Thursday, February 27, 2014

Think like a Giant 3


"The things I tell you will not be wrong.
Better to listen, than to talk.
Don't search for all the answers at once.
A path is formed by laying one stone at a time."

-The Giant from Twin Peaks

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

-ANOTHER

ex•trap•o•late : to infer (an unknown) from something that is known or assumed; conjecture.

I have an extrapolation to share with you. It is backed by sound logic and Another, if nothing else. Another wrote, "To find the answer, work with inside assumptions and extrapolate them to the outside!" That is what I will do in this post.

Michael dV went to see 'The Monuments Men' the other day, which is a movie based on the true-story book, The Monuments Men: Allied Heroes, Nazi Thieves and the Greatest Treasure Hunt in History. It is about an Army unit in WWII, comprised of seven museum directors, curators, and art historians, tasked with finding stolen art and returning it to its rightful owners. Mike wrote the following to me in an email:

In the movie there is a scene when the Americans find a painting in a farm house. The farmer says 'it was a gift'… the American replies 'but your CĂ©zanne says Rothschild on the back'.

Just thinking of Another as Guy gives me the ability to see how his point of view really is one with a long historical perspective, and one driven by a real need for humans to find a better way to manage themselves. I'm not rich but even I can feel the tribal nature of our species lining up to get my free shit. It must have been a struggle to keep what you had. One would keep a very close eye on politicians too. Being super rich must have been exhausting.

Another wrote about a two-tier gold market, where Giants were trading gold *IN SIZE* at a price that was multiples of the open market price. He wrote, "Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

There is disagreement, even within the ranks of evil gold hoarders and time misallocators, as to whether those statements should be taken literally. To make the ever-present religious analogy, it reminds me of the age-old disagreement, even among scholars, as to whether the Bible should be taken literally or figuratively.

My extrapolation—you can call it a hypothesis if you'd rather—is that what Another was revealing was not only 100% literal, but that it has been happening for centuries, not just in the 90s with an inevitable revaluation on the horizon. If you think about this idea for a moment, you'll see, then, that the much higher price at the giant level was not about an expected market revaluation; it was about something else entirely—gold's true value.

What got me thinking about it this way, as a hidden phenomenon possibly stretching back to the Middle Ages, was the "Barron" comment that was discussed recently: "This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich."

You'll have to bear with me because this will take a while to explain. What I'm conjecturing is that gold *IN SIZE* has been trading at multiples of its known price since probably as far back as this chart goes:


Another said, "At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich." I think the "now" period (Now it is large with the BIS) refers to the 80s and 90s, perhaps even stretching back to 1971, but probably not before. And notice that he differentiates "the Barron" from the "super rich". Perhaps we could take that to mean the difference between "old money" and "new money", with "the Barron" representing old money.

There is a difference. Think about the difference between income and wealth. "New money" would be buying gold with new income as it is being earned in the present, while "old money" would be trading one asset for another, wealth representing money that was accumulated generations earlier.

Of course old money Giants earn income as well, and they even acquire new assets with some of that income in the present. For that income portion, I imagine they would go to the open market to acquire assets just like everyone else. Remember that Another also said, "Think now, if you are a person of "great worth" is it not better to acquire gold over years, at better prices?"

This slow accumulation "over years, at better prices" would be done at the same price as everyone else. But once you had built up a stash consisting of, say, hundreds of tonnes, which probably took generations to accumulate, it would suddenly have a much greater value than the market price said it was worth. It would kind of be the inverse of this: "It is to say " your wealth isn't as great as your currency says it is"!" In this case, it would be to say "your wealth is far greater than your currency says it is."

Obviously, if you had slowly accumulated hundreds of tonnes a couple hundred years ago, and then dumped it onto the open market all at once, you'd lose your shirt because the market price would crash and you'd only be able to redeem a fraction of what you had put into it. So that's not what I'm talking about. I'm talking about its value in trade with other Giants, within the hidden 2nd tier Giant market.

Looking at that chart above, gold was locked at about $20 per ounce for almost 250 years. Let's say, just for hypothetical purposes, that this 2nd tier market was around 20 times the public market price. I have no idea what it would have been, but 20 was a multiple mentioned by Another. 4M ounces is about 125 tonnes. At $20/oz., 125 tonnes would cost $80M. But you'd never be able to buy that much gold all at once, especially hundreds of years ago. Or maybe you could, but it would cost you at least $1.6B!

(FWIW, according to Niall Ferguson, James de Rothschild, Guy's great grandfather and the founder of the French branch of the Rothschild family, accumulated a personal fortune five times larger than Bill Gates. So 125 tonnes would have been about 2.5% of his fortune at market prices, but 50% at a 2nd tier price of 20 times the market price, which fits my hypothesis quite well.)

Now, think about the reasons why you might overpay by 20 times the market price in order to obtain that much gold all at once. It comes back to what Mike said above: "It must have been a struggle to keep what you had… Being super rich must have been exhausting."

Depending on how developed this hidden market of Giants was—and it could have been quite developed—you aren't overpaying at all, because the higher price you paid will be redeemed later by selling it to another Giant. It was simply a different price for otherwise unobtainable, extremely large (and if sold on the open market, market-busting sized) hoards of gold.

Still can't picture it? Well, consider the insane prices the uber-rich pay for other stuff, like Balloon Dogs, $100M homes, art, cars and so on. It's really a separate market in which they exist, where prices are ridiculously high all around. They don't buy a Jeff Koons Balloon Dog worrying about having to sell it at a swap meet some day. They buy it intending to sell it to another Giant down the road. It's a Giants' marketplace, and a 125 tonne hoard of gold is just as rare as any of the other things they trade at nosebleed prices, especially 200 years ago.

I talk about a "savers' circuit" in Freegold that is isolated from the rest of the market. Well, there truly is a "Giants' circuit" that has always been isolated from the rest of the marketplace. When you're a Giant, and you buy Giant stores-of-value, your marketplace truly consists only of other Giants. They, as a whole, are the future counterparty you count on should you, or your progeny, ever have to dishoard. You can't, and therefore don't, count on the rest of the marketplace.

I can think of many reasons why physical gold would be far more valuable than other stores of value to a true, old money Giant. But the biggest one is that it can be secured for the long haul. It can be buried. Other forms of wealth are quite vulnerable to uprisings of the hungry collective. Guy de Rothschild, in one lifetime, had it happen to him twice!

Sure, gold can be stolen too, but properly acquired and stored, it can be totally invisible, and that's the very best form of security. And when I say properly acquired and stored, you will never know the details of private deals that have happened at the Giant level. They were all done in total and absolute privacy. Not "cloak and dagger" skullduggery, but simple and rational privacy.

"I tell my children, as you may tell yours: "when a thousand hungry lions fight for one scrap of food, small dogs should hide with what's in their belly."

Here's the full conversation leading up to the "Barron" comment, which I also featured in Think like a Giant 2:

Date: Sat Nov 29 1997 15:53
ANOTHER (THOUGHTS!) ID#60253:

Something interesting happened just ago that will, in time impact the price of gold in US$. A proposal was offered to borrow in broken lots, 3.5 and 5.5 million ozs for resale. It was turned down. The owner offered to sell only, no lease. What turned heads was that someone else stepped in and took it all, at a premium!


Date: Fri Dec 12 1997 22:18
sweat (To Anybody) ID#23782:


Is there any way to find out if the 9,000,000 oz. deal really happened?

Where might the trade have taken place?

Is this whole gold trading business really that much "cloak and dagger"?


Date: Fri Dec 12 1997 22:31
ANOTHER (THOUGHTS!) ID#60253:

SW,
What is "cloak and dagger"?


Date: Fri Dec 12 1997 22:54
sweat (ANOTHER) ID#23782:


"Cloak and dagger" is an expression I would use for an action ( or trade ) done in great secracy.

My experience as a trader has taught me to value such things as
a ) time and sales - as reported on various exchanges
b ) open interest - as reported on various exchanges

The market always moves to size, you spoke of "making the turn". I would love to see documentation of a trade that size.

No offence intended, of course.


Date: Fri Dec 12 1997 23:08
ANOTHER (THOUGHTS!) ID#60253:

SWEAT:
You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich.


Put yourself back in time. It doesn't really matter when, but sometime during the hundreds of years that gold was used as official money, and think about how the Giants might view the monetary system in a way similar to the "discount trade" Another described in the 90s.

A Giant wouldn't care about the price of gold. If he already had a Giant stash, he'd have access to the 2nd tier market where gold *IN SIZE* traded at a different price anyway. And he'd have no reason to bust the gold market because, it was, in fact, the monetary system in which he became a Giant in the first place.

If he wanted "to acquire gold over years, at better prices" through the monetary system, he could. And if he wanted to trade gold *IN SIZE* for other Giant stores-of-value, he could do that as well. Those would have been very private off-market deals because of their size. Giants can't just step into the market *IN SIZE* without extremely negative consequences, like blowing up the monetary system that is serving them well and causing an uprising of the hungry collective.

If we put ourselves back in time to the FDR confiscation and revaluation, we can see that true Giants wouldn't have cared. In fact, it probably made more gold available to the Giants by removing it from the US banking system and using it only for external payments to Europe and elsewhere.

We'll never know how much gold is held by true Giants, but we do know that it's not the enormous hoards of "black gold" that conspiritards fantasize about. We know that more than half of the gold mined throughout all of history was mined in the last 50 years. And we know that at the height of the 20th century gold standard, more than half of the gold mined throughout all of history was used as monetary reserves within the system. We know that China and India have a cultural affinity for gold and have long been the top consumers of "wearable gold", so we can make some relatively reasonable assumptions about who has the gold.

I want to make it clear that estimates of the amount of gold mined throughout all of history, currently around 177,000 tonnes, are quite reliable. (Note that estimates vary, so a reasonable margin of error, like 3% or so, should be assumed.) Here's a table from the USGS of how much gold was mined globally going back to 1900:

Year
World Production (in metric tons)
1900
386
1901
395
1902
451
1903
496
1904
526
1905
575
1906
608
1907
623
1908
668
1909
687
1910
689
1911
699
1912
705
1913
694
1914
663
1915
704
1916
685
1917
631
1918
578
1919
550
1920
507
1921
498
1922
481
1923
554
1924
592
1925
591
1926
602
1927
597
1928
603
1929
609
1930
648
1931
695
1932
754
1933
793
1934
841
1935
924
1936
1,030
1937
1,100
1938
1,170
1939
1,230
1940
1,310
1941
1,080
1942
1,120
1943
896
1944
813
1945
762
1946
860
1947
900
1948
932
1949
964
1950
879
1951
883
1952
868
1953
864
1954
965
1955
947
1956
978
1957
1,020
1958
1,050
1959
1,130
1960
1,190
1961
1,230
1962
1,290
1963
1,340
1964
1,390
1965
1,440
1966
1,450
1967
1,420
1968
1,440
1969
1,450
1970
1,480
1971
1,450
1972
1,390
1973
1,350
1974
1,250
1975
1,200
1976
1,210
1977
1,210
1978
1,210
1979
1,210
1980
1,220
1981
1,280
1982
1,340
1983
1,400
1984
1,460
1985
1,530
1986
1,610
1987
1,660
1988
1,870
1989
2,010
1990
2,180
1991
2,160
1992
2,260
1993
2,280
1994
2,260
1995
2,230
1996
2,290
1997
2,450
1998
2,500
1999
2,570
2000
2,590
2001
2,600
2002
2,550
2003
2,540
2004
2,420
2005
2,470
2006
2,370
2007
2,360
2008
2,290
2009
2,450
2010
2,500
2011
2,700
2012
2,864
2013
3,018

We also have good estimates for various gold rushes throughout history. For example, the California Gold Rush in 1848 yielded around 3,700 tonnes, 570 tonnes came out of the Klondike 50 years later, and the Spanish conquistadors of the 1500s, while braving pirates in the Caribbean, brought home only around 154 tonnes from the New World over an entire century. Most of the bullion (both gold and silver) found its way back to Europe as the only practical source of goods for the New World colonies, which is why we have such detailed estimates.

For the rest of the gold, estimates are based on the tendency of gold to flow rather than hide in antiquity—a concept explained at length by FOA—and the quantities known to have resurfaced during various eras. The bottom line is that the actual scholars who have researched this subject in depth, as opposed to conspiritards who speculate wildly, believe that only around 10,000 tonnes existed prior to the California Gold Rush.

If we add up the numbers in the table above, about 147,000 tonnes have been mined since 1900. That leaves about 30,000 tonnes mined before 1900, and 10,000 tonnes mined before 1848. So about 20,000 tonnes were mined globally in the latter half of the 19th century, with 3,700 of those tonnes, or 19%, coming out of the California Gold Rush.

It should be noted that only a small percentage of prospectors got rich finding gold. The merchants serving the stampede of dreamers made far more money than the miners did during the Gold Rush. Think about that in terms of the Giants. They don't need to dig for gold. The diggers will happily hand over to them whatever they find, in exchange for the goods and services that they provide. And yes, banking is a fundamental service, even back in the Gold Rush days. It was even part of the main storyline in the Klondike miniseries.

This is all just to give you a rough idea of the amounts of gold that existed at various times, so that you can start to build a picture for yourself of how much gold we're talking about within this hidden 2nd tier Giant market. It's probably a lot less than you were initially thinking at the beginning of this post. There are, after all, only a few small handfuls of true Giants in this world, but there are certainly more today than there were 200 years ago.

In building this picture, we can look at various snapshots in time. For example, in 1845, prior to the Gold Rush, there was only about 10,000 tonnes of gold in the world, and only 84 tonnes, less than 1%, were held in central banks. 82 tonnes in the Bank of England, and 2 tonnes in the Bank of France. By 1900, there was more like 30,000 tonnes in the world, and 3,175 tonnes, or 11%, was held in central banks.

Viewed this way, we can see the rapid growth of the gold standard monetary system, and how it sucked in most of the new gold. By 1935, just after the FDR confiscation and revaluation, there were about 52,000 tonnes in the world, and 20,000 tonnes, or 39% of the total, was held by central banks. And 17% of the world's gold supply, almost 9,000 tonnes, was held by the US Treasury at that time.

At the beginning of WWII, there were about 58,000 tonnes in the world, and 65% of that gold, 38,000 tonnes, sat in central bank vaults during the war. The US Treasury alone held 19,500 tonnes at the start of the war. Here we can pause for a moment, simply to marvel at how, while the world's supply of gold grew six-fold in just 95 years, the presence of gold in central bank vaults exploded from less than 1% to 65% of all of the gold in the world during that same timeframe. The data comes from these historical tables put out by the World Gold Council:


In addition to the gold accumulated as central bank reserves, there was also more than 7,000 tonnes of gold that was minted into gold coins which circulated through the economy and within the commercial banking system as reserves during that same 95-year timeframe. But as you can see from the next table, following the FDR confiscation, most of that coinage ended up right back in the central banks.


To complete this picture, today central banks hold only about 18% of the world's gold. But even though the percentage has dropped, the absolute amount is almost the same as it was at the height of the gold standard. In 1952, what was the peak of the Bretton Woods gold standard just seven years after the war, central banks held 31,562 tonnes, and in 2014 that number is 31,320, virtually the same.

All that really changed is that we mined another 107,800 tonnes since 1952. So where did it all go?

My extrapolation is that new gold, that is, new mining supply, is always distributed at the market price. It comes out of the ground slowly, and it is acquired and accumulated slowly, "over years, at better prices," meaning the open market price. In this way, it is easy to imagine where 107,800 tonnes went over the past 62 years.

I mentioned above that we know "the East" (including the Middle East) has long had a cultural affinity for physical gold. As Another said, "It’s not that they are right or wrong to think this way, it’s that we want them to work for us! That is the problem! And when they worked for us we paid them! And who in the hell would have thought that they would have used so much of that pay to buy gold! Some bought in tiny amounts and some bought in large amounts."

And it's not just the "third world nobodies" that wanted gold. Following WWII, there was a new giant on the scene, Saudi Arabia, and its product was all the rage in the West. From 1952-1971, 23,524 tonnes were added to the above ground supply of gold. That sounds like a lot, but at the fixed price of $35 per ounce, it only represented $26.5B. Spread over 19 years, that's only $1.4B per year in surplus income needed to absorb (or corner) the entire global mining supply.

I'm sure there are much better statistics than this, but from what I found, it looks like Saudi Arabia produced about 1 mbd in the 1950s and about 2 mbd in the 60s on average. So, roughly, 10.5B barrels of oil, valued at $32B, for an average annual income of around $1.7B. Of course that's total, not surplus, income, but it does add some perspective. From a PPP trade perspective, one small country about the size of Alaska, with a population about the size of Texas, produced 20% more tradable purchasing power in oil than the gold produced by the entire rest of the planet from 1952-1971.

"But, today we come to a different period, with a different factor and circumstance. For during no period of history has an entity used a commodity to corner another commodity! The intent is not to "corner", but the result will be the same. This action is coming about because of a gross, huge mismatch of the value of gold and oil! We are not talking about the price of these items ( in any currency ) . We speak of the total amount of physical gold, worldwide and the total amount of oil worldwide. During the last twenty years, the world has made oil an absolute necessity for life as we know it. During the same time, gold has been degraded to a "kind of commodity that we may need sometime but, I'm not sure". With the public, government and the business community holding these thoughts, it is easy to understand which item is needed first and which would be dumped. In this day, people would sell gold for oil, no contest!

Consider the amount of oil that is used daily. Consider the future value that this consumption places on reserves in the ground. Compare this to the amount of gold consumed daily. Notice I said "consumed daily", not "traded daily". Clearly, the consumption of oil compared to the consumption of gold places a much higher value on oil reserves than gold reserves. With no replacement for the use of oil ( at present to lower prices ) and no "needed" use for gold in today's thought, we have the ingredients for a mismatch in value of epic proportions!"

This mismatch in value is much greater today than it was even in the 60s. As I have written in the past, the gold-oil ratio (GOR) has been roughly the same for the last 70 years, but while Saudi oil production has increased five-fold since 1965 (ten-fold since the 50s), global gold production has barely doubled. In other words, Saudi Arabia alone is, and has been for the last 25 years or so, pulling 3 to 6 times as much tradable purchasing power out of its in-ground national reserves as the entire rest of the world is pulling out of its gold mines. Not to mention other gold-accumulating oil-producing countries like Russia, China, Brazil, Venezuela, Iran and a few others in the Middle East who, combined, are now producing more oil than three Saudi Arabias.

This may not seem like a problem until you realize that the gold flow was so tight in the mid-60s that it collapsed the international monetary system by 1968, and it is more than 20 times worse today if we simply compare the purchasing power of oil coming from the BRICs plus the Middle East to new gold. "Oil is the only commodity in the world that was large enough for gold to hide in." Add to that "Big Trader" in the mid-90s—Chinese industrialist billionaires that emerged from the privatization of state-run industries in the late 80s and early 90s—who I wrote about in Seventeen.

This is a "physical flow at open market prices" problem. It's not that oil is traded 1:1 for gold, but that oil production depletes valuable national reserves, just like gold mining. So the more oil that is sold relative to the amount of gold coming out of the ground—at the same GOR—the smaller the proportion of that purchasing power that can be saved in physical gold. And "Oil", as well as emerging market industrial magnates, represents a relatively new breed of Giant that is now "acquiring gold over years, at better (open market) prices."

Again, in my extrapolation, "old money", or money earned in the past, is not a threat to the system. "New money", or money being earned today that wants to save some portion in gold, is.

Enter the paper gold market.

____________________________

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

Before 1971, the dollar itself functioned much as the paper gold market does today, keeping anyone who otherwise would not be demanding of only physical gold sated with a globally-recognized expandable proxy. Western Giants in Europe didn't care because, at least in my extrapolation, they had their own 2nd tier market where their large hoards were fairly valued amongst one another. And they had no reason whatsoever to upset the apple cart. In fact, they had the opposite incentive.

Nevertheless, the apple cart was rolled in grand fashion. Perhaps it was the addition of "Oil" to the Eastern "third world nobodies" that added too much pressure to the system such that it peaked right after the debut of Saudi super-wealth and collapsed two decades later. It certainly wasn't the European old money Giants that did it, even though they theoretically could have. Only a government entity representing the hungry collective, as opposed to individual European Giants, would have had the stones to raid the monetary system itself for physical gold *IN SIZE*. A couple did, they were rebuffed, and the system promptly ended.

