Monday, February 3, 2014

Seventeen



"Why do they view their debt in terms of yield
when it only returns more of the same paper?
The only way to convert the return on this
American debt is by buying something real with it.
Only then do we have a “yield”. The Westerners use
“paper to price paper” and “more paper to price more paper”
in an endless quest to add value where value only exists
in the minds of men. To this end they say we have lost value
holding gold, but our families and children cannot go broke.
No one owes us and we owe no one, and we do not “convert paper
to something real” to create “yield”. We already own
our “yield”, no conversion needed!

Now they have created the illusion of gold in
great supply to lower its value in currency terms,
and the Americans accept this. They do not question that this
illusion was done using paper contracts, that do not hold gold
but are priced in currencies that offer a yield valued only
in human emotion terms. It is in this fashion that the
greatest folly of Western thinking will bring an end
to an era of unvalued money. In the near future
a real value will be exchanged for gold and those
that hold paper gold will bid much higher to obtain
what they thought they already had!"

If you're just laying eyes on this Freegold thing for the first time, you are in luck! As of today, if you have, say, $55,000 in surplus currency reserves sitting around, you can still exchange it for 43 ounces of real physical gold! That's almost 3 lbs. of 24-karat gold! And did you know that there's less than 1 ounce per person in the world, so 43 ounces for one person, especially a Westerner, is actually pretty remarkable.

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

"Gold is so old. Such a rich history. An educated western mind cannot begin to understand it! We live in a time of closed thought and controlled perception. How could we have known that two thirds of humanity would still think of gold as wealth. It’s not that they are right or wrong to think this way, it’s that we want them to work for us! That is the problem! And when they worked for us we paid them!

And who in the hell would have thought that they would have used so much of that pay to buy gold! Some bought in tiny amounts and some bought in large amounts. This started with the new world trading order that came into being about six years ago. By now that gold is so spread out it would take 20 years and 5 small armies to get it back, I think."
–Another


Someone recently proclaimed to one of my readers that "gold is not exceptional!" He was comparing gold to the charts and returns of other investments. My reader simply replied, "Gold doesn't need to be more exceptional than anything else in order to be more salient, just as Grand Central Station doesn't need to be more exceptional than anywhere else in order to be the most salient place of encounter in New York City."

I wrote about this three years ago in Focal Point – Gold:

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."

Gold's salience as the focal point store of value par excellence is not a prediction or future projection. It is a backward-looking observation. There are some 5½ billion ounces in this world of 7 billion people, and every last ounce is equitably owned by someone. During the last 17 years, 1.3 billion people were added to this planet, and also 1.3 billion ounces of gold were added to the above-ground supply. And again, every last ounce was purchased by someone.

This may seem like a silly point, but gold does not pile up on overstock.com shelves like last year's iPhone accessories waiting for frugal buyers. It sells out every year. Normally you'd think this means that supply and demand met, price was the result, and therefore the price of gold represents its fair value. But with gold, it's not quite that simple.

When I talk about gold's salience as the focal point wealth reserve, I'm not talking about gold mining shares, gold futures, gold certificates, gold-denominated trading accounts like XAUUSD, or even gold ETFs. I'm talking only about physical gold in hand, meaning discrete physical pieces of gold in the most unambiguous form of ownership you can arrange as a shrimp. I'm talking about this:


I'm sure my comment will, as always, kick off a discussion in the comments about whether this or that "gold and silver" custodial service is a viable alternative to possession, but that will be missing the point. I'm talking about gold's salience as the focal point object of wealth as it already exists among the Giants and "third world nobodies" who already own most of the gold in the world. Look at how they buy and hold gold.

Of course gold's shiny allure does reflect its salient glow upon other gold-ish investments in the mind of the Western investor. The Western mindset sees this focal point salience, is aware of it, but then uses these "alternatives to possession" to place bets on how its allure to Giants and "third world nobodies" will affect its price. As FOA wrote in Chapter 1, "This, my friends, is the very nature of western trading of gold." And Another:
Everyone knows that western minds don't like or want gold, but if they think you like it they will trade it up in price for the sake of "sticking it to you." Enter the world of "paper gold."



A riddle wrapped in a mystery inside an enigma

Something happened 17 years ago last week. I would characterize it as "the opening of the door" for Another and FOA to explain publicly, albeit anonymously, what we today call Freegold. "A riddle wrapped in a mystery inside an enigma" was the way one writer at the time, The Red Baron, described the London gold market. That's because it had been one of the most opaque and secretive markets (for obvious reason) for hundreds of years.

Then, 17 years ago last Thursday, the LBMA released, for the first time ever, its average daily clearing volume, through an article in the London Financial Times titled "Extent of global gold market revealed". Today (and ever since that day) the LBMA releases this volume every month, so it may seem like no big deal. But in 1997, the sheer magnitude of the reported volume was a real head-scratcher for some who had been following the gold market for years. Before I explain, let's take a quick look at how the City of London grew into the world's central hub for trading gold.

According to the official Gold Fixing website, the emergence of London as a gold trading center can be traced back to around 1671, with the arrival of a young merchant named Moses Mocatta. Then, in the early 1800s, Nathan Mayer Rothschild arrived in London and soon became England's official gold broker.

Nathan moved from Germany to England in 1798, and by 1805 he was a successful banker in London. His bank, N.M. Rothschild & Sons Limited, was founded in 1811, and by 1815 he was buying gold on behalf of the British Treasury to fund the Battle of Waterloo. Ten years later, he helped the Bank of England out of a liquidity crisis by providing it with gold coins.

The British army, paid with gold acquired by N.M. Rothschild, narrowly defeated Napoleon's French army in 1815, which makes it a fun fact that the London-based global banking empire of N.M. Rothschild & Sons is now wholly owned by the French branch of the Rothschild family. That happened after Sir Evelyn de Rothschild retired in 2004, and N.M. Rothschild & Sons was then merged with France's Rothschild & Cie Banque through Paris Orléans SA, now headed by David de Rothschild, eldest son of Baron Guy de Rothschild, the head of the French branch who passed away in 2007.

If I've gotten anything wrong there, I apologize. I'm certainly not a Rothschild historian, but they did play a big role in the history of the London gold market. Following WWI, an agreement was struck between London and South Africa such that newly-mined South African gold would be shipped to London for refining, after which it would be sold to the world through N.M. Rothschild for the highest price that could possibly be attained on the market at that time. Thus began the London fix.

"On 12th September 1919 at 11.00 a.m., the first gold fixing took place… The bids were made by telephone for the first few days, but it was then decided to hold a formal meeting at the Rothschild offices… Although the London fix continued to be in sterling for almost another 50 years, what really counted was the dollar price of gold, as the dollar gradually replaced sterling as the world’s favourite reserve currency." goldfixing.com

London gold fixings ceased in 1939 with the outbreak of WWII, and then resumed 15 years later in 1954. The way the fix worked was that five members of the London gold market, the five fixers, would meet once a day in the Rothschild offices with a direct phone line to each of their trading rooms. The trading rooms would be talking to their clients on both the buy and sell sides, and each fixing member would report the net buy or sell orders from their clients. The five fixers would net out the orders from the five banks and if there were more purchase than sell orders, for example, the price would be raised and each bank's trading room would relay the new price to its clients and the orders would be adjusted and reported back to the fix.

Once the buy and sell orders were all matched, the price would be declared "fixed" and the orders would be filled. This happened once a day until 1968 when they added a second "PM" fix to coincide with the opening of the US markets. But as early as 1961, the Bank of England started noticing that it was having to sell from its own reserves to keep the price down to $35 per ounce. This led to the creation of the London Gold Pool, a pool of gold reserves from eight different countries that would be used to keep the fix fixed at $35 per ounce. Within the pool, the Bank of England only had to cover 9% of whatever was needed while the US ponied up the lion's share, 50% of the pool.

In 1968, the London Gold Pool collapsed as buy orders overwhelmed the reserves. According to goldfixing.com, the pool lost 3,000 tonnes trying to hold the price at $35 per ounce. On orders from the US, which was supplying 50% of the pool, the London gold market was closed for two weeks. When it reopened, the second fix was added and they no longer tried to control the price, which quickly rose to $44 per ounce.

But something else happened during those two weeks that the London gold market was closed. London lost its South African supply line to Switzerland, which was a big hit to the London gold market at the time, about 1,000 tonnes a year. And then in 1975, the COMEX futures market opened in the US, taking even more market share away from London. London responded by giving birth to the bullion bank (a term that, in the early 80s, referred only to mine finance) and opening its gold market up to foreign banks who wanted bullion trading rooms in London.

The first of the foreigners in were Morgan Guaranty, Credit Suisse and Nova Scotia, and by the mid-80s this new "open door policy" had attracted more than 50 new "associate members of the London Gold Market". Coordination, like in the good old days of the fix, was getting more complicated. Also in the mid-80s, London opened, and then closed three years later, its own version of the COMEX, the London Gold Futures Market (LGFM). And in 1984, the pioneer of modern bullion banking, Johnson Matthey Bankers, also one of the fixers, collapsed.

It was a mess that had to be cleaned up by the Bank of England itself, and in the aftermath, the BOE assumed the supervisory role over the London bullion market and demanded that the participants create a formal body to represent them as a group. A little more than a year later, in Dec. 1987, the LBMA was born.

The first chairman of the LBMA was also the chairman of the Fix from '74-'93, and a director of N.M. Rothschild & Sons named Robert Guy. Robert Guy was also the first to push for more transparency in the LBMA in the form of turnover volume statistics as early as 1992:

London Bullion Market
By Kenneth Gooding
FT June 22, 1992, Monday

There is a need for greater transparency in the gold market, suggests Mr Robert Guy, a director of N. M. Rothschild, the bullion house which hosts London's daily gold fixing session. 'I find it very difficult when people ask me the turnover of the market not to be able to tell them.'

Mr Guy was the first chairman of the London Bullion Market Association when it was set up in 1987 to represent the interests of participants in the wholesale bullion market. He has only just stepped down after four strenuous years. Freed from the necessity for diplomatic neutrality, Mr Guy is able to nail his colours firmly to the mast. He suggests that the association went one step in the right direction towards more transparency in July, 1990, when it started to publish details of gold lending rates.

'I believe this attracted more business to the market, not only from mining companies, but also from central banks,' he says. Now he has stimulated a debate about turnover transparency. He is very much in favour of the London gold market providing turnover details, not on a daily basis but regular historic statistics. Many other markets do this - Mr Guy points to the London stock exchange as an example of a market where turnover statistics apparently help to lift trade.

'Investors today demand more transparency than they used to. I believe gold market activity would be enhanced if we had greater transparency”

Mr Guy suggests that the management of those companies participating in the market would benefit from publication of turnover statistics. They would have some benchmark figures against which to measure their own statistics. Not every member of the association agrees with him. Mr Guy thinks that most of the LBMA's market making members are in favour but 'as we believe in consensus, unless everyone agrees, it won't happen'.

And that's my brief history of the "riddle wrapped in a mystery inside an enigma" that was the London gold market for the last 300 years, bringing us up to the point in time I want to talk about, 17 years ago last week. On Jan. 22, 1997, the LBMA announced its intention to release its clearing volume in a Financial Times article titled "Dealers end gold trading secrets":

Dealers end gold trading secrets
By Kenneth Gooding
FT January 22, 1997, Wednesday

Bullion dealers, backed by the Bank of England, have agreed to overturn years of tradition and secrecy by publishing details about turnover on the London gold market.

But some analysts warned that the move, designed to increase transparency on international exchanges, might drive business away from London because of clients' desire for anonymity.

The London Bullion Market Association intends to make public international settlement and London market turnover figures every month, starting next week.

Mr Alan Baker, the association's chairman, said it hoped to "walk carefully along a narrow line between the calls for more transparency on one side and the secrecy demanded by our clients on the other".

But one analyst, who asked not to be named, said the move was "terrible". "When did a market need transparency to grow? People won't be attracted to a market showing its underwear in public."

Mr Tony Warwick-Ching, gold specialist at the CRU International consultancy, suggested the move might put London at a disadvantage to the Swiss who were unlikely to reveal any gold statistics.

"The gold market has always thrived on opacity and obscurity," he said.

Mr Baker said the data would reflect global gold dealing activity by revealing the figures for the "loco London" market, or those international deals settled in London.

Ms Rhona O'Connell, analyst at specialist mining stock-broker T. Hoare & Co, suggested the statistics would provide a clear indication of the depth of the gold market.

"It should bolster confidence if people see it is a deep market and not liable to manipulation," she said.

Then, on Jan. 30, 1997, they followed through with the article I mentioned earlier:

Extent of global gold market revealed:
London clears 930 tonnes of bullion each day

By Kenneth Gooding
FT January 30, 1997, Thursday USA EDITION 1

Deals involving about 30m troy ounces, or 930 tonnes, of gold valued at more than $ 10bn are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association's statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be "multiplied by three, and possibly five, to give the full scope of the global market".

Mr Baker said the association would produce average daily clearance figures every month. "They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business," he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. "These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

"The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics."

LBMA members were divided over the move. One said he was puzzled. "What will people make of it?" Another said the exercise was "futile" because it did not give a complete picture of bullion market activity.

But Standard Bank's Mr Rhodes suggested the statistics would "become the key indicator in the world of gold, providing the numbers by which the market can be monitored".

Mr Martin Stokes, vice-chairman of the association, said: "This shows we have a serious market with a lot of depth and deserving of more attention." The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank - a disposal that badly affected bullion market sentiment - was not a large amount by the market's standards. The association was "making a bid to attract investors' interest".

The association also gave details yesterday about the silver market. Roughly 250m ounces of silver valued at more than $ 1bn are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7m ounces of gold, worth nearly $ 3bn, was traded daily by these market-makers.


VOLUME

I want to draw your attention to that last paragraph. It says that the BOE's survey of 14 LMBA market makers in May of 1996 showed a "daily turnover" of 7M ounces worth $3B. Doesn't that seem low compared to the 30M ounces worth over $10B reported as "daily clearing volume" in a survey of the 8 LBMA clearing members just seven months later? Just on the face of it, that's a 4 to 1 jump in daily volume. Did something change between May and December in 1996? Did the gold trading volume explode, or is there some difference in the reporting standards of the two surveys? After all, the BOE's survey called it "daily turnover" and the LBMA survey was the "daily clearing volume".

In fact, the LBMA surveyed its 8 clearing members starting in October '96, and that month the average daily clearing volume was 27.5M ounces. So if there was a dramatic jump in the volume, it must have occurred during June through September. Or was the BOE's May '96 result a fluke, i.e., an abnormally low month? Well, as it turns out, it was not a fluke. The BOE conducted the same survey four times since 1990, with similar results since at least 1991. About 6½ million ounces in '91, 7½ in '94, and 7 in '96.

So, apparently, roughly 7M ounces in "daily turnover" was the status quo from '91 through '96, and then, in the summer of '96, something happened and the volume exploded, like punctuated equilibria, to a new status quo level which, generally, continues to this day. Or is there another explanation for the discrepancy between the BOE and the LBMA surveys? As I already mentioned, the BOE surveyed the LBMA "market makers" (14 of them) for their "daily turnover", and the LBMA surveyed its "clearing members" (which, at that time, were 8 of the 14 market makers surveyed by the BOE) for the "daily clearing volume".

What's the difference between "daily clearing" and "daily turnover", and how should we expect them to relate to one another? In other words, is there an expected ratio, like 4 to 1 or something? Actually there is! But there are many opinions on what it is, generally ranging from 3:1 to 10:1.

In 1997, from the article above, Jeffrey Rhodes of Standard Bank, an LBMA member, said the clearing volume should be "multiplied by three, and possibly five, to give the full scope of the global market."

