Friday, February 25, 2011

Wendy's Open Forum - Part 2

@ Wendy – Sorry I short-changed you on your last open forum. So here's another one. Apologies this time for invading your forum with a bit of tripe. (See below)

@ All – A few thoughts on "Black Gold." I hate to draw attention to ridiculous notions with no basis in history or logic. But apparently this notion of massive secret storerooms of gold is still providing some with the comfort they seek in their aversion to taking action to protect their own wealth. So I suppose it is worth a brief comment.

I have noticed that the most cynical among us tend to view the world as an ant might view the giant humans that massacre hard-working legions of his own kind whenever passing by. And while I can, and often do, entertain such perspectives without accepting them, for the purpose of exploring probability, I can find no logical train of thought that leads to the existence of massive stockpiles of gold as the source of power for our evil overlords.

In fact, massive stockpiles of easily printed cash make a lot more logical sense!

The history of gold mining is well documented, as is the amount of gold in existence during various eras in which it was openly used as currency. So the existence of hidden quantities of the stuff has a tremendous logic threshold to clear before Occam's razor can even be considered against the supposed "evidence" rebutting massive quantities of known history.

And because of the non-clearance of this threshold combined with the relative scarcity of time, I find it extremely wasteful to explore the voluminous fiction that exists on this topic. And I am comforted to share this perspective with ANOTHER, FOA and Randy Strauss (see below).

This topic seems to pop up periodically, each time some poor soul stumbles across one conspiracy-oriented site or another. Each time it is presented, again, with the same zest as the last. And each time, logic, history, reality and fine minds stand firmly in the way.

Remember this Foundation X story from last November where a mysterious organization claiming massive secret gold offered to bail out the UK? I wonder why that story just kind of disappeared. You see, when stories are false, there is a lack of "infinite resolution" to be mined. Perhaps this story went nowhere because scam artist Ray C. Dam of the mysterious OITC that claims to have control of millions of TONNES [see pg. 195 in linked pdf] of secret gold was arrested in Cambodia on December 18, 2010.

This is the kind of resolution you find when you dig into fantastical stories like this. What a waste of time! You can learn a lot about the credibility of the Seagraves who wrote "Gold Warriors" by simply reading the negative reviews on, a big time-saver! Here's one:

Many of the earlier reviewers of "Gold Warriors" have admired the voluminous references presented by the Seagraves to support their incredible assertions. However, I'd like to point out that my personal investigations into a sample of their sources have exposed the Seagraves' quite cynical "research" methods. They are prepared to use sources that are laughably insubstantial, and then present these sources as if they are highly credible. The Seagraves also deliberately misrepresent the words of a source to make it fit the story that they wish to convey.

The whole of page 62 of "Gold Warriors" is given over to the Seagraves' theorising that nearly 400 Allied Prisoners of War were massacred after stowing gold bullion in a mine on Sado Island, Japan. This is outrageous. The source that they use, "Betrayal in High Places", is a book that looks extremely unreliable when first picked up, and its claims fail to be confirmed by any other historical source. In any case, "Betrayal in High Places" does not actually claim that any stolen gold was stored by the POWs!
I am one of the authors of a recent historical paper, published in the Journal of Military History, which has proven the Sado Island Massacre story to be pure fiction. The Seagraves are smart enough to have worked this out for themselves, but they have chosen to legitimise this fantasy in order to sell their books and CDs.

The Seagraves further illustrate their manipulative ways when they cite an innocent travel book as the source of their further assertion,
"more than a thousand Korean slave laborers ... on Sado Island also vanished without a trace" (bottom of p62).

This is just another dishonest misquote. The travel book (Waycott: "Sado: Japan's Island of Exile") actually says, "...During these years, forced labor was certainly used: of the tens of thousands of Koreans imported to work for Imperial Japan, more than 1,000 are known to have been sent to Sado. Of these, 145 are said to have 'escaped' (but where to?) and a dozen or so - surely a low estimate - were killed. Their existence became public knowledge in 1991, after records were released of Mitsubishi's distribution of cigarette rations to its workers."

Westcott's travel book is actually quite pleasant and informative, and there is nothing dishonest about his speculation - but it's only a travel book! Historically, it's clear from post-war Korean records that many "escapes" were indeed successful (often into the local community, or by fishing boat back to nearby Korea). It's also true that a relatively small number of Koreans were killed in mining accidents, and that no "massacre" occurred. Waycott doesn't allege a massacre in any case - but the Seagraves do!
(Page 62 of "Gold Warriors" can be previewed online here on Amazon, for those who would care to check for themselves...)

The Seagraves are obviously misusing these sources quite deliberately. I think it's very reprehensible for modern authors to push this type of mean deception masquerading as history. This is not a victimless crime. (My mum's brother died as a prisoner of the Japanese in WW2, and it is upsetting to see authors such as the Seagraves take these liberties with the emotions of dead POWs' families.)

Not content with pocketing their customers' money for this book, the Seagraves also use their book to continually push their privately-sold CDs, which they claim contain the "evidence" to back up their assertions. In fact, most of the documents on the CDs are just correspondence between "treasure hunters" - who also make their money by selling their Treasure Maps to the gullible... These are hardly independent or authoritative people! Many of the "certificates", which have been laboriously translated (possibly to tire out the reader) can easily be seen to be fakes once you look at images of the "originals". They have cut-and-pasted values for the gold on deposit!

The CDs even torpedo the Seagraves' own assertions in some places. On CD#1 (Jones.PDF file, page 65), a 1997 letter from "R. A. Medland, Senior Manager, Commonwealth Bank Group Investigations/Security Dept." [Melbourne, Australia] says that the gold deposit certificates are, "utter rubbish"! There's also a scary-looking photo of a sleazy Indonesian "lawyer" displaying the "certificates", and a hilarious document very reminiscent of a "Nigerian Letter", purportedly from President Suharto of Indonesia, on the same CD.

Gee, it's a pity these Certificates are rubbish - they were for 420 tonnes and 120 tonnes of Gold !
(US total annual production in 1940 was 155 tonnes, just to show how incredibly unrealistic these numbers are.)

With the kind of resolution one finds when only scratching the surface of these fantasies, I have to wonder that the appeal of such stories must come from their ability to assist in the smoothing of the rough edges of some other square peg these cynics are trying to jam into the round hole of reality. But again, it is a big waste of time to go any further than this when even the simple threshold of logic hasn't been cleared.

Before getting to the archived arguments, I would be remiss not to mention Costata's comment from the end of the last thread:

costata said...

I have read the book [Gold Warriors] that FGA and TDF are referring to. It is mostly BS. The authors (husband and wife) have written about some interesting people and events in Asia. The husband was a journalist who had some good contacts. Some of the stuff they have written about did step on a few important toes but a lot of it is "ancient history" now. IMO Lords of the Rim is probably their most accurate book. It's the story of the Chinese diaspora.

The Yamashita gold story was actually true up to a point. The Japanese did loot gold in China and SEA.

My source was part of the occupation forces in Japan after WWII. He was an officer in charge of a unit involved in decommissioning chemical weapons and logistics. The Japanese stockpiled a lot of materials and valuables in old mines that had been worked out long ago.

A lot of the valuables the Japanese looted during the war were used to fund their war effort. Apparently gold was held in higher esteem by their suppliers than IOUs from the Emperor (despite his unique lineage). Bear in mind too that Japan had some incredibly rich gold seams in their local mines as well. Nothing like the scale of a Boddington of course.

Here's a WA connection you might be interested in. After Australia began to trade with Japan again post war some of the big Japanese trading houses had maps of promising resource regions in WA that the locals had never seen before. The story goes that prior to, and during WWII, the Japanese put teams of engineers into remote areas of WA to identify promising areas for resource exploration. There could be other ways they acquired the maps but as the saying goes "never let the truth get in the way of a good story".


And now I take you back a decade to early 2001, when FOA and Randy "@ The Tower" Strauss took on the reality-challenged cynics of the day with the sharp razor of raw logic and known history. Dismiss these great Freegold minds at your own peril. The comments are presented here in the order they were posted. And as is usually the case, the discussion evolved to the point of depositing the strongest arguments at the very end. My favorite line of the bunch comes from Randy: "…it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them."

FOA (01/10/01; 17:50:30MD - msg#53)
24 hour hike.

Black Gold?
If I understand the reasoning, some people think there is a mass of physical gold out there and it's being used as underground money. This is what explains the low price of gold today, as all that black market gold surfaces?

Well, that may not be the proposition, but if any of you want to know; none of our evil outlaws are so stupid as to use gold for trading when there is literally "TONNES" of cash circulating around the world. Please, give all of us a "logic break" for a minute? Why would I, as a crook, carry even one ounce of gold when three crisp $100 bills can take its place? Even ten $100 bills are easier than gold priced at, say $1000. And there is no shortage of that cash stuff around! Hell, I bet there really is more tonnage of "Black Market Cash" in the world than all the gold still in the ground. Cash for ounce,,,,, gold still priced in the thousands! Believe it!

FOA (1/11/2001; 11:35:06MD - msg#54)
The Curve!

OK,,, I had my coffee and morning walk in the woods to see the wildlife,,,,, packs on,,, let's go.
It's always great to spend time out here,,,, away from the city,,,, out on the Gold Trail.


One more point on Black Gold as we walk:

All that gold, more than triple what we think is out there, would have been in existence for some time prior to our life spans,,,,,, given the timeline required to produce the stuff. Remember, Black Market production could not have existed prior to, say 1971, as even public mines were not making cash profits. Also, it takes real cash and investment to produce both White Gold as well as Black gold.

Indeed, simple extension of physics concludes that nowhere near that much "EXCESS" gold could have been dug over the last 25 years. It didn't happen, even with slave labor. Because, as in above, even lawbreakers have to sell most of the gold in the open just to cover the illegal "Cash" they invested in digging the ore in the first place. These guys don't do such a "wash" business when their cash works just as well in the first place?? Get my point?

