Thursday, April 17, 2014

YOY Structural Support Now Negative

A number of people have emailed me asking for my thoughts on Belgium's recent "buying spree" in USG securities. Here is one of the emails:

"What do you make of the treasury buying out of Belgium? Seems like maybe someone isn’t yet ready for the transition? Really curious to see who it is."

I don't know who it is, but I thought I'd explain which part of the data that I like to watch. Two years ago I used the term "willy-nilly support" to contrast what was happening at that time with the "structural support" of previous decades. Here's a quote from that post:

"In fact, even though it is true that some combination of Japan, oil exporters, Caribbean banking center, Taiwan, Switzerland, Russia, Luxembourg, Belgium and Ireland (to name a few) managed to cobble together the necessary support last year, the dollar is now living off of a willy-nilly support system rather than the "structural support" it enjoyed for the last 30 or so years."

This Belgian buying smells worse than "willy-nilly support" to me. What I watch is the "structural support", defined as the storage of homeless dollars in central banks around the world. Here is FOA from 10/5/01:

"The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage. This is more than enough to end the dollars timeline…"

To see this "structural support", I look at the "For. Official" line in the TIC data sheet of Major Foreign Holders of Treasury Securities from the US Treasury. "For. Official" means "Foreign Official" as opposed to foreign private holders of Treasuries. So this line shows how many homeless dollars the various central banks around the world are currently storing:

Notice that I highlighted $4069.2B for February 2014, and $4100.4B for Feb. 2013, a decrease of $31.2B over the last 12 months. If that doesn't make the hair on the back of your neck stand up, consider this:

On 1/1/14 I posted my New Year's Day post in which I observed, shockingly, that the year-over-year (YOY) increase of the past four years had dropped from a 3-year-average of +$422B to only +$24B for 2013. As shocking as that sounded on New Year's Day, we are no longer even in positive territory. Now we are negative YOY for the first time. For comparison, you can find older versions of mfh.txt here.

Here's what it looks like when we compare the previous three years with the past 12 months:

2010: +$456B (over 12 months)
2011: +$426B (over 12 months)
2012: +$386B (over 12 months)

Last 12 months: -$31.2B

At the beginning of this year, we were at about +$24B. As of the end of February, we have dipped into negative territory. This means that the rest of the world (ROW) is not only no longer "supporting foreign dollar settlement with CB storage," they are now, at least as of February, beginning to kick those homeless dollars out of the comfortable CB vaults and onto the street.

When I wrote my New Year's Day post, I estimated that the YOY for 2013 would be +$24B. It was an estimate because only the data through October was available at that time. When the actuals came in around mid-February, it turned out that my estimate was high. The actual came in at +$22.2B, compared to +$386B the previous year, and also compared to -$31.2B now.

Anyway, whoever is standing by the dollar, he smells fishy to me. My chart in the New Year's post would now look like this, with that last red dot more negative now than it was positive at the beginning of the year:



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Bullion Baron said...

With the US budget deficit falling, estimated to be under $500b this year and the Fed still purchasing treasuries at an annualized rate of $360b (previously higher), it doesn't leave many new treasuries to be purchased by the foreign official sector. I think the real tell will be whether or not this sectors net holdings start to increase again as the Fed tapers further (presuming they do).

Brian said...

That deficit BS has been debunked. We spent an extra trillion last year. Dave at the Golden Truth had it nailed several months before the official numbers came out. Everything this administration does or says is a lie.

Comentakit said...

And who were the big losers, in terms of reducing their holdings? Russia and Singapore, by 24% and 20%, respectively.

Franco said...


A few questions, if you don't mind:

1) Why is meaningful to compare structural support with trade deficit and not with budget deficit?

2) Do you have any idea why the numbers in the TIC press releases don't seem to match the mfh table?

3) For the computation of "structural support" wouldn't it be more encompassing to also include the foreign accumulation of government "agency" debt?


Franco said...

Also, I agree with the comment above that the $500B budget deficit estimate is bullshit. Over the last 12 months, it was $800B.

Kieran O B said...


To answer 1)
The trade deficit represents how many dollars are going overseas not the budget deficit.

Kieran O B said...

BB: With the US budget deficit falling, estimated to be under $500b this year and the Fed still purchasing treasuries at an annualized rate of $360b (previously higher), it doesn't leave many new treasuries to be purchased by the foreign official sector.
Treasuries are sold to the highest bidder. There are plenty of dollars abroad that can bid on treasuries alongside the FED, but they are not doing so.

Thinking that the FED tapers and foreigners will step in because they are simply crowded out at the moment is wrong. If the FED tapers interest rates will rise.

Blake said...

Seems increasingly clear to me that the United States is not going to give up the ex privilege without a fight, i.e., WWIII.

Bullion Baron said...

"A PIIG: Treasuries are sold to the highest bidder. There are plenty of dollars abroad that can bid on treasuries alongside the FED, but they are not doing so."

If the Fed says they will buy X amount of treasuries, then presumably they will bid the highest regardless of competition levels.

When this topic came up on this blog earlier in the year I pointed out volume of bids for US Treasuries didn't seem to have declined:

So what makes you sure that the dollars abroad aren't bidding?

DP said...

We will know Uncle Sam finally has it all fully under control when we notice the blue line is consistently falling faster than the red one.

DP said...

So wake me up when you notice the Treasury starts running surpluses.

Phat Repat said...

Whew... gotta have my fix...


Unknown said...

A prerequisite for this type of analysis is an assessment of the degree of correctness of official "data". Like the reports from the CME where the footnotes virtually state that the data has near-zero reliability.

Unknown said...

If true, this story could rather strain the credibility of Mr. Yellen's recent statement that QE is now "only" $55 B per month. Jim Willie has estimated total QE including covert action to be multiples higher than this figure.

Andrew said...


Thinking that the FED tapers and foreigners will step in because they are simply crowded out at the moment is wrong. If the FED tapers interest rates will rise.

But the Fed is tapering and interest rates haven't moved much.

Jacques Offenbach:

If true, this story could rather strain the credibility of Mr. Yellen's recent statement that QE is now "only" $55 B per month. Jim Willie has estimated total QE including covert action to be multiples higher than this figure.

Ok, so what does this mean? How would the Fed be doing this?

Unknown said...

covered here

And in general, given that all markets are manipulated, why not the information disseminated by the central banks?

"when it becomes serious, you have to lie"
Jean-Claude Juncker

Unknown said...


"But the Fed is tapering and interest rates haven't moved much."

The answer : interest rate derivatives - check out anything Rob Kirby has published, for example

Roacheforque said...

Now that Janet Yellen's sex change operation is apparently complete, and we find that reports of FOFOA's involuntary retirement were greatly exagerrated, I am relieved to be able to comment upon the topic of structural support.

Admittedly, we have no real way to prove whether Belgium's "unusual" purchases are merely a back-door arrangement between the Fed and the ECB, or whether they are meant merely to be "perceived" that way (or neither).

But we do know that US interests are willing to discourage and even prevent support of dollar payment systems abroad through sanctions, which I see as a sort of self-imposed removal of support.

I have not yet decided whether hubris, over-confidence, psychosis, or a grande bluff is the motivational strategy.

But potentially falsified statistical details aside, I do believe that the US is isolating itself from many forms of support, including political, economic and moral.

Presuming that "the EU is the prize" as the recent popular narrative goes, having Belgium made to "look like" the ECB is supporting US debt stands as a rather obvious confidence psy-op in light of the even more obvious self-inflicted isolation.

We will see whether or not Germany will support sanctioning it's own economic inputs from Russia in the form of LNG adaptations to completely different standards (highly unlikely).

China's need to stimulate internal consumption makes ready a much more efficient, regionalized producer/consumer relationship with currency bloc trade partners who appear to have the correct monetary gold policy. This recent strengthening of the YUAN in dollar terms has a long way to go, but quite the uptick so far ...

Andrew said...

Jacques, thanks for the links. Interesting stuff, especially the bit in the Kirby interview about the ESF swaps. I wish they had spent more time explaining that.

Michael dV said...

I suspect the interest rate derivatives are the 'best bang for the buck' when it comes to trying to keep interest rates (i.e. the all important 10 yr rate) below the all important 3%. This is probably 'highly technical' but I'd love to know how inflationary it is. Can they really just keep buying down the rates without it showing up in the 'real economy'?


Michael, no they can't forever. The rubber meets the road when business and individuals take out loans for new offices, oil rigs, homes etc. This money is spent into the real economy and it bids up prices everywhere. So lower rates beget more borrowing and people say "oh, we can afford that monthly payment." Higher rates would slow the bidding of real goods, which would hinder tthe ability of the previous borrower to pay back his loan. I feel we are so far gone at this point that lower rates must beget lower rates. With the predictable reactions of our "leaders", any sudden move higher from here will move us a giant step closer


Stupid phone...

I meant to say one giant step closer to hyperinflation.

t au said...

@ Luke

I was okay with just one giant step closer :)

ATM said...

The UST buying out of Belgium has to be a shell operation. Belgium cannot buy that much and no one else is buying either.

Through the process of deduction it seems clear that the real buyer of that US government debt is the Us government who stands to be the biggest beneficiary or the artificially low rates.

If rates had to rise to meet the market demand for USTs then the Federal government budget deficit would be that much larger and the political pressure would be brought to bear.

If the Fed was outright buying again their would be political pressure as everyone screamed 'they're printing money!"

The backdoor buying they are doing gives them cover. They can print money, lower govt debt interest rates and continue to blow open the fed debt numbers and offshore the accounting.

It's a beauty but it still leads to the same place. Dollar destruction.

M said...

Occams Razor and the Belgium Treasury purchases.

Casey Research posits :

A foreign government can opt to hold its US Treasury securities with the central bank of a foreign government other than the US. An arrangement like this can mean that the foreign holding may not appear on either the TIC or Fed custody holdings.

Further, a foreign government can acquire Treasury securities from a private foreign entity where the transaction occurs on a foreign securities exchange, and the security is held outside the US. Here again, the foreign holding may not appear in US data, or it could appear as a holding by the custodial government. Either way, it skews or corrupts the US data.

The first example is what might have happened with any presumed Russia “selling.” Russia could have moved its Treasury holdings out of the US and into foreign custody. This would account for the large drop in the March US data. And there is evidence that suggests where the securities may have gone.

Belgium is a small country. Its GDP and foreign-currency reserves are about US$420 billion and US$29 billion, respectively. Yet, its Treasury holdings are reported at US$310 billion as of January 2014—and the size of its holdings has nearly doubled since August 2013. That positions it as the world’s third-largest holder of US debt, right behind China and Japan. This lopsided Treasury-holdings-to-GDP ratio strongly suggests that Belgium is in the custodial business.

M said...

@ BullionBarron said

"With the US budget deficit falling, estimated to be under $500b this year and the Fed still purchasing treasuries at an annualized rate of $360b (previously higher), it doesn't leave many new treasuries to be purchased by the foreign official sector."

The trade deficit still puts 40-50 billion per month out there.

It seems like the treasury market is going by way of the mortgage backed securities market in 2007. Another tibit from Casey research.

Treasury Secretary Hank Paulson was in Beijing for a family trip to see the games, but he worried about Fannie and Freddie the whole time, as he was told the Russians had approached the Chinese to work together to dump their Fannie Mae and Freddie Mac shares.