I tell my children, as you may tell yours:
"when a thousand hungry lions fight for one scrap of food, small dogs should hide with what's in their belly"


When a Giant tells this to his children, I imagine he means something like "when the hungry collective goes on the take, we must bury our bone deep."

15 years later, a new system of satiation-by-proxy was born, only this time there was a little more demand for the real stuff from a few of the newer "giant" players.

As I said above, in my extrapolation there's a big difference between newly earned "big money" (like "Oil" and the emergence of Eastern billionaires) and "old money" (large accumulations of wealth acquired by past generations seen mostly in Europe). And when it comes to gold, the store of value par excellence among these types of people, there's a difference in price depending on the *SIZE* of the exchange.

That difference is a very real (and, I think, undeniable) value difference. To someone who has $50B in net worth/assets (but no gold) and is worried about keeping it for generations to come, your 100 ounce shrimp stash of gold coins is worthless. But 50 tonnes in a one-off, totally-private and hidden off-market physical purchase *from another Giant* might be priceless.

You see, in my extrapolation, the gold portion of any "old money wealth portfolio" would be very small if calculated at open market prices. Probably 5% or less. But it would be much more significant, possibly as much as 50%, at 2nd tier "Giant" prices. And again, in my extrapolation, this would be a totally hidden system of very private wealth exchanges stretching back centuries.

"As long as there is an open market for gold, it will not be allowed to trade above it's commodity price! It has far to much value for that to happen. You see, in much the same way that a zero coupon bond trades at a discount to face, gold is traded for it's discount of " money value to commodity price! Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

As far as confusing Another quotes go, this was a big one. But let's see if it makes any more sense within my extrapolation. First of all, he distinguishes between gold's "money value" and its "commodity price." Earlier he said that "So many people worldwide think of [gold] as money, it tends to dry up as the price rises." So the discount when gold trades as a commodity is of great value because not everybody wants a basically-useless commodity. Only a few want it as money, and so the physical gold that necessarily flows to them comes from those who think of it as only a commodity, rather than coming from others who also value it as "store of value money". [Note that Another previously distinguished between "store of value money" and "medium of exchange currency" in this line: "Some time ago gold not only was used as money but also circulated as currency."]

So the gold going to "new money Giants" or the "Superproducers" of today (as opposed to those of yesteryear) would come from someone else, primarily the miners. If that flow dried up, meaning it was insufficient at the discount-market price (and it is today), then the value derived from the discount trade would be lost.

That value was that the gold demanded by new money Superproducers was coming from someone else, someone other than the old money hoards, including CB hoards. It was coming from Western gold bugs and the mines. It was never expected to be a permanent equilibrium, only a temporary fix to buy time. But it turned out to be insufficient after only a few years, which was the reason for the CB-backed "gold for oil deals" in the early 90s.

Those deals deferred overwhelming "new money" gold demand into the future, with the help of CB guarantees, in exchange for guarantees of future oil. But if another (non-oil-based) "new money Superproducer" found out that paper from the bullion banks was being implicitly backed by the gold in the Western CB vaults and was therefore as good as a physical purchase *IN SIZE* that could otherwise not be obtained on the open market without running the price, they might take advantage.

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

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

Everything is now upside down and reversed. The more the CBs sell outright the more the price will rise.

It's not a bearish sign anymore. They will now sell to keep the price rising slowly."


Here we have Giant-sized, non-oil-based new money Superproducers buying, at the open market price, paper gold *IN SIZE* that they think will be made 24-karat good by Western CBs, even though it is way out in front of what the mines are capable of producing anytime soon, simply because the LBMA bullion banks got reckless and took their money while creating implicitly-CB-backed paper from thin air in exchange. Another summed it up succinctly: To use the Queens English "it ain't gona happen dude"!

Two fundamental principles in my extrapolation are that 1.) "old money" Giants do not buy gold from the open market, and 2.) "new money", including emerging "new Giants" do. #1 is easy to understand. You simply can't buy more of something than is being offered at market prices without disrupting the market and running the price, and old money Giants are simply too big to participate. The small amounts on offer are worthless to them even as the giant hoards they already possess are priceless. And the value of a stable "discount market" is that the gold flowing to present net-producers comes from someone else.

Recall that at the height of the gold standard, around half of the world's gold was within the monetary system. This was the "discount open market" at the time. A "new money" net-producer who wanted gold could simply withdraw it from the banking system as a way "to acquire gold over years, at better prices." But a Giant couldn't just go to the bank and exchange a few castles full of priceless artwork for a few hundred tonnes of gold in preparation for war.

#2 is also easy to understand. As Another said, "it’s that we want them to work for us!" And with a functioning currency system, we will not have to pay them 1:1 in gold. They will work for currency and, for those who like physical gold, they will spend their surplus earnings on gold that comes from someone else. If gold had to circulate 1:1 with every exchange, then those Giant hoards would lose their very special value to the Giants. Not that they would become less valuable in currency terms, but that Giant gold hoarders would become evil villains for hoarding the life blood of the economy.

"In the real world some people know that gold is real wealth no matter what currency price is put on it. Around the world it is traded in huge volumes that never show up on bank statements, govt. stats., or trading graph paper."

So the true value of gold for the Giants comes from the way they use it, as the best way to store a large portion of their wealth for the long haul, since uprisings of the hungry collective are actually quite frequent from a multi-generational perspective. And the value of the "discount trade" for the Giants is, very simply, a functioning currency system, such that they can hoard gold without constricting the lifeblood of the economy. But following WWII, a few things changed.

As you can see from the tables above, from 1900 until WWII, 100% of the new mining supply went into the monetary system. After the war, however, there was a "new money" Giant in town; let's call him "Oil". As it turned out, for whatever reason—probably cultural wisdom or something—he liked physical gold and wanted to be paid in it. And his product was of such great value to the rest of the world that we definitely wanted him working for us!

So while all of the newly mined gold went into the monetary system before WWII (as opposed to going into private hoards), none of it did after the war. Big change, huh? Another change was that, around 1965, a few of the CBs started behaving more like clueless old money Giants, demanding gold *IN SIZE* from the "discount market" which promptly collapsed in 1968.

You should be starting to see that the real value is in a functioning international currency system, and that the only thing that matters is the flow of physical gold, not its price (discounted or otherwise). The problems come when the physical gold doesn't flow in sufficient quantities at the discount price, causing an unexpected phase transition from an international currency system based on "discounted gold" to one in which everyone suddenly views gold as money.

Such a transition could send us all into bartertown, where physical gold must be proffered 1:1 as the medium of exchange until a new monetary system takes root and sprouts its more economically-lubricating fruit we know as currency-based credit money. So it's no big stretch to imagine the European old money Giants putting their heads together with European central bankers between 1968 and 1979 to come up with a contingency plan.

Perhaps what was needed was a new international currency, one built for non-discounted gold, that was not only in use before the transition, but also big enough to bridge the gap when it came. Sounds reasonable, right? Curiously, that's exactly the picture that Another painted. As MK wrote: "If his "THOUGHTS!" are theory; they are good theory. If they are speculation; they are reasonable speculation. If they are supposition; they are well-grounded supposition." I'd say it is well-grounded supposition that he knew exactly what he was talking about from first-hand experience.

"Something interesting happened just ago that will, in time impact the price of gold in US$. A proposal was offered to borrow in broken lots, 3.5 and 5.5 million ozs for resale. It was turned down. The owner offered to sell only, no lease. What turned heads was that someone else stepped in and took it all, at a premium!"

This is very interesting, because that's 280 tonnes he's talking about. No small potatoes, even at the discount price which was around $310 at the time, or $10M per tonne. A lot that size would have been about $2.8B at the discount price, yet someone stepped in and paid a premium!

That someone could have been any broker, and the way that market works, you'll never know who the real buyer was nor where the money came from. But I think it was "Oil" behind that purchase, and that they stepped a little bit outside "The Deal" when they did it.

That much gold would have been coming from a "new money Giant" of the kind that might have been approached in the early 90s:

"How DO they do it? It's more complicated than this but here is a close explanation. In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion."

The process would have been to ask someone with allocated bullion to trade it for unallocated credits which could then be sold, traded or whatever. But 280 tonnes would have been very large even for these deals, so it sounds like the approach in this particular case was to do it in two lots, but, surprisingly, the owner of the gold simply wanted out. He didn't want any special deals or CB guarantees. He just wanted cash. Perhaps he was fed up, having watched the POG fall 20% in a year.

A CB-sized hoard like that is best sold in a quiet, off-market deal so as to avoid spooking the market and driving down the price. And since he turned down their proposal and offered to sell only, he probably thought that being approached made for a good opportunity to unload his oversized hoard all at once, at close to the market price. I'm sure he was surprised when someone took it all, at a premium.

Another said this deal "turned heads." It certainly could have been the seller boasting about the premium he received that turned a few heads, but I'm guessing that the "turned heads" Another was referring to were his own, his peers, and a few at the BIS.

"You will not see 80% or more of gold deals. If it was done with all to see the discount value would be lost as the world price would explode. This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich.

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

The BIS, instead of taking it outright, places it where it's needed!..

Make no mistake, the BIS knows gold in the many thousands…

We have seen the last of cheap oil in US$ as the oil states are no longer taking paper gold! I think a large purchase of bullion was just made by them. It should have been paper. The BIS must soon take a stand!"


Another made that last comment the day after he mentioned the "head-turning" purchase at a premium, which was on Nov. 29, 1997. Isn't that interesting?

"Something interesting happened just ago that will, in time impact the price of gold in US$. A proposal was offered to borrow in broken lots, 3.5 and 5.5 million ozs for resale. It was turned down. The owner offered to sell only, no lease. What turned heads was that someone else stepped in and took it all, at a premium!"

Large lots of physical like 280 tonnes are not supposed to be purchased at anywhere near the market price. The flow of physical at the market price is already cornered by "new money" accumulating slowly, including millions of "third world nobodies" who like to save in gold. It has been this way since WWII as evidenced by the fact that 108,000 tonnes mined since then have disappeared into private hands.

Before WWII, none of the new gold in the 20th century went into private hands as we can see from the tables above. This supports the idea that "old money Giants" do not engage the open (discount) market. 280 tonnes in a single purchase can only come from "old gold," meaning either a central bank or a private hoard. This also supports the idea that the rules of the game of Giants are more intuitive than explicit, at least in the last 70 years with the emergence of a new breed of Giants.

It is a basic principle that you cannot buy more of something than is being offered without being prepared to pay a premium. This is an intuitive truth to a Giant—one who doesn't have to "think like a Giant" but just has to think, period, because he is one. Extrapolating this basic principle that exists as a simple fact of life to Giants in all of their market interactions might lead one to my hypothesis even without the benefit of Another spelling it out. But I'm not quite that smart, so thank goodness for Another!

Over time, say, from the Middle Ages up until WWII, this basic principle would likely have developed into a system of sorts, for those who found themselves in a position to participate. One with a deep family history involving such a system of sorts, had such a system of sorts existed, might describe it like this: "This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron."

The fact that Another could share this so casually and candidly supports the idea that there was truly nothing "cloak and dagger" about it. So what if one Baron in 1800 paid another Baron 10 or 20 times the gold standard price of gold for a 50 tonne hoard? Would that have to be a big secret? I doubt that either party would have a single reason to boast about the trade to a shrimp, but even if he had, it's not like the shrimp could then find someone to buy his 50 ounces at the same price per ounce. Small stashes are worthless to Giants, while 50 tonnes in 1800, 0.5% of all the gold in the world at that time, might have been priceless.

This begs the question of which is gold's true value. Is the open market price a discount for smaller individual purchases, or is the Giant market price a premium on large ones? To answer this question, just think about the times when the flow of gold at the discount market price became suddenly insufficient, requiring drastic measures of one kind or another. More specifically, think about it from a Giant's perspective.

These are relatively frequent occurrences. In Guy de Rothschild's 98-year lifetime, it happened at least three times. 1922, 1933 and 1968-1971. Each time, gold was removed from the monetary system a little bit more. From a gold bug's perspective, this was, at best, cheating, and at worst, criminal. But from a Giant's perspective, those who value gold at multiples of its monetary system price and who wield the kind of influence that gets things done, this was always the desired outcome. As I said, you're a jerk if you hoard the lifeblood of the economy, and it's much more preferable to evolve the economy's lifeblood than to have to fear for your most valued possession.

Think about Nathan M. Rothschild, who twice, once in 1815 and again in 1825, gathered enough gold for the British Crown to first fight a war against Napoleon, and then to bail out the British monetary system (the Bank of England). Think about where that gold came from. There are two ways to get gold from a Giant/Baron who has no reason to ever sell his gold. 1.) Make him an offer he can't refuse (your gold or your head), and 2.) make him an equitable offer he can't refuse. Given the fact that N.M. Rothschild became the official gold broker to the Bank of England for the next 200 years, I'd say it was probably the latter.

Does that mean that N.M. Rothschild gave his own gold to the Crown? Of course not. "This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron." Rothschild would have known where to go for almost any amount of gold, and what it would cost. Who knows what treasure, favors and currency England paid for enough gold to fund an army and then a central bank within 10 years of each other, but it would have certainly been more than $19 an ounce.

True Giants have no need to ever sell their gold. And since it is not the realm of any public “wall street”, you'll never know how much they have nor where it is hidden. They sell only when approached by a peer seeking a large hoard and offering an attractive and equitable price. This is the very essence of the 2nd tier price. It is not derived from its liquidation value, but from the perpetual accumulation/non-liquidation by Giants in aggregate.

It is an intuitive truth from the Giants' perspective that, in a situation where emergency liquidation requires engaging the open market, they will never redeem even close to what they put in. This goes for gold as much as it goes for $100M artworks and other Giant wealth items. The future counterparty to the Giants' future liquidation has always been other Giants.

To put it in terms that even shrimps can understand, Giants buy and hoard gold *IN SIZE* at multiples of the market price because of the confidence that other Giants will always buy and hoard gold *IN SIZE* at multiples of the market price, because of the confidence that even more Giants will buy and hoard gold *IN SIZE* at multiples of the market price, ad infinitum.

Old money Giants don't need to save for retirement. They were born set for life. If the Giants of this world all decided to liquidate at the same time (liquidate into what, currency for milk and bread?), then they would lose most of their wealth. They know this intuitively, and they also know that it's never going to happen. They know that they can be killed, robbed, nationalized or whatever—those are real concerns—but they also know that a fantasy like Giant liquidation en masse is just a fantasy of envious shrimps. And they know that keeping as large of a proportion of their wealth in gold as possible is the best way to mitigate those real concerns. Even better if gold is not the lifeblood of the economy.

This is where gold's true value comes from… the Giants!

Consider that official (CB) gold reserves today stand at 31,320 tonnes, the same amount as in 1952. Since then, 108,000 tonnes have been mined. Who has all that gold? Certainly not Western traders today! So where do you think it went? It obviously went somewhere, because gold sells out every year.

If we take today's 31,320 tonnes in central banks and subtract 3,175 tonnes (the amount in CBs in 1900), then net CB additions over the last 114 years were 28,145 tonnes. That's almost precisely the amount of gold mined between 1900 and 1940, which was 28,142t. This means that all of the gold mined from 1941 onward, or almost 119,000 tonnes, has disappeared into private hands, while all of the gold mined before the war in that century went into public treasuries. And again, this dramatic shift coincides with the emergence of Saudi Arabia as a new money Giant. In essence, the flow of "discount gold" has been cornered ever since the Saudis demanded gold for their oil in the 1940s.

"We made an agreement with Ibn Saud that we would give him gold for every ton of oil we took out of his country, we would give him gold. And we did at first. Then we got producing more and more and more. And try to find gold schillings to meet the requirements so we could ship another ton. And finally we had to tell him that we couldn't find that much gold. There wasn't that much gold. We had now, such an enormous business that we cleaned the world of gold schilling."
-Gwin Follis, former chairman of Standard Oil of California


Beginning in 1945, the US minted special gold disks, at the discount market price of $35 per ounce, for Aramco to deliver to King Saud. This was necessary because Aramco simply couldn't source enough gold at the official price on the open market. In fact, it was reported that many of those gold disks we sent were then shipped to Bombay where they were sold for $70 per ounce, melted into bars and then resold in Macao.

In 1948 Saudi Aramco started its own airline for, among other things, delivering 8,000 lb. shipments of gold to the King. King Saud died in 1953, and in 1961, the airline ceased international operations.


That was right around the time that cracks first started appearing in the 17-year-old Bretton Woods international monetary system, due in part to the rising price of gold on the open market. And it was the same year that eight central banks—US, Germany, England, Italy, France, Switzerland, Netherlands and Belgium—resolved to covertly use their own gold reserves to fix the open market price in London at $35 per ounce. With the fix in, backed by eight CBs holding 40% of the world's gold, the Saudis could simply use their dollar profits to buy as much gold as they wanted in London.

That lasted for seven years.

During the 1970s, the "new money" Giant in town, "Oil", learned a lesson about gold. It was a very valuable lesson that prepared him for "The Deal"…

Date: Sat Oct 18 1997 21:04
ANOTHER (THOUGHTS!) ID#60253:

I ask you now: " Is it hard to believe or hard to understand"? When it comes to money it's usually both.

Know this: "gold transcends human valuations thru time and life". . Take your time on this one!

Gold is now caught in a crossfire of world thought. The traders are viewing it as a commodity and trying to make money on its moves using various paper trading vehicles. Their opinion of the market is flawed because the "real value buyers" would never deal with these people or let anyone in that circle know they are buying gold as "money"! The major buying and selling is between CBs, nations, merchant banks, "the super rich" and the hordes of small buyers in forgotten places. That is one of the small many reasons wall street hates gold, they are not part of the real action. Comex is a side show!

Let me fill in the Xs.

First a reprint;
"You see the trading medium changed. Oil went from $30++ to $19 + X amount of gold!
Today it costs $19 + XXX amount of gold! "

If you owned a commodity in the ground that had to be sold for paper currency in order to realize value what would do? Yes, the oil in the ground may last another 50+ years but will the bonds and currencies of other governments last that long? One thing you don't do is buy gold outright, it would cause it to stop trading as a commodity and start trading as money! You learned that in the late 70s. Nor do you acquire "real gold money" in any fashion that would allow a comparison of price trends ( graphs ) ! There must be a way to convert the true wealth of oil into the outright wealth of gold. We know that oil is a consumed wealth of a momentary value that is lost in the heat of fire.

The stars blink and it is oil wealth no more!

It has become "the debt of nations " now owed to you. Gold on the other hand is not a commodity as many assume, as it is truly "the wealth of nations " meant to last thru the ages! A wise oil nation can strike a deal with the paper printers and in doing so come out on top. Go back a few years to the early 90s. Oil is very high, you offer to lower the US$ price in return for X amount of gold purchasing power. You don't care what the current commodity price of gold is, your future generations will keep it as real wealth to replace the oil that is lost. Before the future arrives gold will be, once again valued as money and can be truly counted on to appropriately represent all oil wealth!

The Deal:

We ( an oil state ) now value gold in trade far higher than currencies. We are willing to use gold as a partial payment for the future use of "all oil" and value it at $1,000 US. ( only a small amount of oil is in this deal ) And take a very small amount of gold out of circulation each month using its present commodity price.

If the world price can be maintained in the $300s it would be a small price for the west to pay for cheap oil and monetary stability.

The battle is now between CBs trying to keep gold in the $300s and the "others" buying it up. In effect the governments are selling gold in any form to "KEEP IT" being used as 'REAL MONEY" in oil deals! Some people know this, that is why they aren't trading it,, they are buying it.

Not all oil producers can take advantage of this deal as it is done "where noone can see". And, they know not what has happened for gold does not change in price! But I tell you, gold has been moved and its price has changed in terms of oil! For the monthly amount to be taken off the market has changed from $10 in gold (valued at $1,000) /per barrel to the current $30 in gold /per barrel still valued at $1,000! Much of this gold was in the form of deals in London to launder its movement. Because of some Asians, these deals are no longer being rolled over as paper!

What is happening now is far, far larger than the interest of a few traders or mining companies. They will be stepped on!

Date: Sun Oct 19 1997 09:42
ANOTHER (THOUGHTS!) ID#60253:

There is only one oil state that counts! Only one! They have made it very clear how important gold is to them. If they had started buying outright, gold would have gone to $5,000+ in days. And only a very few million ozs. would have been purchased! The message has been for some years, "we will accumulate thru the back door, using paper deals if you keep the price at or below the cost of production". Do this and oil will remain THE driving force of the world economy!

