Tuesday, January 7, 2014

Chapter 1


I am going to offer a series of posts (chapters)
starting at the "beginning". We will use simple logic
and common terms to explain "what has happened"
along this "journey through time". Another will edit it
for direction (as he has this post). This will be a long
process, and I hope it will offer a real value for
"thoughtful minds". As many are now starting
to discover that most of the Western ideas of
gold investment were flawed from the beginning,
so too will they find their present (gold) portfolios
"unprepared" for the storm that approaches!

-FOA 6/19/99

I know you have all read "The Gold Trail", right? But have you ever read chapter 1?

ANOTHER showed up in 1997 with earth-shattering projections from an ancient but inexorable perspective on wealth. Two years later, he and FOA decided to explain this perennial perspective with paramount modern implications "starting at the beginning… as a journey through time". "The Gold Trail" is the result of that decision, but its first step was taken seven months before they came up with the idea of separating it from the regular discussion forum as a stand-alone archive.

Consequently, the first chapter, or perhaps we could call it the Gold Trail pilot episode, languished in obscurity while the famous Gold Trail actually began on chapter 2.

"The first step is taken and thus defines the trail…"

"For people who demand solid facts and figures to make investment decisions, I submit; we are not trying to create reasons to invest, rather our purpose is to build a background for the understanding of these Thoughts. In this light, all that read this will become the pioneers of new insights."

So now, with the proper frame of mind, and without further ado, here's chapter 1:

ANOTHER (7/10/99; 17:35:55MDT - Msg ID:8633)
Gold: Saving Real Money In A Time Of Transition

Introduction

-------
A gentleman leans over the fence and tells his neighbor that gold is going to rise in price from its current $300. As the person on the other side of the fence thinks differently, they both agree to a binding bet. In three months, we will settle up with a payment of the change in the price of one hundred ounces of gold. Whatever it rises, the "bull" collects that amount. Likewise, whatever it falls, the "bear" collects from the bull. Each puts a $1500 payment guarantee into a common shoe box and gives it to another neighbor for safekeeping.
-------

As an observer of the above, we have just witnessed the creation of a wager not unlike a comex futures contract. On each side of the fence stands a long and a short, that together create an open interest of one contract. Neither has any intention of buying gold, nor do they expect physical gold to be a part of this bet. Yet, at cocktail parties and on public internet forums, one claims to have "bought gold" and the other states that he "sold gold".

To build a further understanding of this transaction: Both of these gentlemen, probably don't have the $30,000+/- to buy or deliver 100 ounces of gold. Human nature being as it is, if they did have that much, they would most likely increase the bet to ten or twenty contracts. Clearly, the intent of this paper market, is to bet on the price of gold as it is determined by the buying and selling of other physical traders. The western public should take these trades for the concept they truly represent. ""I (the long side) bet on the "price" of gold not because we need or want the physical metal. Rather, my wager is that others will need real gold to protect themselves from bad monetary systems. In fulfilling that "need to own", these others will drive up the dollar price and I will make money while working within the confines of our good monetary system.""" The shorts make the opposite bet, in that they think the world monetary system will work itself out and induce "the others" to sell all their gold. That is, gold they bought in the first place, because they did not know that our money managers could repair the world financial system.

Yes, today Western longs and shorts are playing out these two views of the gold market. Yet, both sides are using paper gold bets to represent their beliefs. Truly, the major majority of this market does not buy or sell physical gold to represent their investment concepts. There are a few that buy coins and bullion, but, even in their large amounts, it is only a drop in the paper gold bucket.

This, my friends, is the very nature of western trading of gold. The mindset is to treat it as a concept for making currency, not protecting existing wealth. The exact same mentality exists when one invests in the gold mining industry. Even when these players see the faults in the dollar, and loudly proclaim its inflationary downfall, the largest part of their assets go into the business of producing real gold in exchange for more of the same paper currency. It is a means to build wealth through paper asset appreciation, using the very financial system the "concept" says will fail without physical gold.

There are many mental angles and philosophical side steps one can take when understanding the above. But, in this concept lies the very basis of the flaw in the current gold market. A paper market, built upon world misconceptions of currency values and the historical reasons for owning gold. The present deployment of world assets into a paper system of valuations is likened to traveling a trail of no return. History has shown that the assets accumulated in this way will never be transformed into "the things of life"! The paper wealth you currently own is nowhere near the real value your currency says it is. With the above introduction, we have begun close to the end of this journey. In the upcoming chapter one, we return several miles to walk ground already well traveled. We will observe concepts on the right and the left, not discussed by other guides. The very sights that make such a trip, "worthwhile".

"You will see this trail thru the eyes of history and feel old ways as new Thoughts!" Another

FOA


(( 1. )) Thinking Gold: A montage of views


--------
Pioneers:
"the first step is taken and thus defines the trail, a second step brings others and upon this journey we do now make sail"
"pioneers bring light, for directions long unknown, new spirits shine like stars, so bright the seeds are now all grown"
"quickly to the heights we climb, even the top of the mast,
for there I see the end of knowledge, as it was written in the past"
--------


To fully understand the past and present concepts of gold as money, we are going to have to use logic and common sense. In addition to these attributes, the ability to place oneself into the context of the moment of history will also be helpful. For people who demand solid facts and figures to make investment decisions, I submit; we are not trying to create reasons to invest, rather our purpose is to build a background for the understanding of these Thoughts.

In this light, all that read this will become the pioneers of new insights. Travelers in search of new vistas that best present the lost concepts of money. The real money that this generation has never known.

In our introduction, we witnessed two friends with a fence between them. Neighbors, betting on the "price direction" of gold. Not its future impact on their daily lives or the use of gold as money, but rather how much currency would other people use to buy gold at any given time. Contrast that perspective to our concept of gold and you will see that a wide gulf of understanding stands between our "minds from different worlds".

-------- "They never said it wasn't money! Only, that they could no longer use it as money for their purposes" ------

The author of that statement is unknown, but it was spoken sometime after the "Smithsonian Agreement" of the early 70s finally closed the door on using gold as part of the world monetary system. The old Bretton Woods articles were then officially dead and the dollar would no longer be a "contract currency" for the delivery of gold. Shortly after this event, banks, governments and large investment entities still agreed that gold was real money, but it should be held only in reserve. So, instead of using the dollar as a contract for gold, the world would substitute it as real gold in the currency system and thus sent it down the road of being "demoneyized".

From the 1920s to the 1970s (with striking similarities to today), gold loans between private and official sectors had periodically become so great that they simply couldn't be paid. The world economy was being built upon a debt of gold that no one could pay off.

Early on, it was agreed that because the repayment of loans in real money would break the banks, payments in newly created real money substitutes would suffice as gold. Over time, the reaction to this concept was easy to understand. Every thinking person knew that creating more (inflating) paper currency to cover existing debts would lead to devaluations of such fiat currency. Therefore, we will all hold gold in reserve, while these bankrupt deals are worked out with fraudulent money payments. Money that was no longer "contract currency". Later, gold will be revalued upward to balance these newly created money substitutes. In time, all world currencies would finally be officially devalued against gold. That, my friends is why so many investors continued to buy and hold gold as a long term savings asset throughout the 1970s. It was perceived that the world would eventually return to using gold as the money for payment of debt, instead of using paper money substitutes.

This perception was extremely prudent because history had proven, through the actions of countless generations that creating paper money to save governments and banks from bankruptcy eventually destroys the "concept" of using created money for currency. No one ever expected the general populace to continue using and saving "non contract dollars" for any extended period of time. Mostly, everyone expected the citizens to patriotically continue to use the "new inflated paper legal tender" as asset savings until price inflation exposed that they were sharing their life savings with the state. A process that would require five years at most. Never the ten to fifteen years that have passed. In the end, it made little difference how long it took, as the adjustment in value always compensated for the inflation plus interest. The only investors that didn't think gold would outlast this new system, were the ones with a "short life of little history experience".

Again, from the failure of Bretton Woods to this present day, there is an ongoing event being further played out from the early twenties. By now (2000) the world can no longer use gold as money because to do so would require virtually every debt to fail. But, what is never considered is that a fiat currency system always "fails" the debts anyway. When the price inflation begins, old currency debts lose value at the same rate as the inflation. A history lesson soon to be performed today right before our eyes. We have but to watch and learn!

But, why do we nowhere read that it would be OK for these banks and businesses to fail, thereby allowing others to buy them up for pennies and save the system? Truly, this was the same real problem with the use of honest gold money as it forces "the important" people to fail. People of influence and prestige. Persons that will not allow their debt assets to fail, even if they gain only a few years. For them the world cannot function without an "expandable monetary system"! An ages old scam that is presented to each new generation as a new and improved currency system. Custom tailored for their own technological advances and special time in world History. A special system that will force the average worker to "share" in the loses but still retain this new generations wealth! With this system, any government can then borrow or print money to inflate (expand) the money system so as to bail out failing businesses and foreign entities. Does this sound like the present IMF?

Yes, gold was our money back then (pre- 1920s). But, the bad business debts and wars of the world had "used up" much of those gold savings. Over time, the savings stock of much of the gold that every citizen, business, government and bank had, was borrowed to finance expenditures. It is imperative to understand that using the expression "gold used up" meant that it was "lent out"!

Of course, back then, even if gold is "lent out" it went somewhere, and from that new savings account (somewhere) it can be borrowed again. However, if the world financial strains become great enough, failing governments and businesses could not borrow gold at all. Therein lies the solid law of real money that scares governments today. We must totally fail and start again.

"It is to say, the gold you thought be in your bank, was not. In your account, the real money was lent and the credit claim represents your wealth" Another

It was here, in the 20s 30s 40s, in that context of time, that we witness the harsh reality that wars and governments are financed by borrowing real savings assets and spending them. When gold is used as money, it effectively demonstrates the real risks in lending one's life savings. That being: you may not get your money back. Is it any wonder that many families decide not to lend their savings? A compelling truth, that allows one to separate their money from the state and not share in the losses of others. In this light we confront the real issue of why so many governments always move from using gold as money, to using fiat currencies as money. It enables them to force you to lend!

During the time (1930s) that the American government called in gold from its citizens, it would have been very simple for the US treasury to revalue gold upwards into the $300 +/- range (from the low twenties). Yes, many major financial players would have fallen from this dollar devaluation. In addition, America would have lost much international prestige. However, the real productive assets of this great country would have been kept, "intact"! Those assets were much of the private savings of working people, and most of it was in gold, in their hands. Again, in that time, it was the only money not lent out. This unprecedented action of devaluing the dollar would have clearly identified the losses from wars and poor lending decisions. It would have forced the large wealth holders and governments to lose assets in proportion to their size. As it was, the small citizens were forced to share in balancing the destroyed assets by turning in unlent gold.

History has shown that "some great leaders" have taken the honest gold "deflation" route when they are not under the influence of "money lenders". In these situations, the context of deflation is not the destruction of the money supply, which was gold, rather it was the destruction of the debt securities held as assets. Assets, due to be paid in gold, and cannot! Deflation, in these terms is a far different animal than what is discussed today! In our time, all currency assets are debt securities. That is why any form of price deflation or price inflation, today, will destroy the entire world monetary system. Forcing people back into using real gold, the only money that cannot be deflated!

"It is the clear view for an honest eye, yes?" Another

The Bretton Woods system was bound to fail because the world governments continued to pursue a strategy of saving the integrity of all debts. Even while holding an international pledge to use the dollar as a "contract currency" for gold as money. After the US had robbed its citizens in the 1930s (of gold money) to help balance the books, the stage was clearly set to proceed into currency inflation. They continued to print "dollar currency contracts" as the dollar was a legal contract to deliver 1/35 of an ounce of gold. They did this knowing full well that this process would further demoneyize the dollar. The final destruction of Bretton Woods was but a further step to no longer using gold as money: not using gold because its use required debts to fail. If the debts are "to never" go away, the currency substitutes must be continuously inflated. Thus, the savings of workers must be diluted in order to always save the system from default. As long as the next generation believes that their money assets are growing, they will accept the currency and the fraud it represents. The price inflation (that history shows will always follow this process), is totally dependent on how many currency units the citizens will hold without spending them! If the world population can hold one trillion dollar debt units, and ten years later hold ten trillion without spending them, then no price inflation will show. However, even though each person thinks they have ten times more assets (and are as much more wealthy), that wealth is quickly degraded if and when such currency savings are exchanged for real goods. Again, history shows that only the spending of a small percent of such highly inflated currency holdings will quickly jump the price of things to such a level as to revalue the remaining existing currency. It then becomes equal to real world buying power, not the fiction in your savings account. This, my friends is the realm of price inflation and currency destruction! No currency has survived even a short time, once this spending process begins from the money inflation levels that exist today.


Now you have read some many views of the old dollar and gold. We will discuss these much further in other chapters. So, how do we (myself and Another) view gold?

I want to openly state that we have absolutely "NO" faith in gold! None! We do have "absolute", "unending" and "complete" faith in the judgment of our fellow humans. Because we travel this life journey as a society of like kind, our success over time depends on the ability of people to deal fairly with each other. There is nothing to gain in this life but the honest productive efforts we bestow upon each other. These are represented as the goods and services each of our special talents can produce. We also believe that no one, in this life, should be cheated out of any portion of their savings and will act to protect themselves from losses. This act of protection can and does take many forms as the "lessons of a long life" become the "tools of a families defense". For most of us, indeed, money is "the" lifelong lesson.

I believe, that in the time just ahead, most people will use their natural good judgment and leave the "world monetary system". Mostly because they will begin to lose savings from price inflation. If the history of human kind is any guide, they will return to the safety of the past. They will use the only "conservative money" the world has ever known that cannot be deflated or inflated. They will do this until the currencies are correctly revalued against gold. Gold will then become the de facto world money as currency will be used only for commerce and trade. Its value in trade closely governed by its exchange rate into gold.

To this end, we do not hold gold for any currency return. We hold it as money. No return of any kind is expected because it is not lent or invested. What is expected is a continuation of an open world market for the purchase of gold at lower paper substitute exchange rates. These values of world currencies, as expressed in gold will be governed by the "tolerance" of world savers to hold ever increasing amounts of paper currency as savings. In addition, the ability of governments to keep the market open with physical gold at lower prices are necessary for the continued use of the present currency system.

