50 Years Old
The phrase 'Paradigm Shift' just turned 50. The book that coined the phrase and changed the way we view the world from a steady, cumulative progression to a series of revolutionary punctuations (called paradigm shifts) in between periods of relative complacency, was first published this month in 1962.
Coincidentally, something else that also began at the same time as the concept of the 'Paradigm Shift', according to the ECB's own historians, was the road to the euro.
___________
A big THANK YOU to everyone who sent donations for the fourth anniversary of my blog! I have a couple big posts already in the pipeline for you, but due to delays beyond my control I decided to put up this open forum. You can, of course, discuss anything you want, but I came up with the topic thanks to a couple of recent personal encounters with the problem of perception versus reality.
One was the case of a person who is apparently completely unaware that there may be a vast difference between his own subjective perception of a situation and the objective reality, or at least the common perception of everyone else. The other was an encounter with a flaw in my own perception, which I quickly corrected. But don't worry, it had nothing to do with the subject matter of this blog. ;-)
So please feel free to share with us your own experiences with the difference between perception and reality. And any of you who would like to argue that perception is reality, I welcome that too. There's so much information we can take in today—thanks to the internet—that shapes our individual perception. How do you deal with it? Do you aim to take as much input as possible from every possible angle? Or do you believe that the more information, the more you need to filter?
Or if you'd rather just talk about gold, here's a fresh item to kick off the discussion. It's a NY Post article detailing an assessment by veteran analyst for Citigroup, Tom Fitzpatrick, that gold may reach $2,500 by the 1st quarter of next year. Now, although the nominal price is low by our standards, what strikes me as significant is simply the scale and the timing.
That is, to see a mainstream analyst calling for a 50% move within roughly 6 months in a major/global market like gold is pretty robust. And yet it doesn't garner near the sort of attention that a similar scale prediction would rouse were it in another market. I guess reality still has some work to do on public perception.
Gold could hit $2,500: Citi analyst
Gold has had a good summer, rising more than 9 percent, but that move may be just the start, according to a bullish Citi precious metal analyst.
Tom Fitzpatrick believes autumn will be golden in the beginning of a run-up that he says will culminate with the yellow metal hitting $2,500 an ounce in the first quarter of next year. The price now stands at $1,736 an ounce.
In his client note this week, Fitzpatrick compares this upcoming rally to gold’s huge move higher in 2007. The report is based on technical analysis of precious-metals market moves that could cause a six-month gain of more than 60 percent, just like the bull run five years ago…
Sincerely,
FOFOA
339 comments:
«Oldest ‹Older 201 – 339 of 339Frances,
Again, what "investments" are you talking about? Specifics please. I just can't figure out what you are talking about when you say that for all practical purposes there are no differences between Tbills to "investments". They aren't even close on a risk spectrum - not even on the same spectrum.
By the way, if you had been reading this blog for long enough, you would know that many, many commenters don't see much functional "real" difference between the Fed and the ECB. As JR notes, they both print to prevent asset deflation (among other political reasons).
And not everyone believes that USD hyperinflation is inevitable. The primary argument of hyperinflation is that the fiscal deficit cannot be reduced, when, of course it can be.
However neither f these differences should detract you from thinking about the fundamental concept of "freegold". Fiat currency supplies are going to be expanded - because they have to be expanded (again, as JR noted - and many deflationists argue) to payoff the debt. Which means that currency (MoE) cannot also act as SoV. And the only SoV that really works is gold.
So it might be useful to go back and read some of these debates to see where people are coming from.
Jeff,
Yes, indeed I have a blog, and you are right to question my motivation, too. And of course you may choose not to believe what I say.
Unlike FOFOA I am not anonymous, though I'm sure plenty of people think I use a pseudonym (I don't - this is my real name). Like most bloggers, I write about subjects that interest me, on which I have some knowledge and where I feel I have something to say.
To start with I wrote professional blogs on singing (and I still do this now and then on my professional blogsite). But my previous career was in international banking and finance. So when I read an article in the Guardian on short selling which was wrong from beginning to end, it annoyed me so much I wrote a blog explaining how short selling works in layman's terms and debunking the article. Since then I've written other posts on banking, finance and economics, many of them explanations in plain English of how financial and economic processes actually work. Most of it really isn't rocket science and is completely understandable by ordinary people once you get rid of the complex math and the jargon. I also sometimes write more technical blogs that are mainly read by economists and financial people - I wrote one the other day on the IMF and Ricardian equivalence, if you fancy getting your head round that (it's not very complimentary to the IMF!).
I write a lot about the Eurozone. I'm a long-standing supporter of the European Union as a free trade area but not as a federal union, but I opposed the Euro from the start because I felt (and still feel) that there are too many political, historical and cultural differences between the EU member states for a currency union to work. None of the issues that caused ERM I to fail were ever fixed: they were simply brushed under the carpet. I'm very worried about the way the Euro crisis could play out: the history of Europe suggests that political power struggles, which is what the Eurozone crisis is in reality, don't end peacefully.
Believe it or not, I really don't write very much about my Christian faith. It's unfortunate that most people here have only seen posts where my faith has been a significant factor. Mostly I'm just trying to explain, for ordinary people, how things work and/or what is really going on.
Francis,
The Parable of the Talents, like all parables, is a metaphor intended to illustrate a spiritual truth. In this parable, what is being conveyed is appropriately understood in the context of Christ's command to "go into all the world and preach the Gospel to every living creature". Obviously, if one has the knowledge of the Gospel, is a servant of Christ, and does nothing with it, this is the man that buried the talent.
Now if you use a parable to defend the literal rendering, what do you suppose you get with the parable of the workers of the field? You would have the obsurd notion that an employer would be justified in paying his employees all the same wage for different amounts of work. Now perhaps there are employers that do that, but I don't think God is saying you have to accept it and like it. Yet that parable conveys the Spiritual concept of salvation being a gift, and not a work. And the reward being equal, even though some receive it in the last hours of their lives.
If you are going to teach out of the bible. Please teach what it means, and don't bend it to justify your worldly view.
Thank You
Bradley,
The QE question is an interesting one, because it touches on the nature of money. Strictly, the Fed is not "printing dollars". It is buying assets with newly-created electronic money. But the assets themselves behave much like money in financial markets.
You can regard dollars as a form of government debt akin to USTs. They are in effect zero-coupon perpetual bonds (since we have ZIRP). So when you swap one form of government debt for another, you are changing the TYPE of money in circulation, and the markets in which it is accepted, but not the total amount. Yes, I know "base money" increases, but that's because our measures of money are really quite flawed and we don't include all the instruments that behave like money.
Operation Twist explicitly changed the maturity profile of US government debt - but again, it did not change the amount of money in circulation.
This round of QE is on the face of it different because the Fed is accepting MBS. But when you remember who issues the MBS, it really isn't very different. It's just converting yet another form of government debt into zero-coupon perpetual bonds.
Proportionately, the CB that has done the most QE is actually the Bank of England. The Fed has a long way to go to reach those dizzy heights - and the BoE is still buying. I would personally regard the ECB's SMP, OMT and LTRO all as forms of QE, too, since in repo markets the difference between a loan and a sale is vanishingly small - especially if the loan is inevitably going to be rolled with a haircut at maturity. So if QE alone is a cause of hyperinflation then a lot of countries will be affected. But my issue with QE is not that it is inflationary - it is, a bit, but then it's supposed to be. It's that it doesn't really work and is no substitute for appropriate fiscal action.
Sidelining the US dollar is potentially an issue, I agree. I don't think there's any doubt that the US dollar will eventually be supplanted as world reserve currency. To understand the likely effect of this transition, you need to look at the history of reserve currency transitions (of which there have been several). The most recent was the transition from sterling to the US dollar, which nominally happened at Bretton Woods but didn't fully happen until after the collapse of the London Gold Pool in 1967 and Bretton Woods itself in 1971. I found a very interesting paper on this transition a while ago, which I will try to locate for you. The sterling-dollar transition was quite closely managed and doesn't seem to have caused major currency problems.
If the world follows the same pattern as in previous reserve currency transitions, the next reserve currency will be the yuan.
Nickelsaver,
Jesus' Jewish listeners wouldn't have known what you mean by "spiritual truth". Separation between physical and spiritual is a Greek concept that has no place in Jewish theology. Jesus' listeners would have understood his metaphor in practical terms. I have merely used it in this case to illustrate the difference between investing and saving. I am not making any kind of religious or moral point.
Texan,
Strictly, anything that places savings at risk in order to generate a positive return is an investment. There are different levels of risk and return in investments, of course, and the waters are somewhat muddied by deposit insurance, which removes the risk while still generating a return. But that's the principle.
I would agree that for the CBs to be able to do their job of ensuring there is enough medium of exchange in circulaton, people have to stop regarding "money" as something that has intrinsic value in itself, and that implies that long-term savings, at any rate, need to be in something other than fiat money. Gold is one possible substitute as SoV, but it isn't the only one. Portfolio theory says that you shouldn't have all your eggs in one basket anyway.
Frances:
Strictly, the Fed is not "printing dollars". It is buying assets with newly-created electronic money. But the assets themselves behave much like money in financial markets.
You can regard dollars as a form of government debt akin to USTs. They are in effect zero-coupon perpetual bonds (since we have ZIRP). So when you swap one form of government debt for another, you are changing the TYPE of money in circulation, and the markets in which it is accepted, but not the total amount. Yes, I know "base money" increases, but that's because our measures of money are really quite flawed and we don't include all the instruments that behave like money.
Operation Twist explicitly changed the maturity profile of US government debt - but again, it did not change the amount of money in circulation.
Sounds like FOFOA
The Fed has not created more money, it has simply changed the nature of existing money. Remember, FOA said that "...hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms!"
During hyperinflation the entire money supply becomes "Realdollars" rather than bank credit backed by debt assets. So that is how I view all these "excess reserves held at the Fed", QEx and Swap lines etc.., as a step toward dollar hyperinflation. Back in 2009, when the Fed initially did that $500 bn swap line, I wrote:
Quote:
"This is why it is called a "swap" instead of Quantitative Easing. They are swapping freshly printed currencies instead of assets for currencies. All base money! The same as cash. TWICE as potentially inflationary as QE on a global scale because two sides are now exposed to currency risk. […]
"And now that the European problem has been cleared, the foreign CB can cancel that portion of the two-way swap agreement with the Fed. And no physical dollars need cross the ocean. And that portion of the currency risk is eliminated…"
So now that we have this picture in our minds, what do you think the process of replacing "claims on someone else for Realdollars" with actual Realdollars (on the assets side of bank balance sheets) does to the value of the dollar? It lowers it. This is why the Fed is expanding its balance sheet. To keep dollars cheap. And you do that by slowly changing the very nature of the money supply, from credit money to base money. This is happening. It is not more money being created, it is money being fundamentally altered to keep it cheap.
Frances,
You are using scripture out of context to justify something that it was never intended to say. If you persist, I will call you on it.
The parables where meant for the church, and their understanding only after Pentecost, via the Holy Spirit.
If those truths where meant to be understood at face value. Jesus would not have used a parable to convey them.
So if your intent is not to make a religious or moral point, why use the bible? I suggest you stick to the facts at hand, rather than drag God's word thru the mud. I find it offensive.
Re: Cullen Roche
Read Moneyness - Nov 2011
Cliff notes: MMT (Modern Monetary Theory - Cullen) describes the monetary plane very well but do not extend analysis to the physical plane where the danger for the dollar is.
The danger is the NEED for USG to consume physical items from outside the US without having the dollars used to finance that consumption be "sterilized" by foreign central banks any longer. Spiraling dollar price increases ensue.
Aquilus
Texan,
You think the ECB gives a toss about "price stability" when faced with an existential crisis for the eurozone? LOL
The only existential threat to the Euro would be failure to achieve price stability. What else is out there? Oh, yes, a couple of governments have too high a debt load. Why would that affect the Euro?
Only if the ECB deliberately created inflation (more than the stated 2% annualy) in order to inflate the debt away. As long as they don't, some of the debtors are bankrupt and peope and businesses continue to use the Euro. Where's the problem?
Victor
Frances
another widely held concept that I'm not sure you see is that in a freegold world the price would reach a stable point which would be altered only by inflation in the holders area. If there is no inflation the gold price stays at its stable point of equilibrium. If there is inflation in the area gold will increase in value but just to the point of preservation of purchasing power....thus...gold as a savings vehicle does not change in value...it preserves purchasing power and allows the saver to ignore all the tasty offer of investment and the risk that goes along with it.
Nickelsaver,
If you are going to criticise me for using parables, then there are other people you should criticise too. JR, for example, who was the person who first cited the Good Samaritan. Or the various people who have cited the Parable of the Talents - at least one person on each of my posts.
You do not have a monopoly on the interpretation of scripture. Nor do you have any right to tell me when and how I may, or may not, use scripture. God's word touches every part of human life. It is simply absurd to claim that there are parts of human existence where God's word has no place.
"Lighten up Francis..."
jojo; you owe me a keyboard...
Come on people, a shill's a shill.
This is her frame of reference:
"Surely you've worked out how FOFOA benefits from people like you buying gold?"
which can easily be changed to reflect her background:
"Surely you've worked out how [GS, JPM, Citi, BOA, HSBC, etc...] benefits from people like you buying [paper; derivatives, stocks, bonds, etc...]?"
