Freegold Debate Page 3

This is page # 3, for dedicated FOFOA and Freegold discussion. The previous page became a bit clogged so I have rotated the content. This discussion format involves summarizing content from the previous pages and bringing forward the main points for discussion, with the hope of bubbling the best ideas to the top. This page set is simply a reaction to provide people with what they want (discussing FOFOA at a Screwtape Files venue) without the main articles being choked out. For 'archived' pages, comments will be closed, but the 'current page' will always be active and open to comments. When we get to a certain threshold, we'll roll over to page 4. Sound okay? Good.

Previous Discussion: Freegold Debate Common Venue (Page 2)

This page is a compendium of comments about freegold which appeared on some of the main articles during June 2013, mostly unwarranted attacks and taunts from Freegolders, but also the promotion of 'Time Proven'. This page unfortunately deserves the title given by Jeanne of 'substance-free discussion of FOFOA', with the exception of Bron Suchecki's note/warning about the nature of bullion banking compared against the Freegold story (see below for more), and Sugar Lover's observation that the Freegold thesis is in jeopardy if the price surges beyond $2,000 /oz from this point.

Previous Discussion: Freegold Debated by SMRI (Page 1)

What started originally as SomanyRoadsInvesting expressing his disappointment in the Freegold promise, turned out to be a good discussion with contributions from Bron Suchecki, Michael H and (the devil himself) AdvocatusDiaboli. Main points:
- Similarity of FOFOA's group to cults (with religious allegories by Duggo)
- Common desire to see the Freegold thesis thoroughly tested.
- Bron's discussion of Freebanking.
- Whether or not physical and paper will ever decouple.

-----------------------------

We'll start page 3 by highlighting Bron's comment from page 2:
    "In 2008 I remember FOFOA getting excited about the shortages and whatnot, feeling it may be "it". I disagreed as I wasn't seeing any stress it the wholesale markets.

    Seems like the same again in 2013, and I have the same view again. Paper will only disconnect if the large holders/traders of unallocated refuse to do so. I don't see signs of that happening, at least from where I sit, which is admittedly not the entire gold market.


    My view is bullion banking runs like a freebanking system and thus likely to be more robust than many think, and thus it will take a few more "cycles" of hope then fear to cause a real run.


    Relying on the hype/ exaggeration/ misinformation of newsletter writers and gold bar/coin sellers for one's signals of whether the system is unravelling is not wise."


    -- Bron Suchecki
I think this is crucial to the discussion - namely that Bullion Banks may operate in a slightly different fashion to what most of us are familiar with, and that some of these mechanics may be incompatible with external observations of silver and gold. I certainly understand this from a bar list perspective - where my own analysis of the core data has shown me lots of things that had never been previously considered, with the conclusion there is a whole lot more going on under the hood - almost like its own ecosystem of dependencies and relationships. This is really the core of the issue - whether the description of the gold market offered by Another and FOA were detailed enough to withstand rigorous testing, and the questions about whether anything has changed which may alter the picture slightly (an example of this is that GLD was not created at the time when Another and FOA were writing).

Regards,
Warren James
Bullion Bars Project

44 comments:

Bron Suchecki said...

I look at this freegold stuff from a market participant's point of view, more trees than forest. I don't get into the geopolitical theory aspect as I see that are more speculative as we can't really know what goes on at that level.

It seems a lot of freegolder's faith is based on the idea that Another/FOA were insiders? What would happen if it was found they were just ordinary guys theorising at their computers in their pyjamas?

Warren James said...

I agree. To echo some items from Page 2, many people would be harmed by both (a) the story being a falsehood and (b) the transition wiping out the value of people's fiat-based savings ... either outcome is bad because it means the public has to agonize between being caught out by public deception or mashed between the gears of the power games being played by central banks and imperial policy.

I suppose this is why a lens for inquiry into the topic is useful. I think we need a new set of sciences to help map the complexity of the modern world. Authoritative communications (e.g. from the ECB) would help clear the picture somewhat.

Beer Holiday said...

It seems a lot of freegolder's faith is based on the idea that Another/FOA were insiders? What would happen if it was found they were just ordinary guys theorising at their computers in their pyjamas?

A similar question was posed in "Why do you find A/FOA credible?"