FAIL THIS AND WE WILL PRICE GOLD IN DOLLARS AT THE TRUE VALUE OF OIL TO THE WORLD!

You see, gold is not a commodity. The CBs have used every weapon to keep its price low . Understand me, Gold is now, today, a devalued currency being used in world trade!

Do you think the CBs are selling gold to keep the dollar strong? They don't have to sell to accomplish that feat! CB gold ( one billion ozs.? ) valued at its current commodity price is only worth 300 billion, it's nothing in that price range! They know what it's US$ price is worth in terms of oil! They are not stupid as they show.

Date: Sun Oct 19 1997 13:41
ANOTHER (THOUGHTS!) ID#60253:

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

Think now:

Would the world CBs really have kept gold this long if they only valued it at its ongoing commodity price? Cannot only the offer of gold have some value in a deal? Can paper gold that has a commodity face value of, say $300 be traded for its true value of many thousands? Indeed, if your worldly investments ( US stock market? ) are valued in the long run by a full supply of oil, would not future gold in a Swiss acct. make a good trade?

Date: Sun Oct 19 1997 17:26
ANOTHER (THOUGHTS!) ID#60253:

Where are my THOUGHTS leading?

Yes, Mr. Cole you are correct. The Central Banks have known for quite some time the true value of gold in today's paper world. In a very real sense they are on our side. Let's take their side if you will. They are not dumb or stupid, in fact many of them are the best of the best! You see, the world grew up and ran away from them, totally out of control. It has left in its wake a money system of colossal debt and political mismanagement. They know it is over…

The Asians are the problem, by buying up bullion worldwide and thru South Africa they created a default situation on all the paper for the oil / gold trade! Now the CBs are selling in the open to calm nerves but it's known that they will never sell enough. It was never their intent to provide the gold, only the backing until new mining technology could increase production. Over time the forward sales, such as ABX's should have worked. But LBMA went nuts with the game and the whole mess has now accelerated.


Another wrote, "The Central Banks have known for quite some time the true value of gold in today's paper world." How long was "quite some time"? He also said, "the world grew up and ran away from them, totally out of control." I imagine that the world grew up and ran away from them during the period from 1968 (the collapse of the London Gold Pool) through 1979 (the IMF meeting in Belgrade). This fits my hypothesis perfectly! I wrote above: "So it's no big stretch to imagine the European old money Giants putting their heads together with the European CBs between 1968 and 1979 to come up with a contingency plan."

So some in the BIS knew. Life usually delivers us lessons the hard way, but once in a while we are graced with wise counsel from "another". "This is not the relm of any public “wall street”. At one time it belonged mostly to the Barron. Now it is large with the BIS and super rich." "Now" (ever since the 70s) it is large with the BIS… And the BIS came up with a plan!

As I said, a fundamental principle of my extrapolation is that "new money" (money earned through present net-production) gets to buy gold on an ongoing basis ("is it not better to acquire gold over years, at better prices?") at the (discount) market price. The flipside to that principle is that you can't just accumulate other assets for years, like a trillion in USTs, and then expect to convert them all at once into physical gold at the open market price. Giants understand this principle intuitively, even if others don't.

Understanding this principle, the BIS plan to support the $IMFS, until an alternative currency could be launched, included allowing "Oil" (really just the Saudis) to accumulate real physical gold at the market price for as long as it took. The problem was that oil is so valuable to the world that there wasn't enough gold flow at market prices to suffice. So the plan was to sell them the gold that was still in the ground, knowing it would someday come out!

So a paper market was created that was backed by forward sales from the mines and, to an extent, performance guarantees from the CBs. The CBs in aggregate held more than 35,000 tonnes at that time, equivalent to almost 18 years of global mining supply, so a CB guarantee had some serious credibility. But the euro took longer than expected, and the BIS plan had some flaws, like the expectation that mining production would quintuple with the help of additional financing through forward sales.

Even so, the BIS plan had worst case scenarios covered:

"The gold, while indirectly backed by the CBs would actually come from the mines of the future. With the oil money making a ready market for gold priced at a premium ( contangoed out many years ) , the mines could make a fair profit even with spot gold priced below production. All would win! And for some time, we did! I am able to know some CBs, they are not evil, their minds are for the best that can occur. But, I THINK the world ran away from them. The paper world of gold is now a mess with no resolve! […]

The BIS will not allow the distribution of all gold to settle claims. The mines of the world will be forced to sell to the BIS at the "locked" existing commodity price of gold. This will happen over many, many years as no other "official" market outside the BIS will exist. […]

There is one oil state that no one will play for a fool. The CBs will sell all of their gold or the nations will nationalize all mines and operate them at a loss. One way or another, most of the paper gold market will be honored. Why? Because oil will bid for gold if they do not! We are not talking about an oil embargo or rising oil prices. Indeed, oil will become very cheap for those that can supply physical gold. This deal will not require the agreement of all oil states. Only one can start this, the others will gladly follow. […]

In that day, "good money" will become "bad money" and "derivatives" will be paid to the holders of "derivatives"! In that day, a gold mine will also be paid in "derivatives", for its gold will be for the benefit of all."


The worst case scenario didn't happen. Even though the anticipated increase in annual mining rates didn't pan out, the BIS knew that, at the end of the day, "the deal" would be fulfilled with someone else's gold. Quickly or slowly, with or without revaluation, the gold that had already been sold would come from the mines. And it did!

In 1997, the CBs in aggregate had 33,894 tonnes. They sold a bunch, and even dropped down to around 29,000 tonnes in 2008, but now they are back up to 31,320t in aggregate, a net loss of 2,574t since 1997. During that same timeframe, another 40,792 tonnes were mined. Mining plus what the CBs sold comes to 43,366 tonnes since 1997. So where did all of that gold go?

It's impossible to know how much of that gold went to Western shrimps and "hordes of small buyers in forgotten places" versus Giants, but I think we can get a general idea of the scale by looking at a couple Western shrimp aggregates. Some 1,000 tonnes went into new coins (coins are for shrimps!). Another 2,100 tonnes (net to date) went into ETFs and other tradable funds (ETFs are also for shrimps!). But the majority went into "jewelry demand" which is a euphemism for "third world nobodies" who have "kept the gold market bought up" for the last 50 years or more, even squeezing out the "new money Giants." And the remainder probably went to "Oil" and a few other "new money Giants." That's 3,100 tonnes that went to Western shrimps and traders, and ~40,000 tonnes that went to those who view gold as (store-of-value) money and don't care about its currency price! (Assuming a considerable margin of error, of course!)

The WGC, which is the market development organization for the commodity-gold industry, does a great job of tracking the supply and demand "facts" for the gold market. I'm going to mention some of them, but first I want to remind you of what Another said about gold "facts": "If you are searching for facts you will find them, but the items you find will not be true! Did you think that the high powered world of the LBMA would operate in a fishbowl for all to see? We cannot take what is on the outside as evidence for what is on the inside. To find the answer, work with inside assumptions and extrapolate them to the outside!"

The WGC lumps half of the annual demand for gold as well as half of all of the gold in the world into the "Jewellery" category which, as I mentioned, is a euphemism for "third world nobodies" who have "kept the gold market bought up" for the last 50 years or more:


In their latest publication, they summed the "facts" up nicely:

"The gold market became polarised in 2013 as 21% growth
in demand from consumers and value-seeking investors
contrasted with large-scale outflows from ETFs. The net
result was a 15% decline in full-year gold demand in a year
where jewellery, bar and coin demand reached an all-time
high.

Let’s get physical: record breaking year
for consumer demand


Consumers put on an impressive show of strength last year,
generating a 21% increase in demand for jewellery, small bars
and coins (collectively referred to as ‘consumer demand’) to
a historic high of 3,863.5 tonnes (t)."

I stopped there because of that number: 3,863.5 tonnes. "Consumers" as the WGC calls those who view gold as (store-of-value) money, or "jewellery, small bars and coins (collectively referred to as ‘consumer demand’), " what I would instead collectively refer to as shrimps and "third world nobodies," demanded 3,863.5 tonnes last year, even as the currency price declined 28%. Only after factoring in Western trader demand for paper gold can the WGC turn a 21% increase in physical demand into a 15% decrease in overall demand. "If you are searching for facts you will find them, but the items you find will not be true!"

Anyway, mining supply was HUGE last year, even as the price of gold dropped below sustainable levels. Apparently the mines are in survival mode—like an organism that consumes its own body and signs deals with the devil in hopes of surviving one season—which doesn't bode well for them long term. But even at 3,018.6 tonnes, a 12% increase over the three year average, they still fell short of demand from shrimps and "third world nobodies" by 845 tonnes. Of course I am ignoring technological demand (gold used in electronics) and recycling supply (scrap) here. Combined, they probably cancel out each other plus the additional 845 tonnes demanded by "jewellery." So let's just say that supply met demand last year amongst the commodity-gold industry and the shrimps, both East and West. In essence, shrimps and "third world nobodies" already have new gold cornered today by themselves, so what about new money Giants?

"To find the answer, work with inside assumptions and extrapolate them to the outside!" Another gave us so many great little details, and one of them was how much gold Saudi Arabia was buying in 1991! He wrote: "What quantity of GOLD, paper or physical, has OIL traditionally purchased on an annual basis? From 1991, appx. 20m/oz./yr., now it is more."

Extrapolating, that's about a 10% savings rate on their total oil production. If we extrapolate that further to all of the non-dollar-bloc gold-loving oil producing nations, that's (conservatively) 3,200+ tonnes per year at today's prices. And that's not only to point out that it's more than the mines are supplying right now, but it is also on top of no supply left after the shrimps and "third world nobodies" get done with the carcass. Add Big Trader on top of that (how much gold is China importing these days?) and you can start to picture a rubber band stretched to the brink of its breaking point.

I understand deeply, how difficult it is to picture a significant revaluation of gold, or that the value after revaluation is already present. But it's not about the price. It's about the relative value of other real things. It's about the relative value of an ounce of gold to, say, a barrel of oil. And therein lies the disconnect between gold and everything else.

There is nothing intrinsic to gold's primary function that makes a greater weight more valuable or useful than a lighter weight to those who use it as a wealth reserve. This is what separates gold from commodities. There is, in fact, an essential quality in the use of commodities that makes a greater weight more valuable than a lesser one. More oil is more valuable than less oil because it burns longer. More pork bellies are more valuable than less because they can feed more people. More copper is more valuable because you can pipe more houses. But gold is the opposite. A lesser weight of gold, if it had the same price as a greater weight, performs its primary function more efficiently. This is not true for commodities.

Think about this in terms of Giants hypothetically storing intergenerational wealth in hoards that are 20 times lighter than they would be at the discount market price. Is it not easier to hide 50 tonnes than 1,000? It is certainly more efficient to dig a smaller hole, or build or rent a smaller vault. So, again hypothetically, if they were able to store value in such a way and redeem that value later from other Giants, a lesser weight is intrinsically more valuable than a greater one.

The "inside assumption" I'm using here comes from Another's inference that such a 2nd tier market does indeed exist, and that it at one time belonged mostly to the Baron. Baron, as it is used here, is a generic term referring to the kind of nobility, power and influence that sprung from being a tycoon, magnate or mogul of industry as opposed to simply being of royal blood.

The royals ran the country. They were, in essence, the government, and it was essentially their gold that circulated throughout the economy as they had a legal claim on the kingdom. But the baron's wealth, by contrast, was a private treasure that needed to be secured and protected. As I mentioned above, Baron Nathan M. Rothschild was called upon twice by the British Royal Crown to source and deliver large amounts of gold. And he did.

This is the problem with a "discount market" in gold, whether it's as currency or a commodity, that periodically (quite frequently actually), larger weights than are otherwise available at the market price must be provided to satisfy demand. This was the whole purpose of the London Gold Pool which began when the BOE noticed it was having to supply its own reserves in 1961.

If the market operator doesn't have sufficient reserves, or doesn't want to use his own, then they must be sourced from someone else. In N.M. Rothschild's day, a king, like a CB today, would have been able to pay the 2nd tier price, without the pain of work, through favors, treasure or currency. But such third party sourcing, when it is for the purpose of supplementing the discount market supply, must be done off-market in very private deals for obvious reasons.

If you're using your own gold to supplement the discount market supply, as the CBs have done in the past, it can be done in basically three ways. It can be done in the open market covertly, as in the Gold Pool. It can be done in the open market openly, as the US Treasury and IMF did in the late 70s and the BOE did in 1999. Or it can be done in off-market sales to specific buyers to keep them out of the open market.

In the late 80s and early 90s, the CBs learned that even the offer of future gold from a credible source who has lots of gold can have value:

"Would the world CBs really have kept gold this long if they only valued it at it's ongoing commodity price? Cannot only the offer of gold have some value in a deal? Can paper gold that has a commodity face value of, say $300 be traded for it's true value of many thousands? Indeed, if your worldly investments ( US stock market? ) are valued in the long run by a full supply of oil, would not future gold in a Swiss acct. make a good trade?"

In addition to the promise of future gold in a Swiss account, they also sourced large hoards from 3rd parties wherever possible, again with just the promise of CB sales if they became necessary:

"In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion. That "party" sold to a broker who sold forward for a mine or speculator or government ) . In the end the 3rd party had the backing from the broker that he had backing from the CB to supply physical if needed to put out a fire."

They may have even sourced some at 2nd tier prices through the Baron:

"Think that I a fool, because I trade gold for thousands US an oz.? You will think much on this in the future."

But by 1997, all the 3rd party private stockpiles that could be sold were gone, and the CBs had to become the primary suppliers with their own gold:

"The world private stockpiles that could be sold have been. The CBs are heavy into their own stuff now and are over their heads if they had to make good on all the private deals."

In 1997, due to the spike in paper trading volume, "Oil" stopped rolling its paper forward and started buying physical wherever it was offered:

"Because of some Asians, these deals are no longer being rolled over as paper!"

Here we can see what was possibly the exodus of "the world private stockpiles that could be sold" from London in 1997:


And here we can see the CBs using their own gold to supplement the discount market. Notice that it ended in 2010, the same year that GLD inventory plateaued:


Another made three things about the CBs using their own gold quite clear. 1.) They didn't want to use their own gold:

"Now the CBs will have to sell 1/3 to 1/2 of their gold just to cover whats out there. To use the Queens English "it ain't gona happen dude"!"

2.) They valued gold "in the many thousands" even as it was trading at $300:

"Make no mistake, the BIS knows gold in the many thousands."

He later told us how many thousands:

"The selling of old dollar reserves, alone will reprice gold in US$ terms of at least $6,000/oz! It's present interbank reserve value."

And 3.) what they did was not meant to be a permanent fix. They were just buying time:

"Westerners should not be too upset with the CBs actions, they are buying you time!"

From my shrimp perspective, thank goodness they did, for they bought time for me to buy gold since I didn't start buying until 2008! But thinking like a Giant, this picture, perhaps, reveals a new angle on "support for the paper gold market," doesn't it? The 2010 reversal of CB gold sales in the chart above looks like blatant removal of support in this light, does it not? Remember what Ari told me in 2010?

ARI (via email Dec. 2, 2010) - For the past half-decade, many international policy stirrings gave every indication to me that 2010 was to be the targeted year...

If the CBs "bought" time until 2010, would that mean we are now on borrowed time? ;D

There are a couple of important concepts I want to discuss in the context of this Giant extrapolation. The first is the concept of the dynamic phase transition. If we look simply at my hypothetically potential physical demand numbers above, compared to the amount of new gold being produced, it looks (roughly) like a 3X revaluation would resolve the hypothetical supply and demand mismatch.

In other words, it seems like if the price of paper gold could rise, in isolation (which it can't), to around $4,000 per ounce, then global mining could supply "new money" demand from "Oil", "Big Trader" and "third world nobodies" who seem to be the only ones who want physical. There are several problems with this view, but one of the big ones is that phase transitions are dynamic:

"Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises."

"History has shown that when paper assets start to be revalued downward by gold ( gold rises ) , it's physical supply dries up!"

This "hypothetically potential physical demand" I'm talking about is the "value mismatch" that has the physical market "cornered." It is what has, to quote Another, kept the gold market "bought up" ever since WWII. It is the ever-present tension that threatens to start a phase transition to a much higher price, but it is not sufficient for projecting what gold's true value is. For that we need some of Another's "inside assumptions," which brings me to the second concept I want to discuss.

Let's call this second concept "the Western lottery winner concept". I project a 40X revaluation which means a large windfall for those who hold physical gold through the transition. The naysayers often argue that, even if such a revaluation happened, it couldn't stick because the gold holders would act like lottery winners, try to sell their gold to lock in their windfall, and the price would crash.

There are a few things to mention here. The first is that most of these naysayers are projecting their own Western trader mindset onto those who have bought up 108,000 tonnes of gold while the real price of gold (the GOR) went nowhere. And also, most of the naysayers have very little physical gold themselves, for the very reason that the nominal price (all they really care about) has been going nowhere for a couple of years now.

The Western lottery winner is a gambler, and has become a caricature of the Western trader mindset that is always looking for the next lucky score. The issue with lottery winners is that they usually overdo it, blowing their winnings in short order by suddenly "living large." There will clearly be a "wealth effect" for those who suddenly find their long term savings are 40 times more valuable than they thought, but that doesn't mean they will behave like Western lottery winners, Western traders, or even Westerners in general who, on the whole, seem to prefer living large over saving for the future.

These people who bought all of the new gold for the last 60+ years already view physical gold as the only real (store-of-value) money, so as far as "locking in their windfall" goes, it's already locked in with what they already have. So the question for them, since they are savers and not traders, is not "what other asset should I buy with my gold to lock in my windfall?" Instead, the question will be whether to keep it locked in (in gold) or to unlock some of it and start consuming more than before.

The "wealth effect" means that they will feel more wealthy. But whereas lottery winners often have a hard time keeping their windfall for the rest of their own lives, let alone passing it on to future generations, I think that it is much more likely that the vast majority of today's gold holders will strike a more careful balance between living large now versus allowing their newfound wealth to become intergenerational, even if on a small scale. That's the beauty of gold. It is naturally intergenerational wealth.

"I ask you now: " Is it hard to believe or hard to understand"? When it comes to money it's usually both.

Know this: "gold transcends human valuations thru time and life". . Take your time on this one!"


The point here is that of course many shrimps and "third world nobodies" will sell some gold given the obvious wealth effect that a 40X revaluation will bring, but not "to lock in their profit" as is the way of the Western trader. Instead, they will sell slowly in order to unlock some of that purchasing power and improve their lifestyle, though not quite as rapidly as a first round draft pick in the NFL.

Giants won't do this, simply because they have no need for improvement in their lifestyle. Neither will they "trade out" of gold to lock in their profit. If anything, I think they will trade more of their wealth into gold, because now, for the first time in history, they will be able to do so in any proportion they desire. Think of all the fine art just sitting in wooden crates in expensive Freeport vaults, some of which is simply uninsurable and always vulnerable to fire. Would it not be better to slowly move some of that unseen wealth into a more efficient and durable form?

You see, what Freegold represents is the consolidation of a two tier market into one, for the first time since antiquity. Picture it as the removal of a divider, or the dissolving of the membrane that separates the two markets. The true value of gold that comes from the way Giants have used it for centuries will flow into the open market, but the value added to the whole will be a two way flow. It will truly be phase transition of epic proportions, like a fusion that puts out more than went in.

Because of the fusion of these two markets, both Giants and shrimps will benefit, and the added value of this benefit will go into gold. A Giant who wants to buy gold will, for the first time, have unlimited access to the open market to move any proportion of his wealth into gold, whereas in the past he could only do so through other Giants who already had large hoards. And a Giant who needs to sell will, for the first time, have an entire planet of savers as his counterparty, not just the limited pool of other Giants.

Giants in aggregate, both new money and old, are in a state of perpetual accumulation when viewed as a whole. Ordinary savers, on the other hand, tend to accumulate (save) during their productive years and then live off those savings in retirement, passing whatever is left over on to the next generation. So ordinary savers have each other as their counterparty when viewed as a whole. But if we combine the two, Giants and ordinary savers, we should find a much larger whole that is, in aggregate, in a state of perpetual accumulation. See?

The icing on the cake is that the phase transition will introduce a whole new group of savers to gold, all of whom are still in the accumulation phase of their lives. They, along with the Giants, will more than offset any short term post-reval "Western lottery winner" behavior.

