Saturday, June 29, 2013

Snapshot Day

Yesterday was Snapshot Day at the ECB. It's the day that the ECB takes a snapshot of the current price of the four "foreign currencies" that populate the Eurosystem's reserves. They take this snapshot at the end of each quarter for the purpose of the quarterly revaluation of their reserve assets. Marked to market (or MTM) reserves was one of the founding principles of the euro.

The four snapshots are:

USD (US dollar)
JPY (Japanese yen)
SDR (Special drawing rights)

Each snapshot is recorded as the unit's price relative to the euro because the Eurosystem's reserves are all reported as denominated in euro. So even dollar reserves are reported as a euro-denominated value. And just for the record, gold is both the first line on their balance sheet and also the top snapshot reported. I don't know if this is intended to imply the order of importance… well, yes I do. ;D

If you'd like to read more about this, I recommend any of the following posts as a good place to start:

RPG Update #4
Euro Gold
Reference Point: Gold - Update #1

If there's any doubt as to the importance of gold on the Eurosystem's balance sheet, last quarter gold constituted more than 63% of the Eurosystem's reserves. That means that dollars, yen and SDRs combined made up less than 37% of the reserves.

We won't know yesterday's precise snapshot until next Wednesday when they release their quarterly ConFinStat (Consolidated financial statement of the Eurosystem). But we know it should be somewhere between €914.39 and €948.33. At some point during the day, someone at the ECB noted the current price of gold in euro and wrote it on a form. They don't use the London fix price, and the time at which they take it seems to vary. In April, they took the snapshot very close to the AM fix. But many other times I've noticed it's closer to the PM fix.

In any case, yesterday's AM fix was €921.889 and the PM fix was €914.391. Shortly after the PM fix yesterday, the euro price of gold rallied up, ending the week at €948.33. It would be a bit unusual for them to take a snapshot long after the PM fix, so I will guess it will be around €920.

I have made a simple chart of all of the quarterly snapshots since year end 2001, when the bull-run began and the ECB launched its new notes and coins. For the purpose of this chart, I'm using yesterday's high of €948.33 rather than what I think it will actually be, just so you can see how shocking even the least-shocking possible snapshot will be.

As you can see from the graph, the last time they had a gold snapshot lower than this was April 2, 2010, more than three years ago. Just for fun, let's compare the other snapshots from April 2010 with April 2013 to see if the USD, JPY and SDR fluctuate as wildly as gold.


Gold: EUR 823.132 per fine oz.

USD: 1.3479 per EUR

JPY: 125.93 per EUR

Special drawing rights: EUR 1.1265 per SDR


Gold: EUR 1,251.464 per fine oz.

USD: 1.2805 per EUR

JPY: 120.87 per EUR

Special drawing rights: EUR 1.1698 per SDR

For the US dollar, that's a 5% change. For the yen it's 4%. And for the SDR it's less than 4%. Yet gold, because traders think of it as just another commodity rather than a monetary reserve, changed price by 52% over the same three-year time frame! And now it's down 25% in just one quarter.

There's a point here, but I'm more inclined to let you figure it out for yourselves than to spell it out for you. Somehow, gold ended up in two different worlds at the same time. One which fluctuates wildly in concert with all other commodities, and another one of great monetary significance and relative stability most of the time. Just think about which of these worlds gold actually belongs in, and how it can possibly escape the other one, while you watch this short video presentation:

That video is from my post Fallacies – 1. Paper Gold is just like Paper Anything in case you would like to explore that question a little bit further. ;D

On December 8, 2010, at the bottom of my post Freegold in the Proper Perspective, just for fun I put up a poll for my readers to vote on two contenders for a Freegold theme song. The origin of that poll was an email from Aristotle who, if you don't know, was one of the main contributors while Another and FOA were posting, so he's been following this for as long as anyone.

Anyway, he had this song 'Firework' by Katy Perry come across his screen and he thought it made a great Freegold theme song. He emailed me on Dec. 2, and at that time almost no one had yet heard the song. It was just starting to get airplay and it had just been featured in Victoria's Secret video, which is how it happened to come across Ari's screen. ;D

He thought the imagery in the Victoria's Secret video was particularly "golden", but more importantly, he thought the lyrics were great for those who understand what Freegold means on all levels. Here, judge for yourself:

The reason I bring this up is because he followed that Katy Perry email up with another one that also made reference to the song, as well as to his favorite series of movies. Here's part of that second email:

For the past half-decade, many international policy stirrings gave every indication to me that 2010 was to be the targeted year for assertively rolling forth the freegold paradigm. But as I've said previously, I feel that the ongoing financial crisis that began with the subprime fiasco has caused instability of such magnitude that the central bankers have been forced to delay briefly and "play it safe" -- one does not dare rock the boat (if there remains any choice in deciding the matter) when the financial waters have become so turbulent and choppy. As for the new timeframe, I'd say that the reported EU plan "to make private bond holders shoulder some of the pain from any sovereign debt restructuring after mid-2013" is as good an indication of a benchmark as any I've seen. Plus, that timing nicely accommodates my additional view -- embracing a culturally significant standpoint -- that the December 2013 conclusion to The Hobbit will forever cement the desire for gold into the minds of all western moviegoers, resulting in a perfect storm of the golden variety. ;-)

On the point of the midyear "benchmark" mentioned above, it's almost spookily funny that the song lyrics mention "You just gotta ignite the light and let it shine; Just own the night like the Fourth of July". Indeed -- 2013. (Or sooner, if *necessity* precludes all freedom of choice in the matter!)


Now obviously the specific timing of July 4, 2013 and the Hobbit reference were made in jest, but as I mentioned in my New Year's Day post, Ari has been closely following everything written by the central bankers in particular for more than a decade. And he's also one of the smartest people I've met in more than a decade, so I don't take anything he says lightly.

With that in mind, as the dawn of 2013 was approaching, I decided it would be fun to put the only timing prediction I'd ever seen him make to the test. I'm sure he was less enthused about this than I was, but I thought it would be fun! I suppose it's not really fair to call it a timing prediction, because it wasn't, and it was also made in private by email. So it was more like a working hypothesis that he shared with me way back in 2010. And this is actually a much better way to view it because, not only is it more fair to Ari, but also because I had an observable phenomenon that I could use to test the hypothesis once every three months. Snapshot Day!

About five months before the Katy Perry email, Ari sent another email that also inspired a post. That one was the very simple observation that the price action in gold behaved strangely around Snapshot day on 7/2/10. The implication I took from his email was that, perhaps, there might be some "official support" at play in the gold market.

Then, again, on 12/30/11, I took note of some more strange behavior around Snapshot Day. So in this post on 12/26/12, I proposed that we watch the upcoming 2013 year-end Snapshot Day for any sign of official support. The thing was, the price of gold in euro was already languishing at €1,255.94, down 9% or €121.48 from the October snapshot. So it was a prime opportunity to watch for any mysterious levitation surrounding Snapshot Day that might imply "official support" was still underway, even though 2013 had finally arrived.

In anticipation of no support, I went ahead and dubbed 2013 "Year of the Window" on New Year's Day, meaning "window of opportunity for Freegold transition." Snapshot Day was on January 4th, and while it did come in a little bit higher at €1,261, it ultimately proved inconclusive based on my criteria. So we watched… for any sign… which way would it go? Was the window open or not? Decisively up—window not open. Decisively down—window may be open. The rest, as they say, is history. ;D

So here's that shocking chart once again, this time using €920 which is my guess. Decisive? Window open? Window closed? You decide:

If you'd like to read more of my ramblings about the Year of the Window, I recommend these posts in this order:

1. Happy New Year!
2. The Two-Legged Dog
3. Legs
4. Checkmate

Happy Independence Day, everyone!



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Anonymous said...

Happy snapshot day everyone. It's cool to get better pricing once in a while. ;)

Edwardo said...

What an exciting graph, FOFOA.

Anonymous said...

FG is on and poppin' for 2013!

Winters said...

As a simple shrimp, what is a the implication of the ECB snapshot showing less (in value) reserves? Obviously in extremis if reserves go to zero then we have a problem houston. Just wondering at what point it does become a problem - 600Euro say. Is it a calculatable thing.

"which is how it happened to come across Ari's screen" >> lol.

"And he's also one of the smartest people I've met in more than a decade" >> big props from one of the smartest authors I've read. smiles.

When ECB release the press release about making a physical only market, I think everyone should read it with this accompanying music
[Inception Soundtrack-Dream is Collapsing]

Pete T said...

Freegolders rejoice! Another and FOA are vindicated.

Winters said...

might be early to call vindication. very intersting results - don't get me wrong.

I kinda figured though there would be a week of terrible economic news before any reset to help prepare mainstream for some big action. like a Lehman or something...then the weekend hits and bam - announcments made etc. It's been a quiet week really. China has some liquidity problems granted. Metal price down substantially but to most people its vindication -"yeah see gold is a relic!". It's only us evil jerks that are getting excited by the smackdowns.

Michael dV said...

Very nice summary. It would make a great reference for those getting into FG who were a bit unclear on the 'window' aspect.
The question I have is how low and how long the ECB can/will tolerate the market "saying bad things" (mis-pricing) it's number one asset. At some point it just has to scream "900 bucks?, you think gold is worth 900 bucks?? !! Fine, I'd like 100 tons, whadaya say?" Actually I suspect their offer to buy, in the open, as little as 10 tons would cause a panic into physical.
I am dying to see how this plays out. It really is the greatest show on Earth.
In April, 2010 I realized the monetary was unstable. To think that we may be close to a resolution is both exciting and scary. No where better to follow the proceedings than here.

ein anderer said...

