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CONTINUED. . . from A Very
Special Monetary Discussion!
[Click here for Part
One or here for Part
Two] This discussion took place during February of 2000.
It was joined by many fine-thinking individuals who touched upon
several important and unique aspects of the interrelation of gold
and the monetary system. We hope you gain new perspectives from
this convenient collection of this most remarkable discussion.
Page Three . . .
Trail Guide (02/15/00; 20:36:44MDT - Msg ID:25428)
ORO, Journeyman, All,
I enjoy this conversation, and will continue right along your debate line. But, your question,,,which way do you think they are going as far as mechanism (ref the options above)?,,,,,,,, it will be outlined on the Trails page. I will again be writing there as FOA and this time things will be more in order. It needs to be because events do seem to be proceeding faster now.
I think ABX brought their calls as a "position strategy" put in front of their "intended" buying in of real gold to close some forward sales. They were going to make some hay on any gold spike from their actions,,,,,,but later were shocked to find that no official gold was forth coming! It seems that the Washington Agreement had larger teeth than anyone expected. Even their "well connected" board could not open these doors. So, they put a New York spin on the story! Is this a fact? We will know before long!
Readers should follow the reality here, all forms of paper gold derivatives (gold stocks included) are in good supply ,,,,,, bullion is not! The discount on coins does in no way present the true picture of the physical market.
It seems that Goldfields SA understood this well in front of everyone. They were the first to buy gold at the BOE auction, close out their shorts (most of them) and even held long paper gold. Progressive thinking one would expect from the best. (Yes, for anyone here that remembers, I took a position in them in support of their actions and burned the shares. Never to be sold. My wife may sell after I'm gone, no doubt (smile))
Many other mines and Bullion Banks are now visibly caught in this transition and will have to quickly struggle for position before the next "rule changes" are implemented. No, I don't know the what or when yet, but something is clearly in the works and the major players are creating uneasy feelings that are spooking some people (including some lesser mine leaders). The paper prices could easily swing wildly either way here.
Obviously, I expect some further curtailment of bullion supplies. However this could be in the context of "buy side curtailment". We shall see.
My feelings are,,,, as always, the best way for one to participate in this is with physical gold first in line, as the majority metal holding. If one is concerned about privacy then stock registration is out and indeed, bar registration violates the same ,,,,, then the old country coins are the best.
Later (on Trails) I'll go back and discuss things like Why $280 was important,,, and Why the intentions of oil including gold in their settle mix,,,,, and in general clear up many lose ends.
So, now back to working on the debate!
The Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
The Perfect Monetary System - Installment One
Greetings to all!
Since my last post (23712), I have been quite busy with new endeavors. Yet I have kept up with the Forum's more significant topics of debate. With your permission, I will give my humble opinion on topics to which I am qualified (22788) to speak. So, lets go......
The perfect monetary system of Aristotle, Trail Guide and Oro .....Installment One
Purists. Well meaning, well reasoned and intellectually sincere but at times the debate is reminiscent of those who crusade for world peace. Given man's inherent character flaws, world peace and a perfect monetary system will eternally be but a worthy ideal. When the dying dollar settlement system gasps its last breath next week or next decade due to the stranglehold of defaulted dollar denominated debts, will another settlement system be demanded? Yes, of course. Will it be perfect? Never.
Considering that most posters and lurkers here have only a vague understanding of the theory of money and credit and trade, how successful will the apostles of Jenny, Jerry and Oprah be at evaluating the merits of the system proposed by their esteemed leaders? How much more successful will those dysfunctional creatures be that agree to appear on their shows? Cardinal De Retz of the 17th century once quipped that nothing sways the masses more than arguments they can't understand.
Consider the historical record. The Nineteenth Century was the century of the wealthy a/k/a the creditor class. Thus while woman and most minorities then could not vote (and thus elect sympathetic redistributors of another's wealth), the gold standard prevailed. Remember, America's cherished Constitution originally set forth that only men of property could vote - some with only 3/5ths of a vote. As I mentioned in my last post, debt instruments written by and for the creditor class ('he who has the gold makes the rules') traditionally contained a 'gold clause' that required repayment in cash or at the option of the creditor in a set quantity of gold of a defined fineness. Every member of the creditor class knew of the propensity of the debtor class (this includes national, state and local governments) to inflate away the purchasing power of the dollars to be repaid.
With the immigrant surge that began in the 1880's, the struggle between the creditor class and the debtor class intensified. In 1894, the first federal income tax was passed (2% on incomes exceeding $4,000). It was held unconstitutional by the Supreme Court one year later in RE: Pollack v. Farmers Loan and Trust Co., because it was a direct tax on income from real property that was unapportioned among the states by population.
Then in Chicago in 1896, Democratic candidate and populist William Jennings Bryan delivered his eloquent speech that demanded the free and unlimited coinage of silver (bi-metalism) in order to reflate the economy (more money in circulation) and thus give relief to the nation's farmers and laborers. Who has not heard the rally cry, 'You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.' In a delaying action, the creditor class won the day with the presidential election of 'sound money' advocate William McKinley.
In response to the massive accumulation of wealth by industrialists and railroad tycoons (capitalists) like the Rockefellers, Cabots, Goulds, Morgans, Vanderbilts and Astors and inflamed by socialists writings such as that of Edward Bellamy (Looking Backward - 1888), Ida Tarbell (The History of Standard Oil Company- 1904) and Upton Sinclair (too numerous to cite), the Sherman Anti-Trust Act was passed and upheld by the Supreme Court in May, 1911, by a 9-0 vote.
This victory was quickly followed by the proposal in 1909 and ratification in 1913 of the Sixteenth Amendment - the power of Congress to tax any source whatsoever without apportionment among the states (Read: progressive taxation or a 'scaffolding for plunder'). Two side notes - As 7% was then the maximum marginal rate, has the appetite of government been held in check or was the door opened for voters to begin voting themselves benefits taken out of the pockets of capitalists? Second, this same amendment was the foundation for a Supreme Court case in 1988 (South Carolina v. Baker) which upheld the right of Congress to tax interest income from state and municipal bonds if Congress saw fit to tax that income.
This amendment was the companion needed to put bite into the Federal Reserve Act of 1913. How would this private bank receive its risk-free interest payments if the full faith and credit of the US Government (Read: ability to tax progressively) was not in place and available for use? To complete the decade's trifecta, the Trading With The Enemy Act of 1917 was passed. This act gave the President the power to regulate or prohibit at his sole discretion any transaction in foreign exchange regarding gold or silver coins or bullion or currency. The victory of the poor and huddled masses was now complete.
The First World War (1914-1918) further damaged the creditor class as the British Pound Sterling, a casualty of war, lost its reserve currency status (apparently the sun did set on the mighty British empire) and the Bolsheviks with their 'Laborers of the world unite!' political philosophy began fanning the flames of anarchy. The creditor class was scared stiff for it is hard to buy-off a crazed mob looting your compound.
The easy money of the Roaring Twenties bought some political relief as nearly all shared in the financial euphoria of the day. The Crash of 1929 and the subsequent New Deal remedies of the federal government (for example, alphabet soup make-work agencies, FDR's court stacking and the Social Security Act - which until 1971 was not indexed to inflation and required a maximum of $71 in FICA taxes annually) enhanced the victory that the debtor class won over the creditor class.
The creditor class still fought skirmishes though. Recall that General Douglas MacArthur ordered Col. Dwight Eisenhower to roll tanks though the streets of Washington D.C. to put down the mob of WWI veterans that were marching for their overdue benefits.
With the confiscation of gold by Executive Order #6102 dated 4-1933 (punishable by a $10,000 fine or 10 years in prison or both for not sending your gold to the nearest Federal Reserve Bank within 25 days of the decree in exchange for $20.67 of FR Notes) and the passage of the Gold Reserve Act in 1-1934 (which authorized FDR to revalue gold to $35/ devalue the US$ by nearly 60%) and by striking the 'gold clause' in 2-1935, the complete defeat of the creditor class was achieved. Granted, occasional insurrections are attempted but they are quickly defeated.
