Wednesday, November 9, 2016


For eight years on this blog, I did my best to avoid politics. Then, six months ago, in The Debtors and the Savers 2016, I took a turn for the political, with sub-headings like Peak Progressivism, Trump and Peak Absurdity. Here's a bit from the Trump section:

Progressives, “enlightened” academics, the media, and the mainstream political establishment all seem confounded by Trump’s popularity, but it’s really quite simple. It’s not because his supporters are all dumb racists and xenophobic rednecks living in trailer parks scattered across the fly-over states. Nor is it because Trump is so smart, articulate, and never says anything regrettable. It is quite simply because:

1. People are tired of being lied to by the “progressive” media under the banner of political correctness, and are encouraged by a candidate who is not afraid to stand up to the media…
2. People are tired of being labeled with fake phobias and misused “isms” as an intimidation tactic, and are encouraged by a candidate who is not afraid to be labeled and branded by the imbeciles who buy into that BS…
3. People are tired of blatant discrimination, like affirmative action, and the entitlement attitude of those on the public dole, and are heartened by a candidate who isn’t afraid to talk about hot-button issues…
4. People who had all but given up on the political process are encouraged by a “self-funding” outsider who has the courage to say the things that got his momentum going in the first place…
5. And a whole lot of people are tired of the muzzling effect of utterly absurd political correctness, and for this reason most of all, Trump is still gaining momentum!

And by the way, if you think Trump is a racist, you are part of the problem, and you are wrong.

Now that Trump has won, I see the media and almost everybody who didn't vote for him are not only morose and despondent, but still entirely clueless as to why he won. So I decided to share this post here on my public blog, as a public service to anyone who would like to understand why.

I published the following post on Saturday before the election. It was meant to be a record of my thoughts about the election, my endorsement of Donald Trump, and perhaps a little last minute push to swing a few votes from the Speakeasy. But now that the election result is known, the same post becomes a look at what happened and why. So without further ado, here were my thoughts as of Saturday, Nov. 5, 2016, as posted at the Freegold Speakeasy:

Some Thoughts on Trump

With the election just days away, I wanted to write down my thoughts on Trump, political correctness, and this movement or phenomenon that has propelled him all the way to the finish line.

Trump was not my choice in the beginning. Nothing against him, but I just didn't take him as a serious candidate, or think he could make it through the primary let alone all the way. That said, I wasn't crazy about the rest of the Republican field either. I remember thinking, in a country of 300+ million people, with 17 major candidates, there ought to be at least one obvious stand-out. As it turns out, Trump was that stand-out, I just couldn't see it yet. And the reason I couldn't see it was because I hadn't yet made the connection between peak PC, aka peak absurdity, and Donald Trump.

It has long been a maxim that there is little or no difference between the two parties in our two-party political system. And while it may be practically true that there is little difference between the Republicans and Democrats, I believe there is actually the most profound difference imaginable between the political left and right. Today, however, most people see almost no difference, or worse, they see the exact opposite of reality. This unusual election is only scratching the surface of what I'm talking about, but even that is enough to drive this once-in-a-lifetime movement.

As I have said in the past, I began thinking about this idea of peak PC about a year ago, after a friend sent me this article titled Sorry, Social Justice Warriors: Political Correctness Has Peaked. (Incidentally, perhaps even ironically, the author of that article turned out to be an avid anti-Trumper, as did the publication itself.) Some have harshly criticized the image of Trump as this big anti-PC warrior, or the great PC destroyer. So I want to state right up front that I think that image is a straw man. I think the Trump phenomenon is merely a symptom of PC peaking, not the other way around. So I think this new core anti-PC awareness will continue with or without Trump. Trump is an effect, not the cause, therefore he need not be the most articulate anti-PC spokesman in order to become President through this anti-PC movement. He's the caboose, not the engine. ;D

Now that I've got that out of the way, I want to explain why political correctness is so insidious, and why therefore a Trump victory would be a most righteous outcome. It is not hyperbole to say that Communism is the manifestation of PC at the largest scale, and that PC is the manifestation of Communism at any scale. But before we go there, let's look at the origins of PC as a phrase.

The term "politically correct" in its modern usage emerged during the last century. It was a disparaging term used by Socialists against Communists, primarily in America and the West, where it was still legal to disparage Communism. The term referred to the Communist party line, which provided "correct" positions on political matters. (Wikipedia)

Then, in the 1980s, PC developed into a self-deprecating inside joke among, as Edwardo put it, "the biggest threat to the well-being of mankind," i.e., "People who know what’s best for the rest of us, who possess a surfeit of authority and a pronounced shortage of scruples, i.e. folks like HRC and George Soros," in other words, the political left. In this 80s "in-joke" usage, I think it was, in effect, probably a subconscious psychological self-defense mechanism against drifting too far to the left.

"Politically correct" was born as a lefty in-joke, an insider nod to the smugness of holier-than-thou liberals. As Gloria Steinem put it: "'Politically correct' was invented by people in social-justice movements to make fun of ourselves." In the '80s, the Brown University student Jeff Shesol's "Doonesbury"-esque campus comic strip, "Thatch," introduced a cape-wearing vigilante called Politically Correct Person, who faced off against his archenemy, Insensitive Man. Shesol went on to serve as speechwriter for Bill Clinton.
(NY Times

In the early 1990s, however, the term leaked out into the mainstream lexicon and exploded. A LexisNexis search of the term shows its usage jumped from 70 citations in 1990, to 1,532 in 1991, to more than 7,000 in 1994. Rush Limbaugh's 1993 book, "See, I Told You So", included a chapter titled "The Politically Correct Liberal Lexicon", and Bill Maher's ironically named TV show, "Politically Incorrect", began airing on Comedy Central, also in 1993.

So it went from being a disparaging term used by American Socialists against Communists in the mid-1900s, to a self-deprecating inside joke used by Progressives on themselves in the 80s, to a pejorative phrase used by the Right against the Left in the 90s. This final step, in my opinion, removed the aforementioned self-defense mechanism against drifting too far to the left, and freed the American Left to go all the way—to go for broke—which is how we finally made it to Peak PC last year, how we got a full season of PC Principal on South Park, and how Donald Trump is (IMO) about to become the next POTUS.

The debate over political correctness in the 90s revolved around what should be taught in schools, primarily colleges and universities, and academia is still the front line of PC absurdity today. Fox News Channel even has a regular feature called Campus Craziness. Here's a 4 minute sample:

The college campus problem, however, is just the tip of the iceberg. If PC was limited to kids at college, it would be no big deal. But kids at college eventually grow up, and some of them even become President. To give you just one example of PC at the highest level in the United States, I'm sure you've heard Donald Trump repeatedly criticize both Obama and Hillary for refusing to use the term "Islamic terrorism," or even "radical Islamic terrorism" (which is an even more PC term than the former), but do you know why they won't use those terms?

Words Matter (but not more than meaning, truth and reality!)

This is something we hear all the time from the PC Left: "Words matter." But I'll tell you what matters much more than words, is meaning, truth and reality. There are many things the Left does with words to bend and twist the truth, and to rewrite history (see Hillary's America for more on this subject), but under the Obama administration’s politically correct "countering violent extremism" policies, the institutional word rules of our national security agencies have become dangerous, if not outright deadly.

From practically his first day in office, Obama began what has been called an Islamophobia witchhunt, to purge words like "Islam", "jihad" and "Muslim" from the official US government counter-terrorism lexicon. In 2011, the FBI removed all terms found objectionable by a team of Muslim experts retained by the Department of Justice, from its counter-terrorism training materials. "Violent extremism" is now the government approved "PC" term in the new FBI counterterrorism lexicon manual.

Just this year, the DHS (Department of Homeland Security), which includes the Customs and Border Protection agency, Secret Service, ICE (Immigration and Customs Enforcement), the US Coast Guard and the TSA (Transportation Security Administration), instructed its employees “not to use any language that might be ‘disrespectful’ to Muslims, including (but not limited to) the words ‘jihad,’ ‘sharia’ and ‘takfir.’” There's more, and according to Patrick Poole, a national security and terrorism correspondent for PJMedia, "We now have two terrorism cases with dead Americans six months apart, namely San Bernardino and Orlando, where potential witnesses did not report suspicious activity because they were afraid of being called racists and bigots."

Here's former FBI Asst. Director, James Kallstrom, discussing it in a 5 minute video:

This is how PC works, whether we're talking about universities, corporations, the government, the FBI, or entire Communist countries. First, stupid rules are made by "people who know what’s best for the rest of us, who possess a surfeit of authority and a pronounced shortage of scruples," and then everyone else follows the stupid rules out of fear of losing their jobs, or worse.

Here's four minutes of Aquilus from his debrief, talking about Communism, PC and Donald Trump:


On October 17th, "The Victims of Communism Memorial Foundation (VOC) released the first-of-its-kind Annual Report on U.S. Attitudes towards Socialism, surveying Americans’ attitudes toward Socialism, Communism, and related issues." Shockingly, the poll found that 45% of the upcoming generation (people aged 16-20 today, called GenZ) say they would vote for a Socialist, and 21% would even vote for a Communist. That compares with 91% of elderly Americans who believe that Communism was and still is a problem. The new generation also prefers Socialism over Capitalism, with only 42% of millennials having a favorable view of Capitalism.

Probably the most stunning finding, though, was that a third of millennials believe that more people were killed under George W. Bush than Joseph Stalin, and only 25% knew that communism led to the deaths of "over 100 million people." "It is because of such widespread ignorance about Communism that we formed the Victims of Communism Memorial Foundation, which is dedicated to telling the truth, the whole truth, and nothing but the truth," according to the co-founder of the foundation.

This shifting of public opinion that has taken place, from objective reality to some alternate leftist counterfactual unreality, is due (IMO) to media bias, which comes from the slow creep of political correctness, and which is driven by the left's tendency to project. As a quick aside on media bias, I recently heard an interesting anecdote on the news.

Someone on FNC a few days ago, who had worked with Richard Nixon on the Nixon Library during the early 90s, had asked him why he thought the liberals owned the media, and I thought Nixon's answer was interesting. He said that smart conservatives come out of college and go into business to make money, while smart liberals come out of college and join the media to change the world. It's that old (but true) stereotype that conservatives tend to better themselves to do well in the world as it is, whereas liberals tend to prefer to change the world rather than work on themselves.

