Mike Maloney talks about "gold doing its accounting".

A "few posts" !!!!
It takes long enough to read one !!!
They are good though

and

If I could only find the original article on http://www.hickel.biz/

So, pay off your debt with half your gold. Sounds pretty simple.

I wonder what that would do to the profitability of gold mining companies

Isn't that the sort of thing that has happened to countries that get into unsustainable debt? They end up "selling off the family silver". So it could be any assets that are sold to those who own the debt.

I've gotta think about this because the numbers are VERY large

Teleseminar Audio: Gold to Infinity - Why Gold Will Conquer Inflation

http://www.conquerchange.com/2010/04/teleseminar-audio-gold-to-infinity-...

With mp3 download here:
http://www.tcoyr.com/teleseminar/IAN.TELE.04.21.10.mp3

They cover various views on the eventual "gold price".

So you see why gold mines would be nationalized?

And why NZ govt is opening up Conservation Estate to (gold) mining?

China mining gold and silver so fast as to exhaust all known chinese reserves within 8 years? (they don't have massive known reserves; the reason they are #1 gold producer currently is their rate of extraction. Why so desperate to extract as much as possible as fast as possible?)

I suspect 'Cash4Gold' is Uncle Sam's late entry to the gold accumulation party.
Obama is FDR, and it's 1933 all over again. Except that in 2010 you don't tell the public you are confiscating their gold until afterwards.

Are all major players (Saudi/Russ/Chn/Frn/Grmn/ECB) aligned with BIS vs US/UK? (AKA Anglosphere vs ROW)

OK, I have a few questions, and thoughts.

This GoldUS$ rate prediction is pretty meaningless except in relation to the current debt. Paying back some debt with some assets makes sense.

But, what US$ are we talking about?

I think what I need to go with that sort of prediction is:

1. The GoldOil rate then.

2. The GoldSalary rate. ie taking a typical salary in oz of gold now, what would it be then?

The final 'typical' 'price' needs to fit in with other things for it to make an holistic sensible picture.

For example, it would seem crazy for someone panning for gold to earn $20/hour and collect $50,000 of gold in an hour. There would be an imbalance.

So, what would the typical US salary be in oz of gold compared with a typical Chinese/UK/Indian/Australian etc person?

I think such a bold prediction requires some solid supporting ideas on what that future would look like and how it would work.

Steve Netwriter said:

They all work together to flesh out the whole picture, and it's various aspects.
Together they supply a large amount of analysis and supporting circumstantial evidence, to build a very strong case. This latest post, however, creates an ideal entry point and framework upon which to assemble the information.

You have the huge advantage of already understanding gold's real position in the economic firmament, a large amount of related subject matter already analyzed, a list of recommended posts from the author himself, and most importantly a grasp of the nature of paradigms and a willingness to question your own.

IMHO, this makes you an ideal person to be able to analyze this material from an informed yet impartial(ish) perspective.
Whew, with all that blowing, there must be some smoke coming out your other orifices by now? LOL

Get back to you later on other questions, okay?

Straight from the horse's mouth, as they say.
Your questions from above, FOFOA's answers in bold:

"OK, I have a few questions, and thoughts.
This GoldUS$ rate prediction is pretty meaningless except in relation to the current debt. Paying back some debt with some assets makes sense.
First of all, the fact that "the price of gold" is meaningless to ALL metrics we have been raised on (thinking in terms of dollars) is the key opening one's mind prior to having it opened brutally and forcefully down the road. It is the key to understanding what will transpire.
Secondly, I am not talking about paying back debt with assets. I am talking about the underlying forces that will take gold where it needs to go. Most debt will be defaulted on or paid back in printable dollars, etc... That's not the issue. The issue is that the planet will be recapitalized one way or the other, through human orchestration or natural market forces. I am only trying to establish the "mindset" of the market organism.

But, what US$ are we talking about?
I think what I need to go with that sort of prediction is:
1. The GoldOil rate then.
Present ratios don't apply. It is comparing apples and oranges. Comparing an economic commodity with a money. Would you ever say that the Oil/dollar ratio must always remain the same? Of course not!

2. The GoldSalary rate. ie taking a typical salary in oz of gold now, what would it be then?
Again, totally irrelevant. How can you compare a hard working Chinese man's "salary" to that of a Wall Street CEO. How many orders of magnitude separate them. Salary is meaningless!!