It matters not how much gold there is in the world today, because it is all already owned by someone who likes physical gold, just like it will be after revaluation. It's not like it's a product piling up on store shelves, waiting to sell, which suddenly becomes 40 times more expensive. The product has already sold out. It's its resale price that will change.

People often ask how I came up with my $55K gold projection back in 2009. Now I will tell you. It was the result of working with inside assumptions and extrapolating them to the outside. One assumption I have carried since the beginning was that Another knew what he was talking about from personal experience. My second assumption, which is a corollary to the first, is that whenever Another mentioned specifics, he wasn't just being pretentious and pulling them out of his backside. Rather, he was actually revealing valuable insider assumptions.

My price projection is an amalgamation of Another's occasional specificity. It was never about the currency price. It was always about the revaluation multiple in real terms. Gaze in wonder and reflect upon my two FFPPDC's from way back in 2009:


In 1998, Another praised a post by "Allen (USA)" which Allen wrote using assumptions previously mentioned by Another. Allen's GOR of 1,000:1 came from this earlier statement by Another: "If Arabia says, "I will sell oil for $10US a barrel or in gold valued at $10,000" what do you think would happen?"

Allen's post mentioned a revaluation multiple of 67X, gold at $20,000/oz. and oil at 1,000 bbls/ounce. For comparison, I'm currently using a more conservative revaluation multiple of 40X, gold at $55,000 and oil at 550+ bbls/ounce. I decided to use 1,000 bbls/oz. as the high end of the spectrum in my oil FFPPDC, and an order of magnitude lower as the low end.

Another did say, a few times, that the 2nd tier price of gold was $6,000 at the time that paper gold was trading for $300, a 20X differential. He also clearly stated once, and often implied, that $6,000 (aka 20X) was the low end of possible revaluation prices. He wrote: "The $6,000 valuation of gold can only be true if currency deflation destroys enough dollars to bring it down to that range."

Another (and FOA who was writing on his behalf) mentioned $6,000/oz., implying that it was the 2nd tier price at that time, 14 times. Meanwhile, the number $10,000/oz. was mentioned 43 times, and $30,000/oz. was mentioned 55 times. This gave me an anticipated revaluation that ranged from 33X to 100X in nominal terms. Being overly conservative, I decided to use Another's low end ($10,000) nominally and his high end in real terms, giving me a wide range. Working with $1,000 gold in late 2009, $10,000 was 10X, which was safely under Another's extreme low end of 20X. And $100,000 at the high end, or 100X, fit nicely with oil at $100/bbl. giving me the same high end as the oil FFPPDC.

So, coming directly from Another, we have revaluation multiples of 20X, 33X and 100X, with 20X clearly indicated as the low end. For oil, we only have limited mentions of 1,000 bbls/oz. which corresponded to a 67X revaluation for gold. But Another also said that, after revaluation, oil would be relatively "cheaper" for those who had gold, implying that gold's revaluation multiple against oil would be higher than it would be in absolute real (non-oil) terms. This told me that my target was probably somewhere between 33X and 67X.

My primary assumption was that Another had a reason for the specifics he shared and repeated so many times. I think that the reason he used specific numbers repeatedly is because they were the assumptions being used by those who were in the best position to make such projections. So I figured that a probability curve which encompassed his high and low end projections would give me a reasonable estimate based on true insider assumptions.

Obviously I wanted to be conservative in my estimate, so I used his highs as the absolute while stretching the low end well beyond his lows, knowing that my curve would give them extremely low probabilities anyway. If I rerun the numbers today, using my same conservative range, the projected price is $73,000. If I disregard the conservative end of the spectrum and simply go with Another's range, it comes out to $80,000. Those numbers represent 55X and 60X revaluation multiples respectively.

Upon further reflection, I still like $55K as it now represents about a 40X reval, which is why I have never revised those images. I hope I am low, but 40X is nice and clean because it represents a simple doubling of gold's true value to the Giants in the 2nd tier market that exists within this extrapolation.

In any case, both 40X and 55X lie comfortably within my target range of 33X-67X, with 50X being the dead center. Remember that it's not about the currency price, but simply about the revaluation multiple. In oil terms, the price of gold has hardly changed since WWII. The GOR hovered around 15 when Another was writing. Today it is 13, and historically (over the last 65 years) it has averaged around 14.5.

That's all $55K ever was, an extrapolation from an amalgamation of Another's Thoughts. And the probability curves were simply my way of expressing how I view it as a range of probabilities rather than a specific prediction. Thinking like a Giant can be fun when you really put your mind to it. And it makes me want to buy some more gold right now!
____________________________

So here's my extrapolation using "inside assumptions" provided by Another (and a little common sense) in a nutshell:

Physical gold's true value is 20 times higher than its open market price and has been for centuries. The reason for this "two-tier" gold market was neither nefarious price suppression nor "cloak and dagger" secrecy. It's just the way it was. It's just the way gold's usage developed and matured over time.

The two tiers are soon to be united as one and that will mean a doubling of gold's true value which equates to a 40X revaluation relative to the open market price today. Love it or hate it, it doesn't matter. It is what it is.

Freegold will, for the first time since antiquity, combine the shrimp and Giant gold markets into one single market. The benefit/windfall for shrimps versus Giants will be totally different.

A much higher value of gold already exists for true Giants, so they will not gain as much value from the revaluation. Only the shrimp side of the market will gain windfall-sized value. The value gain for the shrimps flows from the way the Giants have always valued their gold (that is, market-busting sizes of gold hoards) at multiples of the market price.

What Another wrote about Giants trading gold *IN SIZE* at multiples of the market price should be taken quite literally, and it goes back centuries.

The bottom line is that Freegold represents shrimps receiving the flow of a much higher value from the Giants and the way they use gold. The Giants won't gain as much value, but they will gain the ability to store as much of their wealth in gold as they want to at any given time, something that has been difficult if not impossible for centuries.

The Giants will gain some value in their gold holdings, though, because they will have the entire world of savers as the counterparty to the gold portion of their wealth rather than just the very limited pool of other Giants. Compare that to a CĂ©zanne or a Koons Balloon Dog. Only other Giants are their future counterparty for those. Part of being a Giant is that you never actually need to dishoard. You only ever need to acquire more solid wealth because the only alternatives are to either give it away or stop net-producing. As a Giant, you aren't saving for retirement like the rest of us. You are either net-producing or not, and if you are, then you are either buying wealth items with your surplus or you are giving it away.

Yet if misfortune befalls you and you do need to dishoard in a hurry, then you'll not get full value for your wealth simply because you have so much of it. That's just part of being a Giant. So the high value for Giant hoards of gold comes from the buy side (Giants wanting to buy large hoards must approach other Giants who already have large hoards) and not from the sell side. Giant sellers only sell because an offer was made at the proper multiple of the shrimp market price, not because they need to sell.

But Freegold will make it more likely that a Giant who falls on hard times will be able to dishoard more rapidly without losing value than he would have been able to in the past. In the past, the true value of gold for the Giants came from their ability to retain it even through revolutions (like the French Revolution) and wars (like WWII) when everything else they had was easy pickins for the uprising masses. You can bury gold, but castles and art can be destroyed, and land and businesses can be taken away by the government with the stroke of a pen, something that happened to GdR in 1940 and again in 1981.

This two tier market structure has been around for a long time, but it has always suffered from the frequent need for emergency supplemental supply in the discount portion of the market, supply that must come from the properly valued side, one way or another. We've seen this dynamic in action at least half a dozen times over the last 200 years. We know where we have been, and now, perhaps, working with inside assumptions and extrapolating them to the outside, we know where we are going.

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

I recommend rereading ANOTHER (THOUGHTS!) from the beginning after you finish this post. I think you may see everything in there in a different light this time, whether it's your first time or your fifth, as long as you remember to think like a Giant!

____________________________

In keeping with the theme, I thought I'd conclude this post with "Much Ado About Money", chapter 1 in Guy de Rothschild's 1983 memoirs, "The Whims of Fortune"…



Everyone has some; no one has enough. People despise it when they lack it, yet they welcome it with open arms. Reluctant to discuss it, they think about it constantly. Lifeblood of the economy, source of all activity, key to success, symbol of strength, it is the essence of power. It cures, it destroys, it saves, it kills, it is idle, it circulates, it fertilizes, it vanishes, it corrupts, it grows, it changes hands. It is fairly—or unjustly—earned. It is used, dreamed of, hidden, shown off, squandered, scorned, worshipped. Hoarded, it is a treasure—only to become sterile. It is reviled, repudiated, coveted. People invest it with their own intimate feelings: their rivalries, triumphs, frustrations, ambitions, resentments. At night it grows into something living, overpowering, enlightening, protective, crushing. It is a phantasmagorical god whom we both pray to and dread. It is the scapegoat for our misfortunes. Created as a convenience, it is burdened with our emotions; it is a means, but it has become an end.

What has not been said about money? What has not been attempted by politicians to tame it? Taking equality for justice, the socialists want to ration it and try, without much success, to reduce its power. Liberals, more realistically, want to use its potential as an incentive. Yet both seek the well-being, the security and happiness, of mankind.

How amazed I was when the newly elected French prime minister Pierre Mauroy, addressing Parliament in 1981, criticized the leaders of “big business” for endeavoring to make their companies earn money, which is precisely what the heads of firms are meant to do and what they are paid for! If the managers of Air France, Renault, the big banks, and the nationalized companies heed these remarks and ignore their balance sheets, the French, who will have to foot the bill, will hardly look favorably on Mr. Mauroy’s angelic idealism. Because those who do not gain, lose—and most often lose heavily.

The socialists dream of abolishing capitalism but they can’t, for since the Marxist mirage has vanished, there is nothing to put in its place. If they were fair, they’d accept the rules of the game, and as long as people are allowed to make money, they would refrain from denouncing those who succeed. Everyone wants to be better off: The minimum-wage-earner wants to make more, and so do those who earn twice his salary. So why in the world brand someone who is paid four times the minimum a “sordid materialist” the minute he wants to make six times the minimum? There will always be someone poorer than oneself, and there will always be someone richer. Admittedly, there is an intolerable discrepancy between those who can afford more than essential needs and those who fall below the level of survival; but this contrast appears mostly between industrial societies and those of the Third World, rather than within Western nations. Making money doesn’t oblige one to forfeit his honor or conscience.

In France, of course, money has never been honorable, except perhaps during the nineteenth century. The Church put it on the Index in medieval times, and ever since the age of industrialism, socialists and Marxists have held it responsible for every evil. It is a foregone conclusion that money will always remain impure.

And yet, how herculean the efforts to acquire it! The French—whether hypocritical or irrational, it doesn’t matter—have no trouble in getting around the contradiction: They simply cherish their own possessions while condemning everyone else’s. Among all peoples, their love of money is doubtless the keenest, as every Frenchman suspects every other of being motivated by selfish, materialistic considerations. Property, savings, and inheritance are sacred; money and finance are suspect. The French cling to the pathological distinction they make between their own little nest eggs and anonymous riches labeled “finance.” This fantasy provides an excuse for the inventors of the wealth tax, euphemistically referred to as the “tax on large fortunes,” levied on an aggregate of static property, impossible for the most part to divide or liquidate; whereas only those profits earned through the dynamic flux of the country’s economy qualify for annual withholding.

In the final analysis, societies, like individuals, involve their whole nature in their relationship with money. The rich are regarded with ambivalence. Less affluent people want a kind of paternal protection from them, and simultaneously envy and reject them. People expect the rich to feel superior, and then revolt against this imaginary humiliation. No one sees the rich as brothers. They are regarded as members of another species; money isolates them. In their own eyes, however, the advantages money brings them are too easy; the wealthy value only what they earn by personal merit.

Mere mortals made of blood, flesh, and bone, the Rothschilds from birth symbolize money and everything it represents: luxury, fame, power. And should any one of them be so ill advised as to boast about it, he would immediately be as unpopular as he is well known. It’s hardly their fault if, among the many “wealthy few,” they are singled out as a showpiece. What little prestige they might have gained from their relationships with statesmen like Rene Mayer, and particularly Georges Pompidou, was entirely fortuitous, as the Rothschilds knew these men before they became public figures. Any analogy that might be drawn between those friendships and the special relationships the Rothschilds enjoyed in the nineteenth century with Europe’s leaders would be quite mistaken. A temporary illusion appeared, however, for a moment to revive a legend from the past. And it is one of life’s fatal ironies that shortly thereafter the Rothschild Bank was nationalized, thus sweeping away what had been for two centuries their professional identity.

Seen close up, the Rothschilds are decent people. They fulfill their obligations discreetly and without arrogance. They are referred to as "the Rothschilds"; it is only collectively that they are a symbol. Condemned to solidarity by ancestors who chose Concordia, Integritas, Industrie as the family motto, they are forever worrying that one of their own will damage the family reputation, each member regarding the shortcomings of the others without indulgence. Among themselves, of course, they are equals, like Roman citizens, for the similarity of their fates erases any individual differences. The inevitable disagreements usually end with everyone sitting down to a meal prepared with infinite care, out of mutual affection as much as culinary competition.

I have no idea what a poor Rothschild would look like. I suppose he would vanish in anonymity. In the meantime, precious few of them are driven by a money-making obsession or by and urge to rebuild a fortune comparable to that of their ancestors. They tend to make the best of what they have (and now and then a little more), each according to his particular tastes. Their styles of living, however, as well as their choice of homes and art, are remarkably similar. The emphasis put on beauty, the importance given to the quality, to elegant hospitality, are characteristic of a family tradition that gives precedence to refinement over luxury. How long can this last? It doesn't seem to go with the trend of history.

As far as I'm concerned, life may have spoiled me in many ways, but I have never forgotten the restrictions and humiliations suffered by my ancestors, who knew only hard, obsessive work. This memory has helped me face situations in which I saw how easily I could lose material security as well as the social pride generations have acquired.

Bathed from childhood in the embarrassing limelight of celebrity, the Rothschilds can hardly avoid a certain narcissism, which prompts them to justify by their behavior a reputation they would like to deserve. Some may even secretly fear they are not quite up to it. But when all is said and done, conscious of the favors heaven has bestowed upon them, they gallantly bear a symbolic name, accepting with good heart the whims of fortune.

Sincerely,
FOFOA



754 comments:

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Alien said...

Biju,Iraqi oil had to be taken out, Sadam (their tool, too).
Think strong dollar due to oil artificial shortage,
The American blood trail is thick.

nearlynapping said...

Archer, back to gold. Where I live two local cash for gold businesses have closed their in the last four months due to a lack of new supply. The local pawn shops also say that they rarely get in gold now. It could be that the economy is getting better but it does not feel that way.

Phat Repat said...

Though I believe my fellow citizens have abandoned founding principles, and are suffering the consequences, it is quite the slippery slope to attempt to associate atrocious political policy as representative of the peoples of that country. Germany, Japan, China, France, Spain, Italy, Russia, England, India, Pakistan, and on, and on..., to name but a few.

Hopefully the new system, vis-Ă -vis FG, will diminish the ability of nation's 'leaders' to continue making such deleterious decisions on 'our' behalf.

Tommy2Tone said...

Phat-
Re: founding principles, which created a chuckle inside me just now,

May I suggest starting with numero uno here.

Doing so altered forever the way I think of that phrase now.

Anyway, I think FG most certainly will diminish the bad effects of the easy money and culture.

Phat Repat said...

jojo
Good gawd; is there a Reader's digest version? :-) And there's a part 2 as well.

Before I spend the hours this is likely to require, and I don't mind doing that if there is value to be gleaned, what is the gist of that site, from your perspective. Thanks.

Anonymous said...

@Phat

Moldbug is a prominent thinker in the emergent reactionary "movement" here on the Interwebz, a movement he is credited with starting. I like his work but I agree, it's too lengthy for my taste.

Here's a more easily digestible reactionary writer: http://blog.jim.com - that is not me btw.

This could function as a good introductory piece.

Edwardo said...
This comment has been removed by the author.
Motley Fool said...

jojo

Holy shit. There are 7 parts. I managed 3. I give up. He puts even fofoa to shame ito length of posts.

TF

Motley Fool said...

Correction, just found this delightful tidbit at the end of part 8 :

"But this is getting long. Continue to part 9."

There were 13 parts. Good god.

TF

Motley Fool said...

Correction : Nope I got lost in the comments again. There were 14 parts.

I have no words, but clearly Mencius has plenty. xD

Phat Repat said...

@pj
Okay, thanks for that. I read the introductory piece (The Dark Enlightenment) and, though likely hard for some to accept, it does offer up basic truths. And though I didn't find anything particularly profound at this point, it has piqued my curiosity and desire to further explore the other link you shared along with jojo's lengthy link.

Other than that, do you (or jojo) feel this ties to FG somehow? If so, how?

Anonymous said...

Other than that, do you (or jojo) feel this ties to FG somehow? If so, how?

Not directly, though reactionary opposition to democracy is in line with the "savers vs. debtors" concept IMO.

It was reading FOFOA that led me to my eventual conclusion that our problems are mostly not b/c of "elite oppression" but rather that society is in the degenerated state it is now mostly because of the raving delusional masses - tyranny of the majority. That eventually led me (and some other FOFOA regulars) to reaction.

In my (controversial) opinion, once one accepts and agrees with the narrative presented here, I don't see how one can still be a leftist. The cognitive dissonance must be horrible. Usually the leftists simply just don't agree with everything here, particularly the "Debtors vs. Savers" piece; they put their own spin on it.

Phat Repat said...

Thanks for your viewpoint pj. I don't believe in an "elite oppression" either, but there are those who believe they are "elite" because they were able to game the system and are entitled as a result. I hope those types are the ones that will ultimately be "fooled by randomness." (Taleb) And this should be revealed by FG.

I have never understood how someone could have a leftist perspective (using the US definition). But then again, I have always looked to the individual and what their abilities were as opposed to being fearful of our 'differences' (color, language, nationality, or otherwise).

I look forward to delving into the links you shared, though I suspect, the views and beliefs I currently hold won't be significantly challenged. Have a good night.

M said...

@ vizeet

That was just an article I found. I am not entirely sure what the author is getting at... But its the closet explanation to the "Belgian treasury purchases" that ive seen.

vizeet srivastava said...

Biju
I would not want to live in the neighbor of Russia especially after what happened in Ukraine. Russia doesn't have power, money, force and friends to create violence in US backyard. I am not getting deeper into politics here.

tEON said...

From Rickards article HERE:

Gold is not digital, cannot be wiped out by hackers, and is immune to crashing stock markets and bank failures. Russia has increased its gold reserves 70% in the past five years. China has increased its gold reserves over 200% in the same time period. Do they know something you don’t?

Woland said...

In Wold Richter's article, "Kremlin: If the U.S. Tries to Hurt
Russia's Economy, Russia Will Target the Dollar", (which
appears at both "Testosterone Pit" and Naked Capitalism),
he suggests that there is a "media blackout" in the U.S.
regarding the comments of Alexey Ulyukaev, as reported
by Valentin Mandrasescu, which echoed, this time from an
OFFICIAL source, earlier similar remarks by Sergei Glazyev,
an advisor to Vladimir Putin who is not, however, a member of the Russian government. (see my comment of Mar. 4)

Just for fun, I checked those first 2 names on google news to
see if any mainstream U.S. media had covered the recent statement - nope. About the only thing I got was an article
from "Foreign Policy" entitled "After the Revolution". This
paragraph caught my attention:

"Last year Ukraine signed huge deals with Chevron and Shell
to develop shale gas reservoirs and to try to replicate, if on
a smaller scale, the kind of energy revolution that has turned
the U.S. from an importer of natural gas to a prospective exporter in just a few years".

I know…. so what else is new. Anyway, have a look if you've
nothing better to do on a Sat. {;<)>>

Tommy2Tone said...

Ditto to all that poopy said.

I had to laugh as I was reading MF's posts, thinking aloud to myself, "haha, nope, way more than 3".

Myself, I'm only finished with 8. I'm new to it myself, been gnawing on the ideas for a while now. Understanding here led to there and I haven't made the jump to any other writers yet as I get a kick out of lengthy writers I guess.

I will say I'm cautious because the idea that I've become a brainwashed cult member has crossed my brainwashed mind. IMO however, Moldbug lays it out quite well and what made me post was your idea of the "founding fathers" and their "principles".
Moldbug makes a good case that the progressive movement is rooted in Quakerism from the 1600's. That those founding fathers were the leftist liberal nutjobs of their day.

Anyway, I am still reading and absorbing.