In his book On the Brink, Paulson wrote the motivation was “to force the US to use its emergency authorities to prop up these companies.” He went on, “The report was deeply troubling—heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets. I waited till I was back home and in a secure environment to inform the president.”

Of course, Putin spokesman Dmitry Peskov denied the bear raid conspiracy. To this day, the former Treasury secretary claims the two countries never carried out the plan. However, Russia did unload all $65.6 billion of its Fannie and Freddie debt that year.

As for the Chinese, Aaron Back reported for the Wall Street Journal in 2011, “China’s selloff of Fannie and Freddie securities in 2008 was widely credited with pushing up mortgage rates in the US at a time Washington was struggling to revive housing sales.”

He cited US Treasury data, writing, “China has been steadily selling its holdings of agency securities since mid-2008. It sold a net $24.67 billion worth of agency securities in 2009, and $27.35 billion in the first 11 months of 2010, according to the data.”

In the end, less than a month after Paulson was given that information in Beijing, the US government took over Fannie and Freddie and placed them into conservatorship.

Kieran O B said...

So what makes you sure that the dollars abroad aren't bidding?

You picked me up wrong, perhaps my wording. I meant they are not bidding to match the FED, and when the FED removes its bids, the lower foreign bids are whats left.

AuthenticFrontierGibberish said...

This may end up being a double post, the first didn't seem to go thru:

Bullion Baron said...

@M (or anyone else): There must be data to track net new treasury bill issuance per year (total, not just foreign holders), do you know where I'd find it?

@A PIIG: But as I've tried to explain, they can't match the Fed as the Fed has committed to buying a set amount per month. Presumably the Fed will bid whatever necessary to fill their quota, you'd be stupid to bid too high against such a buyer. FOFOA's posts imply that the reduced (YoY) net increase in (official) foreign sector is only a result of falling structural support, IMO while it is playing a part (comments & actions from the BRICS obviously point to an interest in diversifying away from the USD), the drop off has also been a result of lower deficit & Fed UST buying.

Motley Fool said...


Just a quick observation. You realise that internal buying does nothing to support the real value of the currency, only external buying matters?


Kieran O B said...


and I was pointing out that effect on interest rates should not be left out of the FED buying equation.

Bullion Baron said...

@Motley Fool: I disagree with you that ONLY external buying matters/supports the value of the USD. But I'm not really catching the connection or point you are trying to make relative to my earlier posts.

Kieran O B said...


the FED buying is more inflationary than purchases by foreign dollar holders.

Motley Fool said...


So perhaps then you agree with MMT that foreign buying is unnecessary and they can print whatever they like? :D

My point it, stop letting your attention be deflected and focus on that which is important.

If we consider the plane of real goods flowing, in conjunction with the monetary plane, then what is apparent is that foreign buying of US debts means real goods have been shipped, and payment has been accepted in future debt obligations...there is your real value. If you consider FEd buying of such, it has no impact on real world export imbalance, and hence currency real value.


Roacheforque said...

Fed buying of UST / USMBS ultimately means that BIS is owner of said debt. Perhaps these assets are even more valuable than their gold certificates.
Happy Easter
- R

M said...

@ BB said "I disagree with you that ONLY external buying matters/supports the value of the USD. But I'm not really catching the connection or point you are trying to make relative to my earlier posts. "

Hey Krugman... There is, in fact, a difference between having legit buyers of your debt versus buying it yourself.

Basically, the Fed is aiding the external holders in an orderly exit from their positions of treasuries and MBS. If the Fed didn't step in to buy MBS at face value , then the holders would have lost way more as the securities traded down.

Bullion Baron said...

None of the obfuscation or name calling goes anyway to answering the questions I've raised, such as why treasury bid volume hasn't declined (substantially) if there is falling structural support.

This comment has been removed by the author.


Internal buying of debt would support the currency if that support is coming through real saving(excess production). The fed buying the fed buying the paper is a different story

M said...

@ Luke said: Internal buying of debt would support the currency if that support is coming through real saving(excess production)

Yep Japan.

Motley Fool said...


I suppose I should not be surprised. I expected someone would take the comment out of context.

The context was structural support for external deficit, ie. the value of the dollar lost or supported due to monetary support/lack of support for the external trade imbalance.

Obviously the fed is able to influence the value of the dollar, but they cannot support the value of external trade imbalance.


Seriously? Perhaps someone is taking up the slack? -.-


Lisa said...

Back in January, Blake asked how to reconcile the waning support of USTs from surplus nations, and the Feds promise to taper.

There were some most excellent comments during that general time frame from DP, Aquilus and FOFOA on this topic. I saved them all for myself, because this is a very confusing area for me.

NOTE: I linked only the first post from each commenter, make sure to scroll down the respective page to get all the comments.

On January 2, DP gave an explanation of the way the system works, including helpful diagrams - make sure to click on his link to see the diagram:
DP's comments

On January 1, FOFOA's comments on the mechanism that will escalate a simple dollar devaluation to a full blown hyperinflation
FOFOA's comments

On January 5, Aquilus approaches things from a different angle, using easy to understand examples

Aquilus' comments

Unknown said...

And just in, a Belgium banker is murdered.


Michael dV said...

thanks for those references...good little refresher course.

FoNoah said...

@Lisa - I second MdV. Great work with those links. (Do you have any other personal summaries along similar lines that you would care to share?)

kobajashi said...

Hello fellow PGA 's

Do you know Bruno Paul? He also has a blog that is realy worth reading.


The choice is made for several years, international trade will be based on gold [10.3].

How will this happen in practice? Not with boats or trucks loaded with bullions, of course. As we said a "second BIS" was designed that can manage a clearing house for payments (settlements) in physical gold, especially to add to it a fundamental function to allow again international settlements for goods using "Real Bills" (a.k.a. Gold Bills), as recommended by the New Austrian School of Economics. In his work Professor Fekete described these Gold Bills as being “destined to be settled in gold coins that are made available after the ultimate consumer surrenders them in exchange for finished consumer goods upon maturity”. [10.4] Their issue is strictly limited by the orders received to buy goods. They allow increasing the money velocity without systematically using coins and without any risk of inflation. [10.1]

This is far from a simple "100% gold" standard.

Gold is the only money (gold - silver ratio must float) as everyone knew for millennia. Today most people have more or less forgotten this unique role, but not Western central bankers who have tried for a century to put lipstick on a pig, so to speak. [10.8] By deceiving us, they deceived themselves and began to believe their own nonsense. A historical failure and on a global scale. Alas, alas, it is a failure of the European spirit. We need to recognize it in order to find the impetus beneath our feet allowing us to arise from the depth of this graveyard by the sea. [10.2]

BRICS countries do not necessarily need the West to initiate this new settlement system. [10.5] It must be noted in this respect what it can supersede. The dollar currency and U.S. Treasury at the foundation of famous "petrodollars" are replaced by the Gold Bills that will allow buying oil for example. [11] It is the function of reference currency for international trade.
But US Treasuries have a function of income related to their mid/long term interest rate too - it is also a fatal flaw in this system. This is the second problem: the choice of the reserve currency for central banks.

The new system offers very smartly to decouple these two functions. The income function can be brought (at appropriate time) by introducing gold bonds, that is to say bonds denominated in gold weight, with interests denominated in gold weight and whose principal is redeemable in gold weight (ie not merely an obligation backed by a collateral gold and denominated in fiat currency – a.k.a. gold backed bonds). Again, we must have an institution for the issuance of these bonds.

Note that to start, it is not necessary to replace any national currency by gold coins. The gold bills will circulate in parallel of currencies, and user confidence in these currencies will be reflected in real time in the local price of that currency measured in mg of gold (that is to say, the inverse of the ‘price of gold’ measured in the currency, which is the usual vision that we have - a totally wrong perception because you can not measure the length of a bar with a rubber-band: you must take the opposite approach). Hence the fundamental importance of not having rigged gold markets as currently in New York and London. [12]

kobajashi said...


The U.S. have no way to prevent BRICS countries to launch this parallel system, a competitor of the one based on U.S. Treasury bond, and which finally obliterate their attraction.

The only remaining choice as new rules for American decision-makers (that is to say, the public state and the deep state) are the following, as they are standing with their back to the wall [12.2]:
· either to accept an open cohabitation of two parallel systems, with 100% of the players who know that the dollar system can not be competitive (very quickly one system will endure and all U.S. Treasury assets going up in smoke). Modestly this is called "asset restructuring in U.S. bonds market." This is the path of Vienna in 1815. [12.1]
· or not to accept this open cohabitation, that is to say close the door to hide behind and build a wall as high as possible so that no one can escape from the dollar zone. For this area can last as long as possible (while being doomed because of deflation), it must be the largest possible, and the EU is a tempting (with its remaining gold reserves) and very easy prey thanks to Atlantist governments and European Commission who are obediently following the interests of the American deep state. The strategy is therefore to make them sign the TTIP as soon as possible, which quickly convince them not repatriate their gold and abandon the euro (two currencies for the US-EU area only, is one too many) as they have already abandoned their sovereignty. This is the way of Yalta in 1945. [12.3]

The next time you meet your President or Prime Minister, you now know which good question to ask him: what did he choose for us and that is supposed to commit all?
BRICS countries are reaching out to European peoples since 2009, and our governments show their disdain so far, preferring the shadows of the world before. [13] But it is not too late to think about our place in Europe and in the world, it remains few short months and the ticket can be taken since this week. Hurry up or repent.
What is currently discussed off-line is however everybody's concern, and will commit us for a long time to come. Do not suffer without understanding.

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

Is there still a change that this TTIP would not. be signed? And if so? This looks like a desaster for europe.

See also:



Roacheforque said...

I had not heard of this, but it follows the reasoning of peripheral events. THX for the tip.
- R

Unknown said...

@BB - The Fed doesn't bid directly for treasuries, it purchases them from banks that act as agents. There is a bid cover report that lays out where demand comes from. The Fed has set purchasing times which makes it easy for banks to re-sell quickly for a moderate profit. All of the banks also have asset management and wealth management arms where they could also be filling internal demand for clients; it's not as simple as it seems.

@MF - your point is economically correct, however I think technicals and market structure are also important. By purchasing treasuries and MBS, the Fed is reducing the supply making the asset more scarce which does influence the interest rate and the flow of capital. Yes, real goods are flowing at a certain pace out of the country which determines the trade deficit and exchange rate, but that flow is being altered by the interest rate and financial flow of capital. It's an indirect but highly relevant relationship.

Also, whoever mentioned Jim Willie, please, please stop reading anything he says. It's all about scare tactics with big statements that don't have real analysis or work behind them besides his assertion that he is smarter than everyone else and some "friend" told him terrifying news. That anyone would believe the gold in Fort Knox has been replaced with tear gas is beyond me. There are so many military bases, why on Earth would you store it inside a hard to enter vault under the necessary veil of immense secrecy? Do you know how big tear gas is vs. gold bars? It defies any logic or common sense!

Roacheforque said...

The French translation is a bit sparse, but the trail leading to Engdahl, and the GEAB, both confirm supporsitions which I had come to before finding these sources. And Fitts concurs, even to some extent we see this in PCR (though he seems a bit frantic lately).
It is affirming to come to a conclusion through one set of sources, only to find other sources coming to this same conclusion through their deductions, some coming from different sources and perspectives.