The final 'typical' 'price' needs to fit in with other things for it to make an holistic sensible picture.
Perhaps this is true for the rest of the physical world, but not for gold. Read Gold: The Ultimate Unbubble again, and this as well, which talks about the same things...
Part 1: http://www.safehaven.com/article/5205/why-the-global-financial-system-is...
Part 2: http://www.safehaven.com/article/5206/why-the-global-financial-system-is...
The "price" of gold is ARBITRARY. This is what sets it apart from silver, oil, and bananas.

For example, it would seem crazy for someone panning for gold to earn $20/hour and collect $50,000 of gold in an hour. There would be an imbalance.
No one can pan that much gold in an hour! Ever tried it?

So, what would the typical US salary be in oz of gold compared with a typical Chinese/UK/Indian/Australian etc person?
Irrelevant question. Do the math if you want to figure it out. Again, you must evolve your thinking from the dollar-denominated world in which you grew up. "Western Thought" as Another called it.

I think such a bold prediction requires some solid supporting ideas on what that future would look like and how it would work."
No it doesn't. $5,000 gold is enough to get you in. I am only trying to save your sanity from the SHOCK of reality. Your question, from a smart guy like you, shows me how LITTLE gold the common man is going to buy to prepare. If you only convert 1% of your wealth you will not have a big windfall. And most people won't even go that far, at least not with physical.

Looks like Steve wants the original Steve Hickel piece. There are many. Here are some links, copied from one of my comments on the blog...

Link 1 ($156,128.78/oz)(follow GATA's link to gold-eagle.com for Steve's article)
Link 2 ($500,000/oz)
Link 3 ($468,750/oz)

The links above are from 2008. I also have some of his older writings from 1999 and 2000 linked here: Freegold Archaeology

They are all worth reading!

Merkel in Saudi Arabia after raising Iran sanctions in UAE

At this point in time, she has time to go to the Middle East to discuss Iran?
Things to discuss, alright, but I doubt Iran is that high on the agenda.

Germans rumoured to have been advising Saudis and Chinese re gold and dethroning $US for last few years.

Captain,
Thanks, I see this is going to turn into an involved matter.

I'm going to start here:

The Golden Bailout Plan
(in answer to CNBC's request for a plan)
Steve Hickel
http://www.gold-eagle.com/editorials_08/hickel101208.html

That introduces the idea of a "natural level". Many factors, many metrics. eg GoldUS$ or GoldOil, supply (mining, scrap, investment sales), demand (pure jewellery, investment, industrial), cost of mining related to energy costs, labour.
I suggest that if the rewards for mining increase, the supply will tend to increase.

Is that not what I said? If you accept that gold (money) is an asset, as in part of ones wealth.

more later...

Just to be clear, don't presume that Steve Hickel speaks for me in any of those pieces. I pick and choose what I use in my posts, and I even edited slightly what I posted in Reflection. I do have many differences with Steve.

I can see Netwriter beginning to pick at Steve's pieces, but that shouldn't be mistaken for my position.

Apologies, the link to Freegold Archaeology a couple of posts above was not activated.

Steve Netwriter said:

Indeed. This is why I have been persistent since my arrival here with FOFOA links and related material.

I trust you are finding it equally compelling.

I would like to keep emphasizing the relevance of perspective, for the benefit of anyone else out there following this thread. As your perspective moves, so does your understanding, which in turn helps move your perspective further.
I have ended up in a most unexpected philosophical situation now, with regard to where I was both knowledge and perspective wise when I started on my quest to understand global economics little more than 18 months ago.

In recent months I have been following a similar path to that which I imagine FOFOA was on as he started weaving these diverse threads together, with more than a little assistance from him.
And everything really starts to come into focus when one grasps the difference between price and value, and the realization that gold actually is money. The Aristotle On Gold essay is a fantastic point to start in this regard.

I write as I think. I use this website as a notepad. So I don't often publish a finished polished article, instead you get to see my thoughts in action, exposed for what they are, developing.

My current thoughts are on the idea of a "natural level".
I think about ancient history, and I think about things that were bartered.
I recently watched a documentary about the travels of Captain Cook, and noted the ship's men paying for sexual favours with iron nails. So in that context, iron nails gained a natural level. I assume nails were rather useful things at the time.
I expect a local grain seller would have accepted iron nails in payment, knowing that the iron nails could then be used for payment of sexual favours, or used for payment of other things.
Iron nails in this context would have been used as money, and would have gained a natural level relative to other things.
This seems to be a natural way things work.