Also, the gold would have been moved into the open as the majority of goods and services bought with illegal money, to create their evil lifestyle, must involve the White Market Economy too. Black market wealth is mostly in cash, it's just too easy to move and spend. So, there is no reason to go through gold first, just to buy in the real marketplace.

With all that gold out there, the Dollar powers would not need to create paper gold debits to placate strong dollar backers. In fact, I suspect they would have created channels to flush all that gold into the market. Illegal or not, this action would have suited their end result.

No, the natural trend of easy money humans, both good and bad would be to spend said gold for other consumable wealth and keep cash in the background. Indeed, this is truly what has been happening as regular investors trade physical for non-physical substitute gold. The small amount of physical supply vs the monstrous paper trading denotes how such existing gold has bridged the industrial use gap. It didn't take a vast new unaccounted supply to make paper seem real, just moving the existing into new hands did the trick. OK, we finished burning that story in the fire.

Randy (@ The Tower) (1/16/2001; 4:07:45MT - msg#: 45719)
ORO: some of my thoughts on being "not ants"

In your post you make many worthy comments, and certainly the essence of human motivations driven individually by self-interest has not likely changed substantially through time or by geography. This issue of black gold, however, requires an additional depth of understanding suggested earlier this weekend--that we are not ants.

Loosely, I suggest that from the perspective of "antkind" in its struggle for survival, the world is the same as it ever has been...particularly with respect to the "rules of the jungle". And further, seen from the perspective of "the world" itself, the essence of antkind behavior and its impact is also the same as it ever has been (for most practical applications).

In stark contrast to antkind's "same-as-it-ever-was" interaction with Mother Earth, any meaningful assessment of mankind as a whole reveals a performance more akin to the evolving development of a single entity (such as a butterfly) throughout a single lifespan of that entity.

More fully said, as evolving civilization establishes new "rules of the jungle" (laws of the land), men -- like butterflies -- do behave differently depending on the specific "rules" for the stage of the game faced at the given time in life, even while their self-interested motivations remain. Such self-interest may require a body to crawl hidden and eat leaves under one set of rules while exposure to another following set of rules (i.e., opportunity) enables that body to fly forth in a display of nectar-sipping "birth" into the seeing world. And yet, even as the caterpillar's nature is inclined to a hidden existence during a particular stage, a premature and unintended flight into the open can occur even under the old rules of the jungle through discovery/conquest by superior forces (e.g., a bird in this extended metaphor).

Concerning gold and mankind, a rich history of conquest (generally by "official sectors") and of rule changes through time and geography have given ample opportunity for significant gold exposure--by force or by choice. It must certainly be acknowledged that once our civilization's "lifespan" developed to such a point where incentives arose for some gold to be kept hidden at the time of its discovery, clearly the stronger precedent of experience was that such gold was useful when "revealed" (spent) as a suitable alternative to its owners starving in the dark...and this would hold true for any point in this would-be black gold's post-discovery coexistence with mankind.

"Black markets"... "white markets"... go back far enough and you find there were simply "markets". Looking back to one full century after Europe limped through the economically plagued 1300's, estimates from historical evidence suggest there to be found at the time less than 150 tonnes in total gold. Over the next 350 years, and prior to the productive gold rushes of the mid-late 1800's on the several continents, the free and open coinage of precious metals brought to mints for ease of circulation (use as currency) in this more highly sophisticated stage of mankind's existence provided reasonable records and estimates that gold in known use in the civilized world increased by only 3,000 tonnes. Then, the "easy pickins" of the gold rush years prior to the cyanide leaching process instituted from 1890 onward yielded barely a tenth of today's highly scrutinized corporate production totals of roughly 2,500 tonnes per year. (By 1908, the new gold discoveries and extraction techniques had helped companies boost global gold production such that above-ground gold supplies swelled to nearly 18,000 tonnes.)

We must ask, when considering the political backdrop this turn of the previous century, where was the incentive for significant quantities of that newly unearthed gold (or previous hoards) to be kept hidden ("black") from free coinage or other wealth-utilization? Arguably, only with the cyanidation process of the single past century do we get gold production volumes remotely capable of feeding black supplies on a level suggested recently by some posters here.

Equally important, only with our very modern era of fiat currencies and tax policies do we face "rules of the jungle" in this collective lifespan of mankind whereby self-interested motivations would favor a degree of unreported/hidden new production. Certainly too little, too late to provide the levels of black gold cited to exist beyond that which is commonly acknowledged as historically produced totals.

To wrap up this commentary, one other element warrants brief discussion. You said in your #45689:
"The supply of actual gold, not only paper gold, relative to dollar denominated debt had to substantially greater than "officially" stated, else the system would have collapsed long ago as a result of over-leverage."

Could it be that you are overlooking an important phenomenon--growth of the (bullion) banks’ operating sophistication through global integration, and with it the growth of the participants’ confidence which counts for everything? For possible validation of this thought, look no further than the similar absence of U.S. bank collapses against the backdrop of meager "physical" vault cash which has been bolstered by sophistication of operation throughout the latter two-thirds of the Twentieth Century. To be sure, now that the banking structure has gone global beyond the safety of any deep-pocketed lender-of-last-resort, only additional time has been bought by the over leverage, and the eventual failure will be all the more spectacular when it occurs. My friends and myself in The Tower hold physical gold in anticipation of that day. The latest shifts in the "rules of the jungle" indicate the day is near at hand.

Randy (@ The Tower) (1/19/2001; 15:55:58MT - msg#: 45942)
A simple notion for barnacle bill

Inspired by your comment:
"...until there is a clearer picture on the Marcos Gold situation. If those million tons of gold are really there; and they are in the camp of the enemy, then this manipulation can go on indefinitely."

As can be gleaned from my last post, the most powerful nation on Earth -- blessed with a large and technologically clever populace, abundant natural resources, and a vast network of supportive infrastructure -- is only able to produce 355 tonnes of gold per year through the highly scrutinized efforts of its publically owned mining corporations. Fanciful notions notwithstanding, where in space and time did mankind EVER find either the human inclination or capability to gather a million tonnes of gold from the firm embrace of Mother Earth?

Certainly, do not trust the precision of the conventionally accepted numbers of 130,000 tonnes as sum total of all past accumulations, but they come nearer the mark than the output numbers that could only be achieved through the efforts of Paul Bunyan and Babe, his blue ox. (I have it on good authority that Mr. Bunyan spent his days lumberjacking, not secretly mining or panning.) Let your common sense as born and raised unto the physical world be your guide in this and all things... Numbers are, after all, just numbers.

Randy (@ The Tower) (1/19/2001; 18:18:52MT - msg#: 45952) thoughts

"Randy. 200 tons a year for 5000 years. I don't know how the pyramids were built either. They look impossible to me also."

Sure, any combination of production values over years will provide the fanciful number, but will not provide for the sustained secrecy that must accompany it...otherwise this would not be "black gold" above and beyond the recognized yet still impressive (impossible?) historical production. One would think the history books and archeological evidence would be rich with tales and displays such overwhelming pre-Columbian bounty, no?

What say we ask YGM, our most favorite miner, if such numbers are viable without the aid of modern infrastructure and technology?

Otherwise, we are left only to ponder the grandeur of the black pyramids which as assuredly were built above and beyond those that have been accounted for, and the accomplishments of many moon landings that did not survive the oral traditions of our cave dwelling ancestors reaching back into antiquity...leaving us only with imaginations to fill in the gaps of astronautical marvels of what surely occurred prior to 1969.

Randy (@ The Tower) (01/28/01; 15:38:58MT - msg#: 46755)
auspec...another read-through may prove more luminescent

You said:
"Trail Guide has several times mentioned he was going to weigh in on the Black Gold issue, but I have yet to see anything of substance."

Have another look at FOA's latest (msg#56 "The Gold of Troy!") at the Gold trail. While he does not explicitly state that this commentary is to address the "Black Gold" issue among other things, it clearly forms the foundation of thought that more thoroughly builds the necessary historic context that I myself so failed to impress anyone with in several commentaries during recent weeks.

His skill of presentation in this effort greatly exceeded my own attempts, and I was quick to call attention to this fact in my early morning post Friday the 26th. Again, (but perhaps to my rooftop eye only(?)) this post serves to prepare the reader for engaging in critical analysis as to whether such magnificent tales of great storerooms of "black gold" can stand upon their own firm legs in a real world historically shaped by human motivation. For reasons I have previously expressed (however poorly), it remains my objective view that such tall tales must have long bodies and necks because they certainly have no evolutionary (historical) legs to support them.

Randy (@ The Tower) (02/01/01; 16:36:19MT - msg#: 47141)

Hello Trail Guide. Thanks once again for providing a well-lit walking tour through the past
In days past, when I finally chose to weigh in on the fanciful debate over the (un)likelihood of copious amounts of stockpiled "black gold" in existence in bunkers somewhere, I tried to put forth a focus on two elements that would satisfy any farmer regarding the veracity of such claims. (Why farmers? It has been my experience that a majority of farmers are endowed with common sense, and more importantly, they do not hesitate to use it!). I talked against the presence of massive black gold stockpiles due to 1) the many technical/logistical obstacles which do not support such levels of production in human history, and 2) the socio-political-economic realities of our ancestors which would not be conducive to the permanent suppression of any such easily and secretly mined wealth against exposure to the light of day--implying that the ancient chain of owners ALL denied themselves the improved life that would have come from spending what it was they held..."money". Not likely.

In conjunction with your #56, I hope that readers of your latest message come away with a clearer sense of the realities of point #2....that gold would not sit idle or hidden in those days if it could (and it COULD!) be used to purchase a better lifestyle. Truly, while human motivations remain similar through time, the socio-economic environment that we shape for ourselves has evolved, and with it, so too has evolved changes in our behaviors as guided by our unchanged human-creature motivations.