I suppose I would agree with Engdahl that we are at a critical juncture where Europe is "the prize" because it literally holds the "swing vote" in terms of resources, production, economy, gold holdings, partnerships and agreements in place. In terms of its currency project, the Euro, perhaps that is the focal point upon which Europe will turn. Which direction empowers the Euro, to turn West or East? That may be a consideration that could end up an Achilles heal even though the currency itself is largely "separate from the political" and yet in times of change, when an important fork marks the path ahead, which human emotions, which hidden agendas, which exploitable weaknesses pave the way forward?

As much as the larger picture seems clear, the details are foggy, enshrouded as they are in those smaller meetings, and promises uttered. A whisper could change the tide, I think.

Thanks for your contribution here.
- R

Roacheforque said...

Sir Storm,
I'm not sure that any source can be fully discredited or fully vetted in these times. I think some of what Willie says may be entirely wrong, and some entirely right. I would not throw the entirely right out with the bath water.

The same can be said of PCR, Fitts, Engdahl, Kirby, and MacLeod, all have good points yet all may not be 100% accurate.

Depending on sources, and the high level of misdirection, I think it's best to weigh and measure all sources against the aggregate of information to determine which pieces of the puzzle fit the bigger picture, and which can be discarded for now.

A / FOA / FOFOA are some of my most credible sources of all, sort of the yardstick by which I measure lots of credibility, and yet none of these three claims to be perfectly correct, and even warns that should you think this, "grab the kiddies and run".

Then you have the direct opposite like Pete T who continually hints at "grand conspiracies, daily conversations with Another and FOA (yet he won't reveal their identities as no one is worthy of such knowledge) and so you have the obviously deranged and their delusions of grandeur.
Even the hallucinatory have tidbits of value in a world so entranced by manufactured illusion.

Conscience Sociale said...

Thk for your comments about my blog.

The parts you quoted are from this article:

Motley Fool said...

Some off the cuff thoughts.

Jim Willie is not stupid, but if he actually believes the things he claims he is crazy. Personally I think it's simply attention seeking bullshit. He is best ignored.

Real Bills are a no go, and contracts denominated in fixed weights of gold are a bad idea.


Motley Fool said...

Ps. @Andrew. Yes of course. I simply painted the big picture, because some get lost in the forest whilst busy with minute examination of the trees.

Unknown said...

Fair point. I just want to reiterate what you said: weigh any source by its analysis. Some have nothing but grandiose statements that derive legitimacy solely from an association with someone they swear is legitimate. Others, like FOFOA, produce volumes of analysis, thought, supporting documents and the like.

Roacheforque said...

Mssr. Paul,
I have added yours and Leap 2020's links to the roacheforque blog, as they are both surely well worth it, and I see that your latest article as the latest post to Koos site is a victim of the latest attack upon Koos - his site is again hard down.

Conscience Sociale said...

Thks a lot.

Maybe FOFOA could republish it as a guest post too...

BTW: about US Treasury, you might want to visit the most complete page on the internet about UST data, online since years.

ein anderer said...

Tried to summarize this post of FOFOA for German only speaking people …

Jeff said...

A tribute to the Thoughts of Another and his Friend. And Bruno.

Too long for the masthead. Maybe Fekete would welcome a guest post on real bills.

Phat Repat said...

I believe we will see moves into the US and the USD will continue to strengthen (sure, for the short-term, but it is what it is). GLD will continue to get spanked (current target 120.33 stop 126.32), as will the miners (again just my short-term view). The next major sell off will likely be the emerging markets and I will enjoy that ride, while it lasts. But, I know there are no traders on this board so these gyrations really don't matter; though they do. ;-)

Conscience Sociale said...

Thks. I would precise I do not know A, FOA ;) but only their published thoughts.

Here are some Fekete's video and articles about Real Bills:

Jeff said...

Thanks for the spam, Bruno; I won't be reading it. Real bills come up from time to time here; the fact that you are bringing them up shows you haven't read the blog. There is a (mercifully short) discussion in the comments of this post, if you want to understand why freegold and real bills are incompatible. Bon chance.

Conscience Sociale said...

I perfectly know you will not read it, and that's why you will fail.
The second link I gave was indeed the detailed answer of Fekete to Max Photon, whose article was linked in the URL you gave. I knew both of them.

As my conclusion on this topic, do not even think that freegold is *only* what FOFOA is saying, writing or banning. It would be another deception.

Il n'y a pas plus sourd que celui qui ne veut pas entendre.

Motley Fool said...


Well. I have read everything ever posted by Fekete, and understand it all. Before I stumbled on to this blog I was a proponent of Fekete's ideas.

I'm not any more.

Do what you will, but if you take the time to read this blog, you will discover the flaws in Fekete's work for yourself.


Nickelsaver said...

What does the 'free' in Freegold mean? Very simply, that nothing be used to represent it, replace it, expand it, denominated it to a fixed value or issue or redeem it as such.

Freegold is total de-monetization of gold.

Now gold in custody is ok. As long as it is allocated. Allocated ownership of gold that lies still, and is traded as a matter of legal ownership via the custodian is ok. Creation of a document or proxy other than the record of ownership, is not freegold.

Nickelsaver said...

The problem with the Austrian school is that they want gold to be a primary medium of exchange, realize that it could never be in this digital age, so they invent proxies to make its trade viable.

If they could just see it as a secondary medium of exchange, isolated from the primary, this is freegold.

Nickelsaver said...

Some might say, gold is already de-monetized. Not so! Gold is held captive by a fraction reserve authority larger than any central bank.

Michael dV said...

From a Drudge link (via Zerohedge)
so looking at folks as savers is becoming mainstream. It is a pity they are all saving in the wrong media but at least they are trying. It might be nice if someone with authority suggested a better way to save.
I've tried but few will listen.

Michael dV said...

When gold hit mid 1300s I bought some 125 puts. Sold half 100+% up and am ready to sell the other half. Even as gold falls the time factor is eating away at my profits (May17 125 puts)

Phat Repat said...

Good for you! Probably not a bad choice given time constraint. I personally like to play DUST. Higher profits when correct. :-)

I have started to tune out Zero Hedge, Drudge (except contrarian), and other purported news sources. All is propaganda these days; not an honest story to be found or I would cherry pick to satisfy my own confirmation bias. Done with that.

Michael dV said...

agreed, all is just waiting now. I see the range in which the POG moves becoming smaller as time passes. If it goes up to 1340 I'll probably buy another batch of puts and dump them at just below 1300. It is kind of narrow but gold just can't seem to stretch out at all. It is as though if it gets too high the shorters crush it. If it gets too low I suppose the risk of too much physical being taken out of the market place inspires some support.
I actually have no clue what causes anything any more. I have noticed the tighter range however and I'm so bored I play that game with a bit of pocket change.

Roacheforque said...

The current attack is, in fact, along the lines of that conducted against the Euro in 2010, in the knowledge that in breaking the common currency and taking into account the technical impossibility of returning to national currencies, Europe would find itself de facto integrated in the Dollar zone. This time, Europe resisted and saved its currency… at the price of enormous weakness, especially political ... (TTIP) would actually create a huge EU-US free trade zone using Dollars and formally annexing Europe to the Dollar zone. Here again, the tools of European independence are targeted, in this particular case its judicial arsenal for trade protection, guaranteeing Europeans’ economic interest, qualitative competitiveness and health. And the methods to obtain the signature of this treaty at any price are, on their own, proof of deep dishonesty.

Courtesy of a link provided by Mssr. Paul.
I would say this view concurs with the realities not exactly shared along the babbling brooks of the main stream.

Roacheforque said...

But as we have already said, this isn’t the most important thing. The TTIP’s major stake is the Dollar’ s preservation in trade and keeping Europe in the US’ lap in order to avoid the constitution of a Euro-BRICS bloc able to counterbalance the US.

Thus, the Ukrainian crisis, under the pretext of Russian aggression and gas supply, is a good way, in the panic, of imposing the US and the lobbies’ agenda in the face of European leaders who are too weak to act. What wasn’t expected is that the lobbies’ interests are not necessarily going in the direction one thinks…

Phat Repat said...

"I have noticed the tighter range however and I'm so bored I play that game with a bit of pocket change."

Yes, the same for me. It's a fun game (when it works in my favor :-), but either way I like the challenge. There is something building given the rather subdued state these days. I'm still betting down but the mechanical nature of my system could alter that at moments notice. 30% last month ain't too bad. ;-) Leaving in a week for the East, back to expat status; time to catch up...

Phat Repat said...

Goldman: Upgrades precious metals miners.

Hmmm... Now what's the rule? ;-)

Woland said...

So, Tusk is the U.S. stalking horse to the E.U.? Seems so.

Alex in Montana said...

Kyle Bass says Japan blows up first
Martin Armstrong says France blows up first

These two go first among big countries. We follow.

Alien said...

.....and I hope ussa blows up FIRST as they are sooo exceptional!
AND forever

Unknown said...

I'm new here and trying to understand how all this works so forgive my ignorant question but it seems that discussions about freegold have been going on for years and I would like to know what sort of timeline is being talked about. I just see the price of gold dropping, manipulated or not. When do you see this rise in fiat price occurring and what will be the trigger? Are we talking a year or decades?

Franco said...

A year.

byiamBYoung said...

Hi Michael M

You have a lot of reading to catch up on if you want to understand freegold, but I think a great post that begins the conversation is Peak Exorbitant Privilege

Another good starting point might be The Debtors and the Savers

Be sure to seek out the other debtors versus savers posts. Others can offer many other good posts to get you started in understanding the Freegold concept. Happy reading!

Unknown said...

Thanks biam. I've spent many hours reading and will do more but I haven't run across anything that gives a time estimate. I would also like to know what would be the trigger for this reset. Just wanting a quick educated opinion that won't necessitate weeks more reading

tEON said...

@Michael M

There is no timeframe. Anyone attmepting to time FG runs the risk of disappointment. A revaluation may happen next week or after you have left your AU to your children and grandchildren. Being a PGA means saving your excess in Gold, not trying to time when it would be the best time to switch over from every other assett/investment into Gold. As for triggers... there are many - but no one can know which will be the snowflake that causes the avalanche - so discussing the factors is really just biding time. A true FG'er wouldn't need to scramble and do anything different is he or she knew FG would happen next month, IMO. Best of luck.

Unknown said...

I put my gold in a box a long time ago as I don't see the direction the economy is going as having a positive outcome. If there is a windfall in the future then all the better

Michael dV said...

Michael M
potential triggers might be anything that disrupts the flow of physical to certain important producers. Some of us watch the GLD inventory as this represents the last remaining hoard that can supply physical demand and is available to do so. Inflation is another potential cause in that the destruction of the gold pricing mechanism would automatically revalue gold.
Other causes such as a failure in the derivatives market seem possible but the Fed seems to be on the job stuffing holes and shoring up weaknesses.
I expect to wake up one day and find out something happened at the open. Wheelbarrows seem too last century.

Unknown said...

I expect that there will be a nasty surprise like the last one but much worse and most people will be so busy watching reality TV they won't see it coming and won't be prepared in any way

ein anderer said...

tEON: Well said. +1!
Michael M: Keep your gold whatever is happening—and keep reading ;)
Here is a VERY short definition of Freegold, just from our host.

Roacheforque said...