BTW, I hate the term "dark enlightenment".

Tommy2Tone said...

Phat-
One last thing. AIACC

...America Is A Communist Country

As an American and one who recalls the nuke drills in school, the realization of the above, was a big eye opener.

Woland said...

tEON;

You certainly highlighted by far the finest paragraph in of an
otherwise so/so article re: the meaning of the Ukraine conflict.

A better analysis (of motives) can be found in the following:

"The Backstory to the Russia-Ukraine Confrontation: The U.S.
and NATO Encirclement of Russia" a quote:

Stephen Cohen - professor emeritus at New York University
and Princeton University, who has long focused on Russia,
explained this week on CNN;

I don't know if your listeners or viewers remember George
Kennan. He was considered a great strategic thinker about
Russia among American diplomats, but he warned, when we
expanded NATO (under Bill Clinton) that this was the most
fateful mistake of American foreign policy and that it would
lead to a new cold war…………And if you want to know for
sure, and I have spent a lot of time in Moscow, if you want
to know what the Russian power elite thinks Ukraine is about,
it is about bringing it into NATO. One last point, that so
called "economic partnership" that Yanukovich……did not
sign……that so called "economic" agreement, included military clauses which said that Ukraine, by signing this so
called civilization agreement, had to abide by NATO
military policy."

( perhaps Soviet missiles in Cuba could serve as an instructive correlative to clarify one's perspective here)



Woland said...

Today David Stockman follows up: Mar 15, 2014

The Ukrainian Follies: What Crackpots made NATO Alliances
with Albania, Bulgaria, Romania, Slovakia and Slovenia

It contains some good links to the views of some Reagan era
officials who dealt with the Soviet Union

farmersteveg said...

http://davidstockmanscontracorner.com/2014/03/12/yellenomics-the-folly-of-free-money/

"Yellenomics: The Folly of Free Money "

Absolutely a must read. This guy is in the same class as FOFOA, although a different style(lots of sarcasm) and subject matter(macro economics). Never once mentions the final
resolution of this (Keynsian) madness, but lays out in a very concise explanation how this won't go on forever. If BRIC's haven't figgered it out yet, they will after reading this article.

For some reason (maybe just a good's night sleep), I feel more certain than ever Freegold is just around the corner!!

Unknown said...

Interesting article discusses deliberate US strategy to De-legitimatize EU security. The Ukraine seems to be a well thought out strategy to cause more reliance on US from EU. It also a possible attempt to slow Russian growing strength, yet may, could easily back fire.

Any thoughts on the TTIP trade treaty that could end up providing USD support mentioned in the article?

http://www.leap2020.eu/GEAB-N-83-is-available-Global-systemic-crisis-escalation-in-the-US-reaction-for-survival-trigger-a-cold-war-to-make-it_a15801.html

simpleminded said...

God bless Mother Russia !
https://www.youtube.com/watch?v=xhnbLoFbpsU

Enjoy !

Lisa said...

Newsweek interview of Professor Steve Cohen (Woland referenced him a few comments above "The American Who Dared Make Putin's Case"



http://www.newsweek.com/american-who-dared-make-putins-case-231388#

Phat Repat said...

jojo
AIACC?

Well, not sure what to call it, but we definitely have issues.

Thanks to you and pj for sharing. I look forward to reading and learning more.

gull_mann said...

Jim Sinclair has been reading FOFOA it seems like: http://www.youtube.com/watch?v=KXGPzDq45gM&feature=share&list=UUG-G8LLr38fQUNZU8K0t-EA

Calling for $50,000 gold when priced in physical market.

Roacheforque said...

It seems to me, that in a perverse way, the faction is now "electronically confiscating" dollars by means of its SWIFT sanctions. Not in the same way it physically confiscated gold in the 30's, a little more like it did in 71, but today we are attempting to "confiscate" the dollar world utility of MoE.

It seems also to be a fitting end, a standoff of sorts, between gold and it's malformed paper proxy.

This could be an interesting week for popcorn and soda POP.

Woland said...

Thanks, Lisa. I was going to post that yesterday, but didn't.
It goes into the subject in greater depth than the short piece
I referred to, as well as providing a view ( if one were needed )
of the career risks faced by those who oppose the "party line"
on issues like this.

Woland said...

and on a lighter note….
we now know why Bo Polny's charts are worth…..what they're
worth……...Over at JSM.….…..a picture is worth 1000 words.

Woland said...

thanks to our "indefatigable" DP, via The Telegraph:

Merkel Fury after Gerhard Schroeder backs Putin on Ukraine
(Schroeder was chancellor from 1998 - 2005)

MatrixSentry said...

Woland,

The thing is that one of these days ol' Bo is going to be right. The HUI will take off to new highs. Problem is the unit of account he will measure the wealth that his shares represent will be debased sufficiently to change the look of that chart when it's adjusted to show real performance. We'll see this adjustment when we divide the HUI index by the price of gold bullion.

Ouch! Bo doesn't see a day when gold must be demonetized. The reason is because he knows gold is money, the only true and best money. As we have seen, when Bo knows something, he cannot see anything else. Poor Bo.

Tommy2Tone said...

No problem Phat.

Re: aiacc, it was this post where I first saw it:

"Of course, ain't nothin' new here. For quite some time in America it's been illegal to employ racists, sexists and fascists, and mandatory to employ a precisely calibrated percentage of women, workers and peasants. Because America is a free country and that's what freedom means."

Woland said...

Hi Matrix;

I assume you know that my comment was really just about
the "amusing coincidence" of the NAME of Jim's dog, as
shown on JSMineset, and a certain chartist who shares that
name, but little else. ( the dog doesn't have a $$ subscription service) For the rest, of course, I agree.

also; in addition to the comments of Gerhard Schroeder, we
can now ADD those of Gregor Gysi. Just google his name;
I can assure you you'll never find it our domestic(ated) Crimea
news coverage. cheers.

toolmaker said...

If my understanding of Freegold is correct, this article addresses what may be a significant move in the right direction.

http://english.pravda.ru/business/finance/17-03-2014/127119-russia_dollar-0/



"In principle, of course, it must be done. Showing such an initiative would mean striking at one of the world monetary systems established 40 years ago. This system is called petrodollar standard. Under this standard all transactions in this market are made in the U.S. dollars. Of course, it would be even a more serious impact than, say, an attempt to abandon the accumulation of dollars in foreign exchange reserves, or even an attempt to lose dollars. Dumping the dollar from gold and foreign exchange reserves is problematic, because blocking by the U.S is indeed possible. This is a very serious thing, we have to prepare for it," shared his thoughts with Pravda.Ru economist Valentin Katasonov, stressing that perhaps not all OPEC members would be willing to support the abandonment of the dollar, particularly Saudi Arabia that has militarily and politically ties with the U.S, so in this case everyone would act individually.

Yet, according to a leading expert of the Oil Union Rustam Tankaev, it would not be difficult to introduce certain mechanisms that would allow Russian energy to trade without the dollar. The U.S. will feel some loss because the base of the U.S. currency as a result of sanctions against Russia will shrink noticeably.

"There is already a tense situation in the world in relation to the dollar. We all know it very well. The dollar is not a very stable currency. In the absence of other factors, the dollar is declining, and the transition to the gold standard has been mentioned many times, and other currencies were proposed," said Rustam Tankanov. "In this situation, taking any country out of the dollar zone would simply mean bringing the dollar down. Quite a significant number of commitments in our foreign reserves are in dollars. If they are dumped in the market, the U.S. dollar will significantly suffer."

Tommy2Tone said...

Welcome toolmaker and I'd say you've got the gist of it.

Tommy2Tone said...
This comment has been removed by the author.
PS said...
This comment has been removed by the author.
Michael dV said...

I haven't read much on the Ukraine issue from the European point of view but it seems to me that now might be a good time for the Euro to make it's move.
The USA moves to isolate Russia but the EZ needs it's products. The Euro is a stable currency, lots of gold and has been managed to prevent inflation by several countries, not just one.
The Euro could offer itself as a 'reserve currency for a while'...just long enough for the Americans and Russians to come to some agreement. The ECB could demonstrate it's abilities.
If it was to truly become a global reserve though it should have more gold. It could offer to buy it, physical only, market price...see what happens.
These are of course freegold daydreams but the Euro wasn't put in place for the fun of it. It will have to do it's thing some day...why not now, why not this crisis.

vizeet srivastava said...

I think because of fiat based monetary system communism had lost its ground. With FG we may see return of communism in some countries especially ones which will be devastated by HI.

vizeet srivastava said...

In most countries except US and few banana republics in Africa people cannot easily get weapons. The extremists gets these weapons from some where illegally. And countries that give weapons don't give it for free.
I see people giving money to NGOs for social cause without keeping track of where the money finally lands. This is the problem with free money which is going to reduce greatly once we are in FG.

Woland said...

oy neva faut oy'd seen v'day wen DP retweeted FC on DG!

KnallGold said...

Yeah, did the US make a fatal mistake with that Ukraine intrigue?

Anonymous said...

Extremely pro Euro interview by Jim Rickards on Netherlands TV (in English after the introduction). He states that the Euro is "the strongest currency in the world," right now.

Also his predictions of what the next international monetary system will look like - an SDR, possibly a gold backed SDR, or even gold as the reserve.

http://www.rtlnieuws.nl/economie/home/rtl-z-interviewt-econoom-james-rickards-het-monetaire-systeem-zal-instorten

Anonymous said...

http://ineteconomics.org/sites/inet.civicactions.net/files/BWpaper_OROURKE_040811.pdf

A Tale of two Trilemmas - A european view on economics and EMU

"At one level, this can be regarded as a damning indictment of Europe’s political leadership. At another level, the political trilemma suggests that it can be seen as proof of the primacy of politics, the problem being that it is national politics which are currently dominant, and that are making an effective common response impossible.
If the nation state remains dominant within the Eurozone, then the trilemma suggests that there are two logical possibilities. Either public opinion is successfully ignored in countries like Germany, Greece and Ireland; or European Monetary Union will come under threat in the longer run.
Something has got to give."

Jeff said...

Thoughts on the TIC data? European banking centers are the new caribbean banking centers?

Edwardo said...

Sir Tagio,

What you've recounted has been Rickard's line for as long as he's been out there flogging his wares. Unfortunately, no one who interviews him is armed with enough insight to point out that, since SDRs are just a weighted basket of currencies, they have no hope of addressing the level of debt that is acting like an anvil hanging from the neck of the IMF$. Couple the half baked SDR scheme with the no hope for success confiscatory bail-in gambit (that some believe is a fait accompli) and all roads lead to physical gold as the only way out of the burning theater.

Memo to Jim R, Jim S, Jim W, Marty A, KWN etc. etc.: Gold's not going to make it to the promised land until the paper market's down for the count.

"Miners, what miners? We don't need no stinking miners."

Have a nice day.

DP said...

Euroclear

Woland said...

It now appears the Mauritshuis has sold "Girl with a Pearl
Earring", and has {temporarily} parked the proceeds in U.S.
Tresasuries

Blake said...

@ Jeff --

All the TIC report tells us is where the transaction took place; not the nationality of the buyer, the nationality of the ultimate owner of the Treasury, or where the money originated.

Visit the TIC frequently asked questions and they are quite clear...this data is an "imperfect estimate provided primarily bu US based custodians".

http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticfaq2.aspx#q7

Michael dV said...

Woland
I give up…Yiddish mixed with Elvish (the accent you were going for above).

Franco said...

The January 2014 Treasury TIC data shows that withdrawal of structural support from foreign central banks is ON, to the tune of $17 billion of treasuries sold.

DP said...

May be mistaken, but oy fink it might've bin frum Catford or Blackheef, innit?

Unknown said...

Ackshally Twreekal, I fink it wus more Cwristle Pallis?

Awwight?

KnallGold said...

Go Congo! The $hrink continues...

"..Congo’s efforts to stem the use of the dollar is being replicated in other African nations. Neighboring Angola last year introduced a foreign-exchange law that has halved the amount of dollars auctioned by the central bank, while Ghana last month announced a clampdown on dollar sales to prop up the domestic currency. .."

http://www.bloomberg.com/news/2014-03-18/congo-to-debut-3-month-bonds-as-seeks-end-to-dollar-dependence.html?cmpid=yhoo

Woland said...

I don't mean to sound conspiratorial, but my repeated written
requests to the Mauritshuis for a full, independent audit of
their paintings ( including authentication ) has been met with
a stony silence. This has added to my fears re: the fate of
"Girl with a Pearl Earring", whose loss ( to the FED??) would
be a national tragedy for Belgium.

Dante_Eu said...

Speaking about Belgium, funny comment on ZH:

Pink:
"Damn! I wasted all these years learning Mandarin and now I need to learn Belgish!"

Hard working people those belgians! :D

Steve said...

As far as I know, the Mauritshuis and The Girl are in Holland and not Belgium and I am pretty sure about it. And Belgians speak either Flemish (dutch) or French. There is no such thing as Belgish.

Dante_Eu said...

With all due respect Steve, after all I'm from EU, Belgish is as real as Bosnian! ;-)

Dante_Eu said...

What's the difference between a dialect and a language?

If a dialect has an army then it's a language. :-)

Woland said...

Regrettably, your facts do not fit my story, and thus I am
forced to reject them, regardless of what the history books
may show. Greetz!

Anonymous said...

Edwardo,

Re: Rickards' story-line, agreed, he has been singing the same song for awhile. I take his story as the way the US would LIKE to see it go down. How great if we could replace the fiat dollar with the fiat SDR, and continue getting free stuff. I suppose that the thought would be that if the SDR is adminstered by an international committee of various component states, the US's allotment will be liimted somewhat (as oposed to now), so it will be a "stronger" currency. If the Western powers can't sell that story to the BRICS, they'll next try a "gold-backed" SDR. Problem is, hasn't the Middle East and the BRICs seen this story before? Are they really going to be fooled by a "gold-backed" SDR that will inevitably lead to the "closing of the IMF gold window" some twenty or thirty years hence? I suppose anything is possible but I believe this SDR talk is desperation / hope that we can keep the relatively free stuff flowing.

By the way, I think the reason Rickards' keeps mentioning that the US might keep all of Europe's gold and make them "earn" it back is also to apply intimdation and gain extra negotiating leverage in the coming discussions - so it goes our way, and not the gold reserve way, and to outweigh China's ultimate weight in the negotiations. This would also explain why we haven't given Germany its gold back. It's not because we don't have it, it is being held hostage to the coming negotations, to prove a point.

I also think this posturing of the US as a new energy producer superpower has a lot to do with positioning itself for the eventual re-negotiation of the international monetary system.

Just my 2 cents.

Woland said...

@BankingUnion_eu , your one stop tweetshop for all things
ECB SRM and SSM. hooray! today is a big day! Greetz!
{;<)>>

Woland said...

oh, and a quiz for all the "deep thinkers" out there. ( and it comes with a prize, to boot!) (not that you're sure to like it.)
What is the connection between Hermann Hesse and the
Central Bank of Denmark?

Victory said...

From the WSJ this morning...

March 20, 2014 5:36 AM
European Central Banks May End Restrictions on Gold Sales
Over the Past Five Years Central Bank Gold Sales Have Decreased Significantly

By HANS BENTZIEN
FRANKFURT—European central banks may end a 15-year-old restriction on sales of their gold holdings this year, a top German central banker said.
"The negotiations are still ongoing," Deutsche Bundesbank board member Carl-Ludwig Thiele said in a recent interview with The Wall Street Journal. "No one can see into the future, and therefore it is currently under discussion whether it should be continued," he added. The Bundesbank currently holds around 3,400 metric tons of gold.


In 1999, 15 European central banks agreed to sell no more than a total 400 tons of the precious metal over the following five years. The agreement was extended in 2004 among a slightly smaller group of participants, but the maximum was increased to 500 tons. Finally in 2009, the then 17 central banks of the Eurosystem, the Swedish Riksbank and the Swiss National Bank extended the agreement for another five years, lowering the maximum back to 400 tons over the next five years.
Mr. Thiele indicated that one reason the agreement may not be extended is because over the past five years central bank gold sales have decreased significantly. Instead, central banks around the globe have increased their holdings in the aftermath of the financial crisis. In previous years, it has only parted with four-to-five tons, which it gave to the Finance Ministry to use for making gold coins.
Otherwise "we're not selling any gold," Mr. Thiele said.

Motley Fool said...

I would like to share my thoughts on the first Fed press conference for Yellen, that has been called disastrous.

Specifically highlighted was this comment :

“So the language that we used in the statement is considerable period. So I, you know, this is the kind of term it’s hard to define. But, you know, probably means something on the order of around six months, that type of thing.”
Hmm.
I will start by noting I agree this was a disastrous statement, and elaborate as to why I consider it such.
The first thing I would like to note is that the Fed under Bernanke has used the term 'considerable period' or synonyms before, usually in relation to something like how long interest rates would be held low. I have always understood this to mean, and it has been implied to mean something in the region of 1-3 years, with perhaps a median of about 2 years.

This would imply that medium term consideration was t about the 6 month to 1 year range, and short term in the 3-4 month range.

Now, those in industry use these estimates to guess at the likely environment going forward, and base contracts upon such. If I know for example that the fed will keep rates low for the next year at least, then I can easily sign a yearlong contract.

A period of 6 months however is very short in terms of the business cycle. Dangerously short to be making forward estimates from.

The least one can take from it is that rates Could go up in six months time, and thus it would be dangerous to sign a year contract.

If one uses 6 months as the basis for long term projection, then medium term would be 2-3 months and short term would be one month.

Now, there are two main factors that determine how one would define long term in this context. The first is the amount of focus one is placing on the present, how much of your attention the current minutia require. The second is your confidence in the future remaining the same as the present.
By defining this 'considerable period' differently, specifically shorter, than her predecessor, she is signalling both that she is very concerned with the present, and has little confidence in the future( and perhaps their ability to manage things forward for longer than this).

Of course 'considerable period' could be defined as even a shorter timespan, quite reasonably. It is all a matter of perspective. Consider Gideon Gono at that height of the Zimbabwe hyperinflation. For him 1 month would have been a considerable period, 1-2 weeks medium term, and perhaps a few days short term. It might even have been worse.

This does however illustrate the point of those two factors.

So what remains to be asked is how long one could define it and remain credible.

I think 6-months is too short to retain credibility, and that is the crux of the issue ito why it affected markets so badly.

At the very least one would define it as one year, if you wish to illustrate confidence in your own power to steer future events.

/ramble off ;)

TF

MatrixSentry said...

Motley Fool,

I have no real issue with your thoughts. However, I wouldn't describe Yellen's language as disastrous. Apparently nothing can phase this stock market. Good news, stocks way up. Bad news, stocks up. Yesterday's price action was a burp. The feasting continues today. My peak at the MSM analysis, I know that is a joke, is that things are coming along swimmingly. Heard talk of a balanced budgets coming soon to the US and a trade surplus in the future. Debt is not a problem, best fundamentals in the world, energy independence, etc, etc.

Funny thing is those that have a decent job are likely stupid enough to believe that crap. That is plenty sufficient to keep us hurtling at top speed to the wall that awaits.

Roacheforque said...

Victory,
An interesting stab at desperation from the FIAT brigade. Perhaps the CBs can "stick it to the east" with all that useless metal, all to the greater glory of a FREE MARKET IN PAPER!!

As for the Bundesbank and there 3400 tons of gold, we really must understand the definition of "hold" in that context of Sir Hans. Will the FED act as sales agent for what they hold, or haven't they actually already been doing that all along?

More clues over here Sherlock. The Con's afoot!

Roacheforque said...

I hate when someone spells "their" wrong. Then I do it too. Their must be some disconnect between the brain and keyboard.

Edwardo said...

Sir Tagio,

Are they really going to be fooled by a "gold-backed" SDR that will inevitably lead to the "closing of the IMF gold window" some twenty or thirty years hence?

We both (think we) know that the answer is a resounding, NO! And, what's more, it wouldn't take nearly a generation and then some, for the gold to go, but, rather, a much smaller interval of time before the sands ran out of that misbegotten hourglass.

All these dopey measures that all sorts of (would be) analysts propose as characterizing the next system have, as you say, the whiff of desperation about them. In truth they remind me of the denial/negotiation portion of the Kubler Ross Model of the five stages of grief.

Matrix's comments about the delusional phantasmagoria in which the MSM operates fits in nicely with this idea as well.
The entire band that composes this group give a bad name to the condition of whistling past the graveyard.