And, assuming you had any significant role in Finance, how could someone not advocate gold, Freegold aside, based on the fact it has been in a Bull market for the past 11 years? Maybe that's why you are no longer in that sham of an 'industry'?
Fortunately, the need for this 'industry' will be muted going forward. And people will once again be forced to think for themselves as opposed to relying on advice offered NOT in their best interests. Your 'industry' is OVER; and none too soon. Good riddance. The world belongs to producers and savers.
Frances,
I have done my duty with regard to Proverbs 26:5.
I shall now observe the wisdom of Proverbs 26:4.
Victor,
The risk to the Eurozone is rather larger than simply a couple of countries with too much debt. The warning signs are already there; Germany is sliding into recession. I don't think you should underestimate Draghi's concerns. Nor should you ignore the developing north-south split (which Draghi is orchestrating). Much depends on which way France jumps - and that depends on whether or not Greece stays in the Eurozone. It's really rather complicated and very dangerous.
Frances, sorry, I asked for specific investments. Not what is an investment. As for other SoVs, well yes "hard assets" have been discussed many times on this blog. They all have limitations relative to gold. We have evn briefly discussed Art as SoV. I don't think we have discussed wine though....
VtC,
The ECB has literally trillions of a "couple of governments" debt (and all their related appendages) sitting on its balance sheet. If those trillions defaulted - well seems pretty existential to me. I don't even think Germany could recap the ECB if Spain defaulted, assuming it would even want to.
So the ECB has no choice to effectively guarantee fiscal debt now - because IT - the ECB - is now the one most at risk from default. And this is why there will be no conditionality other than lip service. Spain and Italy have trapped the ECB with the oldest game in the book - owe the bank a million, the bank owns you. Owe the bank a billion (or trillion), you own the bank. Aka Mutually Assured Destruction, aka infinite moral hazard.
Note how Spain doesn't think it need a bailout now. It probably doesn't. It will just deficit spend and who cares where yields go - the ECB MUST BUY if no one else will. Go read what they are saying at the Bundesbank about OMT. Not happy campers.
Phat Expat,
What a pity. I was at last beginning to enjoy some sensible polite debate. Then you come along and call me a shill - and we are back to insults and ad homs.
I have been honest and disclosed my background. If I was really here to "promote the bankers' cause", do you think I would have done that?
And as for not promoting gold - I don't give investment advice. Ever.
Please take out your anger at the banks on someone else. I left that industry in 2002.
Texan
Sorry, I misunderstood. I have been speaking generally about investments rather than specifically, as investment choice is a matter of personal preference - attitude to risk, etc. My own preferences regarding the direction of investments should be well known to anyone who has read my posts or the bits that have been cross-posted here. I do not like secondary market investments.
Regarding the ECB's balance sheet risk - yes, that is the point I made in my Draghi post that JR thought meandered a bit. The ECB has no choice but to bail out Spain, Italy and probably France (Hollande wants the ECB to recapitalise its banks). Conditionality simply isn't enforceable without placing the Euro at risk.
Here is weidmann's quote OMT is "tantamount to government financing by printing banknotes". really, how much more explicit can he (and plenty of others) be before one get that they are money printing in exactly the same way as the Fed?
Try this on for size, see if it sounds familiar
"to preserve europe's lifestyle, the ECB will buy all the debt issued by the PIiGS" and call it "price stability", natch. Can't have none of that nasty "deflation" now, can we?
This is NOT Another's ECB.
Nickelsaver,
And I shall continue to act on the basis of Psalm 119:105. :)
Frances:
There are so many comments that can be made, but a few I would like to make.
1) You SHOULD question FOFOA's motivation.
FOFOA's motivation is very clear. He thinks that HI in USD is a done deal. Its only a matter of time. Hence all the paper denominated in Gold is toast. And the collapse of USD will take down with it several companies land rates, including the paper gold and silver market. This means that Gold is the investment vehicle par excellence at this moment. Yes the more people come on board the faster it will happen.
Now most of us on the FOFOA blog are also aligned on this motivation. So when you question his motivation you are questioning our motivations too.
2) Hyperinflation is always associated with severe economic shock (perhaps war), severe political instability and catastrophic production collapse, and nearly always with very high foreign debts (in Weimar this took the form of reparations).
And you do not think US has a very high foreign debt. And that debt is not increasing exponentially. Yes it is denominated in USDs, but that simply means that HI can be a very efficient solution for extinguishing that debt. Why do you think other countries are making currency swap agreements? They are doing this to avoid the effects of the strong inflation that is going to happen. Yes they will then have deflation, but countries that have control of their own currencies will print to create an inflation. And many will undergo HI.
I agree that UK is in a worse shape than US, and surely will experience HI. I worry about my own country India, but possibly we will barely avoid it.
3) In my post "The Nature of Money" I noted that money's use as a store of value is secondary to its function as a medium of exchange, and commented that long-term savings should not be held as "money" but rather as hard assets or investments in productive activities. I made it clear that my personal belief is that the latter is far preferable, because it benefits not only the holder but the rest of society too.
I agree perfectly well with your personal belief. I also agree that I should invest in companies that will produce something and make more money. Unfortunately, I am not interested in understanding a companies finances. I don't care about them. You would say then to invest in Banks. But no I don't understand their business either. I don't know what they invest into. What they do with my money.
What I want is to store my personal excess income where it will fight inflation. I used to save in Fixed Deposits. But I have only lost value in that. Over the last 5 years I have gained only 10% and of that 10% was lost to income tax. And the ground inflation in India is around that. So I can just say that I haven't lost any money. While gold has grown more than 20%, in Rupee terms. So I see it as a dud investment, where I am taking risks while I don't get anything extra. So gold seems to be a better savings vehicle. I agree with the problems of deficit of US, and so I understand that higher inflation is just around the corner.
So gold it is.
I understand that people with interest in investment like Warren Buffet can look into company financials and make good judgement of where to invest, but that person is not me. I guess you are that person. More power to you. But I have to save my money. I would rather do charity with my money, than throw it where the politicians can take it away. You might know the political climate in India, where our Prime Minister is being openly called a thief, and he doesn't care.
Frances:
Nah, I just cut to the chase a bit quicker than everyone else here. I can't tolerate the "whoa is me" routine so spare me with your "insult and ad homs" babble.
You were treated decently but ruffled by the challenge of some Freegold advocates. You then censored and referred to these and other Freegold advocates as 'idiots'. In my book, a leopard doesn't change its spots, ever.
shill: "An ACCOMPLICE of a hawker, gambler, or swindler..."
You mean that doesn't define your 'industry'? I can say I was NEVER part of an industry that didn't attempt to IMPROVE the lives of others. And that didn't entail STEALING from them.
Frances, I don't think there is anything out there that - in reality (here we go again) - is a "productive investment" that is not actively managed. Also known as a "business". Bonds and stocks are actually just types of financing that have more duration or leverage than Tbill savings.
What I was trying to get you to explain - and sorry I ave never read your blog - is what you think a "productive investment" is. Ie, provide even one concrete example. I am willing to bet that what you describe will be a business. And if that is the case, what I cannot reconcile is how you could possibly equate owning Tbills with investing that same amount f money in a business, given all the vagaries of such.
Can you elaborate?
Texan,
Yes, it would be a business. And I can quite understand that people would regard that as more risky than an equivalent TBills investment - although I am not so sure, certainly if you are investing in established businesses. But as I said, it depends on your attitude to risk.
There are some very interesting developments in business finance which can disperse risk - crowdfunding, peer-to-peer lending etc. - which often work on the basis that you don't lend a lot of money to one business but a small amount to lots of businesses. Peer-to-peer lending platforms also exist in personal finance too. They cut out the middleman (no banks) and directly link borrowers to a pool of lenders. These are the kind of initiatives that I find exciting - not yet more cheap money thrown at banks in the hope that they might dribble some of it to businesses at exorbitant rates. (Sorry, that was a rant.)
Phat Expat,
If that's your attitude I am simply going to ignore you and hope that others do too. Your anger at banks is distorting your perception. I left banking in 2002. It is not my industry.
Frances,
The risk to the Eurozone is rather larger than simply a couple of countries with too much debt.
No. The debt of these governments is a risk to the governments themselves, to some extent to their citizens and to their creditors, but not to the Eurozone. Why would it?
Much depends on which way France jumps - and that depends on whether or not Greece stays in the Eurozone.
Italy, France, Greece, ... The fact to ponder here is the fact that it is not any one of them who issues the currency. The currency is rather issued by the ECB.
Nor should you ignore the developing north-south split (which Draghi is orchestrating)
I don't think it making up some cloak-and-dagger stories helps the understanding. Quite the contrary: The ECB people have generally been quite frank about their policy goals. Take a look at
http://www.ecb.int/press/key/date/2010/html/sp100528.en.html
and search for "inflation tax". Or take a look at
http://www.bis.org/review/r111006h.pdf
and search for "safe stores of value".
Texan,
I don't even think Germany could recap the ECB if Spain defaulted, assuming it would even want to.
The ECB has one primary mandate: to achieve an inflation rate of below, but close to 2% annually. They don't even have any mandate to retain "positive equity" in the conventional sense, and so they could even run their balance sheet seriously under water in the IASB sense. And even that isn't a likely threat at all.
They still have some E400bn in accrued FOREX profits on their balance sheet (from the increase of the Euro price of gold), plus their paid in capital. Their total leverage as of today is only 6:1 (total assets divided by equity). If they were a regular financial institution, this would be fantastically conservative and prudent.
Note how Spain doesn't think it need a bailout now. It probably doesn't. It will just deficit spend and who cares where yields go - the ECB MUST BUY if no one else will.
Time will tell all things. As you know, my guess is that there will be further government defaults down the line. Yes, the ECB will print and bail out some debt, but not more than is consistent with their inflation target of below but close to 2%.
Frances again,
Conditionality simply isn't enforceable without placing the Euro at risk.
Can you explain this to me? Let's say, Spain is asking their creditors for a 20% haircut on the Spanish government debt. And on top, Spain refuses to bail out some of their shaky banks. The ECB will keep the banks liquid, but request a haircut on the banks' creditors as well and also refuses to bail out Spain.
What do you think will happen, and why do you think this would hurt the Euro as a currency? (in: people earn their salary in Euros and go shopping with these Euros).
Victor
Texan,
concerning the recent comments from the Bundesbank and also the fact that two of them, Weber and Stark resigned, I do have a cloak-and-dagger story.
The major weakness of Germany in this crisis is that they have so much of their savings in paper and especially in debt issued by foreign debtors. So somehow you have to get the stupid Germans out of this paper (because you know what will happen a couple of years down the line when the dollar goes the way of the dodo, but you cannot say this in public for the very obvious reason that you would then be the scapegoat who gets blamed for triggering it).
How do you get Germans out of paper investments?
Why don't you invoke the inflation scare? That would work in Germany, no?
Is this perhaps what's going on?
If you were a Bundesbank person, and if you were unhappy with the ECB policy, you would fight them rather than stepping down, wouldn't you? (You don't even have to do much in order to fight them, simply because you could threaten to leave the Euro, and the ECB would immediately be forced to follow your orders.
No, it seems the Bundesbank is firmly in charge. It is just that they have to sell a brutal hard-money-policy to the European public (yes, a 2% inflation target means that many will be bankrupt, and basically all governments will have to cut down on their deficit spending). And cannot an Italian with a past at super-vampire-squid Goldman sell this policy best? He is just trying to help you, no? It is just that he isn't entirely free to act - if he was, he would print for you.
Good show, isn't it?
Victor
@ Nickelsaver,
The explanation of the Parable of the Talents, that I was taught when growing up, always seemed problematic to me. Some years ago I came across a new (to me) explanation that forced me to look at that Parable in a totally different way.
If you are interested in contemplating a different perception of this Parable, then have a look at commentary of Ched Myers and Eric DeBode at http://godspace.wordpress.com/2010/05/18/the-parable-of-the-talents-a-view-from-the-other-side/
This is definitely not the forum for a religious debate, so I won't be adding anything further.
(1/2)
Bernanke also admitted that the Fed lacked the tools to deal with the hike in unemployment that the fiscal cliff would be likely to cause if Congress doesn't take steps to reduce its impact. He said this several times during the press conference.
So you have on the one hand the Fed telling Congress they will have to not reel in the sail in order to prevent economic collapse, on the other hand the ECB telling national politicians in Europe that they need to pull the sail taught or they risk a collapse in confidence in the currency (and by extention their own real economies).
Hyperinflation is always associated with severe economic shock (perhaps war), severe political instability and catastrophic production collapse, and nearly always with very high foreign debts (in the US this took the form of US Treasury bonds, unfunded future welfare program liabilities, MBS, derivatative bets, etc)
#FYP?
The problem is that the vast majority of people expect to see a positive return on their savings, even those that they don't wish to put at risk
We argue (per Anand's comment, for example) that the vast majority of people today simply feel forced to demand a nominal return on their savings to offset to some extent the loss of real value they know they will experience by simply holding. They do not wish to 'invest', they just do not wish to see the real exchange value of their savings eroded by systematic inflation of the currency. They do not feel they have any choice under the present system.