I do not believe that GLD represents the last remaining hoard that can supply physical demand. Publicly, it's a nice stack, and the paper price actions shacks out a lot of smaller private hands to keep the stack from shrinking too fast, but I think we're beginning to see other flows within smaller exchanges. Libya's gold didn't come from GLD. Venezuela's repartiation didn't come from GLD, Russia's Iranian gold for oil didn't come from GLD, etc...

When you look at the flow of demand into China, there are real questions about where it is coming from, and if it was solely from GLD, many people would be (and are) scratching their heads about where it is coming from.

I would not be surprised if GLD was emptied, and Western paper holders began screaming for physical as the dollar tanks, and gold elswhere is still flowing outside the Western paper gold. GLD "system".

Those competing markets appear to be forming and gaining traction in the East.

Roacheforque said...

Roacheforque said...

When gold moves it is flowing. The only true measure of ownership is physical possession within the boundaries of land which the gold holder can claim title to and protect from any form of claim upon the gold (including removal by brute force for any reason). And so this often requires secrecy. Repatriation = a form of flow. Mass repatriation under cover = a more robust form of flow.

Edwardo said...

When pondering the question, when will physical gold, in the absence of paper claims meant to artificially expand the supply of physical, and depress its price, function as the world's wealth reserve asset for the grand, not so grand, and downright miniscule, it's worth recalling that, only in "The West", and only over a relatively brief period time, have, so called "paper assets" been asked to try and perform the function that a certain unambiguous form of wealth has successfully performed throughout most ( if not, perhaps, all) of human civilization.

What are we really talking about here? We are talking about the dissolution of an aberration, admittedly a spectacular one, but an aberration nonetheless. So, even as it must be admitted that Freegold represents a unique development in the evolution of monetary affairs, it is, at least in my view, by no means, a thoroughly radical departure from the bulk of broadly defined monetary practice as we have known it over large expanses of human history. To wit: physical gold never stopped functioning as the wealth reserve asset par excellence, let alone as a wealth reserve asset (with no superlative attached). This condition has persisted despite great attempts to supplant physical gold, and, in the absence of succeeding, obscuring its very robust role as humanity's store of value par excellence.

The evidence for this assertion is overwhelming since physical gold has never stopped being held and acquired by the most powerful economic and financial entities across the planet. However, as "The West" specifically, the U.S., has been, more or less, calling the shots for some number of generations the aforesaid glaring and inconvenient fact has been the victim of more than a wee bit of obfuscation not to say reams of downright negative publicity.

The U.S., however, is well down the lonesome road of no longer calling the shots. Other players are now in the process of assuming the mantle of "the decider" to borrow the less than elegant parlance of President Bush jr. In the meantime, however convoluted and downright constipated this process can appear to be, it has, by my lights, made substantial progress over the last few years as witnessed by, among many other developments, the collapse in foreign official support of U.S. sovereign debt. All my palaver is by way of saying that with The Euro here (to stay), and the ROW's officialdom looking elsewhere for a store of value, and knowing that paper gold's existence was always about extending the dollar's timeline, folks are not going to have to wait anything like another generation, let alone a decade, and probably not even another full U.S. Presidential term to see the world finally relinquish the $IMFS.

Perhaps the present farcical system will not give way to freegold, but, equally, one has to consider that any half measure, even if enacted, is not apt to not last very long given that it will, by definition, not address the key malady, a malady whose symptoms are now well and truly of such a magnitude that they beg a comprehensive solution not partially efficacious measures.

Motley Fool said...


Just want to say I enjoyed that deliciously descriptive piece of writing, with its run-on sentences. :D

Painting the broad picture so concisely and eloquently to boot.


Phat Repat said...

Indeed, very well written. And thanks for expanding my vocabulary (palaver). Just think, there was an epoch where such words were common. But no longer, and certainly not on the 'new' SAT; yeah, yesteryear...

Hope your views are realized; especially the "not even another full US Presidential term" as I don't believe we could survive that without dire social consequences.

Woland said...

parlance……palaver……efficacious……. that's part of what
we love about you, Edwardo: The fusion of concision with
onomatopoeia. {;<)>>

Edwardo said...

Thanks, MF, for the kind words, and for your indulgence of my grammar challenged, typo ridden epistle.

One Bad Adder said...

tEON: indeed, well put Sire.
ITMT my personal "tipping-point" HERE is again approaching Zool.

We watch!

One Bad Adder said...

Here's the HERE:$IRX&p=D&b=5&g=0&id=p73458434997

(It shows up correctly in "preview", but doesn't make it to "publish" ...grrr!)

One Bad Adder said...

@ Michael M: further to tEON's points -
Try thinking of GOLD (physical-in-possession) as that which transcends banal monetary considerations ...where TIME is the essence.
ALL monetary functioning, including $PoG/S etc have a time component whereas GOLD per se is TIMELESS.

Unknown said...

Thank you for responding - I'm not used to a blog where the participants actually seem interested in responding and educating others and exchanging views rather than just promoting their own views and egos - nice! As for banal monetary considerations - I will need to cash in at least a portion in future to live day to day and hope that at a higher value it will be a smaller portion. I hear that bars date stamped in the 60's or earlier are showing up and wonder if they are getting to the bottom of the barrel considering the continuing negative GOFO and if this may allow the price to move higher soon.

vizeet srivastava said...

I recently read that Chinese businesses and banks use physical gold as a collateral. I think due to monetary tightening demand for gold should decrease as risk taking will reduce. Also I think major part of gold import by China is driven by demand from people, banks and businesses and not by PBOC. PBOC might be accumulating gold but probably not at a high rate.
Another thing if PoG does not increase for an year or so we should see all banks in London gold fixing to exit leading to variability in global gold pricing. If that happens paper gold will get dumped causing economic crisis.

Motley Fool said...

Michael M

As to rising fiat priced gold, we don't expect it.

Here's something for your consideration, one of my favourite posts :

Hold on to your hat. :)


Tommy2Tone said...

"When do you see this rise in fiat price occurring and what will be the trigger? "

Tuesday, January 1, 2002 - Launch of euro notes and coins
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600

Anonymous said...

Ran across this quote from Henry George's work, Progress and Poverty, regarding "wealth," and thought it might resonate with many on this blog:

"As commonly used, the word " wealth " is applied to anything having an exchange value. But when used as a term of political economy it must be limited to a much more definite meaning, because many things are commonly spoken of as wealth which in taking account of collective or general wealth cannot be considered as wealth at all.

Increase in the amount of bonds, mortgages, notes, or bank bills cannot increase the wealth of the community, that includes as well those who promise to pay as those who are entitled to receive.

The enslavement of a part of their number could not increase the wealth of a people, for what the enslavers gained the enslaved would lose. Increase in land values does not represent increase in the common wealth, for what land owners gain by higher prices, the tenants or purchasers, who must pay them, will lose.

And all this relative wealth, which, in common thought and speech, in legislation and law, is undistinguished from actual wealth, could, without the destruction or consumption of anything more than a few drops of ink and a piece of paper, be utterly annihilated.

By enactment of the sovereign political power debts might be cancelled, slaves emancipated, and land resumed as the common property of the whole people, without the aggregate wealth being diminished by the value of a pinch of snuff, for what some would lose others would gain.

There would be no more destruction of wealth than there was creation of wealth when Elizabeth Tudor enriched her favourite courtiers by the grant of monopolies, or when Boris Godoonof made Russian peasants merchantable property.
All things which have an exchange value are, therefore, not wealth in the only sense in which the term can be used in political economy.

Only such things can be wealth the production of which increases and the destruction of which decreases the aggregate of wealth. If we consider what these things are, and what their nature is, we shall have no difficulty in defining wealth."

Franco said...

Well, Larry Kudlow of CNBC would have a big problem with that narrow definition of wealth because, according to him, bull market runs generate wealth. So, there.

Unknown said...

Motley, very interesting article - it was written in 2010 as gold price continued to rise and then the plummet as predicted. Now it seems that gold for delivery is drying up while demand from China (and soon to be increasing from India) continues to suck more out of the system. As predicted, paper has increased. Looks to me like we are getting close to that point when price will be forced to rise. Am I seeing this accurately?

byiamBYoung said...

Michael M,

I think most folks from around here expect that the paper price still has quite a ways to fall, although timing is anyone's guess.


Motley Fool said...

^ What he said. :P

DP said...

"The price" is for paper.

Do you want it?

DP said...

How about if someone suggested "the price" will fall, while "premiums for physical delivery" expanded massively?

Unknown said...

DP, the paper price matters to me but only for that portion that I will have to sell to finance my daily needs. Fiat is useful at times.

DP said...

Your gold is highly liquid?

DP said...

So why would I keep all of my savings in physical gold at the same time as I expected an eventual collapse in the price of gold? Interesting question, isn't it?

Hold On

Unknown said...

DP, good article - I've been called a fool for putting most of my savings in gold but I was hoping that the price would fall further to speed up the process - I haven't been disappointed :) I have shares in Central Fund of Canada as well as bullion. I will definitely hang on but am hoping for a price rise in the not too distant future as I will need some spending money.

DP said...

I think most of your fellow commenters would agree with my assessment if I were to suggest one might wish to retain a cash buffer, for unforeseen expenses, if one wished to be seen as prudent and tail-risk-averse.

I'd hate to hear you had to sell all of your gold at exactly the worst time in all of recorded history.

Unknown said...

I would never have to sell all my gold, just a small portion for expenses in a few months. What's your view of Central Fund shares?

Nickelsaver said...

DP said...

I don't have any. (Others may care to share their opinions, however?)

WRT to not having to sell all... that depends on your expenses and, perhaps significantly, "the price" when you are forced to sell, I suspect?

Good luck and good night!

MatrixSentry said...

Personally I view GTU and CEF as a big risk, suitable only for money trapped in brokerage accounts like mandatory employer mandated 401ks. I have one of those where I work. 15% of my pay is deposited in the 401k each month by my employer. It is trapped and I cannot access the money until I either resign or retire. Only traditional brokerage type investments are allowed within the plan. I cannot own gold bullion. As such, GTU is the best proxy for gold bullion IMO. There is no mechanism for gold to leave the trust, quite unlike GLD and PHYS.

The main risk as I see it with GTU is that the government can get between me and my gold shares. Either by outright confiscation or through onerous measures to capture any outsized gains I may realize after the transition to freegold.

One Bad Adder said...

@ MM: - If you're confident the "Price" of Gold will either go up OR down in your chosen timeframe, then an effective paper straddle (puts and calls) will serve your needs far better than "selling" GOLD - yes?

Robert said...

Although I understand the theory for why the paper gold price would collapse in a crash when everyone suddenly wanted to pull physical gold out of the system, I cannot grasp why the paper price would run to $1900 and then slip back to a spot close to the cost of production -- and then level off and stay there for an extended period. That can only happen is abundant physical is flowing in quantity. Apparently it is.

One Bad Adder said...

@ Robert: - It's all to do with Inflation / Deflation in the Paper / Fiat / Currency realm. Nothing whatsoever to do with Physical Gold my friend!
Curiously, the really amazing thing with $PoG over the last 15 Yrs is that it went from sub-$300 to $1900 ...before falling back...
...and this had to do with generating the last morsels of Global INflation prior to the turn.
The game seems to be "finally" ending however and REAL DEflation will put the Sword to any and all "future price-derived" Assets - $PoG / S included.
There WILL be price dead-cat-bounces in $PoG (as physical off-take ratchets up and GOLD goes into hiding) but the trend will be down.