Great post, FOFOA: Easy to understand :D

There are some signs that the coming week will be of further interest for all:

The Frankfurter Allgemeine Zeitung, one of the leading daily newspaper of the world and definitely one of the most important newspapers of the financial world published a big article just at Shnapshot day about the bad performance of Gold.
Handelsblatt, a quite popular newspaper on Economy and Finances, published a 99 seconds video talk of it’s online chief Oliver Stock stating not only that gold is »useless since Bretton Woods« but, from the point of a central bank’s view, was »anti-social« because would not earn any interest. »Sell all of your Gold«, he screamed in the direction of the CBs and the civilians, »and buy BONDS instead!«
Today the FAZ gave a kind of second PM lesson by stating that silver was a bad value asset too (well, not all of us would deny).
And today the FAZ is publishing a prominent one page story about the ECB with a full wide picture of Frankfurt: in the foreground the new ECB building (construction almost finished), in the background, quite in a distance, the banking quarter, stating, that this spatial distance was volitional and intended. (Unfortunately their online picture shows »only« the BIZ …)
So it feels like the issue would like to become a bigger one the next days.
We’ll watch!

byiamBYoung said...

Happy Goldhog day, time misallocators!

Unknown said...

I posted this in the last thread right before a new post, didn't get the attention I think it deserved.

How would a freegolder respond to the recent post by Dsn Norcini, that the recent collapse in the price of gold is due to miners once again engaging in hedging forward production, as opposed to any ending of support for paper gold from Euroland? Honestly just trying to reconcile the two ideas, because I must admit, Occums Razor leads me to side with Dan, and it would more logically and simply explain the recent weakness. Thoughts?

Bright aurum said...

@ all
It will be fun to see, how the eurosystem liabilities net out with its assets. Calling in loans from the commercial banks should the revaluation buffer is deemed insufficient? I don`t think so.

RJPadavona said...

I kissed a girl and I liked it. I bought a coin and I liked it too.

Katy Perry gets airtime on my favorite blog. WTF, the $IMFS Armageddon must be nigh.

Edwardo said...

Yes, vindication will have to wait, but, I don't think it will have to wait much longer. Consider that as the gold price has fallen into the zone where mining production becomes unprofitable, supply from the gold extraction industry, which makes up the lion's share of yearly gold "flow", will fall precipitously. Supply will then have to be met by above ground stock which, in size, (and, let's face it, size matters) is now in very strong hands that, buy on every dip, have no need to sell, and, last but not least, have no interest or incentive to keep the now decrepit game, and its chief beneficiaries, going. That leaves one mechanism to coax physical out of very strong hands, and, right now, there is one institution, the ECB, best equipped to manage the operation.

Motley Fool said...


Link the related post if you would.

I am thinking that since mine books are a matter of public record, such hedging would show up. So I was wondering if Dan brought any evidence to bear of such?


Phat Repat said...

If this is to be believed, and I do recognize the source, take one away and there will be substitution:
Silver is winning India’s “War on Gold”

"and, let's face it, size matters..."


Unknown said...

Here is the link. No supporting evidence but I think Trader Dan is at least intellectually honest enough that the idea can't be dismissed out of hand. Perhaps we will see in the next quarter? I imagine some of the hedging would also keep the "flow" going even as the price drops, no?

Robert Mix said...

Now there is another gold analyst (new book, or new to me anyway) calling for $10,000 + gold, let's see that's five now:

-- John Butler "The Golden Revolution"

(and the others as reference):

-- Nick Barisheff
-- Jim Sinclair
-- Mighty FOFOA
-- TwoShortPlanks (the $134,000 guy)

Polly Metallic said...

I think a small amount of new mine hedges will not hurt the price of gold so much as it will hurt the money's profitability.

Happy Snspshot Day, everyone. We've come a long way on the trail and the view is becoming clearer at this height.

Polly Metallic said...

Sorry, that was supposed to read hurt the miner's profitability.

Reality Show said...

@ gull_man re. purchasing...

If I may, I believe you are still thinking in currency terms.
When is the best time to convert unsecured bank credits into gold atoms?
I think you know. Don't be greedy. :)

Phat Repat said...

Interesting experience at the coin store today (yes, back in the US now, thus name change) where I acquired, and promptly lost, my purchase. My dealer lamented the odd pricing of metals and the associated pain the common man has experienced. The manipulation theme came up several times and I tried to quell some of the concern but my comment of "the price will likely go lower before it will go significantly higher" probably didn't help. In fact, they looked at me like I had a two-headed parrot on my shoulder. I did try to point out, however, that the ECB was on our side and that their number one 'asset' is in fact gold (hint, hint). Eyes started glazing so off I went with my little purchase, fortunate to have acquired more for my little stash... A wonderful day.

Reality Show said...

Thanks for the post Fofoa.
I'm confident that the realisation of gold will happen sometime between Monday and my death.
Actually, no I'm not, but things are lining up nice.

@Stuart Unger. Norcini may well be honest but he still equates GLD redemptions with shareholder sentiment. Um, SLV?
@VtC. Indeed. Do you believe support has been withdrawn?

Reality Show said...

One Of These Things is freegoldtube's most effective video in my not so very humble opinion. The tone is just right. Short, snappy, cute and strangely non-condescending, given the approach. Really strong.

Unknown said...

FT says:

"Central banks sold a record amount of US Treasury debt last week while bond funds suffered the biggest-ever investor withdrawals as markets shuddered at the prospect of the US Federal Reserve ending its quantitative easing programme.

Holdings of US Treasuries held at the Fed on behalf of official foreign institutions dropped a record $32.4 billion to $2.93 trillion, eclipsing the prior mark of $24 billion in August 2007. It was the third week of outflows in the past four."

M said...

@ Agent

From the last post you claimed that Maylasia printed money and it helped and they told the IMF to F off.

The ringgit had lost 50% of its value, falling from above 2.50 to under 4.57 on (Jan 23, 1998) to the dollar.

Edwardo said...

The WGC just issued new guidance on "all in" and "all in sustaining" costs in the gold mining industry. The new methodology would put average gold mining costs around $1400 per ounce, the BBC reports.

gull_mann said...

@ Reality Show: :) No not trying to be greedy. Made a small gold purchase the other day and actually lost it when my boat sank on the lake so I will have to buy some more to replace when insurance money comes in. :). Trying not go be too greedy. Just trying to find that right balance between gold and fiat in the bank to cover monthly expenses as well as emergency reserve incase of emergency or loss of employment or health...etc.

@ All: Great article. Can't leave reading article and not loving gold. Yes times are hard, especially if you don't have the right viewpoint. Is 2013 the year? I don't know. I can't pretend to know. TPTB have played this game so long. I know they can keep playing it until they can't. Maybe they have lost control of everything after Bernanke's comments? Could this be it? Maybe. Plan like it is this year but live like it isn't this year. Or something like that.

ein anderer said...

Hi Germans,
just doscovered:
Does not function with embedded videos - but on the YouTube site it does the job very well so far :)

sean said...

the supporting evidence that Trader Dan presented is that Producer/User/Merchant/Processor category increased in new short positions by 7,151 contracts. As you can see in his chart, he has observed a small spike in producer shorts at recent time-points when significant support sites have been breached.
I certainly don't think he is suggesting that the entire recent price decline was due to hedging, but simply that hedging is making a reappearance, which is a significant change - though entirely consistent with the POG going below the price of production.

Edwardo said...

I see the link I posted didn't work. This page should be okay, and contains, among other interesting tidbits, the following quote from Nick Holland, CEO of Gold Fields.

We're going to need at least $1500 an ounce to sustain this industry in any reasonable form

ein anderer said...

Bright aurum,

uuuuuups! Until now I wasn’t aware of this difficulty! Until now I thought always: Well, then they have to state that their gold hast lost value, and that’s it. But balance sheets must be balanced! So, yes: This will be very very very interesting.

Aquilus said...

Ein Anderer,

Don't let "Chicken Little"'s tell you"The sky is falling!".

Look at line 11(Revaluation Accounts ) on the liabilities side of the ECB ConFinStat and you'll see where the adjustment will go. Plenty of room and there for that purpose.

Example: Jan 2013 ConFinStat


Motley Fool said...


Having quickly read the article, I must note some red flags came up, such as mentioning KWN in a positive light and promoting it.

I suppose it is conceivable that some mines have hedged some production given the declining price. Personally, if this is so, I would like a clear estimate of how much, and contextually how much was hedged at the peak of such activities in the early 2000's.

As he notes mines had essentially sworn off such hedging. To overcome that psychological barrier in the short time it has taken gold to fall thus far seems difficult, though some could have managed it, especially the younger companies that are cash poor. Older ones with the highest production costs would be prime candidates, but overcoming mental blocks in static old corporations is no easy thing.

And correct me if I am wrong, but the COT report he quotes as his implied evidence is based on the COMEX right? As in perhaps 5% of the market volume, if that.

Anyhow. I agree it is worth keeping an eye on.


Bright aurum said...


That is why I have put it 'should the revaluation buffer is deemed insufficient'

If you what to be beneficial to the dicussion, please explain how FOFOA`s
'four snapshots are:

USD (US dollar)
JPY (Japanese yen)
SDR (Special drawing rights)'
instead of:
SDR (Special drawing rights)'??

Bright aurum said...

@ Motley Fool
The question about hedging is subservient to the bigger one about production figures. Lower/unproven gold grade deposits will not get enough support through hedging anyway. Should the POG nosedives further by any significant degree then even the cheapest gold mines will have to go through special deals with the Government and/or the oil countries just to manage their fixed costs of production.

Anonymous said...

I am increasingly interested in the psychological aspects of the transition to FG. For past year, I have been calling the transition the "shift," as in, things are going to be different when The _Shift_ Hits the Fan. I say "shift" because I prefer highlighting the mindshift that is part of the FG set of ideas. How do you think the transition is going to impact people psychologically?

FOFOA's posts on The Debtors and the Savers and The Debtors and the Savers 2012 has helped me tremendously. I find it challenging to adopt different perspectives. Fun and exciting, but challenging.

When all paper burns, will people's old perspective burn along with it, leaving them open (grasping?) for new perspectives? Any insights on psychological aspects of the transition to FG would be greatly appreciated.

Unknown said...

@Motley Fool Well, I imagine it's a little late to do much hedging now! :) But I imagine if we see heavy selling into every rally for an extended period we can assume that hedging is coming back into vogue.