In 2007, Stewart Murray, the recently-retired head of the LBMA, wrote that "Previous estimates of the daily volumes traded in the London market have suggested that the quantities are a positive multiple of the clearing volumes with a multiplier of between 5 and 9."

In 2009, Peter L. Smith of JP Morgan Chase, writing in the LBMA's own Alchemist, said that "the numbers are probably understated by as much as a factor of three times, or possibly even more during busy market periods."

And in 2011, in Liquidity in the Global Gold Market – Trading volume and turnover, the World Gold Council reported that "Many dealers estimate that actual daily turnover is an absolute minimum of three times the amount of transfers reported by the LBMA and could be upwards of ten times higher."

So there you have it, 3 to 5, 5 to 9, 3+ and 3 to 10. But the best indicator of the expected ratio of turnover to clearing comes from the LBMA's own 2011Q1 turnover survey, published just four months after the WGC report. In it, for the first time ever, they report both "daily turnover" and "daily clearing" side by side. These were statistics taken over three months, 63 trading days, and they revealed a ratio for turnover to clearing of 9.2 to 1. Definitely the higher end of the 3 to 10 spectrum! ;D

But perhaps you've already noticed something. Perhaps you already caught the catch. This empirical ratio of 9.2:1 does not reconcile or resolve the discrepancy between the May '96 BOE survey and the Oct. '96 LBMA one, it widens it. It makes it worse!

On the surface, that 7M to 27.5M ounce discrepancy looks like a 400% explosion in gold trading volume, over only five months. But if we apply the 9.2:1 ratio discovered in the LBMA's 2011 survey, then it looks more like a nuclear explosion of 3,600%. So, to avoid the impression of sensationalism, let's create a range with 3,600% at the high end. What should be the low, most conservative end of the spectrum, given what we know?

Well, in 2011, the LBMA surveyed 36 members, including all 11 of its "market-making members". In 1996, the BOE only surveyed the market making members, but there were 14 of them at that time. So we're comparing a survey of 14 trading rooms with one that surveyed 36, however the "market making members" should probably be given more weight. But let's not. To be sure we hit the conservative end of the spectrum, let's not discriminate between bullion banks. There is, after all, at least one analysis that concluded 23 or so bullion banks that were not surveyed in 1996 were at least as active as the 14 that were, which brings the total up to 37 bullion banks, pretty close to the 36 that were surveyed in 2011.

I'll keep this part to one paragraph so as not to bore those of you who are still with me. It is a fair assumption that the more banks polled, the higher the reported turnover would be, and therefore the higher the multiple compared to the clearing stats. 36 (members polled in 2011) divided by 14 (members polled in 1996) is 2.57. If we divide the multiple of 9.2 that came out of the 2011 survey by 2.57, we get an expected multiple of 3.6 for the 1996 survey. That is, we could expect the "turnover" to be 3.6 times larger than the "clearing volume", or said another way (because we don't know the clearing volume in May of 1996), we would expect the "clearing volume" to be the reported "turnover" divided by 3.6.

The implied increase in trading volume is about 1,400% in five months. And that gives us our range. Rather than a 400% jump in trading volume as it appears on the surface, it was probably somewhere between 1,400% and 3,600%, and I'm going to roll with the low end because it's more than dramatic enough for my purposes. Here's what it looks like putting the implied clearing volume for May '96 with the reported volumes for October through January. I converted millions of ounces into tonnes, because tonnes are the terms in which I generally think:


Now before you get lost in the details, there's a main point. And that point is that it looks like something changed in the gold market around the middle of 1996. That change, apparently, precipitated the appearance of Big Trader on the Kitco forum in December '96, the LBMA transparency decision in January, and the subsequent appearance of Another and FOA which, to me, seems to be more of an evolution of pseudonyms, from Big Trader to Another, than a string of different posters.

I just want to touch on this for a moment, because it's confusing. And I'm not suggesting that Big Trader and Another were the same person. I don't think they were. I just think that the same person (FOA) probably posted all or most of the comments on both of their behalfs, and that, between Dec. '96 and Oct. '97, the handle he used evolved from Big Trader to ANOTHER ( THOUGHTS! ). The evolution went something like this:

Big Trader
Big Trader ( the writer! )
The Writer
The Writer ( thoughts! )
BIG TRADER (THOUGHTS!)
BIG TRADER (LAST THOUGHTS!)
ANOTHER (thoughts not written anymore)
ANOTHER
ANOTHER ( THOUGHTS! )
Friend of Another
FOA

This only came to my attention less than two years ago, when Nick Laird published the old Kitco forum archives. It is my opinion, and it's only an opinion, that these early "thoughts" (the authentic ones, because there were also a few copycats) were all posted from FOA's computer, even though the thoughts originated with at least two other people, Another and Big Trader. Therefore I view them as coming from a "group" as it were. I realize it's a little ambiguous, but I think it's the best we can do with what we have to work with from those earliest comments. And with that out of the way, let's get back to the volume in 1996.

There appears to have been a dramatic jump in gold trading volume of at least 1,400% sometime in mid-1996. We could even call it a phase transition of sorts, because it appears that volume was stable at one level from '91-'96, and then it has been roughly stable at its new level for the last 17 years. Have you seen it discussed quite this way before? I haven't, and I think that's probably because the sheer magnitude of the jump only became deducible with the advent of the LBMA turnover survey in 2011.

Here it is again. This time I added the implied clearing volumes for '91 and '94 based on the turnover chart on page 40 of this BOE publication, as well as the latest volume released by the LBMA, to show where it is today. Does this make any sense?


What are we to make of this apparent jump in volume of more than a full order of magnitude? Did it really happen, or is there some other explanation for the discrepancy between the two surveys mentioned in Kenneth Gooding's article from Jan. 30, 1997? Most of the gold market followers on Kitco at the time seem to have taken the news as simply the revelation of previously-undisclosed volume, as opposed to the revelation of a sudden increase in volume. And the mainstream media that reported the two survey results seemed to ignore or not even notice the difference.

Here's another article from Gooding in May of '97. Notice the highlighted portion:

LBMA clears less gold during April
By Kenneth Gooding
Financial Times May 13, 1997, Tuesday LONDON EDITION 1

Another fall in the average daily clearing turnover for gold was reported by the London Bullion Market Association yesterday. Daily turnover was 32.1m troy ounces worth $ 11.1bn, well down on the 36.3m troy ounces worth $ 12.8bn cleared in March and the record 40.3m ounces worth $ 14bn reported in February.

The association also pointed out that April's volume total was 15 per cent below the average for the first quarter and 16.5 per cent down in value terms. "Underlying these trends was the levelling out of both gold and silver prices in April and consequently lower volatility which was naturally reflected in a generally declining level of activity and clearing turnover," said Mr Chris Elston, chief executive. Gold averaged $ 344.47 an ounce in April, compared with $ 351.80 in March.

The LBMA started reporting daily clearance statistics for London, the international settlement centre for gold bullion, only from October last year, so there are no comparative figures for April 1996.

The picture for silver in April was similar to that for gold, with 253m ounces worth $ 1.2bn cleared on average every day, down from 284m ounces worth $ 1.5bn in March. The average silver price in April fell to $ 4.77 an ounce from $ 5.20 in March.

That was his standard practice each month, to compare the monthly volume report to the prior year, and, therefore, to note that there was nothing to compare it to until October '97. But he never mentioned the May '96 BOE survey again for comparison. If he had, any comparison between the two would have raised some obvious questions, which is why I said he seemed to either ignore or not even notice the difference. To me, in hindsight, now with the advantage of the 2011 survey which gave us a concrete relationship between turnover and clearing, this seems to be the elephant in the room that nobody noticed.

Another and Big Trader on the other hand, and meanwhile, were going on and on about an explosion in the gold trading volume. Did they know something that no one else knew? Look at this comment from "Big Trader ( the writer! )" on February 27, 1997:

"Let me clear up a few things. I am not the “Big Trader”! He cannot speak or write english and does not/would not post here. He has a need to get “thoughts” to other people. I do not do well with english either. My relations with him are private and restrict me from posting my own thoughts… Those of you who are rich and “on the inside” of gold companies and gold traders, ask if anyone alive had ever seen gold trade in the present volumes that have not been seen in history. The shocking truth is that more gold has just been traded than is held in most of the central banks. So much so that even the 100+ year old london gold pool was forced to admit to trading it’s share! I should think that the big investors on comex would have known this was going to happen! No? It could only have been the people who were about to do this buying that would know ahead of time. Yes, only they would know that a “once in a lifetime” buying spree was about to take hold.

Will gold go back down in price? They don’t realy care! Only on kitco can a trader find such good info. I advise every gold trader in the world to access this site every day! There is only one person who knows me at this site. That person is the soul of discretion and integrity. Someday I will contact him again and he will learn my real name. May the force be with you, and keep your eye on london! thank you"

Notice the highlighted portion. The above was posted at the end of February '97, just about one month after the LBMA released its clearing volume for the first time on Jan. 30th. But Big Trader first showed up on Kitco on December 7, 1996, with this:

"Myself and a group are indeed placing open orders for Feb/97 gold on any breaks below $370.00 and will continue to buy each day under that price ( for weeks if allowed ). We can and will call most or all of these contracts if the market doesn’t rise enough for a rollover. Our cost and fees is such that it’s easier to buy paper here than physicals in asia…"

Again, that was Dec. 7, 1996 when Big Trader first showed up talking about himself and his "group", "in asia", buying paper gold for the purpose of converting it into physical. Then less than two months later, on Jan. 30, 1997, the LBMA released its clearing volume. Then one month later, either FOA or Another wrote "It could only have been the people who were about to do this buying that would know ahead of time. Yes, only they would know that a “once in a lifetime” buying spree was about to take hold."

In hindsight, February '97 had the highest volume, by a fair margin, during the entire first year of reporting. From the LBMA website:


About one year later, on February 4, 1998, Another wrote this:

"Most of the very large buyers completed much of their conversion all of last year. When we speak of these entities one must know that they purchase much larger amounts than Berkshire. Most cannot understand that it is difficult to take five or ten million oz./gold in physical in a month or less. Note that Mr. Buffett has taken six months and only purchased about half of his silver! Even here we speak of only $300m for the amount taken. At this time the market is very, very tight for large money to go into physical. Paper, yes! I could move five billion US into paper metal very fast, but not physical."

Most of this I'm giving you is to simply show that the narrative being explained by Big Trader, Another and FOA in those early days is, in fact, corroborated by data from official (BOE and LBMA) as well as mainstream (FT) sources at the same time, even if it was never explored in quite this same way before. And again, the magnitude of the apparently huge increase in volume only became less speculative and more concrete after August of 2011 when the LBMA released its survey.

To recap, Big Trader shows up in December talking about buying lots of February paper gold and converting it to physical. In January the LBMA starts releasing its clearing volume. In hindsight, February turns out to be a big month. And also in hindsight, 1997 turned out to be a big year for physical gold flowing out of London. Here's a chart of gold imports/exports for the UK that Victor the Cleaner put together. The data he used came from an old article by James Turk:


Notice almost 2,500 tonnes of physical gold in net exports for 1997. If we divide that amount by 12 months, it works out to about 6.7 million ounces per month. Pretty close to what Another said on Feb. 4, 1998: "Most cannot understand that it is difficult to take five or ten million oz./gold in physical in a month or less."

Remember also that Another was fond of saying "Time will prove all things." So was it just a coincidence that, time and again, Another said remarkable things that could only be corroborated years later in hindsight? Or could it be possible that he not only had access to insider intel, but also the "old money/Giant" perspective necessary to put it all together in a way that even most insiders couldn't have done with intel alone? It is this rare combination that, in my opinion, makes Another so unique, and probably also what drove him to share his insights.

This is the way I've always viewed Another, and over the years I have even developed a "profile" for him that I find most fitting. Some think he must have been a central banker, perhaps even one of the euro architects. But I have come to like the idea that he was European old money aristocracy, also having some connection to the various areas that he seemed to know so well.

Michael Kosares wrote in his intro to (THOUGHTS!): "ANOTHER demonstrates a feel for and understanding of the gold and oil markets that indicates connections at the highest echelons of international finance." I would add that he also probably had some connections making him privy to top level intel in central banking, the LBMA, Hong Kong, South Africa and Middle East oil.

In 2001, FOA wrote, paraphrasing Another, "we are not here to prove things, my friend, time will do that for us. It will also expose our standing in world of Thoughts." Please take note of how this posture differs from virtually everything else we read from other gold analysts and so-called "experts", be it reasoned speculation or statements of (supposed) fact. And it wasn't just their posture, but their entire view on the gold market that differed (and still does to this day) from virtually everyone else.

There is certainly nothing wrong with well-reasoned speculation by experts and discussions about apparent facts. But I propose to you that the logical consistency of what A/FOA shared, combined with everything else about it (their posturing, their exposing of what could only be insider intel if true, and the obvious old-money, old-world wisdom they exuded) warrants very serious consideration, especially because their view is so completely different from both the mainstream "expert" view and the majority gold bug view of the market.

So, with that in mind, let's take a quick look at some of the other things they wrote about this explosion in volume:

6/8/97: "So many off market forward gold deals were done without any gold changing hands! Big buyers got on the paper side of these things and thought that the CB’s were backing the dealer banks by written contract. If the mines couldn’t perform the banks would …….! But what if in some deals the mines were not involved at all ? Just off market option trades as backing? … And now whatever gold that was to back these deals is found to be “not there”? And everybody was looking at all this paper being sold and thought there must be one hell of a lot of gold being sold!"

Some of you may recognize the bolded part as an issue that was under debate here a while back. But how else can you explain such a huge expansion, over a short time frame, in the LBMA trading volume? If the expansion/explosion described above really happened, then it was either "one hell of a lot of [physical] gold being sold," i.e., dumped on the market, or it was a hell of a lot of paper gold being written to meet demand. And while the price of gold did decline during the summer of '96, it only dropped by about 2.5%, which, I think, obviously argues against the idea of a physical dump.

1/10/98: "What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis?

From 1991, appx. 20m/oz./yr., now it is more.

How much paper GOLD is out there ready to be squeezed?

Over 14,000 tons."


2/9/01: "Yes, they did introduce the gold carry trade then and the timing was no accident. I also have to point out that Another was the very first to mention a gold lending number anywhere near that level. He said it was around 14,000 many years ago or would soon approach that level. Everyone, except those that knew the game, said it was NUTS! Now, the 10,000 figure is on every desk in the world."

Trading volume, be it turnover or clearing, only tells us something about the flow. It tells us little about the stock. Here Another appears to know the stock of uncovered paper gold that was "written" (lent, borrowed and sold short) during the inflation. In currency terms, that would have been around $160B. At one point FOA infers, in no uncertain terms, that Another is, in fact, privy to this very secret information:

5/3/98 "Somehow, the BIS and the major private gold holders know the total claims, as does Another."

Many in the gold community believe that this high volume must have represented real gold changing hands. Some of it did, but most of it did not according to Another. Many believe that this much real gold could have only come out of the central bank vaults. To be sure, some did, but most of it did not according to Another.

10/12/97: "How DO they do it?

It's more complicated than this but here is a close explanation. In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion. That "party" sold to a broker who sold forward for a mine or speculator or government ) . In the end the 3rd party had the backing from the broker that he had backing from the CB to supply physical if needed to put out a fire. The CB held a very private note from the broker as insurance and was paid a small fee. This process mobilized free standing bullion outside the government stockpiles. The world currency gold price was kept down as large existing physical stockpiles were replaced by notes of future delivery from the merchant banks ( and anyone else who wanted to play ) .

This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN! Why not move a little closer to the action by offering cash directly to the broker/bank ( to be lent out ) in return for a future gold note that was indirectly backed by the CBs. That "paper gold" was just like gold in the bank. The CBs liked it because no one had to move gold and it took BIG buying power off the market that would have gunned the price! It also worked well as a vehicle to cycle oil wealth for gold as a complete paper deal.