Unknown said...

It seems to me that gold has been flowing in quantity, out of GLD, bank vaults etc. Robert, my understanding is that the U.S. must either inflate or default and as they don't want to default they will choose the former to keep things going longer. What I see happening right now is growing inflation. What do you mean by gold going into hiding?

One Bad Adder said...

@ Michael: - The flow of Physical Gold will (at some point) simply cease ...which will exacerbate (price) pressure on the down-side.

Robert said...

I don't follow you OBA. I never understood Another and FOA to have predicted a long drawn out downward trend in the $PoG. I understood them to have predicted a sudden collapse in the $PoG. The market would ultimately freeze when the $PoG suddenly dropped so low that there was not sufficient physical to flow at the paper selloff levels. A deflationary shock might be the trigger, but the point is that it is a "trigger" to a short term "event" -- not a "trend". At least that's how I understood their prediction.

Michael M, gold has been flowing in quantity from somewhere, but where? GLD? There has been a drain in recent months but that has leveled off, at least temporarily. But the GLD inventory is still around where it was back in 2008 when FOFOA started this blog. Which leads to the question of where all the gold came from that was put into the trust from 2008-2011. Can the same unknown pool replenish the trust again? Are movements into and out of GLD just a shell game? GATA says that gold must be flowing out of western central banks, but that takes us into the realm of conspiracy theories, and I think this crowd rejects most of those conspiracy theories.

Is demand from China/India really as strong as the KWN crowd wants us to believe? Are worldwide stock and annual production figures really as well known as WGC and GATA claim? It's all so opaque....

Robert said...

I don't follow you OBA. I never understood Another and FOA to have predicted a long drawn out downward trend in the $PoG. I understood them to have predicted a sudden collapse in the $PoG. The market would ultimately freeze when the $PoG suddenly dropped so low that there was not sufficient physical to flow at the paper selloff levels. A deflationary shock might be the trigger, but the point is that it is a "trigger" to a short term "event" -- not a "trend". At least that's how I understood their prediction.

Michael M, gold has been flowing in quantity from somewhere, but where? GLD? There has been a drain in recent months but that has leveled off, at least temporarily. But the GLD inventory is still around where it was back in 2008 when FOFOA started this blog. Which leads to the question of where all the gold came from that was put into the trust from 2008-2011. Can the same unknown pool replenish the trust again? Are movements into and out of GLD just a shell game? GATA says that gold must be flowing out of western central banks, but that takes us into the realm of conspiracy theories, and I think this crowd rejects most of those conspiracy theories.

Is demand from China/India really as strong as the KWN crowd wants us to believe? Are worldwide stock and annual production figures really as well known as WGC and GATA claim? It's all so opaque....

Unknown said...

I think annual production figures are fairly well known. Worldwide stock is an estimate with who knows how much accuracy. We do know that banks and governments aren't telling us what's in their vaults but it seems very likely that they are being emptied in the west. Those reports of bars labelled in the 60's and earlier showing up recently, if true, may be telling us they are scraping the bottom of the barrel perhaps. I think GOFO rates are also telling us things are getting tight. I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain. I would think that would crash the system and create an immediate rush for any source, jacking the price sky high.

S P said...

It's not so much the price of gold in dollars going up or down as it is gold going into hiding, not trading. Nobody can really know where the price of gold will go as this phenomenon spreads, as we cannot predict the post freegold price of gold.

The action thus far just tells you that gold is still flowing. All of these years, what, 17 and counting? and no major problems with the flow of gold.

In fact, we can gauge this sentiment here. Question: If anybody here had a desperate need, let's say, money for a big move between jobs, or a big operation for yourself or family, something like that, would you sell your gold? Or would you do whatever it takes BUT sell your gold?

If the answer is more the former, then we are still not near freegold, as even die hard fanatics will part with it. If the answer is more the latter, this indicates that we approach freegold.

My answer? I have to admit that if I really needed to, I would sell gold. However, I have currency reserves and enough gold reserves that most of my gold isn't going to be sold. Do you understand - I will hang on unto death itself. My belief is at that level now, I personally think we are getting closer.


If I thought my gold holdings would be revealed 30x I would be moving into my parents house before I sold it.

vizeet srivastava said...

I think there are two possibilities:
1. Gold price will go up rapidly because of high inflation in US.
2. Gold price will go down because investors becomes hopeless of future of gold as other instruments continue to outperform gold.
Point 2 will not occur if paper gold gets official support from somewhere. I am not sure if it possible.
Point 2 may get delayed if China and India put brakes in consumption of gold.

It doesn't matter which one of 1 and 2 occurs first, at the end US will be in HI and gold price will crash and later revalued.

Jeff said...

'I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain.'

vizeet srivastava said...

Michael M,
"I don't understand how the price of gold drops when physical becomes less available"
It becomes simple if you understand that only 1% of paper gold is backed by physical gold. People investing in paper gold are investors or traders. People saving in gold are savers. Savers want to accumulate more while investors wants to make maximum profit in short term. There need is different. Savers buy more physical gold when price is low while investors invest in paper gold when they see prices are going up.
Since only 1% of gold is physical, the PoG is determined by paper gold demand/supply/sentiments not by physical gold demand/supply/sentiments.
Since gold is not giving good returns investors are pulling out of paper gold which is causing gold prices to drop. Since savers buys more when gold prices are low so we are seeing some shortage of gold. The shortage is not visible at shrimp level because gold production is trying to match demand. Gold Miners are producing more gold to improve profit as margins are low.

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

'I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain.'

@Michael H

It's ALL about the Flow of gold IN SIZE.
Read The Shueshine Boy

tEON said...

"I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain."

"In our current dollar gold market, the less gold is supplied, the more it pressures the price down! Players must create and sell not just more contracts to cover expiring ones, but also sell enough paper to force the price down further. In a market that's becoming shorter of physical gold, this is the only way they can add equity to cover rollover positions. In this political game, the dollar supporting paper gold arena is being forced to kill itself. It's also the reason I proclaim that we will see rare physical gold in the thousands once the deed is done.

Looking down the trail we can see the end of our paper gold markets. This same market place that evolved from 1971 into a "contract gold currency" is now being politically forced into hyperinflation in much the same way fiat currencies are. Just as the dollar has been inflated to unimaginable extremes to protect the US banking system, so to will this gold currency be inflated until suddenly it's credibility is shaken." FOA - The Gold Trail

Robert said...

"I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain."

Heh heh. Lots of comments on this one. I can understand why the price of gold drops when physical becomes less available. I cannot understand how this can continue for months and months and months as physical is supposedly becoming less and less available. If the flow really as stressed as we have been told to believe?

MatrixSentry said...


Nobody in the comment section of this blog is going to convince you one way or another whether the flow of gold is being stressed. Why are trying to be convinced by someone. Why not figure it out for yourself? I didn't even start reading the comments until I figured it out for myself. The comments have their place on this blog. They are not a substitute for serious scholarship, best done in quiet contemplation in your favorite easy chair.

It will either click or it won't. If it does, your questions are answered. If not, they aren't, and at best you can say the status of flow is undetermined. This may not satisfy, but I wouldn't take such a high nose attitude if the topic hadn't been literally beaten into the earth many times on this blog, in many different posts.

You have either not spent the time necessary in the arm chair, or the concepts just do not resonate. In the latter, no manner of RTFB orRRTFB will likely alleviate your frustration. Freegold is a viewpoint. Some will never adopt the viewpoint.

byiamBYoung said...

“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises

When the shrimp supply is finally stressed, things have already gone poof.

Robert said...

Matrix Sentry, what are you saying? I should figure out for myself if the flow of gold is stressed? If only that were so easy! Who has the insight to answer that question? The gold market is opaque. Wait, I should RTFB or RRTFB? How condescending of you! Sorry, my friend, the blog cannot answer that question. And I have been around here longer than you. I can probably quote FOFOA even better than you can. Do I sound frustrated? I sure hope not. Skepticism does not come off as frustration except to one who is himself frustrated. Are you frustrated? Skepticism is a healthy response when observations don't line up with theory. If you read what I say closely enough you will see that I don't reject the thesis. But I ask the questions you don't seem willing to ask yourself! I just want to find the truth, and to follow that trail wherever it leads. We all see the trail a little differently. Peace!

Tommy2Tone said...

"If you are searching for facts you will find them,
but the items you find will not be true!
Did you think that the high powered world of the LBMA
would operate in a fishbowl for all to see?
We cannot take what is on the outside as evidence
for what is on the inside. To find the answer, work with
inside assumptions and extrapolate them to the outside!"

Roacheforque said...

The price of gold is doing whatever it is doing because it is still DERIVED from the mechanism of a DERIVATIVE paper proxy.

Whether it goes up, down or stays relatively rangebound has absolutely nothing to do with it's function in a future we have not arrived at yet.

It has everything to do with a predictive future based on a normalcy bias derived from the past.

And that bias informs the future cyclically and in a circular loop, in a sense preventing that future we haven't arrived at yet from ever coming ... until ... all at once ...


Happy Friday!
- R

Michael dV said...

My thoughts on the flow is that the banks use mining supply and the trickle of scrap to keep the vaults at as high a level as they can. They may have acquired gold from Ukraine in March that slowed the loss or maybe mining supply increased.
We should definitely see a continued decrease if reports of increased Chinese buying are true. I believe this loss og GLD gold is critical and therefore those who must maintain it will do all in their power to do that. The first 4 months of this year have been a surprise but long term the trend will continue.
If mines are desperate they might be mining every bit of easy stuff as fast as they can. We can't get the details but we can at least see the GLD inventory. There could also be some cooperation on the part of major producers as they see that immediate demand might cause a situation that they might not be fully prepared for. Kinda like a loan to a relative who just needs a little more time to make the payment.

Nickelsaver said...

'I don't understand how the price of gold drops when physical becomes less available, perhaps someone can explain.

How does Walmart churn a profit selling things for less than Target?

If the minors are pushing more production because their margin has tightened, such that their bottom line is very thin. We could see how any drop in POG at this point would stop the flow suddenly. Not because of availability, but profitability. But their increase in production would keep the price down. Then the sudden drop in production will send a signal to the market that gold is not available. The sector which demands physical will flee the market, and cause a cascade to the sector that trades only its price. GLD should see a quick drain or lock up. If you think about the drain in GLD over the past year or so, had production waned from the minors, we should have seen GLD drain dry. Imagine a sudden drop in porduction at this point. Could paper gold be influenced higher in in the event? Perhaps, but I think only if oil responded quickly downward.

Unknown said...

It seems to me from my research that it's not true that stress in the supply drops the price. Stress can be seen in the GOFO rates. Here's what happens when gold supply is stressed:

Motley Fool said...


So uhm, you want a question that is unanswerable, as the information is unavailable, answered definitively by the members of this here blog?

You are not asking for much are you.


Dante_Eu said...

This is probably nothing because it's a shrimp view of a tiny shrimp market in a northern wilderness of Europe. Anyhow, the biggest online seller of gold bullion, is out of stock of 1 Kg and 250 gram gold bars. It began 2-3 weeks ago and no change in sight. Also, as of today, the difference between sell and buy price (for 100 gram bars) is as low as I ever have seen it. Only 430 SEK which is about 66 bucks. Usually it's in a range 800-1500 SEK.