If the world follows the same pattern as in previous reserve currency transitions, the next reserve currency will be the yuan.
For one thing, nobody wants their national currency to become the next dominant global reserve currency - and we already know you understand this, so the surprise is that you might believe your above remark. For another, nobody else wants to accept subordinating their monetary policies again to some other country's politics, as they have under the dollar system.
Cont'd…
(2/2)
Germany is sliding into recession. I don't think you should underestimate Draghi's concerns
Draghi's concerns? If Germany slides into recession and deflation ensues even in that local powerhouse economy, the answers will come even more easily for Draghi than they do today. Is it really such a big surprise, in the context of a global economy that is deleveraging in aggregate, that export-led economies such as Germany and China should succumb to waning demand? I think it is no surprise, as hinted by Victor's comment, that the ECB head is today an Italian. The sooner the nincompoops at the Bundesbank finally understand the reasoning of the ECB's single mandate, the better it will be for everyone.
I would agree that for the CBs to be able to do their job of ensuring there is enough medium of exchange in circulaton, people have to stop regarding "money" as something that has intrinsic value in itself, and that implies that long-term savings, at any rate, need to be in something other than fiat money. Gold is one possible substitute as SoV, but it isn't the only one.
No argument from me in this extract. As JR highlighted early on in this thread, your view and ours aren't so very far apart - which is why any of us are bothering to expend much effort exploring the differences with you. :-)
Mostly I'm just trying to explain, for ordinary people, how things work and/or what is really going on.
Please keep up the good work! It's good to see you here, where many of us also strive, together, towards this same goal.
Sincerely,
DP :-)
PS: @Texan " I don't think we have discussed wine though" - wine is no long term SoV. At least not if you leave it at my house. The remainder of that comment of yours, regarding recapitalisation, really surprised me. Also your comment regarding "ECB will buy all the debt issued by the PIiGS" and call it "price stability". This is ABSOLUTELY Another's ECB - if you will simply remove the "all" part that you have erroneously inserted. Can't have none of that nasty "deflation" now, can we? … no, absolutely not. Deflation is not price stability.
VtC,
Yes, time will tell. And I will be the first to admit that I am not very well positioned to understand the kabuki being played out in Europe. Hopefully you are right, and I am wrong.
As for Weidmann trying to scare Germans into gold, well, that is a very interesting theory. If you find anything out there that seems to support this conjecture, I would love to hear it.
DP, I am pretty sure it's in direct violation of the Treaty. They have found a clever way around it, but funding government deficits was never part of the deal. And make no mistake, the ECB will be funding deficits. They are so choked with paper now they can't allow a default.
In a way, this is even worse than the US. Here the Fed funds ONE fiscal deficit. In Europe, well, I think they just handed out a license to spend to multiple countries. Ones that like to spend.
Let's see how it develops.
Let us develop a kind of dangerous unselfishness. One day a man came to Jesus, and he wanted to raise some questions about some vital matters of life. At points he wanted to trick Jesus, and show him that he knew a little more than Jesus knew and throw him off base....
Now that question could have easily ended up in a philosophical and theological debate. But Jesus immediately pulled that question from mid-air, and placed it on a dangerous curve between Jerusalem and Jericho. And he talked about a certain man, who fell among thieves. You remember that a Levite and a priest passed by on the other side. They didn't stop to help him. And finally a man of another race came by. He got down from his beast, decided not to be compassionate by proxy. But he got down with him, administered first aid, and helped the man in need. Jesus ended up saying, this was the good man, this was the great man, because he had the capacity to project the "I" into the "thou," and to be concerned about his brother.
Now you know, we use our imagination a great deal to try to determine why the priest and the Levite didn't stop. At times we say they were busy going to a church meeting, an ecclesiastical gathering, and they had to get on down to Jerusalem so they wouldn't be late for their meeting. At other times we would speculate that there was a religious law that "One who was engaged in religious ceremonials was not to touch a human body twenty-four hours before the ceremony." And every now and then we begin to wonder whether maybe they were not going down to Jerusalem -- or down to Jericho, rather to organize a "Jericho Road Improvement Association." That's a possibility. Maybe they felt that it was better to deal with the problem from the causal root, rather than to get bogged down with an individual effect.
But I'm going to tell you what my imagination tells me. It's possible that those men were afraid. You see, the Jericho road is a dangerous road. I remember when Mrs. King and I were first in Jerusalem. We rented a car and drove from Jerusalem down to Jericho. And as soon as we got on that road, I said to my wife, "I can see why Jesus used this as the setting for his parable." It's a winding, meandering road. It's really conducive for ambushing. You start out in Jerusalem, which is about 1200 miles -- or rather 1200 feet above sea level. And by the time you get down to Jericho, fifteen or twenty minutes later, you're about 2200 feet below sea level. That's a dangerous road. In the days of Jesus it came to be known as the "Bloody Pass." And you know, it's possible that the priest and the Levite looked over that man on the ground and wondered if the robbers were still around. Or it's possible that they felt that the man on the ground was merely faking. And he was acting like he had been robbed and hurt, in order to seize them over there, lure them there for quick and easy seizure. And so the first question that the priest asked -- the first question that the Levite asked was, "If I stop to help this man, what will happen to me?" But then the Good Samaritan came by. And he reversed the question: "If I do not stop to help this man, what will happen to him?"
That's the question before you tonight. Not, "If I stop to help the sanitation workers, what will happen to my job. Not, "If I stop to help the sanitation workers what will happen to all of the hours that I usually spend in my office every day and every week as a pastor?" The question is not, "If I stop to help this man in need, what will happen to me?" The question is, "If I do not stop to help the sanitation workers, what will happen to them?" That's the question.
"I've Been to the Mountaintop"
Hehe
Well, if my forest analogy was me being insulting, I'd be amazed to see myself when I consider my words insults.
If I am unable to point out a mistake, and provide a different perspective, without it being called 'insulting' (what? that you may not understand everything perfectly? the very thought. how rude) how then is a discussion to take place?
TF
It is with such activity in mind that the words of the late John F. Kennedy come back to haunt us. Five years ago he said, "Those who make peaceful revolution impossible will make violent revolution inevitable." Increasingly, by choice or by accident, this is the role our nation has taken, the role of those who make peaceful revolution impossible by refusing to give up the privileges and the pleasures that come from the immense profits of overseas investments. I am convinced that if we are to get on the right side of the world revolution, we as a nation must undergo a radical revolution of values. We must rapidly begin...we must rapidly begin the shift from a thing-oriented society to a person-oriented society. When machines and computers, profit motives and property rights, are considered more important than people, the giant triplets of racism, extreme materialism, and militarism are incapable of being conquered.
A true revolution of values will soon cause us to question the fairness and justice of many of our past and present policies. On the one hand, we are called to play the Good Samaritan on life's roadside, but that will be only an initial act. One day we must come to see that the whole Jericho Road must be transformed so that men and women will not be constantly beaten and robbed as they make their journey on life's highway. True compassion is more than flinging a coin to a beggar. It comes to see that an edifice which produces beggars needs restructuring.
A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth. With righteous indignation, it will look across the seas and see individual capitalists of the West investing huge sums of money in Asia, Africa, and South America, only to take the profits out with no concern for the social betterment of the countries, and say, "This is not just." It will look at our alliance with the landed gentry of South America and say, "This is not just." The Western arrogance of feeling that it has everything to teach others and nothing to learn from them is not just.
A true revolution of values will lay hand on the world order and say of war, "This way of settling differences is not just." This business of burning human beings with napalm, of filling our nation's homes with orphans and widows, of injecting poisonous drugs of hate into the veins of peoples normally humane, of sending men home from dark and bloody battlefields physically handicapped and psychologically deranged, cannot be reconciled with wisdom, justice, and love. A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.
Beyond Vietnam -- A Time to Break Silence
By "the Treaty", I presume you mean the Stability & Growth Pact?
They have found a clever way around it, but funding government deficits was never part of the deal.
Watchwords: Conditionality; Stability; Growth.
And make no mistake, the ECB will be funding deficits.
As a means to inject much-needed liquidity into those local economies, where deflation is unfolding, yes absolutely. Also as a means to ensure the market knows they mean business when they talk about Stability & Growth, discourage ill-founded speculative attack. But the conditionality makes it clear, to me, that the commitment to fund deficits is not unlimited as you imply. In the US? … Yes, there is quite a stark difference between the modus operandi at the Fed and the ECB.
They are so choked with paper now they can't allow a default.
How so? Really, you just keep surprising me this morning, Texan.
Texan,
You say:
They have found a clever way around it, but funding government deficits was never part of the deal. And make no mistake, the ECB will be funding deficits. They are so choked with paper now they can't allow a default.
The past is not the future - Euro Gold
"The point is that the Eurosystem's response (volume expansion) to its current systemic threat (the debt crisis) is not surprising. Does this mean the euro will collapse (experience hyperinflation)? No. Because, for one reason, it has severed the link to the nation-state. The euro is behaving perfectly predictably in maintaining the nominal performance of its system through expansion, but it cannot be forced to fund the future government profligacy of the PIIGS through volume-only expansion. That link is severed.
But the dollar, on the other hand, is nominally on the hook not only for the debt mistakes of the past, but for all future dollar-denominated liabilities, obligations, entitlements and promises of the biggest debtor in all of history, on top of a debt mountain that is probably another $100T in size depending on your measurement criteria. That's a big difference. The dollar is an old currency in the winter of its life, linked to the greatest profligate debtor the world has ever known. The euro is a young currency that has severed its link to the nation-state. The ECB can save its own system, but the member states cannot force it to fund perpetual profligacy...
Past debt is a problem - in the $IMFS it is what the savers hold as a store of wealth, and its what the banking system holds as reserves/assets against deposits/liabilities.
I like to think, the euro was in a sense built to print. Past euro debt will be dealt with with an eye to protecting the banking system (writedowns, ZIRP, swaps, repos, emergency lending, assets purchases, restructuring). The euro might quickly devalue against the physical plane during the transition when the $IMFS goes to relieve some of the past debt burden, with gold going up as an asset on the balance sheet to provide an offset for the saver class. Not a running hyperinflation, but a devaluation.
FOA
The world is heading towards a huge financial / currency crack up, but it won't work out with gold coming back into the money game. This very long term transition is playing on a move away from dollar domination with Europe preparing to suffer less than us by pulling in as many other political trading blocks as they can.
Suffer less, but still suffer.
Future obligations are different than past obligations. Imagine the Euro and US devalue - the USG/FED can keep printing to fund liabilities, but the euro can't. See? The euro members cannot force the printing of their future obligations the way the US Congress can. HUGE DIFFERENCE!
The blog FOFOA is a tribute to the "thoughts" of Another
and his friend. It "should" also, in my view, be a tribute
to the "tone of voice" in which those thoughts were both
expressed and debated. Even when, back then, the
equivalent of a troll arrived, in the person of Sir Permafrost,
the tone remained, until the very end, most civil.
Since FOFOA is mostly engaged, these days, in doing the
hard work of research and thinking for the next post, it
is we, the members who must defend not only the ideas,
but the tone as well. To those who have steered the
discussion back, away from the personal to the ideas at
hand (and you know who you are) I can only say, Thank You.
A special thanks to you, JR for the MLK which I had never read.
Make It Good
Brodsky on bridging the bank-credit-to-base-money gap, at KWN.
If only Paul could leave behind all that other "the end of fiat" & "silver and miners leverage to gold" nonsense.
For the record, Jericho is about 1200 feet below sea level.
Share the love today, for tomorrow everyone will share with you. Don't worry, be charitable!
http://www.spiegel.de/international/germany/germans-fear-poverty-in-retirement-even-after-life-of-work-a-855352.html
"Voters have clearly decided in favor of budgetary discipline and adherence to the EU's rule of keeping the increase in the deficit below 3 percent," said Foreign Minister Uriel Rosenthal.
The Dutch vote in favour of Stability & Growth.
Republicans agree to increase State budgets.
Perception versus Reality: The sensory mechanism
Neither you nor I can follow a fugitive through the woods
and fields with our sense of smell, but a bloodhound can.
Likewise, in the game of chess, a master can sense the
arrival of the endgame before a novice. In 1997 Another
and his friend had already seen that endgame enter their
field of vision. Four years ago, that vision was revived by
FOFOA. September 2012 will be, when looked back on
in future years, the moment when a rapidly widening
group of players, of ever decreasing "chess ability" will
be able to see the results, if not the causes, for the
inevitable checkmate. Beyond that point however, I
think we should respect Feynman's chess analogy, because
the longer and deeper we look, the more we see and learn.
We may see the outlines of the features of a "new system",
with their associated probabilities, but until the future
arrives, these must remain conjectures, in the best sense
of that word.
It has been said that economic "science" has produced only
one true "law", that being Sir Gresham's. I would disagree:
There is a second, that being the "law of unintended
consequences". And of course, the last word must go to
Yogi Berra. "In theory, there's no difference between theory
and practice. In practice, there is." Cheers.
P.S> Thanks DP for the Brodsky (and Zulauf) KWN link.
"Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.
The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.”" Bloomberg
Interesting version of musical chairs
Perception and reality
Just the brief mentioning of IMF and David Ricardo up the tread makes me blood boil.