Given the above summary of the intense four decade struggle between the creditor class (advocates of hard money - gold backing) and the debtor class (advocates of soft money - fiat paper with the propensity to inflate away or decrease in purchasing power), does anyone believe that the settlement system to come will reverse the outcome of this class warfare?
In summary, debating a perfect monetary system is for purists and academicians. Given the failings of mankind, a perfect monetary system is not practical in a nation that has democratized credit (its a right of all to have) and socialized credit risk (all share the pain of default).
Thanks for staying with this post to this point. Soon I will post a practical view of the role of the 'Lender of Last Resort' and a view on what motivates bankers. My view has been garnered from over twenty years in the industry. Believe me, the motivation is deplorable but not nefarious as Sir Oro suggests.
Best regards to all.....
PS - Welcome back Trail Guide! The debate is livelier with your formidable intellect.
Trail Guide (02/16/00; 06:30:21MDT - Msg ID:25452)
OH,,,Ho,,Ho! A big welcome to Traveler!
What a great post. Picture me jumping into Traveler's corner,,,, standing behind and pushing him forward. All the while saying "you tell em". Ha Ha. (no doubt he will have me in a head-lock later)
Thanks for a good effort Traveler, I'll post later.
Peter Asher (2/16/2000; 11:49:18MDT - Msg ID:25469)
The Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
Supurb fundemental historic synopsis. I like your depiction of creditor class versus debtor class. You have hit on a key phenomena in the war between those who live by fair exchange and those who crave something for nothing. I/we await your further chapters!
onlychild (2/16/2000; 12:57:42MDT - Msg ID:25470)
Excellent post! You a new shed light on facts that I was already aware of. I had never considered those historical events as the triumph of the debtors, but I see your point. One comment on voting: I hope you haven't confused the 3/5 representation for other than "freemen" with voting rights. You are correct about suffrage being exclusive of everyone but white male property owners, but the 3/5 clause applied to slaves (male and female) for the purpose of determining repesentation in the House. All other persons were counted as a whole person for the purpose of gaining seats in the House of Representatives. OC
Trail Guide (2/16/2000; 16:14:06MDT - Msg ID:25476)
Just read again your post of: Journeyman (02/15/00; 11:10:43MDT - Msg ID:25391)
-----But a bank, especially a central bank, is part of the extended order, and as Hayek suggests,
(TG note: I'm adjusting Hayek's quote to simplify)
" " " If we were to apply the unmodified, uncurbed, rules of the small band or troop, or of, say, our families to our wider civilization,,,,,, as our instincts and sentimental yearnings often make us wish to do, _we would destroy it_."
" " " Yet if we were always to apply the rules of the extended order [Note: as Journeyman would put it,,,,trade with those we don't know face-to-face ] to our more intimate groupings, _we would crush them_." " "
" " " So we must learn to live in two sorts of world at once. To apply the name 'society' to both, or even to either, is hardly of any use, and can be most misleading" "
F. A. Hayek, _THE FATAL CONCEIT The Errors of Socialism_
Now Journeyman writes:
----------The bank treats us, not as part of their "small band or troop," but rather as part of their "extended order" (and rightly so) when times are good ---- we'd better pay up or there goes the ranch. But when they're in trouble, they want to be bailed out, treated by us now as if they were part of our small band or troop, or now that they're really big and might cause the whole neighbourhood to burn, treated as "too big to fail."-----------------
Good point Journeyman! BUT (smile)?? It's always easy to place the failings of a nation,,,,,, a company,,,,, a small group or even a families finances upon some "other extended order". We read a lot about this in the general media (and on the web), but I question just how much of this is in
When referring to how some large entity (big banks?) did them in,, people often camouflage their own emotions by presenting only their side. What if the tables were turned,,,,, and these "small band" victims were in this "extended order" driver's seat themselves. We already know the answer as to how the majority would act. They would fight for their "most profitable" best interest,,,,,,, right or wrong! Sad, but true.
----It's a great life in this here great lands we call these United States" -- Mr. W. Rogers---
This is the "dirty little secret" that many of the most outspoken hide. And,,,, they play out this hidden fact at the voting booth in a democracy. Yes, they "privately" vote for anyone that will protect their "financial position" whether it's moral or not. Then we "publicly" shout about how this "extended order" is doing us in ,,,, but, it's exactly what "we" as a "small band" would do to them.
This is the reason I don't buy the "two worlds occupying one" in a democratic society. The people in power are a reflection of us. Go to small-town anywhere in the US and put "us" up there,,,, and "them" down here,,,,,, and nothing would change. Yes, I know that's not true 100% of the time as there are some fine solid people out there. But,, I bet at least 90% of the time. Yes?
This is why,,,,,, in my Freegold posts to ORO I use Society as a term to express the financial drives of the whole. "We is them", my friends,,, my neighbours!
(note: to gain context of this please read his 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?--
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.
JA (02/16/00; 17:48:49MDT - Msg ID:25481)
Thoughts and Observations
Oro, Aristotle, and Trail Guide thanks for your recent submissions, all very thought provoking information.
Nice to have you visiting this site again. I said in a post several weeks ago that I have decided you bring to the table a unique perspective. It may be prudent for one to at least listen to and evaluate the merits of that perspective. You have stated on a number of occasions to watch Oil to help see when Gold will make it's move. This seems to be proving true. However much was made in those early discussions of the Euro and how it would gain value as the Dollar loses value. That does not seem to be happening yet? In fact as you know the Euro has lost significant ground to the dollar. Why do you think that it is taking so long for the Euro to make that move that was being predicted several years ago?
I have also given some thought your discussion as to the very lofty prices that Gold might obtain in this once in a lifetime move you seem to be suggesting. Should Gold attain $600 dollars an ounce most Gold mining companies would become extremely profitable. Anything above that they might have to hire additional security. At $1,000 an ounce, I might be tempted to quit my day job and go to the hills where I have some gold mining claims. With pick and shovel and a pan a person may be able to get several ounces a week. With modern day equipment a person could likely do much better. At those lofty gold prices we would re-experience the gold rush in this country. Rather than people quitting their day jobs to day trade dot.com stocks they would be quitting their day jobs to go find gold. If on the other hand the price of gold in dollar becomes great simply because of extreme hyperinflation or currency devaluation then all other hard assets would increase in value to the dollar as well. If that is the case what makes gold better than land, silver or wheat for that matter? I guess what I am saying is I can see gold going up significantly over today's prices (It hit what $800 in the past). So It could hit $1000, $2000 or maybe $3000. But how long could that be sustained? On the last run up how many people holding physical gold went out and cashed it in at $800? Help this Western Thinking mind.
Trail Guide (02/16/00; 19:22:58MDT - Msg ID:25485)
Hello again ORO,
ORO (02/15/00; 16:45:38MDT - Msg ID:25407)
------The electronic systems will carry the day.-----------
Eventually they will switch to a free gold banking system
because the fraud of the bank-government-Cabal's fiat money system leaches too much from commerce, and now that electronic free markets have no barriers to entry left, it is on the verge of total collapse. ------Whether the Cabal survives or not turns on Cabal member's acceptance of the reduced position left to them. ------So far, they have attempted to stretch their current position as far as possible - and then some. They are taking what they can out of the current structure and massively moving their holdings of old and new economy corporations onto an unsuspecting public full of enthusiasm. A last effort at one more fleecing of the flock.----------
ORO, I have a hard time accepting the present currency system as a independent Cabal. Even in the context of viewing it as some small part of US government structure. Yes, they are a political block and their policies can be applied to them as an acting whole (FOA's "Dollar / IMF
faction"??). But as a "extended order" type cabal, operating on their own? Consider that every US citizen has a personal share in this structure that many of them have voted for themselves. Just as in my post to Journeyman, we must accept that the entire dollar reserve system has tied all of us to it's fate as much as we tied it to ours. None of us had to go into debt, overspend or use a non- energy efficient product structure. We as a people optioned for the most financial rewarding lifestyles,,,,, not the most moral ones!