Nickelsaver said...

I personally think it is possible we could see one last big headfake in the POG. If it went north of 1800, it would come down like meteor as weak hands and price riders seemingly recovered their loses. No matter how you look at it. Selling now is the worst time in history

Blake said...

Can't miners protect against margin deterioration by going short gold and long oil? Why must a falling gold price and arising input cost doom the miners if they can hedge exposure to both of these events?

tEON said...

It seems to me from my research that it's not true that stress in the supply drops the price

Looking at it in the opposite way - from page 230 of Rickards The Death of Money.

"Many analysts have been baffled by the paradox of strong demand for physical gold around the world and the simultaneous weakness in the price of gold futures traded on the COMEX exchange since August 2011 peak in gold prices. Physical buying is coming not from the central banks but also from individuals, as reflected in the demand for one-kilo bars vs. the 400-ounce "good delivery" bars favored by central banks. Swiss refiners have been working overtime to convert large bars to smaller ones to meet this demand. If the price of any good, whether gold or bread, is held below its intrinsic value by intervention in any form, the behavioral response is always to strip the shelves bare."

Edwardo said...

Blake, I'll tell you why it's no mean feat to successfully pull off what you propose. First of all it's costly to engage in hedges at retail rates, which is what most of these less than imposing outfits are subject to, and, ultimately, it's an exercise in speculation/ trading. The biggest mining outfits have the resources to employ people with the requisite skill and experience to place hedges. And, I suppose, they can probably negotiate a better rate for themselves with the exchanges/brokers, but a lot of these outfits only end up hurting their bottom lines when they engage in hedging.

FWIW, out of interest, I recently did a survey of sorts of APMEX's gold inventory. I counted all of their one ounce, one half ounce gold coin and one, five, and ten ounce bar holdings.

I did not count anything under a half ounce. What I came up with was approximately 21,000 ounces.

Edwardo said...

Also included in the survey are APMEX's kilo bar and coin holdings which aren't abundant.

Unknown said...

It's not about large amount of gold being purchased but about whether supply is tight

One Bad Adder said...

Robert: - In the era Another was posting, (late '90's) the issue then was the gradual grinding down of the Fiat PaperGold-price to at or below production costs.
This was occurring due (largely) to the $ time-line ie: the fast-approaching "use-by-date" of the System du-jour - in DIS-inflation teetering on DE-flation.
Another's message was (above all else) to draw attention to the fact that GOLD was not to be confused with the $PoG.

In the years since, the aforementioned "Time-line" has been extended by various and nefarious means ...but in essence, the A / FoA logic is still firmly intact - IMHO.

RJPadavona said...

Over half the bickering on this forum revolves around timing. What a colossal waste of TIME! It's like waiting around to see if the long-cunted, neighborhood trollop is gonna change her ways and start living a life of chastity. Whether it's by her own free will, menopause, or the effect gravity has on the skin, one of these days her life is gonna take a turn for the better. But there's absolutely no good that can come from keeping up with her progress.

Just imagine if all the time that's been spent on this forum arguing about timing had been spent over-producing and using the surplus to buy gold. Half of you fuckers would be Giants and wouldn't even need to read this blog.

The current monetary system and paper gold market are gonna keep functioning…. until they don't. Patience is more than a virtue; it's a state of mind. IT's gonna happen, folks. But most likely not when you think it will.

Pressure and Time

Robert said...

MF, no I do not think it is an unreasonable question. I will be a little more direct so that you can see where I am going with this. I think FG is still a long way off. I say that with the caveat that I fully agree with FOFOA's point about slow history. Things can change very quickly. But I think we should ignore the noise coming from sources like KWN and GATA that claim that there is insatiable demand from the Chinese government and from third world nobodies, and that supply is tight. I say supply for physical gold is not tight. I fully understand that the price setting mechanism happens in the paper market, and that the $PoG has nothing to do with physical demand. Even if the paper market is the horse and the physical market is the cart, they still have to stay hitched together or all hell breaks loose. If supply were tight we would see more signs of stress. We would see lower Comex inventories and more withdrawals from GLD. Those inventories have stabilized and they are higher than they were back in 2007 before the acute phase of the crisis.

I fully expected physical to dry up in the wake of the onset of deflation -- I figured there were enough people out there who would understand the danger of a financial system collapse and who would want assets that culd not be subject to any claims. Instead, the opposite happened, and I am still trying to figure out why. Instead of GLD winding down, the GLD stock went up. Go figure. During the next deflationary swoon will history repeat itself? I think we have to assume that it could.

In terms of structural support, I still see developing economies adding to their foreign reserves with USD. Do they have any other choice? Sure, they could buy gold instead of the USD, but would they actually deploy their gold to defend their currencies? I think not. I think most central banks want to hold gold all the way to the end game. That's the real reason it's on the balance sheet, no? Sure YOY support is negative for the calendar year, but there have been times in the past when foreign holdings of US paper have leveled off over a 12 month period before heading higher.

Do I reject the FG thesis? Not at all! I fully agree with FOFOA that it's a waste of time to try to time FG, just as it is a waste of time to try to time a major earthquake. But at least for the sake of playing devil's advocate, I think someone needs to step up and make an argument for why the onset of FG is not imminent, and for why the present system can continue well into the future. We are all wasting our time here if we are unwilling to constantly test and challenge the thesis IMHO.

M said...

@ RJPadavona

"Over half the bickering on this forum revolves around timing"

What do you expect ? When did you discover freegold ? I did 5 years ago and have been buying gold hand over fist ever since. Yet, I have sweet fuck all to show for it. Priced in Canadian dollars, after 5 years of averaging in, I'm basically even and there is no end in sight.

No tightness in the physical market, nothing. I could go buy 20 ounces of gold tomorrow and pay less then 1% commission. China supposedly buys a few hundred tons here and there. Gold miners have been going broke for 3 years now.

Where exactly is this fucking gold coming from ?

Whatever.... My position is set. I will keep buying and buying and buying and buying and buying and buying.

vizeet srivastava said...

I personally feel crisis will not come because gold disappears from market and price crashes because gold demand will be manipulated like in India legal import of gold has become difficult. China will also control the flow of gold if need be.
I think crisis will come because US goes into HI so I am expecting at some point in time gold price should start rising.

RJPadavona said...

"Whatever.... My position is set. I will keep buying and buying and buying and buying and buying and buying."

You should quit and start putting your money in a S&P Index Fund. If you'd been doing that for the last five years you'd have way more than sweet fuck all to show for it.

nearlynapping said...

Well said Robert and M. I am always looking for signs of tightness. As for timing I never thought we would get past 2008 without gold flow disappearing. But for me the thesis is sound so I keep buying and only occasionally question my sanity.

M said...

@ RJ

You should quit and start putting your money in a S&P Index Fund.

Do as I do, not as I say. When did you start to understand FG btw.. ?

@ nearlynapping

"occasionally question my sanity."

Where are we going to put all this gold ? Maybe we will see tightness in the safety deposit box arena before we see tightness in the physical market. I couldn't imagine being even a mini giant freegolder. How many safety deposit boxes do they fill up ? I'm on my second one and Im no mini giant.

Sam said...

I've been buying gold for four years now. What do I have to show for it? Gold. Physical coins I can hold in my hand. You don't really get Freegold if you are keeping track of your fiat gain. Most people have fiat investments earning them returns in fiat all tracked on their computer screen. They all think they can cash out tomorrow and bid $1 over the going market price of the worlds commodities and actually get real things for their fiat. This will work all the way up until it doesn't.

If you are lucky, and there's no other word for it but blind fumbling gamblers luck, you will trade your fiat in for something real before its too late. Those that trade way too early will be in great shape compared to those that trade 5 minutes too late.

Unknown said...

This is interesting: Bill Holter reports that the U.S. exported 488 tons of gold last year and another 80 tons in January. That's 568 tons in 13 months while the U.S. only produces 240 tons per year. Bars from the 60's are showing up so there is a suspicion that they're taking it from the bottom of the barrel. Most of it went to Hong Kong. Here's the questions this brings up: Where's it coming from? How long have they been exporting way over production? And more importantly what are they getting in return? It can't be dollars because they can print those. The suspicion is that they have to keep the supply going to China or bad things will happen. We have seen backwardation in GOFO an awful lot lately so things are looking tight. Perhaps we're getting closer to that special time.

Unknown said...

strange also that they can send 568 tons to the Swiss and Hong Kong but only 5 to Germany. It's looking tighter and tighter and I seem to remember FOA saying something about the importance of the flow of gold.

tEON said...

Timing the market - either by stating it will take a long tme or bitching it hasn't happened yet - is just empty jawing. Robert obviously missed the lesson that none of the factors we are privy to will provide reliable timing indicators. Stating that, in his opinion, FG is "still a long way off" is useless rhetoric, IMO - despite the fact he may, or may not, be correct. If you believe it I suppose you can justify dis-hoarding to gamble in the market (which sounds like an underlying rationalization). Any pseudo FG'er giving even remote adherence into the frivolous arguments to specify timing, pro or con, to any degree - is not a real FG'er. By timing you leave yourself subject to either disappointment - and potential frustration followed by irrational dis-hoarding OR ill regrets that you diversified into paper instead of staying the course. What-ever. RJ is correct - it is a waste of time.

No one can tell you, with 100% certainty, that FG won't happen this year but you can easily see we are closer in recent times than when the logical thesis was put for by A / FoA. Whether we look back that a paradigm shift transpired next week or next decade owning real money is your only option in this unparallelled time period of human history where paper currencies are exploding without restraint. Let's remember - Gold involves none of the risks involved in 'investments'. It has no maturity risk since there is no future date when gold will mature into gold; it is gold in the first place. Gold has no counterparty risk because it is an asset to the holder, but it is not anyone's liability. No one 'issues' gold the way a note is issued; it is just gold. Once gold is in your possession, it has no risk related to clearance or settlement. Banks will fail, exchanges may close, and the peace may be lost, but these events have no impact on the intrinsic value of gold. You want to gamble? go, right the fuck ahead, but there is no reason to rationalize it in this forum. Just roll the dice, and stop pontificating about it.

Anonymous said...


Another way of explaining it:

Date: Sun Oct 05 1997 21:29

It was once said that “gold and oil can never flow in the same direction”.
It is the movement of gold in the hidden background that has kept oil at these low prices. Not military might, not a strong US dollar, not political pressure, no it was real gold. In very large amounts. Oil is the only commodity in the world that was large enough for gold to hide in.
the question was asked, “how could LBMA do so many gold deals and not impact the price”. That’s because oil is being partially used to pay for gold!
People wondered how the physical gold market could be “cornered” when it’s currency price wasn’t rising and no shortages were showing up? The CBs were becoming the primary suppliers by replacing openly held gold with CB certificates. This action has helped keep gold flowing during a time that trading would have locked up.
The Western governments needed to keep the price of gold down so it could flow where they needed it to flow. The key to free up gold was simple. The Western public will not hold an asset that going nowhere, at least in currency terms. ( if one can only see value in paper currency terms then one cannot see value at all ) The problem for the CBs was that the third world has kept the gold market “bought up” by working thru South Africa! To avoid a spiking oil price the CBs first freed up the publics gold thru the issuance of various types of “paper future gold”. As that selling dried up they did the only thing they could, become primary suppliers! And here we are today. In the early 1990s oil went to $30++ for reasons we all know. What isn’t known is that it’s price didn’t drop that much. You see the trading medium changed. Oil went from $30++ to $19 + X amount of gold! Today it costs $19 + XXX amount of gold! Yes, gold has gone up and oil has stayed the same in most eyes
Understand that oil is still traded for a certain number of US$ but after the deal is done a certain amount of gold is also purchased "with the future flow of oil as collateral". If the world price of gold gets to high then the oil price is falling. So long as gold stays cheap in currency terms oil will be in good supply.

thx to Victor (c+p from him)

Anonymous said...