In contrast, looking at a 1 New Zealand Dollar note, what I see is a pretty poor piece of plastic. I don't see much utility in it. But I can use it to buy a loaf of locally baked bread. So it has purchasing power, but little inherent value.

It seems that one has a natural level and the other an artificial type of level.

Now when a thing starts being used as money, new forces start acting on its 'value'. The question is, does the change in value reflect a real change, or is it an artificial change much like the plastic NZ$1 note?

Returning to gold, which has indeed been used as money for a very long time, with brief experiments of paper money, what can we say about its natural level? This would be related to its supply, demand, and usefulness.
When used as money, which it have proven to be very suitable for, what additional value is reasonable? Is this extra value reliable, or is it as artificial as the plastic note?

I think the only sensible way to value gold is by measuring what it can buy, not by considering its relationship with any fiat currency. The question is, can gold's value reliably be far from its natural value?

Those are my thoughts at this late hour.

Steve Netwriter said:

I think this can be answered very simply.

THE FUTURE PRICE OF GOLD IS COMPLETELY ECONOMICALLY ARBITRARY. IT WILL GO WHEREVER IT NEEDS TO GO TO SOLVE THE DEBT PROBLEM.

This is it's natural value. As far as I can tell, it always has been.

As FOFOA stated above:

FOFOA:

Aristotle's point on this:

The difference between its natural value and actual value is its usefulness and suitability as money?

It seems to be the characteristics of gold that create that suitability. I don't deny that, I'm no paperbug!

But, I have been both an "understander" of gold and someone impressed by the writing of Bernard Lietaer.
Yes, any man made system can suffer from the actions of man. That's the advantage of gold, it just is the way it is.

But what about the possible HONEST man-made options?

If gold is used as money, then is there a limit to the 'premium' placed on its value because of its use as money?
I come back to the mining supply side. Does an 'excessive' 'premium' create too big a supply side increase?

OK, here's an obvious issue with "too high a value" on gold. Imagine 1oz of gold was sufficient to buy a house. Does that mean all gold jewellery would instantly disappear?
Gold would be too valuable to be used as jewellery.
Is that what is being proposed?

That's why I ask, what real value are we talking about here?
How many oz of gold to buy an average price house?

Are we talking about gold still being used as decoration, or not?

We're obviously cross posting, so the sequence is a little off.

I start to see the point. If gold takes back this role as money, then the debt issue determines value. I think that's what is being suggested.

But, I still want an answer to my oz of gold per house question

You do realise that MOST people will find this VERY difficult to accept?!

I wonder whether an alternate 'solution' is being cooked up.

Honest, man made options are still open to corruption, aren't they?
You say yourself:

Why do you say:

Too high relative to what? People's desire for gold jewellery?
Somebody's preconceived ideas?

What is being proposed is that the market will decide.

It's getting late.

Debt is part of the economy !
Gold affected by debt, debt part of the economic picture.
Arbitrary? No. Related to the debt.

By the way, who said "future price of gold"?

What's "price"?

I thought gold was money, therefore you'd be measuring its "price" with itself!

OK, if the "price" whatever that is is arbitrary, then why not twice that suggested, or 10x ?

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

Because the market decides?
Then why half the debt? Is that another arbitrary market decision?

It's not really arbitrary then is it. It's a market decided "price".

Yes?

This is my interpretation of the proposal, broken down into simple ideas, with some hard numbers as conclusions:

1. This is dependent upon the market deciding that gold should again be the world's form of money.

2. As such the purchasing power of gold would exceed the natural level it would have if it were just a commodity. It would gain a 'premium' because of its usefulness, its reliability, as money.

3. This would be reliant on sentiment. This would only occur if sentiment generally went in that direction. This would involve a loss of faith in the paper currencies, and a gaining of faith in gold as money. And yes, this would involve faith in gold, the only reason for the 'premium'.

4. If this occurred today, then it would not involve any future actions or changes. This means we can talk in terms of the current amount of paper currency, the current debt, the current price of things in those paper currencies. In other words we can work out the situation by the end of today.