I am certain you have opened a door to greater understanding when you explained how the item selected to be spent for other goods was that item which would bring the best trade. For travellers on the road, the necessary convenience of gold dictated its superior performance and hence, its use, whereas in town, one would likely see a flourishing free-for-all "bartering" economy where gold needed not pass from hand to hand for each transaction.

The small parallel we might find helpful to draw is that modern times and commercial banking has given us all the "town" mentality whereby we set our gold aside as the function of our modern currencies allow us to bargain for the best trade for an improved lifestyle. But importantly, we must all recognize that there are distant towns that offer goods to improve our lifestyle, and also recognize that specialization/division of labor has helped to make us each "towns unto ourselves". It is in this sense, therefore, that it remains in our best interest today to hold these golden "hunks of metal" because as travellers in this modern-life environment we are ALWAYS "on the road" figuratively speaking.

But clearly, the problem many people seem to have with this concept is recognizing the necessary transitionary period we are in regarding a shift in popular western thought.

Thanks again for your sharing your considerable talents for elucidation.

It is quite common for unstable, overly cynical persons to seek out extraordinary explanations for ordinary events and conditions that seem to them like giant humans must seem to simple ants. But even so, it is extremely arrogant to believe that such enormous secret stockpiles of, to date, foregone wealth will be deployed in our time, in our "crisis," when it somehow remained hidden through so many generations faced with much more existential challenges than we face. It borders, in my honest opinion, on lunacy.

I highly recommend reading Gold Trail Three - The Scenic Overview which, as Randy noted above, was written by FOA partly in response to all this "Black Gold" talk in the forum. There you may gain a much wider view that actually does have infinite resolution, founded on both logic and history.

Finally, I will close with one last Thought for you. The actual quantity of the gold stock in the world doesn't matter nearly as much as its flow, or velocity, when it comes to storing value. In fact, the greater the stock relative to the same flow, the greater the price stability and therefore the greater the potential value. Again, the greater the stock:flow, the better the store of value. (See: How Can We Possibly Calculate the Future Value of Gold?) So imagine, if you will, a single individual who controls an amount of gold equal to, but separate from, the known stockpile. Mr. X has 160,000 tonnes, and the rest of the world has another 160,000 tonnes. Mr. X is the de facto "King of the World." From a game theory perspective, what would be Mr. X's best move, at any given time in history, with his gold?


Saturday, February 19, 2011

How is that different from Freegold?

FOFOA reader and supporter Cyril asked me by email:

I have a little question that I’d like to ask you. I don’t know if you are familiar with Peter Schiff: he has a radio show every day where he talks about macro-economics.

So the other night, I was listening to it and a caller brought you up in his question. He was a little dismayed that Peter Schiff was not aware of your work (and so was I). That’s probably why he didn’t do a very good job in summarizing the Freegold concept, but to be fair, I don’t know if anyone would have been to able do it in 20 seconds. But here’s the exchange:

Peter Schiff’s first reaction was to ask “OK, and how is that different from what we have now?” I realized that this was a question that I always had in my mind and never found an answer for.

Right now I can buy an ounce of gold for $1373.70. I can also buy the same ounce for 1015.84 Euros. This means that 1US Dollar is 0.000728 ounces of gold and 1 Euro is 0.000984 ounces of gold. How is that different from Freegold?

Good question Peter and Cyril! By the way, Peter Schiff may not have heard of the FOFOA blog, but he has met me. He signed my copy of Crash Proof at one of his "events" in early 2008, before I had even heard of ANOTHER and FOA.

Now most of you know that I consider this topic, Freegold, to be extremely deep. But I'm going to try not to go there in this post. I'm going to attempt to "superficially" focus only on this one question in the hope that this post stays reasonable in length and finds its way to Peter.

Sure, gold is floating against all currencies today, just as it has been since Nixon ended the fixed gold standard. But it is a pretty volatile float, wouldn't you say? From $40 up to $850 back down to $250 and up again to $1,400. All in 40 years. During the prior four decades, gold was locked at $35 per ounce. That's some long term stability! Granted it was a synthetic stability, prone to explosively painful crises like the 1970s.

Freegold will once again deliver a stable gold price, unlike today. The kind of stability Freegold will provide, which will be able to last much longer than 40 years, will form the bedrock foundation of global trade, monetary policy and international finance for the next era. And it will be stable because of two main factors:

1. SUPPLY - Gold will trade on a stable supply of above-ground physical gold in the absence of external influences like "paper gold" (Bullion Bank "BB" liabilities that can be created on demand by a mere book entry on a BB balance sheet, etc.).

2. DEMAND - Gold will also trade on a stable demand due to the global clarity that will emerge as to gold's best and highest function—being only a physical wealth reserve asset and nothing else.

How we get there is easy to visualize. As the physical reserves within the BB system are all moved into allocated accounts, at some point the remaining claims will simply have to be cash-settled. At that point all paper gold markets will cease to exist and all that will be left is the stable supply of above-ground physical gold in the absence of external inflatable (or deflatable) influences.

And when this happens, the dollar will fall in value very quickly, and with it, all savings tied to debts denominated in dollars. What this will reveal on any balance sheet that contains both dollar-based assets and gold, is that gold will rise to fill the void left by the dollar. The balance sheet will not collapse. But the wealth will have transferred from dollar assets into gold.

This is the main significance of all the Central Banks stocking up on gold today as well as the Eurosystem's quarterly mark to market party, I mean policy. When the BB fractional reserves finally run out, this will be a very quick revaluation.

But while I expect a quick and dramatic reset at some point in the near future, this process can be clearly observed happening in slow motion today, both from a political standpoint and on the balance sheet of the ECB. In my post, Reference Point: Gold - Update #1, I highlighted the results from the latest revaluation party, a decade-long trend that has brought the "foreign fiat reserves" portion of the Eurosystem's balance sheet from 69.5% down to 32.9%. Meanwhile, physical gold as a portion of the Eurosystem's reserve assets has risen from 30.5% to 67.1%, even while declining in volume. A virtual flip-flop as I called it in my post.

So while most cannot understand the significance of this slow motion trend today, the explosive "rock meets hard place" encounter that is overdue at this point will be sure to wake even the sleepiest sheep. And at that point gold's best and highest function—being a physical-only wealth reserve asset—will be known by all. And the meeting of such a wide (awake) demand with a newly physical and stable supply in the absence of external (paper) influences will reveal a gold price that is multiples of any that has ever left Peter Schiff's lips.

The next step in discovering how Freegold (or Reference Point Gold "RPG") is different from what we have now is the concept of "captive money." Today gold is traded like a volatile commodity by gamblers who like to call themselves traders. Or else it is held as a small percentage of one's wealth for the expressed purpose of "insurance." Gold is actually a pretty poor inflation hedge as long as it is under external influences such as the inflatable supply of paper gold BB liabilities. So the only way it can even hope to perform as prescribed is as insurance in physical form only. Yet so many investors still hold "paper gold" as the insurance portion of their portfolio. This alone really highlights the confusion in Western "professional" investment Thought.

Most people are savers, not investors or traders. Yet today we are all forced to be investors chasing a yield because there is no such thing as a perfect inflation hedge. If there were such a thing, a large portion of the "investing public" would not be anywhere near stocks and bonds. Even the most "risk free" bonds, US Treasuries, have the greatest risk of all, currency risk. And in the case of the dollar, this is exposure to a risk that, today, is well out of the hands of the currency manager thanks to seven decades of functioning as the global reserve standard.

Furthermore, a saver must look deeper than the CPI, or even its shadow-equivalent, for the real inflation that must be protected against. And that is the inflating VOLUME of savings with which one must compete. A perfect inflation hedge would not only keep up with the shadow-CPI but it would also rise in VALUE (as opposed to volume) relative to changes in aggregate monetary savings. Given such a "perfect inflation hedge," I maintain that it would become the Focal Point of savers all over the world.

I read an interesting piece on Egypt by George Friedman of Stratfor. I thought it described an interesting little microcosm of the dollar's international monetary and financial system ($IMFS) and how it is detrimental to savers. Here are a couple snips from the article:

"One cannot simply walk out of Egypt, so since the time of the pharaohs the Egyptian leadership has commanded a captive labour pool. This phenomenon meant more than simply having access to very cheap labor (free in ancient times); it also meant having access to captive money. Just as the pharaohs exploited the population to build the pyramids, the modern-day elite – the military leadership – exploited the population’s deposits in the banking system. This military elite – or, more accurately, the firms it controlled – took out loans from the country’s banks without any intention of paying them back…

"There were many results, with high inflation, volatile living standards and overall exposure to international financial whims and moods being among the more disruptive.

"Over the past 20 years, three things have changed this environment…

"By 2010 the system was largely reformed and privatised, and the military elite’s ability to tap the banks for “loans” had largely disappeared. The government was then able to step into that gap and tap the banks’ available capital to fund its budget deficit."

I realize that I am side-stepping George's point here to make my own. But the point is that today, all over the world, people's savings are "captive money" inside the $IMFS. One cannot simply walk out of the $IMFS today and hope to retain one's purchasing power over the long run. Therefore the people's savings, their 401Ks, IRAs, pensions and trusts are all captive to the managers of the system. Under Freegold this will be different.

That's the big difference for the majority of todays "investing public," the savers. But then there are those dastardly traders. Those traders are not only capturing fiat profits from gold's volatility, but they are creating the very volatility they aim to capture, which itself is the antithesis of gold's best and highest role, that of being a stable benchmark wealth asset. The activity of trading "gold credits" for volatility is part of the reason we do not have Freegold today. Not only are the traders never holding real gold, but they are denying the rest of us the beneficial stability of price that gold was born to deliver. This "gold gambling arena" will not exist in Freegold.

First of all, there is no incentive for people to gamble on price changes in something that is stable in price. And second, the gamblers' casino chips, ambiguous claims on some illusory pile of gold somewhere back in the cage, will no longer exist. This is probably the most important difference between Freegold and what we have today. After the failure of paper gold liabilities to continue trading at par with physical during the dramatic revaluation, every discrete piece of the 160,000 tonnes of above-ground gold will be **unambiguously** owned!