Are you with me?

Well a funny thing happened right after the Gulf war ended. What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer.

This was not far from the time that "Big Trader" said that "if gold drops below $370 the world would see trading volume like never before seen". The rest is history. Now the CBs will have to sell 1/3 to 1/2 of their gold just to cover whats out there. To use the Queens English "it ain't gona happen dude"!"


11/16/97: "In todays time the CBs do not sell physical gold with a purpose to drive the price down. They sell to cover open orders to buy what cannot be filled from existing stocks. Look to the US treasury sales in the late 70s. They sold 1 million a month using open bid proposals with much fanfare. If the CBs wanted physical sales to drive the price they would sell in the same way.

The sales today are done quietly with purpose. The gold must go to the correct location. That is why these sales do not impact price as they occur, there is a waiting buyer on the other side. As all of these transactions are done thru certain merchant banks, not direct CB contact, the buy side does hold hedges.

When actual delivery takes place, months later ( and usually at the same time as the CB sale statement ) these hedges come off and affect the market price.

It is important to understand that none of these CB sales of physical need to go to the open market at all! The BIS could take it all. …

Banks do lend gold with a reason to control price. If gold rises above its commodity price it loses value in discount trade. They admit now to lending much where they would admit nothing before! They do this now because of the trouble ahead. Does a CB have collateral to lend its gold? Understand, they only lend their good name on paper, not the gold itself. The gold that is put on the market in these deals belongs to someone else! The question is not "Are the CBs worried for the return of gold?" but, "Has our paper been lent to the wrong people?".

The BIS will not allow the distribution of all gold to settle claims."


Confused? Let me briefly explain it as I understand it. In the first of the two comments, he said, "In the beginning…" That relates to the period from roughly 1990 through 1996, prior to the arrival of "Big Trader" and the jump in volume. Up at the top of the post, in another quote, he said, "And who in the hell would have thought that they would have used so much of that pay to buy gold! Some bought in tiny amounts and some bought in large amounts. This started with the new world trading order that came into being about six years ago." That quote was from April '97, so "about six years ago" probably meant around late 1990 to early 1991.

So "in the beginning", the CBs (not directly mind you, but through the LBMA gold dealers) found others with gold who would be willing to sell—to go short—their gold, with the implied promise that it could be repurchased at any time because the broker—the LBMA gold dealer—assured the seller that he had an assurance from the CBs that the CBs would supply physical "if needed to put out a fire." What's a fire? A fire is what the seller of the gold (the short) doesn't want—an explosion in the price while he doesn't have his gold.

"The CB held a very private note from the broker as insurance and was paid a small fee." The private note was a loan note, a promissory note, and the small fee was the gold interest rate, which the LBMA dealer paid the CB even though no real gold changed hands. This was a gold loan from the CB to the bullion bank, but the gold never left the CB vault. It was actually a cash loan at a very low interest rate, ~1%, but the promissory note held by the CB was denominated in gold ounces. It could be retired in cash at the price of gold which was expected to decline since the CBs promised to step in to put out a fire, or with actual ounces of physical received from the mines who hedged, if the price ever rose. Plus the CBs promised to roll the loan (not call it in upon maturity) if the price of gold rose. So, to the bullion banks, the cash was essentially free money that could be used to churn an income.

[5/15/99: "In addition, the CBs said they could roll it forward for ten years +/-, if the price of gold rose!"]

The borrowed cash was used to purchase the real gold from the party who was willing to sell his gold with the assurance that he'd be able to buy it back cheaper in the future. Then the purchased gold was sold to those who wanted only real physical gold, which was, in those days, the swing producer in the oil market, The House of Saud. It was then, and still is today, all about managing the subterranean flow of physical gold which is much tighter than the paper gold market makes it appear.

Those of you who are sharp gold market historians may remember the 90s as "the decade of gold sales". Throughout the decade, the price consistently declined, from $400 down to $250. And every time there was a big drop, there was a news story about another big sale. First it was the Saudis in 1990 who were reportedly selling their gold, driving down the price. Then it was Duisenberg and the DNB in 1993. Then the Belgians, and finally the BOE.

That was the mainstream narrative explaining the gold market in the '90s, but it is very different from what Another explained. And for those of you that remember the story, I wanted to mention the mysteriously large (~90 tonne) Saudi gold sale that was blamed for a sudden $23 drop in the price, and was also denied by the Saudis even though London bullion dealers (LBMA members) insisted it was them.

If it was not a short sale, which no one claimed it was, then it was the sale of a "gold" position that had been previously purchased. In other words, it was the unwinding of a long position. Now think about something Another said: "As all of these transactions are done thru certain merchant banks, not direct CB contact, the buy side does hold hedges…" That would be a long position hedge, to lock in the purchase price until an actual physical order could be filled. "…When actual delivery takes place, months later… these hedges come off and affect the market price."

Could the Saudi sale have been a long position hedge (to lock in a purchase price while waiting for physical to become available) that was unwound (sold) at the moment they received (actually purchased) the physical? This not only makes really good sense, it also explains both the dealer insistence that it was a Saudi "sale", and the Saudi denial, because the Saudis would have actually been buying physical and selling paper, which caused the market price to fall. Elegant solution to the mystery, right? This is kind of like what A/FOA's insights do for the whole macro "riddle wrapped in a mystery inside an enigma." They solve it… elegantly.


Okay, back to my "brief" explanation. Enter Big Trader: "This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN! Why not move a little closer to the action by offering cash directly to the broker/bank ( to be lent out ) in return for a future gold note that was indirectly backed by the CBs. That "paper gold" was just like gold in the bank. The CBs liked it because … it took BIG buying power off the market that would have gunned the price!"

…What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for the real stuff. From that time, early 1997 LBMA was running full speed just to stay in one spot! In other words paper volume had to increase to the physical volume on a worldwide scale, and that was going to be one hell of a jump. It could not be hidden from the news any longer."


So the Asians (in Hong Kong) found out that this cheap paper gold was implicitly backed by the CBs, therefore it was as good as the real thing because it could eventually be converted into physical, or so they thought. So they gave the LBMA gold dealers cash, and lots of it (as I said above, the paper gold "inflation" worked out to about $160B at the time), in exchange for a future gold note (a gold mine forward hedge note) that they thought would be backed by CB gold if the mines couldn't produce enough.

The LBMA gold dealers took this Asian cash and lent it to the miners in exchange for the gold-ounce-denominated promissory note. The bullion bank held the note on the miner and the Asians had a note from the bullion bank. But global mining output was only about 2,290 tonnes per year at that time, and $160B could have hedged 14,000 tonnes of future production, so not all of that money was lent to gold mines.

Enter the hedge funds and the gold carry trade. Gold loans (which were actually dollar loans with the promissory note denominated in ounces) were really cheap at the time, plus the price of gold was declining, making them even better than cheap! They were virtually free money that could be invested almost anywhere to churn an income. Everyone who was anyone wanted in on the deal. And the LBMA gold dealers were the middlemen, taking a percentage from every transaction.

The LBMA could get virtually free money, first from the CBs and later from the Asians, and lend it to, as Another put it, "mines, speculator or governments." Mines were the actual forward hedges, and the speculators and governments were the hedge funds and anyone else who wanted to short the barbarous relic that was seemingly in perpetual decline, and borrow virtually free money at the same time. Money was flowing, in large amounts, and the only catch was that the promissory notes were all denominated in ounces rather than dollars.

There's no problem with this setup for the borrowers (the gold shorts, primarily hedge funds and miners) as long as the price of gold is reliably declining and the gold interest rate is low. There's no problem for the CBs as long as the LBMA can manage the subterranean flow of physical to those buyers who only care about getting the real thing. There's no problem for the paper longs that don't care about physical as long as those that do can convert their paper to physical. There's no problem for the longs that eventually want to convert their paper to physical as long as they confidently can. And there's no problem for the LBMA bullion banks as long as they have the central banks' tacit agreement "to supply physical if needed to put out a fire."

There is, however, a big problem with this setup. But it only becomes apparent to someone who can see it as a unified whole. Another was apparently in a position to see the big picture early, as was Big Trader. The CBs eventually saw it, and were forced to sell a little gold while also retracting their tacit agreement "to supply physical if needed to put out a fire" on Sept. 26, 1999, which spiked the gold lease rate up to 10% and sent the price up 20% over seven days. The hedge funds and mines got out of the carry trade after the gold price started rising, but the paper gold longs are still oblivious to even the slightest problem with this setup. Even after 17 years.

I want to mention something now. I really don't want to make a big deal out of it because it's only speculation, but I think it goes well with this post. It was an afterthought, something that came out of my efforts while writing this post. And I think it may give a few people pause, or at least something to think about and consider its implications. I know a lot of people have their own idea about who Another is, was, or might have been. And I want to state for the record that I don't know who Another was, nor do I think it matters much because his words speak for themselves. But, while working on this post, I came across the best candidate for Another that I have ever laid eyes on.

Those earliest comments by Big Trader, Another and FOA, the ones prior to the USAGOLD archive, only became available to me less than two years ago. Before that, the earliest post from Another was this one which appeared in the Red Baron's LBMA series (my emphasis):

Date: Sun Sep 14 1997 21:12
ANOTHER (an answer?)

This could be an answer directed to the "Red Baron"?

The CBs are becoming "primary suppliers" to
the gold market. Understand that they are not
doing this because they want to, they have to.
The words are spoken to show a need to raise
capital but we knew that was a screen from
long ago. You will find the answer to the LBMA
problem if you follow a route that connects
South Africa, The middle east, India and then
into Asia!


Remember this; the western world uses paper
as a real value, but oil and gold will never
flow in the same direction.
Big Trader

Another referenced that comment two months later:

Date: Sat Nov 22 1997 23:13
ANOTHER (THOUGHTS!) ID#60253:

This was written: "To find the answer to the LBMA , "Follow the connection from London, to South Africa, to the Middle East, and on to Asia"

Mr. Markus Angelicus,
I read the gold-eagle write. You have made the link between London ( LBMA ) and South Africa.

I read that comment while preparing this post, and I realized that now, with the old Kitco archives available, I could look up the Markus Angelicus comment to find out what it was that Another was confirming. It turns out that "Markus Angelicus" had written an article for Vronsky's Gold-Eagle site titled The Rothschilds, LBMA, and Gold, and Vronsky had posted a link to it on Kitco. That was what Another (or FOA) was responding to.

The only relevant reference to South Africa in the article was this: "Rothschild Freres, run by cousin Baron Guy Eduoard, was the largest private bank in France. The French House also controlled mining companies ( De Beers and gold mines in South Africa )…"

So, apparently, Another was confirming that the connection from the LBMA "to South Africa, to the Middle East, and on to Asia" was the House of Rothschild, or at least the link to South Africa.

I have had many people propose many candidates for Another to me over the years. But credit where credit is due, Mortymer proposed Guy de Rothschild as a candidate three years ago. And then FoNoah asked me to take a look at him as a candidate after I sent him the Markus Angelicus article while working on this post. I did, and, surprisingly, he fit my profile far better than anyone I've ever considered in the past. Admittedly, I didn't give Mortymer's proposal enough consideration at the time, but I also didn't have the additional information of Another's inference that Rothschild was a key connection.

I did look at other Rothschilds upon FoNoah's urging, but only Guy fit. And in case you're thinking that the French and English Houses of Rothschild are independent entities, as I mentioned earlier, today they are merged. In fact, the English side (N.M. Rothschild & Sons) is now wholly owned by the French side, and the whole shebang is controlled by Guy de Rothschild's eldest son David. Could he be SOA?

I always wondered if Another might have been directly (or indirectly) involved in the LBMA's decision to release its clearing volume 17 years ago. The Rothschilds certainly were! The Rothschilds not only headed the Fix for 85 years, but Mr. Robert Guy (I know, there's that name "Guy" again), a director at N.M. Rothschild, not only personally headed it from '74-'93, but he was also the first chairman of the LBMA, from '87-'91. And remember, from above, while still chairing the Fix and representing N. M. Rothschild's gold interests, but after retiring from the chairmanship of the LBMA, he was the first person pushing for transparency in the LBMA's turnover volume as early as 1992.

Here's a great article about the history of the LBMA, written by Robert Guy in 2012. And if you're thinking that you might now agree with me that Rothschild led the charge for more transparency in the LBMA, how about the charge to get the ECB to openly declare its intentions regarding gold, which it eventually did on Sept. 26, 1999? Well, check out the highlighted portion of this FT article, by none other than our old friend Kenneth Gooding, two years earlier in 1997:

Call for more gold reserve details
By Kenneth Gooding in Prague
Financial Times June 17, 1997, Tuesday LONDON EDITION 2

Central banks were yesterday urged to end the "fear factor" haunting the gold market by providing more information about what they intend to do with the gold in their official reserves.
Worries about central bank sales have helped to drive down the gold price this year, and there is particular concern about the policies of European banks ahead of the formation of a European Central Bank.

Mr Robert Guy, a director of N. M. Rothschild and Sons, told the Financial Times Gold Conference in Prague that there was a lack of information on sales.

"I hope those involved in the creation of the ECB will break their Trappist vows and share their views with the rest of us," he said. "In these days of transparency and accountability, I find it truly remarkable that we can still be given no clear picture about the role of gold in the event that European monetary union proceeds."

As I said at the top of this post, "if you're just laying eyes on this Freegold thing for the first time, you are in luck! As of today, if you have, say, $55,000 in surplus currency reserves sitting around, you can still exchange it for 43 ounces of real physical gold!" You can, if you want to, feel sorry for the poor souls that bought gold 17 years ago on Another's advice, but I know a few of them, and they don't feel sorry for themselves. They got 160 ounces or more for that same amount of money, and that's some serious wealth! I know a couple of them who got more like 200 ounces for that much currency, and they still have it today.

I'm not wrapping this up for lack of material. I could go on and on with A/FOA quotes explaining the big picture, thanks to the LBMA's revelation of its volume 17 year ago, which really opened the door for Another to speak out. I'm actually holding back a whole bunch of quotes that I pulled for this post, simply because it's already 22 pages long. They aren't really needed anyway, and I've already done it so many times in the past. Look at my blog. I do tend to go on and on, and it's all there—the big picture Freegold view as I learned it from Another—in the archives.

You might also be thinking, "gosh, 17 years. That's a long time. They must have been wrong… or something." Well, that's not how I see it. Again, it's all here in the archives, but it seems to me that what they explained actually makes more sense today, seems more inevitable and possibly even imminent, with the benefit of hindsight, than it did 17 years ago when it was written. At least it does to a shrimp like me. It takes a while to learn to think like a Rothschild. ;D

And if you're truly just seeing this for the first time, you are probably wondering, "What's the bottom line?" Well, again, it's all here in the archives on my blog. But sure, I'll cut to the chase, just for you. It's a necessary and inevitable revaluation of gold. That's not like a bull market run-up in the price. It's an overnight gap-up in the price, something the paper traders will have no say in, and something that won't happen to other "gold-ish" alternatives. Only the real stuff. And when it's done, in my opinion, you'll still be able to get a full ounce of real 24-karat gold for the same amount of austerity that it took you to save up that $55K you have today. That doesn't mean the money you have right now will still buy you a full ounce after revaluation, but if you saved it once, hey, you can do it again. Right?

17 years is indeed a long time. But with Another's very different perspective, we can see what happened during that time, and how things are looking right now. Over the last 17 years, every ounce of new gold was purchased, and the "old gold" worked its way into stronger and stronger hands. The LBMA volume today is almost the same as it was when they started collecting data in October of '96, at least in ounce-denominated terms. In currency terms, and number of transfers, it has tripled.

Hedge funds and mines got out of the gold carry trade, for the most part, once the price started rising. The CBs stopped selling and started buying gold in aggregate around 2010, with one of the largest single purchases by a CB being Saudi Arabia, who purchased 180 tonnes.