The majority of answers to that question given in the comments had more to do with what A/FOA said (and when) rather than baseless speculation on who the might be.

The use of the term "faith" makes the question a slightly loaded one. IMHO most Freegolders don't "believe" in any model, but rather try to find one which best explains the events which have unfolded.

@Warren - Maybe if ANY of the central banks and related institutions would talk about gold it would be a start.

Bron Suchecki said...

"I wanted to reply to Bron's comment regarding the difference in his view of LBMA versus FOFOA. I recall the discussion on the implications of that 2011 LBMA survey.

And what it boiled down to is that the survey rather gave the impression that the LBMA was like COMEX in that gold trade is also derivative paper on that platform (only a much larger scale).

This is a point which Bron disagreed with. And the origins of that discussion can be found here.

A simple google search using "fofoa lbma survey" should lead any interested reader to all additional discussion on that issue."

where did I make that comment on this blog?

My comments on it are here http://goldchat.blogspot.com.au/2012/12/lbma-liquidity-survey.html

My issue was not as you describe "LBMA was like COMEX in that gold trade is also derivative paper" more about whether it showed bullion banks were taking large properitary trading positions. I don't think it shows that or that one can deduce that from it, as there are a lot of questions around the methodology of the survey which could result in the "imbalance".

Bron Suchecki said...

"IMHO most Freegolders don't "believe" in any model"

they believe in freegold, that is the model, which defines

1) a geopolitical theory as to what is planned for gold and will happen to it

2) that "freegold" market state will happen as a natural course of events anyway

3) but in respect of 2), someone/somehow a rule is agreed that gold derviatives will not happen

milamber said...

OK, I think that I am at the right spot.

I do want to throw this out at Bron in regards to his comment,

"In 2008 I remember FOFOA getting excited about the shortages and whatnot, feeling it may be "it". I disagreed as I wasn't seeing any stress it the wholesale markets."

Hmm. I know that you are referencing the gold wholesale market
specifically, and I do think that it is entirely possible that the Perth mint may not see any problems until one plops right in front of them, but did it not come across in Australia that the current IMS was maybe minutes away from collapse during Sept-Oct 2008?

From my perch here in Texas, it looked, sounded, & felt like "it" was going to happen. It being the implosion/change/whatever you want to call it of the current IMS to whatever is going to replace it.

Maybe, as some have suggested, it was just your run of the mill fear mongering (which I don't subscribe to). Or maybe Paulson et all are idiots (which I also don’t believe to be true).

But, I would like to present just a quick sampling of some links that support the opinion (fact?) that we did come perilously close to the current IMS imploding:

http://dailybail.com/home/kanjorski-reveals-paulsons-closed-door-tarp-threats.html

Beginning around 2:20 mark.

Transcript of Rep. Paul Kanjorski statement on C-SPAN:

"It was about September 18th [sic]. … On Thursday at about 11 o’clock in the morning the Federal Reserve noticed a tremendous drawdown of, uh, money market accounts in the United States to the tune of $550-billion was being drawn out in in a matter of an hour or two.
The Treasury opened up its window to help, and pumped in $105-billion into the system, and quickly realized it could not stem the tide. We were having an electronic run on the banks. They decided to close down the operation, to close down the money accounts. … If they had not done that, in their estimation, by 2 PM that afternoon $5.5-trillion would have been withdrawn and would have collapsed the U.S. economy and within 24 hours the world economy would have collapsed. We talked at that time about what would have happened. It would have been the end of our economic and our political system as we know it."


http://en.wikipedia.org/wiki/Reserve_Primary_Fund

The Reserve Primary Fund was a large money market mutual fund.
On September 16, 2008, during the Global financial crisis of September–October, 2008, it lowered its share price below $1 ("breaking the buck") because of exposure to Lehman Brothersdebt securities. This resulted in demands from investors to return their funds as the financial crisis mounted.[1] Normally, the net asset value of money market funds is kept at $1.
The Reserve had multiple other funds frozen because of this failure. It has liquidated a few funds, and post periodic updates about plans to liquidate other funds on their website.


http://dailybail.com/home/kanjorski-asks-paulson-to-describe-his-greatest-fears-from-t.html

KANJORSKI ASKS PAULSON TO DESCRIBE HIS GREATEST FEARS FROM THE FINANCIAL MELTDOWN (CONGRESSIONAL CLIP)

Rep. Kanjorski: "Please describe the meltdown. I'm hoping that you may remember whether questions of law and order were asked. Whether questions of the capacity to feed the American people, and for what period of time, were asked? I'm not going to say what I remember the answers to be."