Furthermore, in every gold exchange, there will be an **unambiguous** seller and an **unambiguous** buyer. This does not necessarily mean that all gold exchanges will be face to face and entail the physical movement of gold. But it does mean the end of ambiguous pools of unspecified gold and its unallocated owners. I realize that this part is difficult for many to visualize today given that it is how a good deal of the gold market presently operates. But I believe that if you give it enough thought, you will ultimately come with me to this conclusion. Otherwise, as Another said, time will reveal all things.

With people's savings no longer captive in a financial system that lends them out at will, interest rates will once again be a direct function of the supply of (as well as demand for) capital inside the system. Yes, banks will still be able to conjure "thin air money" on their balance sheets to make loans, but the aggregate of loans within the banking system will once again be constrained by the capital ratios in the banking system as no secondary market for this debt will exist. And as a result, we will witness the return of prudent lending standards.

All of these subtle changes/differences will flow from the inevitable loss of the paper gold market that presently denies us the stable benchmark that is gold's ONLY job. As will the end of the seemingly infinite well of power that currently springs from the U.S. dollar printing press. And with the loss of this free-flowing fountain of power what I like to call a global **meritocracy** will emerge. And by global I mean on all scales, from national, regional and international on down to the individual.

Through the unavoidable **meritocracy** that is coming straight at us with the inertia of a runaway locomotive, we will witness the unexpected retreat of the social welfare state as well as the reversal of the destructive force of regulatory capture. You see, without the captive money of the savers to be diluted, the printing press becomes a self-defeating mechanism that will be controlled because it will be in the self-interest of the printer to do so. As F.A. Hayek wrote (which I quote and source in Windmills, Paper Tigers, Straw Men and Fallacious Fallacies):

"There are many historical instances which prove that it is certainly possible, if it is in the self-interest of the issuer, to control the quantity even of a token money in such a manner as to keep its value constant."

"I have no doubt, and I believe that most economists agree with me on that particular point, that it is technically possible so to control the value of any token money which is used in competition with other token monies as to fulfill the promise to keep its value stable."

As for running straight back to a gold money system (instead of Freegold), Hayek writes (which I quote and source in Freegold Foundations):

"I do believe that if today all the legal obstacles were removed… people would from their own experience be led to rush for the only thing they know and understand, and start using gold. But this very fact would after a while make it very doubtful whether gold was for the purpose of money really a good standard. It would turn out to be a very good investment, for the reason that because of the increased demand for gold the value of gold would go up; but that very fact would make it very unsuitable as money. You do not want to incur debts in terms of a unit which constantly goes up in value as it would in this case, so people would begin to look for another kind of money: if they were free to choose the money, in terms of which they kept their books, made their calculations, incurred debts or lent money, they would prefer a standard which remains stable in purchasing power."

Why Freegold is far better than Another run through Another gold standard time-line which will ultimately end like all the gold standards of the past is Another subject altogether. Check out my post The Debtors and the Savers for a clue to my Thoughts on it. But for this post I simply wanted to lay out the many ways Freegold is different than what we have today.

So here is a quick cheat sheet of the differences covered in this post (which really only superficially scratches the surface as I said I would do for Peter):

Stable physical-only supply
Stable, wide, awake and global demand
Much higher price
The end of captive savings
The end of gold traders
Unambiguous ownership
Supply resumes its role in fiat interest rates
The return of prudent lending standards
The return of capital ratio relevance
The retreat of Socialism
The reversal of regulatory capture

This is not a dream or utopia. It is simply the swing of the pendulum. If this list seems to you to be too good to be true, then I suggest you spend some time in the archives and give it a little more Thought. As FOA wrote, "This not only has everything to do with a gold bull market, it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too."

"Return to a gold standard" advocates like Peter Schiff have a really hard time wrapping their heads around Freegold because they are so focused on monetary currency that circulates when what really matters is monetary wealth that lies very still. I think the simplest way to express the separation of these two monetary roles to the gold standard advocate is the application of Gresham's law. "Bad money drives good money out of circulation." In other words, the bad (fiat) money circulates while the good (gold) money lies very still… and floats in value relative to the circulating bad money.


PS. Blondie gets the one-liner of the day award: "So I guess 'Peter Schiff was right!' destroyed any chance of him getting out of his own way." – LOL


Possibly related:

Peter Schiff echoes FOFOA on U.S. currency crisis
By GoldSubject on May 9, 2010

Friday, February 18, 2011

Wendy's Open Forum

Wendy: "FOFOA would you please start another post before I am forced to float through cyberspace unattached to anything. It's kinda creepy."

Some give and ask nothing in return.

Others ask questions, and a few even prompt new post ideas!

Wendy gives and asks only to not be excluded by Blogger's screwy comment system.

I aim to please!

(To Wendy: I am working on another post, but it is not quite ready yet. So here you go.)

THANK YOU to everyone who has donated to my Precious Defense Fund!! Now I can pay some bills without having to part with any of the you-know-what.

After five days, the P.D.F. supporter count now stands at 137!

Total donations this week… $10,524!


Sunday, February 13, 2011

Defending the Precious

This blog must be confusing to first-time visitors. I can only imagine. I remember the first time I came across an excerpt of ANOTHER's writings posted in a forum thread. It was a bit strange, but somewhere deep inside of me a spark was lit and a hunger began to grow. The excerpt I came across was on a popular thread asking other participants what they thought about the quote. No one ever responded. ANOTHER went completely ignored.

After that I spent about a month reading the archives, soaking them in, and trying to wrap my head around what I had found. Then once I had a pretty good idea of just how big this thing was, I went on a quest for someone, anyone willing to talk about it. But this Freegold view, it turned out, was either banned or ignored on every forum I tried. I even had my account deleted on one forum for mentioning Freegold and ANOTHER. Eventually, sometime after I started my own blog out of pure frustration, I did find a small group, maybe a couple dozen people, that had been discussing events as seen through the Freegold lens, but it was no wonder I didn't find them sooner; it was all in Dutch!

Today my stats report tells me that in the last 12 months this blog has had 267,000 absolute unique visitors who visited 900,000 times and clicked on a total of 1.35 million pages during those 900,000 visits. That since Feb. 13, 2010. For the last four or five months, it has been around 100,000 visits per month. Seems I've found a few people to talk to now! :)

While this is very exciting, I am still conflicted about the concept of promoting my view. Many have offered me the means to drive traffic to my blog in the thousands. But this thought makes me very uncomfortable. I remember that little spark that was first lit deep inside of me, but now with a wider perspective I can see how rare it is that one gets caught up in the hunger for more that I experienced. And it is for this reason that I do not promote my blog. In fact, I never even send people I know to my blog. Not family, not friends, not even my gold dealer friend. He does not know that I am FOFOA. This blog is simply too… what's the word I'm looking for? Abstruse? Esoteric?

I am aware of this, and I am fine with it. I do realize that I am not simply extolling the known virtues of gold repetitively. There are plenty of places on the Internet where you can find that kind of sustenance, if that is your hunger. What I try to do here is to push the envelope of understanding… in plain-spoken English. And I am continually amazed that a few of you are right up to speed with me, so much so that you can actually pick out that same brightest point of light that I too saw when writing a post.

After reading The View: A Classic Bank Run, Blondie wrote a comment that knocked my socks off. He wrote:

"I read this to find FOFOA has cut the Gordian Knot which was the cryptic words of Another. Seems he was simply telling it as is all the while, but the ascent to the spot from which to see it was the difficulty, and yet the view is relatively simple.

"And the implications are... fairly urgent.

"A highly recommended investment of one's time, in my humble opinion."

While I covered much ground in that post (as I usually do), what struck Blondie like a lightning bolt was exactly the same thing that to me was the pinnacle of the post. I saw maybe one other comment that revealed another reader saw the same thing as Blondie. You see, unless you have read the ANOTHER archives at least two or three times and spent some time quietly contemplating the deep meaning in his words, you could have easily missed the significance of what Blondie found in that post. But that is why I write. Not necessarily for the masses, but for Blondie, and a few others. And I know that one out of (gosh, I don't know how many) will also experience that spark and the hunger that follows. There are few personal experiences as rewarding as a light bulb suddenly lit.

I remember this song from church as a little kid. It went something like, "This little light of mine, I'm gonna let it shine…" This is how I try to live my life. I lead only by example. I may not send my family and friends to my blog, but I am not shy about sharing the peace of mind that gold has brought me after leaving the stress of stock marketing my savings. And I suspect that each of us has a light inside that is worth sharing with others.

I would like to share with you an email I received last week from someone who got "the hunger" a while ago and then read through not only my entire blog, but also the A/FOA archives twice. Jenn is an FOFOA supporter and also a commenter on the blog. Jenn works at a college:

Speaking of funny, a funny thing happened to me yesterday.

The day before yesterday I was reading one of your older posts -- can't remember which one -- and a whole slew of things started to click for me. Anyway, for whatever reason, I thought to myself, "Good thing I have this new understanding. I bet you that means I'm going to run into Robert soon (the former chair of the econ department) so I can try to explain Freegold to him again. Well wouldn't you know it, yesterday I head over to the student center around 9am to hear the president's speech. The president of our college has been meeting with the 700 faculty/staff about every 3 months with updates on our budget challenges (they are basically asking us which benefits we are willing to give up -- faculty are unionized, staff are not). So I show up, get some coffee, and who walks in the student center and looks right at me? Robert! He comes over to say hi, I return the salutation and ask him,

"So can I try to explain Freegold to you again?"

"Sure" he says. So we sit at the same table and I start talking about gold and he says to me,
"Bad idea."

"What's that?" I said.

"Going back to a gold standard" he said.

"No Rob, not a gold standard. The world is never going back to a gold standard."

So I keep talking and 3 or 4 more times he says,
"I can't understand what you are talking about if it is something other than gold backing a currency."