Trying to go back and pick the points of where the "Cabal" crossed a line of no return ,,,, that made us all "go with the flow" begs the question: "When did everyone stop voting?" (smile)
------Trail Guide - you obviously understand the issues as they are, yet you claim that there is a "society" willing to take upon themselves their own fleecing.--------------
No, we turned the cheek as we agreed to fleece each other for the good of the system. All the while holding private emotions that somehow each of us could jockey for financial position while the others were not looking! What else could explain the insane rush into all forms of financial derivatives. No one is chasing this leverage for nothing. The "Western Mission Statement" says that our dollar, free enterprise system is the greatest,,,, let's keep it going,,,, but please let me make my million before anyone "responsible" exposes it for what it is,,,,, and shuts it down!
---------Obviously, you include government and banking as part of this "society", ---------- and point out that they had in the past, and still have the upper hand and will be able to impose their fiat money on us for the foreseeable future.-----------
Too a degree, yes! I covered this in a post today to Journeyman. We are to a point now where the governing powers cannot turn back. You, I and many here understand the dangers,,,,and openly discuss it, but most do not and will not. If we (from my end) have any purpose at all it's
not to stop this "irresistible force",,,, rather, to better light the trail before us. My contention, as an American, it that our dollar fiat currency will continue through out out lifetimes. In a substantially lower value and international use mode,,,,,,, but be in existence never the less.
ORO, our entire society structure was built on this dollar and we will slowly slide with it's inflationary fall. We will not just shift out of it,,, especially on a downhill run. Look at many of the third world countries that still locally use their almost worthless moneys, but use dollars in a parallel economic world. We will eventually do the same. Read Travlers 2nd post here The Traveler (1/28/2000; 1:30:27MDT - Msg ID:23712) ,,,,,,see the part under "Now for new business -----" beautiful! It gives a good perspective.
------ You are arguing that the fiat system is unresponsive to the fact of its own inefficiency reducing long term growth by an enormous margin - by half as far as I can calculate the effect. Alternately, you are making the argument that the system does not reduce efficiency but is necessary for growth. ---------------- I know that the fiat system is not capable of increasing the growth of output. It imposes a transfer of resources from producers to government, banking, and related interests and reduces the resources available for producers to further produce and for the global community to raise standards of living. The fiat system is a negative sum game and the free economy is a positive sum game. Their connection together produces less wealth than is possible without fiat.--------
We shift gears here and talk about the Euro system. We have to differentiate between a brand new reserve fiat currency and an outgoing one that has been aged from debt and it's constant attempted alignment with gold. Of course the Euro has all the bad qualities you mention,,,,,, but so did the dollar at the beginning! Are we comparing apples and oranges?///// No. Just as you posted earlier, the dollar was never on a traditional gold system. And even during most of the time it was,,,,,,, the world financial structure would not hold still.
Yet, the US economy did incredible things and did it using a constantly evolving ,,,,,,"in reality mostly fiat",,,, financial system. Yes, we robbed our citizens of productive efforts (including gold) to do it,,, but "in much of our beginnings" ,,, as a whole it worked well enough to give us a major world standard of living. The same thing is going to somewhat happen in Europe. And their gold system may end up as the best yet!
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.
I never did thank you for that wonderful work in your "Open Letter". All of us gained insight from it.
Thanks for reading.
Henri (02/16/00; 20:55:20MDT - Msg ID:25487)
The Traveler Msg ID:25439 and Trail Guide,Oro et. al.
Isn't it interesting that we cannot discuss gold and its role in society without discussing politics. Traveler, I really enjoyed the disection of the problem from the perspective of a battle between the "haves" and the "have nots". As you pointed out quite astutely the "have nots" have finally carried the day and fulfilled the admonitions of our forefathers. That a democracy (as opposed to the originally intended Republic) leads to a looting of the treasury and the voting of its largesse to be distributed to the public, by majority agreement.
When we discuss the US$ and the debt structure it represents, it cannot really be called "fiat" I think. At the very first moment in a world far away from today, a man's word was worth more than a pile of gold. For on it rode not only his own reputation and his immediate family's but that of his parents and his progeny as well. Surely a man's promise to repay is not "nothing" as the word "fiat" is I think meant to imply. A fiat currency has no backing whatsoever and is a unit of value only by common agreement or more commonly by enforced usaged at the behest of the local powers that be.
I submit that a debt currency, while not having experienced a desirable end, was at first presented as an experiment, even if it was in the progenitors intent no more than a premeditated fleecing of an entire nation's wealth over several generations. It was a time when a gentleman's word meant something special again by common agreement and the knowledge of what reputation would befall the ilk of those associated with a scoundral not only by blood but by association as well. It was an exceedingly "polite" society and yes, armed. Much of this had followed the Americans from Europe where such a system had been in place for years.
Ah but this new society was born of the ideas embodied in the Constitution. These ideas themselves having their origins in old and not so old writings on governance from Europe. This new society was an experiment. An incredibly successful one at first. The guiding principle was individual freedom and responsibility for ones own actions.
I can not help but notice that on this side of the pond, we (the Americans...for that is the side from which I was thrust from the peaceful security of my mother's womb) have sown the seeds of our own destruction. Thank you Traveler for showing us how this occurred in a monetary sense. But there is more to it. It cuts to the very fabric of our Constitutional jurisprudence. The current EU type of culture and the US variety being both good experiments in human understanding are essentially incompatible.
The US culture/legal system has evolved under the concept that individual rights are paramount. The countries of the current EU do not allow for such strict indulgence in individual rights/privilege but instead seem more focused on what some call "Social Justice" that being (I think) to borrow a phrase from Mr. Spock of the planet Vulcan, "the needs of the many outweigh the needs of the few". The way I see it, there is nothing fundamentally wrong with either of these systems of governance. Indeed we have seen both types of organization flourish and prosper in real terms over the last twenty years. The problem only comes when there is an attempt by one or the other to incorporate some of the aspects of the other system. For instance, trying to legislate "social justice" and integrate it into a system fundamentally geared to favor the rights of the individual has led to unmitigated disaster and may be one of the major factors that is tearing the fabric of US society today.
We say we favor individual rights and responsibility (US system) yet we pass legislation that legitimizes the concept that individuals are not responsible for their actions or their "condition in life". We then institute all these bureaucracies to favor one "group" or another because "it is the socially proper thing to do"...it has "social justice".
The evidence is that these two systems of governance and jurisprudence are fundamentally incompatible from a legal perspective. Not to say the two systems cannot coexist peacefully side by side 'til kingdom come. However for one side to take "pot shots" at the other and criticize the way they do things only serves to encourage more attempts to take the best of both worlds and try to integrate these things where they cannot comfortably be integrated without violating their own fundamental precepts.
What it all boils down to in either system is that ultimately the individuals that make up "society" must take responsibility for what is done and for moving their "society" peacefully along to hopefully a more enlightened day without conflicts of any kind.
Not only is the world still experimenting with monetary systems, the world is still experimenting with order and governance. When we try to blend the best of two systems that we all can see both "work" we blur the point of the experiment which was to observe the effect of the diversity on each system. In short, the collective beaker explodes in our faces.
I do not have the answer other than it must involve people taking individual responsibility for doing what is right. In our system (US), people do the right thing often without it needing to be legislated. In both systems often people do not. This will continue.
Yes there is a problem that is tearing the fabric of American communities. From my observers platform, its name is "Social Justice" Not the principle itself, but the attempt to integrate it into a society with a basis that starts with individual rights and their concomitant responsibility. "Social Justice" removes the "responsibility" part causing extremely confused youngsters. We can no more successfully integrate "Social Justice" here than you could integrate legal precedents of individual rights that supercede the "common good" over there.
You can't have it both ways! Each system left to its own fundamentals works and together they work in harmony for greater good, but they should not "interbreed" for it weakens the entire "gene pool" of governance.
Now consider the ramifications of this once proud society facing literal bankruptcy, Yes Yes there I've said it. It is quite likely even without a reckoning of sorts that the enormous debt structure of the US monetary system cannot be brought to account. The only way out now is inflation to insignificance. Truth be known that even the Russians, as pathetic as we make out their circumstance to be are probably better off than the average American from an International debt standpoint. Why oh why they did not immediately disavow their foreign debt service upon the dissolution of the Soviet Union is beyond me...but that is another world. In a similar sense, the formation of a new confederation of states the EU can incorporate their collective prosperity and bank it on the new monetary concept called the "Euro". To be sure it is at first a currency of hard account but only by virtue of its method of retaining gold reserve..the so called nuclear grade weapon for currency defense. We are I'm afraid engaged in a great currency war...much of it being fought behind closed doors. Out of the Limelight so-to-speak such that a world financial upheaval is not created while an old system of account is replaced with a new system. But it is war nonetheless.