Paulson begins speaking at the 3-minute mark: "If no action were taken...it could lead to chaos or even people questioning the basic [banking] system (5:15)."

Kanjorski offers him: "People who say we would have gone back to the 16th century were being optimistic."

Pauslon responds: "I asked Bernanke the same question. He said look at the depression, there's your answer."


cont...

milamber said...

And remember all of this came a year after England almost had their banking system implode with the Northern Rock bank run:

http://www.telegraph.co.uk/finance/economics/2816231/Northern-Rock-made-Mervyn-King-panic.html

My point in bringing these different items up is that during the most intense periods of the GFC, lots of people either thought or were told, “THIS IS IT!”.

The fact that they were able to pull back from the brink doesn't mean we weren't at the brink. So I am surprised that in 2013, you seem to take a somewhat blasé attitude towards FOFOA (and anyone else, myself included), and his thinking that back in 2008, that was “it”.

It sure did seem like it at the time.

Milamber

milamber said...

And remember all of this came a year after England almost had their banking system implode with the Northern Rock bank run:

http://www.telegraph.co.uk/finance/economics/2816231/Northern-Rock-made-Mervyn-King-panic.html

My point in bringing these different items up is that during the most intense periods of the GFC, lots of people either thought or were told, “THIS IS IT!”.

The fact that they were able to pull back from the brink doesn't mean we weren't at the brink. So I am surprised that in 2013, you seem to take a somewhat blasé attitude towards FOFOA (and anyone else, myself included), and his thinking that back in 2008, that was “it”.

It sure did seem like it at the time.

Milamber

Warren James said...

[ This comment was originally on 'A Different view of GLD'.
It has been relocated here due to the content being 95% FOFOA-related, despite the relevance to the other article. ] -ed.

--------------

milamber said...

Bron,

Thanks for the pointer, but that doesn't really answer the question in my opinion. :/

I would love to get back to where I believed the reality to be more mundane, but there is too much evidence out in the open now for that genie to be put back in the bottle, IMO. And unless I have missed some more back & forth between you and FOFOA (as well as Kid Dynamite, Victor, Costata, Warren), then GLD's inventory and more importantly its depletion/replenishment rate is still an unresolved issue with the different sides not really conceding the main points (Coat check room, its only arbitrage, Gold is leaving GLD because investor demand is waning, etc).

As it relate to your's & FOFOA's point/counterpoint, I am specifically referring to these posts:

http://fofoa.blogspot.com/2011/01/who-is-draining-gld.html?

http://goldchat.blogspot.com/2011/01/fraud-on-gld-holders.html

and the relevant comments between you & FOFOA that (as far as I can tell) ended in Feb 2011 with this comment:
http://fofoa.blogspot.com/2011/02/wendys-open-forum.html?showComment=1298198088861#c4054406141174298275

As well as comments made by Kid Dynamite on his blog. If there has been further conversation on this matter, I would greatly like to read it.

But as it is, right now, I think that FOFOA has made an exceedingly strong argument for what is happening with GLD (Coat check room view). And please note, I say that not because I "believe" in Freegold -whatever that statement means :/ -, but because I find his argument to be logically coherent.

But I can also see how a reasonable person could agree with yours and Kid Dynamite's take on GLD as well.

Hence my questions to Warren.

Milamber
Sat Jul 06, 02:17:00 AM GMT+1

ein anderer said...

Bron,

I am new here; and yet pls allow me some remarks.

You are stating that Freegolders »believe in freegold, that is the model, which defines 1)… 2)… 3)…«

From where do you know? From writings?

You see, there are always several possibilites why someone is writing this or that: a) because he believes in what he is saying or b) because he would like to get a feedback about what he is writing because he does NOT "believe" but would like to test a thesis which he *assumes* that it *could* be right. Right?