5. The exchange rate of GoldUS$ is currently about 1200. If the market decided that it should increase so that the US reserves of gold were sufficient to be able to sell half the gold to pay off the debt, then we can calculate the new GoldUS$ rate. Let's take 150,000 for the purposes of extending this thought process.

6 We can now calculate the purchasing power of gold by the close of today.

a. An average US house costs about US$260,000. So you could buy an average house with about 2oz of gold.

b. A wedding ring weighs about 0.2oz. So would cost about US$30,000.

Exactly because the market decides.

No participant is going to want to arrive at the point where their debt is gone, by whatever method, yet they have no remaining reserves, not if they could get to the same point and still retain some reserves.

So which players may be large enough to influence the outcome, and at what level would they consider their possible discomfort (in the case of a large debtor, such as the US) to be acceptable?

I imagine FOFOA has selected this level of retaining half ones' gold reserves as a reasonable estimate, to get the mental wheels turning.
But , as he states quite clearly in Reflection:

Future flow is the determining factor, and it is unknown. So the calculation is not possible.

H.L. Mencken:

Agreed

Gold is not, nor ever was, a 'commodity'. This was a very useful perceptual tool in the battle to keep the fiat paper ponzi from collapse. Discard this idea as completely redundant.

I would dispute the idea of a 'premium'. The value was always there. Only the false 'commodity paradigm' obscured the true value. This is clearly reversing in the current market.
It may yet be revealed that the 'Giants' never had their perception of golds value obscured, and that XL size transactions of physical gold were always conducted via BIS at $US prices far in excess of LMBA daily spot fix.

That, (the idea that one can work it out today), sounds wildly optimistic to me. The general direction of these calculations, though, is overwhelmingly obvious, and that is good enough for me. The trend is your friend, and this trend is clear. I personally have no desire to strain my brain with such a task, nor the time. Not when the trend seems so clear.

If you like.

Making these calculations seems very ambitious, and somewhat arbitrary, and yet...

a. 2oz/average house is fairly close to my feelings of where value will be revealed. Bear in mind, I made no precise calculations, at all. This is simply a value (I was thinking more like 3-5oz, but maybe I was also thinking of a nicer than average house, no?) that felt right.
I place a greater amount of faith in my feelings than I do in any external source of information. Make of that whatever you like.

b. Weight and carat-age of wedding rings no doubt varies widely. You are most likely better informed on this than I.

Steve Netwriter said:

I submit to you that MOST people already find MOST things VERY difficult to accept, as evidenced by their 'normal', everyday behavior.

So I view your point as a wildly bullish factor.

Captain, what you state strikes me as much dogma as the dogma repeated by the paperbugs.
And it is wrong.

You need to look back to ancient human history. When was gold discovered? What was its first use?

To say "never" is wrong. To overstate a case is to undermine it. I think it best to be careful.

Certainly gold (and silver), and mixtures of the two, have a very long history of being used as money. They dominate the historical record. But they do not fill it.

To claim that for all time, for all cultures, that gold was always money, and it was never a commodity would require spectacular proof, and I think the proof of its falseness is quite simple.

You asked me to be critical, and so obviously I am now in critical mode, and picking holes in anything I see posted on this thread. I hope that's what you wanted

I do not see gold as some magical power, some eternal supernatural thing. I see it as a metal, sitting at one end of a spectrum of metals, each with characteristics.

It has appeal because of those characteristics, and it has a pretty good set of characteristics on this planet.

But, the value placed in it is PURELY given by those who value it. And that value varies. The past few decades are a good example of a period when MOST people lowered their valuation of it. They felt it was less necessary.
I see no reason why that value should not bottom at the pure commodity level, the natural level determined by supply and demand, like any other commodity.
At other times it may be considered to be highly valued, and needed as a monetary tool, as money.

The idea that central banks work at a much higher valuation is speculation, and is unproven.

I've posted about various people and their different methods.
On this thread is a rather good audio which mentions many of them.

I think any theory, to be taken seriously, either needs historical precedent, or it needs a very sound logical argument, appraised with knowledgeable critical eyes.

Mike Maloney has described his method, and he gives historical precedent. His result is roughly in-line with many other methods. I would class it as reasonable. It is currently about GoldUS$=15,000.

I think lower outcomes are possible, but less likely. His outcome may be the most likely, but a solution to the debt issue rather than money supply issue would need to be explained, so it may not be high enough.