It has always been, and still is today, all about the flow of physical which underlies the paper gold market but has very little to do with its price. This is evident today, just as it was 17 years ago in 1997, but the conditions, players and incentives are very different today. The weak hands are empty, the CBs are no longer suppliers, scrap is down, mines are under pricing pressure, and "Big Trader" is apparently back in the hunt. My best advice is to get some insurance on the present value of your savings ASAP. 5% of your savings in physical gold should be a no-brainer. And then take a closer look at the big picture Another painted. You might decide, like me, to buy a little more. ;D

"Who am I? As I will not be around for long so I am noone. But, follow with me as all of this takes place in your time!" -Another

Sincerely,
FOFOA





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FOA (06/12/01; 11:23:21MT - usagold.com msg#77)

This was "part" of the price we paid for oil to flow in dollars this last decade as the Euro was born. This was the price we paid for an extension of dollar use in oil settlement. It will be moved when gold trades at a much,,,,, much higher price. It backs Another's point of long ago that oil was traded for gold in the thousands at that time,,,, we just had to wait for the real price to be shown. It will! This is the decades long game we are playing for, my friend. This is the big one we own gold for. This will be the defining moment in our time that changes perceptions about the value, reserve currencies and the wealth of ages. Watch with me now, as events prove all things!


545 comments:

«Oldest   ‹Older   401 – 545 of 545
Edwardo said...

Phat Expat,

You wrote:

Aside from that, I don't believe that some cartel of giant gold holders necessarily hold all the cards.

Part of my answer included this:

You may not like all the ins and outs regarding how the following dynamic operates, but in the world we live in, (as opposed to the one we might prefer to live in) when you not only pay the piper, but feed his entire extended family, you not only call the tune but, ultimately you get to pick the instruments, the key in which the tune is played and the venue for the performance.

You responded with:

Not sure if I get your point entirely here. If you're saying that, post FG, things will not be as they are today then that is certainly as I expect. If not, please expound.

Post freegold, when savings don't automatically feedback into the system, credit will no longer be an all spur and no brake affair, which, as we know, leads to systematic mis-allocation of capital and mal-invesment. Save for the fatal flaw of fixing a weight of gold to credit this is what gold standards of yore did quite well, namely regulate the creation of credit/debt. All that is not what I was referring to however. I was simply pointing out that though some of us, including you it seems, bristle at the idea of gold holders in size calling the tune, before Feegold and after, the planet's biggest producers, will have, as they do now, the prerogative to decide what form of payment they will accept in return for their production. Equally, they will have the prerogative to decide which asset to save in. In that regard, among other points of stasis, little will change. I hope that clarifies my point.

ein anderer said...

@MatrixSentry:

It could happen any day, with an ultimate time horizon that could extend perhaps to 5 years or so.

Is this horizon in tune with FOFOA’s thinking?

There is this famous PoG(phys.) curve, we remember: Telling us that in the year it was created and used the probability of 55K is highest.

Can’t »we« (well, you, ’cause my knowledge is not prepared enough) — can’t we draw a probability curve for the time frame?

Yes, I know: Mr. Black Swan can visit us every hour. But besides swans, be they black or white or golden: We are talking of a physical market, yes? Filling a cube just of 30x30x30 meters, if we would take everything together what was mined ever before.

In our days gold (phys.) seems to have some elbowroom still. Otherwise the music woud have stopped already.

Can’t we really calculate the moment where the probability will have become so extremely high for a »rien ne va plus« that we can say: »Extremely unlikely that the the music will not have stopped until then?

Your 5 years? Oder horizon? Why?

Indenture said...

What do you think will happen first: the paper gold market will break, or the USD will hyperinflate?
My hope is they both happen simultaneously over a long weekend so as to cause the least amount of damage to the world wide financial system but gold will stop flowing before any official hyperinflation.

Franco said...

Indenture:

You say that gold will stop flowing first as if with absolute certainty. Isn't that a little presumptuous?

Sam said...

pre-cartel, when the price of oil would fall, what would happen to oil production? The answer is it went up. Small time producers with bills to pay had to ramp up production to get by. The result led to even more supply and lower prices. Post-cartel, oil producers can wisely cut production into falling prices and achieve higher prices by simply reducing the supply side of the supply and demand dynamic.

Gold mining today is like pre-cartel oil. Miners have bills to pay. They can't weather both a fallen price and a reduction in output and stay in business. Instead the falling price leads to ramped up gold output for the short term. The worst part is that their pricing mechanism is broken and wholly controlled by paper so even if they did cut physical production across the board it wouldn't change the price of gold. When gold's real value is finally discovered mines won't get to capitalize on it as their production will be Controlled (with a capital "C")

Sam said...

Indenture said:

"Our current dollar will function until it can't be exchanged for gold."

This is a subtle but important concept. 99% of people think we like in a world with a fiat reserve currency. I say there is no such thing. The people that want/wanted gold are still getting it in exchange for dollars. In effect (though the chain has become longer and harder to see) gold has always backed the world's reserve currency.

Woland said...

please excuse me for getting in the middle of this, but since
I'm planing to say something about a certain FOA post in the
next day or so, I'll quote a brief passage:

"Michael, (Kosares), you are absolutely correct in that the
USA will see a hyperinflation of its currency and a gold price in dollars that reflects it. Unfortunately, for most investors,
the gold price rise will be SO SUDDEN (like in overnight) and
also HYPER FAST (like in zero to 60 in 3 seconds), as it
will occur just AFTER a rapid plunge in dollar based assets,
including stocks, debt, and the entire banking system."

ANOTHER (THOUGHTS!) Friend of ANOTHER, Mon, Aug 10
1998

A hyper-inflation takes time. A collapse can happen overnight.
So, if one were to be the trigger for the other, I'll go with FOA
on this one, and bet on the collapse coming first.

Woland said...

p.s: the stuff in (parenthesis) is NOT FOA, just me.

Nickelsaver said...

Franco: "You say that gold will stop flowing first as if with absolute certainty. Isn't that a little presumptuous?"

Just to follow up with what Sam was driving at. The whole point is that "flow" within the monetary plane can be generated in a multitude of ways, and seemingly forever. But flow within the physical plane is subject to the limitations of an opaque supply/demand structure which is interfaces with the monetary plane, but which can never be ultimately controlled by the monetary plane. That because there are entities which are ALWAYS ready and willing to buy *IN SIZE* at prices that if made public would send the market to the moon and KILL the paper in its tracks.

So it stands to reason, if the paper is still flowing, it is because the physical is still flowing. For if the physical stopped flowing, what incentive would the buyers *IN SIZE* have to keep from sending the market to the moon?

Indenture said...

"You say that gold will stop flowing first as if with absolute certainty. Isn't that a little presumptuous?"
I have been called many things and presumptuous is already on the list. Thank you.

ein anderer said...

Sorry, my typos:
»Your 5 years? Oder horizon? Why?« ==>

Your 5 years? Other horizon? Why?

Anand Srivastava said...

tEON:

You raise an interesting point. You are saying that govt will conspire to kill BTC in their country to prevent movement of wealth outside the country.

Restriction of wealth movement is only interesting to Deficit countries no? Surplus countries are generating enough wealth that they don't need to have such artificial controls. Is France successful in restricting their moneyed people moving out of the country after they enacted their draconian tax laws? Does it really work.

Agreed, BTCs will be closed down by the Deficit countries. In any case more open economies attract money, and money flees from less open economies. Countries will not put draconian laws to prevent money leaving the country unless they are in trouble in the first place. You cannot really target just BTCs. Even if you blame it on terrorism, etc. Businesses understand what these things really mean. And these mean trouble.

After Gold, Govts will have to allow movement of gold outside the country in Deficit countries to allow natural balancing of trade. It would be possible to have the balancing of trade happen through BTCs also. Balancing of trade just requires one wealth asset to move outside the country, and allow the import of some needed objects in its place. This wealth asset can be gold or BTCs. How does it matter to the country?

What the country should be more interested in is to keep the producers in the country. If the producers move out, and you keep their wealth, you still have lost the wealth generation. I don't think countries (except those in trouble) will try to ban BTCs. It doesn't make sense.

Anand Srivastava said...

MF:

I agree that BTCs are way inferior than gold to protect your wealth. They are too volatile. BTCs can never be as good as gold.

I do understand this blog is about Another and FOA's writings. And they don't deal with Crypto-Currencies. But if we only talk about their teachings, it will get boring here :-).

I would much rather we talk about something interesting than read the inane droppings from the Trolls.

For me it is important to apply the learnings from one place in different areas. The SuperOrganism post was profound. It applies so well to the Medical Industry. Similarly the Store of Value concept applies very well to the BTC, even though on a much smaller temporal scale than Gold.

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

@anand srivastava

I find it amusing that you are attempting to spin BTC ala FG, but - regardless...

Agreed, BTCs will be closed down by the Deficit countries.

So, (now) you believe that BTC will be closed down in the USA, UK, India, France, Turkey, Spain, Hong Kong, Italy, Japan, Egypt, Greece, South Africa, Morocco, Portugal, Poland, Pakistan, Philippines, Lebanon, Ukraine, Romania, Austria, Bangladesh, Mexico, Jordan, Canada, Vietnam, Sri Lanka, Israel, Kenya, and the Dominican Republic?

How do you think that will effect the BTC value when it is 'closed down' in those countries?

and would you like to revise this statement? :

With bitcoins being lost by people, there will be less and less bitcoins in the market keeping the price going up indefinitely.

I guess what I mean is that despite BTCs being 'lost by people' do you see the price 'going up indefinitely' if it is 'closed down by the Deficit countries'?

Countries will not put draconian laws to prevent money leaving the country unless they are in trouble in the first place. You cannot really target just BTCs.

They don't need to 'put them', anand - they already exist. I think you can target BTC in this regard. BTC's ability to move wealth freely (the convenience of billions on a flash drive or a piece of paper) between countries seems its biggest flaw - although idealists continue to hail it as a positive attribute. So, do we anticipate Congress (or other countries governing bodies) to alter their current Capital Control laws? or target BTC as the most prominent example of potentially illegal hidden wealth movement?

Thanks,

KnallGold said...

"Claiming to have vaulted France and Italy in terms of gold reserves, China has announced that they have expanded their gold reserves by 76 %, thus becoming 3rd largest gold reserves in the world. According to the voluntary reporting system of IMF which monitors international gold reserves, China’s gold reserve have increased from the last reported holdings of 1,054 Tons in 2009, April to 2,710 metric tons currently...."

http://www.globalresearch.ca/china-expands-gold-reserves-surged-past-italy-and-france-in-ranking/5365466

They more than doubled again, if one would believe the official figures. Worth noting is that we are increasingly confronted with 4 digit figures. How long can this go on until "the bank has no Gold!" emerges? Did someone made physical in size available recently?

MatrixSentry said...

ein anderer,

Is this horizon in tune with FOFOA’s thinking?

I have no idea as to FOFOA's timeline, if he indeed has one. I do know that he believes it could happen anytime. I also understand him to believe we are moving toward Freegold, not remaining stationary or moving away

There is this famous PoG(phys.) curve, we remember: Telling us that in the year it was created and used the probability of 55K is highest.

Can’t »we« (well, you, ’cause my knowledge is not prepared enough) — can’t we draw a probability curve for the time frame?


Well, lets take a look at what were talking about. After reading this blog, then RRTFB multiple times, my conclusion is that the onset of Freegold will be determined by human behavior. Specifically, when the decision is made that transactions will be cleared in physical plane rather than the monetary. IOW, when payment IOUs are no longer sufficient to clear trade.

There is room for debate as to how this will occur, whether the IOUs lose credibility first, or whether the ultimate form of payment in the physical plane fails to flow in sufficient quantity. The question of WHEN is another thing altogether. We're talking about human behavior here. And not just a human or small group of humans, we're talking about the super-organism. It is magnitudes more complex and smarter than any human or group of humans.

How is it you would have me predict the behavior of the human super-organism, being the smallest elemental unit of that organism? This isn't a machine based on logic and physics. It is organic.

I think you are looking for a time signal based on external factors that can be seen within the super-organism. We quantify everything, so you are likely looking for a number, such when X reaches this or Y reaches that, then we are done. That would be valid if you were speaking about a clockwork mechanism designed around laws. It however is an absurdity when speaking of the collective behavior of the humans on this planet.

Yes, I know: Mr. Black Swan can visit us every hour. But besides swans, be they black or white or golden: We are talking of a physical market, yes? Filling a cube just of 30x30x30 meters, if we would take everything together what was mined ever before.

You just made my point. You are trying to quantify the issue.

In our days gold (phys.) seems to have some elbowroom still. Otherwise the music woud have stopped already.

This is a valid observation. Why the need to seek an invalid observation or conclusion that can only be validated by sheer luck?

Can’t we really calculate the moment where the probability will have become so extremely high for a »rien ne va plus« that we can say: »Extremely unlikely that the the music will not have stopped until then?

Can you really calculate what I am going type next? My answer is of course not. But, I would love to hear your thoughts on that and perhaps a sound methodology.

Your 5 years? Other horizon? Why?

Now we get to the heart of the matter. As it turns out, I study economics as well Freegold. I hated economics for longest time because I thought it was bullshit. Then I discovered an important insight that is lost on most economists. An economy is not a machine. It is a living organism. It is not governed by logic and cannot be accurately described by mathematical equations on all scales. At some point, on the very small scale, certainty of a descriptive equation varies from 1.0 to something less than 1.0. This also occurs on the very large scale as well.

The reason for this is really very clear. It is impossible to predict what a singular human being is going to do at any given time with absolute certainty. Also, a super-organism of humans develops distributed intelligence for surpassing any equation derived by an elemental human or a logic machine designed by him.

(cont.)

MatrixSentry said...

The best way to view macro economics is to view the economy as an organic machine. Some behavior of this organism is machine-like on certain scales of size and time. But it is an emulation. Ultimately, this organic machine is driven on the elemental level by the individual human being. Much like our bodies are driven by our cellular activity.

What if we wanted to look a little closer at the cellular activity in our bodies? Our cells, are they really that elemental? As it turns out, no they aren't. The cells are comprised of all sorts of different things that are elemental to the function of the cells. Lets look closer still. Is there another layer of complexity that is elemental to the elemental components of the cell, that are in themselves elemental to human being, which in turn is elemental to the human super-organism?

Are you starting to get it here? The Super-organism is fractal all the way down to the sub-atomic level. Modern research suggests we may not be able to find the end point of this fractal nature of matter.

You need one key element to speak of an economy. You need a human being. Human beings are part of nature. Nature is governed by laws we do not fully comprehend and is fractal. It is also cyclic. We will never be able to see the full blue print. It is not in the design for us to see it. We will see fractals up and down the scale. To the degree we can zoom in and zoom out, we can discern behavior of nature.

Every cycle has a period, a wavelength. Nature shows us the most most basic cycle that governs all living things. Birth, growth, decay, death. A four beat cycle. The climate has four seasons that align with natures cycle. Our human lives have four parts, (birth) childhood, adulthood (reproduction), maturity, elder-hood (death).

Societal behavior observes a cycle as well. This shouldn't surprise anyone since a society is fundamentally comprised of human beings, who are themselves part of nature. The driver for the cycle is the movement of generations through their own cycle of birth/death existence.

At any given time there are 4 generations living on the earth, children, reproducing adults, mature adults no longer producing, and the elderly approaching death. There is that number four again. In turn, you can observe the behavior of this societal cycle by looking at economic cycle it creates. Would it be a stretch of imagination to guess that the economic cycle you observe just might match the life cycle of its most elemental self-autonomous unit, a long-lived human being? Say perhaps 80-100 years?

As it turns out, it would be an intuitive and accurate guess.