Anyway, while emailing with FoNoah recently over his worries about the election (regardless of the fact that he's not even American, he's still quite uneasy about our election), I wrote the following:

Something you need to understand about the Left is that they "project". Projection is a psychological effect in which people defend themselves (both subconsciously and explicitly) against their own (conscious or subconscious) illicit impulses by denying their existence in themselves while attributing them to others. So in the case of elections, the Left always tries to rig elections, and (Watergate notwithstanding) the Right doesn't. But the Left projects this uncontrollable impulse they have on the Right, while denying it in themselves.

This may sound terribly biased, but I assure you that it's true, and it's true in so many ways other than just election rigging that I'm not even going to go there. We'll just stick to election rigging in this email, but if you watched Hillary's America, you saw Democratic projection on an epic, historical scale!

Anyway, so even as all this stuff is coming out through Wikileaks and James O'Keefe videos, I hear lefties on CNN saying how everybody does this kind of stuff. How both sides do dirty tricks and voter fraud, and it's just the Dems getting caught right now. Then they talk about Bush stealing the 2000 election by rigging the vote in Florida because his brother, Jeb, just happened to be the Governor of Florida at the time. LOL! If they'd rigged Florida in 2000, Bush would have won by more than just a handful of votes after a long and contentious recount.

In fact, there are numerous stories every election of Democrats trying to rig elections, but you rarely see them because the media favors the Dems. Here's one from the 2014 congressional election, in which the Republican candidate tried to vote for himself in Chicago, and the machine would only cast votes for Democrats. And here's an article on how Al Franken beat Norm Coleman in 2008 with "miracle ballots," how Durkin beat Wyman in '74, how McCloskey beat McIntyre in '84, as well as a story from Washington State in 2004. There were stories in 2000, too, but you never hear them anymore since Bush won. I bet, if everything could be known, we'd know that Gore only came so close to winning due to inflated vote counts the night of the election.

Did you know that it's even probable that JFK (really the Democratic Party) stole the 1960 election from Nixon? Oliver Stone put it in his movie, and here are all the details, laid out in a liberal magazine no less:

Of course Nixon is the singular name that comes to everyone's mind when we think of election fraud, right? I wonder why that is… (never mind, rhetorical question.)


Good versus Evil

There was an interesting moment on the Bill Maher show last Friday. On his panel was Michael Moore, some girl, and a former Republican congressman, Rick Lazio from New York. At one point, they were talking about email hacking, and Bill said something like, “I’m at the point where I don't ever want to send another email, which is such a shame because email made all of our lives so much easier 15, 20 years ago.” He was referring to email being hackable, so you just don’t use email if you don’t want your dirty laundry aired publicly by Wikileaks. Michael Moore agreed, and then Rick Lazio disagreed.

Rick said (basically), “If you're not doing anything wrong, if you’ve got nothing to hide, then there’s nothing to worry about.” He said that back when he was running against Hillary for Senate, his campaign email got hacked dozens of times, and his personal computer got hacked once. Michael Moore jumped in and tried to make it about him indicting Hillary in the hacks, but he said, “No, that’s not my point. My point is that I got hacked dozens of times, and nothing embarrassing to me ever came out!" Here, I found the 2 minute clip:

On Tuesday, Aurora wrote:

"Trump is not perfect either, but none of this election is about Trump for us. It’s about right and wrong, good versus evil, love versus hate, truth versus lies, freedom versus tyranny. That is why so many are so passionate about this election because “We The People” want our damn country back from the lunatic left!! That’s what I really care about!! Trump, is just the vehicle to get us there."

Like Aurora, I believe that good and evil exist. I am aware, however, that this is a controversial belief. Some say that good and evil are subjective, or a matter of perspective, but I believe they exist objectively. That doesn't mean I think they are always easy to identify. They aren't.

But I do believe that Communism is evil, and therefore I believe that the political left leans toward the evil end of the spectrum. That does not mean that I think all people on the political left are evil. I don't. As I said at the very top of the post, I think that most people see almost no difference between the political left and right, or worse, they see the exact opposite of reality. I think that most people on the left are very good, compassionate people, who simply see the exact opposite of reality. But like evil, the Left does corrupt, and some people are more corrupted than others.

I am also well aware that people on the left think similarly about me, because I'm on the right. I am aware that some of them hate me passionately and think I'm evil, simply because I'm on the right. This is projection, and seeing the opposite of reality. I will say, though, that in my experience, people on the left are far more passionate, emotional and outspoken about the way they feel toward people on the right than vice versa.

Aurora also wrote:

"Anyone who can openly and passionately support Hillary’s lifetime of and ongoing corruption, lies, collusion, cover-ups, and hate as she bids to be leader of our free world, truly defies all logic and is a real eye opener. One valuable thing this election has done is provide us all with a good look at the people around us, and what they truly look like “inside”. It does not surprise me that family, friends, and other relationships have completely lost their connection over this election cycle due to the Clinton star burst effect lighting up who people “REALLY” are."

I have seen this disconnection myself, even in my own extended family. As the election grows closer, the rising emotion, stress and tension is literally visible if you watch for it on social media. Even Mrs. FOFOA tells me the election is stressing her out.

Strangely, I'm not stressed or nervous about it. For one thing, I am fairly confident that Trump will defy the polls on Tuesday and win in a surprise landslide. But even if I'm wrong about that and Hillary (God forbid) wins, I still think we already won and good things will happen, because as I said at the top, PC has peaked, and this new core anti-PC awareness will continue with or without a Trump victory on Tuesday. Remember that Trump is an effect of what is unfolding, not the cause, and while this may very well be a battle of Good versus Evil, the winner on Tuesday will only be Trump or Clinton, not good or evil.

Now, I am aware that there have been stories in the past few days linking Hillary to Satan, and John Podesta to witchcraft. That's not where I'm coming from at all in this post. The Left has a long history of calling people on the right evil, and I'm simply pointing out that it's another example of projection and seeing the exact opposite of reality.

I know that some of you on the left will be offended by this post, but please don't be. I'll tell you, and this is just my personal experience, but I can really feel, see and hear the rage, disgust and hate that comes out of certain people on the left when they talk about people on the right. I'm not here to return the favor. I think a lot of us on the right are so used to it that we almost tune it out. The Democrats like to talk about how violent and angry Trump supporters are, but again, that's just projection and the exact opposite of reality.

Here's a video of how reality really is. It's from a Trump rally in Costa Mesa earlier this year. Watch how the peaceful protestors representing tolerance interact with the violent, intolerant (i.e. racist) Trump supporters. Oops, that's not how it is. That's the exact opposite of reality:

And it's not just rage, disgust and hate that I've seen coming from the Left, aimed at the Right. It's also extreme condescension, especially right now as the election grows nigh, the kind of disdainful, conceited smugness that is almost never seen in polite society. I think it must have something to do with the election being so close, because what I've seen in the past couple of weeks between people who are otherwise respectful to each other, even though they are on opposite sides politically, is just embarrassing for the Left (IMHO). And yes, I only see it coming one direction, not the other.

I'm sure that some of you know exactly what I'm talking about, and others (mostly the lefties and foreigners) probably don't. So I tried to come up with an analogy to describe what I'm seeing, but it was really hard to do. The best I could come up with was Anthony Weiner. Did any of you see the film Weiner? I watched it the other day on Showtime, and it was actually pretty good.

Anyway, Anthony Weiner was so disgraced that certain reporters, and even just some random people on the street, felt empowered to approach him and say the most condescending, disdainful things right to his face. The kinds of things you wouldn't normally dream of saying to another person. But Anthony Weiner had become nothing more than a piece of shit to these people, not only not worth of the smallest bit of respect, but worthy of vocal distain, talked down upon his lowness from up high. And it's that kind of gross smugness I've not only seen coming from certain reporters when they interview Trump supporters, even famous ones, but I've also seen it coming through social media, from friends and family of people I know. And again, I only see it coming one direction, not the other. I know there are exceptions to this generalization, rude Trump supporters (e.g., some that call themselves "the alt-right"), but spare me. I am not part of, and do not care for (from what I've seen) the "alt-right."

My point here is that I am not spreading rage, disgust and hate, nor am I being disdainfully condescending and conceitedly smug toward the Left. In fact, I am saying that the problems of the Left lie more in the political philosophy than in the people, and while some have been corrupted by the philosophy more than others, most have simply been fooled by decades of political correctness and liberal control of the media into seeing the exact opposite of reality.

My primary purpose here is not even to demonize the Left. I'm here to explain this anti-PC movement or phenomenon that has propelled Donald Trump all the way to the election, which is now only three days away. As Bill Maher put it in the video above, "Donald Trump is largely a result of a backlash to political correctness." And while I agree with Bill (who, btw, is one of those disdainfully condescending interviewers I mentioned) on this one issue, the way he put it makes it sound so small, when in reality it truly is a once-in-a-lifetime kind of movement, and Trump is only the caboose. So let's parse Bill's statement.

"Donald Trump is largely a result…" Very good! As I said at the top, Trump is an effect (or "result"), not the cause of what's happening. So what is the cause? "…result of a backlash…" Yes! The cause is a backlash. But to what? "…a backlash to political correctness." Okay, now we get to the real cause, PC, which you now hopefully understand is evil. Too much? Okay, at the top of the post I said, "It is not hyperbole to say that Communism is the manifestation of PC at the largest scale, and that PC is the manifestation of Communism at any scale." And then about halfway down, I said, "But I do believe that Communism is evil…"

So if Communism is evil, and PC is the manifestation of Communism on any scale, i.e., creeping Communism, then perhaps it is fair to say that PC is evil, or the creep of evil, even at a small scale. And now we have what amounts to a more hefty-sounding cause than just "…a backlash to political correctness." We have "…a backlash to creeping evil!"

Now, I know I keep mentioning Hillary's America, but for those of you who haven't seen it yet, there's a part near the end about Hillary and Saul Alinsky that I thought would be appropriate for this point in the post, so here's that 14 minute scene:

Complete Bullshit

Of course, most of the things said about Trump by the left are hyperbole, projection, or just complete bullshit. The executive producer of HBO's "Girls" (not Lena Dunham) called Trump "a madman who incites violence and racism." Norman Lear called him "f———g dangerous." Bill Maher calls him "the pussy grabber." Even Megyn Kelly used the words "sexual predator" referring to the Access Hollywood "Trump tape". I could go on and on, but let's talk about this "sexual predator" bullshit for a moment.