It is our current perception that the performance of both of these functions is coming to an end as the dollar currency creation process has ended. As this progresses, the value of gold will be best judged by its ability to purchase real things. Out of necessity, the failing paper market place presently called the "gold market", will price gold at ever lower values even as their ability to deliver gold is failing. This situation is not unlike the massive gold loans of years past. Using dollar "contract currency" as a proxy for gold, the world found out that the promise to pay at even $41=/- per ounce was a fraud! We shall see.


In chapter ((2)) we will build upon the workings of the gold market as it represents oil, the most strategic world commodity.
Thank You FOA and Another

___________

The Trail continues here!

Sincerely,
FOFOA


451 comments:

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Attitude_Check said...

I have a thought for review and comment by the FOFOAians. We know that LIBOR was manipulated to a loss on the banks loan book, but to net total profit in interest rate swaps. Could the COMEX be shorted to a loss but make net money based on fx dollar\gold swaps?

Anonymous said...

@Attitudecheck

FOFOAians? I'd prefer FOFOAliens^^
Because of their look from above...

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

Per this site http://www.etfchannel.com/symbol/gld/, GLD Short Interest is as follows:

Shares Short 18,596,300
Chg. from Last Month -4,640,600
Shares Outstanding 264,300,000
% of Shares Short 7.04%
Days to Cover 2.

Not a substantial amount if you ask me. And leasing?

"Is the Trust's gold ever traded, leased or loaned?
Gold held in the Trust's allocated account in bar form or credited to the Trust's unallocated account is the property of the Trust and is not traded, leased or loaned under any circumstances. "

http://www.spdrgoldshares.com/usa/faqs/#q4fa24b4edaddb

Nothing suspicious going on in GLD. This just confirms that it's one of the last known sources for size.

Anand Srivastava said...

michael3c2000:

Still no proof of God. We just don't know how these numbers came about. We just don't know much about gravity, and many other things.

In any case what we have in this table is a chicken egg problem. Is it because of design, or is it because we are in a universe/planet that fulfills the property due to which we exist. aka the weak anthropic principle.

The planet case is pretty simple, there are probably quintillions of planets in this universe, we are observing because we happened to be born in a planet which had the right conditions.

If there is only one universe then we have a case of God, but because of the physical laws we cannot see out of our universe, but can God see inside? And even if it did, is it really interested in the affairs of insignificant humans residing on an insignificant planet traveling in an insignificant galaxy.

But its pretty much possible that there are infinite no. of galaxies each having different possible values of the constants.

Or it could be some mathematical law yet unknown to us constrains many of these constants to what we observe. IMO the fundamental physical laws should arise from properties of mathematics. We will eventually deduce them, unless we destroy ourselves due to some religious fanaticism.

Unknown said...

@Knallgold
"..unallocated account is the property of the Trust and is not traded, leased or loaned under any circumstances."
Sorry to jump in, but "nothing suspicious"? Isn't unallocated per se "paper gold" ?
"An account where specific bars are not set aside and the customer has a general entitlement to the metal. This is the most convenient, cheapest and most commonly used method of holding metal. The holder is an unsecured creditor."
http://www.lbma.org.uk/pages/index.cfm?page_id=89&title=glossary_of_terms#U
Or do I get something wrong here?
btw, thanks FOFOA for your excellent blog ! (and off)


Victory said...

KnallGold,

Short interest is reported every two weeks, a lot can happen in 10 trading days. Short/Cover/Short/Cover...and as FOFOA eluded too some time ago if HSBC really, really, needed to they could just move the gold first then worry about covering later, although technically against the rules I'm sure they could get away with it if they didn't tell anyone :-)

I think it pretty ridiculous that short interest is delayed two weeks for equities. In this day and age there is no reason why it couldn't be reported real time like volume; imo its pretty obvious the exchange does it to control the direction of price movement, by exchange market makers, and keep it hidden from traders.

Nickelsaver said...

Isn't unallocated per se "paper gold" ?

My understanding is that unallocated gold is physical gold with multiple paper claims against it. It's real gold to the custodian, and paper gold to the holders of claims to it.

DP said...

"Unallocated" just means "you never know which bar is yours".

The addition of "fractionally reserved" just means "… or if there will be one for you when you ask for it".

KnallGold said...

The unallocated account in GLD is used to proceed the trading orders. It makes sense to me to have an unallocated port to make the changes in the bar list.

Of course I agree with Victory for what it could be used and things can happen fast. Did it post higher short interests before? Just curious, seeing the #'s for the first time and I'm trying to judge the total tonnage left.

2 weeks for reporting certainly is ridiculous, that's about the time frame for FreeGold to play out :-) . Actually I'd be surprised that exactly the most looked indicator GLD would give that signal...

And welcome Andreas!

Motley Fool said...

Wil Martindale

"This takes into account that all traded commodities are priced in the manner described by Another above. No real physical supply/demand dynamic, but rather through bets on voilume price movement.

I do not know if and how those markets trade, to verify such a claim, but I still contend that the current gold market will not so much be destroyed by Freegold, but rather it will be reduced to a sideshow that does not SET the price in fiat, but merely entertains bets (in fiat) on price movements, while said price is set elsewhere (eastward) in the supply/demand physical markets."

I wanted to point respond to this, but forgot to get around to it.

Yes, all markets do trade this way, but gold is unique in that it's function is not served by the additional trading, whereas the others are to some extent. If memory serves a relevant post is - http://fofoa.blogspot.com/2011/02/how-is-that-different-from-freegold.html . I am sure there are many other relevant posts, and hope others will add those.

I simply wanted to state that I (and I include FOFOA in this) do not agree with your assessment. Even if some form of market is reborn to serve say jewelers, it will be weight based and on much smaller scale.

TF

Unknown said...

Nickelsaver, DP, Knallgold, thanks for your answer.
My understanding is, that GLD is not the custodian, but the client of the unallocated gold account. Is this not correct?
@ Knallgold
As I have never had much interest in GLD plz. forgive my ignorance, but: Is there some percentage of the 790 tons or so, one could ascribe to unallocated? If the bar list represents allocated - does this imply, that the rest is unallocated? Thank you very much for your answer :)

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

TF,
Thanks, and I will look at that post.
Wil Martindale (in case I'm logged in as Roacheforque)

Motley Fool said...

...before I forget.

Shorting stocks on expectation of a hyper-inflationary collapse...what other illumination should we expect.

I suppose we should count ourselves lucky to receive such words of wisdom.

Roacheforque said...

TF,
I do remember the Peter Schiff post and just reread it.

I think this brings up one of the most misunderstood, maybe controversial, and yet hopeful aspects of Freegold: it's role in the rightful resumption in a form of meritocracy in our world. Or perhaps we should say equitability for those who feel that meritocracy is too naive or "Pollyanna" to ascribe to Freegold.

I myself have been one of the biggest proponents of that view, despite some incredulity, even criticism along those lines. And as we live and breath the essence of the current world it is easy to forget how beautiful FREEGOLD can truly be (see, there I go sounding completely childish again)..

I do believe greater price stability (not just in gold, but by extension all things) will be a result.

But I also think that perfectly, naturally occurring, extraneous circumstances will always cause sentiment to shift this way or that (as in FOFOA's much longer term pendulum) and I do susect that gamblers will still bet those shifts. And I still believe that post Freegold the "socialized" pricing of things (based on swings in group sentiment, as it affects demand) will continue, and continue to be wagered against. I don't think derivatives will cease to exist.

That is not to say that I have gone completely FREE FIAT a la VTC, as I have again been a proponent of said stability all along to a degree.

I would be happy to concede that there would be no point betting against a stable price of gold if I thought the degree of meritocracy described in "how is that different ..." was achievable through freegold alone. Perhaps we can hope, and lay that to rest.

I did enjoy re-reading it, and I thank you for the reference. I guess my explanation of how I see things, now and in the future, has had some influence on my latest post at the Roacheforque blog ... as it relates to this matter.

Happy Trail,
-R

tEON said...

@ShavedApe

"Miners have reduced costs sharply and are therefore highly leveraged even to a modest rise in gold prices from here."---my boya, John Hathaway, manager of my favorite fund TGLDX.

Some recent calls of your boya

Hathaway - Gold To Shock World With Rapid $1,000 Advance
June 13, 2013

Hathaway - Gold To Surge As Fed Pursues Radical New Policy
June 5, 2013 Gold was $1400

Hathaway: Gold Setup To Super-Surge To New All-Time Highs
November 7, 2012 - Gold was $1730 at the time

Hathaway - Gold To Hit New All-Time Highs, Despite Pullbacks
October 10, 2012 Gold was $1780 at the time

Hathaway - Gold Shorts To Panic As This Key Level is Breached
September 25, 2012 - yeah they panicked - all the way to the bank.

John Hathaway - $2,000 Gold Will Happen Very Quickly
September 15, 2012

Hathaway - This Financial System Is Now In Its Final Stages
August 20, 2012

Hathaway - We Are About To See $100+ Up Days In Gold
July 29, 2012 Gold was $1620

Hathaway Predicts Gold Will Now Move Substantially Higher
July 25, 2012 Gold was $1570


Hathaway - The Lengthy 10 Month Correction In Gold Is Over
July 6, 2012 Gold was $1600

Hathaway - Fed to Print More Money & Gold to Hit New Highs
April 20, 2012 Gold was $1640

Hathaway - Decline in Gold & the Shares Has Run its Course
January 5, 2012 Gold was $1740

Roacheforque said...

Do you really think that the Federal Reserve and the OCC have the power to stand against Citi and Bundy? Seems to me those were blind eyes for decades.

Or is the BIS actually calling the shots on these recent and increasing "investigations" into LIBOR, SHIBOR FX, etc... ?

And if the latter, the implications are quite favorable in light of recent trail turns ... toward meritocracy??

Indenture said...

tEON: How did you hyperlink your comment? Did you code that by hand or have you found a shortcut? (nice:)

Victory said...

You know Hathaway is going to be right one of these days and then what, in yo face! ;-)

Unknown said...

To all who might be interested: GLD claimed per 01/15/2014 to have 25,491,336 oz in allocated bars. This would be consistent with what they claim they have, 790 tons or so. Cheers, A.

One Bad Adder said...

It would seem DX could be warming for Another uptick. The Currency Basket looks to be softening now in tandem with $PoG.

Michael dV said...

Andreas
not sure if this is your source but this is updated daily at 5 PM EST. It shows all the GLD inventory data.
http://www.spdrgoldshares.com/assets/dynamic/GLD/GLD_US_archive_EN.csv

Knotty Pine said...

@ Indenture,

This is the shortcut I use, hope it helps.

Indenture said...

Thanks Knotty, it's the same as me cutting and pasting into the code I leave as a template in 'Notes'. I thought someone had found a plug-in where you just click a button in your browser and it saves the hyperlink and title of the current page into your clipboard already coded. A simple 'paste' and voila.

So now that I have described the plug-in can anyone create it? Any programmers write plug-ins?

tEON said...

@Indenture
Yes, I did it the old fashioned way... a plug-in, as you describe, does sound efficient!

Unknown said...

Martin Armstrong has argued the U.S. will not experience hyperinflation due to the fact that developed nations do not experience hyperinflation while peripheral nations do.

My response is what happens when the U.S. becomes the peripheral? What happens when the USD is replaced by gold and ROW switches to an alternative currency for OIL and or trade settlement. Add together the De-indutrialization of the U.S., this is not so far fetched.

Unknown said...

So sad people listen to the messenger, the messengers credentials and status rather than the message itself and reason on their own. This blog is the antithesis of the paradigm of listen to the messenger, rather it is listen to the message. In a way it leading the way towards a new paradigm slowly taking shape right before our eyes.

Franco said...

Update: Treasury TIC data for November was published today. After a stretch of five months being net Treasury bond sellers, foreign central banks were net buyers in November 2013 by $10B. Does this mean that the ROW has abandoned the withdrawal of structural support of the US dollar, OR...is this just noise? We'll have to wait to see if this is the beginning of a new trend or not.

KnallGold said...

The math fits with GLD, although I don't know how a short is handled!?

Just noticed there aren't any FG timing predictions running here, maybe then FG IS imminent? Just kidding, it is immanent, but not imminent. But some day, it will be both ;-) Right now the markets seem to hang in the air and very undecided, kudos to those risking forecasts...

Unknown said...

Edwardo,

I agree that Mr. Armstrong misses the point.

Thanks for posting the comments about the pensions perspective above. I was thinking of that piece of the puzzle the other day. Either the FED or Pensions have to soak up TBills other seem to not want anymore. That is a very interesting take...

Edwardo said...

Martin Armstrong, firmly tied to his own idiosyncratic speculations as to what the future will hold, manages to miss the implications of what has already taken place and is ongoing. To wit: The marginalization of the dollar and its debt derivatives- which November's tic data does little, if anything to mitigate- is living breathing evidence that the premise upon which Mr. Armstrong rests his case is, at best, shaky, and, at worst, nearly entirely absent. So, yes, the measly 10 billion is likely noise. Coincidentally, this happens to be roughly the amount by which the The Fed has reduced QE. Which brings me to the following:

Folks, on balance, I am, by no means, an adherent of the world view of Karl Denninger, but he just made a post on his site regarding the taper that I think is worth considering. His thesis is that the taper is designed to address what he imagines The Fed perceives as (the most) clear and present danger, namely:

The pension funds and insurance companies that are the backbone of this market are probably doing plenty of screaming, and with good cause. If this keeps up their cash flow will collapse; they can't absorb it. Further, Bernanke and the rest of the Fed know that factually the damage they took on by buying those instruments during QE cannot be gotten rid of either; it has to roll off, because if you sell that bond you're going to take a capital loss and crystallize the entire loss right now instead of spreading it out! This is what is forcing the end of QE. It is also what is going to force The Fed to pull liquidity and let the short end come up. They don't have a choice but they will never breathe a word of this, because to confirm it would be to give a clean opportunity to gang-bang all those bondholders by Hedge Funds and others who can play in the derivatives market, and that could (read: probably would) set off a crisis far worse than 2008. That's my read on it. We'll see, over the next months, if I'm right.

