why.

Metal in hand we stand.

Reality Show said...

April GLD divergence update

Reality Show said...

Thanks Ender for the added perspective that you bring. Although the rallying cry of "Metal in hand, we stand!" may need some tinkering.

Edwardo said...

In the spirit of Triple Crown season, Let's just say that China's RMB is coming up fast on the outside.

Knotty Pine said...

This from Ed Steer's Gold and Silver Daily:
"The good folks over at Switzerland's Zürcher Kantonalbank...for the week ending at the close of trading on Monday...reported that 33,111 troy ounces of gold were withdrawn from their gold ETF but, for the second week in a row, more silver was added to their silver ETF. This time it was 169,402 troy ounces. Where the heck is all the silver coming from that's disappearing into all these silver funds?"

link here.

Dante_Eu said...

April 30, 2013:

How Europe Fails

***
Mr. Armstrong:

Ever since the ECB issued a report that claims the south was richer than the north to get out of bailing them out, the reaction behind the curtain is very interesting. The talk in the south is now to demand reparations from Germany for World War II. What goes around comes around. There cannot be any realistic expectation that these “loans” will ever be repaid. Had they just created a proper structured currency with a single national debt, this crisis would not have materialized and Europe would have emerged as a potential rival to the USA. It is instead one giant joke, Only a fool still thinks the Euro can compete with the dollar. It cannot absorb big capital because there is NO single national debt to compete with the dollar that is the only game in town for reserves. The tensions are rising. Herein lies the seeds of its destruction and even war.
***

The Fool as I am, with no economic background and no super computer, a simple question arise in my mind:

If ROW (Rest of World) doesn't store it's reserves (ie. savings) in US debt would that mean EOTWAWKI => End Of The World As We Know It?

Or maybe, just maybe, some of the reserves would go to BRICS debt, EU debt, Africas debt. Some of the reserves may even go into stocks, real estate, business ventures. And maybe, just maybe, some of the reserves may find its way into that shiny thing, called gold? In its physical form. Oh, the Horror! EOTWAWKI!

Apocalypse now\Dante_Eu :-)

PS How about a proper structured currency with a single national ASSET in form of free floating physical gold? Oh, the Horror!

ein anderer said...

Some 2c sidekicks from Europe/Germany:
My PM dealer does not get silver anymore. (Not that I am buying it, but I was interested into the information.) "May be in 6-8 weeks", he says. German distributors are empty. Main reason, he says: US distributors are recollecting because of better spread in the US. "You can buy at customer price", they say to the dealers.
Gold still available.

burningfiat said...

Dante, excellent find!

Wow, a currency that doesn't compete for excessive wealth storage from big capital in sovereign IOU's??? How can that be? Oh, and loans will be defaulted upon? Unpossible!? xD

Must be playing an entirely different game this European currency. Martin Armstrong is such a retard that he refuses to see that...

ein anderer said...

Forget to say: Dealer said that as far he can remember this has never happened before. So may be something is going on … xD

ampmfix said...

As I noticed some months ago, Armstrong is definitely NOT the same before release from jail than after release. A bargained deal with the nice gov men for sure. Just my 2c.

Dante_Eu said...

Not to be to harsh on good old Marty, he did nailed 7/8:

1998 seminar. Last slide.

It's just he can't imagine US debt not being as good as gold.

AT said...

@Dante Eu: That is an awfully convenient last slide. Frankly, I would require more proof of Armstrong's predictive abilities than a PDF file dated June, 2011. When I read through the FOFOA archives (about 8 months ago) I thought that his referencing of Armstrong put the single biggest crack in his credibility--and I had never even heard of Armstrong before that. Armstrong struck me as a con artist prognosticator who is not above backdating his predictions to maintain the illusion. If anyone else has closely examined his predictive record, I'd sure love to hear what they found.

Dante_Eu said...

@Ashley:

Yes, it does seem suspicious. :-)

I think I found it as a link on a dutch site about Freegold (freegoldforum if I remember correct), but can't vouch for its authenticity.

Woland said...

Has Draghi just poked the ant hill with his comment today about
having an "open mind" with respect to "negative deposit rates"?
Might this have implications for gold? I guess we'll find out by
watchful waiting. Cheers.

Attitude_Check said...

Edwardo, Thanks for the link. A completely unexpected result documented in the Chart of world currency rankings for trade is that the Euro was number one in 2012 and 2013, the US$ was number 2!? I am reassessing my assumption that the Euro may be dieing - maybe it is just changing into a form that can actually last after the political Euro add-ons are forced out?