I find it ironic that, the old European values of honor and freedom from tyranny created the new republic and at once, having seen what they had created, began to sow the seeds of its demise by first debasing its currency, then its social fabric. In America, I'm sad to say, because of the social and legislative confusion and jurisconstipation induced by the comingling of "social justice" with individual rights and responsibility, we may not even really have to feel bad about what we have done to ourselves. We can blame it on the "system". It is not our fault. The finger can point to....hah! over there. A Rhodes Scholar!
It may well be that a free gold market and the Euro combo are better than belgian ale. But for how long? See how easily the gold market is manipulated. Indeed it might take 56,000 US$ gold to rid the planet of the American debt plague. But what then, yet another cycle. I am not bitter, even a mere middle school child can see the futility of pursuing the US$ farce to the end. I only hope it can die a graceful and timely death without widespread violence. One would have thought that it would have been the proponents of social justice that would have adopted the idea of collective debt currency and the proponents of individual freedom that stuck with immutable objective wealth in the form of gold coin of the realm. perhaps we can return there when we roll out the new monetary plan for this side of the pond,yes We still do have gold (legendary at this point) but presumed by all to exist. Think of it compatible but diverse societies using compatible but diverse currencies in trade. Now if we could only delegislate about 20 years of social engineering from the books and get back to individualism and good old responsibility for our own actions.
But I am not so certain that our Rhodes Scholar likes losing ...or has he won? Its all so confusing. I guess it really doesn't matter in the end. I just hope his recent contact with Putin didn't involve a wink and a nod that says, Well I guess this means its US against them again ...whaddayasayweburytheoldhachet and figure out how we can contain this new upstart that comes out wearing such large britches and speaking of guaranteeing its own security. Whats up with that?
Elwood (02/16/00; 21:44:19MDT - Msg ID:25492)
Thanks, everyone, for the great discussion. If being a purist is a crime, then call me guilty and have the bailiff lead me away. <smile>
It seems that on this road we travel we're unanimous on which direction to take, but, somehow, we've paused to debate the best direction to dodge yonder oncoming runaway truck.
On the one side of the trail there is a precipice that leads not to oblivion, but is just a short drop to a roadway that will lead us through a series of hairpin turns and curves back to this point at which we stand today. That is what the Euro represents. History has time and time again shown that this is the choice man is all-but-destined to make.
The other side, however, represents a different avenue of avoidance. It is a cave. To choose this path is to choose the uncertainty that lies in its darkness. To the mass of humanity, it seems, this darkness, even though its effects be temporary, is unacceptable because of the uncertainty it represents. 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?
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."
Elwood (02/16/00; 22:52:18MDT - Msg ID:25495)
Freegold, Trail Guide (02/16/00; 19:22:58MDT - Msg ID:25485)
"Yet, the US economy did incredible things and did it using a constantly evolving ,,,,,,"in reality mostly fiat",,,, financial system. Yes, we robbed our citizens of productive efforts (including gold) to do it,,, but "in much of our beginnings" ,,, as a whole it worked well enough to give us a major world standard of living. The same thing is going to somewhat happen in Europe. And their gold system may end up as the best yet!"
Haven't you, yourself, argued that our entire standard of living is but an illusion based on that robbery of others?
Trail Guide (02/17/00; 05:20:33MDT - Msg ID:25500)
I printed that one ! So should everyone else(hopefully there will be more of those to come?). Henri (02/16/00; 20:55:20MDT - Msg ID:25487)
Now if we can just get Traveler to continue.
Thank You, sir Trail Guide
Henri (02/17/00; 06:23:12MDT - Msg ID:25506)
Trail Guide Msg 25500
Thank You, Sir You honor me highly, yet it is I who feel privileged to share my ideas among such noble souls as these at the Round Table
Trail Guide (02/17/00; 06:45:40MDT - Msg ID:25508)
-----Elwood (02/16/00; 21:44:19MDT-MsgID:25492) Feegold---
--Elwood (02/16/00; 22:52:18MDT - Msg ID:25495)--------
----- 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 it's value, we can position ourselves to dodge "at least" the "worst effects" of that speeding truck you speak of.
------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
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 it's 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 it's 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
Journeyman (02/17/00; 08:30:48MDT - Msg ID:25516)
Freegold -- on the road! @The Traveler, Trail Guide, ORO, ALL
@The Traveler, Trail Guide, ORO, Aristotle, Elwood, Henri,
dragonfly, Peter Asher, Mr. Gresham, ALL
Welcome indeed Traveler! I was beginning to feel that we
were all "piling on" Trail Guide, somewhat ungratefully
since he's been, in his alter ego, responsible for many
miles of the path that's gotten us here. Not only that, but
his persona is so good natured, it's like "piling on" Santa
OK, so much for the gentlemanly bow and sincerely offered
respect. Now let's get on with the Freegold (debate)!
"Purists. Well meaning, well reasoned and
intellectually sincere but at times the debate is
reminiscent of those who crusade for world peace." -The
Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
It's true! Call me Don Quixote
-- or perhaps Sancho Panza
might be more appropriate. On the other hand, people could
have labeled Keynes similarly when our ancestors were safely
and solidly, they believed, on the gold standard. To
overturn the economic establishment -- gold -- was the
"impossible dream" of Keynes' day:
"The composition of this book has been for the
author a long struggle of escape, and so must the
reading of it be for most readers if the author's
assault upon them is to be successful,--a struggle
of escape from habitual modes of thought and
expression. The ideas which are here expressed so
laboriously are extremely simple and should be
obvious. The difficulty lies not in the new
ideas, but in escaping from the old ones, which
ramify, for those brought up as most of us have
been, into every corner of our minds." -J.M.
Keynes, December 13, 1935 from the introduction to
his _THE GENERAL THEORY of EMPLOYMENT, INTEREST,
Today, ironically, the "habitual
modes of thought and
expression" which "ramify, for those brought up as most of
us have been, into every corner of our minds," are the
remains of the inflationist dogma, prominent among them,
Keynes' ideas. These were some of the very same dogma used
by the banking-government cliques to justify fiat money.
Keynes "struggle of escape" was the struggle to escape the
discipline imposed on governments and bankers by the
painstakingly evolved gold standard. Instructively, it is
the dregs of these previously impossible Keynsian dreams,
perhaps "nightmares," from which we must now wage our own
"long struggle of escape." Back to the future.
The point? Change happens. Today's heresy becomes
tomorrow's orthodoxy. Yesterday's 1900s heresy, at least in
the U.s., was fiat currency and the orthodoxy was gold. Why
shouldn't today's orthodoxy, fiat, give way to today's
Why should "society" _return_ to a gold standard from this
latest greatest fiat experiment? Because the lessons of the
history of both fiat and gold insist. Because gold's
clearly better, probably at this stage, even for the cliques
which have here-to-fore profited from fiat. Can we find
anyone to argue that this isn't the case, that fiat yields
better results -- more civility, higher standards of living,
more freedom, a more productive economy, happier people --
I didn't think so.
The argument then becomes _how_ can we proceed back to the
future. Good news! It's probably gonna happen whether we
like it or not. We can definitely help things along I
think, but I've barely even begun to think about that. ORO
however seems to be quite far along one fork of that trail.
Jason Happy (ah, _Sir_ Happy ;)) was exploring another. How
"Given man's inherent character flaws, world peace and
a perfect monetary system will eternally be but a
worthy ideal. When the dying dollar settlement system
gasps its last breath next week or next decade due to
the stranglehold of defaulted dollar denominated debts,
will another settlement system be demanded? Yes, of
course. Will it be perfect? Never." -The Traveler
(02/16/00; 01:22:22MDT - Msg ID:25439)
Sorry to repeat myself Traveler,
but noone is suggesting the
old gold standard was perfect - - or that the new version
will be either:
"The gold standard is certainly not a perfect or ideal
standard. There is no such thing as perfection in human
things. But nobody is in a position to tell us how
something more satisfactory could be put in place of
the gold standard." -Ludwig von Mises, Human Action A
Treatise on Economics, Third Revised Edition (Chicago,
Illinois: Contemporary Books, Inc. 1966), pg. 473
Thus we need not argue that
the gold standard is perfect,
only that it's better, and that's an easy argument to win.