And as an addendum:

Too hard to follow? If real physical gold trading dries up it's price will rise forcing down the value of oil. All this year physical gold volume kept drying up as paper short volume exploded. But,each time before a squeeze started to run the price the CBs would sell thru LBMA . You see, when paper trading ( of anything ) volume dries up it's a bearish sign but when real physical gold volume drops it's bullish! Thats because gold is being cornered on a scale never seen in history. LBMA is doing it's best to show real volume exists! The problem is, "if the CBs don't expand their roll as "primary suppliers" LBMA will implode and in the process create the greatest bull market in oil and gold the world has ever seen. That is why some "Big Traders" are holding ONLY gold as events unfold. Interesting, don't you think?

farmersteveg said...

Timing, Ukraine, and Dr Bruno Paul

For the more conspiritorial minded among us, the very temporary improvement in the flow of physical may have had everything to do with the reported midnight flight of approx 30 tons of Ukranian gold to the US for "safekeeping". If you factor that possibility into the movement of the gofo rates and the temporary increase in GLD, it might provide an explanation as to what has been transpiring lately. If so, it would spotlight just how tight things really are, as 30 tons had a very temporary effect.
I have been trying to read up on Dr Bruno Paul's writings and find it somewhat difficult due to Google translate, but I think his position is a good sign of "permanent" backwardation is when the 12 month gofo rate goes negative. We ain't there yet, but may be headed there.
I'm good for one more small purchase of gold and am thinking soon as (if) that happens, gonna pull the trigger for the last time.
Bottom line, in light of gld physical back under 800 tons and gofo rates back to negative 6 mos, I think its possible that window is opening wider, not shutting, if the Ukranian gold story is true.

Robert said...

"Any pseudo FG'er giving even remote adherence into the frivolous arguments to specify timing, pro or con, to any degree - is not a real FG'er."


Timing is important. Not for purposes of trying to time when you purchase your physical gold. But for purposes of testing your theory to see whether it's true. Admit it to yourself: Once you grasp the theory, and you come to believe it, you want to know whether it's right. Don't you? Doesn't everyone? And you want to see it with your own eyes before you die. Don't you? Maybe you say you do not care whether you die on a mountain of gold before FG, but if that were really true, you wouldn't be here reading the comments week after week, month after month. Would you?

Even after your have reached your target, you still want to "watch this gold market together" don't you? That's why we are watching for signs. That's why we enjoy FOFOA's insights about what he is watching, even though we accept the disclaimers that he does not "do" timing. That's why we would like to see history "speed up" and why "slow history" is so agonizing. We WANT to see it come true before our very eyes, don't we?

Timing matters. Of course timing matters! Not so that you can time your purchases. Rather, because you want to be vindicated, and we would all rather be vindicated sooner rather than later.

FOFOA has invested years in this blog. Once you invest as much blood sweat and tears as he has in writing the posts that have kept us all tuning in again and again, you want to see some fruit from your labors. You want to see it happen.

Yes, my friends, timing matters. Timing matters a lot. Don't let anyone (including yourself!) tell you otherwise!

Jeff said...

If you can't tell me the date of my death will I live forever?

Is it better to talk about freegold for five years or understand it for one day? If you're waiting for true value to be revealed but you can only measure value in nominal terms, well, that must be confusing.

Robert said...

If you go fishing does it matter if you catch any fish?

To me it does. I would prefer to catch fish early in the morning, and throughout the day, and especially on the last cast before I pack everything up and go home.

I can tell myself it doesn't matter if I don't catch any fish. I can enjoy the scenery, the wildlife, the fresh air. I can think about my life and meditate on good things. That's all true and good, but at the end of the day I want to catch fish. Now. Right now. With this cast.

Fishing is a metaphor for life.

Timing matters.

Jeff said...

Buying a lottery ticket that pays off in dollars doesn't vindicate your poor decision. You should understand what the dollar represents.

FOA: Timing?

We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth.

There is no trading an economic system whose currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price.

burningfiat said...

I've been reading a lot about this Thomas Picketty guy lately. He apparently has solid data to show that global capital accumulation has been growing faster than the global economy at large. I see a lot of commies in the mainstream media drooling over his data and the outlook for a "justified" greater global tax on capital.

I would be interested to hear if anyone has a good FG-centric view on this dude...


Michael dV said...

Certainly there is some desire to see things come about as we believe they will and of course time is an important. I and I suspect many others here have made significant changes in their lives because of what they see coming due to a 'freegold perspective'. I have altered my spending and exerted greater discipline in overall financial matters because I believe these changes will be greatly rewarded…and soon.
Putting aside that lottery ticket mentality however I must say that gain is not the most important thing to come of understanding FG. I have found that I really do view the world in a different way. I see the actions of players big and small in a different way. In some ways it has made me more forgiving of our politicians as I now see that they do what the collective wants and if they did not act as they do another would come along and steal their seat. In our present situation we are all forced to act a certain way. Things will change though and Fg helps me see how they will change.
Naturally I want to have my savings worth more. I want to be able to consume more and I want to be freed from my current self imposed discipline…soon. But even after the world changes I will still see the world in a different way than I did in 2010.
So while we wait and enjoy the scenery waiting for the fish to bite we can also enjoy (somewhat smugly I confess) the pleasure of having a certain knowledge that gives us power. We gain understanding of the real meaning of wealth and a clarity of vision that allows us to view the actors and their actions in a way few others do. I am also freed from reading a lot of crap that would have fascinated me 4 years ago.
So 'vee vait' but not like the guy who isn't getting any bites. Our wait is the one of knowing that the monster is lurking and eyeing our lure and ready to strike.

Michael dV said...

Picketty is some one I won't bother to read unless I see he has specifically refuted The Debtors and the Savers. Marxism died the day I read that piece (not that Karl ever had much influence with me to begin with). Fofoa showed that Marx got the entire conflict wrong. Unless someone shows me Fofoa was wrong too I won't waste my time with another boring academic rewarming last century's left overs.

One Bad Adder said...

Whilst Gold (futures) Backwardation, Negative GOFO etc. are often pointed to as indicative of Physical-gold systemic stress, however ...and contrary to many / most of the Gold-watching commentary crowd, the apparent reality is that these supposedly "Goldish" indicators are all primarily driven by $IRX (a Paper instrument) ...which is again now flirting with Zool.

Michael dV said...

the goddess from Ghostbusters?

One Bad Adder said...

Flirting with Zero M dV. SUB-Zero is where The Goddess ...and all other nasties reside.

RJPadavona said...


"Do as I do, not as I say. When did you start to understand FG btw.. ?"

Lemme guess, you're one of those fellas who sneaks a peek at the guy at the next urinal to see how you compare?

I guess I found this blog 3-4 years ago, I think. I can't exactly remember. But I stumbled into this joint by way of the hard money school, so I already owned gold for several years before that. I'm sure the performance of my gold portfolio sucks just as bad as yours.

Sorry if you didn't get the memo to not take my comments very seriously. What I was getting at with my "advice" that you should buy into a S&P Index Fund was basically the same thing Sam said. If you're complaining about the gains you haven't seen from gold over the last five years, then I wouldn't tell anyone you've been reading this blog for that long. It kinda makes me not feel so bad about being 17 when I was in the 8th grade.

Edwardo said...


Here's a
of Piketty's awesome work by someone whose imprimatur should immediately give one pause.

Unsurprisingly, The Krug is using the NYRB review as a platform to advance an even more pervasive regime of taxation in these here United States. The political class never fails to find an academic who, unwittingly or by design, gives officialdom cover for their agenda.

tEON said...

IMO, FG is also a philosophy that you will never grasp. Months ago you were talking about diversity and you again rejected the ideas put forth to you. I will repeat what I said then - that you have a 'trader's mentality' and see USD as your denominator. What will become of you when that reaches zero? You are similar to many who come here seeking a way to get rich and eventually depart scratching their heads.

Not for purposes of trying to time when you purchase your physical gold. But for purposes of testing your theory to see whether it's true.

Unfortunately, this is not a science experiment. The revaluation is a one time thing. ("Gold only needs to be revalued once in your life") Once it is revealed - it will be unnecessary to debate its validity and too late to adopt the correct course of action.

So, how do you propose testing the theory by contantly watching the pot and guessing at timing predictions?

We WANT to see it come true before our very eyes, don't we?

Accept the irrelevancy of wanting something to it transpiring. They are mutually exclusive. Want with all your abilities - it won't speed-up of slow-down FG.

FOFOA has invested years in this blog. Once you invest as much blood sweat and tears as he has in writing the posts that have kept us all tuning in again and again, you want to see some fruit from your labors.

I've accrued tonnes (metric) of fruit (enlightenment). If you haven't by now, Robert - I suspect that you never will. If FG does not happen next week - I will still have my enlightment while you will still be seeking gains/rewards. You should really go to a GoldBug forum, or better yet play the silver game or mining stocks - you can buy and sell and seek the gains/rewards you so desperately desire.

You want to see it happen.

You only see the rewards side. Once a paradigm shift transpires - you may reflect very fondly on how you are living today with friends and family. By all means, prepare but continue to "Live your life".

Motley Fool said...


Sure timing matters, but there is a difference between recognizing that fact, and wringing your hands at being unable to predict said timing.

A few years ago I picked the end of 2012 as the last possible day by which this would have happened. Shows you what I know.

What I learned from this is that I am not able to predict the timing. So I no longer worry about it.

As per Edwardo's earlier excellent posting, a collapse is the not too distant future.

But if you ask me for specific date I'm gonna tell you to go suck lemons. The same response I have for your request to prove gold is in short supply. I can't do it, and no request is going to change that fact.

I could say that from my research and knowledge of the subject, it does seem to me like supply is growing short. But it falls in the category of my earlier timing prediction. I could be wrong, and I am not losing any sleep over it, as the bigger picture is clear.


vizeet srivastava said...

Economic crisis is more like earth-quake. If you live in earth-quake zone you want to be prepared to deal with it. You getting benefit out of it is a secondary state. I think you are not realizing the consequence of this transition.
Preparation is important not getting into the transition to FG in our lifetime is even better and learning to adopt the lifestyle is best.

Unknown said...

It may not matter what the price of gold is in fiat dollars but it does matter what you are able to trade it for. I have to laugh when I hear people say the price will go to $5000 Perhaps by then a cup of coffee will cost $100 As for timing, at my age I've learned that things usually take a lot longer to unfold than you think they will. The causes of macro events take a long time to unfold and then the event occurs quite suddenly to the surprise of those who are uninformed. It seems to me that we are at the confluence of several crises, politically, morally, financially and environmentally and the crises are about to become a macro event or events. As for fiat, just do the math and you will know where it's going.

Unknown said...