I have studied the hard sciences and wondered at the beauty of the fractal nature of reality. I have despised economics because it pretended to be science. I know now that economics is beautiful as well because it is fractal, just like all of reality. It exhibits cycles within cycles.

We are currently in the fourth beat of a large generational cycle. When this is complete, society will start a new cycle. The fourth beat is a death cycle, where what was born, grew, and then matured must die. It is a time of sudden change, upheaval, where the unsustainable fails. It is a period roughly 20-25 years in length. We started this fourth period in the early to mid 00s. It will be concluded somewhere in the 2020s.
The conclusion will coincide with the beginning of the next cycle, which will last about 80-100 years.

The economic cycle matches up with the societal cycle. The first part is characterized by birth and rapid growth. The second part sees continued growth and economic leverage built on maturing economic forces. The third part is a peak where all economic strength is exploited to the highest degree. The fourth segment is economic decay and collapse.

(cont.)

MatrixSentry said...

A good book that is an easy read and avoids the real technical stuff that I am omitting is The Fourth Turning. It explains the societal cycle and what drives it. It explains why the economic cycle matches up with the societal cycle. We are in the fourth turning of the 7th generational cycle (that we know of). The last 3 fourth turnings in order were: the great depression-WW11, the civil war, the revolutionary war. all characterized by massive social upheaval, war, and economic stress.

My assumption is the unsustainable will not be sustained and will give way to something that can be not only sustained, but will allow the generations to move forward and express their lives in a complete cycle. It has happened every time in the past. This process should be complete within 10 years. My estimate of 5 years is assuming resolution doesn't actually occur on the last day of the turning. IOW, we reach the bottom somewhere within the fourth turning and it is a process that culminates in the fullest expression of Freegold by the end.

If you want anything more precise than that, you won't be getting it from me.

Michael H said...

KnallGold,

""Claiming to have vaulted France and Italy in terms of gold reserves, China has announced that they have expanded their gold reserves by 76 %, thus becoming 3rd largest gold reserves in the world. According to the voluntary reporting system of IMF which monitors international gold reserves, China’s gold reserve have increased from the last reported holdings of 1,054 Tons in 2009, April to 2,710 metric tons currently...."

This is totally made up, the result of 'broken telephone' type feedback.

See:

http://goldchat.blogspot.com/2014/01/watching-china-2710-tonne-reserves-meme.html

Anonymous said...

@MatrixSentry Do you follow Martin Armstrong's blog at all? I don't take note of anything he says about gold, but his cycles theory seems to have a lot of merit. Armstrong keeps emphasising that 2015.75 (third quarter of 2015) is a critical turning point for the US economy.

MatrixSentry said...

gold-kiwi,

I do follow Armstrong, and it pains me to say so. He is a frustrating human being. His cycle theory is relevant and I believe he has real insight to the fractal nature of economy. However, he is forever tainted by his horrendous experience inside the Death Star that is the US government/judicial system. It has twisted his view of the world and it interferes with the application of logic.

I am on the fence as to whether his computer actually exists and does what he says it does. The reason I say this is because I can replicate some of his projections using my own models. I am relatively certain that Martin was wrongly accused and persecuted. But I am less certain that his "thinking computer" is legit.

Pat said...

Matrix, your best series of posts ever, and I have been a fan for a long time. This coincides with my belief that FOFOA's posts have also been increasingly insightful and better and better. This is like the inverse of the fourth cycle; as the decay/death approaches, the written word at this blog is in full bloom. Jetsom and flotsam like athrone, spaul et al excluded of course

ein anderer said...

@MatrixSentry,
thank you very much! I am honored having received such a long and detailed answer by a member of this blog (again).

Sam said...

I also recommend the 4th turning. One of the things this blog helped me understand was that human nature needs to be worked with not fought against when it comes to economics. The 4th turning fits well with this line of thinking. It will tell you where we have been, and where we are going, no advocacy needed.

I like playing poker. I always get a chuckle when a "good player" gets mad at a "bad player" for winning a pot in a way that the "good player" deemed poor play. Is the "good players" lecture supposed to help his odds of winning in the future? If you want to win the game, learn how the other players at the table play the game, and bet accordingly.

Woland said...

somebody pretty smart said this; (nOhU?)

"Having money vs. having assets is like having a jacket vs.
having a ticket to ( hopefully! ) get a jacket back from a cloak
check ( at Gleneagles)."

vizeet srivastava said...
This comment has been removed by the author.
Anand Srivastava said...

tEON:

How do you think that will effect the BTC value when it is 'closed down' in those countries?

I guess what I mean is that despite BTCs being 'lost by people' do you see the price 'going up indefinitely' if it is 'closed down by the Deficit countries'?

I was thinking of a time frame of decades for viability of BTCs. You can’t be serious thinking that the Crisis will continue for decades?

IMNSHO, we will have the crisis soon, 5 years tops. Then Gold will be revalued, to recapitalize the world. This will allow fixing of the crisis soon.
I would think less than 5 years after reval. We are talking about 10 years at max, more like 5 years.

After Crisis, resolution gold prices will become stable and will be moving up slowly, right. Do you agree?

Why is similar reasoning for BTCs wrong. There are so many different types of Store of Values, why you couldn’t think of BTCs as one. They fulfil all criteria for Store of Value. They are not useful for anything else. Their production is highly controlled. Most of BTCs have already been produced. In a few years the production will go below 2% (of the total stock) per annum.

So, do we anticipate Congress (or other countries governing bodies) to alter their current Capital Control laws? or target BTC as the most prominent example of potentially illegal hidden wealth movement?

You already agree that USA is amongst the in trouble countries. Do you think it will be forever in trouble country? Or do you think it will forever behave as an in-trouble country.

My bet is that BTC will not be banned by Germany. It is the most surplus country in Europe. If you are right they will ban BTC.

I would also think that China will not ban BTCs, but China works in mysterious ways . The same regarding Russia.

I would think that it will go up during the crisis before revaluation, when the panic happens. And most of the money moving in BTCs will be from Europe, Russia and China. These are the only places that will be in surplus and not under the influence of US. I think they have enough money to get BTCs moving higher without help from the rest of the world. You have to also understand that the ROW will not be able to sell BTCs to bring down the price of BTCs, due to the laws. All trading will be happening in the surplus world. Yes many people with lots of BTCs will move out of US. But they still will not need to sell a lot of their BTCs, same reasoning as Gold. If you think of its future viability why spend it all now. And most of the big owners are technocrats who believe in the future of Bitcoin.

BTC's ability to move wealth freely (the convenience of billions on a flash drive or a piece of paper) between countries seems its biggest flaw - although idealists continue to hail it as a positive attribute.

I am not really an idealist. I am more a rationalist. I don’t think BTCs ability to move wealth is that big a flaw. I think it is actually a good thing. This is what makes it great for international remittances. And IMO most of that business will move to BTCs. I am saying it doesn’t matter to the nations that are not in trouble. And this is more a problem in the current crazy world. Everybody is trying to delay the coming crisis. After revaluation, this ability would be considered a great feature not the biggest flaw.

Anand Srivastava said...

Woland:
"Having money vs. having assets is like having a jacket vs.
having a ticket to ( hopefully! ) get a jacket back from a cloak
check ( at Gleneagles)."


Shouldn't this be

Having assets vs. money is like having a jacket vs. having a ticket to (hopefully!) get a jacket back from a cloak check (at Gleneagles).

Assets are more like Jackets while money is more like a tickets, IMO.

Anand Srivastava said...

The only reason USD got there was because it was "as good as gold" until it wasn't and all the gold back then was with the US. BTC can come back to the FG discussion after proving its value for another couple of millenia as far as I can tell.

The way we are going I wouldn't be sure of viability of humans on Earth for more than a couple of centuries. Millenia is too long. In any case I never said that BTC will replace Gold. It cannot. I only say that it is the Gold that can be transported on the internet. We don't even know if internet will be there for a couple of millenia (provided that humans survive that long).

Anand Srivastava said...

Phil. S.:
It's been around for 5 years, it's as chaotic and volatile and messy and hacky as it's ever been, world and digital commerce is largely functioning just as well with simple digital-and/or-paper fiat as it did 5 years ago.

Have you tried sending money to another country? How do you like the charges that are levied, and the delay?

BTCs at this point need some sort of legal framework, to allow it to take over the digital Commerce. Currently it is all in a weird state of not being considered legal or illegal. This is why the Digital Commerce world is not embracing it. There have been attempts but mostly feeble.

Also the technology is too new, and yet not very mature. It needed a larger user base which it has got less than in an year. So yes it still has ways to go before it can cause a dent in the international commerce market. I particularly would want to see it get into international remittances space. Lots of Indians and Chinese will love that. They need to send money to their family back home.

vizeet srivastava said...

Anana, woland, tEON, MS
Ultimately whether something that is limited is going to do well in long term, solely depends on whether people will have faith in it. This is true for gold, this is true for shares and this going to be true for virtual currencies.
Future of bitcoin is matter of faith and which is to be seen.

Nickelsaver said...

anand,

Is BTC physical plane or monetary plane?

I think you have found yourself in the brambles. Drop the baggage friend. The entire monetary plane is going to devalue against gold.

Unless you would like to make the case that BTC is physical plane, it will devalue as well.

Further more, there is no AFTER GOLD. There is only AFTER DEBT IMBALANCE.

The imbalances created by dollar debt took decades to form and the credibility inflation that came with it. BTC's credibility rise has been sudden. So will be its fall!

You do a disservice to all of us who follow this blog and who hike the trail by promoting just another value proxy that aint as good as gold.

Bitcoin is

Shorting The Fiat Ugly or STFU

Anand Srivastava said...
This comment has been removed by the author.
Anand Srivastava said...

Nicklesaver:

BTC cannot be monetary plane. It does not arise in debt.

You know in Maths Imaginary Numbers are as real as Real numbers.

Devalue it will, but at the point of revaluation. Other times are not as clear cut.

That After Gold was coined by VTC. I liked it. A new age like AD.

BTCs credibility rise has been sudden, but has it reached its peak that is the question. Inspite of many many bad news against it, it still holds its price level. Its first exchange MTGox is gone. Govts have done things against it. There have been DDoS Attacks. Lots of websites disclosing theft.

I am not sure how I disservice the people of this blog.

I have not tried to misrepresent anything.

Hopefully I am not as bad as the trolls :-P.

Woland said...

anand: thanks! (and I will now crawl back into my hole!) {;<)>

Anonymous said...

BTC cannot be monetary plane. It does not arise in debt.

Dang so, if we go by our understanding of the term "money" as we use it around these parts (i.e. that money is just credit which necessarily arises in debt) then bitcoin is not money. Because for it to be "money," it would necessarily have to represent some kind of an IOU, you know... some amount of goods/services owed to you or that which you owe.

Maybe you should spread the word to the rest of the bitcoin-faithful that bitcoin isn't actually money, because there seems to be a lot of confusion on that particular point. I mean it's obvious to me that it's not money, but seems like most of the people bidding it up are claiming that it IS money. You must be the only one who really gets it.

Anonymous said...

"Have you tried sending money to another country? How do you like the charges that are levied, and the delay?"

This is, as I see it, the main advantage of bitcoin. But if at some point the miners will have to get most of their profits from transfer fees then it might not be so cheap anymore. Would like to see some research on this.

I don't get it why there is so much animosity towards bitcoin or other crypto-"currencies" in this blog. Its not like anyone is seriously claiming it will be better than gold as a SoV. It's not even better than fiat as a MoE, it is just a technical solution to ease the transfer of fiat, a MoE for the MoE if you will. For this purpose it's price is totally irrelevant, even price differences across exchanges are irrelevant, unless the volatility is so high that you need to worry about holding it for a few minutes. Of course you can hold it if you want, but then that is just a speculative bet you're doing (nothing wrong with that either).

It is an interesting development and I see no harm in discussing it here, but it is quite irrelevant for FG and maybe it already got more attention than what it deserves. ;-)


Anonymous said...

@Joe

Its not like anyone is seriously claiming it will be better than gold as a SoV. It's not even better than fiat as a MoE, it is just a technical solution to ease the transfer of fiat, a MoE for the MoE if you will.

So it's not a serious MoE or SoV, it's just (un)interesting technical wankery. Yes, that's my position EXACTLY. And its technical merits do not answer the question of "why bitcoin" because, as I pointed out before, all the technology can easily be replicated in something that might be a suitable, stable MoE, like the dollar or the Euro. We don't an "MoE for the MoE." How completely and utterly superfluous.

it is quite irrelevant for FG

+ a gazillion

Bitcoin is only relevant in that it's an interesting case study of bubbles and the madness of the human herd. It's not dissimilar to watching lemmings walk off a cliff, if you like studying that sort of thing. But to take it seriously is pretty ridiculous IMO.

Anonymous said...

It is not completely and utterly superfluous if it is successful in reducing considerably cross border transfer costs and long delays. And if its features/advantages are replicated into regular fiat, rendering it useless, well then, it served a purpose anyway. ;-)

Nickelsaver said...

anand,


"BTC is definitely Physical Plane, even if it is in Virtual space."


Really?

[long pause for dramatic effect]

Really? LOL

Yeah, I'm not surprised you deleted the comment. You must have sat in your chair for 3 hours trying to think of how you were going to defend that statement. Instead you opted to delete and simply say "BTC cannot be monetary plane. It does not arise in debt."

Now it looks as though you are searching for a plane to put BTC into. GLWT

PS: VtC and Blondie use the term AG in association with their post reval FreeFiat theory, which has been thoroughly debunked by our host.

MatrixSentry said...

Joe,

Speaking for myself, I don't hold any animosity towards bitcoin/crypto-currencies or its proponents. I just find the discussion tedious once we analyze bitcoin in relation to the focus of this blog, Freegold, and find that it doesn't add anything of interest. Kind of like the silver bugs and the mining bugs who felt it necessary to shoehorn their views into the Freegold thesis. We examined their positions, determined that they did not add anything of value to our thesis, and attempted to show them why. Often it just did not satisfy them.

Contrasting Freegold to something that is not or inferior can be instructive. I get that. But once we all see the lesson, it's time to move on. This is a blog about Freegold. There are plenty of blogs that focus on bitcoin. If I wanted to examine bitcoin any more than I already have here on this blog, I would simply migrate to a blog that specializes in bitcoin.

We have already figured out some very important things about bitcoin. It isn't money. It isn't a reserve asset. Oops, we have automatically relegated it to something outside the "Freegold monetary concept" where gold serves as reserve asset and fiat serves as money (unit of account and unit of exchange).

Two things really interest me. What will be the reserve asset of choice (focal point for saving) and what will be used as money. Bitcoin is and will be neither. It is a curiosity and is nothing but a speculative play. Buying and holding entails risk. Holding money over the time frame that I hold it, and in the amount I possess at any one time entails no risk. Holding gold as a reserve asset over the time that I intend to hold entails no risk. This is where I want to be in a Fourth Turning at the end of the $IMFS.

If we could examine a new wrinkle regarding bitcoin, I would be happy to see it here at the blog. Periodic updates perhaps showing evolution of the crypto-currency arena would be fine as well. As long as proponents do not resort to Trollery, I am good with scrolling if my interest isn't captured.

Phat Repat said...

When one considers the number of hands in our pockets these days, from mostly unproductive and entitled sectors (FIRE/Gov), it is easy to see the draw of BTC.

I appreciate the information that was shared here in this regard, and though there are salient features to BTC (as pointed out by Anand, Joe, et al), the volatility alone (and lack of anything tangible in-hand) dissuades me from participating. I much prefer the FG thesis and the odds of that coming to pass over the likelihood of BTC remaining a global phenom post $IMFS.