Now: Since we can’t have any clue at all what is going on in the brain of those who are posting here or there we all *must* stick to the fact (!) that Beer Holiday (well done!) could be right too:

… most Freegolders don't "believe" in any model, but rather try to find one which best explains the events which have unfolded

IMHO it’s a belief too to claim "they are believers". We really don’t know. (Well, we could know a bit by analyzing thoroughly the semantics, the dates, the circumstances by and in which someone is posting and not posting. Afterwards passing this analysis through some psychological raster. Probably then we know a bit more if someone is a *believer* or not. But not before.)

But what we really do know is: Any rational understanding of reality is in needs of a model which we can lay over reality, to compare: Does the model fit? Understanding *is* creating models of reality.

So if there is somebody out there using a model (as FOFOA does) this is no proof for anything else then: Probably he tries to understand.

And also the fact that if someone is holding to one model over a longer period of time is no proof that he is a "believer". The scientific way of doing things is to test a model until it is disproved.

Therefore we can also say: The longer someone is holding to a certain model (as long it is not disproved) the more earnest he seems to be in trying to understand.

What is the outcome of knowledge of those who are flipping from one theory to the next, from one model to the next?

(( Since I am new here: Is there any kind of *key post* of yours describing *your* model of understanding of what is going on these days, espacially in the gold markets? ))

Sincerely
ea

SugarLover said...

@BeerHoliday,

There was a central banker from Mauritius mentioned gold returning as a floating reserve, I don't have his name or link to hand, but it was 2009 or 2010 I think. Other CBs can't be seen to rock the boat, we all know the US is trigger happy these days.

@einanderer,

Problem with Fofoa, in all seriousness, he has very little real credibility. Read his posts from 2008 @ 2009, there is such a load of nonsense and imminent doom prediction. And he didn't grasp the basics of the Euro set up, despite reading Another and Foa several times.

So much of HIS freegold thinking is bastardised, veering away from the pure monetary system ideas of A/Foa, it is pure wishful thinking....especially...all saves to save in gold. Plus, all debate is thoroughly vanquished at hs blog, with his tacit approval. Very strange, very dubious.

Re imminent or not and 2008 issues, Milamber displays the same naïveté as Fofoa. Look around, where is the loss if confidence in the system? It is still there, QE is fololing people, the world is relatively normal.

Eventually, when confidence goes in a couple of big sovereign currencies, probably Japan and UK, things will look a bit different. Even then, what will cause the mighty dollar to collapse?

It'll be the realisation that the world is deflating towards depression despite QE, that there is no hope.

Only then will the final day of reckoning happen. In my opinion of course.

Martin Armstrong gets a lot wrong, especially re the US not hyper inflating, but he has more right on timescales and inter connectedness than freegolders, you are too hung up on the minutiae of GLD and related issues, you have slipped down from the top of the mountain view, or perhaps not quite reached it yet.

SugarLover said...

@BH,

'The nominal value of that gold we controversially purchased from the IMF in November 2009, has risen by some Rs 570 million, perhaps the best investment the bank has ever made in its entire history; no wonder there is international talk about moving back to gold as a reference value, if no longer as actual backing, for paper currencies.'

http://www.bis.org/review/r101203a.pdf

Google reveals plenty of other references by him to gold in speeches, so get digging!

Beer Holiday said...

@SL

Thanks for the link, a very interesting find.

milamber said...

@SL,

Wow! An unexpected compliment. And guilty as charged.I am honored & I thank you tremendously for placing me w/ FOFOA in regards to our collective naivete.

We watch this new gold market together, yes?

Milamber

SugarLover said...

@Milamber,

You're welcome, very polite of you, but do you have anything to add to the FG discussion, especially pertaining to freegolder's very frequent naivete in expecting freegold way before it's due in this now quite mature gold market?

Otherwise, I'll assume you just accept my points as accurate and indefensible.


Cheers.

milamber said...

I dont know if SL's comment was SinBinned or just removed, but I will respond anyways.

I have nothing to add to the timing of the IMS collapse and the birth of the next IMS. Other than this...

Robert continued to say...

"I still see this playing out over a couple of decades rather than a couple of years, and I still think that TBTB are keeping and eye on the flow and that we will continue to see a managed rise in the $POG.”

If I may be so bold, you are looking at this from a shrimps perspective. As FOFOA, Another, FOA, Aristotle & others have pointed out numerous times, this is not about how long the IMF$ holds together.

Predicting timing for a currency collapse/transition is a fools errand.