It may not matter what the price of gold is in fiat dollars but it does matter what you are able to trade it for. I have to laugh when I hear people say the price will go to $5000 Perhaps by then a cup of coffee will cost $100 As for timing, at my age I've learned that things usually take a lot longer to unfold than you think they will. The causes of macro events take a long time to unfold and then the event occurs quite suddenly to the surprise of those who are uninformed. It seems to me that we are at the confluence of several crises, politically, morally, financially and environmentally and the crises are about to become a macro event or events. As for fiat, just do the math and you will know where it's going.

Woland said...

weekend reading assignment: "The Wolfowitz Doctrine",
(aka son of Zbigniew Brezinski's The Global Chessboard)

Welcome to Ukraine…………….Greetz.

Woland said...

Hi Victor;

I started on p.40, and by p.42 I found it.. Buy me a beer, bro. Prozit!

( prior comment should read, "The Grand Chessboard" …...sorry

Aaron said...

Michael M said...

It may not matter what the price of gold is in fiat dollars but it does matter what you are able to trade it for.

Yes, a stable currency. Were you hoping to trade your gold for something else?

I have to laugh when I hear people say the price will go to $5000 Perhaps by then a cup of coffee will cost $100

This is inflation. Freegold has nothing to do with inflation.

As for timing, at my age I've learned that things usually take a lot longer to unfold than you think they will.

The conference which abruptly and significantly changed the course of our monetary system happened back in 1922 so I'd say this one has already taken a lot longer to unfold than anyone could have imagined.

The causes of macro events take a long time to unfold and then the event occurs quite suddenly to the surprise of those who are uninformed.

Yes. Are you still in that camp?

It seems to me that we are at the confluence of several crises, politically, morally, financially and environmentally and the crises are about to become a macro event or events.

I'd say the other three items you mention are direct results of the $IMFS.

Think about how a saver's choice to store his excess labor impacts the rest of the economy and you might start to see some connections. On one hand a saver could choose immediate settlement in the physical plane by spending his credit on objects that serve as better stores of value be it land, gold, or fine art. On the other hand, a saver can choose to buy someone else's debt, say a CDO or an MBS, which sends their dollar savings back into the same machine devaluing it further.

If savers instead chose to settle their excess labor in the real world buying land, gold, fine art or cars, credit would never build up to the unserviceable levels we see before us today simply because people would not be saving credit as their store of value. If savers were to settle in the physical plane, one of two things would happen. Either excess credit continues to bid up stores of value as savers believe consumables will be cheaper tomorrow and only need save enough currency for short term consumables -- or that excess credit starts to leak out of the savers circuit into the consumers circuit chasing goods such as food, paper products, and booze in the case where savers believe the currency is quickly losing on the short term store of value front.

Prices of day to day necessities will signal that the currency is not being managed well and should not be saved. This go around, however, savers will have the added option to save in a physical only market knowing their purchasing power will go up as currency is further mismanaged.

Can you see how the savers of the world are the ones that have been fueling this engine?

What if, there was one item that could serve as the best store of valuable available. An item that isn't essential to industry and as such could be hoarded without adverse impact to the economy. An item that is fungible, durable, portable, divisible, and that is in limited supply able to absorb all any and all excess savings across the global economy. An item that could serve as a global reserve for both individuals and central banks alike.

Robert said...

tEON, all I can do is shake my head. The point I was making about diversification is that if your only goal is to protect your current purchasing power, and you believe in a big revaluation coming, then you do not need a whole lot of physical gold to protect your current purchasing power. Can anyone disagree? Those who go "all in" are looking for more than just protecting their current purchasing power. They are looking to make a killing on a revaluation, and they are making a gamble. And don't blather on about the USD as my denominator. My point has always been purchasing power. You dismiss me as not understanding the theory. Believe what you want if it makes you feel better. But there is a difference between not understanding the theory and simply applying it differently. I think most people understood the point I was trying to make. Apparently you did not.

burningfiat said...

MdV and Edwardo,

Thanks for your responses.

Good review by Krugman. It indeed seems like Piketty's work is being used to promote higher taxes on inherited wealth (capital).
I didn't see any mention of how much of this relatively increased gain on capital since 1980 was made with borrowed money. Eyes of these commies are unsurprisingly shut to the impact of the massive fiat debt increase used to fuel this bull run in capital gains in this final stage of the $IMFS.

Krugman mentions the following as examples of incomes from capital: corporate profits, dividends, rents, or sales of property.

It will be interesting to follow how FG will impact
a) The current r/g ratio.
b) Political response. All things equal, commie politicians must eye the gold of savers.

Mostly I think the bursting of the $IMFS matrix, the massive FG paradigm shift will leave such an impact, that concerns about r/g ratios will seem unimportant compared to the study of why the whole field of economics (Krugman and his ilk) got this so wrong.

Knotty Pine said...

Re Woland's comment: This article describes a document (written primarily by Paul Wolfowitz) known as the "Defense Planning Guidance". The document is basically an internal administration policy statement describing the need for one dominant world superpower post cold war.

The document was ostensibly rejected later but most of it's authors and proponents were members of the (GW) Bush administration. IMHO this document supports Russia's claim regarding NATO expansion and possible US involvement in fomenting the euromaidan uprising and the subsequent illegal overthrow of the Yanukovich regime in Kiev.

Here is an excerpt:

"For the first time since the Defense Planning Guidance process was initiated to shape national security policy, the new draft states that the fragmentation of the former Soviet military establishment has eliminated the capacity for any successor power to wage global conventional war.

But the document qualifies its assessment, saying, “we do not dismiss the risks to stability in Europe from a nationalist backlash in Russia or effort to re-incorporate into Russia the newly independent republics of Ukraine, Belarus and possibly others.”

It says that though U.S. nuclear targeting plans have changed “to account for welcome developments in states of the former Soviet Union,” American strategic nuclear weapons will continue to target vital aspects of the former Soviet military establishment. The rationale for the continuation of this targeting policy is that the United States “must continue to hold at risk those assets and capabilities that current – and future – Russian leaders or other nuclear adversaries value most” because Russia will remain “the only power in the world with the capability of destroying the United States.”

Until such time as the Russian nuclear arsenal has been rendered harmless, “we continue to face the possibility of robust strategic nuclear forces in the hands of those who might revert to closed, authoritarian, and hostile regimes,” the document says. It calls for the “early introduction” of a global anti-missile system."

Jim Okefenokee said...

M @ April 25 at 9.06PM

What follows borders on the trivial, but your statement "... tightness in the safety deposit box arena ...." caught my eye.

Here in Sydney, demand for SDBs has really surged over the last two years. Waiting lists for a SDB in a serious bank vault (minimum 30 ton door, thank you very much) are now well over 10 years. Personal observation and anecdotal info from vault staff suggest a very high proportion of the non-stop enquiries are from immigrant ( but not necessarily recent ) Chinese and Indians. Private vaults ( 5 ton doors! Ha! ) are starting to be opened in the CBD.

Having finally got rid of much of my Ag ( wish I'd discovered FOFOA earlier. Men! They never call!) I now have two empty, unneeded SDBs. Maybe I can profit from this somehow.

db said...

Michael DV, +1 for your 7:35 comment!!!

I couldn't have said it better

Totara said...


Based on experience in New Zealand, I would be a bit cautious about waiting for a Safe Deposit Box with an Australian bank.

By way of background, all of the major established banks in New Zealand (ANZ, BNZ, ASB, Westpac) are owned by Australian banks.

Over about a six-month period, from mid-2010 to early 2011, each of these banks stopped offering Safety Deposit Boxes, as well as the much cheaper Safe Custody service (where a tamper-evident envelope is stored for the customer in the bank's main vault alongside other customers' envelopes), to new customers.

Then, over a period of about 12 months, the bank customers of Safe Deposit Boxes were told that they would need to relocate the contents of their boxes to independently operated (non-bank) Safe Deposit facilities. Safe Custody still exists in some banks for pre-existing customers; but if a customer checks on their envelope, they might not be able to re-deposit it with the bank.

I was astounded that all New Zealand banks would collectively tell their highest-value customers that their business was no longer worth looking after. And the staff I spoke to at the Branch level were equally astounded at their orders, which had taken them completely by surprise, emanating from Head Office. But that is what happened. This has gone almost unreported by what passes for financial journalism here.

As an experiment, I enquired about opening an account with another bank, and they were tripping over themselves for my business until I mentioned that I wanted a Safe Deposit Box too. They chose to turn away my business rather than provide this extra service.

So if you are queuing 10 years for a Safe Deposit Box with an Australian bank, then maybe there might not be one for you at the end of your wait. You might be better off queuing with a non-bank facility.

Jim Okefenokee said...

@ Totara

That's interesting. It sounds very much as though SDB vaults are not worth the trouble for the major banks. Hmm. This requires some thought. My backyard has bedrock at shallow depth.

Woland said...

Hi Knotty Pine;

Guess it's just you and me. whatever Now, via the AP;
Tymoshenko calls for Ukraine NATO membership. Surprise?

(not) {;<)>>

One Bad Adder said...

Jim O, Totara: - If you'll recall, several years ago in London the "authorities" went through SDB's like a Dose of Salts. (austensibly "Terrist-related" from memory)
In all probability the Banks aren't keen to misrepresent a service which no longer has the sacrosanctity it once (notionally) enjoyed - IMHO.

tEON said...


And don't blather on about the USD as my denominator. My point has always been purchasing power.

Right, Robert - so you are a purchaser... who wants power! Gotcha - I mistook you for a saver... who is able to disregard the short-term volitility. You want to be able to use your assets to have stable purchasing power as you sell them daily (weekly??) ... to buy stuff (because you are a purchaser!). See, I consider Gold the medium to save in beyond daily expenses - not accrue short term profits - to spend.

Purchasing power - which you look at in terms of currency, correct?... so you want a good store of value for your assets. Assets that hold their value over time. You are fortunate, I happen to know of a good one. Trouble is the time-frame - with mine you don't look at the balance sheet daily to see how you stand - as you would your stock portfolio (happy, in the morning as it rises, sad if it falls in the afternoon). The SoV I was thinking of may not suit you. It is definitely not for the short-term but historically you won't find a better one. You want to purchase things - I understand now - and you want something that will hold that purchasing power (in $ terms - sorry, don't want to 'blather' but that is how you are measuring it). The consensus is that the paper price of Gold will continue to fall - so you are uncomfortable about holding AG as you may want to buy 'things', say, next week, next month or... next year.

My suggestion is to hold as much gold as you understand and for you... that would be a very small amount. Let's say hold so little that you don't need to return to this Forum in frustration at $990/ounce crying-the-blues that FG has not transpired... yet (and you have lost more purchasing power). That is the amount you should hold. Otherwise the investment world is your oyster. Good luck!

Knotty Pine said...

No surprise Woland. It is also no surprise that more and more of the ROW wants Team America World Police to Leave Me Alone!

Dim said...

From my experience in Brisbane's CBD, the Commonwealth and NAB offer SDBs at reasonable prices. However, only the smallest box sizes are available (approx 15cm x 8cm x 45cm). Like Jim O I swapped almost all of my silver to gold, so this little box suffices my shrimp needs.

I have also noticed almost all clientele at the bank vault are either Asian, Middle Eastern or Indian, plus your occasional scruffy/nerdy Western youth. Many of these people openly examine their gold stacks without going into private rooms! I don't believe I am being affected by confirmation bias...

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