Does this girl, "goldgirlme" on twitter, post here? She claims to know who FOA and Another are.

Anonymous said...


Great words.

I imagine for an Argentinian (and most people), who always saw the dollar as a safe heaven. When the dollar collapses, the "shift" will be hard for most of them (and us). Some say the change will be soft, but I wouldn't count on it.

Its too much mentality-change for most of us to grasp in a lifetime. The standard of living will inevitably change, adaptation will be necessary.

For less than fiat burning, people are protesting today in Brazil, Egypt, Europe. When lifetime savings evaporate, the outcome is unpredictable.

But, is the future... anything can happen.

I hope for the best and that humanity evolves with this experience.


Edwardo said...

I think the question of hedging, are they or aren't they, will they or won't they, and how much, is, for all intents and purposes, beside the point. Output from miners is set to be rather constrained going forward and hedging in an environment where the price of gold has fallen well below the cost of production isn't going to forestall a precipitous drop in mining output.

It's just flat out unprofitable going forward to extract. Sure, maybe some number of outfits will pull off some nimble hedging two step and/or make some deals to stay alive, but basically this industry is in a "you can run, but you can't hide" condition.

And that, from where I sit, equates to a checkmate situation since above ground stock is going to have to be tapped to make meet demand. And, given the new state of play these days, above ground stock isn't going to budge short of an extraordinary readjustment in the bid.

michael3c2000 said...

@Robert Mix
You can add Alf Fields and there's others.

michael3c2000 said...

Hedging in small quantities was occurring just a few years ago. There's no need for us to scrape the bottom of the barrel of excuses why we're qualified goldanalysts. Also Andrew McGuire's recent interview- he said hedging would be unnecessary and unattractive after July 1st begins. Miner forward selling that is; of course there will be paper hedging bets made by other traders/betters/categories.

michael3c2000 said...!/article/51d0642b93e8e441d160e6f7-the-case-for-10-000-an-ounce-gold

Michael dV said...

I do not understand. Pete T wrote that. I see no mention of goldgirlme on the link.

jeb said...

@goldgirlme is the twitter account that spams Pete T's blog. It wasn't that long ago that Pete T and screwtape files had a disagreement about silver quantity. Strange for someone who knows FOA.

Anonymous said...

I don't know who she is but I think she likes us, and really likes Pete!

Cruisin' for booty on watery trails?


Robert Mix said...

@ michael3c2000,

Hey, I clearly do not read enough!

@ people who knew/know FOA..., I'll believe that when I read something coherent. I will mention that it does kind of mystify me that FOA (if still around) has not reached out to FOFOA. A mystery to me, nothing conspiratorial.

Robert said...

michael3c2000, you mentioned the recent Andrew Maguire interview. I have listened to Maguire's interviews in the past, but the more I hear him the more skeptical I become. He sounds like just another KWN Chicken Little. He has been proclaiming severe shortages and rising premiums for a long time. But the Dubai newspapers are reporting that those out-of-control escalating premiums on physical gold are...(are you sitting down?)... $3 per ounce in the UAE (gasp!). And in Shanghai where people are supposing lining up by the thousands the premiums are a whopping $10 per ounce. Those seems pretty low to me. If there are severe shortages out there, wouldn't you expect the premium to be higher than $3? What am I missing?

I know you cited the Maguire interview for a different reason. I only raise the question because you mentioned his name. I already ignore most of the KWN interviews, and I think Maguire's name should be added to the list.

Edwardo said...

My own guess is that we’ll discover the value of gold is not equivalent to its weight in sheetrock. The third quarter of 2013 might go down in history as the great moment of price re-discovery in a world that thought — for a while — that the price of things can be whatever you say it is.

Ken_C said...

@Robert Mix Said:
"I will mention that it does kind of mystify me that FOA (if still around) has not reached out to FOFOA."

There could be many reasons. He may just choose to remain on the sidelines. He may well have been old when he was writing and is no longer with us. No way to tell unless he actually does surface.

Dante_Eu said...

Nice pictures, graphs and videos FOFOA!

On another note, all those talks about EU and € doom and gloom, well, today Croatia become the 28th EU member.

Yes, they are poor, but they have some beatiful beaches! :-)

farmersteveg said...

"Russia is now leading the wave of reactions by launching a physical precious metals exchange. The exchange will start trading gold and silver by the end of this year. Platinum and palladium trading will be launched in 2014. Russia has so far only been trading futures on gold and ......"

Does this announcement somewhat fit into our expectations re: freegold ??

Nickelsaver said...

Another and FOA are/were special individuals. Yet we stand in the midst of the works of an equally unique, and I dare say equally important individual in FOFOA.

Of all of the people in this world that could have elected to even attempt to pick up the A/FOA torch and run with it, doesn't it seem an amazing thing that it was attempted and successfully so by this individual?

I tell you, I have no great need to see FOA return and validate FOFOA. And I would not be surprised at all to eventually learn that FOFOA had been in contact with FOA for many years and was simply keeping his confidence.

It simply doesn't matter. It doesn't matter because the torch is burning bright, right here - right now.


And don't forget to donate!

Bright aurum said...

@ Robert Mix
'...has not reached out to FOFOA. A mystery to me...'
- but then FOA and/or Another could have reached FOFOA themselves if they wanted to, couldn`t they?

tintin said...

Just noticed that the US 90 day bill rate dropped to 1%:

Your comment please?

Roacheforque said...

Regarding A and FOA "reaching out" here is a fellow who was engaged with Another real time in 1997-2000 in the original THOUGHTS, and this is what he is saying.

I couldn't find the passage where A (or was it FOA?) mentions that when ROW CBs start selling US debt "it's over" (or something like that).

It's one thing to stop buying, it's ANOTHER to start selling.

To quote Jesse:
One can keep doubling down on a bluff for too long, and eventually they will be called, and their cards must be shown.

Knotty Pine said...

Hi Edwardo,

The link you posted came up "page not found" for me. Care to try again or elaborate?

Roacheforque said...

Take the trailing /%22 out of the URL (a common paste error when a space follows the URL).

Colorful prose from Kunstler. Funny how we all seem to be saying the same thing, one way or another, as the inevitable consequences of REALITY finally intrude.
I especially liked the reference to the "digital carry-trade between the US Treasury and the Federal Reserve", and yes ... I've been meaning to say, I think Japan's lost ecade has finally been "found".

Cheerio ...

Roacheforque said...

That would be "decade" not "ecade", necessary to correct since the Japanese do have a penchant for digital arcades, as in e-cade?

michael3c2000 said...

Good posts.
I am not endorsing A.McGuire or his trading service. No one makes calls 100% good.
Friday was first notice day for the options expiry week, and also the end of month, and also end of quarter and also end of half, and also time for ECB MTM, and time for other things.

Knotty Pine said...

Thanks Wil

michael3c2000 said...

Because they have better things to do, gold spreads and premiums Andrew McGuire and others (regularly) reference haven't been stores in Shanghai or Dubai, UAE.
They quote "gold in size" rather.
I think of them as Another's "Big Trader", sovereign wealth funds, FOA and FOFOA's "generational wealth", "old money", intimate with gold in size over the counter or off market, off exchange.

Edwardo said...

Knotty Pine,

I'll try again. The link was to a Jim Kunstler epistle that is the source of the italicized quote. It shouldn't come as any surprise to those familiar with JHK's oeuvre to find out that the wellspring for some of his ideas lie outside the realm of the MSM, so, while his intimations about gold may not be informed by you know who, I can't help but wonder.

michael3c2000 said...
The BRICS weren't happy; now it's EU's turn.

Edwardo said...


Good catch with the $IRX. We'll have to see if it sticks or not. If it does, then someone is scared and getting liquid in expectation of some unpleasantness in markets. I can tell you that equities look very heavy and today the $SPX back kissed the underside of a trend line going back to last fall.

michael3c2000 said...
This comment has been removed by the author.
tintin said...

hi michael, LME does not seem to handle gold?

michael3c2000 said... Charles Addams classic cartoon

Carpet crawler cartoon from CA:

michael3c2000 said... Jim Willie interview with Greg Hunter Classic cartoon from Charles Adams

Knotty Pine said...

Thanks Edwardo, the flower already set me straight. Thanks for the link. I always enjoy JHK's missives.

Edwardo said...

Eric Janszen's big picture,FWIW.

michael3c2000 said...

A summary of perspectives by Eric Pomboy using
a group of clearly illustrated and annotated charts supporting FOFOA's 2013 framework, abundant synchronicity

Bright aurum said...

a bit of meddling..
try this graph..$irx&p=D&yr=3&mn=0&dy=0&id=p86906318364
or the iverted one showing that the skies are rising instead of falling..$one:$irx&p=D&yr=3&mn=0&dy=0&id=p86906318364


It is a precursor of a M0 pumping situation me thinks

ein anderer said...

Regarding A and FOA "reaching out" here is a fellow who was engaged with Another real time in 1997-2000 in the original THOUGHTS …
This man wrote a small but marvellous book about gold:
- Michael J. Kosares, The ABCs of Gold Investing. How to Protect and Build Your Wealth With Gold. Omaha, 2005.
If we want to understand gold, some general background knowledge is very useful. Yes, FOFOA is presenting this background knowledge in many posts, as did ANOTHER and FOA too. Any yet: Being no financial pro at all for me it is very worthwhile to have this small 175 p. book in my bookshelf for reading every now and then one or the other chapter. And knowing that this man knew ANOTHER and FOA makes the reading still more thrilling.
Kosares does not underline every point of the Freegold thesis. But as far as I can see he is not in contradiction to FOFOA also. He simply does not point to these special and precious facts which we have learned from FOFOA here.

For Germans and german speaking friends:
Similar is true for
- Dimitri Speck, Geheime Goldpolitik. Warum Zentralbanken den Goldpreis steuern. München, 2010. (329 p.)

tintin said...

thanks guys for the replies.

Hi BA, your first chart seems to show T-bill discount rate at only 0.2%? What's the relationship with nominal yield on the bill?

face value ($1) over discounted value (Price) = nominal interest rate?

ein anderer said...