From what I've seen, Donald Trump is a gentleman who happens to like women. To pretend that it's appalling that he likes beautiful women is simply disingenuous. He's been married to three beautiful women and divorced twice, all in the public eye. And where most billionaires buy sports teams, Trump bought a beauty pageant ffs. That doesn't make him a sexual predator though. It makes him a healthy male.

The latest, greatest Trump sexual assault story (the porn star with Gloria Allred), if true, sounds like a wannabe Hef (he was wearing pajamas) who struck out (he offered $10K for sex and she said no, end of story). As for the Access Hollywood tape, Trump details another failed attempt to sleep with a woman, and when bragging about pussy-grabbing, he wasn't talking about sexually assaulting women. He said, "they let you do it." In fact, what he actually said was, "When you’re a star, they let you do it," which is true. If you still don't get it, watch this awesome video:

I'm sorry for using vulgar language here, but if there's one thing I can't stand, it's the kind of pure bullshit being used against Trump. Yes, I wish he was more articulate. Then again, maybe I don't, because the more polished the politician, the more likely he's delivering a message that was carefully crafted for your consumption. Almost nothing Trump says is carefully crafted, and there's something trustworthy about that.

Donald Trump was uniquely situated to be the one to make it this far. I honestly don't think anyone else could have done it. His kids are great, and more presentable, more articulate than him. Some people wish they were the ones running, but the fact is that the only reason you saw them being so presentable and articulate is because their father ran for President. He's the one. He had the state of mind, the will, the money, the position, the freedom, the name-recognition and the ego to give it a go, and the thick skin to withstand the blowback. There aren't many conservative billionaires who like the limelight. And I believe him when he explains why he's running. He may well be narcissistic, but the abuses he's had to endure on this campaign are not something a narcissist seeks out. Sure, I think he and his brand will come out ahead even if he loses, but that was never a given. It could have easily gone the other way.

I'm sure that this post made a few of you uncomfortable, and it probably made others mad. I am aware that politics is divisive and polarizing, but this past week I decided that I wanted to officially endorse Donald Trump to my small group of subscribers. Not that you didn't know who I was voting for already, but what the heck, maybe I'll get a few more of you to vote for Trump. I think it's worth it, even if I lose a few subscribers.


One last thing, there's this question about who would be more likely to upset the status quo and usher in Freegold faster, Trump or Clinton? I don't know the answer, and I don't think it matters that much. But consider this. Clinton represents the status quo. Those who are deeply invested in the continuation of the status quo (like Wall Street) want Clinton to win. To quote Michael Moore, "He is the human Molotov cocktail… the human hand grenade… yes, on November 8th, you… get to go and blow up the whole goddam system, because it's your right. Trump's election is going to be the biggest fuck you ever recorded in human history, and it will feel good."

Poll Time

Here's the poll from back in July:

Now I want to take a new one. This one will close on Tuesday, or whenever we know who the actual winner is. So vote early and often. ;D

But before you vote, please watch Trump's newest TV ad:

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Tuesday, August 23, 2016


Today is the eighth anniversary of this blog, but as you know, last year I moved most of my activity to a subscription blog called the Freegold Speakeasy. Anyone can join, and a subscription is only about 60 cents a day, but for those of you who don't, can't or just plain won't pay for this stuff, I'm going use this anniversary post to give you a little taste of what you've been missing. ;D

One of the many topics I've been covering this year is GLD and its incredibly increasing inventory. If you didn't know, GLD has added 316 tonnes of gold to its inventory since January 1st. That's a third of its total, which currently stands at 958 tonnes. And a third of that addition, or 108.04 tonnes to be precise, was added in February alone. And that's why, on February 25th, I published a post titled "Plausible Explanations for GLD’s Recent Behavior".

On that day, I wrote:
"I’m theorizing that APs have been creating shares for hedge funds to bet on “gold”, and HSBC has been leasing bar numbers from other entities with allocated gold stored in their vault. They could even be leasing some from the BOE vault."

That was just a theory when I wrote it, but it became much more than a theory when, two weeks later, BlackRock filed a Schedule 13G disclosing that it had acquired 13% of GLD (more on this in a moment), and two months later, when GLD disclosed in its 10-Q filing that at least some of the new gold came from the Bank of England vault. Again, this was just a theory I came up with, using my Freegold lens and coat-check-room view of GLD, which was later confirmed by SEC filings.

Now, a 13G (or 13D in some cases) must be filed by anyone who acquires more than 5% of a publicly traded company. It must be filed within 45 days of a 5% acquisition, or within 10 days if a 10%-or-more threshold is passed. According to BlackRock's filing, it passed that 10% threshold on February 29th, and therefore filed the 13G ten days later. On Feb. 29th, GLD had 777.27 tonnes in its inventory, and 13% of 777.27 tonnes is 101 tonnes. GLD had only added 135 tonnes so far this year at that time, and most of it was in February, so the majority of the additions at that point in time had apparently come from one company, BlackRock. This is important because it supports my theory that someone was soliciting, promoting, possibly even incentivizing, these new share basket creations, rather than their creation being any kind of organic, market-driven phenomenon.

So who might be promoting new share creation, over the purchase of existing shares or bullion bank unallocated, as a way for hedge funds to make big bets on gold, and why? Well, I think the World Gold Council (WGC) might be doing just that. The WGC is a trade association and market development organization for gold mining companies who paid membership dues which totaled $60.2 million in 2012, $28.2 million in 2013, dropped to $12.5 million in 2014, and were phased out entirely in 2015 after several miners resigned from the WGC to avoid paying dues. [1]

No longer collecting membership dues, the WGC now relies on Sponsor fees paid from GLD to its fully-owned subsidiary, the World Gold Trust Services LLC (WGTS), for nearly all (about 97%) of its revenue. But that income stream declined too, from $104 million in 2012 to $71.5 million in 2013, down to $47.8 million in 2014. This was due in part to the 47% decline in GLD inventory during those years. The fee was 0.15% per year of the NAV, or Net Asset Value of GLD, which is the price of gold times the number of ounces in GLD. So changes in the price of gold, and the overall size of GLD, both affect the WGC's fee, which is 97% of its income.

The WGC's combined revenue from membership dues and GLD fees plunged 63%, from $164.2 million in 2012 to $60.3 million in 2014, a decline which the WGC arrested through cost-cutting, restructuring and fee-raising in 2015. In 2015, the WGC cut its number of employees by 44%, and also managed to get its GLD Sponsor fee raised to 0.40% of the NAV. What it actually achieved was a net increase from 0.15% to about 0.24%, after paying out the Marketing Agent, Custodian and Trustee fees. In 2015, that net increase amounted to about $15 million in added revenue. [1]

A Puzzling Disclosure

The BOE disclosure, even though it more or less confirmed my hunch, is a bit of a puzzle itself. Firstly, the disclosure said that no gold was held by subcustodians as of the last day of the quarter, but that some had been held at times during the quarter, the greatest amount of which was 29 tonnes, which was held by the BOE. Here's the actual wording from GLD's 10-Q filing at the SEC:

Subcustodians held no gold on behalf of the Trust as of March 31, 2016. During the quarter ended March 31, 2016, the greatest amount of gold held by subcustodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as subcustodian.

We can calculate the date on which the BOE held 29 tonnes for GLD using simple math and the daily spreadsheet (you can download the Excel spreadsheet by clicking here). 29 tonnes is 3.8% of 763 tonnes, and there was only one day during the quarter when GLD held close to that amount. That was Friday, Feb. 26th (coincidentally the day after my post), when GLD held 762.4 tonnes. The day prior, it held 760.32, and the day after, it held 777.27 tonnes. So it was on Feb. 26th that the greatest amount of gold was "held by subcustodians" (the BOE being the subcustodian).

If we subtract 29 from 762.4 tonnes, we get 733.4 tonnes, and once again, there was only one day during the quarter when GLD held approximately that much. On Feb. 19th, GLD held 732.96 tonnes. The day prior, it held 713.63 tonnes, and the day after, it held 752.29 tonnes. The point here is that we can pinpoint precisely the specific dates and additions that constituted the 29 tonnes disclosed in the filing.

From Feb. 19th to Feb. 26th, 29.44 tonnes were added to the GLD inventory from the Bank of England, most likely because of new share creations on behalf of BlackRock hedge funds. It gets even more interesting when we look at the specific chugs. They were:

That's right! You might remember those two days, Friday then Monday, with the same exact amount added: 19.33 tonnes added two days in a row! Now, perhaps, we finally have a plausible explanation emerging. Now, perhaps, we know why they split a mega-chug of almost 39 tonnes into two equal parts on subsequent days. Wherever the first half came from, we now know that the second half came from the BOE! And, to me, that implies the epic tightness and scarcity that fits my current view of the LBMA.

The second thing about this BOE/subcustodian disclosure which I found puzzling was the request from the SEC to the WGTS, which ostensibly motivated the disclosure. It was in a letter dated 3/29 and filed on 3/30. Here's the official pdf of the letter. Simply stated, it asked GLD to "please disclose the amount of the Trust’s assets that are held by subcustodians." One day later (even though they were given ten business days to respond), dated 3/30 and filed on 3/31, the final day of the quarter in which the disclosure appeared, GLD's response letter replied, "We will, to the extent material, disclose in future periodic reports the amount of the Trust’s assets that are held by subcustodians. Please be advised that during fiscal 2015, no gold was held by subcustodians on behalf of Trust."

No big deal, right? Except that GLD has been disclosing subcustodian holdings in every 10-Q and 10-K filing since 2009! Here, here, here and here are just a few random examples which show that the SEC's letter was as unnecessary as GLD's response (really the WGC's response if you look at the letterhead) was strange. Just do a CTRL-F search for the word subcustodian in those filings, and you'll see that each one says, "Subcustodians held nil ounces of gold in their vaults on behalf of the Trust."

Of course now, in hindsight, it appears that those statements referred only to the last day of the quarter, that specific day of reporting, which wasn't obvious or even implied prior to the 4/29/16 10-Q filing, which for the first time differentiated "during the quarter" from the end date with regard to subcustodian holdings. Think about this, because I think there is a simple and plausible explanation.

The SEC's letter doesn't make sense the way it is written, at least not to the casual reader, because it asks for something that GLD had already been doing for seven years. Neither does GLD's response make sense, because it should have brought attention to the fact that GLD had been reporting nil ounces held by subcustodians since 2009. Both letters do make sense, though, if both letter-writers knew they were referring to "during the quarter" as opposed to on the end date of the quarter. But because this difference wasn't explicit in either letter, they only make sense if they were essentially staged, filed in order to explain and justify a change in reporting whose real motivation lay elsewhere. Indeed, both letters barely squeaked in before the end of the quarter.