Giants have not been accumulating gold for decades, centuries (millennia??) because they were thinking that, “In 2012, boy we are going to see the IMF$ system collapse!” OK Maybe the Mayans were! :)

Freegold will happen when it happens. I don’t mean to sound trite, but that is the nature of the beast.

If you can tell me when the savers SEE & UNDERSTAND that it is no longer in THEIR best interest to soak up those excess dollars or when you can tell me when a saver (in size!) or a giant will CREDIBLY be denied physical gold, then we can start discussing timing. And even then it will be a fool’s errand. Why? Because if you wait until that phase transition begins, then you are already too late.

And in case some shrimps didn’t reread the FOFOA pieces above, please read this edited for brevity (Ha!) FOFOA/FOA masterpiece as you ponder the “impediments” that WILL cause you to make a mistake “timing” the transition to Freegold.

FOFOA said,

“But first I need to make it clear once again that this hyperinflation discussion is not about timing. It’s about how it all ends, and it’s better (for a saver) to be a decade too early than a minute too late. The other side (whoever it may be) often tries to make the debate about timing. It is not about timing and I don't do timing, but that doesn't mean the end is far away. If anything, it's overdue in the same way a big earthquake can be overdue…

Here is FOA on timing, from a post in which he specifically predicted dollar "hyper price inflation":

Timing?

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

There is no trading an economic system whose currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price. Mine owners will see any near term profits evaporate into a government induced pricing contango that constrains stock equity with forced selling at paper gold prices.

My personal view

They will, one day in the future, helplessly watch their investments fall far behind a world free market price for physical gold. Further into the future, one day, mines will make money on the last thousand per ounce price for gold; only the first $XX,000.00 of price will not be available to them.
....
My argument for hyperinflation is FOA's argument. So you'll see me use FOA's terms. You'll see me quote a lot of FOA. And you'll see me restate the same call he made back in 2001...



cont...

milamber said...


And just to be clear about FOA's call, here it is from that same post:

"While others call, once again, for a little bit of 5, 10, 15% price inflation, that lasts until the fed can once again get it under control,,,, I call for a complete, currency killing, inflation process that runs until the dollar resembles some South American Peso!"

"Complete, currency killing" hyperinflation is a one-time event…”


http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

Milamber

milamber said...

The comment (made a year ago) is actually linked here

http://fofoa.blogspot.com/2012/06/blondies-view.html?showComment=1339433965088#c4443379587299048725

Milamber

Bron Suchecki said...

Milamber,

An IMS failure/bank run is not the same as a bullion bank run. Freegold requires a run on unallocated account to cause the failure of fractional reserve bullion banking.

In Australia we certaintly did have the start of a bank run and there was a book written on it, I think called "shitstorm" (http://books.google.com/books?id=keqb9Vpk_s8C&pg=PA50&lpg=PA50&dq=shitstorm+australian+bank+run&source=bl&ots=moicFud-1A&sig=AbOoXOkSeh21G24wOpexY7gYKZU&hl=en&sa=X&ei=VonaUdueIISBrgeXsIAo&ved=0CAcQ6AEwAA)

As an example in 2008, we had a lady withdraw over $100,000 in cash and come to the Perth Mint to buy gold. Here is the thing, we didn't experience a run on our unallocated (withdrawals were up, but fraction of a percent) nor did I see signs of that happening in London. Same now, so that is why I am ho hum about "this is it" calls.

FYI IMO the coatcheck idea doesn't stack up in logic or make any sense as to how the industry works. IMO it is a construct to provide FOFOA a reason why we are still here 5 years later and bullion banks are just sailing along fine.

I have lost interest in FOFOA's writings because for me the coatcheck and lbma survey interpretation (and ignoring the idea BBs are a freebanking system) appear to be making the events/data fit his theory rather then letting the data speak for itself. I think most BB behaviour can be easily (and more simply) explained by BBs arbitraging. FOFOA I think is now about sustaining his Narrative (see my blog) because he has followers to whom he has to minister support.

Beer Holiday said...

FOFOA I think is now about sustaining his Narrative (see my blog) because he has followers to whom he has to minister support.

I hope your resort to ad hominem attacks doesn't derail the freegold debate.