Yes, Karl, we will.

Broadly speaking, I think what is most interesting about this line of thought is that it makes it very clear, at least to those of us who understand QE as ultimately being about serving Uncle Sugar, that The Fed has too many plates in the air that they must successfully juggle in order to avoid the proverbial black hole. If The Fed is in the business, at least for the time being, of saving the parties KD has in mind, they will set off another substantial move higher in rates across the curve. This we know, because the mere talk of tapering, let alone following through on that threat, very quickly achieved a much higher rate structure as it would, even if the world were, somehow, miraculously, not increasingly shunning U.S. Sovereign Debt. Suffice it to say that, if The Fed is headed down the road Mr. Denninger thinks they are, this will cause the full on manifestation of an intractable sovereign debt crisis here on our shores sooner rather than later. The Fed is, in short, picking their poison, and may, if they are making the choice that KD speculates, hastening the end of the $IMFS rather than prolonging it.

Archer said...

For the TA inclined 'tards who are apt to cheer mindlessly every time the doomed paper gold market spasms a bit higher (and takes equally doomed mining outfits with it) I feel duty bound to point out that today's higher than Tuesday's high in shares is already running out of steam basis the the MACD histogram which is sporting a negative divergence.

t au said...

Bernanke, Draghi, Carney and Xiaochuan all meet regularly in secret, they all know what is needed and what will provide an opportunity for it to happen.

Oh yea, and they all meet at the Trilateral Commission’s tree-house.

Moron.

Archer said...

Sigh. Yes, the BIS is the central bank to the central banks. What certain, medically challenged, folks do with that information is something else entirely.

Roacheforque said...

Eduardo,
Spot on as far as at least acknowledging the feasibility of Denninger's supposition.

But would the pension funds and (re)insurers alone be systemically important enough to salvage at the risk of of a dollar collapse (as you say sovereign debt crisis).

Or wouldn't the ESF or Treasury .... or ultimately BIS, have something to say about that?

If, in the end, the protocols are not in place to pick said poison from a position of systemic supremacy, i.e. who is the big cheeses calling the shots ...

Then indeed we can understand that the disorderly state of affairs of an independent, and not globally interdependant (and submissive) Fed may indeed tip over the punch bowl ...

Ken_C said...

"Bernanke, Draghi, Carney and Xiaochuan all meet regularly in secret, they all know what is needed and what will provide an opportunity for it to happen.

Oh yea, and they all meet at the Trilateral Commission’s tree-house.

Moron."


My thoughts were: ..If it is a secret then how do you know?

Franco said...

Denninger's head almost exploded when the Fed surprised almost (*almost*) everybody with the non-taper announcement. Now he's at it again. We shall see.

Edwardo said...

Roacheforque asked,

But would the pension funds and (re)insurers alone be systemically important enough to salvage at the risk of of a dollar collapse (as you say sovereign debt crisis).

Because, if you stop to ponder it, this is ultimately a commercial bank saving gambit as they hold the other side of that crap.

Denninger's head will, as per Franco's comment, explode ultimately, because, even as The Fed sees its primary function as the ultimate backstop to its member commercial banks, they are, when all is said and done, at the beck and call of Uncle Sugar who can, if they want to, shut them down. And, so, The Fed will, at some point, be faced with an choice, and they will choose to pay for Uncle Sam to keep on keepin' on until the rest of the world pulls the plug.

Flounder said...

Another troll calling the bottom. But in this game of limbo, the bar keeps dropping until there is no one left on the dance floor.

Unknown said...

Ahh Flounder, if you but had eyes on both sides of your face, you would see that the game of limbo is rigged to force the "little people" to bend over backward, gesticulating in muted protest as they attempt in vain to slip beneath the ever descending horizontal barrier to entry into the inner circle of low-dancing "con"-testants.

One might wonder if that bar be a bar of gold... but the game is not played that way in the meeting halls of the little people!

Archer said...

Another day another conspiriturd, er tard, flushed. I love the smell of a clean blog in the morning.

MatrixSentry said...

Smells like...victory.

Jeff said...

The fix is not in.

http://www.reuters.com/article/2014/01/17/deutsche-gold-fix-idUSL5N0KR19G20140117

KnallGold said...

Gold: EUR 871.22 per fine oz., down she went on SSD.

http://www.ecb.europa.eu/press/pr/wfs/2014/html/fs140108.en.html

But London says first signs of shortage:

"..“There is a shortage of big bars, especially good-delivery 400-ounce bars,” Bernard Dahdah at Natixis said. “One part of the problem is that large quantities of these bars that have come from ETFs, have now been moved to be re-refined into three-nines bars of smaller sizes and are therefore no longer available to the London market.”
- See more at: http://www.fastmarkets.com/gold-news/69679-0-en#sthash.B4s9hN2j.dpuf

Gold savers party back to the Bat Cave ...

Archer said...

There's a bearish setup in the junior mining share index right now. It's called a three gap play. Most of the gains on the recent move up are apt to be wiped out.

Polly Metallic said...

Grumps,

Who really cares whether the dying paper gold market has a few ups as well as downs before the wheels fall off the bus? Yes, there will always be a number of traders who play the paper trading arena when values become historically oversold. Does that mean the paper gold market will thrive for any extended period of time? No. Is it likely that some weekend the markets close and paper traders are left on the sidelines with their paper claims on gold that can not be delivered? Yes. Why do you want to play this game? If you think you can benefit from it then go right ahead and play with the traders. No one here is stopping you. Our sights are set much higher. Your unwillingness to grasp this and hang out somewhere else with people of like mind to yourself leaves you looking like a mentally disturbed individual. I guess that is the nature of trolls, but I will never really understand the apeal of trolling.

Archer said...

+1 Polly.

t au said...

+2 Polly

Again, waiting for that fresh smell of victory.

KnallGold said...

Archer, its called a grumps trap. Row harder Grumps, row harder! 1300 is close!

GLD tonnage? Hmmm. I'm still thinking on the workings of a short sale in GLD, does physical leave the fund? If not, it would be backed. But if the short is then covered with a profit, where would the money come from? Is it then actually a paper trade on the LBMA?

With shorting, you cannot force metal to leave GLD or can you?


Victory said...

wait let me put on my 'freegold' glasses so I can try and see this clearly...hmmm!

deutsche bank exits gold price fixing

Victory said...

..funny when did the Rothschilds exit 2004? What's that Doctore FOFOA said, BIG money owns the bus company and knows they aren't sending any more buses!

KnallGold said...

...And the $ runs in tandem with $Gold, again...hmmm!

Indenture said...

Deutsche Bank explains why we hoard gold

One Bad Adder said...

Knall: -
Whilst the weekly trend is indicating Dollar strength - and softer $PoG (refer previous post) this Daily Chart is showing several divergences within the timeframe.
$PoG is STILL an effective Systemic credence indicator ...and they (it would appear) have it well under control.
With the thing at (or about) production costs, the next $PoG rout "should be" the one we've been awaiting methinks.
(maybe the NEXT Full-moon ;-)

Indenture said...

Refresher: Moneyness 2: Money is Credit

Polly Metallic said...

Grumps,

What you fail to understand is we here at this blog are not trying to accumulate a pile of "money" aka fiat currency. Every fiat currency reaches the end of it's timeline and ends up in the dust bins of history. We here are accumulating a weath asset that will survive beyond the wreckage of currency valuations. We can't accumulate gold if we spend all our excess cash gambling on mining stocks, lol! I have gone that route in the past, playing the timing game. I had a few ten baggers or better and I had plenty that were ten or twenty baggers in reverse. Some went bankrupt as I expect many more will in the future. Even some of the more viable concerns issued more stock and devalued shareholder equity, or they needed to resort to additional financing which also cratered their share price. Bah. I don't need that stress. I would rather patiently hold gold.

FOA once wrote:


"Anyone that tries to time this market with paper gold investments (futures, mine stocks, mine options, gold certificates, etc.) is making a play for a repeat of the 1970s markets. Or even a quick turn around of the current trend. Perhaps those are good bets.

But, what if, in the late 1990s we are currently beginning a "controlled implosion" of the dollar? A type of slow dollar debt destruction, that breaks every market that uses the dollar for settlement ? A kind of dollar squeeze that changes the psychology of foreign nationals that use it for trade. An attitude like this one from Asia::

"This dollar thing is killing us and it doesn't want to go away. Their (IMF) solution is to lend us more of the same! After all these years, it's getting to the point where we wouldn't lose that much if we just switched our trade to something else. We'll pay the dollar debt when and
if we can!"

Do you get my drift? This sort of "implosion" is a viable direction and would impact the gold market in a far different way than in the 70s. The dollar wouldn't necessarily crash quickly, just slowly be defaulted on in a transition from it's use. In this circumstance, buyers could create a major short squeeze/run in the paper gold market that could drive it's price so high, so fast, that the exchanges close from immediate bankruptcy (without any gold delivery).
OR, the world does just what I outlined above. The players on the buy side slowly back away from the dollar gold market (the entire present paper market as we know it) and allow it to short itself into bankruptcy in an effort to protect the dollar. Let's face it, the London market could "burn" as Another puts it, in both of these fashions."

So there you have it. The paper gold market could rise very fast like it did from $1500-1900 and then implode next time, or support could fall away and the price of paper gold crash (which we view as the more likely scenario). Either way the result is the same: paper gold gamblers lose and their paper bets turn to ashes in their hands.

Dante_Eu said...

Dear altruist, you know who you are, why don't you start your own blog and save many of lost souls out there? Instead of few here?!

I honestly think that you are paid, even mentally disturbed would stop at this point.

Ken_C said...

"I honestly think that you are paid, even mentally disturbed would stop at this point. "

I wonder how one gets a job as a paid troll. I don't think I have ever seen it advertised.

Just curious.

t au said...

Gee, it that was all it was, I'd consider paying em to just shut the hell up.

Dr. Boer said...

Grps (a) is prodiguous, (b) an easy writer, (c) a good writer, (d) versatile and knowledgeable, (e) persevering, and undoubtedly endowed with many more excellent qualities. The intriguing question is WHAT'S BEHIND HIS ZEAL? Money--quite possible. Personality dysfunction (likes to be called "mud", likes attention regardless the quality of that attention)? A combination of the two? Other possibilities (just for fun): Grps is the alter ego of Fofoa, the so-called Fofoa at midnight.

byiamBYoung said...

Phil_O_Dendron,

"I wonder how one gets a job as a paid troll."

I bet it has something to do with endlessly sending copies of the same resume, pasted together one word at a time like a ransom note.

Cheers

Anonymous said...

Just in case you missed it:
http://www.ingoldwetrust.ch/the-big-reset-part-1

Franco said...

You have to hand it to LaBastard. As far as being an internet troll is concerned, he is the best one I've ever seen. I mean, come on, his posts get deleted every night, and he keeps coming back. LaBastard reminds me of this passage from the book "World War Z":

"I once watched a Zed Head (zombie) go after something, probably a golden mole, in the Namib Desert. The mole had burrowed deep in the slope of a dune. As the ghoul tried to go after it, the sand kept pouring down and filling the hole. The ghoul didn't stop, didn't react in any way, it just kept going. I watched it for five days, the fuzzy image of this G digging, and digging, and digging, then suddenly one morning just stopping, getting up, and shuffling away as if nothing had happened. It must have lost the scent. Good on the mole"

Maybe one day LaBastard will shuffle out of this blog as if nothing had happened.

Aaron said...

Not having much to do this evening I decided to follow FOFOA’s link at the end of this post and it inspired me to visit the old USAGOLD Hall of Fame. The Hall of Fame was a special place that USAGOLD posters could nominate the contributions of one another to become part of an archive that they described as “a permanent hall of record, established so that anyone searching for this sort of information can find it more easily among the wealth of archived contributions.”.

Strolling through the Hall of Fame I stumbled upon a comment from FOA about the gold confiscation of 1933 that that changed my view of currency forever when I initially read it back in 2009. It was the idea that US dollars held across the globe after 1933 fell into two different "threat buckets" if you will that both needed to be managed. The first “threat bucket” as I call it was the bucket of dollars circulating inside the US that had a claim on all goods and services excluding gold. You could buy goods and you could buy services, but you couldn’t buy gold so these domestic dollars weren’t much of a threat to the Treasury’s precious pile of assets. The second “threat bucket” however, was the bucket of dollars outside of the US and those US dollars had a claim on Treasury gold.

Here’s the very first sentence in the Wiki entry for Triffin’s Dilemma:

The Triffin dilemma or paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives when a national currency also serves as a world reserve currency.

And here is a snippet from FOA in that Hall of Fame post:


FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview

ORO (01/06/00; 15:05:40MDT - Msg ID:22411)

Your words:
-----------------For years, I could not understand how the dollar could stabilize in 1980. It was a complete mystery to me. Austrian monetary theory, which I studied with the intense interest of youth, alongside Monetarist theory, was giving no clue as to how the dollar could be stable at all once the arbitrage to gold through redeemability was closed to everyone - CBs included.---------------------

ORO,

It was amazing wasn't it? During that time, anyone that had any grasp of money theory just knew that eventual world wide dollar inflation was coming. Yet, right after the Mexico default crisis, the whole system came back to life. Never before in history had a country dropped it's gold backing, watched it's currency be devalued against gold ($800+) and then returned it to normal use as if nothing had happened.

But something did happen and it sent the world onto a different trail. Thinkers, world leaders, common workers, and investors had just spent the previous ten years learning the true worth of oil! And they learned how it had two values.

Consider:

Duality of value is a funny thing.

If you have a gun in hand pointed at me and I have an identical gun pointed at you, their (the guns) worth is the same. Yet, if I am wearing a bullet-proof vest, my identical gun has more worth. Not much, just a little more. Strategic location? You pointed out how in 1933 dollars outside the US were worth their weight in gold. Yet, inside the US they were not. The same dollar had a dual value dependent on location.