As I like to say, "What you see today, you will not see tomorrow. " Aside from the eventuality of FG, I hope that those in 'unproductive' industries are making plans for alternate careers; especially at all levels of FIRE/Gov. Further to that point: Pentagon Set to Slash Military to Pre-World War II Levels. And that's probably not enough. The ship is righting.

Anonymous said...

Phat Repat,

For the record I am not trying to convince anyone to participate. I myself do not own or ever owned any bitcoins, I'm just curious to understand what its all about and its possible usefulness in a less volatile future.

MatrixSentry,
I am getting bored of it as well, so let's move on. ;-)
ps: I normally enjoy your comments a lot, but this recent stuff on cycles and "fourth turnings" is losing me...

Indenture said...

Why have purchasing power in Bitcoin now except to playfully gamble but after dollar collapse, when the markets open after a long weekend and the world reorganizes itself, then I could see entering Bitcoin when it would be at its lowest from capital flight and would be poised as an empty sponge ready to soak up tech savvy new capital.
Entering Bitcoin the moment after the world shudders would be less of a gamble.
Any thoughts? (Using Freegold as the lens because it is how the organism reacts after transition that will determine how the new capital is distributed) Which brings up another question which is, ‘where will new capital go when it is released from physical gold for investment by tiny giants and large shrimp’?

Nickelsaver said...

"Buying and holding entails risk. Holding money over the time frame that I hold it, and in the amount I possess at any one time entails no risk. Holding gold as a reserve asset over the time that I intend to hold entails no risk."

The specific risk we seek to avoid isn't merely the perceived value assigned by the collective. It is also that which comes from having a counter-party.

In the case of BTC, Ownership is ambiguous and requires the counter-party of technology in order to retrieve the value.

Physical gold requires nothing. When you have gold you are "Paid In Full".

Motley Fool said...

NS

For the present moment this : "In the case of BTC, Ownership is ambiguous and requires the counter-party of technology in order to retrieve the value. " , doesn't worry me. Rather that future counterparties would continue to see value whilst we are heading into global economic collapse.

As to cost benefit...yes at present it is slightly less expensive than international ETF's ( saw a cost study linked on ZH a while back), but imo this is largely due to mining being profitable at present. In future transaction costs would need to be added to entice ledger calculations and then the cost benefit is likely to be negligible.

This is said with the caveat that this study was as regards transfers between first world countries. For us plebs the costs are much much higher and the benefit of BTC transfers at present much greater, assuming low volatility, which we don't have yet.

We should also bear in mind that for us third world countries, under freegold such capital transfer costs are likely to be much lower than today as well.

In summation, I am uncertain that this momentary benefit, which to me is one of the key points of interest of BTC is likely to remain in future, for anyone.

TF

MatrixSentry said...

Joe,

To understand the Fourth Turning as I superficially described, you need to read the book. This blog is really not the place to get into great detail other than to say it meshes well with death of the $IMFS and the emergence of Freegold. It paints a portrait background where Freegold can emerge.

The Fourth Turning meshed real nice with my work on cycle theory in markets as well and convinced me of the fractal nature of everything, from the fabric of the universe to the macro-behavior of our human super-organism.

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

»Hey, folks. You can take all of the glitter stuff. I’ll be satisfied with the financial treasuries …«

Anonymous said...

MatrixSentry,

I usually try to keep an open mind about new concepts, so I might take a look at the book before forming an opinion. But I have to say, I am extremely skeptical about it. I don't believe there are such cycles ruling the super-organism, my view is that those theories are just an attempt to see order where there is not one, or where the existing order (be it fractal or not) is too complex and depends on too many variables (think butterfly effect). Honestly, when you talk about that stuff I start picturing loonies with "the end is near" signs, or the second coming of christ, or astrology crap, or "man really did go to the moon" kind of stuff. My resistance is so big that I can even hardly see myself actually buying the book.

ps. the man on the moon part was a joke :-)

Sam said...

"see order where there is not one"

I don't look at a cycle as order. A cycle in human behavior is the natural reaction to surrounding circumstances. As circumstances for regions go through ups and downs the human reaction to their surroundings are fairly consistent.

Dim said...

Matrix and Sam, I have really been enjoying your comments lately. Please keep up the insights :)

I will be picking up The Fourth Turning on my way to the coin shop, it does sound very interesting.

Anand Srivastava said...
This comment has been removed by the author.
Michael dV said...

JV I tend towards your attitude on the cycle thingy. I also have avoided the book for similar reasons. When I look at Armstrong and his 2013.64 definition of dates (to make cycles easier to calculate I assume) I think 'there is a guy trying way too hard to make the data fit.'
Obviously we humans make the same errors over and over again (how many kinds of mistakes are there any way?) and one set of circumstances often gives rise to the same response it did last time (you sink my boat I blow up your city) but I just can see history cycling. There are too many new things that really change the way we deal with each other and sometimes we really do learn from the mistakes of our predecessors.
I see freegold as being such a set of events. When savers have an alternative I think we will see big changes in human behavior...maybe not a thousand years of peace but something big.

Michael dV said...

'but I just can see' should be 'but I just can't see'

can can't ya ya ya

said...

Indenture:Which brings up another question which is, ‘where will new capital go when it is released from physical gold for investment by tiny giants and large shrimp’?


I don't think you will much of a difference to where capital flows today. A very large % of the "new found wealth" will just sit there. The ones who want to spend their wealth will put it in real estate, stocks, cars etc. I doubt many more castles will be bought.

Anand Srivastava said...

Nicklesaver:

Yeah, I'm not surprised you deleted the comment. You must have sat in your chair for 3 hours trying to think of how you were going to defend that statement. Instead you opted to delete and simply say "BTC cannot be monetary plane. It does not arise in debt."

Yes there was a problem in my post. But it was towards the end of the post. On rereading I didn't like its tone.

In the first one I had made an assertion. In this one I had posted a proof. Don't you think this is more effective than the previous.

If there are only two planes, physical and monetary, and BTC couldn't be in monetary, where it would be?

I think I was one of the people who debunked VtCs FreeFiat. But still I like the AG moniker. Take what is good and leave what is bad.

Anand Srivastava said...

Why have purchasing power in Bitcoin now except to playfully gamble but after dollar collapse, when the markets open after a long weekend and the world reorganizes itself, then I could see entering Bitcoin when it would be at its lowest from capital flight and would be poised as an empty sponge ready to soak up tech savvy new capital.

I don't think it will work out that way. I agree with Luke here. Gold Money is not going to sell gold to buy BTCs. That would be stupid, IMO.

What will happen is that BTCs will slowly start to get used in real life, and that will cause their prices to increase. This will take time, at least 5 years.

The phase upto the Revaluation is of speculation. There are traders putting in lots of money in anticipation of more earnings. While technical people who are bullish about the technology are putting money in Miners. There is still money to be made in mining as there is still a big gap between Bitcoin Network capacity and BTC price. So business minded people are also getting in.

Still the whole infrastructure is around creating bitcoins and speculating on it. There is not much real use of it. I would think that would change over the next few years.

Also after the Reval, there will not be so much free money to fuel bubbles, so bitcoins will lose their price edge somewhat.

The only window for speculative money making is from the time the banks reopen after the closer and revaluation. I don't know what will happen (I don't even know how to go about thinking of this time, Aquilus who knows a lot more about this says my thinking is wrong.), but it seems to me that money will want to move into assets (preferably liquid) at this moment causing prices to rise for such assets. One of these assets will be BTC. You could sell at this moment, and buy fixed assets. But the timing is a bitch. And you have to be in a stable currency zone, as you will not be allowed to sell in a non-stable ones. US/India/Japan/etc citizens need not apply. IMO don't try this with any significant money :-).

Beer Holiday said...

My 2 cents on cycles

Cycles are everywhere. Why, IDK. Maybe because if something is endless, it's bound to repeat :-) Cycles are solutions to systems with certain (very common) boundary conditions - e.g. a string closed at both ends.

There has been excellent discussion on here about the Fibonacci sequence, and why it is seen everywhere. A great link posted by Lisa or Wendy IIRC. I liked it so much, a great example of something which sounds like BS, but it really isn't. It does happen, a great reminder not to be too skeptical.

A quick point is that in terms of human behavior, I'm all for as many ways to look at it a possible, and as such The Fourth Turning is on my reading list.

It seems to be human nature to see cycles, and to try and understand them somehow. Today, we have the technology of the Fourier transform. You stick your cyclic data in, and you get the frequencies of the sinusoidal waves out.

And then we go to the pub, and forget about any further ideas, because we know that the Fourier series is the most efficient way to do the analysis.

But this isn't the approach of some people. They come up there own ways to do the analysis, as if they are some genius smarter than the rest of us. I think "their way" is, at very best, one example of transformation which is not as efficient as a Fourier one. At worst, it's reading tea leaves.

I'm always amazed by the number of people on financial blogs obsessed some new method (always a propriety secret) to analyze cycles.

Martin Armstrong is one. Vice President I-debunked-the-Anuuukis is another. Their eyes glazed over at the beautiful cycles, and they invented some BS method for "understanding" them.

Before they know it, 10 years, 20 years has flown by. Are they billionaires from they're secret knowledge of the stock market? No. Do people still turn up to their cringe-worthy talks? Apparently yes.

Finally, one of the worst movie quotes is on Fourier "transfers" from the movie Transformers:

We got to move past Fourier "transfers" (sic)
and start considering Quantum Mechanics
/face palm

Nickelsaver said...

anand,

"BTC cannot be monetary plane. It does not arise in debt...If there are only two planes, physical and monetary, and BTC couldn't be in monetary, where it would be?"

Your logic is faulty. BTC exists as numbers on a computer. And your computer does not change in weight or substance when you add or subtract BTC from it. Therefore, it MUST BE monetary plane.

And I will assert that it is nothing more than an isolated circuit within the monetary plane. Much the same way as gold will be an isolated circuit within Freegold.

But there are some obvious drawbacks to this isolated circuit of BTC.

- BTC are borrowed and lent> https://www.bitbond.net/
You might be inclined to say, "Yes, but they are not fractionally reserved." I would say that is both a blessing and a curse. A blessing because you should obviously be assured that BTC value would only go up as it spreads through the collective. A curse, because in order to spread through the collective, the code used to define increasingly smaller divisions of bits grows increasingly more complex. The longer the bit, the longer the security code required to protect it. Contrast that with gold. The more you divide it, the cheaper and easier it is to store.

- BTC can be counterfeited> Http://articles.latimes.com/2013/dec/04/business/la-fi-mo-bitcoin-counterfeit-germany-arrest-20131204
I have read proponents of BTC claim it is counterfeit proof. I don't believe that. Here we get into the whole security aspect again. The further down the BTC timeline we go, the more likely it is that some very bright humans will crack whatever security is in place and be able to copy and spend ambiguous BTC's that you think are securely yours. Suppose you have some BTC's in your wallet. You've had them there for several years. You go to spend them and you find that they were already spent by someone else. This can never happen with your gold. Yes, someone can go into your house and steal your gold. But they can't replicate it remotely and then spend it.


Edwardo said...

Michael dV wrote:

When I look at Armstrong and his 2013.64 definition of dates (to make cycles easier to calculate I assume) I think 'there is a guy trying way too hard to make the data fit.

Amen. Armstrong is, indeed, quite the contortionist.

Anand Srivastava said...

NS:

True. The software I write exists only on computers. Do you mean to say that it is useless, and the people that pay me for it are fools?

Like I said in Math Imaginary numbers are as real as real numbers.

The BTCs may exist in the Virtual world, but they are as real as gold atoms.

Regarding divisibility of bitcoins. Currently the system allows 10^8 divisions. For storing this you need less than 32 bits, ie 4 bytes. This is trivial only 8 bytes per transaction. There are much more resource consuming elements in the protocol. A typical transaction is several hundred bytes in length. If you added 8 bits ie a bytes the divisibility of bitocoins will increase by 256 times, but would add only 2 bytes to the transaction.

If BTCs can be counterfeited, we will have to give up on either SHA256 or PGP. You don't know what this means, I guess. Otherwise you wouldn't claim that.

News can be very misleading. Most reporters don't know what they are talking about, when it comes to technology.

That particular news item is more clueless than normal.

Beer Holiday said...

The BTCs may exist in the Virtual world, but they are as real as gold atoms.

Do you really think that? How would you convince average Joe on the street. IDK how I could be convinced of that.

I'm not talking about the definition of "real", or such philosophical diversion. I can eat gold leaf. I can pick up pieces of gold in a stream. The closest to eating a BTC is as USB drive, containing a representation of a BTC? Real things are things I can eat :-)

Anonymous said...

Cycles are everywhere sure, systems oscillate according to their initial conditions and resonance frequencies, which are the result of a very specific, immutable and finite set of properties. The thing is, if these properties are not so immutable, if they change ever so slightly, depending on the sensibility of the system to these properties, the effect on the resulting oscillation can be dramatic, making the initial cycle totally useless in predicting the future behavior of the system. The human super-organism is a system subject to a seemingly infinite set of properties or variables which change all the time. Sure, you can interpolate or fit Fourier transforms to past data, which will only give you glimpse into what were the properties of the system before, not on how they will evolve. Off course this does not mean that we cannot make any predictions, we can make educated guesses as to how will most people react to a given set of circumstances and/or incentives, this is what we do when predicting FG. But to claim that in 80 years or whatever there will be upheaval, paradigm change, just because "the cycle says so", without even beginning to imagine the set of circumstances that would drive that, is just utter nonsense to me.

frankthetank said...

Joe Vanderbilt said...
"I don't believe there are such cycles ruling the super-organism,"

does terra rule luna just because luna diceded to circulate around terra?

" my view is that those theories are just an attempt to see order where there is not one, or where the existing order (be it fractal or not) is too complex and depends on too many variables (think butterfly effect)."

look into the sky! watch the weather! look at the house of a snail! look at the electrons circulate around in atoms and some other things circulate in electrons and so fortht! here are many things out there we know of and still lot more we don't. there are circles small and big, fast and slow. each one on his one more or less simple. the more circles you look at simultaniously the harder it gets, but the big ones can sometimes help to sum up some smaller ones. some pretty big and quite a lot smaller ones are comming together in the near future. you know what a spring tide is and why it happens?

"Honestly, when you talk about that stuff I start picturing loonies"

whats the difference between genius and lunacy? well, i don't know, but i think quite often it's not a big one.

" with "the end is near" signs, or the second coming of christ, or astrology crap, or "man really did go to the moon" kind of stuff. My resistance is so big that I can even hardly see myself actually buying the book.

ps. the man on the moon part was a joke :-)"


good one.

to the book or this armstrong guy a can't say something, cause i've read none of them.
but if you want advise about circles from me, i have a good one, i hope:
dont buy the book and use the money to buy some ice cream now that the sun springs higher and higher everyday. and not only the sun, but the skirts are doing the same. 55°F and the sun is shining beautifully.
have fun!

Beer Holiday said...

@ JV

Some systems are chaotic, and of course we know such systems are highly very sensitive to initial conditions. And Fourier analysis would be screwed trying to describe a chaotic system.

I'm only talking about cyclic systems, and the models people use.

I agree, understanding human behavior is a great challenge and IMVHO beyond maths or science.

Also I think my above comment is limited to the "cycles" talk. Forecasting is another topic, and perhaps more of an art form.

Perhaps one is "where have we been" and the other "where are we going" :-)

burningfiat said...

I agree with Anand,

Bitcoins are real. Real math. The medium used to store them (your head, paper, flash memory or magnetic drive) are of secondary concern.
Bitcoins are not tangible though. In theory someone with a bigger brain than you can rob you of all your bitcoins regardless of your storage method. You can't keep your BTC's secret. Everyone can see them on record in the blockchain...
Because BTC's are just math/idea/concept they can vanish even though you lock the usb-stick in the worlds best safe.