So I say to him,
"Okay, think of this. Imagine you buy an AM/FM radio in USD for say, 10 bucks, then go to Japan and see the same radio for 900 Yen, do you see how this radio can be priced in two currencies?"

He says,
"yeah, that's called purchasing power parity".

"Exactly! Now think of gold in terms of purchasing power parity".

So he thinks for quite some time and says to me,
"So, countries are going to settle balance of trade in real gold?"


"And who is going to clear these trades?"

"I'm not sure, but my best guess is the BIS."

"Do you own gold?"

"Yes, I own gold."

BIG SHOCK. He moves his chair back.

"How much?"

"I'm not going to tell you that Robert. Why don't you tell me how much you have in your retirement plan, how much your salary is, and how much debt you have?"

"Which one should I answer first?"

"Rob, I'm not going to tell you how much gold I have."

"And when did you start buying?"

"Oh, I made my first purchase back in 2005. But I started trading silver for gold about 3 weeks ago."

"But wait, then you were steering Joe (another economics professor) in the wrong direction when he bought those 20 silver eagles!"

"I hear ya Rob. I didn't understand back then. But silver is still going to hold up in hyperinflation, it's just not going to perform the way gold is."

"Why won't it go up in value like gold?"

"Can you show me a central bank with silver on the asset side of their balance sheet."

"Ah. I see." he says.

I said to him,
"You should buy gold too."

"I can't afford gold", he says.

"Sure you can. They sell 1/20 ounce eagles at the bank down the street for $75."

Long look from him again -- and then a big smile.

"So ok, can you give me something short to read?"

"Robert, I can't. You've got to read a couple of thousand of pages to get this concept."

"C'mon Jenn, isn't there something short you can give me?"

Knowing that he also studies oil as do I, I printed out Aristotle's 5 part post from the Hall of Fame. That should get him thinking, don't cha think? ;-)

Anyway, I'm PUMPED he's finally starting to understand. He still uses me as an example in his classes (without using my name) as the one that goes to the bank every so often to exchange FRNs for silver eagles. "Not anymore" I told him. "Tell your students that now I only buy gold -- and now that we've had this conversation you can tell them why."

Being able to bring that kind of understanding to professor of econ that will be teaching for years to come -- and no less a Keynesian(!) -- is just incredibly awesome -- and I have you to thank for it.


No Jenn, YOU rock!

I would now like to thank Jenn and several others (you know who you are!) that have been consistently contributing to my "gold defense fund" since June, multiple donations, as many as twelve from one supporter, to enable me to keep this blog going at a consistent pace.

But why do I need donations, you ask?

Well, I used to be a small business owner, but today this blog is my only job. And the funny thing about running a not-for-profit blog that I'm finding out is that it doesn't generate income. Now I have modest gold savings, modest living expenses and almost no debt. And no, I am not a Giant pretending to be poor. In fact, I'm not poor. I simply have no income with which to defend my gold savings against my expenses. And frankly, the defense of my savings against the call of expenses is my top priority, although this blog is a close second.

None of the donations that have come in have gone to buy me more gold. They are only used to defend the gold I already had when I started this blog two and a half years ago. And I want to thank all of you, from the deepest recesses of my heart, that have made it possible for me to keep writing during this most-interesting (and important!) period of time. The amount of content you see here is the result of a full-time effort, whether it seems like it or not.

So here's the thing. I can get a job if I need to. I am somewhat competent in several areas. And I will take a job before I have to sell one single gold coin in order to meet my humble expenses. And while the donations so far have been absolutely stunning, there is a reason why I am making this post right now. As much as I detest having to write posts like this one, I must, in defense of the precious. If I have to take a job in order to defend my gold you will see a lot less in the way of contributions from me on this blog. So if you value this forum of discussion, please consider lending me a little support.

There are around 3,000 of you that come here every single day, some more than once. 200 of you have supported my gold defense fund enabling me to focus on writing about Freegold. To the other 2,800 of you, I ask, please consider a small donation relative to how much you value my efforts. I know some of you do not value my efforts and you only come here for the opportunity to make that clear. If that is you, you do not need to contribute. You can continue coming for free.

I do not publish a list of donations, but at this time I would like to thank some of the public names that you all know; those that have supported my ability to keep this blog going through monetary donations. If I missed your pseudonym, please send me an email and I will add it to the list. Likewise, if you want your name off the list let me know. Like I said, there are 200 of you so this is only a list of the names everyone should recognize. Again, thank you deeply to everyone who supports this effort!! The list is in no particular order:

Randy Strauss
Eric Lemaire
Aragorn III
Rocky Racoon
Jeff Allen
Golden Tube
Greyfox It's the Debt Stupid

We all need to defend our treasure. I simply need your help. If you appreciate what I am doing here and would like to contribute to my ability to keep doing it, you can do so by clicking this button:

Thank you very much!


Wednesday, February 9, 2011

Reply to Bron

A Note: I originally started writing this reply to Bron to be posted in the last comments section. But somewhere around page 7 I realized it was too long to be a "comment." To anyone I have ever replied to: While my replies may be addressed to you, they are often written for everyone but you. To Bron: Once this reply got away from me a bit, I just sort of let it run. Hope you understand. End of note.

Ah, Bron,

I see now that it is true, that there is little new under the sun. (Bron, meet ORO.)

You write: "The phrase "always leads" I think is only true where fractional reserve banking is allowed.

"If… the law only allowed 100% reserve banking and time deposits (what I refered to previously as NON-maturity transformation) then you do not have credit being created or volume expanded.

"I don't think the problem is gold being used as a currency, rather the rules around banking."

I remember when FOA and Aristotle had similar conversations. So let's pretend we've eliminated fractional reserve banking yet we still have gold loans. The big difference would be that the banks (or whomever) could only lend gold that was put on deposit for the expressed purpose of lending. And the note held by the depositor would be a time deposit, not a demand deposit. Demand deposits could not be lent. Does this sound like what you are imagining?

So the depositor could not spend that gold note as it is not a spendable currency, not a bearer bond redeemable on demand. Problem solved, right? Wrong. The depositor can no longer spend the gold he deposited, but the borrower can! And he will give it to someone in exchange for something, and that someone may deposit it with the expressed purpose of lending.

Now we will have two notes out on one piece of gold. The second borrower will now spend that piece of gold and soon we'll have three notes out on that same piece of gold. This leads to a "synthetic supply" of savings, granted they are time deposits, as well as an increased velocity of the underlying reserve (which suppresses its value just like volume expansion), all with 100% reserve banking.

Now these time deposit notes are more like Treasuries than base money, I'll agree with that. But at some point we always end up with a borrower who must default on the terms of his loan. And then those depositors will lose their savings. But when this happens on a large enough scale (a chain reaction?), society simply never gives in to a large segment losing its nominal savings. So the rules are always changed, the repayment terms made easier, the losses are papered over, and the synthetic supply exploded.

It seems the ingredient that you (and most everyone) miss is the ever present evolution, due to what FOA called the changing "political will." You (meaning y'all) point with great precision at the maths and structures that add up to: here is how it will work if we do this. "If we only constrain and regulate da banks in this or that way, the problem will be solved…" It's all the banks' fault, not the political will that flows directly from human nature. It reminds me of what I wrote about deflationists in Just Another Hyperinflation Post – Part 1:

"What is a deflationist? It is one who looks very closely at the present structure of everything, the laws, the rules, the regulations, what is supposed to happen, who should fail, etc… but ignores the political (collective) will that backs it all up."

What you (and virtually everyone) ignore is that every time something similar is tried, the same tribulations emerge and are dealt with the same way, over and over again, through a changing political will.

I present now a few discussions from the past along these same lines of Thought. Please don't be angry at the length. I am not trying to bury you with words. Quite the opposite. I am trying to do you a favor by hand-picking a few key "off-Trail" posts and selections from what is actually quite a lot of fantastic material on this subject (as well as a couple brief detours). First up is Aristotle summarizing the logical journey of the mind he laid out in a 5-part series that developed into an extended discussion about Freegold, prior to the start of the Gold Trail.

(I recommend reading the full 5-part series at the link, but I'll warn you that it is 50% longer than this entire post! So I offer his very brief summary.)

From Hall Discussion Page 1:

** Gold is the only real money there is--fiat currency is not money--so only Gold should be used as currency.

** Fractional reserve lending destroys a currency's value in trade, and therefore must not be allowed.

[time for concessions to the real world]

** People will always want to borrow for the things they want to have beyond their current financial means.

** Spending Gold into the marketplace, whether by the owner or by a borrower, would tend to result in prices "that weigh more"--cost more Gold, that is.

** As ever more Gold is borrowed out of other people's savings to be spent into the economy, the Gold's purchasing power is lessened from what it otherwise would be...hurting those who have elected to hold their Gold instead of risking it by lending it out as a source of income.

[notice in the above that we have all the bad devaluation effects without a single bank entering the equation!]

** For Gold to find its truest value, all savers must retain their Gold for their own use. Its properly retained value will more than make up for the foregone interest income. Gold must not be lent! [Gresham's law alone is adequate to achieve this.]

** With Gold as the only money, people will not be able to get loans. [In the real world, this is hard to imagine!] As an alternative, they will work up complicated contracts for the item they desire (new home or car?) in which they promise to deliver a certain level of their future productivity against a pledge of real wealth collateral.

** These contracts for the delivery of future man-hours would eventually be organized into their own market, and quantified into standardized units (called something like "manos" [generic form for the modern dollar]) functioning as a currency. Everyone would know what the price for a loaf of bread would be in "manos," and they would all revel at the high price of Gold as quoted in "manos".

** As more future productivity is brought forward into today's market, we would see this "manos" currency-supply inflate, and each pledge of future manhours would be seen as less and less valuable when compared to real goods.

** Someone holding Gold in savings who needed to get some work done or to buy goods could purchase it directly with Gold. They could also sell a quantity of their Gold on the free market to buy the Man-hours they needed to get the job done. There will always be people with an excess of "manos" that will want to move them into this supreme monetary asset--Gold.