Indenture said...

"They don’t want 12 castles, never did. And they certainly don’t need 12 castles. So why did they buy, furnish and perfect 12 castles? When did the marginal utility of castles drop off for them? After 5 maybe? So why did they keep buying so many castles? Couldn’t they have just bought gold instead? Why do you think they didn’t buy gold instead of more castles after they already had 5 and the marginal utility of more castles dropped?

Answer that question because it leads then to what you want to talk about… "a Giant that has 100mil piling up on its doorstep every day.""

Indenture said...

"To understand gold we must understand money in its purest form; apart from its manmade convoluted function of being something you save. Money in its purest form is a mental association of values in trade; a concept in memory not a real item. In proper vernacular; a 1930s style US gold coin was stamped in the act of applying the money concept to a real piece of tradable wealth. Not the best way to use gold, considering our human nature." 'Moneyness'

Aaron said...

cont.

Oil, gold, minerals and ones bank account can all have dual values based on the strategic location of these items. Another form of duality exists for most things. Gold has a jewellery value and a monetary value. It's price is reflected in the degree of total demand generated from each value. In fact everything we own has our personal wealth value and a "monetary" worth. After 1980, oil also reflected this different duality.

byiamBYoung said...

I gained a great deal of insight by reading and fully understanding the following from Focal point Gold:

FOFOA: "In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do." This type of focal point later was named after Schelling.

Consider a simple example: two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square. Of course, the red square is not in a sense a better square; they could win by both choosing any square. And it is the "right" square to select only if a player can be sure that the other player has selected it; but by hypothesis neither can. It is the most salient, the most notable square, though, and lacking any other one most people will choose it, and this will in fact (often) work.

Schelling himself illustrated this concept with the following problem: Tomorrow you have to meet a stranger in NYC. Where and when do you meet them? This is a Coordination game, where any place in time in the city could be an equilibrium solution. Schelling asked a group of students this question, and found the most common answer was "noon at (the information booth at) Grand Central Station." There is nothing that makes "Grand Central Station" a location with a higher payoff (you could just as easily meet someone at a bar, or the public library reading room), but its tradition as a meeting place raises its salience, and therefore makes it a natural "focal point."

[Salience: the state or quality of an item that stands out relative to neighboring items.]

There are two simple, but seemingly, apparently impossible-to-comprehend concepts. The first concept is why money not only can be split into separate units for separate roles, one as the store of value and the other to be used as a medium of exchange and unit of account, but why it absolutely must and WILL split at this point in the long evolution of the money concept. This means no fixed gold standard, or any system that attempts to combine these units/roles into one, making easy money "less easy" and hard money "less hard." And by "must" I do not mean that we must do this, I mean that it is happening today whether we recognize it or not.

And the second concept, once the first is understood, is how and why gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold. People often ask why I don't mention silver. They assume that when I say gold I really must mean gold and silver, or precious metals. So let me be clear. When I say gold, I mean gold and only gold."

Me again: For me, a powerful argument pointing to gold as the monetary focal point is that it has been chosen for this role, over and over throughout history, and is the choice of giants and central banks even today.

Edwardo said...

To augment byiamByoung's point about gold functioning as the monetary focal point over and throughout history, it's crucial to keep in mind that physical Gold has never ceased to function as the monetary focal point despite the preposterous monetary and financial episode that has ensued in the wake of the collapse of Bretton Woods some forty odd years ago.

Now try not to guffaw too much, but it strikes me that it is not at all unlike The Wizard of Oz, in which Dorothy never actually leaves Kansas. She simply falls into something like a trauma induced delerium that produces some powerful archetypes and vivid symbols, not the least of which is the unbroken and hallowed path known as The Yellow Brick Road.

Michael dV said...

One of the 'indicators some of feel compelled to follow if the remaining inventory in GLD.
In December od 2012 Fofoa stated that the 'window' was open. We expected the price of gold to have no support (meaning the price of paper gold) and we should see it fall. I'm not sure exactly when but early in the year we noted the GLD inventory was falling ...fast...in 2013 it lost over 550 tons about 40%. Some of us we called 'potwatchers as we obsessively watched that level. The thought being, if that is all the physical gold left in the marketplace, we could use it as a guide for a possible reset. If there is no physical gold then there can be no paper (derivative) gold market.
December was a brisk month for loss of inventory. Over the past year there were very few reversals of inventory. Everyday was down or flat except for a handful. The largest 'up' day was just over 6 tons and there were only 2 of these.
Today the fund gained 7+ tons....what does it mean. I suspect nothing. My guess is that soon it will resume it downward drift. Maybe it will even pickup as China celebrates the lunar new year.
If it does continue to build....well that will be a hot topic I suspect. What could change that allows the system to increase its stores?
Remember, loss of physical weakens the system, purchases of paper strengthens it. Could there be a source of physical we don't know about? Could the previous supporters be reconsidering their support? Does 'Black gold (or whatever the hidden treasures of the Philippines are called) exist? Did someone find my stash?
stay tuned....

Zebedee said...

Professor Antal E. Fekete and gold backwardation.

http://professorfekete.com/articles/AEFReminiscenses1.pdf

"Yet such a day that the dollar won't fetch one grain of gold is going to dawn. And you won't have to wait for it till doomsday. It is around the corner.....................I continue to sound the alarm that the present insane gold policy of our political and economic leadership shall land us in the black-hole of permanent gold backwardation, with a ticket to the next Dark Age of Western civilization."

Anand Srivastava said...

Deutsche bank withdrawal seems important. What if the rest also withdraw?

I think it will cause the pricing to diverge between regions. With China having higher pricing due to mostly physical. While west will have lower price due to mostly paper.

Jeff said...

With DB out of the gold fix, consider the remaining players:

HSBC - a Chinese/UK based bank
Barclays - UK based bank
Scotia Mocatta- Canadian owned with historical ties to UK
Societe Generale - French bank

The London fix is really starting to live up to its' name, with one of four participants which would be considered to be Continental.

Jeff said...

Anand,

If you were establishing a physical only market in Euros, would you want London seeing your cards? Everyone has to choose a side.

Indenture said...

THE WONDERFUL WIZARD OF OZ:
A Monetary Reformer’s Brief Symbol Glossary

Edwardo said...

Here is some recent GLD inventory history, FWIW.

During the paper gold debacle of 2013, the first meaningful low to generate a bounce (at least one that lasted more than a few trading days) came at the end of June when paper gold briefly plumbed the depths at just below $1200 dollars an ounce.

During the ensuing bounce, physical continued to be drained from GLD until August 8th. On August 9th, a thirteen day trading period ensued wherein ten tons of physical returned to the fund. On August 23rd the largest single day addition clocked in at 6.40 tons. The bounce in gold ended on August 27th and, so to, did the bounce higher in the physical inventory of GLD.

The present bounce in paper gold began on the 19th of December. Some may see December 31st, where, for example, basis GLD, the fund fell a statistically insignificant .04 tenth of a point below the low of the 19th as the low, but from a momentum standpoint, it's clearly the 19th. The following day GLD added 5.60 tons of physical. Yesterday on day nineteen of the rally, GLD added 7.50 tons.

With respect to the present "bounce", there are a variety of ways in which to compare this move to the last. Using GDXJ as a proxy, and employing indicators such as the MACD histogram, the July/August move was more impressive in its first month, moving higher and with more momentum than the present one. Overall volume has, however, picked up measurably on this bounce over the last one.

From a chartist's perspective, the most recent move is under girded by a more technically solid rounded bottom. It looks to have more room to run higher looking at the weekly stochastic. The last move failed at the weekly upper Bollinger Band, and this move will likely test the upper BB too.

Using the paper gold price as a proxy, this move is just plain weak. After nineteen days of rally, it's moved a measly 6%. It is full of overlaps which is a hallmark of corrective moves destined to fail. Price is now sitting right under a trend line that goes back to the fall of 2012. Lower prices beckon once the present twitching (in the manner of a corpse) , courtesy of the usual compulsive paper playing suspects, plays itself out.

KnallGold said...

When Deutsche leaves the fix, would there be some accompanying book squaring going on like closing shorts? And if the rest will follow!? Is that the reason for the latest modest upsurge in POG? Or simply speculation on a higher POG because the fix ends?

We'll see what the year end official Gold holdings will tell, but renewed support makes no sense. The "squeeze" will end like always...

Flounder said...

From the Trail Guide

"Western society and Western influenced investors cannot grasp gold's value because they mentally must denominate it into currency first. To do this they turn to the "market place" as the undisputed tester of values. But....our market place uses a currency system that is entering the end of it's timeline and therefore can no longer measure "things" on a simple supply and demand value basis."

Lisa said...

Sometimes weekend comments are slow, so here is something you might want to read.

Michael Kosares, of USAGOLD, is writing a 5 part series on gold’s performance under the four most commonly predicted worst-case economic scenarios.

You can read the first part, on how gold would perform in a deflationary environment here .

Michael Kosares has been around for a long time. Here is FOA's comment about MK early on the Trail:

"And lastly, I wish to thank Mr. Michael Kosares for creating this fine venue. Displaying all of the creative, professional talents of the Centennial group of people, this entire site is a testimony to their forward thinking ability which is so lacking in most precious metals companies...."

While reading the article, I found it interesting that there were certain comments made by MK, which triggered a FOFOAian thought in my mind, including

1. whether Central Bankers have learned from the past
2. whether gold will be confiscated by the US government
3. whether the US will allow a deflation to occur
4. the concept of deflation as to gold, hyperinflation as to all other things

What a tribute to the education we receive here from FOFOA, to be able to read and understand and analyze.

Enjoy

Attitude_Check said...

Is the German investigation into Gold price fixing "fixing" an "official" plan to end the LBMA paper gold trade and force a true physical spot price mechanism?

http://www.bloomberg.com/news/2014-01-17/hsbc-says-it-suspended-two-london-foreign-exchange-traders-1-.html
http://www.reuters.com/article/2014/01/17/deutsche-gold-fix-idUSL5N0KR19G20140117
http://www.ft.com/intl/cms/s/0/b386aa16-6358-11e3-886f-00144feabdc0.html?siteedition=uk
http://www.ft.com/intl/cms/s/0/02f5a19c-7f97-11e3-b6a7-00144feabdc0.html

So Deutsche Bank is trying to sell it's seat, and speculation is the rest of the banks are as well given that the investigation is finding illegal behavior? What bank would want to buy a seat? Is this a way the end the LBMA paper gold trade, which will result in a shift to Shanghai, to set the world-wide gold price - which is an actual physical market? The window may be getting ready to close, for all that haven't acquired physical gold.

What say the rest of you FOFOAians?

Indenture said...

Sprott: "Manipulation Of Gold By Central Banks Cannot Continue In 2014"


The first six comments are worth the read. "Once again FOFOA is prescient in how this is playing out --"

Anonymous said...

Michael dV said...
“If there is no physical gold then there can be no paper (derivative) gold market.”

I think a new paper market will emerge from the ashes of the present one with a key difference. It will be the physical flow of gold that dominates the paper price not the other way around as it is now. Paper will just be a medium of exchange. The notion that it can be ‘also’ be a SoV at a sufficient interest rate will be a thing of the past: at least for a generation anyway.

Those that want to be paid in ‘real’ terms will hedge accordingly with bets placed on the physical price of gold relative to paper. Thus a monetary spectrum between the hard and soft money camps will be formed largely based on duration risk. Speaking of which, brushing up on real bills might do us gold bugs some good. The thing is that we haven’t been living in a real market based capitalist economy for generations. So our understanding of how such a system works is hard to get our minds around right now.

The key relationship I see is physical gold becoming a proxy for energy; the king of all consumables. All other things of value will find their relative mean value to gold in absolute terms via their holistic energy use; which goes far beyond just the diesel in mining trucks and the natural gas used to fire the smelter.

I remember seeing a study that showed that a car takes more energy to produce than it burns in its lifetime.

ein anderer said...

Very strange explanatory statement of the Deutsche why they leave the fixing: "We’ll step out of commodity business. We’ll stick only to derivatives and to the gold and silver business.«
So gold (and silver) is no commodity business anymore for them?

The story was part of a big p1 article of the financial section of the Frankfurter Allgemeine Zeitung, covering »new investigations shocking the banks«.

P2: A big chart speculating about a forthcoming »bank crash« because of similarities between Dow Jones 1928-1929 and 2012-2014 …

Michael dV said...

Did some spray the room with Fabreeze™? It smells like fresh forrest here now. Positively refreshing!

tEON said...

Physical Gold Shortage Goes Mainstream

t au said...

@ Indenture

Very nice article on the Wizard of Oz.


Mark Hanna, such a man at the time, has been suggested as the real life model for the Wizard. He said “There are two things that are important in politics. The first is money and I can’t remember the second”.

Pretty well sums up the current day also.

Ken_C said...

tEON -

I watched the video on Zerohedge about Physical Gold Goes Mainstream. This guy Knippa says to get physical gold not ETF or other paper. All well and good but then he goes on to talk about he prefers to own gold in Yen not dollars. This sure sounds like a paper trade to me. If I have dollars and want gold what is the difference if I buy gold with the dollars versus buy Yen with dollars and then buy gold with Yen?

Sounds to be like he is advocating some sort of paper trade.

Sam said...

@Phil

One of the best things this blog has etched into my brain is the money concept. We often talk about paper and physical gold but that's just one of so many circumstances where we have all been conditioned to accept credit as equal to the real thing.

Edwardo said...

Knippa's a western centric trader, (he's focused on The Comex) who, ultimately, thinks like one-here I paraphrase- "It's (futures) saying the actual metal is worth more than the deferred month contract."

-An Anonymous figure walks Mr.Knippa over to a quiet area, looks left, then right, then begins to speak in a lowered voice.

"Physical is always worth more than any paper claim, but that condition hasn't, um, manifested, in a while. I assure that when it does, the paper proxy will represent only its intrinsic value as the stuff of confetti. I highly suggest you develop a yen for physical."

Marco Polo said...

http://m.youtube.com/watch?v=V3p5fgjc8WI&desktop_uri=%2Fwatch%3Fv%3DV3p5fgjc8WI

Roacheforque said...