Gold, you can keep secret, safe and/or you can blow holes in somebody who's trying to take possession of your gold atoms. As wealth storage for the ages nothing comes close. Especially not standard encryption-solutions with a probable NSA-backdoor in them.

BaronSilverBaron said...

Bitcoins. The Bitcoin World seems to be divided into three groups. Those who think they are great and the future of money. Those who think they are a rip-off and a Ponzi scheme and the third group (like me) completely clueless as to how they will work day to day.

The thing that puzzles me about Bitcoins is how do you pay for a cup of coffee now or in the future? Will you have a Bitcoin "credit card"? Or will you have to have a smart-phone or pocket pc to exchange details? Or will they still have to be changed into the local currency?

Anonymous said...

Frankthetank,
See my last comment. I obviously do not deny that there are some systems which behave quite predictably in a cyclic way, systems which are subject to properties which do not change or change in a predictable way. But just because some systems work this way does not mean all systems do.

Beer Holiday said...

Math =/= real IMHO.

If my usb drive with a collection of 1s and 0s makes bitcoins real, then the same goes for any movie, tv show or novel I put on it? Including the relevant characters.

Hello Santa, and Jessica from Who Framed Roger the Rabbit. Oh and the monster group with 196882 dimensions.

vizeet srivastava said...

Future of Bitcoin is matter of faith...... Period

Lisa said...

Beer Holiday

I posted this fascinating little video on fibonacci numbers last year.

It is fun and fast and good for those not math inclined ;)

JC said...

All information is physical, bitcoins are very much a physical thing.

"Information is inevitably tied to a physical representation and therefore to restrictions and possibilities related to the laws of physics and the parts available in the universe."

http://www.uni-leipzig.de/~biophy09/Biophysik-Vorlesung_2009-2010_DATA/QUELLEN/LIT/A/B/3/Landauer_1996_physical_nature_information.pdf

A song can also be a physical thing, like a vinyl or an mp3 on your computer, a physical arrangement of electrons. But a song can also exist solely in the mind, never recorded or written down, just passed from person to person through singing. A little bit like credit and money which can also exist solely in the mind or if you so wish as physical things. The monetary plane refers to the ideas and accounts we have about credit and money that exist in our collective mind.

A new physical thing now exists called crypto-currency, we are having all sorts of ideas about it's place in our minds where the monetary plane usually exists. I believe the future of crypto-currency will not be bitcoin itself, it will only one aspect. Other crypto-currencies or new 'physical items' with properties exo-bitcoin that will expand our ideas about the monetary plane. All these aspects will eventually be rolled together by geeks until we have not only a crypto medium of exchange but also a unit of account and even have a stable store of value function within the crypto sphere, all functioning with an easy to use interface for anyone that wishes to use it.

Crypto-currency will still only be a niche utility though, certainly not the place to store your retirement savings, Gold and EFTPOS will be the main event.

Beer Holiday said...

Good reminder Lisa! The second and other videos are well worth finding on youtube too.

If Bitcoin is a physical thing because it can be physically represented then so are Santa and Roger Rabbit's wife. Also anything I write, any statement I can make. Even false statements. 1+1 = 3 is now a physical thing, if that's what you think. It's information, after all.

Gold is more real than that IMHO.

Anand Srivastava said...

BurningFiat:

In theory someone with a bigger brain than you can rob you of all your bitcoins regardless of your storage method. You can't keep your BTC's secret.

In theory you will need a huge computing resource and a lot of time to break the code. But it so happens that some implementations are not that security conscious. That is why you must rely on only opensource software for security.

It is very important how you store the wallet. The MTGox people are trying to place the blame on the vulnerability discovered recently, but it is pretty obvious that it is an inside job. A wallet in Cold Storage cannot be hacked.

It has nothing to do with the brain.

Woland said...

fun with that "special spiral", the golden section

a square with side integer n can be completely filled with other squares

but there is a special set of squares, which can be completely
filled by other squares, where each interior square appears
only ONCE

if you try to find the smallest square satisfying this condition,
you will quickly learn something about that "special, golden section" spiral.

Greetz! {;<)>>


Ken_C said...

http://www.merriam-webster.com/dictionary/physical

: relating to the body of a person instead of the mind

: existing in a form that you can touch or see
having material existence : perceptible
especially through the senses and subject
to the laws of nature

: involving or related to sex


If you can't touch it, weigh it, see it feel it, etc. it is not physical. Don't try to stretch the definition to fit the outcome you want.

MatrixSentry said...

I think there is some misconceptions that have crept into the cycle discussion that I really did not intend to launch. If you go back and read my original post I think you will see what they are. I was critical of economics because it is widely seen as a clockwork mechanism, described by complex mathematical equations. In fact, complex economies are more organic in nature.

Nature is fractal and exhibits cycles, period. One would not say there are known equations that can exactly predict what the weather will be 3 months from now on Sunday, 25th of May. What we can say is the weather in a macro-sense will be statistically similar to May 25th, 2012 and most other May 25ths. There is a weather cycle that is generated by the properties of our atmosphere and our relative position of the planet within the solar orbit (cycle).

The cycles I am speaking of aren't clockwork cycles like an orbit around a star. The are more akin to weather cycles. Trying to disqualifying a weather cycle because it cannot be found to be 100% deterministic is fallacious and leads to absurd conclusions.

The cycle I was speaking of is not a cycle that originates or exists external to human beings. The cycle is a cycle of HUMAN BEHAVIOR. At any particular instant, human behavior cannot be exactly determined. However, in a macro sense, patterns emerge that can predict behavior. This is because we humans share a universal cycle, the life cycle. We have the same history and the same fate. We were born and we will die, predictably with a period of 80-100 years in most cases. We have the same needs and desires. These are the same needs and desires that our ancestors had, going all the way back to the beginning. Yes, the world has changed and the manifestation of those needs look very different over the millenia, but the basic desire to live is universal.

Humans cans be very predictable when you look from the macro angle and observe the basic and universal drive to survive. Behavior changes within the life cycle itself as a person lives through childhood to elderhood. The interaction of 4 living generations, living out there existence, create a grand societal cycle. Human desire to survive, consume, and to procreate is the engine that drives the cycle.

If there were no cycle, humans would quickly overwhelm the planet's ability to support us. We would drown in our waste and deplete all our natural resources just as a bacterium in a petri dish. Just as we Freegolders laugh at the idea of perpetual real growth in the economy, so should we laugh at a linear human existence.

We humans tend to seek the path of least resistance that offers the best chance to survive. We are in the end a selfish organism bent on surviving. When given the option we will consume. Hopefully it is consumption derived by our own production, but often it is not. We steal and are dishonest when we can chisel an existence that expends less energy. We will stockpile beyond our needs and watch others go without. We will seek to dominate others and make them produce for us in order to grow our stockpiles. This isn't good or bad behavior, it is human behavior.

A society is a living breathing organism that is busy being human. We will create a cycle of birth, maturity, harvest, and death (economically and socially) by simply doing what we must do, living our lives and responding to survival challenges.

(cont)

MatrixSentry said...

Start the cycle following the resolution of a societal upheaval that threatens the existence of the society itself. We see a very tight knit society that has endured a survival event. It has had to pool resources and depend on teamwork in order to survive. The existential threat is gone, now the society must set about the business of rebuilding shattered structures, both societal and economic. This is a period of growth following a period of decay and destruction.

After awhile, growth accelerates as new constructs saturate the society. With growth comes broadening prosperity. Society relaxes a bit and now there is time and room enough the broadening expression.

After more time, society reaches a peak where human expression has fully manifested itself and any more expression yield marginal returns. This is the harvest time, where real growth is no longer possible. The crops are harvested and it is a good time to be alive when we get to expend minimal energy for the most benefit. Society is fragmented now, not needing each other to exist. Individualism has peaked.

Winter comes. We do not want to let go of autumn. Winter is tough and means death. We will do anything to hold on to summer and fall, when life was good and easy. So too we deny what is obvious in a Fourth Turning, that the unsustainable cannot be sustained. We steer ourselves into the unsustainable and crisis (societal and economic) is the result. To sustain our existence, the old unsustainable constructs must be swept away, just as our crops must die in order to enrich the soil for another season of growth. A fragmented society must once again pull together in order to survive.

Read the book. We aren't talking about Armstrong's thinking computer here. We are talking economics. Economics is the study of human behavior.

DP said...

Physical: You can touch it, real wealth "here right now". (eg: Mona Lisa)

Financial: Claim/liability pairs, balance sheet items… promise for wealth in future. (e.g.: US Tbond)

Virtual: Some believe it is real, but there is really nothing. (eg: Bitcoin)

byiamBYoung said...

Phil_O_Dendron,

": involving or related to sex"

Merriam-Webster may be onto something there. I put a little gambling money into bitcoin when it was over a thousand, and now I'm feeling a little bit screwed.

Cheers

Beer Holiday said...

@MS My long comment wasn't directed at you on the topic of the Forth Turning, but at the profusion of cycle talk that it generated.

I will RTFB(ook), and before then, no comment.

I am very interested in the idea of what I call a human lifetime timescale of events. I think it is a useful idea.

A good example was that silly trillion dollar coin idea that was floated. Currencies often collapse, but they do so on a human time scale of 6 months to years. No trillion dollar coins yet.

Thanks for your comments, as always.

@Woland, no idea, I guess 24.

Cheers - BH

tEON said...

In theory you will need a huge computing resource and a lot of time to break the code.

Maybe they don't have to 'break' the code...

'Pony' botnet steals bitcoins, digital currencies

Trustwave said on Monday that it has found evidence that the operators of a cybercrime ring known as the Pony botnet have stolen some 85 virtual "wallets" that contained bitcoins and other types of digital currencies. The firm said it did not know how much digital currency was contained in the wallets.

Anonymous said...

Count me in as a believer in the cyclical nature of everything. It's just cause and effect. For some reason I've found that most people I speak to believe in linear human progress i.e. that things are only getting better, that technology will continue to inexorably advance, that there can be no form of government other than democracy, etc. They can't even comprehend a total disruption and annihilation of the status quo, even though all evidence points to this eventual outcome. It's normalcy bias, and most people are addicted to it.

Our present mode of existence at one point solved certain problems but it is unsustainable; inevitably nature will destroy that which is unsustainable and we will be forced to start anew with whatever remains. The present is merely a product of past events; industrialization and technological developments of the nineteenth and twentieth centuries caused much human labor to become obsolete as well massively reducing resource scarcity. These amongst other factors caused people to demand socialism, and up came democracies with universal suffrage, as well as the collapse of tradition, religion, and the importance of community. The unsustainability of this is apparent; democracy is merely mob rule. The virtuous and productive are punished, whipped like slaves, and made to be infertile while the worst elements of society are celebrated and reproduce with reckless abandon.

Our present monetary system has simply postponed recognition of the failure of liberal democracies in the West. That failure would have already manifested itself in the absence of $IMFS. Also, I'm not an optimist who thinks freegold will herald a new golden age of liberty or socialism or any other brand of idealism. Rather, I think it will merely force us to recognize and deal with the shortcomings of liberal democracy in some way, shape, or form.

I completely agree w/MatrixSentry that we have reached "peak individualism." Hopefully we have also reached peak materialism. In the future I predict things like tradition and community will become pivotal to survival.

Anonymous said...

MS,

You do a lousy job at not launching discussions! ;-)

"In fact, complex economies are more organic in nature."

Agreed.

"Nature is fractal and exhibits cycles, period."

I never said that nature does not exhibits cycles, of course it does. But it is a big extrapolation to say that because there are some cycles then everything is ruled by cycles.
I'm also not so sure everything is fractal, but let's not go there.

"This is because we humans share a universal cycle, the life cycle."

I would not really call it a cycle, its quite linear, its not like you are reborn after you die (unless you are a Buddhist). And this affects the human super-organism about as much as the "life cycle" of the cells in your body affect you. The human super-organism does not have a "life cycle", it just exists or it doesn't.

"Humans cans be very predictable"

Of course they can, if you can determine with some certainty the circumstances and incentives to which they will be exposed. The human behavior you described is all very natural, but we can only guess it because you defined very well the initial conditions (revolution just took place), but I see no reason for every single one of those "cycles", for every civilization that has ever existed on this planet, must always last 80 to 100 years. Why not one that lasts 10 years? And a next one that lasts 1000 years? And if the cycle length can variate so much, can we really call it a cycle?

I will try to bring myself to read the book anyway.


Lisa,

Awesome videos on fibonacci numbers! Thanks for sharing :-)

MatrixSentry said...

A linear life would be birth with no death. Growth with no decay. We return to where we came from. It is a round trip. We enter the world utterly weak and helpless, and leave the same way. The matter that makes our bodies does not disappear. It returns to where it came. This is saying nothing about the spirit. I am not going there, thank you!

It isn't the end of society when the 80-100 year cycle is up. It is simply a round trip from a low to high and back to a low again. Our society in the U.S. has experienced 5 generational cycles since the founding of the New World, 3 since the formation of the Republic during the revolutionary war period. Our society is still here.

One quick look at this the last cycle, the millennial cycle (1946-2026?). The first turning was characterized by a society that was very tight knit and very conservative. Think Leave it to Beaver or Happy Days. Social protocol was very stiff and structured. One did not seek attention and conformity was the rule. Economically it was a time of growth following a horrendous Fourth Turning (previous generational cycle 1865-1946) that included the great depression and WWII. This 20 year period (1946-1966) was the polar opposite of the Third Turning of the previous generational cycle that culminated in the Roaring Twenties. Credit was severely constrained and thrift was the norm. A whole generation never trusted credit again after the great depression.

The Second Turning showed a move to more liberalization and a relaxation of social restrictions as a new generation came of age. Society started to shift the focus from the family and community to focus on ones self. This was the era of Woodstock and into the early 80s. Economic momentum increased as a whole new class, the middle class that was created in the First Turning, came into its own as a consuming force. Startling technological advances were the hallmark of this time, as well as financialization.

The Third Turning came along and the fragmentation of society that started in the 2nd Turning reached its peak. Credit also peaked. Everyone could buy a car and house, some without jobs. Who needs family and community when you could get virtually anything on your own? This time was the similar to the last 3rd Turning, which ended with the Roaring Twenties. Money was fast and easy. Social behavior was totally focused on the individual, the more unique and outrageous the better.

We are now in the 4th Turning where social isolation cannot be maintained. The excesses of debt created in the 2nd and 3rd Turnings can no longer be maintained. Economic dislocation always leads to societal conflict. Just open your eyes and look at what is happening all around the world as the $IMFS dies. We will have to pull together before this thing is over. Families are already re-coalescing. Grown children are living at home in shocking numbers. Next it will be communities that pull together, especially when the USD loses its exorbitant privilege. There will be little time and patience for self-serving individualism. By the time the 4th Turning is over we will frown upon blatant individualism and will reward conformity.

This cycle has happened many times.

Again, this is too complex a topic to for my limited writing skills. Read the book. What is there to lose?

Phat Repat said...

Interesting discussion regarding cycles, human behavior, and the book "The Fourth Turning." I haven't read this book yet in its entirety but it focuses expressly on the American experience. So, an interesting follow-up would be the identification of those countries that are in a more favorable "Turn". Anyone aware of such a treatise?

Anonymous said...

"A linear life would be birth with no death. Growth with no decay."

I meant life is linear in the sense that it is a one way street, one that does not end up at the same place where it started.
That does not mean we cannot find ups and downs along the way. Someone said that life is like a book, there's a beginning and an end, but the story in between is limitless.

"It isn't the end of society when the 80-100 year cycle is up. It is simply a round trip from a low to high and back to a low again."

I can accept that all societies, to some degree at least, are subject to those forces you describe, bringing them up and down again. I still don't get why should this process always take 80-100 years.

From where I am standing (Europe), I don't see how it fits. Through out our history we had both situations, centuries of status quo, and revolutionary changes (serious SHTF scenarios) happening within the space of a few years.