Some Hyperinflation informations: How to Survive When Prices Double Every Day and a Half

Unknown said...

A hyperinflation is really just another form of derivative failure.

Fiat currencies are transactional derivatives ... of gold ... and they precede by many years what we think of as "financial derivatives" in the interest rate, commodity, FX and equity markets (though in the FX derivative market their trading purpose is clear).

All debt-paper wealth (promises of future payment) is a derivative of payment in full.

The dollar became the first financial derivative to be embraced as a global wealth reserve "asset" (truly a contradiction in terms) when it became a derivative of its former self.

Not because it became "freed" from its fix to gold, but rather because it was not governed by a truly free gold market, as said market was in experimental paper gold manipulation for years prior to this change, paper gold being another important derivative in this game of market rigging.

Currency failures are derivative failures, nothing more.

So the dollar could fail, yes, but more likely interest rate derivatives will fail because interest rate derivatives do not have the political support which transactional currencies enjoy.

So if Rob Kirby is correct, and I believe he is, we would expect to see a repeat performance of this to offset the bond market sell off.

So we shall see soon enough if my Kirby-esque endgame is truly a pipe-dream sponsored by the flower of understanding.

John said...

@ Wil

That latest entry may have been the single best snippet of logic you have thusfar penned. It definitely added to my personal "flower of understanding".


Ken_C said...


Thanks for posting the Kirby link.
The conclusion is simply frightening

"The U.S. Bond market has been “gamed” beyond belief and the only institution in the world with the means and motive to conduct this business is the U.S. Treasury [ESF] in conjunction with/acting through the New York Federal Reserve. As such, U.S. bond pricing and interest rates are set 100 % arbitrarily and today represent the BIGGEST FINANCIAL HOAX ever perpetrated on mankind.

Rob Kirby

Sam said...


What is the Kirby-esque endgame you expect? Wouldn't you say interest rate derivatives also have political support by the ESF as a matter of US national security as per Kirby's paper? To me, it seems the market that will break is the one that requires political support from the ROW, not anything the US can support on their own. That market is the Paper gold market

Bright aurum said...

ein anderer is far better than me in explaining matters concerning bond prices and yields. Still I do know that when yields touch 0% and bond prices are at their peak, it becomes rasonable(if one has sertain future income flow) to short g.bonds and buy stuff from the physical world. Once yields normalize and bond prices fall one can cover one`s positions earning free stuff in the process - backwardation of a sort in all physical things!
Real dollars are printed/typed in due process so that those transactions can take place.

Time Proven said...

“Time will prove all things”

Hello FOFOA,
Thank you for sharing all your thoughts and understanding about gold, finance and those two guys! (smile) If FOA was around I bet he would say something like “you, me and Another make three”.

Much over a decade ago, Another made a simple point for regular people: use physical gold as a pass-book account! It was not a trade, not an investment, not an interest bearing CD. Nor was it a business venture (mining company) or hedge against anything; only a form of wealth savings an average person could hold without having to think so much. One didn’t have to sell it to gain or pay yearly taxes on the interest accrued. Only buy as much as your understanding would allow. Wow, a dumb holding for smart families. Looking at where its’ price has come from, in those days, average people are today “as tall as giants”, yes?

But, today is different from then. The dollar has bankrupted itself, (as it was allowed to do) and the world currency wars have begun. My friend, that is a big statement for such small print.

Yes, it took time to prove all things. Time for world events to play out. Time to make all that dollar debt “rope” so everyone could hang out together (smile, king of a joke). But time is what we all had plenty of then, today it’s time for things to change. All the figures about “how much gold is in every vault” are being openly questioned. Grandpa’s gold takes weeks, months even years to deliver while newsletter writers and TV talkers use those same bar counts to analyze supply and demand dynamics! Traders run to sell paper gold in a nano-second and find there is no big gold to trade into “right now”! With 110 times gold paper to be exchanged into 1 times the amount of real physical,,,,, can “nano-gold “ stay the same price as “delivery waiting bars”? Not in these new times!

As music rules the forum, a song for you with a hint inside it: sing with “The Charlie Daniels Band” The Devil Went Down To Georgia

ANOTHER went down to Georgia
He was looking for the Gambler’s Gold

The boy took flight when the Other caught sight And so the story unfolds

Round the bend now run boy run
The Devils on ya tail with “The Rising Sun”

Lighten those pockets unload that goal
Paper won’t save ya cause he’s after ya Soul

He bet his fiddle of gold

Against your paper Hold

And how you lost, so tell ya boss Make his blood run cold

Round the bend now run boy run
Other got your tail with “the Rising Sun”

Chicken in the Gold Pan picking up nuggets

Unknown said...

I think you may have answered your own question.

We know the USG, ESF and UST will support their own interst rate derivative Ponzi scheme ... but will the rest of the world?

Will the BIS?

I don't know exactly how it will end (even if I had DTCC records I could never unravel them) or whether a busted paper gold market will be the cause - or effect - of a busted interest rate derivatives market.

The point is these are ALL interconnected and interdependent, and they are ALL derivatives one way or another ... and they will fail.

Gold on the other hand never fails. It, in fact "succeeds" in more ways then one ... that is "success" and "succession".


Unknown said...

So to the point, I think the ROW did support the bond market and must continue to support it for ZIRP and dollar supremacy to be maintained.

The BIS might just instruct it's ROW CB's to call off their primary's in bond support, which then might just trigger an epic interest rate derivative failure if the FED doesn't come to one hellacious rescue.

It's that old FED vs. the BIS dichotomy. The system has strange bedfellows, I can't really tell who's sleeping with who.

Dante_Eu said...

@Time Proven:

Hey man, that ain't funny. I was already fooled once by 60253 (AKA Gary).

So, either spell it out or remain silent for the rest of time. :-)

Polly Metallic said...

I just received this email. It will be interesting to see if the other brokerage company I use, TDAmeritrade, offers a similar program. I'm not sure whether this is good or bad yet, but am about to wade through the fine print and see if I can understand the ramifications.

Dear Scottrade® Client,

Scottrade is pleased to offer a program that provides up to $500,000 of FDIC insurance protection for your uninvested cash. Our Bank Deposit Program (BDP) transfers available cash in your Scottrade brokerage account and deposits it in one or more FDIC-insured bank accounts. To review the details of the BDP, please review the BDP Terms and Conditions.

What this means for your account: Unless you opt out of the BDP per the instructions below, uninvested cash in your Scottrade account(s) will be automatically deposited, or "swept," into one or more interest-bearing FDIC-insured bank deposit accounts beginning on or after August 2, 2013. When you purchase securities or withdraw funds, the necessary cash will be automatically swept back into your brokerage account. You can easily stay on top of this information through your Scottrade brokerage statements, where balances and activity in the deposit accounts will be reflected. Scottrade Bank, our affiliate, will be one of the banks in this program. Your account will not be charged any fees for the BDP. However, Scottrade does receive a financial benefit in connection with the program which is discussed in detail in Section 8 of the BDP Terms and Conditions.

Your next steps: If you approve of this change, you do not need to take further action. If you choose to not participate in this program, you have two options. You may make this election by logging into your account at Scottrade's website and visiting the Bank Deposit Program section of the My Account tab, or you may contact your local Scottrade team. You must opt out by August 2, 2013 to avoid being enrolled in this program. If you do not contact us, Scottrade will make the changes detailed in the Terms and Conditions.

Please contact your local Scottrade team with any questions

Pat said...

Scottrade- to me it's pretty obvious. Sweep your cash into a bank account where it can be Cyprus'ed. And Scottrade off the hook.

Polly Metallic said...

I had several thoughts while reading the fine print. This clause concerns me although perhaps a similar policy exists currently:

Federal banking regulations require Banks to reserve the right to require written notice seven days before permitting transfers or withdrawals from BDP or other deposit accounts.

Also I note that they are making money from this:

Financial Benefits to Scottrade. Scottrade receives a fee from each non-affiliated Program Bank, and may receive a fee from Scottrade Bank. The fee paid to Scottrade by Program Banks may vary over time and may be as much as 4%.

Another thought was that currently unused funds reside in a money market fund, and I have read that legislation is in place to prevent people from panicking and withdrawing their funds during a market crash as it would "break the buck" due to mass selling of the underlying debt instruments. So, possibly moving funds from money market to a bank account now before a crisis is preferable?

Woland said...

Good day, sir knight, and welcome!

Much has come to pass since those early days a decade and more now
past! And, too, much still remains to be done! One thing, however, has
changed. We no longer use the phrases (smile) or (big smile). We have
progressed! The new current usage is as follows: Believe It!!

{:<)> (we use this for Giants) or ;-)> (for economists) or :-) (for the
great unwashed remainder) just sayin'.......Greetz!

Sam said...

@ Woland


@ Wil

I'll admit I don't understand the interest rate derivative Ponzi scheme very deeply. I just figure if needed the FED could in fact use drastic measures to keep that scheme going for a while. Paper gold on the other hand as I understand it will fall to it's intrinsic value of zero without the ROW playing along

Bright aurum said...

@ Woland

How is your investigation progressing by the way?

Unknown said...

I do not in principle disagree with you. I just see the potential for very large counterparty claims in the interest rate derivatives market as testing the credibility of the system if a rate change doesn't net out.

And I think it's one of many brilliant ways for a monetary authority like the BIS to come in and say that this system is only Too Big Too Fail if there is no PLAN B to prevent what could erupt as the counterparty dispute of all time.

And we all know what PLAN B is. But does it just have to more violently erupt or does the BIS have the good sense to know when to officially make that solution call?

Aside from that, the slow Bossanova grind of the paper gold death could somehow beat the derivative rate swap crash to the finish line, but could have a few other contenders nipping at the heels.

My sense of things is that everything is so intertwined that all the potential collapse triggers could be in for a tie to the dollar endgame finish line with a dollar denominated price tag so big in terms of global GDP output for the foreseeable future that NO PARTY can be expected or singled out to somehow "BAIL THIS OUT" other than the existing stock of repriced physical gold.