If this explanation is correct, then it raises the question of why the change in reporting needed to happen for that specific quarter. There are basically three players involved—the SEC, GLD and the BOE. Of the three, the BOE is the new one, so perhaps it was the BOE that, for whatever reason, wanted to get this subcustodial disclosure on the record. Perhaps a request by the BOE was the real motivation. Think about the events we know about in terms of a timeline.

First, we have BlackRock creating a massive amount of new GLD shares in February, which requires HSBC (the GLD Custodian) to allocate actual bar numbers to the Trust. HSBC adds 90 tonnes-worth of bar numbers from Jan. 1 to Feb. 19, and then something changes. Wherever those new bar numbers were coming from suddenly runs out, so HSBC turns to the BOE.

The straw that apparently broke the camel's back was a massive 38.66 tonne share creation request on Friday, Feb. 19, which had to be split in two over a weekend. 19.33 tonnes-worth of bar numbers were allocated to GLD on Friday, probably from somewhere within HSBC's own vault, and then another 19.33 tonnes-worth of bar numbers were provided by the BOE on Monday… and another 8.03 tonnes-worth on Wednesday… and 2.08 tonnes on Friday. The total for that week from the BOE… 29.44 tonnes.

Then, four and a half weeks later, the SEC files a puzzling letter asking GLD to disclose subcustodian holdings, using a questionable pretense, and GLD responds immediately, on the last day of the quarter no less. I should also note that, according to the 10-Q in question, subcustodians held no gold on behalf of GLD at the end of the quarter. So either the 29.44 tonnes were physically moved from the BOE to HSBC's vault during the weekend of Feb. 27/28 (because another 15 tonnes were added on Monday), or else some other arrangement was made between HSBC and the BOE. It may even be as simple as HSBC leasing some space inside the BOE's vault. Who knows?

The point is that this is the simplest, most plausible explanation I could come up with for the puzzling BOE disclosure and SEC/GLD letters. For whatever reason, it seems to me that the BOE must have wanted it on the record that it was now providing GLD with bar numbers. Incidentally, I emailed Warren James back in June to see if he was still collecting bar numbers for his database. I asked him if he noticed any difference in the bar numbers coming in this year versus past years, and here's what he told me:

"regarding the GLD additions, it was just a once-off analysis and I didn't publish anything because it wasn't a comprehensive survey. i.e. it only looked at a period of about 6 weeks. But yes, the normal flow of 'dark bullion returning' markedly stopped at some point and was replaced with a flow of 'random' bars as the 'new' source."

I then asked him to confirm that, by "random bars," he meant old bars coming from existing stock, as opposed to new bars coming into the LBMA from the mints:

"re: Random bars. Yes that's right --> there are three main sources of stock for 'GLD Addition' ...
very broadly speaking, the following pattern applies:

approximately 30% is always 'previously-seen-stock-previously-absent' (dark bullion).
another 30% is consistently the Johnson Matthey newly minted stuff (now branded as 'Asahi', since they bought out JM)
the remaining 30 - 40% is always a mix of randoms, with proportions as expected from Refiner market share.

So yes, this event was notable that for a number of additions the proportions from the three sources changed to roughly 0:0:100, suggesting that temporarily source #1 and #2 were unavailable.
... so the question now is whether that trend continued or not, and whether it is still present.

Just for the record, the BOE vault stores approximately 5,134.37 tonnes of gold. [2]

As you can see from the chart, the BOE only owns 310.3 tonnes of that gold. Most of the rest is held on behalf of other central banks, and 1,355 tonnes is held on behalf of unknown entities, which may or may not be central banks. From BOE day, Feb. 19, to GLD's peak for this year of 982.72 tonnes on July 5th, 250 tonnes were added. Since then, the inventory has receded by about 24 tonnes to 958, but, to put it into perspective, if all of that 250 tonnes had come from the BOE's own stockpile, it would have represented 80% of the UK's gold.

This raises the question of whether the BOE would actually be lending its own gold to HSBC, or someone else's. For this, I turn to ANOTHER:

ANOTHER (Sun Oct 05 1997 21:29 - ID#60253)

People wondered how the physical gold market could be "cornered" when its 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.

ANOTHER (Sun Nov 16 1997 10:20 - ID#60253)

Does a CB have collateral to lend it's gold? Understand, they only lend their good name on paper, not the gold itself. The gold that is put on the market in these deals belongs to someone else! The question is not "Are the CBs worried for the return of gold?" but, "Has our paper been lent to the wrong people?".

And FOA:

Friend of ANOTHER (Mon Aug 10 1998)

The process: An oil country (or others
[say, BlackRock]) goes to London and purchases one tonn of gold [or 100 tonnes-worth of GLD shares] from a Bullion Bank. The BB [HSBC] borrowed this gold [the physical representing the bar numbers allocated to GLD] from the CB (leased). The one tonn gold certificate [new GLD shares] is transferred to the new owner. The gold stays in the CB vault and the owner goes home.

You can draw your own conclusions. Obviously ANOTHER and FOA weren't talking about GLD in those quotes, because it didn't even exist yet. But they were talking about one way that central banks supply gold when needed.

Curiously, in its latest 10-Q, filed just three weeks ago today, GLD neither disclosed nor denied that it's still getting bar numbers from the BOE. Instead, they changed the wording to reflect the greatest amount held during the last nine months, rather than the last quarter as they did in April. To me, this obvious ploy implies the obvious, and then some.

I was emailing about this just the other day with someone who asked me about my thinking in terms of why the BOE might want this on the record. He wanted to know if I thought the BOE might be covering its bases against potential legal problems with getting its gold back in the case of a market dislocation and GLD dissolution. I will share with you my reply:

Yes, that’s very close to my thinking. But it’s not so much that the BOE will run into legal problems (it won’t), but that it wants to avoid looking bad or getting blamed in such a situation. Imagine if it happened fairly soon, and in the aftermath it came out that the BOE had just started supplying GLD this year, and did so secretly, then it might look bad for the BOE.

So you have the WGC promoting this (temporary) increase in GLD shares and inventory because it makes them millions in Sponsor fees (316t added x $1,340/oz. x 0.24% = $32M), and the BOE is willing to go along, wittingly or unwittingly (doesn’t really matter which), but not secretly.

Look, GLD is going to be terminated and liquidated if/when the London gold market dislocates, period, full stop. It's right there in the prospectus under termination events. So all GLD shareholders are going to be cashed out at the frozen paper gold price, and the physical will be “sold” in order to “liquidate” the fund. In other words, in Freegold, the overnight gold revaluation windfall profit won't go to GLD shareholders, even though GLD is fully allocated with bar numbers of real physical gold. It will go to the BOE or whoever owned those bars in the BOE vault that were leased to HSBC and then allocated to GLD.

So, when someone like Warren in the future goes through the bar numbers and finds that a bunch of them came from the BOE in 2016, at least the BOE can point to the SEC filing and say that it wasn’t done in secret!

One question I see repeatedly is, Why do I even care about GLD? Why do I spend so much time discussing it? Well, there are at least a couple of reasons why. First, GLD is a significant component of the LBMA and the global gold market in general, but it wasn’t around when A/FOA were writing. They stopped writing in 2001, and GLD was created in 2004. So it has always been kind of a pet project of mine to integrate it into the big picture.

Second, the LBMA is the very center of the global (paper) gold market arena, not COMEX, not the SGE, only the LBMA, so, as goes the slack in the flow of physical through the LBMA, so goes paper gold and its dominance in pricing. However, the LBMA is extremely opaque, so we cannot see directly whether there is an abundance or scarcity of unallocated physical reserves standing behind the massive paper gold market, but sometimes we can see the shadows it casts. Shadows like, for example, HSBC having to go to the BOE for dusty old bar numbers for the first time ever.

You see, I view GLD as a unique window into the otherwise-opaque world of the LBMA. It's a window that didn't exist when A/FOA were writing, so in a way, they were the window in their time. For certain things, they told us then what GLD can tell us today, like whether or not the physical side of the most overwhelming segment of the global (paper) gold market is currently tight and under stress.

Looking for signs that it's tight is as good as it gets. We have solid theory and logic that says it should be, so we look for evidence that it is, and from that we deduce that time is short. The precipitous drain in 2013 was a good sign that it was tight then, and now this BOE disclosure is a new sign that it’s tight right now, even though the previous sign reversed.

In "Plausible Explanations for GLD’s Recent Behavior", I explained how I like to think of the life of GLD in terms of three phases—growth, plateau and drain—and in 2016 we have apparently entered a new phase, with a spurt of (inorganic) "growth" driven by something entirely different from the growth in phase 1.

Here is a list of my GLD-related posts this year, for anyone who's interested in exploring this topic further:

Plausible Explanations (for GLD’s Recent Behavior) February 25, 2016 – 178 comments
Coat Check 101 March 4, 2016 – 291 comments
Bullion Banking 201 March 19, 2016 – 366 comments
GLD Recap June 12, 2016 – 290 comments
GLD and the BOE June 30, 2016 – 366 comments
GLD and the WGC July 29, 2016 – 280 comments

In addition to those, and just as many non-GLD-related posts this year, the Speakeasy also has new video "Debriefs" of me interviewing, via Skype, Michael dV, tEON, Sam, Indenture, Delusional Investing, byiamBYoung, and an all-new Debrief with Aquilus. So if you would like to join the fun, or just lurk silently like a fly on the wall, you can click here and join for the low, low price of just $110 for six months. ;D

Thank you for stopping by, and if I don't see you at the Speakeasy, I'll probably see you back here again in a few months. :D


[1] Credit for the WGC statistics goes to Ronan Manly of and his excellent sleuthing and reporting on this topic, especially in The funding model of the World Gold Council: GLD Fees and Gold Miner Dues and Execs flee GLD – The revolving door at the SPDR Gold Trust Sponsor.
[2] Once again, Ronan Manly has done some very impressive digging, calculations and reporting on the topic of gold at the BOE, especially in How many Good Delivery gold bars are in all the London Vaults?….including the Bank of England vaults and Central bank gold at the Bank of England.

Tuesday, May 10, 2016

The Debtors and the Savers 2016

This being the anniversary of the new Freegold Speakeasy, I wanted to write a post for both sites. And after taking stock of the current state of affairs, as well as the changes over the past year that led us to where we are today, an updated Debtors v. Savers post was the obvious choice.