Ricardian equivalence, assuming that taxpayers save in bonds in anticipation of higher taxes later, makes government spending debt money equal to spending tax money, is as flawed as his labor theory of value.
The perception fostered by these false assumptions in the foundations of modern economic thinking makes it possible for the real world players to go on exploiting the world behind the scenes. Since the advent of the industrial revolution its been but one rule of thumb in political economic policy making. For a country to get rich it needs to focus on exporting industrial goods and importing raw materials. England did not allow its colonies to start manufacturing goods.
The value added by a industrial worker is increasing along with the technological evolution and mass production. The same dynamic is not possible to the same extent in the production of raw materials and service sector so if your are in farming/mining/building/painting etc. You are stuck being poor.
Freegold can possibly regulate this nicely, but big reform in trade policy is needed. Countries must be free to protect their domestic industry and agreculture as they se fit. Real Freetrade !
A false perception of reality lives and thrives in the financial economy, but the real truth is hidden in the day to day battles of the real economy where everybody believes in such as David Ricardo's equivalence and LTV.
Texan observes:
I don't think we have discussed wine though....
That's what Ender is for:
Ender said...
I’m sure there are many here that can answer your questions better than I!
From my point of view, gold is a wealth reserve asset. It is like owning a fine work of art or an ageless bottle of wine. Parting with it (spending) is to no longer own it.
If liquidity is a prerequisite for owning gold, it would appear that gold, to you, is a means to currency. A little more realistic thinking, one that may serve you better, is to life a life where currency is a means to gold.
My personal stand is – spend what currency you make in exchange for your services on a good life! If you are fortunate enough to have a surplus of currency you may be able to enjoy the finer things in like – gold. If you truly believe that you’ll have to sell the finer things in life before too long, it would be foolish to buy it.
If you have read any of my previous comments (found in the archives) you will know that I advocate physical gold in your own possession. Every other form of what appears to be gold ownership is simply a book entry that signifies that someone owes you gold. One of the key functions gold provides is payment in full. By holding gold, no one else owes you anything.
If this does not help, I’m sure someone will chip in something that makes sense for you.
Good day!
January 22, 2011 4:05 PM
Totara,
Thanks for the link. You are correct that this is not the venue for expounding further on this subject. I have many thoughts and beliefs about these things which are not represented in my comments earlier in the thread. That is, that I did not purpose to give a thorough rendering of my views on the matter, only that I absolutely disagree with the use of it as it was being applied. Additionally, I understand the view of the article you posted and do not agree with some of the conclusions drawn by the author. But I do so on grounds, which to elaborate, would turn this comments section into a bible study. But thank you for pointing it out.
Haven't seen this posted yet
(1/2) On Sept. 11, Pastor Lindsey Williams, former minister to the global oil companies during the building of the Alaskan pipeline, announced the most significant event to affect the U.S. dollar since its inception as a currency. For the first time since the 1970's, when Henry Kissenger forged a trade agreement with the Royal house of Saud to sell oil using only U.S. dollars, China announced its intention to bypass the dollar for global oil customers and began selling the commodity using their own currency.
Lindsey Williams: "The most significant day in the history of the American dollar, since its inception, happened on Thursday, Sept. 6. On that day, something took place that is going to affect your life, your family, your dinner table more than you can possibly imagine."
"On Thursday, Sept. 6... just a few days ago, China made the official announcement. China said on that day, our banking system is ready, all of our communication systems are ready, all of the transfer systems are ready, and as of that day, Thursday, Sept. 6, any nation in the world that wishes from this point on, to buy, sell, or trade crude oil, can do using the Chinese currency, not the American dollar. - Interview with Natty Bumpo on the Just Measures Radio network, Sept. 11
This announcement by China is one of the most significant sea changes in the global economic and monetary systems, but was barely reported on due to its announcement taking place during the Democratic convention last week. The ramifications of this new action are vast, and could very well be the catalyst that brings down the dollar as the global reserve currency, and change the entire landscape of how the world purchases energy.
Ironically, since Sept. 6, the U.S. dollar has fallen from 81.467 on the index to today's price of 79.73. While analysts will focus on actions taking place in the Eurozone, and expected easing signals from the Federal Reserve on Thursday regarding the fall of the dollar, it is not coincidence that the dollar began to lose strength on the very day of China's announcement.
Since China is not a natural oil producing nation, the question most people will ask is how will the Asian economic power get enough oil to affect dollar hegemony? That question was also answered by Lindsey Williams when he pointed out a new trade agreement that was signed on Sept. 7 between China and Russia, in which the Russian Federation agreed to sell oil to China in any and all amounts they desired.
(2/2)
Lindsey Williams: "This has never happened in the history of crude oil. Since crude oil became the motivating force behind our (U.S.) entire economy, and everything in our lives revolves around crude oil. And since crude oil became the motivating factor behind our economy... never, ever has crude oil been sold, bought, traded, in any country in the world, without using the American dollar."
"Crude oil is the standard currency of the world. Not the Yen, not the Pound, not the Dollar. More money is transferred around the world in crude oil than in any other product."
"On Friday, Sept. 7, Russia announced, that as of today, we will supply China with all of the crude oil that they need, no matter how much they want... there is no limit. And Russia will not sell or trade this crude oil to China using the American dollar." -Interview with Natty Bumpo on the Just Measures Radio network, Sept. 11
These duo actions by the two most powerful adversaries of the U.S. economy and empire, have now joined in to make a move to attack the primary economic stronghold that keeps America as the most powerful economic superpower. Once the majority of the world begins to bypass the dollar, and purchase oil in other currencies, then the full weight of our debt and diminished manufacturing structure will come crashing down on the American people.
This new agreement between Russia and China also has serious ramifications in regards to Iran, and the rest of the Middle East. No longer will U.S. sanctions against Iran have a measurable affect, as the rogue nation can simply choose to sell its oil to China, and receive Yuan in return, and use that currency to trade for the necessary resources it needs to sustain its economy and nuclear programs.
The world changed last week, and there was nary a word spoken by Wall Street or by politicians who reveled in their own magnificence as this event took place during the party conventions. A major blow was done on Sept. 6 to the American empire, and to the power of the U.S. dollar as the world's reserve currency. And China, along with Russia, are now aiming to become the controllers of energy, and thus, controllers of a new petro-currency.
http://www.examiner.com/article/dollar-no-longer-primary-oil-currency-as-china-begins-to-sell-oil-using-yuan
h/t Max Keiser
Indenture said about the following:
The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.”" Bloomber
"Interesting version of musical chairs"
It strikes me as a kind of variant on Gresham's Law. Bad money isn't driving out good in this case, but, rather, bad money is degrading (less bad) money. How do you like your counterparty risk? Well done, please.
So the scam is that all the work done by Fofoa is so that gold purchases of the 100 or so of us here on the blog (or heck, lets even broaden that universe to include all of the people who have ever read the blog and all of the people the readers of the blog have ever communicated with about it)are going to positively affect the gold price so that Fofoa can sell his gold that he bought before he started the blog at a higher price? And he is laughing all the way to the bank? Man, am I furious. I'm calling Bob Woodward right now under an alias (Shallow Trachea) and give him the scoop. Fofoa isn't the only one laughing at that plot...I give it an A for creativity but an F for plausibility.
Ok, ladies and gentlemen, now, pay attention.
------------------------------------------------
10 signs that you have been brainwashed by FOFOA.
------------------------------------------------
1. You know who Gideon Gono is.
2. You can recite FOFOA’s Dilemma even when you are abruptly awakened from sleep at 3 in the morning.
3. You don't associate prices in terms of your local currency any more; instead you associate them in terms of grams and ounces.
4. Your family members will never-ever buy 1 ounce of physical gold. Not in a zillion years. In fact, you trying to explain Freegold to them only reinforces theirs believe that “goldbugs” are crazy.
5. You are NOT “goldbug”. You are former “goldbug”. You consider yourself to be PGA (has nothing to do with Tiger Woods or golf).
6. When you hear the word "Blondie", you do not associate it with that gorgeous colleague of yours that you always wanted to #@¤§. Instead, you associate it with some dude from New Zealand and his badass smart comments.
7. When you hear the initials “JR”, you do not associate it with the TV-series that is back on the air again. Instead you associate it with some dude from USA who is order of magnitude more brainwashed by FOFOA’s writings than you are.
8. You are surprised that “Aristotle” is still alive and lives apparently in London, UK. Yes, that Aristotle.
9. You know what superorganism is. In fact, you even can describe it. As a consequence, you become sentimental about ants; because, in principle, you realize you ARE ant.
10. You write lists like this.
If you have 2 or more symptoms. Seek help. Seriously.
Yours truly\Dante
PS 3 extra just for you:
11. When you realize that 1 ounce of physical gold is, for all intents and purposes, priceless, you curse the day you tried to convince everyone else you know to buy. Because you know that no one did and you are probably going to be prime target when and if SHTF.
12. As a consequence of above you are considering to arm yourself in order to defend the precious.
If you live in USA: M16
EU or ROW: Baseball bat
13. You start to joke more and more with your boss. Because you know that after the paradigm shift, you may become her\his boss. Naturally the boss thinks you are an idiot because you save in physical gold.
Oh, sh!t - "12/10 must try harder"
Ahahaha Dante_EU,
ROFLCOPTER.... Priceless list.
I definitely need to seek help. Who can help us Dante?
Dante_Eu
Now THAT was funny. Bravo!
Thank you, Thank you all.
Me thinks that's some guest post material right there, but I will let FOFOA decide.
Who can help us? Someone’s blog perhaps? I will not mention any names; misunderstandings are common and easy in this day and age.
I have some more material but since English isn't my first language I have to use that wonderful peace of software called Google Translate. And that takes some time and nerves.
If you want to have enchanted experience:
1. Copy the entire list to Google Translate EXACTLY as it is.
2. In the lower right corner, click on “Listen”.
3. Enjoy!
Nr. 6 sounds particularly lovely! ;-)
I am ant, and so are you. FOFOA's gangsta ant.
http://youtu.be/CDl9ZMfj6aE
Not severed from the nation-state:
“This is a Main Street policy, because what we’re about here is trying to get jobs going,” Bernanke said in a press conference yesterday. “We’re trying to create more employment. We’re trying to meet our maximum employment mandate, so that’s the objective,” he said, referring to the Fed’s mandate from Congress for full employment and stable prices.
"enhanced experience" not "enchanted experience"...
Godd@m Google Translate... :-)
Frances,
I would love it if you would participate in a discussion of Freegold Theory. That is what I was hoping for 2 months ago when I asked my questions. So lets try again, shall we?
Let’s see a portion of what you originally wrote (that prompted me to ask you some questions 2 months ago):
Frances wrote,
“I have spent some time reading the writings of their guru, an anonymous blogger known as FOFOA (which apparently means Friend of Friend of Another). I'm going to summarize here what I have drawn from these writings.
... Gold, to them, is not a commodity, so its price is not moveable:
… They describe the "freeing" of gold from its present use as a fixed asset backing paper investments, and from any present or future monetary use, as Freegold.
… we seem to have something akin to a doomsday cult.
…And their belief in financial Armageddon and phase transition to a new gold-based financial order (which they are working to bring about by encouraging people to move their savings to physical gold)
…And that brings me to my second objection. The unproductive hoarding of wealth runs counter to everything I believe - both economically and as a Christian…”
Etc…
http://coppolacomment.blogspot.co.uk/2012/07/the-golden-calf.html
So. You claim that Freegold theory (as blogged about by FOFOA, NOT WIKIPEDIA):
states that its [edit gold] price is not moveable.
You label “us” a doomsday cult
Saving in gold is the problem
And hoarding said gold makes you a bad Christian (and is bad economically to boot)
After reading that, naturally I was shocked to find out that I believed in those things! I didn’t realize I did. I tried to reconcile your take on Freegold with my understanding of Freegold Theory, and I couldn’t do it. So I asked you some basic questions on your blog seeking enlightenment. Because, as dense as I am, if I am being taken in by a swindler (I’M LOOKING AT YOU FOFOA!), I want to know about it!
Thus, my first query to you:
1. How do *you* resolve FOFOA's dilemma?
Your original answer to that question was:
“ I did not discuss the question of the Triffin dilemma in this post because I was more interested in the moral issues around hoarding in general. You will note that I am equally scathing about hoarding of other hard assets and, indeed, paper investments that don't provide money directly to productive enterprises. So I am hardly a supporter of the present system, am I?? However, since you ask, gold is not the only possible solution to the Triffin dilemma. The IMF is promoting SDRs as an alternative, and you may recall that Keynes' original idea was a separate international currency (Bancor). I regard the possible use of gold as an international reserve as not unreasonable, but I remain to be convinced that it is better than the alternatives. “
Pardon me for saying so, but I don’t think that answers the question. You talk about something (Triffin Dilemma) that (AIUI) is also resolved by Freegold. But maybe it isn’t. Based on your summary above, I have a flawed understanding of Freegold Theory. Because I certainly don’t believe in any of the items listed above that you said “Freegolders” believe in. Maybe FOFOA has misled me into believing that Freegold would resolve Triffin’s Dilemma.
I have no problems stating that I am out of my depth in the field of economics. But given enough time & when I take my shoes & socks off, even I can work basic math out.