If you tried to Cyprus it, you'd have global Armageddon.

The longer it waits to happen, the bigger the reval as "debt servicing debt" expands.

That's the part of me that says there's so much funny money in the effin rate swaps. Some party can win a B I G bet there and it's gonna look silly on the books, and some old fart with an Italian last name is gonna come to the BIS podium and say, "APRIL FOOL! OK Here's plan B."
(just in a much more politically correct and bullshitically verbose fashion)

That's what think. I'm just an idiot, but at least they let me blather here.

Unknown said...

Remember the shock and awe of world war and the impact all this physical destruction had on the architects of this new debt based wealth reserve system?

It does take a psychological shock it seems, like war, or a market crash so huge that it is classified by the BIS as a "present system default" (perhaps) ... to prepare for what must be sacrificed to forge ahead with a new, more equitable system that "serves the greater good".

Maybe we could call it a blow to the psyche of the superorganism's resistance to change.

At one such juncture they confiscated private gold holdings. I don't see anything quite that drastic necessary if it's handled well. It's only paper this time after all.

S P said...

Polly Metallic:
If I were you I would act now to remove any "cash" from Scottrade.

If you can't make payment with it, it's not cash. Which means the only cash you should hold should be physical under your mattress or in your wallet, or a checking account where you can make payments.

Anything else will be Cyprused. But they can't Cyprus cash and checking accounts without destroying the payment system, and they are probably smart enough to realize that.

michael3c2000 said...
Crude Oil AUG contract pennies away from $100,
petrodollar has it's drawbacks, almighty dollar reigns on supreme... gasoline

Sam said...

I wonder if 1250 gold is the only reason we aren't at $5.00 gas is the US. Just a thought

Sam said...

Why was it called a shock?

For decades the United States was the issuer of paper gold called dollars. In 1971 they could have raised the price of gold in dollars to theoretically preserve and extend the gold standard of the time. Instead they chose to default. I believe this choice was made because the fundamental design flaw of the dollar reserve monetary system was understood and that day was always destined to come. Like an aging athlete that knows he will one day have to retire. Back then it was primarily the French draining an uncomfortably large amount of physical gold from the US. Today it is the whole world allocating their gold from the world paper markets. A parallel choice is upon the world and the same decision as back then will be made with regard to the gold market today. Oddly enough many will expect this time to be different. Most will think everything is fine, the majority of the rest will think the other side of this bet is that the price of our newest version of paper gold will be allowed to skyrocket within the system to save and preserve the system itself. They will both be wrong. Only a few will preserve and grow their wealth through this next transition with physical gold bullion. Today’s version of a 1971 default is once again the only choice. Prepare for the “freegold shock.” It shouldn’t be a shock at all.

Unknown said...

In THIS I do believe we all agree.

Wendy said...

WOW, some nics keep going and going and going and going and going .............ZZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzz

Wendy said...

lousy impersonation "time proven" when FOA returns he will certainly have the dignity of properly introducing himself before he "drops in" (smile) :(

ein anderer said...

@Bright aurum,

»ein anderer is far better than me in explaining matters concerning bond prices and yields«

You really meant »ein anderer«?
Really, such a task would be much, much over my head, believe me! :D

Motley Fool said...


Those aspects are very interesting in their own right. :)

sean said...

The Rob Kirby articles sounds interesting though I'm the first to admit I don't know much about it. I did find this post with a bit of discussion about it

michael3c2000 said...

@Time Proven - Good one! In the same "vein":

gull_mann said...

With Egypt going up in flames, Portugal and Greece teetering on meltdown once again, plus all the other ongoing issues in the world economy. Can we just get the party started? This delay is such a tease. Sorta like the picture above of Ms. Perry.

RevolutionOfNations said...

Wow..... I don't know if I should feel scared or excited... I have some of that yellow metal stuff, but my gut tells me this ain't good... I may have some, but what about the 99%...? Highway to hell or heaven?

RevolutionOfNations said...

Wow..... I don't know if I should feel scared or excited... I have some of that yellow metal stuff, but my gut tells me this ain't good... I may have some, but what about the 99%...? Highway to hell or heaven?

Unknown said...

I think it is going to take a crisis to institute Freegold. We'll need an economic Pearl Harbor, much like the melt down of 2008, to get the Freegold party started.

A global meltdown, an 'emergency' meeting of the G20, and then the new system is put in place to save the day.

Of course it will all look like it was done on the fly, but it has been planned for decades.

JR said...

The author of 1915's The Metamorphosis was born 130 years ago today. In it, Gregor Samsa and the other characters confront an absurd, wildly irrational event - a bewildering, unexplained transfromation - that suggests a random, chaotic universe devoid of a governing system of order and justice.

While there is no "Ungeziefer" to comprehend, FOFOA's Metamorphosis confronts a similar theme: change. But instead of itnerposing the story after the change, without the benefit of much backstory or explanation, FOFOA offers a preview of the change. An advance look.

And unlike the alientation, distress and seeming incomprehnsibility of the transformation detailed in The Metamorphasis, FOFOA's Metamorphosis offers a chance to prepare, to understand the putative change at hand before it occurs and many are set adrift in a world of seeming absurdity, a world they no longer recognize.

So yeah, if Freegold seems Kafkaesque to you and that's a bit unsettling, perhaps its time to explore the Metamorphosis that is unfolding. Its not too late.

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


One might as well check Shake the Disease:

"On this blog I write mostly about two things: the dollar and gold. The disease and the cure. On the dollar side, I usually focus on the inflation-deflation debate and my view that hyperinflation is both imminent and inevitable. On the gold side I focus mostly on freegold, the impending emergence of a physical-only gold market, and also on the tremendous benefit of holding physical gold through this transition.

These two subjects relate fractally to everyone. What is best for the individual producer/saver. What is best for the various collective producer/saver groups. And what is best for the entire planet. This is not a patriotic issue. It is common sense!

Today we have a disease that has crippled our global economy. All existing real-world capital is still out there, but for some reason it won't circulate. Forcing paper capital through our planetary veins is not a solution any more than transfusing water to replace the blood stream would keep a dying man alive. We need real blood to survive. This is a natural law.

Our disease is a parasite which has spread throughout the entire circulatory system, collecting and clotting blood in only non-vital, non-productive organs like the appendix and Goldman Sachs. To cure this disease we will have to remove the parasite, the diseased organs, and transfuse new, healthy blood. This disease is in violation of natural laws, and its cure will be a natural solution."

There's nothing evil about Freegold. It's as natural as gravity. It's not good it's not bad, it just is. If you know how it works it will probably be good for you.

If you don't know how it works, well, as with gravitation, you will eventually discover it's there, and will learn to live well with it.

ein anderer said...

Thx, JR, for this hint to one of our greatest authors!
But what is »what is next“?

Dante_Eu said...


This is next: LARVA -> PUPA -> BUTTERFLY


FrankS said...

3 July 2013 - Consolidated financial statement of the Eurosystem as at 28 June 2013

Gold: EUR 919.916 per fine oz.

USD: 1.3080 per EUR

JPY: 129.39 per EUR

Special drawing rights: EUR 1.1506 per SDR

FrankS said...

FOFOA: "It would be a bit unusual for them to take a snapshot long after the PM fix, so I will guess it will be around €920."

"Gold: EUR 919.916 per fine oz."

Not too shabby ...

FrankS said...

Here are the latest three statements:

9 January 2013 - Consolidated financial statement of the Eurosystem as at 4 January 2013

Gold: EUR 1,261.179 per fine oz.
USD: 1.3194 per EUR
JPY: 113.61 per EUR
Special drawing rights: EUR 1.1657 per SDR


4 April 2013 - Consolidated financial statement of the Eurosystem as at 29 March 2013

Gold: EUR 1,251.464 per fine oz.
USD: 1.2805 per EUR
JPY: 120.87 per EUR
Special drawing rights: EUR 1.1698 per SDR


3 July 2013 - Consolidated financial statement of the Eurosystem as at 28 June 2013

Gold: EUR 919.916 per fine oz.
USD: 1.3080 per EUR
JPY: 129.39 per EUR
Special drawing rights: EUR 1.1506 per SDR

One Bad Adder said...

Hi tintin:- this is the latest Auction result which @ 4.29 Bid-to-Cover isn't showing anything "alarming" just yet.
The general concensus that $US is on the skids because Bonds are selling off misses the mark IMHO ...and I'd definitely not be short Dollars in here.
What they are "vigourously" defending is the ever-present threat of the "system" collapsing into the here-n-now (short yields and DX will do a moonshot ...and the Long end will sell off hard as liquidity evaporates.
This could all happen in the twinkling of an eye FWIW.

One Bad Adder said...

Tintin: - ...should've said short "prices" (Zero-negative Yield)

ein anderer said...

JR, sorry now for my stupid question. I’ve trusted so much into the direct link that I’ve not even thought of copy & paste. Nice picture!
Thx, Dante!

tintin said...

Thanks OBA.

Unknown said...

Well blogger ate my post, but thanks JR for posting that great link, I loved it when I read it and love it more today.

Unknown said...

While I have called it a transformation from a "debt based" to an "asset based" system in recent comments, I think an equity based system, as FOFOA explained it, is synonymous.

The cracks are indeed showing in the derivative payout system, some cracks we see, others we do not, even as they expand.

In the risk rate swap market (interest rates being risk rates so why not call them what they are) the nominal price tag to "clear" the delta on mispriced risk will be unfathomable in terms of future promises.

It will be as futile as the idea of taking a smoldering Europe after WWII and basing it's restructuring upoon the equity positions of rubble.

There was only one hope for that time, and it was afforded an exhorbitant privilege to play out that role.

And it should be obvious by the wisdom of this blog, as corroborated by any critical evaluation of the evidence all around us, that physical gold is the only equity position that can be repriced, in a way that all parties can agree upon, to literally "clear" the way to a DO-ABLE replacement system.