What I'm talking about, well… there are a lot of things that happened over the past year, but I think the main ones are the European migrant crisis which is tearing Europe apart, at least on ideological grounds, and threatening to do so literally as well, and in the US, the election, in which we have on one side a very popular "free everything" (MMT-informed) Bernie Sanders, and on the other the unstoppable Trump Train. Can you see yet why The Debtors and the Savers was the obvious choice?

In the first Debtors and Savers back in 2010, I agreed with Karl Marx's statement that "the history of society is the history of class struggle," but I disagreed with his delineation of the classes as the workers versus the capitalists, the rich versus the poor, or the haves versus the have-nots. My delineation was "the easy money camp" or "the redistributors," which I dubbed the Debtors for short, versus "the hard money camp" or "the live within their means and take personal responsibility for their own future camp," which I dubbed the Savers for short.

Marx and I merely have two different perspectives on history. But Marx's perspective is wrong yet almost universally held, dangerous because it often leads to bloodshed, and politically expedient to the Left because it rousts envy in the have-nots. Meanwhile, my perspective, being the correct yet little known one, actually reveals how Freegold is the elegant solution to one of the oldest conflicts in the world. Instead of trying to force hard money on the easy money camp to keep their savings from devaluing, the Savers will simply stop saving in money, debt and financial instruments.

They will stop, because they will get burned in a way that will live in the collective memory forever, or at least for generations. Easy money systems, as I discussed in the post, have a typical profile of gradually transferring purchasing power from the Savers who save in money, debt and financial instruments, to the Debtors. Then, at the very end of the system, they have one final, very rapid wealth transfer, from paper's remaining purchasing power into real things, primarily real wealth items that can be possessed, because physical possession is wealth's defining attribute, especially at such times as the end of an easy money regime.

This change won't deprive the Debtors of money to borrow, because if there's one thing we know about easy money, it's that you can easily make more of it. What it will do, however, is to keep the Saver's savings from being disproportionately drained of value by an expandable monetary system. This will solve, once and for all, one of the oldest conflicts in the world, that of the Debtors and the Savers trying to use the same monetary unit, whether easy or hard, for both borrowing and saving, which has always ended in either bloodshed or tears for the Savers.

Hard money systems tend to end in violence, uprisings, bloodshed and even war, as I discussed in the post, while easy money systems tend to end in monetary collapse and financial devastation for unprepared Savers. Today we are at the end of the longest-running easy money system ever, so "Choose your camp wisely," as I said in the post, "and prepare to own the future." Because "it's not a matter of good versus evil at this point, it is a matter of survival!"

In Debtors v. Savers II - FOA Retro House Mix, I threw up a mix of FOA's comments about our tribal nature. Here's a sample:

Human society has from the very beginnings formed tribes and picked sides against each other. When we are not battling nation against nation, we jockey for position within our own groups. Right down to "me and my neighbour against the three houses down the street. As a tribe ,,, as a nation ,,,,,, as a group ,,,,,, our war is really a human problem with each other and always has been. In better context; the problems are in the way we use our laws and governments to gain advantage over the next in line.

Whether through force (war) or democratic means, we subject ourselves to the order of governments. We rightly perceive that,,,,,, the order gained from this action ,,,,,,, the security of a group, overcomes the rights and property lost on an individual level that living in a tribe requires. It's been this way through the ages. It's a political process that has always had its in-house battles ,,,,, namely portions of society try to circumvent their percentage of lost rights and property by maneuvering the rules (laws) in their favor. Yes,,,,,if I can gain the advantages of tribe life and still keep my "lost portions",,,,, I'm gaining wealth to the disadvantage of the group…

The "reality" of life on this earth is this: ,,,,,,Some portion of society will use their influence or control of the leaders to make their debts easier to pay…

Yes, we can break gold into many small parts,,,,, 'stamp it into coins and circulate gold certificates as money. We can borrow it, lend it and also circulate gold bonds as the economy grows. It is the perfect "weights and measures" monetary system. Exactly representing our productive efforts in every facet of human endeavour. But, when the losses mount, our tribal human tendencies will not allow us to support a government or banking system that forces these real losses on only a portion of the group. Never has,,,, and never will! Without this escape valve, we go to war ,,,,,, internally or on a world scale,,, so we all can share the loss,,,one way or another. As a human society of thousands of years,,, outside of war,,,,, we have learned to inflate our loses upon everyone as a whole,,,,,for the good of the keeping the whole from each others throats. Even to the point of a total loss of the current system,,,,, and all the destruction that entails for everyone.

Yes, indeed,,,,,,,we will transition to the next fiat system from the dollar, when the time comes. Believe it!

In Debtors v. Savers III - Back to "honest" gold money? Or forward on to Freegold?, I put up a post by Randy Strauss (TownCrier) from 2006, where he tackled a common myth in the hard money camp—that easy money causes wars while hard money is the key to peace:

"Attractive as it would be to simply take Rockwell at his word regarding his association between the making of fiat money and the making of war (essentially saying that war could be abolished if fiat currency were abolished), history begs us to identify that notion as a utopian falsehood. Two handy examples from very close to home (in space and time) provide the necessary instruction on this point.

1) We launched into the U.S. Civil War despite our being on a bi-metallic (gold and silver) currency system.

2) We launched into World War I despite many of the participants being on a gold standard.

Sure, paper greenbacks and confederate currency came along to prominence in the Civil War, as did the abandonment of the gold standard and implementation of fiat currency in WWI, but this development misses a most important point.

That point being, if the metallic monetary standard fails to prevent the war in the first place, then all subsequent arguments about the nature of money go out the window. Because once a nation deems itself engaged in a struggle for its very survival, there is no power on Earth that can compel such a nation to cling fast to its metallic currency standard if the legislators deem that a fiat currency would be expedient to facilitate the war effort...

Because of this difficult truth, "Your wealth is not what your money say it is," as Another used to say. Instead, your wealth, properly measured, is the tangibles you've accumulated, the store of resources you've saved. And among the world of tangibles, gold is globally the most liquid -- the most universally recognized, honored, and accepted.

In time of war, governments may (and history has shown they often do) recognize and declare that gold is too valuable to be wasted underutilized (undervalued) in the representational coinage of national currency. Therefore, fiat currency is adopted, and gold is instead mobilized in its fully-valued form -- a tangible resource uniquely and reliably suitable for any and all international settlements."

And in The Debtors and the Savers 2012, I took a closer look at the value theories of Marx, Munger, and even MMT:

"You could say, the sovereign borrowed from the rich (those with surplus wealth which will otherwise perish) and redistributed the wealth according to the needs of the community. Since everybody received something, including the ‘rich’, a tax (cancellation of debts outstanding) kept the system in balance. Very MMT."

What she's saying here is that too much savings is a burden on the system and the government provides the valuable service of debasing burdensome levels of savings down to a socially healthy level. How does that make you feel? And yeah, Izabella is apparently quite fond of MMT, which is why this part reminded me of someone else who once said that savings above "a certain level" are a "burden". I'm talking about our very own MMT Greg:

"I don't disagree with your idea of saving but it cannot be done to much of a degree on a macro level. There must be someone to consume your oversupply after a certain level. Savings is a burden when excessive..."

In part 2 of her bug schooling affectionately titled "Gold’s Anti-Social Behaviour Order", here is Izabella expressing the same sentiment as MMT Greg regarding excessive savings being a burden on the system:


"The problem with promissory notes from a goldbug’s point of view, however, is that a sovereign always has the means to “manipulate” supply so as to regulate the system’s excesses and deficits for the benefit of the group: bringing the purchasing power of the notes down when there is an abundance of goods to notes “by printing more” […]

In a perfect system the sovereign should provide for you, once you’re no longer productive anyway."

In other words, it is good that the government can reduce "excessive savings" through debasement. In fact it is the government's job to do that, just like it is the government's job to take care of you when you get old according to Izabella. And here is "gold's anti-social behavior" in a nutshell:


"Since gold can’t be “debased”, it begins to attract investment from those who would rather not consume today’s overproduction (and via that sharing wealth and ‘favours’) but continue to hoard these for the purpose of individual wealth accumulation.


Gold in this way symbolises humanity’s selfish streak.


What’s more, while gold encourages anti-social behaviour and hoarding in individuals, a fiat-based system encourages the very opposite: sharing, distribution, collaboration and cooperation.


Which leaves two possible plans [to get us] out of the crisis:

1) The goldbug plan: based on encouraging everyone to hoard ever greater amounts of natural wealth for themselves and themselves in what is ultimately a commodity you might never be able to eat.

2) The fiat plan: based on encouraging society to trust each other again, and via that storing, redeeming and returning favours until the system’s ails are eliminated."

Freegold is not about making easy money a little bit harder. On the contrary, it is about the debtors and the savers coexisting without the perpetual monetary conflict embedded in all prior systems…

Izabella has probably never heard of FOFOA's dilemma. Here it is:

FOFOA's dilemma: "When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma."

And from that same post, here's my definition of Honest Money: "My definition is that honest money is simply money that does not purport to be something it is not." As I explained in that post, money's two main functions, medium of exchange and store of value, are actually fulfilled by two different media, even today: a primary and a secondary medium of exchange. Today (and in Izabella's ideal world) that secondary medium of exchange is debt denominated in the primary medium.


Now would probably be a good time to restate that "the debtors and the savers" is a dichotomy, not a moral judgment. It is a way of viewing the world in two camps that corrects Karl Marx's most enduring (and harmful) legacy. Neither camp is better than the other any more than women are better than men. It is simply a model for understanding how two groups with apparently different innate tendencies have always been placed in conflict with each other throughout history due to the emergence of monetary systems."

That was from 2012. In February of 2015, Yanis Varoufakis stepped into the global limelight through Greek politics, and I made two posts about him: Yanis! and Confessions of an Erratic Marxist, which was what Yanis himself titled a speech he gave at the Subversive Festival in 2013, an annual Marxist convention in Croatia.