I am almost tempted to feel sympathetic towards all the parties involved except for the fact that the present system is such a massive abomination. Speaking of which, I see Obama has signed orders to sanction Russia. Gosh, it does all seen to be coming together so nicely with respect to the old system setting up to do the final swirl of the bowl.

We have The Fed under "Old Yellen"- as I recall, it didn't end happily for Old Yeller- tapering with gusto into a secular trend by foreigners away from U.S. debt, increased geo-political tensions between the two biggest planetary power blocs, namely the U.S. and Russia/China, and now the EU banking union has been approved.

Phat Repat said...

The market is a funny fickle place; it goes up, it goes down, big deal, opportunities on both sides. Everything can't possibly be manipulated at the same time, can it? No, it can't.

However, I agree that this just might be the year that we go off the rails. The constant threats and interference in the affairs of sovereign nations, and their citizens, has got to be reaching the point where serious blowback can and likely will happen. I believe the PTB are searching for the scapegoat and Russia just may have been pushed into this position. Life's a funny thing.

Also, not sure the thoughts of John Williams from Shadow Stats around here, but he feels HI hits this year with a 90% probability. I have followed some of his commentary and while he has felt a HI Great Depression will visit us, I don't recall him ever putting a hard date on it. Hmmm... We shall see...

Victory said...

Roacheforque,

The article really isn't saying all that much but I thought it of note that it was in the WSJ and it's certainly a good reminder that the Central Bank Agreement on Gold is coming up for renegotiation.

Since the article isn't saying much one can place their own bias on it any way one wishes...is it bearish or bullish for physical gold? The way I'm choosing to frame it is that if the 'Old World Order/FreeGold Market' monetary system is going to emerge then the Gold must flow. It's hard for the Gold to flow with a 400 ton cap, or any cap for that matter.

The CBA is a five year agreement (at least it has been historically) so if the ECB/BIS are planning for the next five years it makes sense to me that they would remove this restriction, especially if they are leading by example.

It will be very interesting to read the terms of the new agreement later this year.

-v

Victory said...

Also kind of amusing the author doesn't even know what he's writing about because it sounds to me like he's saying the agreement was not to sell more than 400 tons over the following 5 years, when the agreement was actually not to sell more than 400 tons per year in each of subsequent five years for a total not to exceed 2,000 tones. Big difference. Either that or the author is just a really poor writer.

the CBA on Gold is up for renewal at the end of Sept btw.



Jeff said...

John Williams is wonderfully consistent; he predicts HI every year. One year he will be correct.

Issue Number 41
April 8, 2008
Hyperinflationary Depression Remains Likely As Early As 2010

'Hyperinflation could be experienced as early as 2010, if not before...'

http://www.shadowstats.com/article/hyperinflation


Michael dV said...

John Williams is now in the same boat as the rest of us. He sees the world through GAAP and previous accounting methods. He doesn't have any better idea than the rest of us as to how long the monetary powers can keep things on track.
He is a good source to show how methods of analysis have changed to benefit the government but I don't think he has more predictive abilities than any other writer.....and he made the always fatal mistake of predicting timing....ooops...

Jeff said...

If you like John Williams I recommend also reading Doug Noland's Credit bubble bulletin. It's a weekly trip through the entrails of our misbegotten monetary system, peppered with exclamations of shock and horror, and statements that this can't go on. I've been reading it for about 10 years, always the same thing.

But one day they will be right, for the wrong reasons. Williams and Noland are right; the end should have come a long time ago. They don't know why it hasn't so they just keep going on and on with the wrong explanation. As Indiana Jones tells his faithful sidekick about why the nazis won't find the room where the ark is hidden; 'they're digging in the wrong place'.

FOA 2/26/00 - So, dollar hyper inflation never arrived and gold did not make its run because world CBs bet your productive efforts on supporting the dollar reserve. In the process, the US standard of living was raised tremendously on the backs of most of the worlds working poor. But this is not about to last!

FOA 3/10/00 - My point was that their actions can only be justified from a position of "buying time"… Their Central Banks support polices were a decision to waste their citizen's productive efforts in a process that held together a failing currency system.

FOA 4/19/01 - What changes is the recognition of what we do produce for ourselves and what we require from others to maintain our current standard of living… We will come to know just how "above" our capabilities we have been living. Receiving free support by way of an overvalued dollar that we spent without the pain of work.

FOA 7/16/01 - The American dollar has bought its makers a lifestyle that is at odds with this new thrust in money use. A reserve currency today must allow its value to be set solely upon its money function [MoE arena], not its function of retaining wealth [SoV arena]. Use trends today are forcing money creation policy and money values to be determined by wealth outside the official money realm. All the while the dollar holders are fighting to stop this from happening.

FOA 10/5/01 - Even the third world didn't want to hear it. They figured that any return to a hard money system would hark back to a time they remembered well. These guys suffered during the early century and no one was going to tell them that the gold standard wasn't at fault. The US is today, and was then, robbing them blind but the situation seemed, to them, that this new dollar standard was building them up. Looking at it all,,,,, we robbed the Japan life style standards the most. All to buy us an almost free standard and they loved it.

FOA 10/8/01 - We managed this threat with help from our Euro friends; somehow thinking they enjoyed and wanted our fleecing their lifestyle to the same degree we did it to the rest of the world. Their cooperation, we will find out, was but a structural policy that bought time; time for a dollar replacement to be made.

FOA 10/26/01 - Again; this all works as long as the world "buys into" using our dollars. As I said; an expanding fiat works to grow the economy thru expanding credit buying power because the fed can support the system with credit creation that has no "inflation premium". That lack of premium only exists as long as Americans can exchange free credit for real physical goods. Once this perception changes it's over. Once the world understands that it's not local US goods that stands behind dollar growth, but less expensive foreign goods,,,,,,,,,, the stage is set for our "supporters" to sell to themselves! Making themselves
"lifestyle rich". All they need is Another currency unit.

Indenture said...

Very nice Jeff.

Phat Repat said...

Jeff
From your link:

"The official actions likely have advanced the timing of the hyperinflation to the much nearer future, perhaps within the next year or two."

To me, "likely have advanced", isn't exactly putting a number to it so, no, it's not the same thing. So, by stating a 90% probability; well, that speaks to credibility and of course we shall see. But, to your point, yes, he has a service to sell and his view is HI is the endpoint of our monetary experiment (not unlike the beliefs of FG adherents, or?).

MdV
"and he made the always fatal mistake of predicting timing....ooops... "

Ain't that a no kidder. :-) Not sure about you but there is an uneasiness just below the surface seemingly waiting to explode... Or, perhaps, it's just me and my gut still getting accustomed to western food and the low quality ingredients we use? I dunno...

Roacheforque said...

V,
Can't comment on the totality of the WSJ article (didn't read it) but agree that the source is notable. As I consider the WSJ a real mainstream information source, I interpreted your snippets from the angle of "what is the perception they are being told to manage here."

So when I see, "European central banks may end a 15-year-old restriction on sales of their gold holdings this year" the inference to me is that the signal being sent out to the unwashed masses is the same as in any former public pronouncements of central bank gold sales.

Meaning that the central bank is a wise seller and buyers, whoever they may be, are stupid and barbaric. So "don't be stupid and barbaric like those nameless, foolish buyers. Sell your gold too and buy equities."

So while you and I may see this as one thing, I think the intent is to shake out the Lemmings as they plunge over the cliffs of paper promises.

And that meme fits well the recent mild decline of paper gold as well.

But I am just a conspiracy theorist, and proud to admit it.

Michael dV said...

My personal 'uneasiness' has been a poor indicator which I no longer trust. I do talk to a lot of patients and family though and I think there is a fairly uniform awareness that government numbers about inflation and unemployment are bogus. Some don't get it but enough do so that I think saying 'there remains little trust in the words of the government' is probably true.
Obama has his die hard fans but rational people with something to lose are feeling nervous and are aware that we are not being told the truth....about much of anything.
In my life I have only seen this level of loss of trust during the reign of Nixon.
I personally believe nothing, in fact I look behind me when they say look out ahead. I am convinced that the government is pretty much looking out for number one and there is little real care for the people.
They are in a situation in which truthfulness can only lose them their jobs. NO ONE is both in the know and telling the truth.

Motley Fool said...

Michael dV

On that topic : http://www.zerohedge.com/news/2014-03-20/what-surprise-it-turns-out-they-lied-about-deficit-last-year

Roacheforque said...

I think John Williams has been plagued by the same "suspension of fundamentals" dilemma that most here seem to understand from the many mentions of it by A/FOA/FOFOA.(and now Jeff, nice collection there).

It's possible the phenomenon has befuddled so many for so long that it has taken on a sort of "dollar mystique" or "suspension of fundamentals value" (SOFV) which buoys the dollar further by instilling the "confidence that defies all logic".

It certainly has allowed the mainstream media to represent Obama as a Nero like "dollar narcissist" weilding sanctions with bravado and threats quite unbecoming to any sort of magnanimous ruler (as the USA once desired to portray its benign and just empire).

But it's difficult to understand who is pulling his strings and why. I find it hard to accept that Obama has some innate sense of monetary warfare, and is spouting forth his threats to Russia of his own accord.

I must say, that the Narrators have me a bit confused on the public relations angle to the US international narrative. Maybe PR went out the door with ethics and morality, but I do feel that the US is playing a losing hand with much swagger.

Obama the Bluffer?

M said...

vizeet srivastava said...

I think because of fiat based monetary system communism had lost its ground. With FG we may see return of communism in some countries especially ones which will be devastated by HI.

Western style democracies are a failure. A communist regime who believes in capitalism (China) is better then then these socialist mobocracies. The only problem with China is that its Keynesian.

The Putin system is better then democracy.

vizeet srivastava said...

M
I think which system will work better varies country to country. I personally prefer India form of Parliamentary Democracy which not work in most of the other countries. Direct democracy works very well in Switzerland. I think communism is helpful in countries with low basic resources. I count Russia in that because as solar power etc become cheaper oil will not be most important fuel. This will take few decades. I see large solar projects coming up in India. Thorium reactors can be next big thing.
US never support Thorium reactors because it is not viable fuel for nuclear weapons.

Anand Srivastava said...

M

The society is always divided into two classes of people, those who have money and power, and those who don't.

In China style of communism, the people with money and power are living a capitalist life. They can make more money. The people who don't have money and power don't have any rights. The govt can simply ask them to move from a place if they need the space (for real need or for some people who have money and power). The have nots also have to work in very bad conditions and at very low wages.

In the American style of capitalism, the haves control the companies and the companies control the govt. The have nots are expected to give a large part of their incomes to the govt, which hands it out to the companies. The have nots are too busy just earning enough to survive. The western world (and increasingly the eastern world), has increased consumerism to such a level, where even if the have nots could have a nice life with their incomes, they still toil for the useless stuff thinking they don't have enough to survive.

The European system is a mix of socialism and capitalism, where people are free to make money, but they are expected to hand over a large part of their incomes to the govt. Which uses that money to support the unproductive part of the population.

India is a democracy, where everybody does as much corruption as they can. The govt is of the corrupt, for the corrupt, and by the corrupt.

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

Agreed Anand,

Indian democracy corrupts across the population which is different from most of the other countries. Problem is due to lack of law enforcement not due to political structure. I think the law we have today is mostly inherited from pre-independence which was not improved to make it more efficient and further the size of judges are not increased to match justice requirement. This is done to support corruption. There is one fundamental problem with democracy is that it promotes lobbying. Parliamentary democracy does best in bringing representatives of most sections and geographies to the platform.

michael3c2000 said...

http://www.washingtonsblog.com/2014/03/djia-hoax.html
Some things up with the Dow.
Don't look at the giants!
Everyone's at the show.
The numbers are all in compliance.
You gotta beef with science?


KnallGold said...

-S&P downs Russia, Fitch ups USA. It isn't even comical anymore. Just fucking tiresome.

-Krim goes to Russia. Putin vs. US now 2:0. Face it, Washington made a terrible mistake with that intrigue, even risking WW3. And economic warfare, yeah good moment now. Suicidal maybe...

-Did POG reverse at a lower high than last Aug? At a time when the personal uneasiness indicator got hits in its trustfulness, one has to watch others. And no, GLD didn't even add 33t's to its stock (those 33t's..).

-a hmm from there
"By Ambrose Evans-Pritchard
The Telegraph, London
Thursday, March 20, 2014

China's yuan has suffered its biggest one-week fall in 20 years, nearing key trigger levels that threaten a wave of forced selling and mounting stress for those with dollar debts. .."

-where are we going right now, yes, *sigh*. Maybe time to rrtfb and see what has changed. In the end, not much. Just more foul gases from that $IMS carcass leading always to the same des- and delusional destiny.

Really liked the "Liberator" from Spear of Destiny, for its punch and lyrics, ah those 80'ies...

https://www.youtube.com/watch?v=wnuB1fwhdak

May we be close to the FreeGold Liberator!

KnallGold said...

In the Go South Korea thread :-)

Official gold market to open in South Korea

http://english.hani.co.kr/arti/english_edition/e_business/629279.html

Anand Srivastava said...

Vizeet:

I think the real problem is the constitution. But lets discuss it elsewhere.

Sam said...

when it comes to having money I prefer to separate them as "debtors and savers" rather than "haves and have nots." Power is a more complicated subject. If you equate money to power I imagine you would be surprised if you were the rich man in the room when the sellsword inserts his blade into you gut and kneels before the priest or king.

burningfiat said...

Yes Sam!

"Debtors and Savers" have a nice flowish ring to it.
"Haves and Have nots" have a stockish sounds...

I read some article today about the 5 richest families of UK, which apparently have more than the 20% poorest part of the population (surprised it isn't more)...
Stock-envious people (socialists?) would probably like to redistribute the stock of those 5 "have" families to the poorest 20%!
Tell you what, that wealth will be gone in 6 months and the poor will ask for more again. Were will the new flow to the poor come from? Confiscation of wealthy peoples already taxed savings is not conducive to further (super-)production. I don't like the media focus on the stock of the wealthy...

I agree with our host. It really is about the flow in all things concerning money and wealth...


Alien said...

Burning ,

I have a solution: let ua kill the 20% and the five families will be secure.
What you say, Mr. Billionaire?


burningfiat said...

Alien, who the hell talked about killing people? But yeah, that sounds like some of the inhumane stuff you commie scum are capable of!

All I'm talking about is a less static concept of haves and have nots. Change is possible either way through the _flow_ of money through honest trade, commerce and hard work! A debtor can easily turn into a saver by consuming less and/or producing more. BTW, the top of the debtor class might not necessarily be 1-1 with the 20% poorest.
Please read http://fofoa.blogspot.com/2010/07/debtors-and-savers.html
Many debtors live really classy life-styles...

BTW, how are the Opus Dei conspiracy theories working for you lately?

Alien said...

opus dei???? wtf should I care?

Left and right is sth for idiots, read some history /genemarchbanks as starters and leave behind D as its climate freezes your brains!

Alien said...

and btw Burning, thanks for your daily apps -how many commies watch it, you little ape? Even if it most probably has no meaning (screwt....defrag..)
Take care & go south!

Sam said...

Or the poorest 20% could kill the 5 richest families? Which scenario has happened more often throughout history? Just being on a list called "UK's richest" puts a target on ones head. Why? Because you produce stuff people want and they trade you paper for your efforts. Remember having money means you have only completed 1/2 of a trade. You gave someone a product or service and they gave you a depreciating debt instrument to hold. What a deal, lets ramp up production some more! Whoops give them too much stuff in exchange for paper promised and they hate you for it!

Freegold is an elegant solution to the alternative of making these "producers of value" hide in the shadows, reduce or limit their production, have their successful business ventures socialized or confiscated and then ran into the ground by people that are better at taking than creating.

burningfiat said...

Alien, I dunno, you tell me? Bilderberg, OpusDei?

I would give you the benefit of doubt, but your latest comments are shit. Who talked about left/right and killing class enemies other than you? The debtors/savers concept is opposed to the left/right concept. Please read this blog and rejoice that it is actually possible to go from a have not to a saver in this world, by really not that much effort.

Ps. You don't get to tell me where to go. Mind our own business...

Alien said...

Politics IS about conspiracy, whether you get it or not, and of course you don't. It's done in secrecy. If it weren't you'd not be here readying FOFOA. It is also geostrategy and mind controlling! Get that it in your skull better sooner than later.And for your information: I've read this blog since almost it's birthday with all wonderful posts from FOFOA and also with its infamous detractors, trolls and retarded and rude participants.
Your choice with whom you get in line!

"Class enemies"´??? Are you drinking so much at 3am?
I don't have class enemies, maybe you do.
Saving I've done all my life, thanks for educational advice but I've got it as family tradition. My family knew about gold for generations even if hindered by legisslation they've always had some coins aside. Tradition, my dear.
Last but not least: my condoleances for living in a country depriving you of your paper in such proportion! It must be very unpleasant to buy your gold from the crumbs remaining in your wallet at the end of the month and I fully understand your commie-hate.LOL
I really feel your pain.

M said...

@ aand saristava

"India is a democracy, where everybody does as much corruption as they can. The govt is of the corrupt, for the corrupt, and by the corrupt. "

Interesting comments.

You know what you get when you have a democracy and the people actually care ? Thailand. That is why they are in perpetual political crisis.

Somebody needs to teach the Thai's that, in order for democracy to work, you have to turn a blind eye to mostly everything.

Democracy is a joke

Trannyofthepresent said...

Burningfiat,

You'll have to forgive my friend Alien. You see, he's a special guy who's been having some real bad problems and... gosh, how to even put this. I guess I'll just come out and say it:

I have it on good information that Alien is in the late stages of the syph. Yes, it is true. And while I'll spare you some of the more graphic details, symptoms include: difficulty coordinating your muscle movements, paralysis, numbness, blindness, and perhaps most pertinently dementia.

See that? Nothing to be done about it.

Alien said...

Good night, poor retards!

Alien said...

"And so you see, it is not freegold, but freegold n' silver. If you reject this conclusion, you are a biased cultist." .... said a troll called Time of Diarrhea eager to become one of the rich.

Saturday jokes. ROTFL

Nickelsaver said...

Tranny,

Alien is a female. Despite her masculine demeanor (which explaines your attraction to her) she is definately missing the WHY chromer.

Alien,

Obviously something about this blog resonates with you, else you would not return. What exactly do you like about it?

Alien said...

Dear Nickel,
don't underestimate my knowledge about FG.
Secondly I have a hope that as soon as it happens the world will get rid of the ugly face of EUSSR. Because I just hate this world order imposed by some dirty mericans and their bought vassals evrywhere else. My political direction is ordoliberalism in case you want to know without insaine mccains, barossos, and their likes.


Alien said...

Oh, Nickel I had to laugh.... that's not my blog.....
I'd love to be that young! I just stole it from someone and this someone is ...no, I won't tell you. The NSA knows already. Ask them. Morning humor!

Alien said...

Oh, Nickel, I do not reurn, I am always here.
Do you mind to become wealthy some day with only your yellow savings? Wouldn't you like to take home your troops from all over the world and feed them yourselves some nice day?

Jeff said...

Dear German nihilists; this is a private residence, man.

https://www.youtube.com/watch?v=ajirS06GQyM

Dante_Eu said...

This aggresssion will not stand, Man.

Woland said...

just out, 21 March 2014
Robert Pringle's Viewpoint:
"Storm Signals over World Money"

Motley Fool said...

Matrix

Perhaps. It would seem the market reaction was one of incredulity, as if she misspoke. With fed head Bullard now confirming that was not the case the markets have reacted negatively again.

Then ofc we should not forget that at present pace of tapering it will reach zero by October. Even though we know the end result is the front lawn dump, at some point market participants will price in QE at zero. I think this is likely to happen in the next month, or two at most.

Let's see what happens.

TF

Edwardo said...

Perhaps you can give us non subs an encapsulation of Mr. Pringle's view, Woland.

Woland said...

Hi Edwardo: I don't think these essays needs a subscription. When you google - Robert Pringle's Viewpoint, they all should
pop up. I actually don't have a subscription to to central banking.com, just to "the money trap". If it doesn't work in
a few days, I'll put it up with an assist from Mrs. W. Cheers.

Knotty Pine said...

Link here

Woland said...

Thanks, KP . As an SWTWHIF, I've "always relied on the
kindness of strangers". {;<)>>

Edwardo said...