JR said...

Hi,

Big day for FC Basel as they square off with Chelsea in centeral London in the second leg of their Europa league semifinal. They face a big task in trying to recover from their 2-1 loss at home as David Luiz scored a injury time free kick winner to take the first leg 2-1.

So apparently the FAA sequester funding protest worked. Who could have known? From an NBC article discussing the "impermamencne" of the sequester, and the ease with which special interests and public complaints overrode these putative "tough cuts:"

"The longer the sequester is in effect, the more we’re learning that it’s not quite the fiscal straightjacket that it might have appeared to be at first. Despite being billed as automatic spending cuts, the sequester is not an unalterable doomsday machine.

And in the weeks ahead Congress and the Obama administration will be under pressure from advocacy groups and special interests to find other ways to relax some of the fiscal constraints the law was supposed to apply.

Last week’s decision by Congress to explicitly give the Department of Transportation the power to shift $253 million in funds to the Federal Aviation Administration so as to avert furloughs of air traffic controllers was a reminder that despite the “automatic” cuts in the sequester, Congress is still making spending choices and sometimes second- guessing the choices made by executive branch officials."


Anyway, that reminds me of FOFOA from last year's classic Inflation or Hyperinflation, discussing the purpose of QE:

"It is a myth that QE is a result of the Fed's concern for the economic outlook or even about keeping interest rates down. That's just what they want you to be focused on, rather than the real reason for QE. Notice that QE began at the same time as the federal budget deficit overtook and surpassed the trade deficit. Not only that, but the amount of QE matches close enough for government work the difference between the budget deficit and the trade deficit.

It is also a myth that QE is sterile money creation because (as they like to say) it is all just sitting on the banks' balance sheets as excess reserves held at the Fed rather than circulating in the economy. In fact, it is ALL circulating in the economy because the USG spends that money into the economy. Government dollar emissions simply come with bank reserves. If you don't understand this, please go back and review my banking system model in Peak Exorbitant Privilege.

So if you're watching "economic indicators" and Treasury market figures and interest rate curves trying to guess if there will be more printing, aka QE3, you should instead ask yourself if the USG will cut a quarter of all its spending habits this year, or ever. That would be roughly equivalent to cutting all of Medicare, or all of Social Security, or all of defense spending, or a third of each, just to give you an idea of how much they are printing. "


That's a fine thought for the day. How much spending will the USG be able to "cut" as the "exorbitant privilege" afforded by international support continues to wane? Is the sequester illustrative of the difficulty in embarking on such a path of fiscal restarint and austerirty? Momentum and intertia sure seem to be powerful forces in contemporary American politics.

That's all all folks!

Knotty Pine said...

On the subject of QE: Here is a clip from the Milken Institute Global Conference 2013 in which former Fed Governor Kevin Warsh describes QE as simply the CB's attempt to buy time. Link HERE

Pat said...

JR, fantastic to see you contributing again. Austerity in the US, while the Ex. Priv. is still intact? What politician will even suggest such an affront? No it will be QE 4eva, until EP is rescinded by the ROW, and I think that asymptote is rapidly approaching the x axis.

M said...

Why are the big names behind these gold mining just sitting there taking it with a smile on their face ?

Goldcorp, who has no debt is hitting 2005 levels, never mind 2008. These gold miners are gutted. Even the CEO's are going to have trouble keeping the lights on in their offices. But time and time again, they just sit there and let the paper price drive them out of business.

Confused..

ein anderer said...

WOW. First bigger german blogpost about ANOTHER and FOFOA.
Author is asking for matter-of-fact-corrections (if necessary). Anybody out there who has a firm standing in Freegold, papergold, gold?

M said...

So the bullion bank that I deal with wont even take orders for physical gold until they have stock.

One thing I found interesting though was that the lady on the phone said :

"in special cases , we can make an order for you. We had a gentleman come in that brought in certificates that he purchased from us. In that case, we put in an order for him"

^So it sounds like ScotiaBank is only selling their current supply of physical to certificate holders (GLD Im guessing) You have to wonder if they first have to sell their certificate in the market and then take the money to buy the physical...?

I've never dealt with a coin dealer before but Alberta Bullion quoted me $1575 CAD for an oz bar. They will actually take orders now, unlike Scotia. That is a 6.5% mark up. I was paying about 2% with Scotia and under 1% for big orders. So unless the price of phys drops more, I am just going to wait for Scotia to get more stock.

Unknown said...