So. As someone who is (once again) concerned that he is being snookered, can you address the FOFOA dilemma part of my original question & tell me how you would resolve it?
Milamber
Victor,
you around? :-)
saw GLD added 9 tonnes today......
total of 43 tonnes added since 6/30.....
are you getting as sell signal?
thanks and best, E
The Long Road to Freegold
Please take the time to understand FOFOA's dilemma if you'd like to grasp the importance and significance of the long-line Trail exhibited below:
FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma.
Once Upon a Time
What the 1922 Genoa Conference did was to institutionalize the "sterilization" of gold for the rest of the world through the reserve structure of the international banking system. And this bit of genius was decided by a "committee of experts" from 34 different countries. They did this by introducing paper gold—or paper promises of gold—into the international banking system as reserves equal to the gold itself. This wasn't the first paper gold, but it was the first time that specific paper gold (that from New York and London) was used as an equal reserve upon which credit can be expanded. What is acceptable as international reserves is critical because trade settlement is a function of the reserves. This conference was the birth of the $IMFS.
[...]
Our money is credit. “The people’s” money has always been credit. Credit expands and contracts based on the availability of actual money, the monetary base. 1922 was the first time they included a form of credit as the base itself. A Pandora’s box if ever there was one!
[...]
The Architects
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.
Following ANOTHER's revelations, Jacques Rueff was the first name I put on my own personal list of early ideological euro architects a couple years ago. The ECB itself pegs the beginning of "The Road to the Single Currency, The Euro" at 1962 with the "Marjolin-Memorandum". [5][6]
The Marjolin-Memorandum was the European Commission's first proposal for an economic and monetary union. Robert Marjolin (1911-1986) was a French economist and politician involved in the formation of the European Economic Community (EEC). He was 15 years Jacques Rueff's (1896-1978) junior and, like Rueff, he was an economic advisor to Charles de Gaulle. I mention this only to further the connection between the modern euro and Charles de Gaulle of the 1960s who complained publicly about the exorbitant privilege afforded the US by the use of dollars as international CB reserves, demanded physical gold from the US Treasury, and pulled out of the London Gold Pool which led to the end of Bretton Woods three years later.
What we learned from ANOTHER thirty years later was:
1. The purpose of the euro was to provide an international transactional alternative to the dollar.
2. 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
[...]
Here's the main thing, gold will work the same way as a reserve asset in Freegold as it did before 1922, even without going back to being the sole monetary base. Gold is superior to even the entire monetary plane in this regard. It is the sole monetary member of the physical realm.
Gogogo Nickelsaver!!
Awesome stuff today!
Dante- omg...too funny!
Frances
a final word and thought...
I have been coming here for over a year. I read to learn but it is more than just idle interest...it is my retirement fund that is at stake. I look for flaws, ideas that do not jive with the reality (as I interpret it after source bias is accounted for) and conflicts with other thinkers. I of course do find some, but overall the freegold view of our current world economic crisis is the best explanation and road map for behavior I have found. It is not found in the writing of the Fed, nor the evening news, not Sinclair or Zero Hedge, and not in the theories or Marx or other great dead economic thinkers...but here at fofoa.
I do not know what you are looking for or trying to explain. Maybe you do not see a problem with the way the world works now. Maybe you think it is fair and functional. I do not. I find the freegold 'theory' (fofoa insists it is not a theory but...) to be both optimistic and practical. It also seems to be 'the plan' of those who get to make grand plans.
I'm not following your objections to what you read here. Is one not to maximize ones finances? Charity can only come from those who have something to give after all. Hoarding sounds nasty but I think fofoa put that old chestnut to bed with his reply to Charlie Munger.
I suggest you lay out your problems with fofoa AFTER you have read him. It is clear you do not understand a good deal what he is saying yet. If after that you want to pick a bone I'm sure there will be a long line ready to politely give you some back and forth. And remember, this is the internet, if you want polite conversation try a biker bar, or here...it really is one of the best behaved bunch of internet savages I have found.
JR,
Not severed from the nation-state:
Would he ever admit that the international role of the dollar is the first priority and that everything else, U.S. employment, U.S. GDP, etc. is subordinate to that?
Watch the dollar price of oil increase, gentlemen. And if it doesn't on its own, it will be helped.
enough,
Victor, you around? :-)
Indeed.
Since I wrote that article, we had the following signals:
May 22: buy
July 19: buy
August 17: sell
September 14: sell
Victor
Questions for the board:
I understand the call of FO/FO/A on the collapse of paper gold. I'm wondering now what affect that will have on the oil futures market? Will that market freeze at the same time? If we see a transition to Petro-Euros, or Petro-Yuan (yikes), what are those implications?
And, does anyone know if there is any such thing as an E-Trade type of brokerage account available to Americans that is Euro based?
Thanks
I've always loved Coppola,
good to see one again !
For *&%!s and giggles. I hasten to offer the following caveat about the prediction at the link: The author's track record is abysmal, but you know what they say about broken clocks. Last but not least, after pondering this prediction, it occurs to me, without any undue torturing of logic, to be an inadvertent forecast for freegold.
http://www.economicfractalist.com/blog/2012/09/09/the-historical-gold-crash-after-13-september-2012-the-new-quantum-science-of-lammert-asset-debt-saturation-economics/
Edwardo,
That article doesn't make any sense to me. The chart is labeled "gold crash"(devaluation), yet the copy talks only about debt default. So he thinks massive debt defaults/credit deflation will lead to a collapsing gold price? As Spock would say, "interesting"...
Nickelsaver,
Your broker should be able to trade in foreign markets and foreign currencies. Or maybe you want a FOREX broker?
Victor,
The August sale signal failed, correct? What is the accuracy rate of the signals? Thank you.
It occurs to me that determining the demand and price of the SoV (separate yet correlated metrics) is in large part driven by the need to match the efficiency of the means of production.
In this light, one would expect that the vast increases in productivity of the last 50 years would need an equal increase in efficiency in the SoV. Instead of increasing the efficiency though, we've decreased the efficiency and increased the supply through a flawed SoV. FOFOA has already discussed how the efficiency of gold as a SoV improves as its price rises.
The more our technology and productivity is directly correlated to Moore's law, the more pressure for a SoV to match those efficiency gains. It may be enlightening to compare the growth of dollar-denominated SoV-like instruments in this context. If indeed that is the primary driver of the value of the SoV to society as a whole, then many of our assumptions about the post-Freegold price and market may understate the long term trend.
Part 1/2
Ok, here is some more…in the end, I’m going to disclose a SHOCKING information about myself…so, here we go:
14. For you, diversification means, to physically divide and move your stash to different locations. If you have means, then different countries and\or continents.
15. You have ONE (1) friend who really understands you and whom you can talk to. He also reads FOFOA. He is convinced that silver is better investment because poor people can afford it. You don’t bother anymore (the cheap bastard never donates to FOFOA).
16. Almost all your silver has been swapped for gold. Yes, it was difficult at the time, but you know, deep down, it was the only sensible thing to do.
17. You know for a fact, the only ones worse than “goldbugs” are “silverbugs”. Those sons of bitches are crazy!
18. Occasionally, you go to zerohedge.com just to feel the mood of HMS. There, you always wonder why some dude called Tyler, do not write more about FOFOA. Also, you mix Tyler with some dude called Tyrone, are they one and the same person? Who knows? However, you do know, one of them occasionally make posts on FOFOA’s blog, is impressed by him, and begs him to reveal the self.
19. You start to like Dutch people, just because, you figured out that ANOTHER was Dutch. Or at least, you think you have figured it out.
20. You are aware that the cause of the GFC is not fiat currency, banks, fractional reserve banking or credit. You only need to look at the mirror. There’s the problem. Also, the solution. It literally is in your hands.
Puh…there you have it. Now it is 2 lists instead of 1:
List 1: Signs 1 - 10
List 2: Signs 11 - 20 (advanced symptoms)
Now, I planned to write
….@FOFOA:….
….but then, I stopped. I thought, wait a minute, FOFOA is responsible for all this! Why would he like to help? After all, doesn’t he need some fiat to stay afloat and hence need more brainwashed readers? So…
@Anyone who would like to help:
Here’s the cure for the disease (Yes, it is disease):
Ok, first thing first, understand that you have to take it gradually. As with any junkie, abrupt denial to the object of desire, can lead to fatal consequences. So you have to gradually decrease exposure to FOFOA writings, and accordingly, increase exposure to MSM – Mainstream Media. Arbitrary news program, newspaper, blog or homepage from MSM will do just fine. Also, any grassroots and \ or independent media will do nicely, the odds that they mention FOFOA or Free Gold close to 0. There is one obscure newspaper in India, though, what are the odds of a patient reading it? Thought so.
Ok, here’s the recipe:
First step is to publish List nr. 1 so you can identify your patients. Please, understand that some symptoms are more severe than others. For example, symptom nr. 10 is alone enough to get diagnosis. When you identified patients start to implement this 13-step program:
13-step program
----------------------
Day 1: 70 % FOFOA, 30% MSM
Day 2: 67 % FOFOA, 33% MSM
Day 3: 68 % FOFOA, 32% MSM
Day 4: 67 % FOFOA, 33% MSM
Day 5: 65 % FOFOA, 35% MSM
Day 6: 60 % FOFOA, 40% MSM
Day 7: 55 % FOFOA, 45% MSM
Day 8: 50 % FOFOA, 50% MSM (now the signs of the real recovery starts to appear)
Day 9: 45 % FOFOA, 55% MSM
Day 10: 40 % FOFOA, 60% MSM
Day 11: 38 % FOFOA, 62% MSM
Day 12: 42 % FOFOA, 58% MSM
Day 13: 37 % FOFOA, 63% MSM
Here is the program in the chart form:
Red line – FOFOA, Blue line – MSM, on x-axis, replace years with days i.e. Day 8 = Year 2006
13-step program in chart form
On the 14th Day give the patient List nr. 2 (signs 11-20, advanced symptoms). If the patient still shows symptoms of FOFOISM (LOL) repeat the program! Eventually, what you desire is 10% FOFOA, 90% MSM. At that stage, the patient is considered to be cured.
...Part 2/2 below...
Part 2/2
If the patient doesn’t get better after several iterations, then I don’t know what to do. Oh wait, I know for a fact, there is one lady (whose husband is surgeon); she reads FOFOA and then interprets the ideas to her husband. Maybe she can ask him if he knows any psychiatrist that could help? Not psychologist, we know for fact that psychology is not real science, just like economics.
Ok, time to wrap things up. In some rare cases the patient has all 20 symptoms. Yes, it is hard to believe, but nevertheless, it is true. The best I can describe it is: “I can imagine how it is to live in North Korea.” Oh wait…
21. You know for a fact, how it is to live in North Korea. You have watched some disturbing videos about life in North Korea on FOFOA blog.
Oh…for the love of god…please stop…I can’t take this anymore…try..must…group therapy…
Sincerely\Dante
PS Here’s the shocking disclosure:
I work for a CHARITY organization (quite successful one to)! Ha, You didn’t see that coming, did You?
Victor,
They are one in the same, because the economy is built on the dollar. That's a big part of the not severed from the nation-state. The US economy needs cheap oil in dollars, not in gold.
FOA (2/28/2000; 10:18:13MT - usagold.com msg#8)
First walk
The real risk today is now being understood. The American economy will only slow down from a hyperinflation,,,,, and that will be caused from a shift from the dollar reserve function!
FOA (6/4/2000; 21:26:34MT - usagold.com msg#25)
The Trail is getting Hot!
The political agenda in both Japan and the US generally supported the outcome of borrowing Yen to invest in dollars. Mostly because the Yen must eventually be inflated in supply to keep the Yen in a competitively down stance to save market share. In a long view, both currencies will inflate together and balance that carry trade. Even if they both hyper inflate.
In contrast, the Euro does not need to inflate to remain competitive. We have said all along that the ECB is allowing the markets to do what the Japanese have struggled a decade to accomplish. That being having a weak (in exchange rate only) global currency with low inflation relative to the reserve dollar. This supports the internal economy of Europe without having to drive interest rates to zero (like Japan) to do it. Every day that this Euro / dollar currency mismatch continues, it expands the coming Euro Zone financial dynamics. The longer that dynamic is in place and growing, the less impact an eventual failing dollar will have on them. This is the fatal flaw for the dollar in this ongoing "currency war". When the dollar death signs are signaled by our Fed raising rates further, it also outlines the significant difference the Yen carry has with the Euro carry. Truly, the ECB will not have to inflate the Euro currency supply in an exchange lowering rate battle with the dollar in order to maintain "market share"! This will trap the Euro carry in a diminished currency supply situation that will literally decimate their (the carry trade) program. It will also gun the Euro!
The Fed cannot raise rates high enough or restrict reserve creation enough to slow the US economy without cascading our financial markets. This is a seldom seen typical function of a failing currency system off the gold system. Such a Fed action that would drive business into the Euro Zone sector at the exact same time that currency and it's economy is rising. And rising as local Euro rates stay the same. Today, the political perception of this risk is raising the dollar's political liability.
If the Fed does nothing, they remain on a full blown inflation track. Right where Europe want's them.
FOA (10/20/00; 14:00:07MD - usagold.com msg#43)
A Fireside Chat
[...]