I think most BB behaviour can be easily (and more simply) explained by BBs arbitraging

This argument gets weaker as time goes on. If it's 100% arbitration and no other considerations, why do the SLV and GLD inventories behave differently.

Why were GLD pukes a successful indicator for price increases last year, but not this year?. How can SLV have >500 tonne daily movements, it the movements are 100 % driven by arbitration.

Beer Holiday said...

No to mention that FOFOA's coatcheck model of GLD has almost little to do with freegold.

People were talking about freegold before the GLD existed.

Bron Suchecki said...

Not and ad hominem attack, just the reality of the dynamics when when popularity strikes and solititation for donations is involved.

I should qualify by saying most behaviour is explanined by arbitrage, as certainly trading positions are also taken.

GLD and SLV behave differently because GLD has 50% institutional investors and SLV is at around 20%. That different mix of investor types has to be a factor.

Warren James said...

Some good discussions here, with a lot raised. There's a few items starting to bubble out which I think are worth exploring. If I may summarize the polarity, they are:

1. Different interpretations on the role of GLD and how it functions --> has a bearing on whether the GLD 'drain' is significant or not in terms of future price.

2. Whether or not the bullion banks are still 'exposed' as they were claimed to be in the years leading up to 2000.

3. For what period of time will the USD retain its store of value function (SOV). (i.e. short sharp shock, gradual social transition, or social disintegration as per Martin Armstrong).

Those are the things I'm interested in, anyway. Rgds,

S Roche said...

Bron,

I like your first comment and I think you are almost on the money. You are certainly right it would have a devastating effect.

I think some people who were there at the beginning, and before, are very tight lipped about that. Some because they have a commercial interest to protect and probably were not in their pyjamas, and some others who possibly just enjoy their quiet life now and don't feel any need to share what, (they are pretty sure), they know.

Apart from the occasional hint.

Bron Suchecki said...

That doesn't mean we can't speculate, which is a lot easier to do for anonymous people

SugarLover said...

@Milamber,

Your quotes did not address the issue being discussed, namely:

'pertaining to freegolder's very frequent naivete in expecting freegold way before it's due in this now quite mature gold market?'

I note that you merely supplied some random Fofoa quotes & comments, but avoided the issue at hand.

I wonder if you have anything to add on that subject in the way of explaining why Freegolders, and their gurus, constantly expect a transition, and then years/decades past and freegold is nowhere to be seen. An exercise currently being repeated of course.

I'll be interested in any freegolder attempting to explain this naivete.

I can understand it to a certain extent today, as Fofoa and his followers are all outsiders, just guessing, but Another, supposedly an insider, and FOA, supposedly the bright young apprentice?

Let's see if anyone bothers to take an honest look in the mirror here.

milamber said...

Bron,

Thanks for your respons. Sorry for being late; I was off grid for a little.

I'll provide a more detailed one later; there are a few concepts that I would like to explore related to your answer, but probably not in a comment.

Milamber

Beer Holiday said...

That doesn't mean we can't speculate, which is a lot easier to do for anonymous people

That's a good point. In speculating, it's important to have an anchor to reality. Which is why I respect your comments so much.

There is endless speculation about gold, but that's the price for keeping the main market opaque, except for occasionally wowing everyone with the trading volume.

BTW Between the comments here and at "Figured it out" the case for the arbitrage mechanism is much clearer.

@ SR

Some food for thought.

Bron Suchecki said...

The speculation I was referring to was the identity of Another.

Bron Suchecki said...

From a Stansberry Research daily email: "Joshua Rotbart, general manager at Malca-Amit, said silver investors are mostly individuals, while the bulk of gold investors are institutional."

Gary said...

An interesting FOA quote here:

http://t.co/yb4d3dJiai

It's comment number 130, near the top of the page.

Here is the quote:

'You just have to give the devil his due,,,,,, Wim Duisenberg gave a clear signal today and his timing
allowed him to hit two birds with one rock.

First target: He has all of Political officialdom now holding their tongues because they learned that
the ECB is not the same animal as our Fed. From the link:

---- "Politicians have been scared of publicly pressing the independent ECB to act for fear it may
dig in its heels and remained cautious Monday" ----

Ha. Ha. They now know that these guys (ECB) are looking out for not only the money of a large
diverse group of nations, but perhaps a new bench mark currency a good portion of the rest of the
world may use. Their stance, recently, states that a currency should be valuable too and even offer a real return for those that hold it for a while.'