Spaul67,
I agree with your assessment as to what you describe being one of the possibilities as to how a future "gold" derivatives market can exist post Freegold, (i.e. like I mentioned b4, betting the spread between fiat and the more stable physical gold).

It is interesting (per the earlier TF discussion) how FOFOA uses the quote from Another about "don't like this system, won't like the next." as a supporting argument (in "how is that different?") for a stable gold price. Whereas I see it as support for the counter argument.

That is to say that today gamblers like the present system, and savers don't. But with a stable price of gold (and all the ramifications therein to which Motley ascribes) savers would like the new system and gamblers wouldn't.

So that is a counter argument to Another's presumption in my opinion. I say that Another is correct, gamblers will still like the new system and savers will still be at a disadvantage. They will get a one-time reward / revaluation, but debt will continue to grow as a means of exchange and unit of account. So much of it will have been redefined by gold, it can resume growth at a logical pace, in keeping with real factors like CPI and GDP (not imaginary, but anchored and real).

InowB4,
I have not decided yet if Koos Jansen really "gets it" but his guest poster 24karat seems to be an A/FOA/FOFOA acolyte,
As for the carefully planned, homogenously orchestrated "SDR Transition" ....uh...I don't think so. It's just one of manay competing theories for the definition of the present and possible future reality.


Dante_Eu said...

James Turk, one of the talking heads on KWN, now introduces Bitcoin storage:

2014-01-16, by DayTradeShow: Surprise? Now, James Turk! Who's Next?

"A spin-off business that offers a cold storage solution for bitcoins."

Kitco, the hardest site of the hard money crowd, goes Bitcoin:

2014-01-01, by silverfuturist: Kitco has Bitcoin prices???

Oh man, hard money socialists becoming Bitcoin socialists. Can it get any better than this? :-)

tEON said...

@Edwardo

Knippa's a western centric trader, (he's focused on The Comex) who, ultimately, thinks like one-here I paraphrase- "It's (futures) saying the actual metal is worth more than the deferred month contract."

What I read from the Physical Gold Shortage Goes Mainstream BNN video was that while this Comex trader was stating much of what we already believe - I again began to question how it might play out. In my eyes he was denouncing paper Gold as if he just looked at Jesse's Cafe Americain charts HERE and had an epiphany about the 112-to-1 backing.
So if more of this information goes mainstream - it should, continue to, decrease the paper price. No? - Even if it is only the Comex being referred to. Reading between the lines he was denouncing paper gold and, essentially, extolling physical - when pushed he stated; "I would be an accumulator of Gold... I don't see how you can't be." Whether he buys with USD or Yen is less material to his stance, IMO.
So, did you, also, see that as, yet, another 'nail in the coffin' of the paper price of Gold? Traders aren't simply acting upon some of the factors of their disinterest in paper Gold - they (well, this guy) are openly admitting it in interviews. (recall BNN was the financial agency up here in Canada that GATA cited HERE, with some inside information, of NOT being allowed to address 'Gold' or was it just 'GATA' at all on their Network). Personally, I can verify that to some degree. An old girlfriend of mine married a chap who is on BNN every Tuesday. I had chatted with him about Gold and he asked me to call in with a question about Gold when he was on-air. This was about 1.5 years ago. It didn't go well at all - I was cut short and then hung-up on by the BNN operator. LOL

I'm curious as to your opinion - not whether the guy is on the correct trail/path. But how, if others were thinking along the same lines as he was, that it would be another negative in regards to distancing them from the paper market. It seems so much of the market is HST that it's hard to know how much traders impact presently...

Cheers,

Agent98! said...

A little something putin Pravda:

http://english.pravda.ru/business/finance/07-01-2014/126559-gold-0/

"Gold will break below $960 – it’s in the script
07.01.2014

As gold broke below the psychologically important level of $1,200 an ounce late in December of 2014, the mainstream financial media burst with headlines like this one from Marketwatch, "Gold's Safe-Haven Role is Over". The Noble prize winning economist from The NY Times, Paul Krugman, penned a wicked missive on the 'barbarous relic' by invoking Keynes and the absurdity of miners going to "great lengths to dig cash out of the ground, even though unlimited amounts of cash could be created at essentially no cost with the printing press..."

What's an esotericist?

Anonymous said...

@Roacheforque

With gold serving as ‘safe’ SoV though the state will lose a key mechanism of extracting net production; what some have called financial repression. One scenario is for the state to nationalize the mines, and then use the difference in production cost vs. monetary value as a means of ‘taxing’ the net production of savers. Thus I can also see a future in which gold becomes demonetized post freegold just like demonetization of debt will usher in freegold. They are just two sides of the same coin.

That is my fear in what Another meant by “if you don’t like the current system you won’t like the next one either”. Both systems (debt based or gold based), are just a means of controlling the flow of net production to those in power; the primary purpose of which is to keep them in power regardless of the political system in place. If you control the money and taxing power you basically have net producers in trap regardless of the monetary paradigm.

Reminds me of the basic plot theme of the Matrix.

About the only net producers that can benefit from this are those holding physical gold just before debt demonetizes. Not unlike how in the grander scheme of things Neo’s little band selected survivors are intended to restart the next cycle. Anomalies that naturally accumlate in the Matrix require a periodic reboot of the Matrix in order for those in power to stay in power.

KnallGold said...

"..The Fed controls the gold price, Rickards says, "by using various price-depression techniques which are quite simple to execute including physical gold sales, paper gold sales, leasing, unallocated gold -- there's a whole of bunch of techniques that they use. "

Physical Gold sales? Is there any proof or sign of that? Without the treasury which owns it, not possible.

At least on the German channels the manipulation issue is tipping into mainstream. Setting the groundwork to explain the very crazy market moves ahead and the need for reform?

We are witnessing the end of the Dollar Gold Pool, that's for sure now!

Indenture said...

If you own shares of a mining company you might want to read this.

Gold Mining in Freegold

MatthAu said...

@spaul67,

what's the difference between "based" and "backed"?

If you are a producer of apples, and I come to purchase a bushel, and you want more fiat than I expect to pay you, there are a few scenarios;

1- you are a gouger, in which case I will go to another mechant.
2-bad year for apple harvest, in which case I should know, or will find out when the next merchant has the same price

3-monetary price inflation, if done at a small enough rate, i'll barely notice. BUT! if i notice, and i'm uncomfortable.... I can always REFERENCE the price of gold. If I see that the price of gold has increased in my currency, I will know that my currency is weak vs gold, and merchants will demand more for their soft items to turn them into hard ones!

i think Another was talking about most people out there.... who work, and pay, and eat, and pay, and work....and never save.

While I can see many benefits on society as a whole because of freegold (less malinvesment) people will still be cheated, taken advantage of, etc... but hopefully those will be "investors" not "savers"

Roacheforque said...

spaul67,
I do believe Sir, you have made my case. And as we watch the silly game of 25 "dollar" peaks and valleys, the fools and their "gold" are parted, some paper, some metal ...

I only await the decline in paper to the point of incredulity, that fickle moment when gold "sellers" begin to think, "Why should I sell?" but can still be cajoled to do so by the Roache ...

ein anderer said...

»Ich glaube, wir erleben, dass die Leute anfangen, physische Auslieferung zu präferieren und sie zahlen ein Aufgeld, um das zu erreichen.«

»I believe we are witnessing now that [ETF-] people start to prefer the physical delivery. To manage this they pay a premium.«

Source:
Goldreporter

tcelfer said...

OK -- So I don't know if any of you will enjoy this, as I clearly do, but I keep seeing this commercial on TV and every time the guy says "What if you didn't know that as the price of gold goes up..." And then you see that Prospector in the window, oogling the ladies jewelry -- it gets me every time. I love the way they portray a 'gold bug' in that commercial, hah. I hope it brings some of you a smile as well. The whole commercial is short (30 seconds) but the part I'm talking about starts around :12 and the part I really enjoy is :15-16.

Farmers, the more you know

Cheers folks. May this year be full of precipitation and may we all stay dry with our golden umbrellas.
-tc

gull_mann said...

From my time trying to catch up on old articles, I really haven't come across an answer to .9999 gold vs. old stuff that is .90 or .916. I know any gold is better than no gold, but is there an answer to this question in terms of free gold? Seems like .9999 would make the most sense as that is what countries like China are buying up and making sure it goes through Switzerland first if it isn't already .9999. Anyone with a thought on this?

Michael dV said...

.916 is 22 carat gold and is used for coins so they don't wear as fast. The issue is .995 and .9999 gold which is the difference between London good delivery bars and the .999 the Chinese like in kilo bars. All that matters is 'how much gold'. It will be the atom count that matters and not the purity. Hell I'd hold 18 carat if I could get it at a discount. In the end much of it just gets melted into the new owners preference.

gull_mann said...

@ Michael, that is what I thought. I always have bought my coins based on AGW. Just wasn't sure if I should take the fineness of the coin into more of a consideration than I have. Cheers.

S P said...

I like a quote from the architect in Matrix Reloaded:

"The answer was stumbled upon by another"

fnord88 said...

gull man you have to be careful because in different countries it affects the tax (particularly capital gains) you pay, and can also affect import / export duties. In Oz for example you pay GST on anything less than .999

Zebedee said...

For a slow comments day 'What happened to the German Gold'?

http://www.video.theblaze.com/media/video.jsp?content_id=31293951

Re-hypothecation perhaps? (20min)

Michael dV said...

I agree that local taxes are a consideration I did not mention.
In Nevada there is sales tax on coins but not on bullion, at least at retail stores. Since we FGers will be holding 'to the end' though I don't worry about taxes upon selling. Indeed since most of my dragon hoard was purchased at a higher than current price I suppose I should think of a possible tax loss if I'm forced to sell before reset.
If one is in this situation then the thought:
If things don't fall apart soon, I'll be in trouble. Might enter your mind.
We are an odd bunch.

ChrisF said...

@ gull_mann
Personally I prefer 22 carat coins since they don't scratch easily like .9999 coins. After the reset, when I may wish to barter or sell some for local MoE, I do not exactly want some buyer to try to reduce my price because of the apparent poor condition (scratches etc.) of my coins.
Thus, Krugers and Eagles preferred over the others. Also in 1/4 oz. size due to their astronomic (!) new value?
Maybe a professional dealer like Pollymetallic would like to comment... ?

DP said...

Or would you prefer, rather than selling, to retain ownership of your gold as long as you keep up the repayments on an incredibly cheap secured loan?

Roacheforque said...

It seems fairly simple, by extension if 100% gold = Z, then you get .016 x Z.
Across the pond I see a big red bar backed by a river of yellow ... If you can trade debt for gold in the next system, you'll like it indeed.

http://www.zerohedge.com/news/2013-11-26/chart-day-how-five-short-years-breakneck-liquification-china-humiliated-worlds-centr

Grinners said...

Question in relation to the below concept (taken from "How is that different":

Hayek writes "I do believe that if today all the legal obstacles
were removed… people would from their own
experience be led to rush for the only thing
they know and understand, and start using
gold. But this very fact would after a while
make it very doubtful whether gold was for the
purpose of money really a good standard. It
would turn out to be a very good investment,
for the reason that because of the increased
demand for gold the value of gold would go up;
but that very fact would make it very
unsuitable as money. You do not want to incur
debts in terms of a unit which constantly goes
up in value as it would in this case, so people
would begin to look for another kind of money:
if they were free to choose the money, in
terms of which they kept their books, made
their calculations, incurred debts or lent money,
they would prefer a standard which remains
stable in purchasing power."

I take it that post-Freegold those that lend currency are those that want to take additional risk (as compared to holding gold) in return for the chance at additional reward. If this is the case, then said people are only going to lend currency for the prospect of a positive real return. As such, is it not the case that the borrower is still having to pay back a loan that "constantly goes
up in value" (When the interest repayments are considered)?

If it is not going up in value, then nobody would lend. Thoughts?

truthwinsalways said...

this is my first post. I have a question for fofoa. How does your analysis change if the US government does not have any gold left ( or much less than advertised) having sold it into the market to depress prices over the last 40 years?Would they still have the incentive to revalue gold even if they have nothing with which to close trade deficits?

gull_mann said...

@ ChrisF, I agree about the .9999 potentially scratching easily, however I leave mine in plastic. Haven't had an issue yet.

I haven't bought any 1/4 oz Eagles partly because of the high premium! It comes out to a premium of $120-150 per oz over spot. Too rich! I have been buying more old European gold for fractional stuff. British Soverign and German 20 Mark coins can be had at a decent premium. Plus Ducats. Lot to pick from. Guess any gold is good gold if you get it for a good/fair deal.

Roacheforque said...

BTW, that's .916, not .016. The 9 is very close to the 0 onmy keyboard. Close enough for derivatives work ...

oldinvestor said...

I think there is some misunderstanding about the purity of gold coins. You see the term "4-9's" used. But that does not mean 99.9999 pure. To refine to that degree would not be practical. "4-9's " usually means 99.99 percent purity. That is 99 and 99 hundredths of a percent.

Go to the Canadian mint site and see the specifications for its maple leaf coin, widely acknowledged to be the most pure gold bullion coin. It is listed at 99.99%

http://www.mint.ca/store/coin/1-oz.-pure-gold-coin-maple-leaf-2014-prod1840021#.UuBQZP0QFlU

Also check out Bron's site. He has posted on this as well.

Nickelsaver said...

Not FOFOA, but I'll give you my take.

How does your analysis change if the US government does not have any gold left ( or much less than advertised) having sold it into the market to depress prices over the last 40 years?

The only thing that would change is the position that the US would find itself in, in a post revaluation (freegold) economy.

Would they still have the incentive to revalue gold even if they have nothing with which to close trade deficits?

The assumption that the UST (they own the gold, not the Fed) would have the ability to set the price, is incorrect. Their gold has already been revalued relative to their official book entry which has remained at the $42.22 mark since the 70's. It will be out of necessity that gold is again officially recognized and then used as a free floating reserve, in the wake of the dollar being dumped as a world reserve currency and its inevitable hyperinflation.