It appears to me, perhaps peeking behind "Ender's Curtain" (smile) that our Giants among Giants are more interested in profiting from the "cycling" between super producing economies and super consuming economies, with gold as a means to back those differentials "through the fires of change".

That said, they will profit enormously in a hyper-dollar price of gold, but not so much due to their own "stack of gold" (though that won't hurt) but due to their repositioning to take advantage of the massive USE shift away from dollars in the IMF$ regime change.

And THAT said (paraphrasing ANOTHER) we won't like this new system if we didn't like the last because the essential similarity between the two will be the maintenance of that massive wealth gap. What could be simpler: the rich like getting richer and poor hate getting poorer.

Perhaps THAT is the objective of the super-Giant.

And so Ender, in the spirit of looking "for supporting evidence in every news article that you read" (if not to beg the obvious) would perhaps this article be of some interest??

This we grasp from ...

ampmfix said...

Cuba is reforming some of their tax rules. Maximum bracket is now around 50% for the people making above 2000$... per year! That has to do with the new liberalization in privately owned small businesses. I almost died laughing (for not crying that is), poor souls...

Biju said...

M : Go with other dealers or kitco/Apmex. instead of waiting for scotia.

Knotty Pine said...

@M
Try Gainesville Coins: They are around 1512.00 CAD for 1oz bars. Not sure about shipping cost to Canada.

burningfiat said...

ein anderer,

Congrats to You and Nikolaus on Freegold going more mainstream in Germany! That's what we need to secure the strong hands!

Excellent article, couldn't find any significant flaws... Certainly a better introduction to the real gold market than some freewheeling American gold writers are presenting at the moment, no offense intended...

Anonymous said...

@M

Don't worry about the miners. There's a bunch of nonsense floating around that they need $1700 to break even. All-in cost for the majors is $1100. The propaganda is just to scare shrimps into selling at the bottom.

What the FG rapture monkeys don't understand is that a static gold supply is unstable for so many reasons. The gold leasing/gold hedging operation of the 90's was a miserable failure. The 5x increase in mining supply never happened but it was sold into the market as a promise. If a CB wants to stay in the game it's going to get that gold out of the ground. If anything I would expect miner-friendly legislation pushed by the real powers from behind government.

JR said...

In these comments, Attitude_Check offered a thought on the how the Euro may have come up short and the potential role of the SDR and China:

This may be considered heresy to some here, but I think the Euro fumbled free-gold, but the fumble has been picked up by China. The problem is I don't know if the Chinese have the big picture that Europe had. I don't think it changes the primary shift to Gold as the global store of value, but it will shift some of the details. I think when the UK didn't enter the Euro as planned, bringing the LBMA trade inside the EZ, the Euro free-gold vision became unimplementable. The Europeans are fighting a strategic retreat, looking instead to the SDR as a $-reserve replacement, with Gold as a prominent component, along with a few BRICS currencies to try to prevent a full-on Free-gold solution that will leave Europe with a much reduced global influence.

I think the bold is key, because it gets to the crux of the issue - what's a viable alternative to the dollar. Will gold be set free (aka demonetised), or will it remain monetized/a part of the money system (like a component of the SDR)?

Victor posted a great selection of translated and English writings of the late Dutch central banker, President of the Bank for International Settlements, renowned Dutch economic scholar, former minister of Economic Affairs, minister of Finance, Prime Minister, and last but not least, member of the European Advisory Board on Economic and Monetary Integration (since August 1991), Dr. Jelle Zijlstra (1918-2001).

FOFOA readers will recognize Dr. Zijlstra's from Aristotle's epic 5 part series
GOLD & MONEY: More Than Meets the Eye, which FOFOA has posted I believe three separate times, most recently as Flow Addendum:

Jelle Zijlstra, who became head of the Bank for International Settlements, said while with the Bank of the Netherlands in regard to the 1971 severing of Gold from the dollar, "When we left the pound, we could go to the dollar. But where could we go from the dollar? To the moon?"

As I continue this tale, I hope it becomes clear that not only have we gone to the moon, but that Gold is going there also.


Anyway, in the collection of writings recently posted by Victor, Dr. Zijlstra offers some thoughts on the SDR that seem pertinent still today. I would encourage you to explore his thoughts.