In 2001 FOA was aware that the ECB was going to deliver a money that could be held as reserves/savings and that would hold it's value (even offer a real return).

So different from the view that today's Fofoa followers espouse.

I'd like to pay tribute to FOA for spotting the trend 12 years ago.

Gary said...

This post was deleted at Fofoa's blog, so perhaps Aaron will spot it here:
_______
(1/2)

@Aaron, hello.

Can I attempt to answer this question you posed (it won't be easy for me, but here goes). You asked:

' (VtC said):The idea that you need to separate the medium of exchange from the store of value is not valid.

Victor, help me out here.

If you loan out your store of value, you increase the existing store of value stock. The very act of loaning your store of value is working against your reserve.

How does not separating the MoE and SoV not cause a problem for the SoV?'
_________

Firstly,inflation in our current system is caused by more credit being extended now than actually exists. Credit should equal the credibility of the borrowers, and banks are just facilitating the exercise of that credit now. (h/t Fofoa).

But today, banks (and others) over extend credit, meaning too much credit, and then inflation gets going, and loans go bad, as the credibility just was never there in the first place (sub-prime etc).

So, the issue really is restraining the amount of credit to reflect actual credibility of the borrowers (i.e. there is a very good chance it will actually be paid back!).

The big change, really the biggest, is being attempted in the Eurozone. It challenges FOA's assertion that the collective will never allow losses in a credit crash to be suffered by one 'group' and instead will socialise them across the collective, via inflation/printing/devaluation etc. Banks will be rescued always and forever FOA thinks to share the pain.

Well, post reset, banks in Europe will not be rescued (to be precise, they will not be rescued by the currency issuer the ECB. Individual states can attempt rescues if they wish, and if they can afford to do so, as markets will price their govt debt accordingly, but that is irrelevant to our discussion of the currency).

We have already seen this in Cyprus, where bank debtors lost money. Those under 100,000 Euros were saved, but the collective was VERY HAPPY to see big savers and bond-holders lose money. (Please bear in mind, the collective is everyone who uses the Euro, not just Cypriots).

....(cont)

Gary said...

(2/2)

So, we now see the ECB moving towards a comprehensive bank assessment, and eventually later next year it'll supervise all of the banks (and resolve them when necessary). I imagine it will be very busy, the state of European banks, many will fail!

So, is it any coincidence we see bank credit reducing in the Eurozone already? And why? because the banks can see the writing is on the wall.

They know if they become insolvent by extending poor credit, it is highly probable they will go under! Excellent news.

So, perhaps you can see how it is the separation of the Euro from the nation state (no mention of gold in the post), and the subsequent forcing of capitalism on banks that will keep them honest?

And that 'skin in the game' that banks have, will restrict the credit to what is credible, and you won't have to worry about inflation. In fact already the EZ is at 0.7% inflation, due to credit contracting.

The issue I describe above is why I see the Euro being very stable for savers in the 1-5 years time frame.

Also, post reset, I ponder if inflation is at 1%, and a 100,000 savings account with a bank (well-run, well capitalised, skin-in-the-game) earns that saver 1% interest net of tax, why on earth would he risk INVESTING in gold? Anyone ever consider that?

I'll not get into the international settlement issues, because TBH that is not of interest to me, and I don't grasp it all. But Noyer and other ECB bods (and FOA himself) all mentioned (10 years apart) that the Euro was going to hold 'real value', so I'll go with that until I see/hear otherwise.

But as Blondie said, no one grasps the magnitude of the change the Euro design is going to have on the world.
It is the separation of currency from state that is the biggest move.
Finally capitalism will be given a chance to thrive. Potentially the greatest EVER advance for mankind.
I am optimistic about our future therefore.

Let us hope the collective in Europe gives the Euro a chance, I suspect the 'gold nuclear button' will be deployed at the worst of it anyway, to ease Europe's transition, and ensure the new system is given a chance.

For anyone confused by the above, sorry, but Blondie/CvG explains it better over at Neuralnetwriter.