We all know that this expanding debt system is not DO-ABLE, or as FOFOA says "SUSTAINABLE". The self-imposed margin call on the system cannot be bailed out by the idea of generations upon generations of servitude.

The superorganism will not respond favorably to the psychological shock of the next "bailout", it will respond favorably to an equity based system going forward.

The idea is that there is something to live for, not unrepayable debt for your bloodline as far as the mind can see.

Thanks again JR, I am in complete agreement with every word of Metamorphhosis.

Unknown said...

This we grasp ... from the flower of understanding ...

Unknown said...

And MAY YOU ALL rediscover the true value of the INDEPENDENCE that your understanding brings to you, as we here in the states celebrate the bittersweet triumph of America's Independence Day.

In a way, the new system will be best for her, such that she might regain the great merit of her youth, through the struggles of her founders.


Bright aurum said...

So the revaluation buffer is still adequat_ish

We will all see what happens next one thing for sure: If a currency is not suffering from exorbitant privilege syndrome its central banking system MUST have a revaluation buffer guarding its liabilities side from a speculative attack.

Michael dV said...

Im using my cell and i have a 'reply' option.

byiamBYoung said...


I guess we are Here



Grumps LaBastard said...

Two Short Planks has got a new post up.

Woland said...

Just when you thought it was unsafe to ever again visit KWN, especially
for those with severe reactions to "superlatives overdose syndrome", we
get a first rate interview with Ben Steil, (of the CFR no less!), who is the
author of recently released, "The Battle of Breton Woods". It is 18
minutes well spent, IMHO. {:<)>

ein anderer said...

Short and precise german blog post about »Gold for Oil« by Freegold conscious economic writer Nikolaus Jilch:

ein anderer said...

Two sources from the same article:

Black Gold - The End of Bretton Woods and the Oil-Price-Shocks of the 1970s

Pete T, Physical Gold ETFs/GLD: Fully-Backed by and Redeemable for Gold Bullion (Buddy, can you spare a cool $17million?)

gull_mann said...

Add Nick Barisheff, CEO of Bullion Management Group, to those expecting 5 digit gold.

Anand Srivastava said...

Looks like that Revaluation buffer (285BEuros) is nearly same as gold (320BEuros). That buffer is adequate for any kind of price drop. I guess they know that it will go that low.

Knotty Pine said...

This article describes the difference between western paper gold and eastern physical gold. From the article:

"Many analysts believe Asian prices are “real” because of the physical nature of the market, while the mainstream media uses the Western prices as a reference.

The Asian prices are higher because of the need to deliver the physical gold and not some king of promissory note or a certificate confirming gold ownership in an “unallocated gold account” at a “bullion bank”.

The pace of increasing premiums in Asia means physical gold prices are booming while physical gold cannot be delivered quick enough.

Whenever prices fall, Asians tend to buy more gold for its physical value and the yellow metal has become the subject of a fierce battle between two investing cultures and only time will tell which of the two gold prices is real"

Jeff said...

Screwtapefiles takes a look at the bar inventory of GLD.

Edwardo said...

Anand wrote,

. That buffer is adequate for any kind of price drop. I guess they know that it will go that low

From where I sit (In the cheap seats) it isn't likely given that gold is already priced below the cost of production. By the time the market threatens $1000 an ounce the mining sector will be be producing very little physical. Couple that with the overwhelming trend towards allocation and the idea that gold can fall much further before this decrepit game fades to black seems fanciful.

Anand Srivastava said...


Agreed that the mining will stop by the time price drops to 1000$. But it will not stop there, as the price has nothing to do with physical. At some point below that they will close the market. Then the price will be as good as zero. The buffer I guess needed to handle that eventuality.

With that in my mind. I don't think ECB has any reason to revalue gold. I think it will probably be Saudi Arabia, with the help BIS. They will not accept any currency for their oil, if they cannot get gold. So the BIS will have to step in and create a market for Physical Gold.

Edwardo said...

The point, Anand, is that there will be no flow when mining output stops. And it's not even that they will close the market which sounds like some pro forma action. There simply won't be a market with a tiny or nonexistent trickle of physical, because even paper gold must have the ability to allocate. Without that it loses any shred of credibility. That's the nub of the issue, paper gold needs physical, but not vice versa.

DASK said...

The buffer seems to be enough to handle 101 Euro gold if the relevant calculation is buffer as a percentage of reserves*snapshot price

Still a few more dots my shrimp brain can't quite connect here.. does it simply mean that they essentially have sterilized all paper gold price appreciation with the revaluation buffer so far? E.g. like it hasn't really counted so far?

Thanks for the KWN interview Woland. Even though the computer feels a bit dirty with KWN in the history.

Robert said...

Some days I wonder how I will feel if I wake up, turn on the computer, and read the news that the first small giant has run out the front door of the bank shouting "The bank has no gold!" What happens if Another/FOA/FOFOA's prediction actually comes true?

On one hand, I can see myself saying "Of course. This is what I expected all along." On the other hand, I can see myself saying "Wow. I cannot believe it actually happened."

But what about all the other people out there who find themselves unprepared? I'm sure many will be completely shocked and surprised and will conclude that this was completely unforseeable. That will be the story from officialdom and the legacy media. But I think there will be a large number of people, perhaps even a majority, who kick themselves and say: "What was I thinking? In my heart of hearts I KNEW something like this was going to happen. I knew the system was sick. I knew it was all unsustainable. And yet I could not bring myself to act because . . . ?"

I still think it is inevitable but not at all imminent.

Pat said...

What other people? Gold revaluing to most will be a non-event, like seeing some stock shoot up 30-40x which happens on occasion. When I say "most" I mean western most of course. The reaction in India, Thailand, etc will be more fun to watch.

Dante_Eu said...

"I still think it is inevitable but not at all imminent."

There's your answer why people don't act. :-) Not just in finance, but in general. It's called normalcy bias.

John said...

@ Dante won't feel imminent when it finally comes, the reval, that is. Everyone will be caught unawares as they already in that respect the prevailing conditions are sufficiently ripe. However some observers have observed that this latest downdraft (from past three months) was more than the usual "paper rigging"...that it was accompanied by sufficient amounts of physical metal that could only have come from official sources. If true, it would suggest that a reval is not imminent as logically giants would have little to gain to be supplying precious physical in front of a reval, never to be seen again.

Woland said...

hi Pat;

You raise an interesting issue. When I was a kid, (probably before
you were born) there was a TV show called "The Millionaire". Each week
in the series, a new recipient would be selected to receive $1M, and the
anonymous donor would observe the effects on the life of that person.
(I might add that back then, 1 million was "real money")

Now imagine (as in India) that a large swath of the second most
populous nation on earth were to receive such a windfall. Imagining
just where and how this newfound wealth might seek to express
itself could provide an otherwise bored person with many hours of fun.

cheers {:<)>

farmersteveg said...

What I believe is prolonging freegold from happening:

The world has changed dramatically since euro was envisioned. The freedom which freegold will usher in is being fought tooth and nail by TPTB. Obviously, govt worldwide (especially the west) can't tolerate more freedom, requires less freedom daily to maintain status quo, while constantly moving towards even more control.

My guess, China is gonna be the one to usher it in when they deem it suits them. West (including Europe) will be fighting it the whole way. I don't see why this is not gonna drag out for a long time, I hope I'm wrong.

We are all fortunate to have FOFOA share his insights, and I'm hitting the donate button as soon as this is posted. I don't think anyone in the 90's could or would have really understood how accurate Orwell was with his predictions,(Ayn Rand, etc).

At this stage, I think politics trumps everything, pretty sure FOFOA somewhat agrees. I just don't see the TPTB benefitting from Freegold and they currently have the power to keep it from happening.

ein anderer said...

I just don't see the TPTB benefitting from Freegold …
Debt write-off?
Economical stability?
Trade balance?
Sure—as long as the nation owns gold. So it seems to me more a question of who has more power: those nations with gold or those w/o.

Anand Srivastava said...


What would the BBs do when they cannot allocate?

They will have to close down and say that they will refund in currency. No?

ein anderer said...

Regarding the post’s topic:

Had a short mail exchange with FOFOA.
I learned:
The ECB is absolutely not free what it writes down into the consolidated balance sheet of the Euro zone—except Activa line #1.
This line alone gives an opportunity to "read between the lines".
If PoG is presenting different values at a Snapshot day (and it always does) it could be interesting which value is choosed. The higher one? The lower one?

In April, they took the snapshot very close to the AM fix. But many other times I've noticed it's closer to the PM fix.

Also any strange changings of the PoG near to the Snapshot day could(!) reflect something going on behind the scene.

Passiva line #11 is offering a balance opportunity, right. But neither the CBs are allowed to use their proportion of the revaluation account nor the ECB is allowed to use it either: ECB owes it to tne CBs.

Hope I understood it correctly. (Yet I am sure: If the revaluation account would rise into Trillions because of Freegold they *will* find a way to let the CBs participate, f.e. for debt write-offs or for balancing the negative effects of the transition. Some selling of gold would do the trick.)

Edwardo said...


If the BBs have currency then they will cash people out.

DP said...

The revaluation account records unrealised MTM gains on assets held. You can't spend an unrealised gain. However, MTM losses/gains in the revaluation account perfectly balance any MTM losses/gains on the related assets. So, from the point of view of solvency, there is no problem with asset valuations (eg: gold) going down again after their earlier rise.

If they want to utilise some of the gains in the revaluation account, they would sell some part of the assets to crystalise the gain — handing over the assets in exchange for liabilities (euros) from some market participant. The part of the previously-unrealised gains attributable to the sold asset then moves from the revaluation account to the general equity line (realised gains).

Smaller balance sheet (fewer assets and fewer liabilities to others), but with a higher proportion of equity (liabilities to shareholders).

This real equity can then be used to absorb losses on any remaining assets, if necessary, without the balance sheet getting … out of balance. #BailIn

Nickelsaver said...