Sorry but if the book is focused only on the US then my interest is further reduced.

Anonymous said...

Everyone remember Rawdog from the bitcoin open forum posts? I like his latest video: Lets laugh Bitcoin out of existence!! LOL

Phat Repat said...

"There will be little time and patience for self-serving individualism. By the time the 4th Turning is over we will frown upon blatant individualism and will reward conformity."

Hmmm... Truly scary thought; I could never live under such a system. Which leads me to my favorite quote (George Bernard Shaw):

"The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."

Backwards we go. What a grand show.

said...

Rawdog has some funny videos.

Bitcoins simply don't have a producer supporting them and I feel they never will. For the same reason I won't store my wealth in Ugandan Shillings, even if I was somehow assured they wouldn't print more, I won't put my saving in something which someone who makes what I want, wouldn't want. You got that?

Eventually all holders will want to consume because they are consumers(like me!), so no wealth is stored there.

Anand Srivastava said...

tEON:

Agreed. Botnets are a big headache. When your computer is infected there is no security.

This is why there is a need for offline Cold Storage of Wallets. Wallets that are rarely used for sending money. Receiving is not a problem.

We will eventually need hardware devices to allow storage of wallets for online use. There is one which will be available in a few months. I would wait till there is one for a year without an exploit being discovered. Till then it is not for people who do not have a basic understanding of computer security.

Anand Srivastava said...

I guess Facebook buying What'sApp for 16 billion must exist in today's warped world.

Or maybe we need a third plane, one for monetary, one for physical and one for virtual. I wonder where we would place the virtual one?

DP said...

Virtual > Derivative > Financial > Hope of future return

DP said...

buying What'sApp for 16 billion > Hope of future return

vecelec said...

Maybe this might help describe the book the fourth turning
google ( the kondrayieff wave) It will explain the four seasons and we are in winter at the moment

vecelec said...
This comment has been removed by the author.
DP said...

The Fourth Turning

Number of times you turn each page of the book before thinking "I should top obsessively reading this book and read some other stuff too".

In an age of American Empire, it is relevant to you wherever you are.

vecelec said...

sorry (the Kondratieff curve)

Dante_Eu said...

This is my favorite Rawdog video: Rawdog acquires more than 1500 Bitcoin!

The best thing about BitCoiners is trying to persuade others how great and revolutionizing it is. If BC really is the best thing since sliced bread, why not accumulate as much as possible by yourself...in stealth? No need to convince anyone, because:

"Time will tell all things."

Right? :-)

PS Here up in north, it's allways winter, no matter which cycle we are in. ;-)

CharlieBravo said...

http://www.cnn.com/2014/02/25/us/california-gold-discovery/

In case you missed it. California gold discovery.

The coins were unearthed in February 2013 by the husband and wife, who wish to remain anonymous.

They were walking their dog when they spotted something shiny on the ground.
The couple dug and eventually discovered eight metal cans, containing more than 1,400 gold coins.

They have a combined face value of about $27,000, but experts believe they could fetch $10 million or more.

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

Oh man, sunny weather all year long, and walking your dog, you stumble across $10 million in goldcoins.

Life is not fair. :-)

Edwardo said...

Individualism need not be a dirty word. And while I wouldn't presume to speak for Matrix, I think that what he may be trying to emphasize by using the term individualism is widespread self indulgence by individuals that surfaces during certain periods and which tends to be detrimental, sometimes severely so, to the wider world.

It's all about balance and the effects that incur when balance is absent, or so it seems to me.

Phat Repat said...

Edwardo
That's likely the case; and something I could live with. Unfortunately, there tends to be overshoot when it comes to these transitions and he may not be so far off. And that is the part I couldn't tolerate.

Anonymous said...

Point is, I think, that most people who think they are "independent" today are really not. Most people are dependents, whether they're working in makework jobs or directly relying on welfare. We've severed, or at least considerably weakened, the ties of family and community which dependents used to rely upon and replaced them with big daddy gubmint, the makework economy, etc.

So we have negligently enfranchised many people with wealth, rights, and freedoms which they do not deserve and cannot competently wield. This has manifested itself in the form of widespread degeneracy, depression, and various other social pathologies. In the future I think these people will be beholden to those who actually do deserve wealth, rights, and freedoms, because the centralized structure they had relied upon for sustenance will have been severely weakened or wiped out.

So I guess what I'm saying is I think there will still be "individualism" for those who can competently exercise it, and those who can't do so will be beholden to those who can.

All predictions are of course speculative though and I don't claim to know anything for certain, but those are my thoughts.

MatrixSentry said...

Edwardo,

Speak for me anytime, you got it!

For all the non-Americans out there, why would you would you be immune to generational cycles wherever you are? Because the book references American generations? I assume you are all human and live in a society. BTW, the book describes the first 3 generational cycles that occurred in Europe, Late Medieval (1435 -1487), Reformation (1487- 1594), New World (1594 - 1704). The cycle was occurring before the migration to North America.

Also, the world has synced up ever since communication, travel, and trade brought about a "global society". Today, the USD is the unifying force economically. The demise of $IMFS will be felt around the entire world.

A hallmark of Fourth Turnings is war. Every single 4th Turning has had one. A major war today has global ramifications, especially if the US is involved. I suppose this 4th Turning could be the first one that does not have war. I think the demise of the $IMFS will have ramifications along the same scale as war in previous generational cycles. But, just imagine the global shift and change that would result from both, a major war and the demise of the $IMFS?

MatrixSentry said...

Rawdog is one funny dude! Maybe someone could get him to do a video on Freegold?

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

They’ve found 1’400 Gold coins, worth 10mn US-Dollar B.R. (before revaluation).

So far so good.

Now they are told to sell these coins …

Well …

MatrixSentry said...

The smart play is to sell now and capture the numismatic premium. Then use the proceeds to buy gold bullion.

KnallGold said...

"The couple is planning to sell much of the collection."

Yeah, right. Give others a chance ;-) And when the $ hypers, the couple will scream "life is not fair!". The cycle of luck and misfortune, just one of the trillions...but aren't we all cycles, in the grand scheme of things? A cycle within a cycle, is but a dream within a dream

I stand amid the roar
Of a surf-tormented shore,
And I hold within my hand
Grains of the golden sand...

(Smoke fills the holy Cathedral of FreeGold...)

Woland said...

"A hallmark of Fourth Turnings is war. Every single 4th
Turning has had one."

Looking outside, that's all I see. The only difference, is that
most of these are "proxy wars", fought by major powers via
the funding of insurgencies, or the covert special operations forces of those powers.

Phat Repat said...

And it's gone... U.S. prosecutors investigating bitcoin businesses: source

Phat Repat said...

Of course, another argument, and one I'm more inclined to accept; intrusions like this will just hasten the demise of the $IMFS. I do believe the constant meddling, or attempts to control, will ultimately lead to collapse. Only a matter of time...

Woland said...

Hi Matrix:

I've often wondered about numismatic premiums post reset.
Today, a coin with gold value x, could have ( excluding super
rarities like the Brasher doubloon, etc.) a numismatic value
from 2x to 50x, maybe 100 x. In a post revalued world, I can't
see the HIGHER end of those same rations holding, as they
must compete with other fine art rarities which do not undergo
the same revaluation. Your thoughts?

Ken_C said...

Matrix Sentry
"The smart play is to sell now and capture the numismatic premium. Then use the proceeds to buy gold bullion. "

Indeed, most of that $10 million value is numismatic premium. Sell it all and buy bullion with most of the proceeds.

MatrixSentry said...

Woland,

I am inclined to agree with your postulation. I would seriously doubt the current premiums would hold up for anything other than the very most rarest of coins, which would continue to be attractive to the very rich as fine art or collectables.

Anonymous said...

Hi Woland,


I've enjoyed the last few updates from Paul Craig Roberts. I can't help but wonder where the breaking point is with the level of "meddling" going on. Eventually one or two strong leaders who've remained diplomatic and fairly level-headed through all of the fuckery, might just snap. I hope it doesn't lead to WW3...



Anonymous said...

Ok, I will let go of this topic on cycles. It seems it is a matter of faith, either you believe cycles rule everything or you don't. I just don't see the logic in it. You could just as easily have come up with 40 year cycles or 150 year cycles, I'm sure you would be able to find events deemed worthy of being the defining moments. But I guess it is easier to pick 80-100 years, the length of a human life, a "generational cycle", whatever the connection is.

DP said...

Those who really wish to know, find out.

Knotty Pine said...

@SleepingVillage

Hopefully it won't come to that! Down here everyone is waiting for Judgement Day...

Anonymous said...

KP,

Let's hope not, bud:-) and great tune, BTW. Scott has been my favorite hellbilly since I first heard Graveyard Shift when it came out.

FoNoah said...

@Woland - do all the squares in your solution sets have sides which are real numbers, and are there a finite number of such squares?

@Lisa - agree with BH. Great Fibonacci video.

Michael dV said...

Matrix
any thoughts on Another's comment about ending the dollar 'without war'? (vis a vis cycles and 4th Turnings)

Michael dV said...

and as for the infinitely fractal nature of matter...that would mean that the 'god particle' has it's own even smaller 'god particle' correct?
If on the other hand our physical world is structured from atoms (or large molecules) on up then we could see fractal up to a certain size and then a break as we go from one range of matter to another, as in micro to macro and the macro to stellar.
I won't say it is not possible but it just seems unlikely that there is an infinitely fractal order to all of matter.

M said...

Regarding Wazzap for 19 billion.. (not 16)

That's a higher market cap then Harley Davidson.

This is simply the internet bubble 2.0. Now we have the internet bubble, the housing bubble, the US stock market bubble and the bond bubble, all going at the same time.

This has gone on long enough to discredit all the gold advocates of all stripes. Now everyone is divided into 2 camps. The normalcy bias camp and the gold "bugs". The gold "bugs" have kept buying gold all along and the normalcy biasers, have been doing everything that the name entails.

Should be interesting if anything ever changes.

Totara said...

For those who enjoyed Lisa's Fibonacci video, you might like this one too.

Woland said...

Hi FoNoah;

Yes, all unique squares embedded within the largest square
are positive integers. Like I said, when you start trying to
fill one up, you'll quickly learn something about the golden
section (square root of 5) -1 divided by 2. Have fun!

BTW, here's a bonus question: could a solution possibly
exist for this same problem in 3 dimensions? ( a cube FULLY
filled with integer cubes?) I personally think it is impossible,
but that's just my conjecture, as I've never investigated it.

MatrixSentry said...

Michael dV,

Actually I do consider the possibility of the completion of the Fourth Turning without war. The reason is that we are in completely uncharted water here with the globe united in its use of the USD ($IMFS) as a reserve asset. That puts everyone in the same boat.

I agree with FOFOA that an inflationary outcome is more stable than a deflationary one. A deflationary outcome is more likely to lead to war. If the world resolves the debt problem all at once and simultaneously, we might be able to avoid a major war.

Also, the stakes are way higher now than during the last Fourth Turning. We can literally destroy the entire planet with nuclear fallout. Perhaps this is enough to prevent all out war.

Lets just say I am hopeful and do not see war as a necessity in order to complete the Fourth Turning. However, a resolution of the debt problem is a must. Therefore, I see massive economic dislocation and societal upheaval as the paper wealth disappears. This aspect of the Fourth Turning must and will happen. The "wealth" of the new rich and the middle class will be wiped out. They will have to produce to well beyond the point they imagined they would have to, and far in far less style than they planned. The poor will largely be unaffected with perhaps a reduced social safety net and a further diminished access to credit.

In the end our society will have to learn to live with much less. People will once again become accustomed to pooling resources and families will become closer.



Lisa said...

Totara

Nice video - Nature is amazing in its uniformity.

Which reminds me of FOFOA's fractal posts Michael dV alluded to above - also well worth watching.

Woland said...

Those of you who have read Adam Fergusson's "When Money Dies" may recall what effects a newly "revalued"
currency can have on a local economy, when that new
source of demand is allowed to enter from abroad.
From p. 87:


ca. 1921: The young Ernest Hemingway, however, working
for the Toronto Daily Star, crossed the frontier from France
at about that time and managed to be equally gloomy from
the other side of the fence:

"There were no marks to be had in Strasbourg, the mounting
exchange rate had cleaned the bankers out days ago, so we
changed some French money in the railway station at Kehl.
For 10 francs I received 670 marks. Ten francs amounted
to about 90 cents in Canadian money. That 90 cents lasted
Mrs.Hemingway and me for a day of heavy spending and at
the end of the day, we had 120 marks left".

I remember the days not long ago when the "Celtic Tiger"
was fueling an influx of condo buyers into New York City.
Watch out for when both homeless dollars, and a new gold wealth from abroad, begin competing with you for your
own lifestyle. cheers.

Michael dV said...

Woland
are you suggesting those Indian brides will be competing with freegolders for the goodies when we have a reval?

Lisa said...

Woland

Isn't what you describe indicative of the spur and brake cycle which we would expect to see post revaluation?

So it spurs the US economy and we start the pendulum swinging from trade deficit to trade surplus and on and on?

Tommy2Tone said...

I think Woland means during the transition. When our currency is HI, anyone with a stronger currency or say some shiny asset, can come exchange for boatloads of $ and buy our shit up.
Or in the case of his example from the book, goods were hard to come by but people outside of Germany could come over the border and eat real, real good for pennies and then go back to France say.

Which made me curious, a little further from your quote Woland, it mentions the French wives bringing their kids over to eat and clean out the bakery in minutes and that the bakers were a little irritated by this as they could barely afford to bake more.
Why in the world would these German shops just over the border not raise their prices charged to all those french people coming over the border?

I've witnessed this effect by crossing into Canada for the "sweet exchange rate" only to discover all the shops marked up accordingly.

Michael dV said...

A quick look at finviz reveals some commodities are now above their 2011 highs.Several are at recent highs. I wonder how the Fed will view this. I also wonder how it is happening as less fed money is going into the economy every month. I suppose it could be coming out of something else but I don't see it….but then there is much we cannot see in this modern derivative economy.

Woland said...

Hi Lisa;

I think you're exactly right. Some ( perhaps many ) will have
a hard time facing this reversal of fortune, particularly if these
newly wealthy ones don't look too much like us, as Michael
dV suggests. It will be good business for many, catering to
this new demand, but there will also be a crowding out effect
on domestic purchasing power, at least until we are able to
produce enough to satisfy both. Jojo is right, that the most
pronounced effects will be closest to the transition period,
but increasing production will take a lot of time. It's certainly
complicated. Jojo, it's hard to answer your second question
based on just the information in that little anecdote. Maybe
they needed to price for BOTH home and crossover markets,
and couldn't have a 2 tier price? Not a great guess, I know.
cheers.

Woland said...

OMG! 4 2 days,my @darenpa72 wouldn't update - NOW it's back! Yay!

Dante_Eu said...

Just one last observation about BitCoin price performance. I was thinking, if some IT-geeks, small money and few shrimps can levitate the price of BC (in limited supply) by a factor of 100, then what could big money and many shrimps do to the price of physical gold (in limited supply)?

I recall Another claiming that maybe 1 ounce of physical gold is undervalued by a factor of 1000 (gold at $250/oz at that time). 1 ounce for 250.000 US$ in real purchasing power (todays US$)? Outrageous? Or maybe not? :-)

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

For those interested in cycles, patterns, and fractals, you'll probably enjoy Lecture 2: Fundamentals of Pattern.

C.L. said...

"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."

I did a simple experiment with my 2-year old: I give her a multivitamin each morning. They come in three colors: orange, pink and purple. When presented with three orange and one purple, she hesitated, but grabbed the purple one... Can't wait to see the result after a week playing this game.

DP said...

Even 2 year olds get the [Schelling] point of FOFOA blog!

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