I doubt that the UST has secretly sold all the gold. For what would have been the purpose of closing the gold window in the first place, if they were going to just sell it all anyway. I think we see that they didn't need to sell after the gold window closed, because the ROW continued to support the unbacked dollar.

Now the other CB's that used to sell into the market to provided liquidity to the east, they have stopped. And we really have now is western dishoarders and the mines supply the physical market. And that is falling too.

But, if as you contend, that UST has sold the gold, it would merely serve as an incentive for UST to kick the can down the road. But that is already the reality is it not? If UST has no gold, American is toast!

IMHO

NS

tEON said...

maple leaf coin, widely acknowledged to be the most pure gold bullion coin. It is listed at 99.99%

Actually THESE are the purest Gold Coins - also Canadian (but a Mountie on this one - not a Maple Leaf) and 99.999% pure (5 X 9's!)

Sam said...

@Grinners

The situation you describe would be one where an investor looks to invest in a loan. This is not typical lending. Most lending will be financial institutions creating currency out of thin air and looking for nominal performance. Interest rates will represent risk plus profit, gold won't even factor in.

The issue you are alluding to is deflationary pressure caused by debts being harder and harder to repay. This isn't caused by lending rates above inflation or "real rates" as some call them. This is a phenomenon caused when the currency unit itself is increasing in value. Many people call rising and falling prices inflation or deflation when in fact there are so many factors that go into market prices that these claims are junk in my opinion. The only inflation or deflation that matters is the value of the currency unit itself. This is something that is hard to track but can certainly be felt when things get out of control in either direction. It is also precisely why gold is bad in the role of money and why currency will do well in this role once it is no longer asked to also be a long term store of value

Michael dV said...

NS if the USG has no gold they will buy it with new dollars. Once the smoke has cleared and the relative values of the new dollar the euro and the new Yuan are all worked out they will offer to buy. I'll buy some new dollars!
In fact I believe they will buy gold and NEVER allow the balance in the treasury to be inventoried. Why should they?
All the G has to do is be sure we run a positive trade balance, not spend more than it taxes and buy gold and it will do fine.
Telling the world how much gold you have is very 'gold standard'. You declare what percentage you are backing with.
In the new system gold will only be needed to defend the currency. As long as Soros can't short the new dollar they won't have to show an inch.

Nickelsaver said...

MdV,

Those are some very big ifs, and I think you have the cart before the horse.

I think that USA will need to run a trade surplus first, before new dollars are bid for by foreign gold. The government can denominate its currency, but it can't determine its strength. Only the market can do that. This will require a serious culture change within US borders. Granted, we would expect there to be change no matter how much gold USG has. So what we are talking about is how much forced austerity will there be. A little if USG has the gold, quite a lot if they don't. Do you really believe that it will be a smooth transition from what we have now to what it will be, especially if there is no gold. If anything, having the gold would allow the US to run a small deficit until it learns its place in the brave new world without exorbitant privilege.

The gold must flow! Or the value of the dollar we will not know.

Anand Srivastava said...

truthwinsalways:

If US has sold all its gold, then it will be in a very bad shape. And along with that there will be no hope for building America back again in a short time.

Mdv:
I don't think US would be able to buy gold with newly minted dollar, because that will trash the value of their new dollar.

After the collapse, the new currency and the new govt will have to build America based on the produce of the people. The only thing gold does is that it allows to sell gold to build America and not wait till the people have produced enough.

In any case the gold with the Govt is not important post FreeGold. The gold with the people is important.

Gold with the govt can be sold to build things that are needed. But as with any thing that govt does, the gold will be wasted on maintaining a bigger govt than required.

Robert said...

If the US government determines that it does not have enough gold, it will not buy someone else´s gold. It will simply take it. That is what the military is for. Of course there is be a pretext like fighting terrorism or regime change against the axis of evil. But at the end of the day they will just take it. That´s the way the world works.

Marco Polo said...

I don't get it: here in the UK, the media are full of good economic news stories. The biggest fall in unemployment over a single quarter ever. Manufacturing 'booming'. Growth figures being revised upwards by WEF. Pound is up, property is up. FTSE is up. The 'reset' looks like a fading memory.

Am I going mad?

Beer Holiday said...

@MP And everyone lived happily ever after.

Thanks printing presses. Thanps

Roacheforque said...

But the world should have confidence that the US of A can pull a miraculous talking rabbit out of its ass, like nano-genetic medicine, or cold fusion 2.4, or anti-matter molecular transfer and the like, which will save the day thorugh our uniquely exceptional "US of A-ness". At this juncture, I believe that type of miracle is required to sustain any sense of sovereignty whatsoever, fleeting though that will be ...

But countries do not make these decisions anymore my friends. They are already beholden to the multi-national corporations and the principles of their financial backers, and through this central banking "debt-bargain" of corporatism, by rights they are no longer sovereigns.

Witness the European Union. For all its intended good it does reduce the sovereignty of individual nations.Through debt, the last remaining sovereigns are the generational wealth dynasty's that control the TBTFs.

What exactlly again is CHINA's massive debt bubble (the one that dwarfs the FED, ECB and Japan CB combined?) indebted to?

Itself?

Indeed gold plays a role in this final turn (where gold resumes its role as wealth focal point, displacing unsustainable debt) but consider that the true value of gold is sovereignty.

If you didn't like the fact that the rich get richer and the poor get poorer in the last system, you will by God surely hate the next.

Thus it is with the flower of understanding, in the garden of discontent ...

Indenture said...

"I don't think US would be able to buy gold with newly minted dollar, because that will trash the value of their new dollar."

Will it trash the value of the new dollar or determine the value of the new dollar?

Anonymous said...

@truthalwayswins,
If the US has sold most of its gold, then of necessity the US would have to focus on its internal market, because imports will be far too costly. The real value is our own labor and natural resources, those are still there, and our fiat currency will have to provide the lubricant to unleash that potential. "Luxuries" like crapola products from China will be a thing of the past, ditto cheap oil from other lands, meaning precious oil will be husbanded for important projects. Recreational driving & easy credit for non-productive "assets" will be things of the past. POTENTIALLY it is a good thing, because it would actually force the US to transition to the post-peak oil world, while the ROW uses their gold (capital) to pursue the false "growth" economic model, making their inevitable crash worse by delaying the inevitable transition to a different relationship with Planet Earth. (I put aside fantasies like cold fusion, thorium reactors, etc. "saving" us).

Unfortunately, while that COULD occur, especially with clear-headed leadership, what I think is MORE LIKELY is that the real world game of Risk that our large corporations and governments play would greatly intensify. The sociopaths in big ass corporations and in politics will scramble by any means necessary to grab the remaining oil and wealth with which to continue their cushy and delusional life-styles. Confiscation is possible in those circumstances, as are wars with Mexico and Venzuela to gain control of remaining reserves of oil in our "back yard," while serious arm-twisting will be applied to Canada to do the same, so that Canada effectively provides its resources to the US.

Bottom line: disastrous.

oldinvestor said...

Thanks tEON, those look very nice. I would suppose these specialty collector coins would carry a hefty premium, it is hard to tell as they are sold out.

I would think most stackers would stick to the common bullion coins. I was very surprised at the Canadian mint site, I had no idea they had so many specialty collector coins in addition to their bullion Maple Leafs.

KnallGold said...

...but only this time its different!

Is this the unraveling of the fix? As it seems now they all wanna leave, this will have repercussions in the Gold market as we knew it. Let's see where this leads us.

Anonymous said...

anand srivastava said...
If US has sold all its gold, then it will be in a very bad shape.

I don’t think it’s that bleak. First off the US has about 400 million oz of gold still in the ground or roughly double its ‘official’ above ground reserves. At the same time the US is running trade deficit of about 4% GDP or $500 billion/year. So let’s say that the US has already re-hypothecated not only Germany’s gold but its own as well. Let’s also assume that it would take about 30 years of mining to get at what US gold remains in the ground. The price of gold required to cover a constant $500 billion/year deficit over 30 years would be about $38K/oz assuming zero dishoarding of private US stocks, highly unlikely at $38K/oz.

Here is the thing; the US deficit is primarily driven by Triffin's dilemma. The only reason the US can run a deficit of this size over such an extended period of time is because at present the US dollar is the focal point. Thus the US ‘must’ run a trade deficit in order for other nations to accumlate the reserves required to run their own local fiat ponzi scheme on their respective net producers; a scheme that acts as hidden tax on all the accumulated wealth of the 99.9% on the planet. This in my mind is primary reason why the world tolerates the current condition. To do otherwise would be to reduce tax revenue and cause unemployment.

This exorbitant privilege of the US being at the top of the fiat ponzi scheme heap is also a curse in that it is the primary driving force behind the de-industrialization and growing dependency of the US as reflected in the lower worker participation and median wage numbers. It’s always cheaper to print paper than to produce the good or services this new paper can buy internationally.

The current monetary dynamic changes when physical gold becomes the focal point and tax free SoV for the wealth producers of the world. Thus why a new mechanism of fleecing the net producers will need to reestablished. Which is why I think the nationalization of the mines will become the new way of fleecing the net producers in a post dollar US.

On the positive side once gold becomes the focal point, the true free market value of energy and other resources and thus by extension imports/exports will be revealed. Goods and services will be produced and in proportion to their utility where they are best produced. With gold as the focal point capital allocation and productivity will increase significantly so even parasites will still be fed, but they will be fed from increased productivity rather than off the decay of dying host like they are now.

The current monetary paradigm is simply not going to work in world faced by real limits on growth driven by lower and lower EROI, depleting resources and a declining world population. While a geometrically increasing monetary paradigm may have been the best system for a world about to explode in population and productivity it’s hard to imagine the next two hundred years being anything like the last two hundred years.

Gold pricing energy and then energy pricing very thing else seems like the best monetary system going forward. The nexus between that which isn’t consumed meets that which must be consumed.

Those that own physical gold in front of this epic shift stand to gain in epic proportions. For everyone else life will go on like it has in the past except they will be saving via an inflated price of gold vs. an inflated price of debt. Same objectives just a different means. My guess is that when you look at human monetary history a thousand years from now, the last 200 years will clearly be the anomaly not the norm. But even that prediction assumes we don’t have some kind-off breakthrough in energy and/or the ability to travel amongst the stars. Most visions of the future are based on a more efficient past, and that is why they are typically wrong.

Sam said...

@marco

It is debt that eventually kills all currencies in our modern world not the economies of the countries that use them. Housing and manufacturing can go up and down on the whims of consumer and business confidence. Ask yourself this. Has overall currency debt in all countries gone up or down? Has more debt been issued than can ever possibly be paid back via productivity alone?

Blake said...

Anyone have any comment on the unprecedented dollar amount of reverse repos the Fed has been engaging in since the end of 2013? Seems to me they are loaning out their SOMA portfolio to keep the repo market flush with high quality collateral...

Dante_Eu said...

@Marco Polo:

It's like with a heroin addict. Injected with a new dose of heroin...short term: Euphoria, long term: Prognosis Negative. :-)

sean said...

Marco Polo,
yeah, it does seem weird all the stats we hear from UK sound so positive. Property just keeps going up, but how much of that is high-wealth and foreign investor demand? I guess we will find out just how real this "recovery" is when Carney increases interest rates.....

Michael dV said...

anand
I agree that governments often blow the 'new improved' currency with the same mistreatment they gave the original. this happened in the Weimar as the Reichsmark yielded to the Rentenmark, which lasted a year. eventually the have to get it right. My guess is that with the Euro as an example they will get it right on the first try next time.
Nevertheless....I would not sell them a lot of gold all at once. I'd sell enough to get things I wanted soon and then observe. If inflation sets in too fast I'd sell my gold to a printer who knew how to behave the next time I wanted to buy something.

Michael dV said...

Robert
If the US tried to take gold where would it look?
One of the beauties of gold is that it can be hidden easily. Once word got out that the USG was once again badly behaving re: gold most of the gold would disappear. They might get some from bank boxes but they did that last time and now they can't count on much being in those boxes. They might also try to get the Texas University endowment gold (Kyle Bass) but they'd have to fight Texas. They might try to get the GLD gold...that will already be gone we think.
I suppose they could go house to house but no one really has any gold these days. The records might reveal who bought gold but most of those folks are very forgetful about where they stashed it and many have had a series of boating accidents.
My guess is that before long they would conclude they will just have to buy it. Any why not? Even if they are paying new dollar 250,000 per ounce...it is just electrons.

Michael dV said...

NS
Yes the G would have a learning curve but from a personal point of view I'd be first in line to buy new dollars. I'd have a plan to spend all the new dollars I was buying so I could of load the new currency before they had a chance to over print it again.
Foreign gold is another story. Why would foreigners want dollars? Why to buy the same things I want! They too will cautiously at first change Euros for new dollars. If they see a rapidly inflating currency they will only buy the dollars they need. Even if the new dollar is well managed however there will be little incentive to buy a bunch. Gold will be the reference point and any currency arbitrage will be best carried out with gold rather than buying dollars because one suspects it will perform better than say the euro.
Who knows how politicians will behave in the short term. the first year will be dangerous. After that, as you say, the US will discover its place in the world sans exorbitant privilege.

Michael dV said...

This is over a year old but it is from Forbes and I missed it so maybe you did too.
http://www.forbes.com/sites/ralphbenko/2012/10/08/signs-of-the-gold-standard-are-increasingly-emerging-worldwide/

several quotes about central banking and gold

Nickelsaver said...

I don't think it is too far fetched to imagine that when the current iteration of the dollar reaches the end of its timeline, that it will simply be no more. And that the Euro, proving its worthiness as a currency, will be the model upon which new currencies are formed. The idea that the Americas would form a currency block (Amero), along with the pacific rim and others, just seems rather obvious to me.

Maybe we don't get there all at once, but that would seem to be the direction the superorganism is headed, IMO.

Reality Show said...

MP, the recovery is nominal.

One informed member of the Question Time audience tonight brought up the point that rising wages would lead to rising prices, he was ignored unfortunately.