And it's _because_ of "man's inherent character flaws" that
you mention in your post that we need that return to gold.
Comparing the quest for world peace with the quest for a
return to a gold standard isn't really a useful comparison;
we've never had world peace, but here in America we thrived
on a gold standard for over a century.
When the dollar dies, we lose if we have quit the
battlefield without firing a shot, or even more
ignominiously, if we don't even show up simply because we've
become convinced the path back to gold would involve a "long
struggle of escape."
"Considering that most posters and lurkers [even -j.]
here have only a vague understanding of the theory of
money and credit and trade, how successful will the
apostles of Jenny, Jerry and Oprah be at evaluating the
merits of the system proposed by their esteemed
leaders?" -The Traveler (02/16/00; 01:22:22MDT - Msg
Good point, but only about 7%
of the population of the
Colonies was actually involved in the First American
Revolutionary War, and that includes the Torries. It's
clear that way fewer than 7% successfully engineered the up-
hill battle from gold to fiat between 1912 and 1933. It
would be nice to have a mass movement back to gold by people
who completely understood what was going on and why, but
this is highly unlikely - - - and, I believe, unnecessary.
As I've suggested before, I believe this will be an
evolution that happens whether we like it or not. "When?"
you ask? Remember my crystal ball got broken awhile back --
but things these days often happen faster than expected.
QUESTION 1: What if anything, specifically, changed in 1933
that put us in a situation _requiring_ abandonment, after
more than a century of operation, of the painstakingly
evolved and smoothly functioning gold standard?
QUESTION 2: What makes it impossible today (we already know
it's desirable don't we?) to re-institute free banking?
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.
I'm glad to find that these recent thoughts are in harmony with the view you have on events; past, present and probable. I hope to very soon join in to help explain my position (as if I needed to add yet more wind to a long post that I thought adequately covered the bases!), though you have made an admirable champion in my absence. Obviously, this topic was one you had planned to visit in depth at some time down the road. I hope I didn't undermine any natural progression of ideas you had planned by tossing this out on the Table too early. Seemingly, very few are ready to see things this way. A pity, because as we've tried to show, it the clearest, most natural way for Gold to have its sustainable day in the Sun.
More on this as a full schedule allows.
Gold. Get you some! ---Aristotle
Cavan Man (02/18/00; 15:44:03MDT - Msg ID:25621)
No, you don't need a grip. Rather, you deserve a standing ovation for your yeoman efforts on behalf of gold.
The Comex is a casino. Surely anyone going through the turnstile realizes this fundamental point.
R Powell (02/18/00; 16:14:25MDT - Msg ID:25625)
Aristotle Re Ted Butler's letter
Yes, thank you, I was wondering the same. People also buy and sell index numbers like the $index, the DOW, and the S+P where instead of not enough supply to cover contracts there is no supply at all. Most textbooks say that speculation exists in futures contracts to supply liquidity to the market so that the buyer can buy or a seller can sell at any time with some risk passed on to the speculator. This has been my understanding. Mr. Butler's letter implies otherwise that contracts for should never exceed supply?
Aristotle (02/18/00; 17:31:49MDT - Msg ID:25628)
R Powell--you made an excellent example
On some of these futures contracts, there is no "supply" at all--such as derivatives on an index. If that doesn't make the point, nothing will. Silver does not hold my interest, so I'll leave those specific battles to others. But where the parallel Gold market exists, it should be clear to most people by now that the market valuation on the Gold in their personal treasury is falsely established by a paper market that has little connection with actual metal. Based on prevailing paper perceptions, metal sellers are over a barrel, selling at a mathematically derived spot price based on futures contract "prices." The upside is that those who use Gold as their fundamental savings (such as I do) can get Gold at these terrifically flawed prices.
One of the points of my recent set of posts was to show that both the dollar and Gold could/should be stabilized by removing any last vestiges of paper attachments (loans, derivatives, etc.) from Gold. A purely physical metal market would tend to be stable and based on a slow and steadily increasing world supply from mining, and its value would grow as the world's population sought the ultimate form of money to represent their savings. Paper currencies, meanwhile, would continue on their merry way--subject to inflations and deflations of supply, but most generally they would continue to inflate, inspiring most people to opt for the no-brainer choice of Gold as their savings asset. And with Gold as this ubiquitous, independent and parallel "currency," the paper currencies which continue to circulate will be spared some their debilitating *shocks* that currently result when today's derivative games spill out into the open. Unshackling Gold from paper will always provide a point of stabilty for all markets, all nations.
My argument earlier wasn't for the excellence of a fiat system of currency. It was about the excellence of Gold being freed of its paper attachments. One of ORO's points to me, which I intend to address a bit better later, was that the system I described was unnatural and required too many new rules. He then proceeded to lay down about a dozen of his own for a system he suggests would be better. He has missed my point entirely. Gresham's law is a natural one that simply helped me forecast the fate of Gold once the paper attachments were abolished. And as for the difficulty of abolishing these Gold-based derivatives? Just image the Washington Agreement: Round Two. It's that simple. Done in the blink of an eye. "Lightning in the night," as a friend would say.
Gold. Get you some! ---Aristotle
Trail Guide (02/19/00; 08:26:47MDT - Msg ID:25658)
Thanks for the "Hall Discussion" page. I can now see where lot's of clarification and more discussion is in order.
Bet you knew what I meant in:
Trail Guide(02/11/00) - Msg ID:24996)--- The Gold Trails
-----Thank you Aristotle! A fine work that's worth a long study, my friend. Aristotle, your five part series is ????trechantly???? ritten and offers readers a glimpse into a future that must be. Will be!---------
Hope you did understand it,,, because I didn't! (smile)
Should be -- trenchantly --- vigorously effective and articulate,,,,, sharply perceptive!
In the future ,,,, as I have always done in the past ,,,,, will try harder to use as few "extra descriptive" words as possible. It's bad enough for us to read between the lines of thought,,, and fill in (in our minds) the simple bad word use and misspelling (we all offer),,,,,,, but fast typing descriptive terms wrong ,,,,,, just kills the whole presentation completely. No?
Formal papers are given a good going over,,,,, several times before print. Here, in this convention hall,,,, we not only say what we think,,, we are also saying what we are feeling about the subject as well. Same as if we were in person.
(ha! Ha!) Reading and listening here is no different from my talking to a large group. Going back,,,,, hearing some of my tape recordings of the past ,,,,,, often think "I can't believe anyone actually understood what I said" (smile). But, all in all,,,,, most do,,, I do also ,,,,,, human dynamics in action.
I have stopped all new projects and will be writing a lot,,, fairly soon. Next post coming up.
Trail Guide (02/19/00; 10:03:17MDT - Msg ID:25661)
Boy,,,,, the privateer is now hitting right on some of the discussion we have been having here. See his whole post,,, good site.
----------And Gold's history as a tradable financial asset only really goes back to the "floating" of world currencies in early 1973. --------------
As the whole gold / currency entanglement threatened our economy and began to come unglued,,,,, they just did what we have been talking about. Instead of setting gold free to trade as a physical asset alone, it was turned into a "financial asset". This exposed it to all the lending,
borrowing and derivative entanglements.
Most every thinker from that time to present uses that period to mark the beginning of Freegold trading,,,, what really happened was far from this. Gold never did become freely traded in the perceived context of just buying and selling gold alone. In parallel to the physical market a
paper market grew that eventually set the price for buying and selling Freegold,,, physical gold. In this respect, gold never did detach from the currency markets. Official policy could still be used to control it's price, therefore making the dollar look good,,, and extend it's life. Yes, one could buy gold, but it's price was marked to the fiat currencies no different than when it was part of the money system. The only difference was that the private market makers provided the hardware (various paper gold derivatives) while the Official markets provided the software (keeping gold lending rates well below currency market rates with the use of small actual sales and "grey" guarantees to supply if needed). In addition this played on the publics ("society") perversion to sell their "hard" , fully paid for" gold holdings and hold the newly offered "soft" (leveraged with less cash on deposit) paper gold. As such the "gap" (physical deficit) has been filled from old private holdings. Holdings that are / were much larger than the CB stash. This supply fact is largely backed up by looking at the gold holdings of "ALL" Central Banks over the last ten+ years. The actual average amount of CB gold hitting the market was never enough to cover the deficit. Not even close. Mostly, other CBs (and large entities) brought the offered gold.