Yanis is an interesting Marxist to me, because for one thing, he's really smart, and he comes so close to Freegold you almost can't resist reaching out to him, yet I don't and I won't. In a paper in 2011, he wrote an interesting section which caught my attention, titled Conflating wealth with capital (secton 2, pages 2 & 3). And the following paragraph from a 2013 post on his blog also caught my eye:

"But there is no such thing as the Germans. Or the Greeks. Or the French for that matter. “We are all individuals” as Monty Python have taught us. Or Europeans, as many of us would like to think. And, yes, some Europeans are grasshoppers whereas others are ants. But the notion that the ants all live in the North and the grasshoppers have all congregated in the South, plus in Ireland, is absurd. There are ants and there are grasshoppers in each of our nations. During the ‘good’ times of the Eurozone, the grasshoppers of the North and the grasshoppers of the South went on a frenzy. And when their feeding frenzy led to the crisis, it was the ants of the North and the ants of the South that were made to foot the bill. Tragically, our leaders’ espousal of the grasshoppers’ agenda, everywhere in Europe, ended up turning the ants of the North against the ants of the South in a Europe that is losing its soul because of stereotyping, denial and because of the ironclad determination of grubby so-called elites not to let go of the levers of ill-gotten power."

I mention this stuff about Yanis as a preface to an email I want to share with you. I wrote it in early February, 2015, while emailing with someone about Yanis:

Hello XXXXX,

Don't you think his [Yanis'] false premise is the same one I identified in Debtors and Savers?...

"Karl Marx predicted the breakdown of capitalism as a result of class struggle, followed by the establishment of a grand commune in which all the means of production would become publicly owned and used only for the public good."

Yanis sees the breakdown of (his idea of) capitalism happening right now.

"Marx writes, "The history of all hitherto existing society is the history of class struggle." He got this part right! What he got wrong was his delineation of the classes."

So Marx thought that the history of all society is the history of the struggle between the haves and the have-nots, and that this struggle would lead to the breakdown of (his idea of) capitalism.

I bet this is what Yanis thinks too. In this case, the Germans are the haves and the Greeks are the have-nots, and (his idea of) capitalism is collapsing because of it.

Well, first of all, I don't really think of the $IMFS and Wall Street as true capitalism. A lot of phony "wealth" is accumulating on Wall Street, but that's because of this "global surplus recycling" (as Yanis calls it) that has been funneling through Wall Street for at least 40 years now.

People view the Wall Street bankers as the haves and hate them because of envy. But if you shift your perspective a little bit you can see that the Wall Street bankers are actually in the same camp as Yanis and the Greeks, the debtor camp or the easy money camp.

Envy is a derivative of pride which I think is the "Original Sin". Pride is the root of this "we are all equal" ideology that says "I am just as deserving as those who have lots, therefore we should all have the same." See how "I am just as good as you" is a symptom of pride? And envy flows from that.

So, what you are calling a false premise, I would call a sin. Not in a religious sense (the seven deadly sins are not biblical in origin, but an ethical tradition that grew out of the Renaissance period in Europe), but more in the sense that it is an ethical misstep that, on a big enough scale, leads to really bad things happening (like the French Revolution or 150 million deaths attributed to Marx and Communism).

Remember that the Debtors and the Savers dichotomy is not meant as a value judgment that one of the camps is better or more ethical than the other. It is simply a better description of reality and history. And because it is correct while Marx's dichotomy is false, it is a premise on which a real solution can be found, unlike Marx's false premise which usually leads to bloodshed or tears.

Here's a little more on the seven deadly sins which I wrote in an email a few years ago:

The seven deadly sins, also known as the "capital vices" or "cardinal sins", are not discrete from other sins, but are instead the origin ("capital" comes from the Latin caput, head) of all other sins. Sins are traditionally divided into two categories; lesser sins which do not break one's friendship with God but injure it, and mortal or deadly sins which, if unforgiven upon death, are said to result in a complete separation from God. "Capital vices" is probably a better term for the seven than "deadly" because each of them can be either venial (lesser) or mortal (deadly) depending on the situation, but they are called "capital" because they engender other sins, other vices. The seven are:


These are said to be the root sins, the underlying cause of all other sins, and each is a form of Idolatry-of-Self wherein the subjective reigns over the objective.

Of the seven, pride is considered the original and most serious, and the source of the others. Pride is generally identified as believing that one is essentially better than others. It may be true in certain contexts (e.g., Kenyans/Ethiopians are better runners and therefore win marathons), but pride itself is considered the original sin and the source of all others.

Private property (aka wealth) is sacrosanct, good, and a God-given right. Even in prison, where we strip inmates of everything, they still manage to accumulate private property. And as FOA clearly stated, the identifying mark of wealth, throughout all of history, is possession. The only way to truly do away with private property is to kill a man. There's a great Clint Eastwood line in the Unforgiven: "It's a hell of a thing killing a man, you take away all he's got, and all he's ever gonna have."

I think that envy is the root of all Communist thought. Perhaps pride goes even deeper, as the have-nots mob up and truly believe they are better (as individuals and as a group) than those who have accumulated wealth. Wrath, which is the most obvious sin of Islamic jihadists, is a derivative of envy and pride.

I think that Progressivism is a prideful reaction to envy (kind of a sinful feedback loop). Progressives are full of pride, greed, sloth, gluttony, lust and wrath, but they take prideful solace in fanning the flames of envy so that they can play the prideful role of Robin Hood (a blatant thief) to the envious sinners they create but cannot control. That's just who they are. They have always been with us, but they stumbled into a global monetary system in the 20s and 30s which enabled their proliferation and all but disabled any opposition.

We all work within the given system. Even Freegolders are doing so by buying physical gold right now. Fortunes are made through genius, hard work and deliberate underconsumption. But truly immense fortunes are made mostly through making the most of the present system and a large helping of luck. Of course you've got to be capable and intelligent to do so, but first-generation billion dollar fortunes come from a lot of luck combined with working with (not against) the present system.

When I say luck, I'm talking about the "tournament effect". It applies to the Rothschilds and the "robber barons" of the 19th century as well as to Bill Gates and Steve Jobs. There are plenty of really smart, hard-working people out there, but the tournament effect rewards just a few of them in REALLY big ways. The "tournament effect" is an analogy of life to things like the WSOP, or American Idol, or beauty pageants. Pro sports are a good example. The teams are relatively evenly matched in talent, so you only have to be a hair's breadth better than the second best (or have a little luck) to win the whole thing. Life is a tournament too, and that luck-based prize is not a bad thing, it is the carrot that brings so many into the big game!

But envy views the tournament effect as a bad thing. It correctly observes that the big winners are not necessarily better than itself, at least not in proportion to their oversized winnings. So it tries to take those oversized winnings away and do away with the (quite natural) tournament effect, not realizing the unintended consequence of removing the carrot that brings so many into the game in the first place.

While we're thinking about oversized fortunes, it should be observed that they are all won while working within the system at that time. Sometimes that system included slavery. Sometimes it included child labor. Sometimes it included war and brutality like in the French Revolution and WWII. And lately it includes high frequency trading, complex mathematical algorithms and derivatives, and the "magic" of Wall Street in general, which is a result of all of the savings of the largest population the world has ever seen (7bn people, it was half that in 1970) sloshing around, ripe for the skimming, in one centralized mega financial industry.

If you feel a twinge of envy toward those rich bankers, I suppose the silver lining is that most of their "wealth" will vanish in a flash. And then someone else will be quite envious of you, since you bought gold before the big revaluation. Just remember that and let it help you keep your mouth shut about your gold when the time comes!


There are a few readers with whom I email regularly, and I shared that particular email with three people in addition to the person who emailed me. That was more than a year ago like I said, and here were their four responses:

Holy shit, bro. This analysis is just genius on so many levels. I can see why this might not end up as a post on the blog, but if it does I think a lot of people would benefit from this lens beyond what they've read in Debtors vs. Savers.

I had never heard of the tournament effect, but I find it very interesting using that lens to see why common folk might react with disdain towards others that won big within the current economic system simply by employing the rules of the game. I can also see how that might extend to a, "Hey! He's no smarter than me. That big CEO is just an asshole because he chose to use the rules to his advantage in a way I wouldn't have done. I also could have done that so we should all have an equal share of the total pie" mentality.

I'll tell you what. I didn't spend a few thousands hours behind a computer studying the history of our international monetary and financial system so I could shuttle my wealth through a crash to feed the dregs that hang out by the convenient store around the corner.

Thanks for sharing. This is really good stuff you should try to work into a future post when the time is right.


Ha ha, he beat me to “holy shit, bro.”

Mine went, “Holy shit I finally understand the universe past present and future!”

I find myself getting jealous of guys that grew up with money, went to school with money, golfed with money and now do business with money. I think to myself, “their wealth doesn’t count because they were given advantages I wasn’t and on an even playing field we would still be even.”

But then I always remember the first time I heard “living well is the best revenge” from one of your comments and I think, “those rich guys don’t give a shit where I grew up, all they know is they’re living well.” I’m not living well because I didn’t make the right moves at the right time. The moves were there for the taking, I just made different ones.

But this new language of yours makes it clearer. I’m still in the tournament and even though I haven’t won yet, I might be just a hair’s breadth away. Ha ha.


thank you very much for forwarding this. It is so much up my alley, so much like how I think about communism, jihadists and progressives just to name a few, it's downright scary to see it verbalized. ;D In a good way that is.

But then again The Debtors and the Savers is one of my all time favorites that made me realize your blog was something very different....


Oooo I liked that! Deadly sins, Yanis, and the hints of a debtors and savers 2 post. Who could ask for more! Since he is obviously going to read it the part I think yanis would like, a point often forgotten or glossed over as maybe opinion, is that savers aren't superior to debtors. Greece isn't bad and Germany isn't good. Yanis is right that if you shrink the purchasing power of the net importers it would damage the economies of the net exporters. Greece simply IS a debtor and Germany simply IS a saver. From a "think like a CB" perspective both should try to push themselves towards balance (preferably via automatic adjustment mechanisms) in order to accomplish a maximized standard of living.


And I should also include this limerick, written by the Speakeasy’s very own poet laureate, Edwardo:
Jealousy, vanity, greed
Those are some sins you don't need
And anger's a curse
Though pride may be worse
I envy all those who take heed

Which brings us back to Bernie Sanders, Donald Trump, Angela Merkel and Viktor Orbán. For those living under a rock, Trump wants to build a border barrier to ensure border security by preventing immigrants from entering illegally, and Orbán actually did build one last year, on the border between Hungary and Serbia, in response to the migrant crisis. Meanwhile, Angela Merkel has made it clear that there is no limit to how many asylum-seekers Germany will take. This is a very divisive issue, for many reasons and on many levels.

In general, I try to avoid politics as much as possible on my blog. But as you will see, the two main political sides in the world align much better with my delineation of the camps or "classes" than with Marx's. And because most gold bugs come out of the hard money camp, my readers tend toward the conservative side of the political spectrum. So it may seem to the reader, because of his own bias, that this discussion is a moral indictment of the political left, when it is more fundamentally about how things are unfolding, how they will ultimately end, and how the two sides will then be able to live together, each being their natural self, without monetary conflict.