** Such a system is not prone to shocks (bank runs and currency crises, etc. are like earthquakes where pressure builds and then is suddenly released) because at all points the assets may freely come into balance against each other in the free markets of the world.

There is little difference between a manos in Bangladesh and a manos in Canada where one manos is taken at a moment in time as the work equivalent to a healthy man shovelling sand with a spoon into a soda bottle. Who cares if one manos is actually called one, ten, or 27.34 rupees in one dialect while in another language it is called one, two, or 6.45 dollars? Its really just a mathematical exercise. Who's to stop the real world from pursuing such a system? It's basically what we have now, except the evolution took another route!

The key is that Gold must be assisted towards its own final and perfect destiny through the straightforward mandate (whether social, governmental or religious) that Gold shall not be lent as it has been, or otherwise attached to various financial derivatives. You can work for it, mine it, buy it, and sell it. You can't borrow it. Monetary perfection for an imperfect planet.

Gold. Get you some. We are moving in this direction faster than you imagine. ---Aristotle

FOFOA: Next, ORO objects. Just a snip:

ORO: Wrong. Non fractional lending does not increase the money supply because the great variety of non-bank notes are not bearer bonds, and not redeemable upon demand. They don't function fully as money substitutes - $1 of bank debt = $2 of money supply, $1 of bonds = $1 to $1.2 in money supply, and up to $1.5 for the most liquid bonds. (I am assuming that the situation is the one you refer to in the brackets). This bond type lending only increases the velocity of circulation and has little effect on gold's purchasing power.

FOFOA: FOA comes to the rescue explaining how the issue of political will applies, with shades of what I later covered in The Debtors and the Savers.

From Hall Discussion – Page 2:

Trail Guide (2/12/2000; 9:52:36MDT - Msg ID:25137)

Hello ORO,
Well, I knew that if I only asked, we would all receive! Boy did you deliver in ORO (Msg ID:25113).
Good stuff for everyone to read, my friend. You mentioned; """ The comments below - particularly those to Aristotle, are somewhat harsh. I hope this is taken in the spirit of friendly criticism."""

Sir, you can serve me (and probably everyone here) your "harsh" anytime. Waiter ,,,,,,,, I'll have a double order of that please! (smile)

OK, brace yourself ORO ,,,,,, a big plate of my "Trail" harsh coming up!

You write:
-------There are consequences to the existence of a fiat currency and for the use of debt money for trade settlement. FIAT HAS NEVER BEEN THE CHOICE OF THE PEOPLE ACTING IN COMMERCE OF THEIR OWN ACCORD. Even when wildly popular, fiat money has not had a single instance when it had not been established by force - by laws imposing its use.-----------


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

Whether through force (war) or democratic means, we subject ourselves to the order of governments. We rightly perceive that,,,,,, the order gained from this action ,,,,,,, the security of a group, overcomes the rights and property lost on a individual level that living in a tribe requires. It's been this way through the ages. It's a political process that has always had its in-house battles ,,,,, namely portions of society try to circumvent their percentage of lost rights and property by maneuvering the rules (laws) in their favor. Yes,,,,,if I can gain the advantages of tribe life and still keep my "portions lost",,,,,I'm gaining wealth to the disadvantage of the group. Truly, the most obvious action of not paying your taxes,,,,,and that's only a small item when viewing the world battle as a whole.

So, how does this apply to money?


This is true, but this was never the thrust of the argument. The use of money in any context, fiat, gold or seashells, has always entailed the use of borrowing and lending... And as long as economies function at a profit, debts are made and paid back without argument. However, when the eventual downturn arrives, some portions (perhaps a large portion) of the owed wealth (debt) cannot be returned.

It's here,,,,at this point in tribal life,,,,,,,that all of the context from above comes into play. The "reality" of life on this earth is this: ,,,,,,Some portion of society will use their influence or control of the leaders to make their debts easier to pay. In fact,,,,,it's times 2 for that number of government influencers ,,,, because even the ones that have debt owed to them will try to alleviate an impossible payback situation the ones that owe them face.

You see,,,,,tribal life and the human nature that comes with it,,,,,,,,will not allow any money system to "completely" destroy the wealth of a good portion of society. Even if everyone is plainly shown that they are going to lose something ,,,,,,they would still option for the good of the overall tribe. This is why we return,,,,time and again to fiat monetary systems. In the few examples where a gold system brings the harsh reality of loses to bear on a nation,,,,,,usually war is the result. Not a good outcome.

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

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


For myself and other observers ,,,,, we know about "peace on earth" and live our life in this context but,,,,as a member of the world tribe,,,,,,and following our best interest,,,,,, one must still arrange his affairs to shield their family from the "I'm going to get yours" times we live in. Should we get our leaders to help us? Well, the leaders of this world can only be but a reflection of us as a whole. Yes, many things are not right, but they can only strive to do what can be done, not what must be done.

Consider the dilemma:

If a small portion of society telegraphs thoughts that "if we cannot have our oil we will go to war",,,,,,,,how would you force them to not elect officials that ease their pain in a gold money system? What's right and what's wrong is not the issue,,,,,,it's what this present generation will live with that rules. If they will break the gold yoke, no matter,,,,then why place gold on them? Is it not better to at least free the "knight" (gold) for the good of those that would stand with him?

During the period we are now entering,,,,,we can see all the ugly aspects of a fiat system that is failing its tribe. Look far and wide and witness the various groups ,,,, all jockeying for position as they use whatever influence they have to lessen their own private loses. If this had been a gold system, the outcome would be the same,,,,,as players force their leaders to lessen the gold debts that could not be paid. They would raise the price of gold and inflate their way out of it,,,,,,for better or worse ,,,, come hell or high water.

So, my friend (smile),,,,,,,as you can see,,,,,I completely agree with all of your post. Only, my trail is hiked with a different mind. "Another" mind set, if you will. We use the life experiences of man to dictate the best path to follow. As such,,,,,,Gold must not be part of any money system,,,,,,it must reside as a freely traded asset without debt or paper to resemble it. In this position ,,,,, its value can fully represent the ebb and flow of the affairs of man. And in doing so retain the wealth of man as a holding of things. Truly, the "Wealth of Nations" in the peoples' hands. We move forward by starting at the beginning of time.

Trail Guide (2/14/2000; 8:08:19MDT - Msg ID:25302)

NOTE: These are (see the bottom) segments of questions and answers copied from this interview. I PLACE THEM OUT OF CONTEXT TO UNDERSCORE THE THOUGHT! Please see the link above for the full discussion. It's very good and so is Mr. Park's and his site.

ALSO: The point I was trying to make in #25137 (and the question I was asking) was this;
A full gold money system works during level and rising economic dynamics. It also works "VERY" well during a downturn. In fact it works "Perfectly" all the time! It's the lending of money that creates debt, be it gold debt or fiat debt ,,,, and the failure of that debt during a downturn is what causes the pain.

I ,,,,, we as gold bugs ,,,,,, most financial thinkers ,,,,, do not debate this point. The argument is that:
If the pain dynamic (loses) of a financial downturn is not "Somewhat" shared by society as a whole ,,,,, the economic dislocation always intensifies until we go to conflict. (see my earlier post)

It's during the downturns that society in general will not tolerate a full gold system because it concentrates the loses upon their rightful owners. As such "these same" are usually "wiped completely out" and their fallout effects on the social and economic structure can be widespread and very destructive to tribal life.
Again, history has proven, time and time again that humans will not allow the full (natural) effects of gold money ,,,,, if it threatens to create factions. They accept gold during long periods until conflict (internally political or externally war) forces a break in the gold bond.
We as nations will break the "gold bond" by calling for the shared pain of inflation. Whether we (as countrymen) understand the reasoning behind it or not; currency inflation (not price inflation) in the modern world is carried out until its debt destroys the current system ,,, there by, sharing all the pain of the loses before it. We then move into the next fiat system.

The question:

Is it not better for all ,,,, if we remove gold from the official currency structure by forcing derivitives failure and creating a free physical only marketplace,,,,, so as to keep "US" ,,,,,, ourselves ,,,,,, from controlling it through our politicians?
Through "legal tender laws" currently in place ,,, let's force us (ourselves) to continue to create debts only in paper.
As such, "they" ,, "we" can manipulate the fiat as needed for society.
Does this not place gold in its rightful position of being a "real currency asset" as it was chosen to be used from the beginning of time?
A private money for trade and savings that's outside the "contract / debt' system. Your thoughts?

Trail Guide

Robert Mundell:
--------I think that legal tender is a very old institution. It certainly goes back thousands of years and legal tender is an institution, whether we like it or not is going to stay. ----------

Robert Mundell :
------There's no institutional mechanism by which we could ever duplicate the kind of financial system we have under a system that relied almost entirely upon gold. Of course you could always have a system that used a lot of paper that was in some sense convertible into gold. You could always find a price of gold that you could convert that paper theoretically into gold. But I don't think anyone has thought in terms of the enormous price of gold that would be required in order to achieve that.-----------

Larry Parks:
---------George Soros says in his book Soros on Soros that the gold standard had to be given up because it did not make possible a lender of last resort. And says Soros, because financial markets are in his words ìinherently unstableî you have to have a lender of last resort.-------

Trail Guide (2/14/2000; 18:20:51MDT - Msg ID:25335)

…Yes, our present financial system gives the impression of total insanity,,,, but we are looking at the very "end of the timeline",,,, not how it began. It all starts with the very first loan and progresses until everyone has borrowed "too much", but no one wants the music to stop. Last resort lenders then become the norm because society will lose "across the board" if everything is "marked to the market". It is not a circle (smile) as it starts and ends with the currency system (gold or fiat) everyone demands to borrow into. It all ends in the shared pain of debt collapse as the debt is discounted to zero from price inflation ,,,, even if it's based on gold ,,,,,, gold that cannot be returned. Not much different from our present gold loan structure.