This is the period that low gold prices were,,,, allowing some entities a recycle their dollars back into gold without impacting the price. Some used the paper gold function while others used actual hard gold buys. Oil is good example. In return for the worlds "official policy" oil production was kept high and prices low. Even in the face of a demographic growth in oil use that should have driven prices much higher. In reality, these low prices were backing the dollar reserve system with cheap oil,,,, settled in dollars only.
Cheap gold,,,, cheap oil and World CB support has been used to maintain and extend the dollar reserve system until another currency was available. Today, one is. It's no accident that one year after the Euro was born:
,,,,,,,We find oil prices steadily rising to match it's true economic relationship to world economic growth and use.
,,,,,,,We find the Euro becomming more and more of a financing preference.
,,,,,, We find oil production unresponsive to US demands. Even hinting to cut supplies further!
,,,,,,,We find this modern two tier gold marketplace,,,,,,, built from the mid seventies,,,,,, being abandoned ,,,as it's useful purpose to support the dollar is no longer needed. The Washington Agreement will be seen as only the first of many changes.
,,,,,,,We find the dollar driven into a more overvalued position as world dollar use and therefore liquidity begins to dry up. Prompting the US Fed to pump the money supply in an effort to replace international dollar reserves. We have but to look at Japan and it's Yen to see a similar situation. Here a nations currency is constantly driven upwards,,,,, not from the value of economic function ,,,, rather from financial destruction. Even now the BOE takes steps that may lead to major (hyper?) inflation. Our fate acted out on a much smaller scale? Is this the reason Another said that the dollar would rise first,,,, before it's end, and gold's beginning?
,,,,,,,,We hear talk in Euroland (German citizens) that it's not that their Euro and gold have fallen,,,, rather it's that the dollar has created a US financial bubble similar to Japan in the late 80s,,,, and this crisis is driving the dollar and it's financial sector into a mania. Perhaps an hyper mania?
Also from the Privateer:
-----------Gold has always been a great boon to the world's economic prosperity. And for that precise reason, it has always been a great threat to government created and administered financial systems. ---------------
To date, if physical gold supply is further curtailed,,,,,,if physical gold demand rises,,,,,, it's price will do so independant of the paper marketplace. This will destroy the modern dollar-supporting two-tier gold market. A market created to extend the system, not maintain it indefinitely.
In addition I add that governments can,,, have,,, and do use gold to their best interest if the strategy is to unseat an established but failing money system. We shall see.
-----It is an "asset class" (like stocks, bonds, and "cash") but it cannot be controlled. ------------
The "true value" of physical gold alone could never be controlled. If,,,,physical gold, trading as Freegold can again act as it did in the very beginning. It will perform it's wondrefull function outside the official money arena,,,, it becomes what it really is,,,,,, an "asset class" as wealth money. A wealth asset,,,,, not an unworkable financial asset.
-----What has and is being controlled are Gold DERIVATIVES. And as long as the demand for physical Gold can be met, the price can be controlled by the use of these derivatives. -------
----Since 1980, the demand for PHYSICAL Gold has never got out of hand, and the use of derivatives to control the price has been developed to its present level. -------------
Something the world is "on the road" to changing today.
------The problem now is that unlike most other financial derivatives, which can be "settled" merely by the issuance of more debt paper or, in a final extremity, by the printing of actual currency, Gold derivatives rest on PHYSICAL Gold, which is in finite supply.---------------
Truly the weak link in dollar support that Euroland will break.
Walking the gold Trail!
Trail Guide (02/19/00; 10:58:10MDT - Msg ID:25663)
Not too many logs my friend(smile), I have to leave. Last post for today.
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
canamami (02/19/00; 11:37:37MDT - Msg ID:25664)
Reply to Trail Guide
The debate concerning the morality of CB gold sales and leasing turns on whether the CB's should convert what I'll call "currency gold" (accumulated when currencies and gold were more intertwined than they currently are, and often the product of expropriation or other governmental coercion) into what I'll call "multi-use gold" - i.e., commodity and jewelry use, and private savings not denominated in currency terms.
I believe it is improper for CB's to convert "currency gold" into "multi-use gold". First, this gold represents in a concrete form the accumulated savings of those who created wealth at a time when gold and currencies were intertwined, and thus dumping it on the market for "multi-use" purposes is a method of frittering away past savings. Second, an industry has arisen (i.e., gold mining) based on the premise that the CB's won't place this gold on the "multi-use" market. Therefore, CB gold sales serve to wrongfully destroy the gold mining industry.
Although I understand and appreciate your assertions of hypocrisy against those who cry about manipulation simply because they lose from the manipulation, I submit there is a principled moral argument against CB sales which transcends self-interest.
Of course, enemies of gold like "Hutch" on SI believe the failure of the CB's to put their gold on the market is a form of price-fixing in favour of the gold mining industry. For the above reasons, I disagree with the view put forward by people like "Hutch". Rather, I submit CB's should be restricted to using gold for inter-CB settlement, and for gold coins denominated in the national currency.
dragonfly (02/20/00; 10:11:08MDT - Msg ID:25696)
A few observations on the discussion about society, cabals, haves and have-nots, nattering nabobs and what-have-you. Thanks to all who are posting on this matter. Indeed, it seems that the closer we get to the beast that we are hunting on this gold trail the less need there is to follow the spoor so closely and the greater need becomes a more 'heads up' approach, 360 degrees so to speak. We sure wouldn't want this tiger sneaking up on us now, would we? We also wouldn't want any stampede it causes to catch us unaware. It's important to estimate consequences, understand the terrain and be attentive to larger details, in our case these are often historical and are dual-edged in that much is lost in the all-too-human tendency to lump things together and simplify the complex. The hunt changes as we get closer to our prize and it's increasingly relevant to note the specific as well as the general nature of things. That it's not just a tree, it's an oak tree for instance, and a falling one at that! Before my metaphors leave me out on a limb I will hasten to the point(s).
Having spent a good deal of the last 20 years studying the thoughts and motivations of people and organizations from every political persuasion I could find, I would be very reluctant to use some of the terminology and come to some of the conclusions presented here recently. While I too abhor the compliance, venality and willful ignorance of society-at-large and individual-at-small, the causes are many and often quite wicked indeed, leaving the thoughtful student of history and human nature at a bit of a loss vis-a-vis accurate analysis of how things came to be what they have become.
I see some truth in what some 'leftists' are saying as well as what 'rightists' and 'constitutionalists' and 'libertarians' and 'anarchists' and 'religionists' and 'environmentalists' and 'communitarians' are also saying.
Does that sound like confusion?
What side were each of us on when the genocide was occurring in Guatemala?
More importantly, what did we as individuals do or not do?
Will gold enthroned solve this kind of thing? Will it end the sanctions on Iraq?
Should simple people be sacrificed to 'progress' as defined by the plutocratic socialists ( dressed as conservative Republicrats ). At what point should it get violent -- ahh the dreaded violence -- dreaded only when we think about it on US soil perhaps, yes???
Dangerous times indeed. Dollar Bill has some valid concerns. The world idealized in many posts here will still be full of thugs and maniacs and mafias and CIAs and KGBs and mercenaries. It will still be conditioned and coerced by force applied and force threatened. It will be ever more dangerous as the uncertainty increases. You see, violence and reactions to it will likely play out long before some enlightened leadership, some philosopher king, comes to pull our fannies from the fire. No, we're probably all going to get a bit toasted before this thing is over.
As my friend Flora used to say, 'God help ya when you get what you ask for'.