Peak Progressivism

Progressivism is a name adopted by the political left in its endless push to "progress" toward a world without a political right, without opposition to progressivism. Progressivism generally traces back to the 18th century period leading up to the French Revolution, in which "progressives" eliminated some 50,000 opponents.

French Progressives

Progressives are very good with words, as evidenced by the name itself. What could possibly be wrong with progress? And if you aren't for progress, then you must be a bad person. It's an almost indisputably-positive word, right? Kind of like "social justice". If you're not for social justice, then you must be for social injustice, which would obviously make you an evil person, right? And then they have a whole list of made-up phobias and misused "isms" with which to label and brand their opponents.

In fact, the French Revolution gave the English language three politically descriptive words denoting anti-progressive politics: reactionary, conservative and right. "Reactionary" came from the French, réactionnaire, meaning "a movement towards the reversal of an existing tendency, and a return to a previous state of affairs," and was a pejorative label given to those supposedly opposed to modernity and progress. So they were doing it even back then!

Here's a comment I wrote back in 2010, shortly after The Debtors and the Savers:

Hello Desperado,

Desperado wrote: "Gary North has an interesting look at "Greenbackism" in Cheerleader for Hitler's Economics. He has researched Ellen Brown extensively. He discusses her and the Greenbacker links to the tea party, and I would think they would fit together like a hand and glove. The Greenbackers have historically been against gold based money and they could easily help push the teaparty into being swept up in an anti-gold and anti-hoarder populism.

It seems that we are having more than a currency war, we are having a struggle between monetary philosophies at a very base level as gold reasserts itself and the $IMFS breaks apart. This is something that has not happened for over 100 years when the Greenbackers, the Silverites, and others struggled against the gold standard.

I would love to hear anything you (and anyone else) might be able to add concerning this re-emerging conflict."

Certainly! First let me say that I thoroughly enjoyed that Gary North piece. Bravo to him! As always, I only have minor differences with him.

I have been writing about this "re-emerging conflict" a lot lately, but you simply cannot see it, Desperado. Politically I am firmly on your side. Monetarily, you are blinded by your intense political focus, in my opinion.

You say, "It seems that we are having more than a currency war, we are having a struggle between monetary philosophies at a very base level..."

Yes, absolutely. Go reread my post about the Debtors and the Savers. You can think of them as the "easy money camp" and the "hard money camp" if you like. And "hard" means "difficult to obtain" not "metal" in this case. That's why I used "easy" and not "soft" for the other camp.

Ellen Brown is in the "easy money camp," as are many others who are unfortunately frequented by our online peers, like the AMI, Freedom's Vision, Bill Still, this guy, this guy, this guy, the entire MMT blogging crowd, and many more, including a lot of deflationist and silverbug names you would recognize but I'm not going to list.

Hopefully you can tell these people by those they associate with. It is basically everyone on the left that is anti-Fed and anti-"banksters," including Ralph Nader and Dennis Kucinich. These people, and the "greenback historians" that North so brilliantly illuminates have contributed most of the "anti-bankster" myths that have lasted 150 years. Just watch the Secret of Oz to see them all laid out.


The "NWO Socialist Welfare State" (or whatever you want to call it) is completely dependent on the US dollar's global use in the store of value role. Something that cannot be controlled. It can only be earned through confidence. And most simply stated, that's ending. Look no farther than how the creep of progressivism has paralleled the creep of the US dollar, and then you will see how far this movement is about to be set back.

They can try a welfare state with an "easy medium of exchange," but it won't get very far in Freegold. There will be an uncontrollable transition whereby the "free stuff crowd" goes back to work out of necessity.

There is a fatal flaw in the reasoning of "easy money" thinkers like Ellen Brown. The flaw is in the cause and effect blame game they play. Their disdain is directed at the wrong cause.

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

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

And this fatal flaw in the "greenbackers'" reasoning is, for all practical purposes, written into their Western genetic code. They won't see the flaw until it finally fails them. It comes back to the concept of money. Ever since the Dark Ages, money has been both a medium of exchange and store of value, for better or worse. They can't even conceptualize the separating of functions, so they don't bother considering the consequences. They think "all we need is free money and it will be a wellspring of value, because money is always valuable." How wrong they are.

If you want a glimpse at how things will actually play out monetarily, it can be most clearly seen in the structure of the euro. As Wim Duisenberg said in his famous speech, "It is the first currency that has not only severed its link to gold, but also its link to the nation-state." Here, the euro solved TWO problems. 1. It severed its link to the wealth reserve function of money. And 2. it severed its link to the Triffin Paradox.

The resolution of these two problems with the dollar (1. trying to be everything to everyone, and 2. suffering the Triffin Paradox) is the inevitable shakeout of this crisis. This is the final point you should internalize.

Now, I fully realize that this is the point of the conversation where you glaze over and start foaming at the mouth with hatred for the NWO Socialist elites that forced the euro on Europe. So I'll just stop here and not waste any more of our time.



Progressives, “enlightened” academics, the media, and the mainstream political establishment all seem confounded by Trump’s popularity, but it’s really quite simple. It’s not because his supporters are all dumb racists and xenophobic rednecks living in trailer parks scattered across the fly-over states. Nor is it because Trump is so smart, articulate, and never says anything regrettable. It is quite simply because:

1. People are tired of being lied to by the “progressive” media under the banner of political correctness, and are encouraged by a candidate who is not afraid to stand up to the media…
2. People are tired of being labeled with fake phobias and misused “isms” as an intimidation tactic, and are encouraged by a candidate who is not afraid to be labeled and branded by the imbeciles who buy into that BS…
3. People are tired of blatant discrimination, like affirmative action, and the entitlement attitude of those on the public dole, and are heartened by a candidate who isn’t afraid to talk about hot-button issues…
4. People who had all but given up on the political process are encouraged by a “self-funding” outsider who has the courage to say the things that got his momentum going in the first place…
5. And a whole lot of people are tired of the muzzling effect of utterly absurd political correctness, and for this reason most of all, Trump is still gaining momentum!

And by the way, if you think Trump is a racist, you are part of the problem, and you are wrong:

Peak Absurdity

Back in November, someone sent me an article titled Sorry, Social Justice Warriors: Political Correctness Has Peaked. The article began like this:

"If you’re Social Justice Warrior, you’re a liar. You actively spread absurd falsehoods about the nature of men, women, sex, and culture that can’t withstand even the slightest scrutiny. You change history and conceal facts to fit preferred narratives, even when it costs human lives. You claim the best of intentions yet achieve the worst of outcomes…"

The author pegged October 31, 2015 as "peak PC":

"When universities actually post flow charts to keep your Halloween party from being offensive, humorlessness is redefined. When students are so fragile that the very thought of ethnic-themed Halloween costumes leads to much-mocked YouTube “guides,” then political correctness is losing its punch:

If you disagree — if you think that political correctness is gaining momentum — then consider a few facts. First, the top two candidates in the Republican race for president of the United States attained their front-runner status by willfully, gleefully defying political correctness at every turn. Ben Carson shot to the top of the polls when he did the unthinkable — told the truth about guns, about Islam, about resistance to mass shooters, and about abortion — without flinching. It’s old news by now that Donald Trump’s supporters love him for his anti-PC stands…

If there is one thing that’s predictable in this otherwise unpredictable GOP cycle, it’s that defying the PC police is the path to prominence."

Of course, even if PC has peaked, that doesn't mean it's gone. Just this past Easter, a UK paper reported that Cadbury was no longer prominently displaying the word Easter on the front of its Easter egg packaging.

There are too many examples of peak absurdity to list. Just do a Google search of "absurd examples of political correctness" if you'd like to see more. The same author who wrote the peak PC article above had a new one out just last week, which started with "the utterly absurd bathroom wars":

"One of his New York City readers wrote in to say that her 14-year-old daughter had just finished dressing in a city locker room when a grown man stepped from the showers wearing only a towel. Girls as young as seven were present, and they were staring at the man with “concerned expressions.” The reader ends her e-mail with, “It sucks to be a parent these days."

For anyone living under a rock, "transphobia" is one of the new front lines in this progressive push to absurdity. Just last month, Bruce Springsteen canceled a concert in North Carolina to protest against a "transphobic" bathroom law, saying, "Some things are more important than a rock show and this fight against prejudice and bigotry — which is happening as I write — is one of them. It is the strongest means I have for raising my voice in opposition to those who continue to push us backwards instead of forwards."

I couldn't care less about the law in NC, so don't get mad at me if you're in favor of Bruce Jenner using the same restroom as your wife and daughter (even though he still has his man parts and is still sexually attracted to women). I'm not taking sides here, I'm simply pointing out the absurdity of it, and yes, I am aware that Trump said Jenner is welcome to use the ladies' room in Trump Tower. ;D

MMT Bernie

As I'm writing this, Donald Trump has just won the Indiana primary, Ted Cruz just dropped out of the race, and Trump just became the presumptive nominee, saying in his speech that soon we'll be allowed to say Merry Christmas again, instead of the PC Happy Holidays. Over on the Democrat side, however, the race is still too close to call, with Bernie and Hillary neck and neck. But as I watch the precincts slowly rolling in, I've seen Bernie rise from 49.5% with Hillary at 50.5%, up to Bernie at 52.8% and Hillary at 47.2% with 72% of the precincts reporting. And with that, CNN just called it for Bernie Sanders.

Bernie is especially popular among young people because of his "free stuff" approach to government. Take college tuition for example. I don't think I need to tell you how expensive college has gotten, and the student loan debt these kids face who are just turning old enough to vote. So of course Sanders' promise of tuition-free college is going to be hugely popular.

Stephanie Kelton is an economics professor at the University of Missouri–Kansas City. She is also an economic advisor to Sanders' presidential campaign. Her economic school is Post-Keynesian economics and Modern Monetary Theory, also known as MMT. MMT is kind of like the monetary equivalent—in terms of jumping the shark—of humorless Halloween costume flow charts. Here she is talking about how giving away free stuff really is the secret to Bernie Sanders' success:

If you don't know what MMT is, I'm not going to explain it here, but I did explain it in this post back in 2011. Just scroll down to the section titled "MMT". Suffice it to say that MMTers love to say the government can't run out of money, and that government spending grows the economy. Unbelievable? Just listen to MMT Mike explain it in 7 minutes:

And just in case you were wondering, yes, he "feels the Bern" too:

That's right, the other side not only believes their own nonsense, they think you're the idiot for not believing it, or worse… maybe you're just evil! >:D

By the way, I'm not suggesting that Bernie Sanders will win. The Democratic primary is less democratic and more corrupt (i.e., rigged) than the Republican one, so he will most likely lose. I'm simply pointing out that his popularity is another sign of peak absurdity.