In the meantime, here are some excerpts that resonated with me:

One can say that a solution in first instance is found with the implementation of SDR’s in 1967. But the success of this alternative to the dollar as the pivot of this international monetary framework has thus far only proved itself limited. Especially, so long the SDR cannot be freely exchanged on markets — currently it only functions as means of settlements among central banks and in first instance only allows for settlement of deficits — its emergence is stuck. The broad basis of trust that must be met for such an emergence of [the status of] the SDR is apparently not there. One could also think of solutions whereby other currencies could support the dollar by adopting the function of acting as reserve currency to a certain degree. This will not be simple. The question of repairing the intensive cooperation of the countries of the G10 (along with Switzerland), that led astray during those turbulent times in the first years of the 1970s, would then however return to the agenda again. It should come down to a systematic categorization of and institutionalization of ad hoc arrangements that has been agreed to in this year of annual reporting [read: 1979] to support the dollar, without continuing to extend an unlimited monetary credit to the United States.

cont.

JR said...

cont.

However, those talking part in the many discussions which are devoted to the SDR do not, in my opinion, always evince an adequate insight into the problems we will face if the SDR is actually to become the pivot of a new international monetary system. Such a new system requires that two conditions be met. First, greater exchange rate stability is essential. If exchange rates are left to be dictated by market forces, reserves are basically unnecessary. In the fullness of time the SDR will have to be the fullfledged instrument of settlement. If no settlements take place, or if this is done erratically or unsystematically, there is no need for a fundamental instrument of settlement. Second, and in connection with the first condition, convertibility will have to be restored. In an orderly international monetary system, in which the SDR is given the role formerly played by gold, major currencies, including the dollar, must be convertible into SDRs. Whoever truly wishes to make the SDR the pivot of a reformed international monetary systems, and shall transmit to the Congress a report containing its others and perhaps even himself.

All this is not of course feasible at present, so that the role of the SDR will continue to be a marginal one for some time to come, even though its significance as a unit of account is on the increase. This also means that there will be no substitution account in the near future and that the allocation of SDRs will have to remain limited.


[...]

May it be expected for the future, somewhat further down the road, that the new reserve component complements the current reserves and especially gold, and even partially replacing it; in enthusiastic [intellectual] reflections on this new system it is at times claimed that according to deliberate and rational considerations the myth (sometimes it is also referred to as tyranny) of gold shall be replaced. This however is a misconception. Certainly, for the distant future one must hope for an international monetary framework that is built up likewise rationally and able to function as a money framework within any orderly states. Special drawing rights however, like they are currently foreseen, can only function because of the link between it and gold; this link is enfolded by the stipulation that the unit of account in which the special drawing rights are expressed is equal to 0.888671 grams of gold. Without a fixed price of monetary gold, the special drawing rights as they were conceptualized as a system in Rio de Janeiro, are [indeed] inconceivable. The claim that is argued once in a while, that these drawing rights will lead to a demonetisation of gold [cannot be maintained]; on the contrary, such a demonetisation of gold would be the end of the special drawing rights [as they currently, are in character proposed]. If it is desired to make this new framework a success, then [all] have to do [their] best to have gold maintain its important role in the international monetary framework. A full replacement of gold by deliberately created reserve [assets] assumes political stability in the world and a general trust in a global authority of the issuing institution, of which one (unfortunately) must say, that will require substantial time [that we must await]. Because of this, the currently foreseen drawing rights shall remain for a long time being, a complementing [one] and thus cannot be [considered] a full replacement of gold.

Reality Show said...

A_C, maybe take a close look at how the Euro was designed. It is honest money (does not pretend to be anything it's not), is not backed by a nation state (solving the Triffin paradox), and is supported by the wealth reserve of freely floating unencumbered physical gold. And yet every man and his dog conflate sovereign economic distress with the health of this growing new world fiat.

M said...

from JR's post

to support the dollar, without continuing to extend an unlimited monetary credit to the United States.

^34 years later and the world is still extending unlimited monetary credit to the USA.

Indenture said...

ein anderer: I read a Google Translate of the article and I like it. It had the bookends of Another and FOFOA so if the reader glossed over the first reference the last one might sink in and the multiple uses of the words 'paper gold' helps people visualize a difference in the single word, gold.

Indenture said...

"FG Rapture Monkeys"
I love it!

Evil gold hoarders, jerks, time misallocatoring, brainwashed rapture monkey cult members:

Rapture Monkey. Funny. I can see myself tomorrow, moving rocks, thinking about Ender and how ""It is good to see bullion transactions happening – this shows that our currencies are still alive!" and while pondering the ramifications of this simple statement I can see the words 'rapture monkey' jumping into my stream of consciousness.

But I can also see it as the name of my new band so thanks.

byiamBYoung said...

Freegold Rapture Monkeys FTW!!!

byiamBYoung said...

To be clear,

Freegold Rapture monkeys

Cheers

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