The various monetary luminaries quoted in the article do a passable job of telling us what they don't like about the present system, but, as soon as they've given us a sense of what they deplore, they strain to say anything concrete about what sort of monetary system they have in mind to act as a replacement. I hasten to add, that within that context they never, ever, reference The Euro and its unique attributes.

I did, as per the following snippetGovernments have been warned. Lack of attention to the malfunctioning of the international monetary system is damaging the world economy and threatening international cooperation. Leading financial statesmen, central bank governors and representatives of ascendant powers ask the United States and other developed countries to pay attention. Nigeria shows the way events are movingtakeaway that a certain urgency seems to in force now, which one can reasonably assume implies that change is coming sooner rather than latter. But, again, not much in the way of specifics are offered.

Knotty Pine said...

Hi Woland, try this. Just paste your link where it says URL and you can enter your mysterious acronym where it says anchor text. Then click on submit, then select all and right click on it and copy and paste in your comment.

whatever-fits said...

Here is a thought to get things back on topic here. I do not recall a specific description and thorough discussion of the gold game being played in China with CCFD's. Yet here is an interesting article from Zero Hedge which sheds some long needed light on this topic. Ever wonder about those early morning hits to the gold price in Asia? Here is a link.

http://www.zerohedge.com/news/2014-03-22/how-china-imported-record-70-billion-physical-gold-without-sending-price-gold-soarin

I look forward to hearing comments on this board about this topic.

Edwardo said...

This piece from ZHis worthwhile, though one still needs to read it with the usual filter reserved especially for ZH.

whatever-fits said...

Every board seems to require an adjustment to it's culture as does this one. Pray tell exactly how do you filter your view of ZH posts, and how does that apply to the topic raised by the article?

Anonymous said...

@whatever-fits

ZH is prone to hyperbole, frequently hyping up non-events as though they are big events, sometimes intentionally misleading the reader, mostly for the purpose of generating clicks and keeping their resident click-monkeys pumped up w/adrenaline and populist fervor.

ZH is also comprised predominantly of "Hard Money Socialists." They are philosophically against "fiat currency," and love "fightin' teh system bro!" They are all about "power 2 the people" and think that all problems are because of corrupt "plutocrats," "oligarchs," and "elitez." So despite being ostensibly right-leaning in their nominal opposition to today's welfare state, there is a not-so-subtle undercurrent of resentment of the rich, and they also kowtow to dominant leftist ideologies like feminism. Basically what I'm saying is that they're dirty commies.

Notwithstanding all that, compared to other sources ZH is a decent place to gather important news related to the issues we discuss here, as long as you can tease out the hyperbole and bias.

Indenture said...

whatever-fits: Would you like to describe the conflicts between the Zero Hedge article and the principles of Freegold?

Anonymous said...

Ah and I forgot to mention one important point. In line with their tendency to blame "elitez" for everything, ZH is prone to giving credence to conspiracy theories, whether it's 9/11 conspiracy theories, conspiracies about "elitez" stealing gold from CB vaults, "silver manipulation," etc. This is all, of course, pure unadulterated bullshit.

PS said...
This comment has been removed by the author.
PS said...
This comment has been removed by the author.
The Transparent Unicorn said...

"ZH is prone to giving credence to conspiracy theories, whether it's 9/11 conspiracy theories, conspiracies about "elitez" stealing gold from CB vaults, "silver manipulation," etc. This is all, of course, pure unadulterated bullshit."

Well, I don't know about silver or gold, but in the case of 9/11, if there is one thing that is "pure unadulterated bullshit" it's most likely the official mainstream version. Or do you still believe in the 19 men trained in Afghanistan caves whose passports were found on the streets (this is also a "conspiracy theory" by the way - I love it when people who blindly put all "conspiracy theories" in the "bullshit" category don't realize that many official accounts are also conspiratorial...). And let's not even get started about WTC 7...

I know this is not the topic of FOFOA's blog, but any informed person defending the official 9/11 account in 2014 deserves to be ridiculed. It's one thing to be skeptical, but claims of "pure unadulterated bullshit" are going way too far.

whatever-fits said...

Well I was hoping for a discussion regarding the circularity of the CCFD's and the actual relevance that may have to advancing the the Freegold theorem. My feelings about the infantile nature of the ZH adherents/crowd or the sensationalization of gloom and doom as a marketable commodity are not of interest to me. Rather I hope to gain a clearer picture of a complex subject. There a multitude of sites and ZH does often have news that surfaces there before many other venues, so my apologies to the sensitive and defensive on FOFOA. I once made a cash donation here and may again. I think FOFOA works hard to present a viewpoint quite unique. So back to the CCFD's any thoughts?

Motley Fool said...

whatever-fits

The ZH piece offers too few details to work out the exact mechanism of circulation of warrants leading to multiple claims. If we could have the original piece of research then more thoughts are possible.

TF

Motley Fool said...

Ps. I can however offer you one link to the FG-theorem. Price suppression via this means caused increased physical gold flow. This shortens the time horizon, since that gold is not coming back.

whatever-fits said...

Motley Fool

I do appreciate that post script comment. A very simple thought, but yes likely a meaningful factor in hastening the reset of the gold market. I know from a little personal history that China is not a very stable place and the duplicity of dealing operates on every level. It is a strange country as the dualities exist as a part of life there can be both beautiful and dangerous, truthful and false at the same time. What I wonder about here is if through the use of warrants against supposed holdings does not distort the numbers coming from HK regarding the amount of gold actually moving to mainland China, and if so to what degree.

Blake said...

The more I see how dollar hegemony will be enforced at all costs (most recently Ukraine) the more I understand that freegold will not be ushered in anytime soon... They are absolutely at odds with each other and I fear a reset will not occur without some major violence...

Zebedee said...

Wildcat fever in Western Australia.....

'Resurgence in prospecting sees thousands flock to WA goldfields'

http://www.abc.net.au/news/2014-03-23/resurgence-in-gold-prospectors-seeking-a-fortune/5339628

Thanks for Another great post FOFOA btw. Excellent stuff.
Cheers!

Archer said...

Did someone say dollar hegemony? It's in the rear view mirror and the Ukraine situation certainly doesn't make that case. You'd have been better off had you employed events in the (now smaller than before) Ukraine as evidence of the weak enforcement of that which is receding faster than the snows of Kilimanjaro. Maybe Freegold isn't coming to a global monetary system anytime soon- define soon- but the trend in the demand for U.S. sovereign debt is hardly incompatible with freegold.

Blake said...

Archer -

There seems to be a healthy demand for U.S. debt in the EU. I suspect we (Fed) is indirectly funding these purchases (especially in the case of Belgium). The fraud cannot go on forever but I don't see an imminent collapse of this ad hoc support anytime soon...

As far as dollar hegemony, what do you call the IMF rescue package for Ukraine...

Franco said...

I love the hyperbole from ZH. If the price of something goes up 1%, it soars or explodes. If it goes down 1%, it plunges or collapses. But even more I enjoy their long ass sentences full of sarcasm. All kidding aside, I do appreciate their effort to expose fraud and corruption.

whatever-fits said...

Franco

A positive filtering of ZH for sure. King World News is really the most hyperbolic. I really can't understand how any of the commentators on that site can bring themselves to be couched in the ridiculous theatrical framing of every thing in catastrophic bombastic hyperbole and then tagged with silly grotesque pictures. On the other hand I know some of the commentators to be intelligent and insightful, some of them, not all.

Woland said...

In his post, "Zero Hedge is Wrong" (see link at Jesse's Cafe) Dave in Denver makes the following statement:

"It is well documented that the Bank of England sold 1300
tons of gold sometime in April 2013", and he refers to a
1308 ton discrepancy in holdings from the March 2013 to
June 2013 reporting period. Really?? Well documented??

The only thing I can find is Alistair McLeod's supposition that
the change constituted a "sale of physical". Has anyone
seen something "more substantial" by way of an explanation
for that large drop in reported custodial holdings? Is there
in fact any connection between that drop and the 2 day $220
price drop in April 2013. I'm agnostic on this. Any Gnostics?

Edwardo said...

Woland,

There is nothing backing up the assertion that the BOE sold what some have claimed they sold.

Woland said...

hmm. I now see Screwtape Files did a piece in July 2013
debunking that supposition. I'm having a look now. ( via
Bron S. ) Thanks, Edwardo.

Roacheforque said...

Turk gives a plausible explanation of why he thinks ZH is worng about CCFDs but his interview with Koos Jansen is much more interesting.
I see that Koos asks Turk if he is familiar with the Freegold concept, and turk replies he is familiar with it, but not an expert on it. And that is all that is said on the topic.
I do tend to agree with Turk that the Narrators want a paper based SDR as the new post dollar global reserve, with a few notable Giants abstaining who see the superiority of a Freegold solution as bringing about a more equitable system.

I'm not sure if Rickards "King Dollar" is not in fact a dollar reserve standard in a free gold market. He seems to note the key benefit of stability, and implies the relative continuity of a "Freegold Dollar" as a means to that end, but then he has to sell his book, so an interview is only going to reveal so much.

Three respectable gold advocates in one room does seem to me to be a worthwhile read at Koos Jansen's site.

Roacheforque said...

(also interesting was Turk's take on US wanting gold prices to rise now and China keeping it low).

KnallGold said...

An illustration of how NOT to approach it...

https://www.youtube.com/watch?v=CAaedxIv-rI

Michael dV said...

Franco
at least one of the Tylers thinks highly of his writing skills and often goes for paragraph long sentences. The result is usually unreadable. I don't have the patience to see if they make sense. When I see this guy having his fun I just skip the article.
I am a big fan of learning but I refuse to read at the level of Russian literature to get my info.

Dante_Eu said...

Reading the latest headlines on KWN: "LBMA-Default", "Super-Major Bull Market", "Historic Short Squeeze", "Disorderly Price Spike"...

I think I have been reading the same headlines since 2010. Super bull market or major bull market is not enough any more, now it has to be Super-Duper-Major bull market. :-)

If anything this should be an indicator of a major downturn. Lets hope for sub-1000 $-price this time around. ;-)

Motley Fool said...

I got annoyed and posted a comment of at Koos's site. For posterity I will post it here too.

The
SDR 'solution' touted by Rickards remains doomed to failure.

Using http://en.wikipedia.org/wiki/Special_drawing_rights as source, let us
examine this non-solution.

I will be altering some numbers for ease of calculation.

Current SDR in existence : XDR 476.8 billion. Let's call it 500 Billion.

It has a currently defined value of 41.9% USD + 37.4% EUR + 9.4% JPY + 11.3% GBP. This basket weighting is reconsidered every 5 years. ( Just short enough when currencies are failing rapidly, right, right? :P )

Of course, this definition has little meaning in and of it self, as it does not give you the value of one SDR.

This is further defined as follows (currently): 1 SDR = 0.66 USD + 0.4230 EUR + 12.1 JPY + 0.1110 GBP.

The currency crosses relative to USD is computed daily here : http://www.imf.org/external/np/fin/data/rms_sdrv.aspx

Currently 1 SDR = 1,54335 USD.

Let's call it 1.5 USD.

So at present there exists real value reserves of about $750 billion.

Ok. So let us do a few gedanken experiments.

First let's assume Rickards is right and there is a currency collapse, and each of these currencies lose 90% of their value over one month at the same rate. So after the month each would be worth 1/10th of their current value.

Firstly the currency crosses would be unaffected so the SDR would still be defined as 1.5 USD. However in real terms each of these currencies are now worth a tenth of what they were before. So the real value of all SDR falls to $75 Billion in real terms.

Oops.

1 of 3

Motley Fool said...

Ok. So say we include gold today in this basket. Instead of playing around with the numbers too much let's just call it 0.01 grams of gold added to the basket.

Assuming gold priced at $1300, we get 0.418 USD for this 0.01 gram. So this means the SDR is now worth about 1.9 USD and gold makes up 22% of this new basket. This is close enough to Rickards estimate of 25% gold backing for illustrating the general idea.

Let's just call it 2 USD per SDR.

So now we have the total SDR value of $1 trillion.

Let us now repeat the same experiment with there being a currency collapse and each currency losing 90% of it's value. We will also assume as Rickards does that gold remains constant and only currencies fluctuate, and so gold would be worth 10x as much in each currency than it was before this month long currency collapse. ( I should note that Rickards is wrong here. Gold does not remain constant in value. Both gold and currencies fluctuate in value.)

So after the month 78% of the basket is now worth 7.8% in real terms, and 22% is now worth 220%. What percentage of the new basket is gold? Well (220/ 220 + 7.8)*100 = 96.6%.

So what does this addition to for confidence in the failing currencies? That's right! It further erodes it! Seeing this rapid rate of devaluation, people with simply start rushing to gold with
even more haste.

Oops.

Before I forget to mention, presently SDR's are defined as a call option “ for euros, Japanese
yen, pounds sterling, or US dollars, SDRs may actually represent a potential claim on IMF member countries' nongold foreign exchange reserve assets, which are usually held in
those currencies.” - from wiki

Notice the “or”. So if you were to trade your SDR's you would get only one of these (rapidly depreciating) currencies. Presently you have no call option on a country's gold reserves, but the moment we include gold in the basket, it must become such a call option.

So, seeing this rate of devaluation, what are you going to exercise your SDR call option on? Gold, or one of these rapidly failing currencies? That's right! Gold.

Oops.

Seeing as there are 500 Billion SDR's and I defined them initially as 0.01 grams of gold, this means the whole stock is a call option on 5000 tonnes of gold. Ok. So this leaves some breathing room for the IMF to create more SDR's. I am sure everyone will be very happy they can create extra call options on their gold. Haha. How much, well I don't think more than there are
gold central banking reserves, let's call that 32,000 tonnes. So what happens if they want to create more SDR's after this point...like the trillions Rickards think they can? Right.

Oops.

2 of 3

Motley Fool said...

So in effect in this option we see that SDR's simply become a call on gold, as currencies continue to devalue. It will become 99% of the basket, then 99.9% and so on till it is in effect the whole basket.

Oops.

Ok. So let us try and conduct a third gedanken experiment. This time we only include gold in the basket after our month of devaluation.

So what happens this time? Well, the currencies are still continually losing value. We included the gold, because according to Rickards this will boost confidence in the SDR. Instead, what will we see, the percentage value that gold represents of the basket creeping up, just
like before, and the higher it goes, the faster confidence is lost, and the faster it goes to 100% of the basket.

Oops.


In conclusion, all roads lead to FreeGold. ;)

3 of 3

Motley Fool said...

The only criticism I can think to level at this critique is perhaps gold does not go to 220% of the basket. Perhaps once the value of the basket reaches 100% again, with gold making up the losses, confidence is restored.

There are of course other complicated interplays here such as how much gold each currency zone has relative to the amount of gold they have in reserve.

Would the value of SDR's stabilize in this scenario, and each of the currencies in turn? This I will leave to the board to ponder.

Over time the end result remains though, gold will become the whole of the basket as currency values are eroded due to inflation. But it might get there by slower grind, after the initial big jump in percentage.

Still, each currency would then be defined ito it's gold holdings, and the ECB would still be using MTM.

Now. How's that different from freegold? ;)

Motley Fool said...

Ok, so normally I wouldn't bother fixing a sentence...but, this time meaning is obscured, so :

There are of course other complicated interplays here such as how much currency each monetary zone has relative to the amount of gold they have in reserve.

Roacheforque said...

I think we've seen posts here by FOFOA that explain the non-starter status of the SDR, and I agree with those sentiments.

However, I did note that Rickards isn't advocating for the SDR, but rather the "King Dollar" (Freefiat??). He is merely citing what "they want" (or perhaps think they want).

I would mention that "they" have given us "TBTF", and "ZIRP" as entrenched monetary policy, along with irrational asset valuations, a $1300 "gold price", numerous boom / bust bubble episodes, record wealth disparity, record food stamps and unemployment in the devolving (I mean developed) markets, and so on ... basically "they" have given us a global depression masked by an ocean of QE liquidity.

I'm not so sure they wouldn't see the SDR as a further slow-burn to delay the inevitable and maintain the status quo a bit longer through an SDR "solution".

Whatever it takes to kick the can a bit longer beyond the inevitability (we should hope) of an equity based outcome, I believe they'll do. And in that regard, Turk may be right as rain on the intent, if not for the devil in the details.

Roacheforque said...

Speaking of "oops" I meant to say Rickards, not Turk. Even though they only look a little bit alike I always seem to confuse the two.

M said...

It is understandable why the comments on ZeroHedge are batshit crazy. Anyone who's discovered Austrian economics over the last few years cant stand to see this lunacy go on and on and on.

BTW Good work MF

MatrixSentry said...

Did Iraq buy 36 tonnes of gold in March. Well they say they did, and I guess I'll take their word for it. However, what form of gold did they buy? Did they buy XAU with their IQD and log it as a ledger entry? Did they buy and take delivery of allocated bullion for storage in their vault? Did they buy and settle for a claim to an unallocated pool of gold somewhere?

If they bought allocated bullion and plan on taking delivery, how long will it take? Is it done, or will it be a few months? A few years? Hmmm, I wonder. Details, details.

Franco said...

What do y'all think about these energy "deals" being announced lately between Russia and China (and possibly with India also)? Could the west shunning Russia lead to a stronger Russo-Assian block, and eventually to unintended consequences for the US dollar's hegemony? Or is this just posturing?

Woland said...

The gas negotiations have been going on for 5 years, and are
due to be finalized in May, if all goes well. A simple principle
is that ALL customers wants a diversity of suppliers, and ALL
producers want a diversity of customers, for the same reason:
immunity from a failing partner, or the application of political
leverage. Remember, BRICS is not just an acronym, but an
organization, still in its teething stages, but with a plan for
co:operation among its members on many fronts. My personal
opinion is that they see themselves as a "potential" 3rd force,
to act as a counterweight to the $ and Euro. FWIW

Edwardo said...

Franco,

The west isn't going to get far shunning Russia. The west in, for example, the form of Germany, to name just one key state, needs Russia's energy too much to engage in anything as draconian and, most pertinently, self defeating as shunning Russia.

This is why, save for tepid sanctions and subterfuge of the sort that helped topple Yanukovych, not much from "The West" by way of a consequential response is going to come from Russia's invasion and seizure of The Crimea.

Were I playing the geo-political long game, which I imagine they are in Moscow and Bejing, I would, as part of any such grand strategy, continue to test "the west's" mettle-no pun intended. Probing for weakness has been pretty profitable of late.

China seems to think that some Japanese islands are actually Chinese islands, and then, of course, there's a particular island called Taiwan that China very much wants "back in the fold" in much the same way Putin wanted The Crimea back in the loving embrace of Mother Russia.

So, with the EZ neutered due to its dependence on Russian fuel, the U.S. is kind of on its own with anything other than feckless measures.

Having said that, I don't imagine China and Russia will take any action that causes the U.S. to engage them in a direct military confrontation. They will pick their spots and continue to push at the rapidly softening edges of so called U.S. hegemony.

In the meantime Russia and China will do their level best to make the U.S. military moot. And the best way to do that is via economic and financial means. Energy deals between two producer nations are simply evidence that Russia and China are working in tandem on their mutual aim of drastically reducing U.S. global influence.

Dim said...

Regarding the recent ZH article about how China imported $70B worth of GOLD without the price rising: Isn't it just a simple issue of the fact that physical purchases don't affect the $PoG nearly as much as volumes of paper trades? I couldn't understand all ZHs analysis on CCFDs. Thoughts anyone?

Michael dV said...

Eduardo
I think your comments are as close to accurate as anything I have heard....chip, chip, chip....when you can't pay your bills you just don't seem all that tough.
At least the American citizen is prepared/ sarc

Michael dV said...

Dim
yes you are correct...but none of these 'gold analysts' seem to understand the basics of the overall gold market as fofoa has easily explained.
Until someone clears the fofoa hurdle (they answer the questions raised here every day) I don't even listen to them. So far the list of people I don't listen to include: Sinclair, Schiff, Rickards (though I will read his book for fun), Willie (he is great to listen to during a workout), Turk & Turd, even Rogers and Faber. Some of these guys should know better for all of their bluster.
How can a humble, underpaid blogger raise questions that they run from? And after running how can they still pretend to be experts?
The sad truth is that none of these guys, for all their pretentions understands the real gold market today. They are living in the past when gold meant metal. They overlook the creation of the peper market....and their biggest failure is to overlook the words of Another , FOA and our current itteration.
I wouldn't mind if they decided to take on freegold and punch holes in it...but the don't or more likely can't. Sinclair and Rickards in particular...they both know better.