...The freedom which freegold will usher in is being fought tooth and nail by TPTB. Obviously, govt worldwide (especially the west) can't tolerate more freedom, requires less freedom daily to maintain status quo, while constantly moving towards even more control. My guess, China is gonna be the one to usher it in...

Yeah, China is all about Freedom!

Ken_C said...

@Robert ...
"I still think it is inevitable but not at all imminent.""

Indeed this current situation could stagger along for a while longer. However, some unforseen event may trigger the reval tomorrow. You just can't put a time tag on the event.
Which is why the saying "It is better to be a year early instead of a day late applies"
The only solution is to stack as much as you can without trying to impact your current ability to live within the system we have today.

It is sort of like being in a crowded theater and noticing all of the flamable displays that could go up at any time. Do you wait until someone shouts "fire" to make your way to the exit? The theater may not burn for years but do you want to take that chance?

ein anderer said...

DP, thx.

Bright aurum said...

Every arab tent dweller and his camel should be buying gold now.

Roacheforque said...

The dollar empire has strange bedfellows in far away places.

It is not geographical. It is not in the way of national pride. It is in the way of self interest.

It is through this consolidation of interests that we have systemic stasis, as the planet slowly stears toward a new direction.

This we grasp ....

M said...

@ John

Quote:that it was accompanied by sufficient amounts of physical metal that could only have come from official sources. If true, it would suggest that a reval is not imminent as logically giants would have little to gain to be supplying precious physical in front of a reval, never to be seen again."

Giants are not in this to gain per se. You are suggesting that the giants are in full control which I don't believe. Financial crises effect the rich more then they effect anyone else.

Roacheforque said...

No debt crisis (is there any other kind today?)affects the issuer of debt if it is not allowed to default and the ultimate issuers of debt (fiat) are made whole...

The question is, who is in a position (or in line) to bail the debt out as it expands?

From Hayman:
“The scale and pace of credit (debt) expansion in China over the last 5 years is truly staggering. The compounded annual growth of bank assets as measured by the China Banking Regulatory Commission has been 30.8%,” Bass wrote. “To give some perspective, a 30.8% compounded annual growth of credit in the U.S. equivalent over 5 years would be an expansion of $33 trillion. This rate of credit (debt) growth is three times the total credit (debt) system growth experienced in the U.S. at the peak of the bubble in 2006…

There is much gold there in the land of the rising sun ... when debt defaults ...

Robert said...

Phil, I agree with you. I never meant to suggest that one should wait until the last minute before buying the first ounce of gold. At the same time, I have never been one of the "all in" crowd because I do not see an imminent catalyst. I agree with the Faber approach of steady accumulation every month. But my post was not about me. It was about the psychology of the person who knows better, but nevertheless finds himself completely unprepared one day too late.

ein anderer said...

DP, thx.

DP said...

De rien, avec plaisir :-)

Roacheforque said...

The riddle of gold is that though it is always accepted as the ultimate store of wealth, it has little to do with real power. Real power comes from the production of wealth.

In ancient times, Pharoahs commanded armies of slaves to build great cities and monuments that were a marvel to the common man then, and even today.

But the Pharoahs of Egypt are no match for the FIAT Pharoahs of today.

Today they program 99% of the world's people into debt slaves, chasing after the dream of wealth in the form of illusory wealth bubbles, where "equity' they borrow against does not exist other than through the construct of their own covetousness ...

... And the Pharoahs of FIAT retain this new debt as the senior tranch upon a world who lubricates this system with CONfidence, the true power of FIAT wealth production.

The power to create "production" and "consumption" economies on a scale of USA and China are the true powers of wealth production of the modern era, and the insistence, and fullfillment, of 100% performance, of all associated debt (as in USTs for example) are the spoils of this scheme.

We watch as the worm turns and the shifting of players unfolds, but the masters of the game remain steadfast, always benefitting by the power of the issuance of "debt as wealth", no matter where it's trail leads.

And with each new bailout or bail-in, or whatever we wish to call "debt saving debt" placing a more enormous burden upon the debt slaves toward greater future production, the credibility of the system is stretched to the point that this debt should no longer remain transactional .. and yet it does .. and the FIAT Pharoahs accumulate more true wealth with it, as CONfidence in the system retains transactional value.

FREEGOLD describes only the death of one certain transactional FIAT debt-as-wealth reserve "asset", an important one to be sure (for this present incarnation of the much older privately issued money system) and the return to an asset or equity based valuation system for FIAT.

But a system of deceit whereby the 99% chase after an illusion will continue on ... that part of the last system, if you did not like it, will follow you to the new, to be sure.

The only change is that the truly wealthy, now that true wealth circulates among themselves (the debt slaves already milked to the point that their remaining function is to merely produce the necessities common to all) will have raised the stakes to the flow of true wealth between them.

This we learn in the garden of knowledge, through a deeper communion with the flower of undertsanding ...

Bright aurum said...
This comment has been removed by the author.
Bright aurum said...

Does anybody know what Bron thinks perspective of this?

Roacheforque said...

Bright aurum said...

@ Wil (from another account)
Thanks for that.
Do you have a clue about the recent mint sales figures?

Anonymous said...

We don't need to be "milked" by Freegolders. Honest, Constitutional money GOLD and SILVER is the only way to stop the bankers aka Freegolders.

One Bad Adder said...

The main reason I chose to retreat to GOLD c'98 had to do with THIS situation in the primary currency Bond market.
Currently we're seeing the Ratio flirting with 200wma of 118 ...following a "benign" (if 25 can be called that) 2012.
A "riskless" Ratio is c 3-5 BTW!

Gold Kiwi said...


This small fish is hoping for some advice from fellow Freegolders.

Thanks to discovering the wise words of FOFOA, I have more than enough physical gold to come through the transition in good shape. My dilemma is what to do with that darned silver and those gold mining stocks I acquired along the way.

These numbers might not look like much, but they're causing me a bit of stress!

I have 292 ounces of physical silver and am currently sitting on an unrealised paper loss of 67%. There are two options as I see it: (1) Sell the silver now and put the money back into gold when the paper price has dropped some more (assuming physical can still be aquired at that lower price); (2) Keep the silver and hope its value increases in future from what it is now.

As for the gold mining stocks, my initial investment of $8,000 (I told you I'm a small fish) is currently down 42%. There are two options as I see it: (1) Sell that junk now and cut my losses; (2) Take the chance that Freegold is still a long ways off and the paper price of gold may yet see another big upswing and hold onto the stocks until I can recoup my loss.

All opinions appreciated.

jeb said...

Simon- DO you have some food stores to help you through the transition? Might be more useful than gold stocks and silver.

Tommy2Tone said...

No one can or will tell you what to do. Buy as much gold as you understand. Outside of that, RTFB and your understanding may change.IMO

S P said...

I comment because I have thought much on this. Although earlier I have suggested holding other metal, I am sort of getting tired of tracking it all.

There is time and cost associated with all surplus. Why not just bite the bullet and hold only fiat and gold? It is very tempting to do just that and I am leaning in that direction.

Polly Metallic said...


Find a coin dealer who has gold and will make a trade for your silver. Expect them to make a little profit from both ends of your transaction. As for the mining shares it looks like they could head much lower. Knowing that is a distinct possibility you must decide how much you are willing to lose.

John said...


Would you mind kindly translating the implications of where you think we are heading with those graphs in plain english for the benefit of those not fully versed in all the technical mumbo-jumbo.....just trying to add to my "flower of understanding" :)

Ken_C said...

What do you all make of the continual loss of gold from the Comex? At some point I would think that this is going to implode.

"JP Morgan Vault Gold Drops To New Record Low; Brinks Gold Plunges By 24% In One Day"

Gold Kiwi said...

Thanks for the responses above.

Food stores - sorted.

I have as much gold as I need/feel comfortable with.

It's really just a question of whether I cut my losses on the silver and mining stocks or hold onto them on the off chance prices may rise again in the future (between now and Freegold).

As for "RTFB," I've done a lot of that, including the two excellent blog posts on silver and I understand the Freegold position on miners.

I guess what it boils down to is what happens between now and Freegold and how many more years the current system can be sustained. "Your guess is as good as mine" is probably the most valid answer :-)

One Bad Adder said...

Hi John: - "TIME" my friend the essence! - and embracing / understanding the implications of TIME / RISK is what we're dealing with.
When discussing GOLD otoh, it's critically important to understand that Au (due to it's unique suite-of-properties) is "timeless" which equates to "riskless".
The current international currency debacle is TOTALLY dependent on time / risk ...which is on the verge of unravelling.
The "Timelessness of Gold" is without doubt the most enduring ...and simplest petal of understanding the Flower can bestow John. IMHO.

One Bad Adder said...

...whatsmore John: -
RULE 1 - STOP "believing ...and start "thinking"
RULE 2 - STOP "believing ...and start "thinking
RULES 3 - 10 think ...and Think...and THINK!
...and sooner or later the FoU will blossom.

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


did you mean these two posts?

You’ve seen this one too?

For the case I’ve been missing another one please tell.

To your question:
I'm with Polly Metallic.

You see: FOFOA never stated that silver is bad. How could he? Industry needs it (70%), so that’s it. He only stated that silver will not see any Waterfall Effect. And that it could still be overvalued.

So from his PoV it's possible that silver will go down further (as papergold), and there it’ll stay, waiting for HI. But no transition.

Gold Kiwi said...

Actually, I was thinking of these two:

But I'd also read the posts you linked to above.

John said...


Thank you for your words....and I've since placed my "thinking cap" on which hopefully won't be mistaken as a "dunce cap". I believe your thinking parallels Fekete's "Basis" argument which definitely makes sense to me. The part that I wonder about is why should there be such a precise level of rates that triggers a "phase change" like in the example of a "boiling point of water"? In other words, what difference should it make that a dollar bill can "earn" 3 or 4 basis point of interest in short term duration credit? Given the other characteristics that make that dollar bill inferior to gold already (default risk, debasement, and counter party risk) how could that nominal level of rates be enough to hold that dollar together. In other words, why would the theory already be in motion right now with rates being where they are? Why should there be a precise trigger at say level x ? Thank you for your thoughts OBA, they are much appreciated.