We will move on to the next money system when this one ends.

If it were gold we started with? The banker would lend his gold only to find the same metal returned to his bank as a new deposit. The "society at large" would remove his franchise if he did not re-lend that same gold during "good times", "booming times" no less! Round and round the gold goes. Reserve lending hits its limit and society demands the limits be raised again ,,, and again ,,, and again! Lender of last ,,,,,, or not.

In our modern world we must remove gold from the official money system, place it in a free market and people will use it as wealth money, not borrowing money. Then the fiat can come and go as the wind! Yes?
You agree now!
I'm so very glad!

Trail Guide

From Hall Discussion – Page 3

Trail Guide (2/16/2000; 16:14:06MDT - Msg ID:25476)
Freegold (debate)

Hello Journeyman:
Just read again your post of: Journeyman (02/15/00; 11:10:43MDT - Msg ID:25391)
Good post!


-----The writing of IOUs, that is, lending, is unavoidable, and when done "correctly," is good. (There is "consumer debt," which except for rare instances is in the long run inherently "bad," and "commercial debt" which is good or bad based, ultimately, on whether or not it increases productivity.) But how are you going to stop Uncle Joe from writing an IOU and using his gold sovereign as collateral?--

FOA: When gold is trading in a free physical market,, outside the currency perception,, Uncle Joe can use his "Swiss 20 Franc Helvetia's" all he wants for collateral in a currency loan. In this context gold is no different from any other item of wealth we own. Be it a car, house, furniture or a petroleum cracking unit in a "Texas City Texas refinery ,,,,,, we are borrowing the fiat currency not the item of wealth.

As long as gold is "ideally" implicated as some form of "official money", modern society will try to lend "it" (the gold) and borrow "it" (the gold). Then it becomes part of the debt itself and is entangled in all kinds of ,,, "oh where am I going to get the gold to pay off this loan",,,,, issues! This throws it right back into the arena of "currency manipulations" by officials,,,,, all in an effort to maintain the economic momentum. The very same thing we are into today.

Again, today gold still carries the baggage of past associations with "official currency / money schemes of yesterday year. As time has progressed, and our economy has developed, each passing stage of using gold in the official money / currency mix has become more convoluted. As I noted to ORO, it's a shame we cannot just use gold,, outright,, but modern society has proven that it will never leave it alone.

We have evolved to a point where no one,,,, gold bankers, gold miners, politicians or private savers even knows what the term "today's gold market" really means! We have distorted the physical gold market to the point that the trading of "paper contracts",,, that have virtually no call on real gold (ABX cash settle calls as example??) price the supply and demand of real gold. All in an effort to keep the dollar looking good. And do we blame them for doing it?

Think about it,,,, prior to the birth of another possible currency system (Euro),,,,,, looking from 1990 backwards,,,, the amount of economic loss that would have been associated with a dollar failure made the minor loss of killing the gold industry look,,,,, well,,,, like nothing! Kind of like sending in your best troops to be mowed down,,,,all to build time to assemble a full army.

Thanks for discussing Jman,,,,,,, I have more for Cman and ORO later.

Trail Guide

Trail Guide (02/16/00; 19:22:58MDT - Msg ID:25485)

My FREEGOLD discussion with ORO and others is not a change of venue for me. Actually, I am laying the foundation for much of the discussion I will undertake on the "Gold Trail". Here, as Trail Guide I am debating the issues as myself. As FOA I will be offering the Thoughts and Reasoning of others.

Trail Guide (02/17/00; 06:45:40MDT - Msg ID:25508)

Hello Elwood,

You write:

----- During the few times in history in which man has chosen this path, great leaders have arose to lead them there and thence out again once the danger has passed. Wherefore are such leaders today? Are the spirits of Jefferson and Jackson truly dead?---------------(and)--Was Freeman Tilden truly correct when he wrote the following in his book, A World in Debt? "Nothing, has been more amply demonstrated during the past three thousand years than this: that the great majority of men do not esteem, or understand, or even desire personal liberty. What they value is the semblance of liberty accompanied by indulgence."-----

Oh boy, Tilden said it right,,,,, "semblance of liberty accompanied by indulgence"! This very aspect of modern life is clearly visible in our money systems today,,, and will most likely be the norm for some time.

It's one of the reasons I brought up Freegold,,,,,, so we can all air our feelings and perceptions about money and life,,,,,, past and present. I submit that most goldbugs are not preparing themselves for the trail ahead. "Reality",,,, in today's context is that the world is going to use a fiat system for the foreseeable future,,,,, come what may.

If we can understand the impact a currencies "timeline" has on its value, we can position ourselves to dodge "at least" the "worst effects" of that speeding truck you speak of.

You write:

------Haven't you, yourself, argued that our entire standard of living is but an illusion based on that robbery of others?---

Yes,,,, AND eventually??,,,,, or perhaps most likely??,,,, the fiat Euro will also create the same illusion of wealth that the dollar has given today. But, the size,,,,,, scope,,,, perception of that wealth illusion is most evident at the end time of a currency's life,,,,,, not the beginning.

This is one of the reasons my friends question the over dependence,,,,,, the over positioning of ones wealth in dollar based wealth and gold derivatives for this transition. For myself, it amazes me what a difference there is from Western perceptions and much of the rest of the world. In America, for instance,,,, investors know little about the true need for "real gold" and put perhaps 10% into it at best. And even little of that position is real metal. Major private players elsewhere consider 30% a good mark for our present time. It used to be 90% (talking about the hard money portion of ones overall wealth) of our (American view) metal holdings was in derivatives with 10% in metal. In the 70s that meant gold futures and mining stocks as the paper portion and 7% silver, 2% gold and 1% other as hard metal. Today, many do the same thing and also "trade" extensively, thinking it's the way to catch up. What they do not realize is that the mechanics of the entire "gold market" as we know, it has changed dramatically. The risk today is that the whole gold market place,,, and all the equity structure that depends on it,,,,,, will fail and shut down as the dollar reserve currency system suffers the first (and largest portion) phases of its long term downward drift.

In ground reserves (ore),,,,, future delivery against contract gold,,,,, cash delivery against contract gold and its implied later purchase of gold on the open market,,,,,, will all be discounted heavily in a mad scramble to exit dollar assets.

This recent paper evolution of our gold market is the natural, end result of an old dollar / gold relationship being mutated in an effort to prop up and extend our dollar system. Once this strategy was / is abandoned, it will collapse with and before the dollar,,,,,, and in doing so "take out" the perceived "equity" in almost every gold derivative asset.

This is the reason why many major private gold investors today believe physical gold will far outrun all of its modern contemporaries,,,,,, and do so by a huge amount. As such we (that's me too) now place 95% (again this is the hard asset portion of their overall wealth) of their hard money in physical "gold" only! I not only expect gold to keep up with any hyperinflation of the dollar,,,,, but out- pace even that ,,,,,, by a large amount!

This position was promoted and considered very radical only a few years ago. Today, many are reconsidering it. Again, on the Trail I'll build quite a foundation to support this view.

Thanks Trail Guide

Aristotle (02/18/00; 15:34:00MDT - Msg ID:25618)
A little help, please.

In scanning through the posts today, I find myself largely confused by the letter to the NYMEX president from Ted Butler. Doesn't Mr. Butler realize that thousands of people can bet on the very same Superbowl? It doesn't get much clearer than this: where he states "People who buy COMEX contracts have a reasonable expectation of their contracts being fulfilled [the implication is metal delivery]" I offer this alternate view as one more accurate--'People who enter COMEX contracts have a reasonable expectation that their counterparty will pay up [cash] when the price changes.' And what's more, the price changes are based upon the supply and demand for these wager contracts. Metal has very little to do with the COMEX marketplace.

The more clearly a person grasps this, more clearly you'll grasp a portion of the point I was making in my recent series of posts. Or else I am COMPLETELY out to lunch with no grip on reality.

Trail Guide (02/19/00; 10:58:10MDT - Msg ID:25663)
(No Subject)

Hello Aristotle,
You are right about Ted Butler. I truly think he and many other traders are a generation that grew up thinking that paper trading of all kinds is equal to the real thing. Yet, look around us,,,,, in reality our whole economic structure is always in the courts fighting over contract clauses someone could not make good on. Rents, leases, buy outs! Even on time delivery of new aircraft often defaults! Just because it's in writing,,,, guaranteed,,,,,, and has good counter party support doesn't mean a contract is the same as "in my hand"! Contracts are just agreements between two parties and mean nothing until concluded.

Far too many players take paper gold as a sure thing. They lost the perception that these items are just a bet on the price change performance, not delivery performance. It was barely real in the beginning and has lost even that early perception now,,,, by a factor of 1,000%. Still, we read of how it's all illegal and "they" are doing us in! Yet, I can place $2,000 down and create a contract for delivery ,,,,,, and that could be all the wealth I have ,,,, period. What's illegal about that?

We usually hear these arguments in court when somebody is losing big. They try their best to match a moral concept against a legal concept and hope the jury is out to lunch (smile). It's the same in Las Vegas,,,,,,, a guy loses big,,,,,, then tries to tell the jury that the house should have stopped him,,,,,, because he didn't know the house rules were established against him winning!

The real answer to all of this is,,,,, "boy don't play these games in their house, if you don't want to lose". Yet, people still gamble the futures and options in gold and get mad when they find out that the rules were always against them. Ha! Ha!,,,, they never cry a moral story when they are

Same thing today for the gold mine stock holders. How many would have said a word if the paper gold markets were manipulated in their favour??????? Not a word I bet! Yet, still illegal, no?

ALL: They tell this tale for their own advantage. Gold can't rise that much so use leverage ,,,,,, Gold can't rise that much so buy silver ,,,,, Gold can't rise that much so buy gold stocks. Then gold falls,,, they lose over and over from trading in and out and cry it's all illegal ,,,,,, we pack physical in and wait for the world to swing our way and pray for more of this illegal stuff to keep the price down!