Over in Europe, the migrant crisis is the front line of "Progress" versus push-back. Of course Europe doesn't have the same idea of free speech as we do in America, so we don't get to hear as much from the conservative resistance as we do from the Progressives, who label anyone opposed to massive immigration from the Arab world, North Africa and the Middle East, as xenophobic, racist or worse. In some places, you can be arrested for simply saying the wrong thing about the crisis, or even just tweeting it.

We do get a glimpse, though, at what is developing over there. In Sweden, anti-immigration groups are labeled as Nazis, yet we continue to hear stories about these "no-go" zones which are essentially Muslim slums where even the police don't go. Such stories are considered racist and routinely suppressed inside Sweden, but just a few weeks ago, an Australian 60 Minutes crew was attacked in one of these areas, and published the video saying there are now 55 such no-go zones in Sweden. So apparently there are reasons other than being a Nazi to hold an anti-immigration stance in Sweden.

In Germany, just days ago, hundreds of "left-wing protestors" clashed with thousands of members of the Alternative für Deutschland (AfD) party who were meeting in Stuttgart. The protestors chanted "Keep refugees, drive Nazis away!" But I looked into this group, and they appear to not be as "far-right" as some. They are actively trying not to attract more radical ultra-nationalists, they are fearful of being labeled "xenophobic or even racist," and have shied away from supporting similar groups as a result. They have, however, labeled Merkel's decision to accept a million migrants in 2015 as "catastrophic," they would like to ban the burqa and outlaw minarets (the towers from which Muslims announce obligatory prayer time five times a day) in Germany, and they are also opposed to gay marriage. Freakin' "Nazis" (yeah, right).

Stories like these just keep on coming, and one might say that peak Progressive nonsense has awakened the sleeping giant of the European Right. In France it's Marine Le Pen's National Front party. In Austria it's the Freedom Party. In Sweden, the conservative party is called the Swedish Democrats. And in Britain, the Conservative victory last year has led to a public vote next month on whether or not to leave the EU.

Many people around the internet see these various political conflicts peaking, becoming the absurdities that they are, and then feel compelled to predict how it's all going to end. I have even seen it predicted that WWIII may break out between Islam and the West, as a guerilla-style urban warfare scenario in Europe, in an attempt to evict those now being welcomed into the warm embrace of the leftist welfare state. But that's not how I see it ending.

No one is on a hard money system today. The entire world is on easy money, so there will be monetary appeasement, not war, right up until the end. And that end will be the collapse of the international monetary and financial system (the $IMFS), not WWIII, because that is what history has taught us.

I agree that it is frightful to have foreign cultures flooding into your backyard. And it can seem like much of the damage that has already been done is irreversible, short of war. But you need to understand that it is happening because it has been financially incentivized, encouraged and even facilitated by that which has peaked or is peaking. And without the $IMFS, the incentives, encouragement and facilitation will reverse direction. It won't happen all at once, but I recommend that you "prepare to own the future" (as I said in the first Debtors and Savers post), because happen it will.

The Euro

The euro as a currency is separate from Europe's political division. That's not to say the ECB isn't susceptible to political influence. Of course it is! That is one of its strengths, which I will get to in a moment. And as I said above, the two political camps generally align with the two monetary camps in the title of this post. So the Debtors, the "easy money camp" or "the redistributors" are generally the Progressives on the left, and the Savers, or the "live within their means and personal responsibility camp" are generally the conservatives on the right.

The EU, as a superfluous layer of big government, is very much Progressive. And people who hate this Leftist umbrella of Socialist welfare state that now covers most of Europe, tend to project that same hatred onto an inanimate object, the euro, as if it is somehow the linchpin of Europe's absurdity. Unfortunately, they also tend to hate me, Freegold and A/FOA, because they perceive anything positive said about the euro as support for their political enemy.

As I say, this is unfortunate, because it prevents them from both understanding what is actually unfolding, and from seeing the tremendous wealth opportunity it brings with it. Hopefully this post will make it obvious that I hail from the right side of the political spectrum (pun intended), and that I also understand the Leftist nature of Europe. So, with that in mind, perhaps you (if you are one of "them") should take another look at why I have positive things to say about the euro.

The euro is, of course, easy money. It is a fiat currency that can be printed at will by its central bank. So why, if I hail essentially from the hard money camp, would I have anything positive to say about the euro? The answer is up in my 2010 comment to Desperado. He was one of those "right-wingers" in Europe who ultimately wrote me off because he couldn't get past projecting his hatred for the EU welfare state onto a symbolic token unit of account.

The reason I have positive things to say about the euro is because, no matter how it's being used today, it was conceived and constructed to bridge the end of the dollar reserve system to the next one. Its design, its architecture, will not only allow it to survive the transition, but also to flourish within the next system. That design is what I wrote about in the Desperado comment:

"'It is the first currency that has not only severed its link to gold, but also its link to the nation-state.' Here, the euro solved TWO problems. 1. It severed its link to the wealth reserve function of money. And 2. it severed its link to the Triffin Paradox. The resolution of these two problems with the dollar (1. trying to be everything to everyone, and 2. suffering the Triffin Paradox) is the inevitable shakeout of this crisis."

And it is the currency of many different countries, which is why its susceptibility to political influence is actually a strength, not a weakness. FOA:

"The dollar is ruled by one country and one country only. This implies that only one Economy is taken into consideration when policy is discussed, the USA. The management of interest rates, inflation, dollar value and crisis intervention, are therefore politically motivated to benefit one world group, again, Americans. We have seen the news events of how this tramples upon the needs of other geopolitical groups (countries).

On the other hand, the Euro will utilize a totally different structure of consensus management. It will be governed by many nations of obvious conflicting needs. This very weakness, that is so well documented by analysts, is the "major" strength that will contribute to the popularity of the Euro. In time, it will be governed by many cultures, including an "open market" valuation of gold."

So the euro is the "easy money" that the Debtor camp wants, but it has also severed the long-standing monetary link between transactional currency and "the wealth reserve function" which the Savers' camp needs. Each camp gets what it needs monetarily, without fundamentally infringing on the other camp's needs. A win-win! :D

On top of that, it has further resolved Triffin's paradox or dilemma by not being beholden to one part of its constituency (the US) at the expense of the rest (the rest of the world). (If you aren't familiar with the Triffin dilemma, I explained it in my Dilemma post.) It's a multinational, purely fiat currency, with an economic zone as big as the dollar's, that doesn't need foreign exchange rate manipulation or foreign financial use to survive.

It also has 348 million ounces, or 10,825 tonnes of gold in reserve. So it doesn't really matter how much "QE" or "helicopter money" they have to print to keep the peace until the $IMFS finally ends. The euro won't have the same "denouement" as the dollar. It's the dollar's system that is ending, the euro is the bridge to the next system, and whatever it ends up being called, you here today will always know it as "Freegold".


Freegold is kind of like the middle ground, or center, between the two camps. It is the compromise, the obvious solution, but that doesn't mean that I'm a centrist when it comes to politics. I can see that, as Ari said, we need our money to be "easy" in order to set gold free to be the "hard" wealth reserve par excellence that is needed to keep the peace. We get our "hard" secondary money, let them have their "easy" primary money, and learn to appreciate the elegance of the arrangement!

In fact, since most of us intuitively hail from the hard money camp, it's a healthy exercise to embrace the idea of money being even "easier" in Freegold than it is today. Easy money saps value from every monetary unit on record, so today that disproportionately taxes the savers through the financial system, but in Freegold it won't. So I don't expect money to be any "harder" in Freegold. Since it will have a smaller pool of value to sap from, it may even be "easier" than today's money.

As FOA said, we have always formed "tribes" or groups, in which we trade some measure of our personal freedom of choice for the security of being part of a larger group. Within that group, subgroups tend to jockey for control in order to bend the rules in their favor, in order to regain some of what they perceive they have lost by being part of the group, at the expense of other subgroups. It's just the way we are as a species, and understanding human nature and how to work within it, rather than forever struggling to change it, is really what Freegold is all about.

As for the two most general subgroups, most would agree they are the political Left and Right. But from a monetary, economic and financial perspective, we always see the divide framed as the rich versus the poor. Yet there are rich and poor on both sides of the political spectrum, or ants and grasshoppers in each of our nations as Yanis said, so obviously we need a better framework of understanding if we are to comprehend what is actually unfolding.

That framework is the Debtors and the Savers, as I have defined them in terms of easy versus hard money preference, and in terms of social versus personal responsibility being primary. This understanding also blends extremely well with the history of the political Left and Right, revealing an undeniable connection between political and monetary evolution and change.

With this view, we can see how the rise of Progressivism to absurd levels has paralleled the rise of the dollar-based international monetary and financial system to its own absurd levels. It's easy to see what constitutes Progressivism, but if you are willing to buy the idea that both have peaked, then it's important to also understand what constitutes the $IMFS. Because while Conservatism stands ready to take control back from Progressivism, there's no way in hell that we're going back to hard money.

What most fundamentally constitutes the $IMFS is simply the idea that money, debt and financial instruments constitute wealth. As Randy said in Debtors v. Savers III, "Instead, your wealth, properly measured, is the tangibles you’ve accumulated, the store of resources you’ve saved. And among the world of tangibles, gold is globally the most liquid — the most universally recognized, honored, and accepted." This is what will change monetarily: the simple idea of what constitutes wealth.

If you are still struggling with this concept, just think about what it actually is that makes the $IMFS seem so absurd today, not just in the US, but all around the world. It is the perception of wealth held in money, debt and financial instruments that is so disproportionate to the real economy. And not just the size, but the rate and direction of change. The perception of wealth can expand in the $IMFS even while the real economy is shrinking. This is why Another always said, "Your wealth is not what your money say it is."

So, basically, Freegold is not about us versus them, it’s about living together without monetary conflict. And because of pride, envy and the lot of them, monetary conflict is indeed at the heart of these political conflicts. So while it might be a bit much to say Freegold will solve every problem, I think it’s fair to say it will at least reverse the incentives and send us “progressing” in a better direction. :D

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