I hope not to offend any of the gentle folks who post here but may I ask a simple question? If the powers that be have the ability to pull off what they have pulled off - how can any of us lay the blame for the state of affairs on ignorant have-nots? That is 'The Devil Made Me Do It' kind of logic don't you think? Can you see the tragic irony of that excuse for the world as it is? Picture elites saying 'Holy Mackeral !!! We better set up a socialistic state or these ignorant have-nots are going to overwhelm us and take what we have'. The same elites who have responsibility for uncountable murders and wars and lootings perpetrated to cripple and eliminate said have-nots as well as weaken those who have more.
I would posit that those most to blame are the ones who have had the knowledge and financial capability to confront the enemies of humankind on every front, but were/are too engrossed in the stock pages, the sports pages, the business pages. Pogo was right.
At the same time I agree with Phos that it is wise to pay attention and live to hopefully create a better world. I would just caution that we should be aware of our own complicity in the one that is falling apart before we take it upon ourselves to lead others to the promised land.
Trail Guide (02/20/00; 12:44:17MDT - Msg ID:25701)
You write in your: canamami (02/19/00; 11:37:37MDT - Msg ID:25664)
-------The debate concerning the morality of CB gold sales and leasing turns on whether the CB's should convert what I'll call "currency gold" (accumulated when currencies and gold were more intertwined than they currently are, and often the product of expropriation or other governmental coercion) into what I'll call "multi-use gold" - i.e., commodity and jewelry use, and private savings not denominated in currency terms.----------------
------I believe it is improper for CB's to convert "currency gold" into "multi-use gold". First, this gold represents in a concrete form the accumulated savings of those who created wealth at a time when gold and currencies were intertwined, and thus dumping it on the market for "multi-use" purposes is a method of frittering away past savings. Second, an industry has arisen (i.e., gold mining) based on the premise that the CB's won't place this gold on the "multi-use" market. Therefore, CB gold sales serve to wrongfully destroy the gold mining industry.------
It seems to me that much of the whole argument on gold swings on whether the CBs are indeed dumping gold in the traditional sense,,,, that is, actually selling it into the industrial marketplace. This is much of the real thrust of everyone's discussion. I think it leaves out most of the picture and shrinks our ability to understand what is happening.
If one looks at the world through a long pipe we only see a small amount. It's called a narrow view. Gold thinking has today forever changed as Western people now think they are more educated,,, sophisticated and only need to see what is right in front of them. Put the pipe down and it's amazing what's out there.
Well, it all started many years ago when most investors had never even heard of "forward sales". We all received a good education given by the mining and brokerage industry as to how one should invest in gold,,,, and from this position it's no wonder the price of physical gold is now so easy to control.
The modern gold industry could be compared to a hypothetical "shoe" industry,,,,,
------Every family was taught that there was much more leverage (and profit) from putting the families finances into buying the shares of companies that make shoes. It seemed that almost everyone would have to buy shoes at one time or another and this demand would certainly drive shoe prices sky high. In time, thought has indeed evolved. Today our logic dictated as a must that it was even far better for one to buy shoe mining companies than owning the shoes themselves. Slowly, over many years,,,, families held less and less pairs of shoes and more and more company stocks. Logic moved further until,,,,, they lowered their shoe buying until each family shared only one pair, but owned a bunch of shoe co. stocks. In addition,,,, "indirectly, through third parties" ,,, they owned contracts for the delivery of real shoes. Indeed, this was smarter because their money was invested for a higher return in other areas,,,, and they could always exercise their contracts for more shoes if needed. Especially if "changing times" required the ownership of more than one pair per family.
The future as my evidence for today:
(A). As time and events later proved,,,, things were not as everyone thought. Later in this cycle, it turned out that many of the shoes everyone had contracts for,,,,,, were mostly the product of other families selling their excess shoe holdings. Not the governments selling so much themselves. Worse yet, those shoes had multiple contracts written on them so as to make the delivery impossible. To cover all those contracts, shoe brokers and companies had gone into OTC and futures exchanges to buy "financial" hedges for shoe delivery. In a twist of logic, even though those hedges could only be settled in cash, these contract buyers figured that at least their "financial book" would be covered if a shoe default occurred. But this did nothing for all the families that didn't read the small print that said shoe delivery contracts would "through national emergency" or perhaps "security exchange rules",,,,,, also be settled in cash under adverse conditions. Well,,,, most of these very sharp investors accepted even these conditions. They figured that with even a cash settlement, and well before national rule changes,,,, they could pay their taxes on the profits and still buy the shoes in an open market. And using the same logic that placed them in this position,,,,, figured they would buy even more shoes because their cashed in paper leverage gave them more money! Now, after the fact it didn't work out that way. Shoe prices ran ten times faster in the middle of the default settlements,,, so even with some players making 1,000% in cash,,,, shoes were nowhere to be found. If they were found, these cash profits brought even less pairs than if they had put the origional money in them in the first place
(B). Further,,,,, time later revealed that in the late 90s demand for shoes had indeed "skyrocketed", world-wide. Fortunately, many of the people in the Western nations of the world had "brought into" this logic of having only a few pairs of shoes per family and holding their other "shoe wealth" in other paper forms. Some in Dow stocks,,,, some in shoe stocks,,,,, some in shoe contracts,,,, some in shoe derivatives and other options. This effect diverted much of the real shoe demand by spreading out the buying into paper form. It allowed many existing shoes to be diverted overseas where people wanted to get rid of extra dollars and indeed, hold real shoes as their families wealth. Now, after the fact,, we know that the real demand figures from Shoefield services were completely skewered because they only counted real shoes shipped,,,, not the paper shoes purchased!
(C). Further,,,,,, events later proved that the Central Banks really knew the value of shoes to the world after all. Even during this period, records later proved that the CB mostly sold shoes to each other,,,, with only a small amount (relative to demand) flowing into the real markets. It seemed that they really only rented a very small amount of shoes (relative to demand) to keep the rates down. Perhaps it was the power of suggestion?
All this was in an effort to keep world demand from destroying the "Whole Marketplace" for shoes. This policy was helped enormously as most of the Dollar / IMF banks were more than willing to supply "this paper shoe marketplace they had created earlier",,,,,,,, with paper shoe commitments because of the profits this created. The CBs saw that "Western investors" would satisfy most of the real demand through their willingness to hold paper shoes,,,,,, and indeed, if shoe prices stayed low,,,, these same investors did indeed,,,, gladly sell their "old shoe bar holdings" into the huge world demand. Further helping to keep the shoe prices low. All in a effort to give some foreign dollars an illusion of shoe buying power. The rest of the other dollar world,,,, that understood the message being sent by the CBs,,,,, traded their fiat for shoes,,,, over time,,, as able. Now, after the fact,,, they were right. The gold ,,, err err shoes, that is,,,,, they purchased and held in physical shoe friendly government hands more than offset the value lost as the world gold market fell apart,,,,, taking the dollar with it.
Indeed, it's strange to see that today (year 200?) after the fact,,,,,,, the dollar is still trading,,,,, and still the main currency of the US and a losing holding for many other dollar tied countries. Now, with oil, shoes, goods and services still being sold to them in dollars we now know that talk of dollars being phased out was all wrong! The only thing that changed was dollar asset values and an realignment of world trading structure as it applied to using currency reserves.
Today, most all products brought and sold in dollars are either done in Euros first then changed to dollars,,,, or indexed to the new world Freegold market price. Of course price inflation has virtually destroyed a major portion of the US economic structure,,,,,, rendering it unable to compete very well world-wide. Indeed, whatever price advantage dollar depreciation gives them, it's completely lost because inflation continues to make production profits non-existent. Slowly, they are using up all their gold reserves in an effort to prop up local industry with profit supports. Still, in time US manufacturing infrastructure will become only a shadow of past glory days.
(D). But time stops for no one,,,, and the shoe market had indeed evolved further. ------ As in all things, greed got the better of the "World gold marketplace" as the ones (banks) that made the market went hog wild creating paper gold for their clients. It seems they entangled every financial facet of the industry into this operation. It eventually became impossible to function outside this new creation. When the end came, most everyone had had some exposure to the vitality of this paper gold market. When the two tiered marketplace finally failed, it took almost,,,,, "ALMOST" everyone in the industry with it.