In the past if the system began driving the dollar too high and forcing US trade deficits, the Fed would raise rates to throw us (USA) into an economic recession that broke the vicious deficit trade cycle. Knowing full well that it would be a short recession policy because "noone" would jump the dollar ship before the medicine could work. Looking around back then and we see there was no other reserve currency ship to jump to. We either lose jobs and profits from an "overvalued currency" or from an induced recession. The first can lead to a financial breakdown, the lasts corrects things after only a short while. Naturally, we embark on the quick fix of a fast recession.
This is why our times are so very different now. What the "chimps" came to know over this 20+ year period as a strong America in a high dollar, was always something our money creators were striving to fight against. We truly have always been inflating our currency for these many years in a attempt to keep the natural effects of the IMF reserve system from spiking the currency too high up. Again, if we had a regular currency, our policies would have been reflected in sky high prices for everything. What most of us "smart chimps" know as price inflation reflecting money supply inflation.
OK, let me sip some starbuck's:
Ever since the Euro was seen in by US policy makers as an eventual success, our treasury has tried to put it's best "New York Spin" on the ongoing process. Simply stated; from the early to mid 90s we are in favor of a strong dollar policy. In reality, with the advent of the Euro and the evolving stance of the BIS, this has made our "economy killing" strong dollar unavoidable.
There is no way the Fed can create a new recession now without everyone jumping ship for another currency reserve. There is no possible way the Euro Zone will suffer as big a downfall as the US in another policy induced recession. Just looking at their closed economy and debt structure tells that story by itself. Any US slowdown means a run for the Euro, yet weakness in the Euro means the US must inflate at a torrid rate. We now stand toe to toe and wait to see who will fall first. All the while our world dollar gold markets are caught in the cross fire!
This is where we have been for the last decade. This explains why the DOW and all it's paper cousins have enjoyed the effects of a massive, ongoing dollar expansion worldwide without any official policy interference. Right when we were to the point of changing policy to slow things down, the Euro was to be introduced in a year or two and risked taking away or sharing the dollar's standard.
The "lesser chimps", lost in Western thought keep waiting for the fed to induce their deflationary policy. (I was monkey - ing around in this area for a while myself) (grin) It is not coming. To do so now would commit the dollar to non reserve status in a hurry and produce a massive price inflation at home (right now) as all these unneeded dollar reserves come racing home. Remember, the ECB does not need dollar reserves!
[...]
The lesser of the two evils today (and this is the one the ECB / BIS enjoys watching) is our current frozen policy. We can no longer cut off the strong dollar / growing deficit circle by raising rates and invoking a recession as in the past. This time we must continue to pump the reserves at all costs in a process that only floods the world with more dollars. It's called a currency hyperinflation and is one we (as US people) have never witnessed in modern times. The pressure has built up full volume now as all escape valves are being closed. We are well on the way to a derivatives exploding event that will break into the open with a cascading dollar and full force US price inflation.
FOA (02/09/01; 14:24:03MT - usagold.com msg#59)
Current background
[...]
The point of my presenting this is that the whole object of the paper gold dynamic is and always was to function for industry hedging habits, not so much to deliver gold to the public. Yet, because this maze was encouraged by the CBs to grow so super large, it's goal was so that political gold could be moved. One day, this entire structure will have served it's useful purpose and then it will be allowed to fail. That day is approaching.
To bring us up to present:
To date, that purpose has been served largely because it succeeded in keeping dollar supporting oil prices down, extending our US economy,,,,, until EMU. As evidence to the process, notice how oil prices began their dollar rise only 6 months into post EMU. Clearly, there was no longer a need to support our dollar economy once the Euro was established. Indeed, just like a turning supertanker takes time, so too does the higher energy prices take time to work their will. Make no mistake, the world has seen the very last of cheap dollar oil. The next dynamic of that process in the transition of oil settlement support into Euro denominations. Notwithstanding Iraq's move as a convenient trial balloon, the mass of this transition will not begin until the US has clearly embarked on a slowdown. And that slowdown, energy induced as it is, will, this time, force the fed to fight it with a super inflationary buyout of anything and everything that defaults. Right down to your shoe laces. This, my friends is the inflation dynamic unleashed once a currency is removed from reserve status.
Further; its no mistake of identification in understanding the ECB / BIS roll in all of this. That the ECB has started cashing in all it's interest on dollar reserves points to a new direction in currency warfare. Our own Randy@ The Tower has documented this for some time. In addition, their marking gold to market is a prerequisite to following the Fed's new inflation stance by scoring the dollar against the Euro gold price once the paper gold markets fail.
FOA (4/19/01; 17:50:29MT - usagold.com msg#65)
Reply
[...]
My friends, a national fiat in our modern world only functions if the whole world uses and supports it's flow and most importantly likes it's management (political styling is the catch word). This support and use of our dollar can and will change faster than many think possible once the Euro is finished. Our dollar is not going to become a "banana" or "nada" in the future, as auspec notes. It already is and has carried this trait for some time now as does every fiat today. The only thing that keeps them from cascading away is world support and use.
Point:
When most of the major players that styled the Euro decide to swing even 1/2 support toward that new money, the exchange rate for our dollar will plunge to it's true worth! That dollar value is there now, you just don't see it yet. The price inflation that many (auspec) don't / can't see happening, will be the result of our currency management changing to confront the nature of all the above. The world economic financing, pricing, saving, settlement and opinion is shifting toward the Euro. As this happens the US will have to raise rates ever higher, even as it massively prints more currency to support our internal economy. Our entire economy will slow and fail as this price inflating process moves on. Some will call it stag / flation, but will change that description as the it becomes more of a crash / hyperinflation.
Right now, the actions of our fed is telling this truth. We must inflate while we watch the Eurozone enjoy it's basically internal trade economy. As other nation blocks embrace that zone, they will pull economic function from us.
Hello Nickelsaver:
Yes, that was a truly lovely summary. And you got me thinking
about a simple question. If one must choose whether to hold
gold (the real thing) versus "paper gold" (the promise?? to deliver
it) then how did USG persuade the citizen (or foreign CB) to hold
the latter? The answer is simple: interest. If gold yielded no
interest (unless you were a bullion bank) during the time that
its price was kept fixed, but the dollar had a real (or nominal)
yield, as measured in real goods, then the dollar would be
logically preferred. The fragility of the "credibility of the
promise" was only seen by a few CB's.
From 1971 to 1980 this logic was reversed, as the gold price
outpaced any rise in interest rates at maintaining real purchasing
power, but in 1980 thru 1987, record high interest rates helped
to reversed the pattern, at the price of a double recession. The
expansion of paper gold supply also contributed.
Today, the risk free dollar holding has a zero nominal and
negative real yield, whereas gold has kept a steady ratio to
oil, at 17 barrels per oz, and a steadily rising purchasing
power relative to real goods. The logical preference to hold
paper over physical has been reversed, and the awareness of
this fact, which cannot be suppressed, is spreading.
One can only attempt to obscure the causes underlying this
reality, and that is job #1 of the USG today.
And unlike 1980, the option of much higher interest rates
today would instantly destroy both the system, the economy
and all paper assets which rely on them for value.
Checkmate.
JMan1959 wrote:
"So he thinks massive debt defaults/credit deflation will lead to a collapsing gold price?
Yes, a collapsing paper gold price, because I think it's reasonably clear that the fractalist either doesn't know, or, perhaps, more lamentably, doesn't subscribe to the idea that there is a profound difference between paper and physical.
Jeff,
I think you misunderstood what I am thinking. I don't want to trade in forex or trade in foreign securities.
I've come to the place where I understand that physical gold is the most secure vehicle for preservation of wealth. I have no doubts about this.
But I do still ponder all of the different ways the transition will be best navigated, as in how to make it though.
I'm thinking that American brokers are going to go bust along with dollar and paper gold. But what if I was a European, with a European brokerage account who traded in Euros?
And the first part of the question about oil futures. Perhaps you can see where I am going with that.
I'm just trying to think out loud here about a way to move a small portion through the monetary plane with the thought of having some form of liquidity during the transition.
If I may add a post script, the only asset left with the capacity
to keep citizens (not CB's) from exchanging dollars for tangible
assets is the stock market. During growth and during recession,
or depression, it must be continually seen to be rising. This rise is
the equivalent to the interest which cannot be paid. But there is
a price for this: ever increasing fragility,or instability, followed
at some point by a "first mover" running for the exit. As David
Rosenberg just remarked over at Zero Hedge, at that point, the
Fed will own the market. (channeling the front lawn dump)
LOL @Dante_eu
Cure to FOFOISM: Abandon reason, rationality, logic, and common sense. Instead, trust in emotions, stories, rumors, and the consensus of "professionals". If you heard it on TV, it is true. Believe in the magical dollar. Believe in unicorns. Be like everyone else. Approval of others is more important than freedom. Nothing bad can ever happen. USG loves you. Go back to sleep.
Words to live by. ^_____^
Woland,
Would you be so kind as to provide the link to Mr. Rosenberg's commentary. Thanks.
Big Mama Gonna Whip Us Good
Rosenberg: "If The US Is Truly Japan, The Fed Will End Up Owning The Entire Market"
David Rosenberg, Gluskin Sheff: BernanQE Plays With A New Deck
It would be glib to ask "well, wasn't QE3 priced in?"
What the Fed did was actually much more than QE3. Call it QE3-plus... a gift that will now keep on giving. No maximum. No time limit. The Fed also lowered the bar on what it will take, going forward, for even more intervention.
The Fed announced that it will buy $40 billion per month in MBS (together with the on-going Operation Twist program, this brings total asset purchases to around $85 billion monthly through year-end), but the press statement contained an open-ended commitment to QE until labour market conditions not only improve, but do so 'substantially". This is a radical shift.
Before, the QEs had an explicit maximum limit in magnitude duration. That is no longer the case — $40 billion in MBS buying month in, month out, perhaps until such time that the Fed owns the entire market (the Fed already has $843 billion of Agency MBS on its balance sheet as it is — if this is truly Japan and it takes another ten years for the economy to improve "substantially", the Fed will end up owning the entire market).[...]
Hello Edwardo;
As a few here know, I am a member of the Illiterati as it pertains
to the net (a distant relation to the illuminati).
The title of the ZH article is as follows;
Rosenberg; If the US is truly Japan, the Fed will end up owning
the entire market.
That should get you there with their search. Cheers.
oops. If you think you're going to beat JR to the punch, the
ref will be counting you out. 1,2,3,..... guess I'll take up another
sport, like knitting.
J: Thanks for the link to the Examiner article concerning China & Russia. "These duo actions by the two most powerful adversaries of the U.S. economy and empire, have now joined in to make a move to attack the primary economic stronghold that keeps America as the most powerful economic superpower. Once the majority of the world begins to bypass the dollar, and purchase oil in other currencies, then the full weight of our debt and diminished manufacturing structure will come crashing down on the American people."
This appears to be a turning point. Any thoughts?
Then again, I thought the Pan Asian Gold Exchange would be a turning point. (and it would have been dag nab-it:)
Oh, by the way,via Bloomberg, : Bernanke is going to have a
private meeting with the Senate Finance Committee on Sept.
19. The subject, among others, will be the "fiscal cliff".
maybe it's time to let the "senetards" in on reality 101??
You have to make an assumption regarding whether Bernanke
understands, as FOA said Greenspan did, the exact nature of
his current dilemma. Victor presumes that he must, and that
is the most logical interpretation, since Greenspan would not
have "endorsed" him to assume the post without that knowledge.
What a shame to have a job where "lying isn't everything, it's
the ONLY thing" (shades of Vince Lombardi)
That being said, it is hard to imagine him telling them that
they are in check, and that there is not even the possibility
of a stalemate. They would not like to hear that. Oh, to be
a fly on that wall next Wednesday!!
Thanks, JR, for the link.
Woland I like your thinking regarding the "first mover", but the burgeoning instability in the stock market is primarily a function of illiquidity. And that is a function of who is in the market and how they are allowed to conduct business. All of the TA methods that I am familiar with have long since ceased to be reliable even by their best practitioners, because the signals coming from the market are so horrifically distorted. I have no doubt that things will become worse for the reasons you allude to, but the shock, er stock market, as per The May 2010 flash crash, is already walking a frayed tightrope over a grand crevasse.
Whatever nominal gains the stock market attains going forward will likely look more and more ridiculous with each passing quarter. The sucker could- and probably should- go no bid at any moment. Which, of course, brings us back to The NY Fed as the ultimate bag holder.
Indenture, The Russia/China maneuvers just make me realize that pincer movements aren't just for military engagements. Then again, this is war, just not (at least not yet) of the shooting sort. The funny thing (I used the word funny advisedly) about all these bi-lateral trade agreements is that they are, mostly, or so it seems to me, prophylactic measures against the moment when the dollar implodes. But as these agreements profliferate in number I can't help but feel that they have a proactive force that accelerates the arrival of the conditions these measures are meant to guard against. Self fulfilling prophecy meet Nash Equilibrium.