I'm sure George will be able to announce the cancellation of the next £25,000,000,000 in planned cuts any day now. Our economy is fixed, hooray.

byiamBYoung said...

Speaking of superorganism, I have a couple of thoughts that keep rattling around in my brain, and I can't seem to shake them, so I'll posit them here, and see what folks think.

Regarding China, they are obviously showing a motivation to accumulate physical gold lately. What is enough for China? In my mind, it seems most like China to want to accumulate enough physical as to be ahead of the United States in holdings, and therefore be number one in the world. Am I right?

They bought, what 2,000 tonnes this year? So, assuming they have a low of 2,500 tonnes to a high of 4,000 or so now, maybe two more years of accumulation until they are ahead of the rest of the world?

Another thought, although conventional wisdom holds that the west considers gold obsolete as money (not sure this is accurate), what would the US reaction be when China is on the verge of surpassing them in gold holdings? Maybe some attempt to interrupt China's accumulaton? A rush to grab the remaining supply? Something more drastic?

Just thinking. Any thoughts out there on this?

Cheers

Anand Srivastava said...

http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1

A very interesting article on Bitcoin by Marc Andreessen, who had created the first internet browser, and the enormously successful company Netscape.

The article is about the breakthrough in Internet technology that is represented by Bitcoin. It has nothing to do with its monetary value. The Technological use means that it is here to stay. It will NOT be undermined by the governments, because it will become as important as the internet.

The author has invested 50M into Bitcoin technology, but doesn't own a lot of bitcoins.

This article should put to rest the speculation that Bitcoin is going to be blocked by governments, except maybe during the crisis. So you cannot rely on it during the crisis.

I do think that any investment at this point will be a profit making investment but may not be as much as the 30X increment of gold. But given that during the crisis there will be problems with keeping gold secure, it maybe a good idea to hedge with bitcoin.

Marco Polo said...

The problem to me is the 'babble'. The explosion of sources, pundits, opinions etc. that the internet has created. These swirl and change direction like flocks of starlings or shoals of fish. In an instant. The serious part of the analogy is that these movements in real life dramatically affect what happens on a personal level. In other words, it is not so much what you or I or FOFOA believe, it is the swirl of the flock that matters. Wish I had studied chaos or game theory, as it seems so random: the wonder is that there are fewer catastrophes than we observe. Never before have we had to process so much distraction, rather than information. Reminded of the pictures of bowler-hatted men on the Tube all going to work in the City, all lined up with an open newspaper. The only choice was which one. Now, as then, there are few, if any sources of unbiased information. The useless excess just makes them harder to identify. Seems everyone is on the make, if not to sell you something directly, then rely on followership figures for some other gain. Nut jobs and conspiracy theorists. Politicians and spin doctors. Banksters.

That is why stumbling on FOFOA was a revelation. The theory of freehold is beautiful in its symmetry if nothing else. Rational and incisive. Sometimes hard to come here, as I personally do not know anyone with the right mix of curiosity and insight to appreciate the content. The condescending smile of polite pity as one tries to enthuse...


Freehold inevitable? Unpopular to say so here, but not sure this is a given. The madness of crowds etc.
What worries me is that there are so many tensions building that 'rage may consume us all' (Martin Wolf at FT.com) before freehold has a chance. Sorry, bored and rambling....

Anand Srivastava said...

MdV:

Yes the G would have a learning curve but from a personal point of view I'd be first in line to buy new dollars.

I have a question. Would you sell your gold for the current dollar. If no. Then what is the difference that you see in new dollar.

I will only sell my gold for property or things that are much cheaper in gold than their present value (like around 30X cheaper :-)). I wouldn't care about the currency that was used as the medium for these transactions. Possibly the second party will prefer gold as the medium during the crisis. We would probably have to pay taxes for the transaction in the medium, and for that I would have to dishoard some more. If it seems to happen that there is too much tax on selling my gold, I would let it lie very still, under the river bed :-).

Sam said...

@Marco

If only the separation of MoE and SoV and the default of paper gold had been deemed "freehold" those of us using mobile with autocorrect would be much less frustrated. =D

I like your thoughts though. I'm personally in the inevitable camp but that is because I believe that the "shoals of fish" won't get a vote on this particular issue. Or said a better way, their vote won't matter, and will quickly change, once the folks that do matter reveal the true value of physical gold and the new monetary system it will support

Beer Holiday said...

Hope you stick with "freehold"* MP :-) Personally I like it because it seems to be correct despite being counter-intuitive to begin with. Like most things that actually work IMHO.

*Isn't auto-correct a bitch?

Freegold - . Into deeper water

Roacheforque said...

Ahhh Bimby,
I take no "stock" in the official movements or accumulations of physical gold as respeculated upon or specuported by the variious swirling starlings (hat tip MP) of the mainstream flock.
The littler people are never to know such things as long as the present system is in place, so all such tabulations are rehypothespeculations in my opinion.
I do believe that jaw-dropping surprises are in store for the little people, though the vast majority of them would draw no conclusions from it ... it might as well be an Einsteinian incongruity in another solar system for all it would impart to the masses.
But certain Giants are keeping tabs, some of whom probably almost know the truth.

Says the flower:

"As with the student ... when the system is ready, the gold will appear."

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

That is Freegold : deper water followed by cool beach themed lifestyle music vids :-) I want to live by the beach.

Rip tide
http://www.youtube.com/watch?v=uJ_1HMAGb4k

deeper water
http://www.youtube.com/watch?v=uJ_1HMAGb4k

Wonderland
http://www.youtube.com/watch?v=tWQWnqJS6ck

Franco said...

I think that there is virtually no chance that the US government has no gold left. When they closed the gold window in 1971, there was 8000 tons. Where would all that gold have gone? Secretly sold it to the east? Stolen by the bad guy from Die Hard?

Woland said...

"recent" British discovery may render gold obsolete
www.youtube.com/watch?v=ivf4w3r-_3c

Michael dV said...

beer I'm a freeholder too, auto correct....the way new words will develop.

Michael dV said...

anand
obviously I am referring to a time when a reval has occurred.
I am not selling gold now. In fact I have developed the annoying habit of viewing large optional purchases as costing 30x their stated price.
hmmm do I buy the new computer now or wait for reval and get it for 1/30 the price....do I buy that new gun or an ounce....do I buy my kids shoes or...actually I still have the ability to live life normally as far as fundamentals go, but for extravagances I'm far more cautious with an eye on the instability in the system.

Michael dV said...

bBy
The China question is interesting. The idea that the West has given up on gold is silly. They were all in until 1971 and only gave up because they were forced to do so.
At high levels gold is certainly held in highest regard. otherwise just send Germany its gold right?
As for China's share they are WAY behind. They have less than 0.1 ounce per capita. The USA has .75 and the EZ .8. China seems to realize that the government itself does not need to hold the gold. They just need enough in the CB to defend the currency (in a FG system).
I often wonder if there is not some cooperation in China's acquisition. If we are going to screw China (and we must) out of their dollar reserve value, then why not help them catch up to avoid war?
Who can really know? At any rate the gold is leaving and the g is not doing anything effective to stop it. At the current rate of depletion we have 18 months to go before all the GLD gold is gone. Then we will see what happens when the 'unimportant' stops flowing.

Flounder said...

...respeculated upon or specuported...

This we know by the Flounder of Understanding?

Indenture said...

”I will only sell my gold for property or things that are much cheaper in gold than their present value (like around 30X cheaper :-)).

Yes, but in order for this to occur those item most be priced in the new dollar (or how else would you know you were receiving a 30x increase in purchasing power). So the new dollar will be used whether your purchasing power passes through it or not.

MdV: ”Yes the G would have a learning curve but from a personal point of view I'd be first in line to buy new dollars.”


I agree. A new dollar price in gold will manifest quickly and a position towards the front of the line will allow an individual to use those new dollars for investment, speculation, personal purchases or even charity. But an even better use of gold could be to heed DP’s words, “Or would you prefer, rather than selling, to retain ownership of your gold as long as you keep up the repayments on an incredibly cheap secured loan?

I wonder what the interest rate on a gold secured loan will be?

tEON said...

actually I still have the ability to live life normally as far as fundamentals go

Michael, some might call this attitude 'saving'. How consumerism has fueled the US economy is almost unbelievable. I read recently that 1 in 10 American households has purchased a 'Storage Unit' to, presumably, keep all their extra crap. They even have a TV show simply for auction buying of unpaid storage units... so not only do we buy too much junk - we fight over it when it is discarded or abandoned to, eventually, resell it to others.

byiamBYoung said...

MdV,

I hadn't thought about the per capita equation.

As for cooperation, maybe so. But I bet whatever help USG gives China to catch up will be promptly forgotten when China's holdings of US debt go sour.

Things sure are getting interesting.

Flounder of understanding....hehe.

Cheers

Reality Show said...

MP, personally I gave up trying to help others understand gold and these days, when needed, just hold the hands of the people that I had already convinced. I found that people fell into three camps: some bought simply because they trusted me, some because they intuitively, rather than intellectually understood and the rest just couldn't listen.

I couldn't care less what anybody else thinks, especially all the gold market pundits who constantly reveal their own ignorance. In fact I've got to a point now where I don't care if gold is revalued or not. I know why I save my surplus productivity in gold, its price fluctuations will never change that.

Aaron said...

I couldn't care less what anybody else thinks, especially all the gold market pundits who constantly reveal their own ignorance. In fact I've got to a point now where I don't care if gold is revalued or not. I know why I save my surplus productivity in gold, its price fluctuations will never change that.

Well said Reality Show. I wholeheartedly agree.

Franco said...

Why compare China's gold against US or EU per capita? Wouldn't it be more meaningful to use the metric gold/GDP or maybe gold/debt?

byiamBYoung said...

Franco et al,

The point I was driving at is really simple with regard to China/US/Gold.

In a simple summary, China thinks beating US is relevant. Having more gold than US is a way for China to beat US. China is actively gaining gold, which fits this narrative.

US likes being the top country, because good things go along with it.

If China gains more gold than US, the top dog status is in question.

As China gains gold, the moment when China overtakes Us approaches.

US watches, and sees this coming.

What does US do?

There is a point in time when this comes to a head. What will happen? Nothing? War? Something else?

Cheers

Unknown said...

Anyone have any insight on how companies will behave in the freegold paradigm? Will corporations hold gold as an asset? I think they would as a medium to long term asset later to be deployed?

Michael dV said...

I have been giving some thought to the 'new dollar'.
If the current dollar failed and the G decided to make a new one. How would they do it?
My guess is that they mimic the euro but in a confusing way.
First they would want folks to feel rich so they would make sure that remaining stooges were making a higher number than in the old system.
If you were paid 65k old dollars they'd make it 502k in new dollars. The ratio of old to new I picked was 7.76 to 1. Why? So it would be hard to figure what things used to cost, that's why. I would not invite comparison to the old system. I'd make that number higher than 1 but not an integer. Too high and it might seem like hyperinflation. Too low and the poorer folks would be looking at really low numbers as they pick up their welfare checks.
I'd be sure welfare and SS payments were in the hundred thousand range. The fact that a potato cost 4 new dollars would not be entirely lost on people but most are not good at math on the fly so they'd just go along and bitch about how things are worse than before 'but at least I'm getting more now.'
It is a bit devious but the transition will be shocking and the standard of living will no doubt be lower for almost everyone. Might as well try to obscure the problems a bit and therefore obscure the loss.
How would you handle the new dollar?

Sam said...

@Michael

That might be a good strategy. I figure when the time comes that the "old dollar" price inflation is out of control new currency should be issued at a lower value in an attempt to make things appear like they are back to the good old days.

Michael dV said...

Sam
if HI takes its usual course you are correct.My thought is that it ends suddenly. Reset will follow a blow up and we never see those million dollar loaves of bread.

Dante_Eu said...

For you gamers out there:

Ultra rare NES cartridge going for over $30K on eBay

"The near mythical cart was only manufactured an alleged 116 times as it was created exclusively for the US-based Nintendo Entertainment System tournament in 1990. 90 copies in a grey cart - like the one currently on sale - were distributed to the competition's finalists, while another 26 were forged with special golden cartridges and given away as part of a Nintendo Power contest.

There's that gold again. :-)

PS Latest bid: US $90,600!

Edwardo said...

Speaking of inflation, of the kind that matters most, namely decreased purchasing power in the physical plane, lately I've noticed one of the oldest tricks in the book rearing its ugly head. Typically, at least in the retail food business, as "inflation" emerges, the last thing one actually sees at the grocer are out and out price hikes. The first resort by the seller is to cheapen the ingredients while keeping all else the same. Sometimes this isn't possible, which necessitates the second resort, which is to change the weight of the contents of the box, aka more air in the bag. However, that is a maneuver that is not always efficacious-consumers tend to feel ripped off which engenders resentment. So, onto the last resort employed before engaging in dreaded price hikes, namely to decrease the overall size of the package. It's not a pleasant sight for ye olde shopper, but it's not so unpleasant psychogically as being confronted with a higher price.

All this by way saying that, with regard to Michael dV's thesis, I think (what I take to be that) which underlies his basic idea to have merit since deception is always a key part of the roll out of any major program. That said, it will be in the authority's interest, in fact it will be an imperative, to drastically reduce the debt in real terms. This condition may or may not forestall avoiding something as warped as million dollar price tags on loaves of bread.

In the meantime, at least in the early going, it looks like 2014 is going to be a year of turmoil. Wouldn't you say?

S P said...

Josh:
Companies are speculative ventures and thereby exist wholly in the debt based currency system. They have no need for gold, except for private miners, refiners, etc.

Gold is for sovereign countries and individuals. We've lived in a corporate dominated world for so long now, we can't imagine any other.

Dante:
I place no faith in human beings. Please don't misunderstand this. Even the most optimistic freegolder has to admit that at some level this is what gold is about.

If people will pay $90,000 for a worthless piece of video game industrial scrap from 1990, but won't pay $1200 for an ounce of the world's ancient and most precious form of savings, I mean, what can you do. Events have to play out.

Anand Srivastava said...

@Indenture:

I don't really care what the MoE of the day is. If it is 1/30 of the amount of gold that I pay today, its a good deal. Yeah applicable taxes do matter.