What started as an official "grey" policy to keep gold prices low,,,,, had mushroomed into a "we cannot turn back situation"! When it's existence became in the "national interest" of the US (dollar / IMF) we now understand,,,,, because it's failure did indeed rock the dollar world,,,,, not to mention it's old illusion of value. Up until then, dollar assets outside the US had a choice of staying put or moving into gold as a reserve. But prior to that time society forced the old gold system to fail,,,, so no one could make a good point for returning to a system the world was not willing to live with!
Further, if they did move into gold then, the shock would not only kill the marketplace from where they got cheap gold, it would destroy the function of the world economy because it had no other dollar system to use. So, they supported the dollar and it's gold market even though they didn't like doing it.
(E). Closer to home now,,,,,,, and back from the future::::: This is the broad view.
World political warfare being what it is,,,,, and lasting through out the ages,,,,,, an event has occurred that changed everything in strategic thinking. The Euro was born and became a success!
Now,,,,, this Euro is no dollar, I know,,, and it has many, many problems,,,,, true. But the one thing most people don't understand is just how much political "will" there is out there to escape from the dollar held world. And do it before dollar debt makes it self implode in an inflationary blaze. Every major world player today, knows that for the last 25+ years we all have lived in a dollar house with a ticking inflation bomb about to go off and burn it down. Every bid of new debt piled ever higher on this system ages it's timeline and takes it one step closer to going off. Yet, it also is trip wired so that if we all exit at once it goes off while we are at the door, leaving many inside. Only recently has an unwired window been found for all of the world (that wants to and can) to escape
On this measurement everyone has completely missed out thoughts. If the Euro proves equal or better than the dollar ,,,,,, good! But, it doesn't have to be even close for most of the world to eventually run to it. They want out from under the dollar system ,,, so bad,, they will eventually throw caution to the wind to escape it. Understanding this dynamic is key to seeing how the shoe market (gold market ,,, (smile)) is going to evolve. Supply and demand,,,,, legalities and moral truth,,,, fiat moneys verses hard moneys,,,,,, are all nothing in political warfare and national financial self preservation. If gold happens be used as one of many items to help unseat the dollar,,,,,, to quote from the bible,,,,,, "it shall be done!"
Once the gold market implodes, it will set off a chain of events that will propel investors into using the Euro as a world reserve, come what may. From that time forward any mention of paper gold will be looked at with total disbelief. Anything outside of up front, cash on the head physical trading will be only be found in the back alleys. Euroland will embrace gold with a new physical marketplace that will endorse a bull run in prices like nothing ever seen in modern times. It will not be inflationary anymore than YAHOO stock prices are, precisely because gold will trade as an asset, not a currency. Official BIS / ECB policy will hold that gold is this asset wealth we have been talking so long about. This is exactly why they now hold it as a asset reserve outside their Euro and mark it to the market. In the future it will be used to settle payments no different than if one gave another Yahoo shares or the deed to their house as debt payment. But, it will no longer contain an official currency function. The political will to control it's price for the sake of world currencies will be gone.
So, canamami,,,,,, are the CBs selling gold that -------" " represents in a concrete form the accumulated savings of those who created wealth at a time when gold and currencies were intertwined, and thus dumping it on the market for "multi-use" purposes is a method of frittering away past savings." " ?????? ----
Could be my friend, but there is a lot more to it than that!
I think that by putting down the pipe of narrow vision investors can see that they can participate profitably in a future financial structure,,,,,, but only if they can see the future in a broad sense. Most, " "I say MOST" " of the gold industry will suffer massive dislocation and investor loses. But not all of it. Still the risks are so great (as many such as yourself have found out),,,,,, that the correct position is having the majority of my hard assets in physical gold and the rest in a very small position of paid up gold shares. Even today we read account after account of sleepless nights and worry over whether ones 100% holdings in mining shares will work out. Desperately hopping that the stock markets will not crash,,,, and inflation will return before the paper gold market forces prices down one more time,,,,,, and did I make the right move,,,,,and is this the right stock,,,,,, are they really hedged,,,,,,, and will my penny stock last long enough. And all for what?? The hope that the world has not changed and ,,,,, mining stocks will run before gold prices like they did before and ,,,,,, and they won't let me down by only going up at the same rate (or a little bit faster) than much safer bullion?
If ,,,,, " " IF " " what we offer is just a theory as yourself and many other proclaim,,,,,, do you think I am going to be hurt holding a chest of MK's old world coins and just a few mining shares? Truly in this world today,,,,, "a man's just got to know his limitations!" Yes? And you ladies also!
Indeed, had the world been different,,,,,, I think there is not a mining co. leader out there that would not have wished for another outcome. Nobody in their right mind encourages consumers to buy their company stock first, instead of their main product. Had all investors bought physical gold (shoes) first and held a small position of shares for a lifetime (instead of trading), the entire market would have been forced from real physical demand to re-adjust. The lending industry would self destruct long before this. And perversely, too the dollar would have been devalued in gold,,, perhaps changing the future?? We will never know the end of that story.
Having said all of this,,,,,, I am very positive about GATA,,,,, a few mining shares and the prospects of gold coins (and bars) in general. We'll have lots of time on the Gold Trail to see the good side of all of this.
Thanks ALL: for your time Hiking with me!
CoBra(too) (02/20/00; 14:43:12MDT - Msg ID:25706)
TG - Many thanks for your "shoe" industry allegory.
Your essay sheds light far beyond the next turn of the trail and allows a glimpse towards the next destination for all to see. Even if some fellow travellers may choose to take upon the additional burden to toil with pick and shovel to replenish some of the wealth, used as nutrient along the way. A nugget uncovered with your own labor on a promising site, just off the main trail, but nobody else's "claim", may even be more rewarding than loping all the physical along the way. At any rate the puppetmasters and their "bully" puppeteers are playing their puppets on their last and final "shoe"-strings, while some of the puppets are now trying to escape their bonds - there are others never having acepted the lead-string.
Thanks - CB2
Trail Guide (02/20/00; 18:09:59MDT - Msg ID:25717)
ALL: Thanks for your thoughts. Cmax,,,,, (smile)
Cavan Man (02/20/00; 13:17:45MDT - Msg ID:25704)
What do you mean by "paid up gold shares"? Thanks!"
The very best brains for management,,, mines in operation for decades,,, unhedged,,, profitable now and at much lower prices,,, massive reserves going out decades,,, paying a dividend,,, outside the sphere of US / IMF influence,,, likely to have a good relationship with Euroland investors in the future,,, large payroll that supports a big segment of host countries citizens making further nationalization and taxation contradictory to national interest,,, takes world class steps in support of a physical marketplace!!!!!!
All in all, a company that wouldn't mind if investors brought it without any leverage,,, and did so as an after thought behind ones buying the same bullion product they sell,,,, especially if they (company investors) would only hold for a good long time. -------- Not many around like this,,,, uh? (smile) Yes, they do exist.
"Paid up gold shares" belong to investors that have purchased their "very private bullion coins first" as the largest part of their position and still have resources to buy more coins later. Shares amount to a small, but "concrete" portion of our long term hard wealth,,,,,, held with no leverage,,,,,, no sleepless nights! In other words, putting you in control of a successful hard wealth investment plan. One you can live a lifetime with! The secret of the world's truly wealthy is in their being in control, not how much they have. Each of us has the power to place ourselves,,,,, one on one,,,, eye to eye,,, with the the most powerful. Because it was never how much you have,,, rather how much control you have over your wealth that makes or breakes you.
Most all of us are blessed with the time to build a powerful position, no matter how short our life or how little we make. Unreasonable use of leverage is the "hangman of fools" and "the destroyer of our free spirit".
I'll talk more on this,,,,,, along the trail,,,,, be sure of this!
Thanks Trail Guide
Trail Guide (02/20/00; 18:19:48MDT - Msg ID:25718)
CoBra(too) (02/20/00; 14:43:12MDT - Msg ID:25706)
------A nugget uncovered with your own labor on a promising site, just off the main trail, but nobody else's "claim", may even be more rewarding than loping all the physical along the way.----
You are a free spirit indeed, CoBra(too)! May the wind always be at your back!
Thanks for discussing,,,,,,,,, Be back in a day or so.