JR quotes FOA:
"To date, that purpose has been served largely because it succeeded in keeping dollar supporting oil prices down, extending our US economy,,,,, until EMU. As evidence to the process, notice how oil prices began their dollar rise only 6 months into post EMU. Clearly, there was no longer a need to support our dollar economy once the Euro was established. Indeed, just like a turning supertanker takes time, so too does the higher energy prices take time to work their will. Make no mistake, the world has seen the very last of cheap dollar oil. The next dynamic of that process in the transition of oil settlement support into Euro denominations. Notwithstanding Iraq's move as a convenient trial balloon, the mass of this transition will not begin until the US has clearly embarked on a slowdown. And that slowdown, energy induced as it is, will, this time, force the fed to fight it with a super inflationary buyout of anything and everything that defaults. Right down to your shoe laces. This, my friends is the inflation dynamic unleashed once a currency is removed from reserve status."
I wonder how many other people were predicting an "energy-induced slowdown" for the US in 2001, when gas was $1.45/gallon?
...
milamber wrote
"“…share with us your own experiences with the difference between hearing and sound.”
We use our hearing to experience sound. So I am a little confused by the phraseology employed in the question."
It is interesting that, while sound has a physical definition, that definition is based on what we humans can perceive.
Further, while hearing cannot be easily fooled, if we used vision / sight as an analogy for the perception of reality I think the metaphor works better.
Take, for example, an optical illusion. Maybe some people have only seen the vase for their entire lives, and finally something clicks and they see the lovers. The reality is unchanged but our perception has shifted. We have experience the difference between reality and perception, so to speak.
In social systems, moreover, we are the subject matter of the reality as well as the only means to perceive the reality. So we cannot make definitions like we can with sound, and devise instruments to measure these distinct aspects of reality. We must rely on our perception.
Done rambling.
...
I just noticed that, at the bottom of the blog, below the blinking map, it says:
"Evil gold hoarders, jerks and brainwashed cult members:
Join this site"
Is this new?
Michael H wrote:
"According to Peter Berhnolz, monetization above 40% of government expenditures is a sure-fire predictor of hyperinflation"
Michael is right.
Bernholz is a Swiss gentleman, Professor Emeritus at the University of Basel. His book "Monetary Regimes and Inflation" is a real jewel. A must for any serious freegolder. I Here is the link in Amazon:
http://www.amazon.com/Monetary-Regimes-Inflation-Political-Relationships/dp/1845427785/ref=sr_1_1?s=books&ie=UTF8&qid=1347759715&sr=1-1&keywords=bernholz
Michael H: Yes the 'Evil gold hoarders, jerks and brainwashed cult members:' at the bottom is new. I think FOFOA enjoys his newly raised status as a 'Cult Leader'. I know others have called him this before but it is the poetic cadence of the entire description that sings.
On Your Feet On Your Knees
Kudos Costata!!!
On June 28, 2012 at 11:29 PM Costata commented as follows:
Attention Reluctant Silverbugs
[…]
“Our "equal opportunity" manipulators in the paper gold and silver markets may yet have another surprise in store for the punters. So an exit at a much more favourable GSR may be in prospect. And, as always, I'm not calling tops or bottoms - just a good old fashioned pump and dump.
And what is a brazen prediction without some equally brazen numbers to go with it? Let's say somewhere above US$55 for silver and for those with nerves of steel and exquisite timing before liquidity, er, evaporates, a sub-40 GSR.”
End of quote.
Well, it seems Costata was right. Silver has been outperforming paper gold (GLD). Currently the ratio stands at ca. 51. Technically, silver’s greater relative strength seems to have some months left which may make Costata’s non-binding target of a sub-40 GSR achievable. Furthermore, technically, both gold and silver are in a primary bull market which, if experience is to serve us as a tentative guide, may result in price gains of 50% or more.
Timing the “dump” is the tricky issue since the window of opportunity may be small (big rise and big sell off in a matter of days). Timing the “exit” only with the GSR is not precise enough because of the unclear technical patterns of the ratio. However, if you plot the GLD/DIA ratio and the SLV/DIA ratio a much clearer picture arises. Currently, the GLD/DIA ratio is bearish which means that stocks are stronger than gold (in spite of gold going up). However, the SLV/DIA ratio is undergoing a primary bull trend which means that (a) silver is stronger than stocks and (b) that such movement is far from being exhausted given that it is a primary trend.
In the very moment, the GLD/DIA ratio issues a primary bull market signal, meaning that GLD will be stronger than stocks, it will be the time to carefully look at the price of silver and the GSR ratio. If, for instance, SLV is trading at 48 and the ratio stands at 39, then irrespective of gold price, it will be the wake up call to “dump”.
You can find a detailed explanation and the relevant charts commented here:
http://www.dowtheoryinvestment.com/2012/09/is-really-gold-glittering-who-benefited.html
I don’t know whether Costata uses charts but it seems he’s got a crystal ball.
Thx Costata for raising my awareness on this issue.
Caveat: Don’t take the link as demeaning gold. It just compares paper silver and paper gold and has nothing to do to the real-unambiguous-physical-in-your-possession gold. However, the charts and comments thereto may be helpful to time Costata’s forecast which, until now, has been proven very timely and right.
I forgot. Sorry
Here's the link to Costata's comment
http://fofoa.blogspot.com/2012/06/debtors-and-savers-2012.html?commentPage=2
Indenture states:
"This appears to be a turning point. Any thoughts? "
Yes, great for the American people. Albeit painful to start.
Answer this: What are the great new industries available to the American people? Hint: It ain't welfare. Hmmm... What could it be? Should we ask the FIRE 'industry'? LOL
Indenture - "Then again, I thought the Pan Asian Gold Exchange would be a turning point. (and it would have been dag nab-it:)"
Same here. As to your question..my thoughts are pretty much inline with the conclusion of the article. Oil being sold in currencies other than the $ is no good for the $. Pretty simple thoughts.
despite my disdain for chartists, and the optical illusions of their trade, the recent decoupling of silver from its long-term association with stocks as
seen here, has presented a fun, little wave to ride a little higher. The question as always being, of course, when to quit the ride for safer shores to avoid a dumping. If one should only save as much as one understands in gold, one should gamble only as much as one is prepared to lose on silver!
And for some reason the management of perception works quite good, at least for some time, until reality sets in again and can't be denied anymore...
Now while you are at sound as physical reality,
http://www.psychotraumatologie.de/
("Deutsches Institut für Psychotraumatologie"-DIPT, how the hell did they come to this name, if you've ever been to DIPTland you'll be a bit more cautious with easy definitions! Its just flabbergasting, well, and a bit a pain in the a..hem ear.
Pitchblack shift and the connection with tinnitus, another strange perceptual physical burden for some people, makes it extremely interesting for research, but the pain it causes has neither interested any authority, thank God at least half.
Btw Fiat almost catched fire because of outweared fuel-line but thanks Götte and all guardian angels we could fix it just before disaster, *Sigh of relief* (and hey you with the burning fiat atavar, from the front it almost looks like an old Mustang!).
And hmm on the Pandacoins, Phat expat, but the Chinese will also get the opportunity to deal with nouveau-richearrogance-->to modesty, no?
KnallGold, mourning the loss of great aunt Alice, dying peacefully at age of 100 in night 10-11.sptbr. Nice Sunday to you all, may peace prevail on THis wonderland!
OMG, that McGurk Effect (funny name!)...that's some voodoo stuff...
Now, I belive:
Perception is everything; reality is overrated.
Until you get smacked in the head with a hard object. :-)
@poopyjim:
After that cure, you become immune.
Over at Jesse's Cafe, at the top of the links sidebar,
there is a piece, with a link to Chris Martensen's site.
An interview with Janet Tavakoli, "Understanding
derivatives and their risks". This is her specialty. At one
point she refers to derivative contracts, written on dollar
holdings, which are required to to settle in gold. Not
settle in dollars at the then operative price of gold, but
in actual gold.
As the evil hoarders here know, this will not be possible.
it will be available "only for the very few", for those parties
who are kind of "indispensable" . When these derivatives
do fail, and only dollars are provided to hedge the falling
dollar, there may be a giant whooshing sound. Cheers.
@KnallGold
Not sure what you are getting at with your reference to pandas, Nouveau riche, and the Chinese. Please share as I enjoy reading the views of those on the outside looking in.
Those of you who read Cullen Roche's paper on hyperinflation and my comments about hyperinflation, please note that "foreign debt" does NOT mean debt held by foreigners. It means debt denominated in a foreign currency, or a currency that the government has no power to issue. The US does not have any. The three countries that I cited as likely candidates for hyperinflation - Hungary, Argentina and (when it leaves the Euro) Greece - all have large foreign-denominated debts: Argentina, dollars and the other two, Euros.
Gunnar, I am no more complimentary about Ricardian equivalence than I am about the IMF. I agree with you that the world has gone mad believing this stuff.
Frances
I have read the linked paper, and do not see anything wrong with it.
What he is describing is most hyperinflations, and he is correct as to why they happened. The coming US hyperinflation will have a different cause.
I second whoever suggested you read Moneyness
In the paper you linked the author is careful to use the words " in general" and "in most cases" when describing the causes of hyperinflation. Perhaps you glossed over these terms and understood him to mean that the reasons highlighted was the case for all historic cases, and would be for all future cases.
TF
Ps. It would be easy to read it that way as the author himself seems to forget it in his concluding paragraphs. ^^
Motley,
Peak Exorbitant Privilege seems quite germane, to me, too.
Cheers,
DP :-)
@Frances:
US "foreign debt" is physical stuff (equivalent to debt denominated in a foreign currency) which they import from ROW (Rest of world). And are paying with nothing but the paper. And have been doing so for last, like 40 years.
FOFOA:
Of course they are looking only at the monetary plane, the silly market for U.S. Treasury debt which the Fed can dominate with infinite demand. As I keep saying, the real threat to the dollar is in the physical plane: the price of all those containers being unloaded and then exported empty.
The U.S. government has grown addicted to its exorbitant privilege over the years. It is a privilege that has been supported by foreign Central Banks buying U.S. debt for the better part of the last 30 years. But as I wrote in Moneyness, and as Ms. Pomboy has noticed above, that ended a few years ago. From Moneyness, the blue that I circled below shows the Fed defending our exports **of empty containers** with nothing more than the printing press and calling it QE:
Sector Financial Balances as % of GDP, 1952q1 to 2010q4
I would like you all to give this some serious thought:
1. The U.S. exorbitant privilege peaked in 2005 (before the financial crisis) and is now on the decline, meaning it is no longer supported abroad.
2. The U.S. government (with the obvious assistance of the Fed) is now in defensive mode, defending that inflow of free stuff with the printing press.
3. The U.S. federal government budget deficit (DC's "needs" minus its normal revenue) **eclipses** the trade deficit by more than a 2 to 1 margin.
So what could possibly go wrong? The recession has already contracted the U.S. economy, all except the part that resides in Washington, DC. And just to maintain its own status quo (when has it ever been happy doing only that?) our federal government needs to insure our national business of exporting empty containers at its present level.
What could go wrong? Prices! If the price of an apple doubles, what do you think happens to the price of a full container? Those of you who think we are due for some more price deflation in the stuff that the USG needs to maintain its status quo should really have your heads examined. Even Obama is winding up to pitch the whole ball of twine at the problem. He just delegated his executive power to print until the cows come home to each of his department heads. I quote from Executive Order -- National Defense Resources Preparedness:
"To ensure the supply… from high cost sources… in light of a temporary increase in transportation cost… the head of each agency… is delegated the authority… to make subsidy payments"
In case you're having difficulty connecting the dots I've laid out (not) so subtly, I'm talking about a near-term dollar super-hyperinflation that will make your hair curl and make Weimar and Zimbabwe seem like child's play in the rearview mirror. If you're new to this blog, you should know that the rate of hyperinflation does not follow the printing. An apple does not end up costing a trillion dollars because they printed enough dollars to price all apples that way. Hyperinflation comes from the margin, from the government defending its own needs, and there's never enough "money" for us mere mortals to pay the prices which are running away from everyone during hyperinflation.
...
If you haven't, must read:
fofoa.blogspot.com/2012/04/peak-exorbitant-privilege.html
Yes.
Also Ball Of Twine Open Forum.
Frances said, "The three countries that I cited as likely candidates for hyperinflation - Hungary, Argentina and (when it leaves the Euro) Greece - all have large foreign-denominated debts: Argentina, dollars and the other two, Euros."
A few years ago I too would have thought Greece's problems would be solved by 'leaving the Euro' but there is the small problem of Greece defending it's new currency when it leaves. It's one thing to trade Greece your exports for Eros now because the exporting country can use those Euros within it's own borders, however, what happens when Greece pays for imports with 'New Drachma' or 'Whatever We Want To Call The New Currency'? What will the exporting country do with these 'New Drachmas'? Where, besides Greece, will these 'New Drachmas' be accepted for trade? Greece will not leave the Euro because no one would accept their 'New Drachma' for trade. Greece would implode.
But perhaps you confusion comes from the fact that you consider the Euro to be a "foreign denominated debt' for Greece. How is the Euro a "foreign denominated debt" to Greece?
It's one thing to trade Greece your exports for Eros
Now there's a fresh solution to the crisis! :)
@burningfiat:
I was thinking the same:
Eros - Erotic Greek Men
:-)
@Frances
As others have already noted, the driving factor for hyperinflation is the US is not any debt owed in foreign currency but USG's structural addiction to real stuff from abroad.