Next play ,,,,, gold spikes way up ,,,, crashes the entire paper marketplace ,,,,,, destroying the finances of most mines and players in the process ,,,,,, same cries again ,,,,,,, it's all illegal ,,,,, they forced it too high!!!!! It will never end!

As Another said "Out bet? They can never cover. Because we play "our" game in "their" house"

Also: Aristotle ,,,,, you write,

"I hope I didn't undermine any natural progression of ideas you had planned by tossing this out on the Table too early"

I saw some while back that you had caught on to what was happening. Funny, there is but a very small group, world-wide, that are working on this. I guess thoughts travel through space and time?

Go for it my friend.

Thanks Trail Guide

FOFOA: Then some 15 months later FOA is brought back to the subject of gold lending:

FOA (05/08/01; 20:54:48MT - msg#71)
A Tree in the Making #03

Hello Econoclast,
I'm going to take parts of your find and comment on it out of sequence. You write in #52646:

------Any system that could possibly be thought of or proposed must include the use of law. Part of the answer (transparency) includes a complete treatise of the "new" laws written in simple, direct English (8th grade level-2 pages instead of 2000). The laws would be directed towards controlling the bankers, not the people for a change. The laws would be written with input from bankers, but not by bankers. Penalties for financial fraud/counterfeiting/etc. would be severe. ---------------------------------This new gold dollar system would function alongside the current FED system. Any large debts (mortgages, business debt, most importantly, govt debt) would be denominated in fiat dollars. That way govt could continue to operate (maybe, ha ha) and the banksters could still have their play money to manipulate and try to capitalize on. A free market would exist to redeem back and forth as necessary. This free market would show the relative worth between the two currencies. ---------------

Excellent thought sir. Econoclast, using your thrust as my platform:

One of the major problems faced by past hard money planners was that any time real wealth, gold, is denominated as credit money, it always placed the relationship between the rule of law and the rule of gold at odds. If our laws defined gold as official money, and lent it, then by association the law had to define a portion of gold that did not exist in circulation. That portion was the contract asset held as bank savings. Yet, a person's claims against it identified said gold as real. This was and is an inherent contradiction because no law can define the value of real wealth held in contract.

This particular fiat form of hard money owed its existence upon a continuous function of the economy. What the above means is that you cannot take something real and lend it over and over, as banks do when lending fiat, and still demand that the law recognize said contract moneys as hard legal tender.

I would state that no form of lent gold be recognizable or enforceable in the court of law as a legal tender contract. One may borrow gold, relend it, or even borrow against it, but that gold would not be valid in the payment of all debts both public or private. It could not, by law be legal tender. This is not to say the trading of gold would not somewhat supplant currency in function. It could and most likely would to a degree, but it would no longer carry a credit quality that fiat would in the form of a time function. Indeed, in our modern economic structure, a credit time function is very valuable and gives digital contract currencies their demand.

To deal in the future,,,,, to borrow,,,,, to capitalize would require the use of a fiat function. Gold could / would be a final trade; I'll give you ten cars (or gold) for your house,,, deal done. If I want more time to pay, I and we must engage a fiat loan.

You write:

-------weaving OUR gold supply, literally, into gold dollars--------Contracts could be denominated in gold dollars, however these "gold notes" are strictly non-transferable. If someone wants to sell their gold note, they can't. It is only enforceable between the parties that entered into it originally. All forms of paper gold are illegal-fraudulent. Any debt larger than the legal tender law amount has to be denominated in fiat, smaller can be negotiated.------------

Well sir,
Once again, it looks good at first but later evolves. By mingling your gold currency into the contract / credit realm, it once again creates gold loans that are at odds with human nature. Yes, the gold notes may not be transferable, but the lent gold currency is. It is at once someone's asset while also another's liability. The gold currency in circulation expands thru the nature of loans. When these loans fail on a national scale (major downturn) the legal tender laws defining our new gold currency will be changed. We thin our gold again in an ages old cycle aimed at covering debts that are the common citizen's savings.

Still, we are not far from the position you see. We must remember that neither currencies or gold define society's economy. Business can function using fiat alone. We have been doing just that for a number of decades. Installing a trading medium outside lawful money that acts as a wealth savings and a final trade will not destroy the bankers, governments or paper credit inflation. But, it will allow society a way to judge political efficiency. A nation's productivity will then have two scales to measure with, one it must live with (final payment) and another it cannot live without (future payment).

We shall see (smile)

And also for Atticus:

FOA (5/9/01; 07:20:23MT - msg#72)
A Tree in the Making #04

Our modern gold market and the price illusion it creates, is little more than a fiat dollar system that denominates gold credits in contract form. Is it a free market? Why yes, very free. But only free in the sense that supply is unlimited. Investors and the industry in total, bought into paper based gold and yet they fully well knew 90% of it had only cash equity as the collateral on the other side. Then, somehow expected that those contracts were limited in creation by the fixed amount of gold in the world. Their mistake, not the markets.

…Indeed, a currency without a country! In order to implement such a currency, gold would require laws that would keep it within its wealth concept. Gold in possession would be wealth in possession as long as governments could not use it as credit money. In my discussion with Econoclast, I took his legal meanings and applied them to this "wealth without a country" position.

Keeping gold out of the fiat arena would be more simple than many hard school advocates envision. The key to that is found in the implementation of international law. The leading economic countries (EuroZone in the future) would have but to establish a protocol that forbid the enforcement of collateral attachment anytime physical gold is traded, lent or involved in a trade. In this context, no banker would lend you gold to buy a house if, in a default, he could not claim your house in a court of law. Even private parties would never lend gold if the asset behind the loan could not be claimed for nonpayment. It's that simple. With a stroke of written law, the trading of gold as wealth would become a final payment with no possible credit implications. Our official fiats and wealth without a country would never again function as one.

Bron, think of this as more of a natural law, a little like Gresham's law. You save the good money while you lend, or circulate, the bad money. And sometimes you codify natural (good) laws simply to protect the morons from the sharks.

As Atticus wrote, it can be as simple as non-enforcement of gold lending contracts in the courts. The intent of the law would be not so much to prevent you from lending your gold as it would be to protect you from unscrupulous borrowers who would take it and spend it without the ability to get it back.

Why would a rational person want to lend gold? How about two friends; why would you want to lend gold to your friend? So he could spend it into the marketplace? That act alone puts downward pressure on the value of your gold savings, which could have instead been lying very still under your bed.

And then there is the issue that you cannot squeeze blood from a turnip. You cannot force the repayment of something real that someone no longer has. This issue can become especially problematic internationally if you really think about it. Countries have gone to war for less. Which is another good reason for an internationally codified (natural) law to protect the morons from the sharks, as well as the sharks from armed and dangerous morons.

Bron, can you give me a good reason why the morons should have the Libertarian freedom to lend their gold to sharks, presuming that "freedom" destabilizes the foundation on which the rest of the global economy builds?



Aristotle (10/13/03; 23:29:04MT - msg#: 110354)

…To say "Gold is money" is to give bankers full license to treat it like money, thus throwing open the door to lost purchasing power of the metal and giving rise to ambiguous notions of OWNERSHIP…

Aristotle (10/14/03; 03:01:32MT - msg#: 110359)
on the topic of honest money

To offer up the culmination of a long inquiry into the nature of money from the humblest beginnings, two things come immediately to the fore.

1.) An understanding of money -- Form and Function -- requires *REQUIRES* an understanding of banking. This, to the extent that a person can't hope to claim a mastery of the monetary phenomenon ever exceeding his or her mastery of banking as a System of Practices.

2.) Money is more about the Rule of Law than anything else.

Long trudging will eventually root out even the most entrenched preconceived notions about Gold in all of this. In the end, we're left with this unobstructed view of the horizon: Banking institutionalizes the accounting of Money; Rule of Law provides the vitality of contracts (wages, loans, purchase orders) which, forming an interconnected network of settlements and expectations of settlements, gives rise to (and, at the same time, gives insight into) the Value that a society engenders in its monetary unit.

The role of Gold in the whole affair can be seen naturally as a passing phase in which the universal barter agent of Gold lumps evolved into standard Gold currency serving furthermore as a catalyst helping the Monetary phenomenon to set up and gel as a pure numerical system.

The problem with Gold's low bartering/exchange/market/wealth value today is that it hasn't yet been set free again to behave a pure Property. It remains encumbered in a certain element of the banking system as a token behind an artificial valuation established by derivatives.

As I tend to characterize it, it would seem that the Dollar-brand prototype of Money was never fully and fairly allowed to "gel" under standard Rule of Law within an uncoerced marketplace. As a result, the risk today is that the Dollar would collapse in a heap like so much premature quiche if LOW PRICED Gold were removed (i.e., becomes high priced Gold) as the ongoing stabilizing agent in the dollar's ongoing attempt at earning its own monetary wings.

The euro is trying not to make that mistake. It wants the marketplace to form a stable network of pricing and contracts without false pretenses with respect to Gold. If it succeeds, it will be the world's first fully fledged Money -- in the most Proper use of the word!

The euro could in fact be called honest money, if you like. That is, as honest and as trustworthy as the Rule of Law that stands in the background to enforce contracts.

But as we know, Rule of Law today is not one and the same predictable Rule of Law we want to be able to count on tomorrow. It blows around a bit due to political will. Therefore, we'll always want honest Gold property used as our core Wealth Savings. We'll own it to compensate for our human inabilities to provide ourselves with a PERFECT Money.

In other words, because we have to settle for using, at BEST, a system of honest money which is always humanly flawed, we need Gold to return to its ANCIENT job description as perfect property. The kind of stuff that can be OWNED, not "as money," but rather, OWNED....... (wait for it......).... UNAMBIGUOUSLY!!!!

I hope this doesn't make anyone choke on their breakfast!

Gold. Get you some. --- Aristotle

Belgian (10/14/03; 03:13:19MT - msg#: 110361)

I am speechless and saw the "unobstructed horizon " !