M said...

Micheal DV,

Schiff used to flatly reject anything about gold manipulations. Now he basically admits that gold gets hammered all the time by this strange seller all the time. I;m not sure if you actually listen to KWN interviews but most of the guys he's had on lately make an obvious distinction between the paper and physical markets. Gold revaluation is also bantered around a lot.

Jim Rickards was on the Schiff show this morning. He started bringing up the SDR and Schiff took him to task on it. He just said that's what he expects the elite to try and he doesn't expect it to work. Then he said that eventually the world will have to go to some sort of gold standard. Not a very insightful interview considering the cast.

Michael dV said...

M
I gave up KWN for lent (actually for life).

Testing said...

Hi, I´ve been reading the blog a lot, but I can´t manage to find the explanation of why the paper gold price climbed from USD 300 to USD 1900 or USD 1300´s or whatever. Is there an answer to that?
If it´s not manipulated, why doesn´t it keep going up.
If it is, why not leave it at 300 and make it look like a lousy investment.
Any help with this one?

Woland said...

via Marketwatch: "Home equity loans reaching their end of
draw period". (see chart)

Beware the HELOC shock, my son
The rates that bite, the clause that catch
Beware the reset, coming soon
and shun the dubious Kovacevich (apologies to Lewis Carroll)

MdV: If "superlatives" ever become a currency, KWN will be
a gold mine!

Knotty Pine said...

Hi Testing,

I think the answer as to why goldish paper rose is simply momentum trading in a bull market. I think Dan Norcini does a good job outlining hedge fund momentum trading here. This explains most of gold's price movement. FOFOA has written about official support (CB) for the gold market in these posts.

Michael dV said...

testing
the fall of the POG has been explained here as 'withdrawl of official support'. I'm sure you've caught that part.
The run up has also been dealt with but it is a less clear picture. The ECB wanted gold to be strong because they have gold as their number one asset on their balance sheet. Inflation alone can account for some of the run up and the ECB would have not had to act in support of that component.
GLD and many of the 'paper gold products are a relatively new phenomenon. GLD was started in 2004, other ETFs later. With ETFs supplying the 'needs' of many investors physical gold became less of factor. The ability to control the POG then became easier because the need could be satisfied with just paper.
Another tells us that this paper was already a problem in 1997.
So (I'm confusing myself here) the naturally rising price of gold due to inflation (due to excess currency) in the past had to be met with physical gold and now it can be met, in most cases with derivatives.
Why the run up, why the halt?
The run up was due to normal inflation driven demand.
The halt due to withdrawal of support on the part of those who would have previously wanted to keep the POG up to make the Euro look good as it was being established but now felt confident that it would survive on its own. Even though it could temporarily made the Euro look weak as their main asset dropped in dollar value, the just quit worrying and decided to let the chips fall where they may.
If we are correct here if gold goes to $300 and physical quits trading they are fine as they can then start a physical only market at market prices. If it goes higher they look better but the dollar begins its demise...and they are still OK because they are now the only currency able to fill the role of reserve currency.
That is my middle of lunch time explanation. If I get a better though I'll post later.

Dim said...

Hi Michael Thanks for your post regarding the ZH article. Appreciated.

Testing said...

Darn you both!!! Now I´ll have to read a lot more than I expected to rebut your comments....
BTW, nice "lunch time answer", hope I´m up to the challenge.

FoNoah said...

Hello Michael dV - do you also include Daniel Ammerman, Porter Stansberry and Doug Casey as analysts you don't listen to? These guys get sooo close and yet are so far away.

I have been trying to put my finger on exactly what element(s) of the FG narrative they miss? For example, Stansberry sees US HI, and "The end of America" (dollar losing its reserve status) - but then sees a "gold backed Yuan" as taking its place.

I wonder if they are aware of the FG story?

RJPadavona said...

MdV,

I gave up tithing for Lent (then I was excommunicated for life).

Roacheforque said...

MdV and testing,
I would say that the best way to analyze the dollar price movements of paper gold is to take into account that the pricing mechanism is a byproduct of the trader mentality that the aforementioned "should have known betters" propagate ... in a manner that "A" would describe as "thoughts blowing in the wind"...

Until gold in the minds of "investors" ceases to be seen as an investment and is instead anchored as a remonetized wealth reserve asset (allowing currencies to function as they should) we will continue to have inexplicable movements in the dollar based valuation of what should be seen as a focal point wealth asset around which currencies are effectively managed in a free market.

Sorry for the long answer, but it's something we haven't seen in so long, most people forget what it's resurgence will look and feel like.

Hope that helps a bit.

Michael dV said...

RJP..me too
FoNoah
Casey and Stansberry too.... but Amerman is a special case. Dan is like my accountant. He makes things I understand intuitively and renders them opaque with accounting language. He is smart but does not see the end of the dollar like so many others do. He gives advise that will do one well if this lingers. He recognizes that inflation would kill any gold gains if they unfold over a long period. He thinks debt plus depreciation is the answer. If it ever dawns on him that the currency could die he would be a good source.

FoNoah said...

@M dV - yes that's my take on Amerman too. He sees business as usual indefinitely. High but no hyper inflation, no discontinuity, no paradigm shift.

Stansberry is the one that intrigues (and frustrates) me the most. No doubt he is very smart, and he has connected so many of the dots already, why can't he connect the final Euro dot?

Testing said...

First of all, bear with me… this whole mess is way too complicated for me to fully grasp yet. I feel like walking on a wet floor. Whenever I feel I´ve got my act together, a little nudge and I start waiving my arms and end up on the floor again.
So correct me all you want, I won´t offend.
Knotty, thanks for the links!

"testing
the fall of the POG has been explained here as 'withdrawl of official support'. I'm sure you've caught that part.
The run up has also been dealt with but it is a less clear picture. The ECB wanted gold to be strong because they have gold as their number one asset on their balance sheet. Inflation alone can account for some of the run up and the ECB would have not had to act in support of that component."

OK, but there was inflation in the 90´s too.

"GLD and many of the 'paper gold products are a relatively new phenomenon. GLD was started in 2004, other ETFs later. With ETFs supplying the 'needs' of many investors physical gold became less of factor. The ability to control the POG then became easier because the need could be satisfied with just paper."

So, we are assuming here that paper gold price is “controlled” as in “manipulated”?
I´m going to state my position here that I think the paper price of gold is highly and intentionally manipulated, although I do not yet understand the logic behind it.
The bottom line question is: why the ups and downs in the paper gold price? What´s the gain to whoever induces those price spikes and bottoms? To shake physical gold from weak hands doing it over and over again?

"Another tells us that this paper was already a problem in 1997.
So (I'm confusing myself here) the naturally rising price of gold due to inflation (due to excess currency) in the past had to be met with physical gold and now it can be met, in most cases with derivatives."

Around early 90´s the forward sales + paper gold scheme was set up. Paper gold was created to fund increased mine production. At first, this paper gold was created in limited amounts representing forward selling by the mines. Physical gold from the mines would flow to the oil giants that got paid in dollars and kept oil price down in a “$$$+X amount of gold” deal.
Later on, paper gold issuing increased because central banks were being forced to sell their own gold to keep the flow going to where it was needed, and also to supply western investment needs without rising the price until they drowned the world in paper gold. This came along with a change in the deal with the oil giants to “$$$ + XXX amount of gold”
This mine production increase was grossly overestimated and came up very short of the original expectations, fixing a gold production cost higher than expected.
Am I correct?

1 of 2

Testing said...

"Why the run up, why the halt?
The run up was due to normal inflation driven demand."

I´m more comfortable with the idea that it was inflation driven demand + overdue price adjustment. Oil got to $ 850, then it was lowered to 300, while money inflation still continued. This was a totally counterintuitive price movement as seen from the money inflation perspective.
This lower price was “manufactured” thru the paper gold + forward sales original deals that stopped the oil giants from bidding for gold with petrodollars. So when year 2001 arrived and prices started going up it was a long overdue upward correction + inflation driven demand, as I see it…

"The halt due to withdrawal of support on the part of those who would have previously wanted to keep the POG up to make the Euro look good as it was being established but now felt confident that it would survive on its own. Even though it could temporarily made the Euro look weak as their main asset dropped in dollar value, the just quit worrying and decided to let the chips fall where they may."

Who wanted to make the Euro “look good”? ECB + BIS? How did they instrument this run up and halt? Again, this is indicating a strict manipulation of gold paper price. And not just up and down, but strict manipulation in nominal terms (“let´s take it to 1450 and leave it there for a few weeks, then down to 1180 again, that´ll teach´em”)

"If we are correct here if gold goes to $300 and physical quits trading they are fine as they can then start a physical only market at market prices. If it goes higher they look better but the dollar begins its demise...and they are still OK because they are now the only currency able to fill the role of reserve currency.
That is my middle of lunch time explanation. If I get a better though I'll post later."

Thanks again for the answer. I would appreciate further comments on this topic.

2 of 2

Nickelsaver said...

testing

from > http://fofoa.blogspot.com/2011/09/once-upon-time.html

In my opinion, there are two things we learned from ANOTHER via his mouthpiece FOA that outweighed all the other great insights they shared. Those two things are:

1. The true purpose behind the euro and its architecture, and
2. The effect the approaching euro launch would have on gold.

[...]

The consequence of the launch of the euro would be that gold would undergo "the most visible transformation since it was first used as money."

Quote - Monday, August 6, 2001 - GOLD @ $267.20 - FOA: "The result will be a massive dollar price rise in gold that performs over several years."

Tuesday, January 1, 2002 - Launch of euro notes and coins
Friday, February 8, 2002 - GOLD ABOVE $300
Monday, December 1, 2003 - GOLD ABOVE $400
Thursday December 1, 2005 - GOLD ABOVE $500
Monday, April 17, 2006 - GOLD ABOVE $600
Tuesday, May 9, 2006 - GOLD ABOVE $700
Friday, November 2, 2007 - GOLD ABOVE $800
Monday, January 14, 2008 - GOLD ABOVE $900
Monday, March 17, 2008 - GOLD ABOVE $1000
Monday, November 9, 2009 - GOLD ABOVE $1100
Tuesday, December 1, 2009 - GOLD ABOVE $1200
Tuesday, September 28, 2010 - GOLD ABOVE $1300
Wednesday, November 9, 2010 - GOLD ABOVE $1400
Wednesday, April 20, 2011 - GOLD ABOVE $1500
Monday, July 18, 2011 - GOLD ABOVE $1600
Monday, August 8, 2011 - GOLD ABOVE $1700
Thursday, August 18, 2011 - GOLD ABOVE $1800

What I can tell you with full confidence is that this is only the very beginning of gold's functional transformation.


The Euro was the the prime mover for the bull market. But paper gold could never ultimately continue along the path that physical was destined to go. This because by its very nature paper gold systemically suppresses the price thru factionally reserving gold. The pressure on gold for a higher price is there and remains there. But the paper gold market cannot sustain the pressure without a certain amount of actual physical gold flow underneath it.

Nickelsaver said...

We may very well see paper gold continue on this upward trend. Perhaps there are still some weak hands waiting, hoping for the price to rise to $1600, just so they can finally get out about where they got in.

Or maybe it will shoot past 1600 in a mania, IDK.

But one thing is for sure. The final destination for paper gold, no matter what happens going forward, is the cellar.

It has to go there. To think otherwise is to make the bet that the dollar is indestructible!

Nickelsaver said...

testing

from > http://fofoa.blogspot.com/2013/08/my-candid-view-part-7.html

As you know, I don't think anyone is actively trying to suppress paper gold. Short term price manipulation can happen in anything, and in any direction, but that's done for short term profits and not for ideology.

[...]

The suppression of gold was systemic and due to the expansion of the supply of paper gold backed by central bank guarantees from ~1983-1999. The suppression was for the purpose of buying time, and not for some CB anti-gold ideology. (For more on this, please see 'The View of the Rocket Man' video at the bottom of Part 3.)

In terms of "active suppression," I do think the BBs have control of how quickly paper gold rises given overwhelming demand. In other words, they have no problem handling high demand for paper gold. They can simply create more of it. They can expand the supply. So the rate of rise can be easily managed as long as there's strong market demand for their product, paper gold. It gets quite a bit more difficult to control the price, however, when there is low market demand for their product, especially with so much of it already out there. Kind of like dollars. ;D

Michael dV said...

NS much better than my lunchtime scribble

Fonoah…NO ONE discusses the structure of the euro! To every single source I've read the ECB equals the Fed. The euro equals the dollar. It is a secret known only here…so it seems. I think fofoa is the only person on the planet who receives (and reads) the regular reporting of the ECB.
I've put it out at ZH a dozen times and never a response…no even a friendly 'fuck you' or yer full it'.

Woland said...

Former Chancellor Helmut Schmidt now joins Former Chancellor Gerhard Schroeder's position on Putin/Ukraine.
Merkel backtracks on sanctions application. I think Victor
is correct that this was part of an attempt to foment dissent
within the Eurozone. Meanwhile, April 20 IMF meeting is
drawing closer, with no US legislation in sight on 2010 quota
reform. A more interesting pot to watch than POG, IMHO.

Indenture said...

testing:

Understanding the Euro Currency is an integral part of understanding Freegold.

http://fofoa.blogspot.com/2011/07/euro-gold.html

Edwardo said...

Just for fun, and FYI, the IMF meeting falls on a date that is very close-within a day or two- of a date that the astro folks, in the aggregate, have pinned as a big day on the U.S. natal chart.

Knotty Pine said...

@ Testing,

Gold is still traded like any other commodity. As you can see this commodity complex tends to move in lockstep. I think momentum trading is the still the primary price mover in the gold market. The point to "official" support as described in the links I provided is that it appears that there is no longer an official "floor" under a falling gold price. The markets can take the gold price wherever the traders lead. We understand that gold is not really like any other commodity. When will the ROW figure it out?

Woland said...

and, for that "certain someone" on your Saint Andrew's Day
list: Spotify plans Fall 2014 IPO
( I personally recommend a "balanced portfolio"; 50% twitter,
50% spotify )

Testing said...

Wow, I never expected to rattle the cage so much. Thanks for your answers. I´m at work now so I´ll be brief.

Nickel,
It´s true that manipulation can happen in anything, but I disagree that there is not an ideology in this. Gold (and oil) is not like sugar, cocoa or copper. Oil is -literally- the fuel and of Western capitalism and gold is currencies nemesis (if they are used as a SoV). So there is a lot of ideology here, I think. Also, since 1983-1999 the worldwide economic scenery has changed, a lot. There are trillions of reasons to actively supress gold and oil prices that didn´t exist then.

I fully agree on the supply-demand issue.

I (think I) understand the euro structure and gold as it´s number one asset. So I if read you correctly, BB reduced the supply-demand ratio of paper gold in the 2001-2011 period, thus allowing the natural overwhelming demand for gold (in all forms) to rise. If this made the Euro look good, why not continue, since that was the plan from the beggining. As I recall, if China hadn´t started storing USD like maniacs since 2000, Another and FOA were expecting a system collapse as soon as 2001-2002. It was a matter of months, but China delayed the whole thing.
What I don´t fully understand is, if the price rise was a good thing thru 2011, why is it not a good thing now?

Also, the Euro planners surely didn´t preview the PIIGS multiple debt crisis and EZ mismanaging of their own currency. Could this have caused new fears surrounding the Euro that prevent things from flowing as intended? Is the transition being delayed even more for some reason?

That´s all I can come up with right now.
Thanks to everyone.

Motley Fool said...

Testing

Just a quick thought. Part of the rise in gold can be attributed to the price having to be viable to both continue existing mine supply, and expand it( as there was a lot of outstanding gold obligations to cover...at least 14,000 tonnes). And in feedback, as gold rised, so did oil, which had an impact on input costs for mines.

TF

Anonymous said...

The IMF has approved a $27 billion plan for Ukraine.

http://www.zerohedge.com/news/2014-03-27/and-now-real-economic-pain-begins-imf-unleashes-27bn-bailout-near-bankrupt-ukraine

When we take into account the reports that 33 tonnes of Ukraine's gold were moved to the US for "safekeeping,"

http://nsnbc.me/2014/03/15/ukraines-gold-reserves-secretely-flown-confiscated-new-york-federal-reserve/,

then by my calculations we obtain an implied valuation of $27,000,000,000 / 1,060,974 troy ounces = $25,448 per troy ounce, as the IMF's 100% collateralization value of gold. If we assume the IMF's loan is "overcollateralized," as would be customary with prudent lending practices, then the IMF's implied value is even higher. At a 1.25 value to loan ratio, the price would be $31,810 per ounce.

As Fofoa further refines the lens on thefuture, it seems ever more clear that the key issue is whether, as he argues, the price of gold per ounce for very large, bulk sales will also become the price per ounce for shrimps.

Testing said...

MF, that is a good insight. Pretty solid positive feedback loop for increasing production costs...
One could assume those obligations were fulfilled, since mines´ CAPEX collapsed and many of them are reducing gold output due to the fall in gold commodity price.
Once the obligations were fulfilled, support for higher gold price and strong mine output decreased.

Phat Repat said...

Testing
"Rattle the cage..."

Yeah, here for edumacational poiposes? Or, perhaps, I'm jumping the gun? ;-) You're not rattling anything around these here parts junior.

Edwardo
Always wondered about the accuracy/track record of these astro folks. Could be fun.

Hmmm... Even as I want the system to change, I hope we have more time (around 2015) for FG to be implemented. I like being able to exchange fiat for physical at these price levels.

KnallGold said...

If we'd get an echo of POG's nosedive last year, hmm...

Maybe the west is waking up, before even more chips are flowing eastwards, and we've interpreted the recent events wrongly. Europe and America announcing reset/RPG which the rest of the world can live happily with it. A long weekend event, as Indenture supposed. Giving the US the taper gift by the transfer of Bonds to Belgium, vs. receiving a jointly RPG agreement. Win-win situation.

And the world lived happily thereafter, more or less...

Of course some think, oh, the SDR will be announced on the G7 in Brussels(!), Obama has already traveled to Belgium(!). The SDR approach feels like a Baron von MĂĽnchhausen syndrome though and seems very unlikely.

America will have a role in the new evolving paradigma, prepares for it and maybe is further ahead than we aknowledge. There are adaptations worldwide, a rebalancing with occasional overshootings. The nature of such transitions. At some point we'll just be there.

Phat Repat said...

Changes of the FG variety are not going to be easy and will entail a considerable amount of pain for the uninitiated. It is necessary given the chicanery most have participated in or allowed to transpire.

"America will have a role in the new evolving paradigma..."

No, the longer I stay in-country, and the devolution I have witnessed, it would be better not to allow Americans such involvement until issues within the borders have been addressed and resolved. Too many to mention.

Testing said...

"rattle the cage"...I´ve always wanted to use that expression.
"Junior"...I haven´t been called that in a while. It makes me feel like a young Indiana Jones.

Phat Repat said...

Whatever floats your boat. :-)

Junior; okay, that was over the top. Yeah, to feel like a young Indiana Jones again. Yep, time to change the handle back to Expat. Getting cranky in the US.

Tommy2Tone said...

It's all the commies around you ;)

Phat Repat said...

jojo

Not sure what it is but, darn, I don't recognize the place anymore. Outta here in April. ;-)

S P said...

In case anyone has failed to notice, America is in a sort of drawn out collapse. Freegold or not, it has major problems.

I think I'm ready for freegold. I wasn't in 2009 and even a year ago probably wasn't. I would appreciate more time, but I don't really need it. In any event, it's going to be interesting.

M said...

Until the trend in the bond market changes, the Fed can afford to control the forex and gold markets.





Michael dV said...

I'm hoping all the anti-constitutional stuff is merely the last gasp of a dying regime. Hitler type shit requires a LOT more public enthusiasm behind t that the government has now. Even the takers seem to have a jaundiced view of those in charge. Once the checks stop going out in full amount there will be enough to keep the remaining 'public servants' (no offense meant by the quote marks poopy) busy without much left over time to harass the rest of us. Hoping anyway….

One Bad Adder said...

In some (many) ways, the current multi-generational Fiat System can be likened to the serving of a prison term.
When released, some (most) will hanker for the Bread 'n Circuses this "systemic prison" has provided for them.
TRUE Freedom ...and also FreeGold will accompany (currently unfathomable) responsibility methinks.

Unknown said...

OBA, I was looking for a 'Like' button for your comment. Click, click, click + + + !

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