Roche states that USD is not in danger of hyperinflation in part because "We do not rely on the kindness of strangers (no foreign denominated debt)." However, we do rely on their kindness to the extent they send us free stuff in support of a seemingly perpetual trade deficit. Foreign central bank support for the dollar i.e. CB storage is the kindness on which we have relied. Absent foreign CB support, those dollars go out and bid for real things in the real world, creating problems with respect to USG's voracious appetite for real stuff. See Inflation or hyperinflation.
Also here's a salient quote from Moneyness which I think really helps clarify this concept:
Okay. So the USG doesn't owe a hard debt like Weimar Germany did in the early '20s. But perhaps she has developed a structural addiction; a need for something that's just as hard as foreign currency—real stuff from the physical plane. Here is L. Randall Wray describing Weimar:
"The typical story about Weimar Germany is that the government began to freely print a fiat money with no gold standing behind it, with no regard for the hyperinflationary consequences. The reality is more complex. First, we must understand that even in the early 20th century, most governments spent by issuing IOUs—albeit many were convertible on demand to sterling or gold. Germany had lost WWI and suffered under the burden of impossibly large reparations payments—that had to be made in gold. To make matters worse, much of its productive capacity had been destroyed or captured, and it had little gold reserves. It was supposed to export to earn the gold needed to make the payments demanded by the victors. (Keynes wrote his first globally famous book arguing that Germany could not possibly pay the debts—note these were external debts denominated essentially in gold.)
The nation’s productive capacity was not even sufficient to satisfy domestic demand, much less to export to pay reparations. Government knew that it was not only economically impossible but also politically impossible to impose taxes at a sufficient level to move resources to the public sector for exports to make the reparations payments. So instead it relied on spending. This meant government competed with domestic demand for a limited supply of output—driving prices up. At the same time, Germany’s domestic producers had to borrow abroad (in foreign currency) to buy needed imports. Rising prices plus foreign borrowing caused depreciation of the domestic currency, which increased necessitous borrowing (since foreign imports cost more in terms of domestic currency) and at the same time increased the cost of the reparations in terms of domestic currency...
(cont.)
[...]
I want to try a little word replacement game with Wray's Weimar description. Let's replace Germany with the USG and the war reparations debt with a trade deficit addiction and see how it looks. Other than these few substitutions, I'll leave Wray's descriptive words alone:
"The USG had endured 30 years of foreign-supported trade deficit and developed an addiction to free stuff. To make matters worse, much of its productive capacity had been shipped overseas during this time period. The US private sector could not possibly support the USG’s addiction to real goods.
The nation’s productive capacity was not even sufficient to satisfy domestic demand, much less to support USG demand. Government knew that it was not only economically impossible but also politically impossible to impose taxes at a sufficient level to move resources to the public sector to satisfy the USG’s insatiable addiction. So instead, it relied on deficit spending through raw base money creation. This meant government competed with global demand for a limited supply of importable goods—driving prices up. At the same time, the US private sector had to pay the same higher prices without the benefit of issuing its own currency to buy needed imports. Rising import prices forced the US economy to consume more of its own domestic goods, which increased USG’s reliance on imports, and since foreign imports cost more in terms of the domestic currency, this increased the cost of the USG’s addiction in terms of domestic currency." (Me)
@brainwashed cult members:
I’m in Berlin starting on 19. September for couple of days. If anyone would like to discuss future of money over a beer (or wine), give me a hint.
Preferably some lady in her 30’s. Yes, I know chances are slim, but still. :-)
Dante aus Berlin (soon)
Guys, I agree there is potentially a problem with the US trade deficit. I was just clarifying what "foreign debt" meant in Roche's paper and in my comment.
I've read both Moneyness and Peak Exorbitant Privilege.
Indenture, I agree that Greece is highly unlikely to leave the Euro voluntarily. But it could still be forced out - and if it is, then I would regard its new currency is a near-certainty for hyperinflation. Even if it repudiated its Euro-denominated debts, its trade deficit with Euro countries is huge. It ticks all the boxes.
Frances: Why would Greece be forced out of the Euro?
Indenture
Because people in countries that have so far provided the funds to pay Greece's debts do not wish to do so any more - and politicians listen to them.
Frances,
How would Greece be forced to leave the Euro?
I am having trouble visualizing how this would be logistically possible.
Frances,
I asked that question in an earlier comment,
http://fofoa.blogspot.com/2012/08/four.html?showComment=1347032662104#c1541722913575041791
so far I haven't come any closer to an answer.
Frances: So Germany stops buying Greek debt. So what. That has nothing to do with Greece leaving the European Union.
Question: What would happen to all the 'German Savings in Greek Debt' if Greece left the Euro? Would those promises to pay still be valid? Does Greece have to default on it's debt obligations when it leaves the Euro?
Sounds to me like Germany has much to lose if Greece defaults/leaves the Euro.
Dante: Just had to say I loved the list. The last time I heard Tuco say Blondie I wasn't thinking about Clint Eastwood's hair so I know I'm infected. Stay clear. It's contagious but long time exposure is necessary for the virus to establish.
Default - Found my way out
The Golden Road
Indenture:
The country with the most to lose from a Greek exit is actually France (which would see its banking system fail). German exposure to Greece is far less than it was. German banks have shed most of their Greek debt, and lots of the private funds invested in Greece have been repatriated to Germany. That's why the Target2 balance has been going up so much - it is mainly capital transfers, not export finance. Greek exit is openly discussed in Germany as an option - this may be a bluff by politicians, but among ordinary people the mood of the country is very much in favour of ditching Greece. This does matter - they have elections fairly soon, remember.
FOA wrote,
"The next dynamic of that process in the transition of oil settlement support into Euro denominations. Notwithstanding Iraq's move as a convenient trial balloon, the mass of this transition will not begin until the US has clearly embarked on a slowdown. And that slowdown, energy induced as it is, will, this time, force the fed to fight it with a super inflationary buyout of anything and everything that defaults."
Where are we now, and how do we expect this process to play out?
The 2008 financial crisis certainly seems to qualify as an 'energy-induced slowdown'. But is it THE slowdown, or only the prelude? Is the next step a deepening slowdown with higher and higher $-oil prices, or has that stage passed, and now we are waiting for the rest of the world to move away from dollar-settled oil?
My guess is that we would see another leg higher of world oil prices (in all currencies), with the gold-oil ratio leaving its historical bounds. This would be followed by a falling value of the USD on the FX markets.
But that's just a guess.
http://www.examiner.com/article/dollar-no-longer-primary-oil-currency-as-china-begins-to-sell-oil-using-yuan
Sir Andrew Crockett 1943 - 2012
September 2012
With deep regret the Bank for International Settlements has learned of the recent death of Sir Andrew Crockett after a long illness.
Sir Andrew was General Manager of the BIS from 1 January 1994 until 31 March 2003. During this time, he led the Bank through a period of considerable change following the creation of the European Monetary Institute, which later became the European Central Bank. In particular, he strongly encouraged the expansion of BIS membership beyond its traditional mostly European base. His work triggered the admission of 19 new member central banks. The Bank also opened offices in Hong Kong and Mexico.
Some of the other milestones that took place under Sir Andrew's leadership included the creation of the Financial Stability Forum (later the Financial Stability Board), of which he was the first chairman, the establishment of the BIS's Financial Stability Institute, the move to Basel of the International Association of Insurance Supervisors (IAIS) and the International Association of Deposit Insurers (IADI), and the repurchase of the shares in the BIS formerly held by private shareholders.
These events were all the result of Sir Andrew's vision for the BIS as a global cooperative institution serving central banks around the world and as a forum for promoting international financial stability.
Matching the shift in the BIS's external outreach, Sir Andrew also initiated significant changes to its internal culture. He was a strong advocate for a transparent management style, and much of what he put in place is still visible in the Bank's way of operating today.
After he stepped down as General Manager, Sir Andrew stayed in close touch with the BIS, maintaining a keen interest in the organisation's financial stability mission. An excellent speaker, he delivered a thoughtful and stimulating Per Jacobsson Lecture in June last year on the principles that should underpin the financial system.
Those of us who worked with Sir Andrew remember him as an inspiring man of great intellectual distinction with a wonderful sense of humour. He was a good friend of the BIS, whom we will miss very much. Our thoughts are with his wife, Marjorie, his three children, and the other members of his family.
Jaime Caruana, General Manager
http://www.bis.org/about/2012adc.htm
RIP
I hope to some day understand the relationship between Sir Andrew Crockett, FOA, & Another.
Milamber
Jeff,
The August sale signal failed, correct? What is the accuracy rate of the signals? Thank you.
Well, even if I call it 'sell signal', you are not supposed to sell anything. The strategy has roughly the following performance: Between 'buy' and 'sell', the London gold price increases at an annualized rate of 40%. Between 'sell' and 'buy' only with 8%.
Yes, the previous few signals didn't quite improve this, you are right. Accuracy, I don't know, simply because it's not meant to be traded.
JR,
The US economy needs cheap oil in dollars, not in gold.
Unfortunately, the dollar needs expensive oil in dollars. That's what's eventually going to bring them down, but perhaps not without a further fight.
Date: Sun Nov 02 1997 21:52
ANOTHER (THOUGHTS!) ID#60253:
Today, all currencies are traded against the dollar for it’s usage as a medium of oil exchange! Take away that link and the entire currency/ debt exchange system, as we know it will collapse! The US$ must be maintained as the “most used” if the other currencies are to have a chance to survive.
Date: Wed Nov 12 1997 20:41
ANOTHER (THOUGHTS!) ID#60253:
The world currency system has, for years been little more than digital credits backed by “usage demand”. In the long run it was oil backing the US$ that kept it all together!
Date: Fri Nov 07 1997 21:59
ANOTHER (THOUGHTS!) ID#60253:
Turn slowly now and view all directions. The wealth that was had was not real. The Pacific Rim started, now South America. Next will be Europe closely followed by the US. Remember, all currencies are the same now as they are “digital paper”! Nations will defend the system at all cost They will never sell US$ treasury debt as that debt is their currency! The dollar will soar as a final defense! As part of this defense they will allow oil to rise as oil is priced in dollars. How do you get oil to rise? Today, we stop our CBs from selling gold!
Date: Wed Mar 25 1998 23:58
ANOTHER (THOUGHTS!) ID#60253:
it is the loss of having the US$ removed as the “world reserve currency” that makes them “fight” a lower oil price, and the new “world oil currency” that it would bring!
Bring this thought into focus and you will inderstand why Iran and Iraq did fight so long. And why Iraq invaded. The warships are an attempt to keep prices from “falling”! You think long and hard on this!
Date: Sat Apr 04 1998 19:55
ANOTHER (THOUGHTS!) ID#60253:
Look now and see if the US dollar does not “fight” for a high oil price! In every way, the question of supply disruptions is shown as the need for other suppliers. But, other suppliers cannot produce at a lower price? If the gulf states are allowed to bring oil “down” to it’s true “fair” production price, in terms of a “correctly higher revalued” gold price, the US dollar would no longer be priced and backed by oil. Any paper trading currency would do.
“The world is going off the dollar standard as the dollar is going off the oil standard “, find this event “in your time”! We watch this new gold market, together, yes?
Date: Sun Nov 30 1997 20:29
ANOTHER (THOUGHTS!) ID#60253:
As a large tanker takes time to turn, so will the coming change in oil values take time to see. We have seen the last of cheap oil in US$ as the oil states are no longer taking paper gold! This change in trading will have a great future impact on oil/gold/US$.
Victor
Frances,
according to Bernholz (yes, the one mentioned by Michael H and The Dow Theorist above), hyperinflations happen primarily when the CB is subordinate to the government whereas they don't happen when the CB is largely independent. And that's backed by a few centuries of empirical data.
and
Indenture, I agree that Greece is highly unlikely to leave the Euro voluntarily. But it could still be forced out
How do you think would one force Greece out? I'd like an answer with at least some of the legal and technical details. Secondly, who would want this (say who of the big three: Germany, France, Italy)?
Because people in countries that have so far provided the funds to pay Greece's debts do not wish to do so any more - and politicians listen to them.
The solution to this problem is to just stop paying. In this case, Greece will default. This would be no different if Greece left the Euro zone. So this one isn't an argument for forcing Greece out, but rather just for stopping to pay.
Victor
VTC - I believe I tried that some months back. Didn't work out too well.
Yes Victor,
Unfortunately, the dollar needs expensive oil in dollars.
The dollar needs a higher $ oil price to keep dollar oil cheap, aka priced in $.
BB has to inflate to pump the economy to try to push jobs because the economy is built on cheap $ oil ["As part of this defense they will allow oil to rise as oil is priced in dollars."] and not inflating means cheap dollar oil is gone.
The Fed is not severed from the nation-state.
Vtc&Texan,
Re: Weidmann scaring Germans.
He just announced that the Euro is just painted cotton and gold is the only timeless classic:
http://www.mmnews.de/index.php/gold/10863-bundesbank-euro-papier
I wouldnt disturbe further discussion, just to let you know, since you've been woundering... :)
Greets, AD
http://www.youtube.com/watch?feature=endscreen&NR=1&v=oLiYg97iZ_o
Regards
Ozzy
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