Off topic, it is good to see some posters engaging and thinking. Read from this comment forwards, many times, especially Capt Goodvibes posts and his discussions with 'learner' and Milamber http://neuralnetwriter.cylo42.com/node/4014?page=3#comment-9380

It is not about debtors and savers, banks don't need savers, they just need constraining by market forces!

Gary said...

Thinking for yourself will help you to grasp monetary issues:

http://www.twitlonger.com/show/n_1rrnvgv

Gary said...

Where did Fofoa wander off the Trail?

http://www.twitlonger.com/show/n_1rs7dfl

Pete T said...

What a pitiful coterie of nobodies and losers pronouncing the most shortsighted analysis and judgement. Startlingly reductionist thinking and world views submit the absurd case that the system works cos the game ain't up . Yet. The past is not a reliable predictor of the future. Now, has anyone noticed that small sea change in the air? You know, that small matter of The Crowns operations being moved East and leaving the USA, UK, Oz and the ret of its possesses lands to eat shit. Bron is a mere apologist for his owners. There's not a word in his narrative can be relied upon to be true. He does The Mans bidding, and sells the .lies his owner would have you believe. The gold markets don't run from the West no more. Not the meaningful gold markets. Let Bron and his sad crew count their up allocated book-keeping-entry paper OSS. The game left those suckers long ago.
Bron may be something of a hero in this pathetic community. But he is distinctly and assuredly nobody in the gold game.. He's merely another pawn for tThe Man. ANOTHER, the genius sans pareil, the gold market expert, would not sit with such small-fry., except possibly to lie entertained by the pompous and simultaneously pig-ignorant drivel that fool uiiers every time he opens his mouth. Who is ANOTHER? He's just one of us reading this pure BS and laughing.

Warren James said...

Good to see you too, Dr Trzaska.

Feel free to enlighten us with your take on the current gold market (as you know we are always asking questions) but we would also appreciate it if you didn't trash the other correspondents.

Regards,
Warren

Bron Suchecki said...

You could have just said I was a Liar and Cartel Apologist.

What does OSS mean?

Gary said...

Fofoa, confused re the Euro:

http://www.twitlonger.com/show/n_1rtkv9n

Warren James said...

@Gary .. ok read it.. I don't see any specific howler or contradictions. Having inflation targets for a currency is the same as intentional Devaluation of said currency (AUD example explained here). So the only question becomes how much (and in what doses) is necessary to achieve political lever-pulling exercises.

Discussing the content is difficult because of the format - debating a tweet which contains a link to a comment section on another website, on a page which is itself a placeholder discussion of the primary topic of another website ... well I think this page is about to implode and I have a strong urge to cancel the experiment, pls. convince me otherwise.

Gary said...

I don't know what you mean by 'experiment' or 'implode' sorry?

I just post thoughts and views here because Fofoa deletes them at his site. If it troubles you, do as you please, it's your site.

Thanks.

Gary said...

I'm sorry, I disagree with this statement BTW 'Having inflation targets for a currency is the same as intentional Devaluation of said currency'.

I'd suggest considering Iceland v Greece as an example of the vastness of the difference.

Once the Eurozone has been reset in a few years, there will be no need for inflation, but it is clear even now, at 0.7% on goods people use every day, the ECB is comfortable with that.

Ask yourself why would the ECB need any inflation in a post-reset Eurozone? And where would it come from? What causes it in the first place?

If you're not up to speed with the debate, you probably won't be able to answer those questions, and sadly I have no time now to explain, but VtC's blog (latest post) has some useful recent comments on this, worth a read.

Or follow me on twitter!

Warren James said...

I'm impartial, I just don't think this page has proven to be an effective means of facilitating discussion or debate on this topic (the experiment).

If you set up a blog called 'freegoldthinking.blogspot.com', I would be happy to join as an Author, but I think Screwtape's role in facilitating discussion here is drawing to a close through natural events.

Warren James said...

Posted my response above before I saw your latest above, but I think you just proved my point with more clarity than I otherwise could.

The 'Freegold Debate' link is now removed from the main page, and these pages will be closed for comment.

If I have time I will create a post with my reasoning, however currently I am too busy combating currency devaluation to really deal with it properly.

Complaints, protest, etc. can be sent to bullionbars@hotmail.com. Don't forget any freegold content on main articles not related may be removed, and anything particularly obnoxious will go to the sin bin. Best regards & thanks for all the fish, Warren