Roacheforque said...

I haven't followed the most recent mint sales figures, other than to note that they have been setting records in recent months. I suspect the trend is steady?

Good words sir.

A good word substitution rule to follow when reading "between" the financial news.

credit = debt
asset = debt
liability = debt
money = debt
dollar = debt

interest = risk
inflation = confiscation

It is amazing when you call things what they truly are how clear the understanding is.

Pat said...

Wil= best new-ish poster

This would be a good time to thank all non-Art posters, especially some superstars, for their contributions in the comments section.
The Chinese radio program stating USA ( and Europe...Hmmm ) have actively suppressed gold prices seems like a big deal.
What say ye all?

ein anderer said...

Simon, thx!
Pat, I stick more with FOFOA’s logic! There was *no* suppression of Gold prices. Where? Look at the chart. Bull run since the Euro was launched!
But may be there was support in all those days? Support of this well known paper price?
And now, since 2012? May be stop of support? Let the paper go? Let the dollar go? Seems logic to me.

ein anderer said...


and probably:

journalist’s gold = speculative paper
Au = metal, The Real

Roacheforque said...

Thanks for your kind words, I only hope to add some dim candlelight to the clarity of thought that FOFOA and his predecessors (friends) have brought bursting forth through the dark clouds of Western "thought control" like a beaming ray of sunshine.

As the dark overlords of "debt is your only salvation" preach their sermons of "faith in debt" up and down our Jersey Shores, I am inspired by the piercing light of the message of FREEGOLD.

The flower of understanding cannot grow in the dark and foggy realm of the Oracles of FIAT. It needs the golden rays of FREEGOLD shining down upon it to give back the FREEDOM of TRUTH.

To understand the TRUTH is all we really ask. I rarely hear it articulated outside of fellowship of the FREEGOLD realm.

TIME will decide which is CULT, and which is REALITY.

Jesse McL said...

Wil, ironically that was your most Cult Preacher-like post to date! Remember, the FoU does not require you to inhale on EVERY toke! Surely if anything, freegold is about fiat and gold in mutual balance with each other... so why all the FIAT HATE? When are you going to grasp this particular petal?

Edwardo said...

Simon says, (Sorry I couldn't resist)

I guess what it boils down to is what happens between now and Freegold and how many more years the current system can be sustained.

It might be helpful to consider that, at the very least, there are entities, forces, call them what you will, that are actively engaged in aiding a transition to a new system. And while we can't say with certainty that the new system is one where physical gold, and only physical gold, acts as the planet's wealth reserve asset, evidence has accumulated, some of it circumstantial, that suggests this is a decent supposition. Put more succinctly, the present $IMFS isn't being sustained, at least not by all the players who have a say in the matter, and, perhaps more importantly, the folks on the side trying to hold the present system together are simultaneously losing traction and being outmaneuvered.

Unknown said...

The advice of "buy as much as you understand" is fascinating to me because the primary justification for the action is based on knowledge within and not some technical or fundamental factor observed in the marketplace. Granted, my understanding may be based upon what I see and read in the world around me, but this imperative is based upon my interpretation of this world. The gold is physical; the understanding that drives acquiring gold is mental.

As I re-read FOFOA posts with this in mind, I have begun to appreciate the theme related to people perceptions of gold. Within many blog posts, FOFOA writes about how people (like the Giants) have a different view of gold. I will say that my mental model of gold has changed after reading FOFOA posts. It is invigorating. Consequently, I am now immensely interested in how people come to a different view of gold and I seek guidance on how I can learn more about this.

The discussion of John Exter's inverse pyramid really helped me understand what FOFOA was writing about. FOFOA introduced that concept in his post All Paper is STILL a short position on gold and is featured prominently in the Gold is Wealth post.

I now think of the two triangles (the upside down paper triangle which is balancing precariously on the stable triangle of real things) as each having their own paradigms of thinking. Now, when I see those two triangles, I see a mindset for the paper and a mindset for physical.

Roacheforque said...

I do embrace the coming FIAT petal with all of my Freegoldishness.

But I denounce the way in which pre-FREEGOLD FIAT is used to expand debt, which at this point cannot be paid, but is "saved or extended" by selectively socialized confiscation.

And who decides which of Ye are excommunicated by a more senior tranche who holds claim to thy FIAT? Why the monetary clergy on high of course.

Being the consummate secular monetarist myself, I only use the "preachy dogma" to highlight the religious ferver with which CONFIDENCE is lauded and Consumptionism preached at the pulpit of debt-expansion, while the ritual of cleansing by way of tithing the masses bleeds the congregation dry.

Or do you think that FIAT in the post FREEGOLD world will retain all its present characteristics which the paradigm of Dollarism holds?

I think post FREEGOLD some terms will change, and some will stay the same though their meanings will change.

As the nature of FIAT changes through FREEGOLD so shall my attitude toward it.

Roacheforque said...

Blair Eric,
I have alway thought of the saying as an acknowledgement of the personal nature of one's understanding, encompassings their personal means, their personal intent, their personal design.
A gold decision is a personal decision, based on this understanding. As the understanding grows, decisions may change, but they will always be personal, as to "your understanding" of those personal matters upon which only you can decide.

burningfiat said...

Wil, well said.

May the seed be sown in FOA's field of understanding and grow up to emancipate us from the fiat-pharaohs (aka $IMFS/Wall str./Financial Industry/.gov)!!! :D

Blair Eric, nice (first?) comment :) Welcome!

Roacheforque said...

Thank you Burning,

For what is CONfidence if not FAITH?
And what is this FAITH in the almighty dollar if not a pagan religion?

This religion today denounces GOLD as the realm of a barbarous cult (and we good naturedly wear that badge of courage proudly).

But the FREEGOLD view, I say, sees GOLD as REALITY and the debt-paper-as-wealth view as the arcane CULT of a dying past.

The thinking will shift in a "tectonic" way. As in "a return to old values repackaged for our modern time."

Time reveals all.

milamber said...

@ Wil,

As you work your way through your petals, you may want go back and reread FOFOA's take on "honest" money.


"The debate mentioned above within the Austrian/Libertarian community boils down to a free market solution versus a government dictate against FRB.

But either way, all Austrian Economists agree that the real issue is credit expansion, which is at the heart of one of Mises' greatest insights – the Austrian business cycle theory (ABCT).

Briefly, ABCT blames the boom-bust economic cycle on fractional-reserve banking, or the expansion of credit without an actual act of saving by someone in the economy. When credit is expanded beyond reserves, the resulting drop in interest rates is artificial (i.e. not due to actual increase in loanable funds). This sets in motion an unsustainable boom period of malinvestment and erroneous capital consumption that sows the seeds of the inevitable bust. This process is supplemented by government intervention to protect privileged bankers from being “caught” short by the market and allows credit to expand far more than it would without such intervention. This practice of absolving privileged bankers of their legal obligations via intervention was institutionalized in 1913 with the creation of the Federal Reserve.

And an understanding of ABCT provides the context for understanding why Freegold is unfolding. Freegold simply offers a different way of controlling credit expansion that is more effective than the modern Austrian suggestions of making money harder and/or limiting or eliminating fractional reserve banking. There is no need for all that convolution, just separate the store of value so it cannot be fractionalized and then non-productive credit expansion will be as limp as a eunuch (which comes from this comment by yours truly). Snippet:

But debt itself is not the cause of our problems today. Today we have a situation where the vast majority of excess production value (excess capital) is enabling massive amounts of global malinvestment through new debt creation. That has peaked and is now contracting. But the problem is not the debt itself. The problem is the enabling effect of excess capital not having a viable alternative that floats against the currency. The problem is the lack of the adjustment mechanism of Freegold. There is no viable counterbalance against uncontrolled debt growth today. So we are only left with credit collapse and hyperinflation of the monetary base to clear the malinvestment from the system.

It is easy to blame this on debt as a principle, but unless you don't mind being wrong, there are some deeper explanations out there. Debt under Freegold will not reach such destructive levels. "Easy money" thinkers may or may not get their debt-free money, but if they do they will suddenly realize the flaw in their reasoning. Oops! That it can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.


Motley Fool said...


Fwiw, it is old news, very old news. Release of which dates to Sept 2011, and representing public knowledge(in china at least) before that, having been publicized in the Chinese World News Journal.

It's interesting though, ofc.


Motley Fool said...


Cable creation date : 2009-04-28 08:23:00

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Edwardo said...

Wil poses the following question:

For what is CONfidence if not FAITH?

Yours may be something of a rhetorical flourish, to which I'll offer that when confidence is granted in the absence of being earned it amounts to an act of faith. Confidence, as in the case of the confidence trickster, is attained via deceit, so one has to be on guard for actions that are designed to engender confidence that are simply a case of ye olde bait and switch. But even when confidence is earned on the up and up things can emerge to shake confidence that do not have their source in malevolence, but, rather, something more quotidian like, happenstance or bad luck.

The monetary realm has always been vulnerable to phony displays meant to engender confidence, and our age is particularly beset with that sort of behavior. I have confidence that this too shall pass.

Bright aurum said...

Could you please give us some update on the coin market as you see it?

One Bad Adder said...

@John: - Glad to help ThinkingCap-ville there's no such thing as a Dunces-cap mate ;-)
Feketes' "Basis" works for me ...but he puts the Cart before the Horse in current circumstances it seems to me anyway.
Gold futures backwardation will be an "effect" of negative $IRX ...rather than a "cause" of systemic meltdown. At the end of the day we're screwed either way!

OK - you seem to accept the Timelessness /risklessness of Gold which is often misconsrued ie: the barbourous relic - doesn't earn interest ...etc.
The thing that will completely up-set the apple-cart will be when the $US eye-balls Gold at the Zero-bound ($IRX) ...and then continues to drive short yields into negativity.
Timelessness / Risklessness is NOT the precinct of Currencies John ...never has been, never will be.
Interest (risk) will never-ever factor into Au ...and those who forego T/R in pursuit of "interest" do so at their peril.

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