I agree that gold will not be available for some period, but it will not be available in any currency (including Euros). It will not be simply available because the price will be low enough that mining will stop, and the gold would be distributed with people that have no intention of parting with their gold (again in any currency). People like Indians for whom the gold is priceless, it is a status symbol. If it is cheaper they can show it off more. For them selling because they are losing money on it, doesn't compute.

By this point the ECB will be the only one with a currency that has shown its resilience in the face of the crisis, and most surviving currencies will be pegging to it. ECB will then determine the price of gold in Euros (possibly by buying it in quantity in the open market).

Once the price is determined, again the gold will start to flow and will be available in all currencies (with proper conversion with Euro). The Euro will have proven itself to be the UoA in the crisis. This is why we need the Euro. We need a UoA to survive this coming crisis. Without a UoA it will be much more chaotic.

Anand Srivastava said...

MdV:

The Dollar hyperinflation is required. There is no other way that the current mountain of Debt that is denominated in Dollar will go away. Maybe if you are lucky the HI will stop in the thousands, and doesn't proceed to millions, billions, and trillions. But thousands are absolutely required.

Anand Srivastava said...

MdV: Forgot to add. My comment is valid even with the 30x revaluation of gold. The US is not going to throw away all that gold for quenching that mountain of debt. The gold will hopefully be used to build America back from the ashes. But it will not be thrown in the fire.

schizoidlemming said...

Dear FOFOA and members,
this is my first comment after quietly following this blog for about four years.
Initial deeply skeptical interest turned into obsession and finally evolved into conviction. As the current events in the gold market and the global political theatre unfold - currently topping in an article by the FT (sic!) stating " "Learn from Buba and demand delivery for true price of gold: One day the ties that bind the actual and the traded commodity will snap" and the current discord between Saudi Arabia and the US- I think it is high time to express a heartfelt THANK YOU for introducing me to the Thoughts! of Another and his Friend as well as providing your own outstanding and thought provoking insights. I really enjoyed silently walking this trail alongside you, following the footsteps of giants.
It seems as if the day is not so far away on which the scenario painted in the "shoeshine boy" will come to pass and it will become clear to everyone that "he who holds gold has already been paid in full" !

Best Wishes to you all

Attitude_Check said...

So now the FT is talking about paper gold price manipulation and paper/physical disconnect!

http://www.ft.com/intl/cms/s/0/1586a7fe-84d6-11e3-a793-00144feab7de.html?siteedition=intl

Fascinating, does this mean some folks are concerned they are about to lose control? Is the discussed China bond default and HSBC limitation of large cash withdrawals the canary in the coal mine dying?

http://www.bbc.co.uk/news/business-25861717
http://www.bloomberg.com/news/2013-12-09/first-default-seen-as-record-427-billion-debt-due-china-credit.html
http://www.bloomberg.com/news/2014-01-24/ubs-says-market-wants-default-as-risks-to-pile-up-china-credit.html

Is this yet another sign of a coming default, that will ensure massive naked printing to "solve" it? ushering in the FG Hyperinflation option?

http://www.scmp.com/news/asia/article/1410614/japan-plans-raid-dormant-bank-accounts-raise-new-revenue

"The ruling Liberal Democratic Party and its main ally in government, New Komeito, are planning to submit a bill to allow the government to access bank accounts that have not been touched for 10 years or more. The funds would be used for welfare and education projects."

Knotty Pine said...

Welcome schizoidlemming,

I have also noticed some of the concepts discussed here becoming somewhat mainstream and I am noticing more and more freegoldish posts on various blogs. Is it time to grab the kids and haul ass? There is something in the air.

Sam said...

"Initial deeply skeptical interest turned into obsession and finally evolved into conviction"

A common process we all know too well. Welcome

t au said...

Also another welcome to schizoidlemming, good to hear from you.

Michael dV said...

anand
I agree completely.
I see a complete loss of the current dollar and all debt denominated in it.
To try to save part of it has been tried (by France in the 1790s) and it does not work. We will just let it go and move on. the new (and improved !) dollar will come into use and the old one will be forgotten like the money of the Confederacy....and the Continental...and the Greenback...and the Reichsmark...and...

Nickelsaver said...

One of the things that the paper gold market has going for it is it's ability to expand & contract in trading volume and in volatility. This feature allows it to keep from breaking. That is, as long as the price is changing, up or down doesn't really matter.

Consequently, what we should be looking for as an indication that the paper portion of the market is about to collapse , would be a slow withdrawal from the market (a gradual decrease in volume) as the really smart money gets out. Followed by a spike in volatility together with its volume shrinking to next to nothing. Which is to say, there would eventually be only sellers and trading would stop.

So the question begs, what is the real smart money? It is that portion of the market which deals in both, the flow of the real McCoy, and in its paper proxy. I say this, because in order to get gold to flow, those that are on the receiving end know that they have to eat a lot of paper to get a little gold. But at some point, if the flow of real gold diminishes to the point that the ratio of paper gold to real gold required to move it surpasses X, they will simply look to other items in the physical plain and get out of the market. Theoretically, X should be close to the FG value, perhaps even above it.

This is a top down collapse. Those that trade in A LOT of paper gold to move real gold first, followed by those that only trade its price. And those that trade only its price will be the sellers caught holding dead paper only in the end. Those that benefited from this market having received a portion of real gold in exchange for a vast amount of paper, already saw the paper as dead. So it was no loss to them.

Those that traded its price only and are stuck holding dead paper will see this as just the beginning of their troubles. For even those that got out with their portfolios intact, will have to deal with the second barrage of an inevitable currency collapse. The smart ones from that group will flee into the physical plane wherever they can. The dumb ones into other paper assets. The demand for cash will be high, as the demand in volume and volatility for real things increases the price of real things. And so we will enter a hyperinflationary death spiral as the printer will not be able to keep up with the demand for cash to spend in the marketplace.

Dante_Eu said...

Continuing the game theme. For all you BitCoin-pundits out there:

The case of the disappearing video games:
Digitally distributed video games are vanishing from sale.

"Does it matter when a medium's past begins to disappear"?

Got me thinking about inheritance. Digital or physical? No-brainer... :-)

Anonymous said...

Now watch this:
https://webcasts.weforum.org/widget/1/davos2014?p=1&pi=1&a=52371
Especially from 9:09 on: Lagarde says RESET not reform!

Motley Fool said...

Schizoidlemming

"Initial deeply skeptical interest turned into obsession and finally evolved into conviction."

Yup.

Nice to see one of the otherwise silent ones posting. Feel free to do so more often. :)

TF

tEON said...

Gold production soars to record in 2013 despite price drop: study

Sam said...

@Dante Eu

A friend of mine bought a playstation 3 on Craigslist. The seller had 4 games on CD and 6 digitally downloaded games and a couple movies. When the seller deleted his on-line account (wanting I suppose to protect his privacy, credit card info, ect.) the digital stuff vanished. My friend cancelled the transaction at that point. The seller called Sony to see if The deletion could be reversed and content restored. The answer was no. Just another anecdotal lesson in our digital world that physical possession is wealth.

Edwardo said...

Here's the report.that tEON referenced.

Michael dV said...

Eduardo
The increased mine production is interesting. We should remember though that bringing it up out of the ground does not alter the total retrievable gold on the planet AND the movement of physical is dwarfed by the movement of paper.
My guess is that desperate miners are bringing up the easy stuff to pay the bills and stay open another year.
As oil goes up the cost of further production will rise. Eventually it will fall.
Probably we will never know as a reset will alter the attitude toward gold mining.

Anand Srivastava said...

Dante Eu:

What happens if the paper burns/rots/lost?

Bitcoin is an infrastructure, just like the internet is.

If Bitcoin goes away in the future, it will be because the internet went away, and the world as we know it has been destroyed by nuclear war.

The good thing about having a contract in Bitcoin network is that you can keep the document on display multiple places on the internet and as files. The only thing you need to keep safe is your Wallet. If you made only that transaction with the wallet and you have the wallet printed on a piece of paper, it is just like any other contract on paper.

If somebody was to steal your wallet, he could move the bitcoin to his account, but since the contract is for a physical item, the new owner must prove that he got the contract in a legal way, ie paid you some consideration, and would have to pay some money to the govt as well. So the Bitcoin contract becomes even better than the current contracts, at least for the very expensive items.

Edwardo said...

Michael dV wrote:

My guess is that desperate miners are bringing up the easy stuff to pay the bills and stay open another year.

Yes, that seems to be how things are proceeding.

As oil goes up the cost of further production will rise.

That's the primary reason why this pop in "gold" has been so tepid, the price of fuel hasn't come down much. My bias is that folks who are looking for lower paper gold prices to stock up on physical will get their chance in the next few months.

Anand Srivastava said...

Sam: That thing has no bearing on Bitcoin. DRM is the bane of digital content. Don't buy them period.

Roacheforque said...

Crypto currencies may never go away, but for now they appear too volatile to challenged any deeply rooted currency in terms of acceptance.

Speaking of which, we do see more volatility lately in paper gold, but it seems to be "psuedo-tracking" certain risk-based fundamentals, so we are not seeing the degree of volatility we might expect of a failing price discovery system ... yet.

However if paper gold was even remotely tracking the fluctuations of Bitcoin in relative currency pricing, we would conlcude that the waiting is over, because we'd have $800/oz. (paper) gold rising to $20.000/oz. and various levels in between during the course of several months (even if paper gold were only half as volatile as Bitcoin).

So do we conclude that Bitcoin "fails" as a currency unless it becomes more stable? Yes. Stability is certainly the aim of central bankers in their gradual and coordinated snails-pace race to the dirt-floor FIAT bottom.

We do see events unfolding lately (too many to cite) in a manner that seems to indicate signs of a pre-freegold chain reaction, yet every time this has happened before, the central planners pull another talking rabbit out of their collective central a-hole.

So we tend to look at the dying artificial markets crying wolf and go back to our regularly scheduled programming with no expectaion that the sky is falling.

Yet one of these days, the FIAT skies will indeed fall, and after so many red flags being subdued over so many years, even the staunchest of freegold Centurians could be caught with his winky in the sunlight.

Be prepared, cries the F.O.U.. Be prepared.

Sam said...

Miners are ramping up the low cost mines and shutting down the expensive ones. They are also cutting expenses such as exploration and R&D. A short term strategy with no future unless gold rises drastically once again. All that production in a year when gold's price crumbled...

"people will say why did I think no-one wanted gold when so many people were buying it"

Dante_Eu said...

@anand:

Oh man, there are too many wallets in your comment for my taste. I got lost after the 3rd one. :-)

Anyhow, it may well be so that BC is here to stay for long time. I was more thinking about digital information in a broader term. For example, I remember seeing a TV-program, maybe a decade ago, it was about an East German (Stasi) digital archive that was lost forever. The reason was the archive was stored in a proprietary operating system that nobody could understand or interpret. East-german programmers who made the operating system, were no longer alive, present programmers didn't understand it and the information in the Stasi archive was lost forever.

Who knows what's in store for digital information? It doesn't need to be nuclear war. A power outage, couple of weeks because of solar flares, and we are back in stone age?

Guess what works even in that scenario? ;-)

S P said...

schizoidlemming:
At some point is just clicks and becomes a revelation.

My opinion is that the people who understand it tend to be generalists and big thinkers while specialists and micro thinkers have trouble.

Our world has favored ultra specialization for a long time now so few really understand.

frankthetank said...

S P, i think you just told us a lot of truth in this comment.
further i think this "Our world has favored ultra specialization for a long time now so few really understand." will change soon. or at least the first part of it.

Sam said...

@SP

It's also a lot to take in on a subject that many have heavy baggage. Freegold isn't very marketable which is why the usual "gold promoters" stay away from it. Like most good things in life you can't be pushed or sold into the wisdoms of Freegold, you have to have a desire to discover it on your own and a willingness to put in the time

Michael dV said...

http://www.gold.org/government_affairs/gold_reserves/
This page has a download on the right side "Central Bank Diversification Strategies"
In it Chart 13 shows that the daily traded gold is $240 Billion $.
This is another ref to what fofoa has been saying and shows the relative volumes of the Dow and other assets. a nice reference. Overall worth having and reading.

Nickelsaver said...

Continuing with this thought, 'if the flow of real gold diminishes to the point that the ratio of paper gold to real gold required to move it surpasses X, they [the real smart money] will simply look to other items in the physical plane and get out of the market. Theoretically, X should be close to the FG value, perhaps even above it.'

One of the indications that the real smart money is getting out of paper gold for real gold and into other physical assets would be a break in the gold/oil ratio. What I mean is, if oil thought that it needed to drop the price of oil in order to get gold to flow, it would do it.

We see that in 2008, starting from mid year to the last quarter, the price of gold dropped from 1000/oz to 750/oz. A drop of 25%. Over that same period, Oil dropped from $140/barrel to $40/barrel. Oil was responding to the drop in gold price in such a way that it would ensure it continued to get real gold by the same mechanism it has for the past many years. In fact, that drop in oil price greased the wheels for the gold miners by bringing production cost low.

Compare that to today, where we have seen the price of gold go from $1800ish in August of 2011 down to the $1200ish level of today, a drop of 33%. Yet over that same time frame, the price of oil has nominally fluctuated in a channel of $90 to $100 per barrel.

If oil thought that it could get more gold via the paper gold mechanism, it would certainly drop its price for oil to grease those wheels once again. It did it in the past. However, if oil knew that the flow of real gold had dried up to the point that even if they did make the mines profitable, they were not getting the amount of gold required to sway them away from instead acquiring other items in the physical plane. In other words, the ratio of paper gold to real gold surpassed X.

Luckily for us shrimp, the flow at our level has not dried up. We can continue to get gold for bargain prices. But for how much longer? Have the giants spoken via price of oil?

Anonymous said...

I thought this video was very interesting.

What if Oil Bids Directly for Gold?

http://www.youtube.com/watch?v=yEc_cb6y0yA

He has others on his home page that are also very interesting.

http://www.youtube.com/user/belangp?feature=watch

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