I agree on the trend. I see the purchasing power of gold increasing. I'm not personally that fussed how high it goes. But I think very high numbers require very sound and detailed explanation.

I would like to understand the issues, and what may happen, and what possible solutions there may be.

One aspect that would need to be considered is what effect any solution would have on the marginal productivity of debt. Government debt might be reduced by gold reserve sales, but what about personal debt? Would the marginal productivity of debt go back to positive territory?

By very little
I did a quick search to find typical wedding ring weights.
24ct rings that are about 0.2oz seems a typical size, just as a guide.

eg
http://www.kalopedis.com/products.php?ID=39

I stand corrected.
This is exactly why I have been looking forward to this exchange.
I agree completely with your analysis of my statement.

That is exactly what I was hoping for.

Neither do I. I'm not sure how you interpreted my words to arrive at that conclusion.

True, but they have been 'valuing' it, as you say, through 'price' eyes, if you will. 'Western Thought' is how Another termed this perspective. Thinking only as a trader might also be a good description. This perspective is the major stumbling block for almost everyone examining the A/FOA/FOFOA thoughts.

Why did most people lower their value?
Were they well informed when making this 'valuation', or were they lead to believe that the past function of gold in the monetary system was now obsolete, thus rendering gold a 'barbarous relic'?
If it was to turn out that they were misinformed, would that not render their 'valuation' incorrect?

I concede that gold may well have been a commodity at points early in its history, but I still fail to see how it has qualified as such recently, except as noted above, which I feel is in a fraudulent fashion. You are well aware of how the fiat money system of the last few decades would have performed had gold not been recast as a 'commodity'.
It would seem that it is needed now as that monetary tool, more than ever?
And only because it's function as such has been effectively disabled for perhaps the last 88 years?

FOFOA has been following this thread, and has forwarded the following back and forth, our comments and questions in blue, FOFOAs' comments to each point in plain:

Yes!

Yes

Best guess, and it's only a guess, 1 ounce.

Not, except that in some countries the form in which gold will store value might not be coins, might be jewelry.

1 ounce! Goldfinger used to have a great thread on this at the old GIM.

Of course! Most people on FOFOA can't even accept it. It took me a long time to visualize it.

Doubt it. SDRs or not, that is not an alternate solution to a gold base expansion. Anyway, they have bigger fish to fry, and bigger problems. Soon they will realize this is not something to fight, but to embrace.

Of course I mean future value. But by qualifying the discussion (which I did in the post) as "inflation adjusted dollars", I can discuss value in dollar terms. As FOA pointed out, most people can subconsciously store something like 2000 dollar-denominated prices in memory. That is present value!

Future price in inflation-adjusted dollars may never be printed on any exchange or anywhere for that matter. It is simply a means of discussing value in terms we can all presently relate to.

Exactly! Now you're catching on. Ever notice that a $100 bill is the same size as a $1 bill? Ever notice it is the same amount of paper and ink? Did you know that they once printed $1,000 and $10,000 bills? Did you know that they printed (on slightly larger paper granted) bearer bonds worth MILLIONS?

Money can be ANY value.

I will have to dig for the post, but Shanti once made a very convincing argument for gold over $1,000,000.

It is arbitrary to all the metrics we presently use (uncontrollably, automatically, subconsciouly). But you are right, the "market organism", "invisible hand", whatever you want to call it, will set the price with a purpose. So not arbitrary to.... God? But arbitrary to man? Perhaps, not arbitrary to the "superorganism"! Did you read Life in the Antfarm?

Market and "Giants" have already decided this. It is profligate man that is fighting it... and losing.

As the wealth consolidator. It depends on your definition of money. Does it include long term store of value? I proposed that the most primitive concept of money was the unit of account, and that later developments added the other two.

More like it will involve the natural instinct of the wealthy to protect and preserve their present purchasing power. I don't believe this requires the sentiment change of those who use money mainly for transactions. They will likely never touch gold again in their lifetimes.

Nope. Everything is connected. Governmental addiction to promising that which cannot be delivered will bring us actual hyperinflation, at least here in the US. Debt will completely collapse in value and when new usury emerges on the other side it will bear little resemblance to what we know as debt. Basically, debt will be converted into equity. From memory, I think that was what my post Metamorphosis was about.

Fine. But it will be complicated because we will likely have hyperinflation at the same time. So only the superorganism itself has the brain power to work it all out and find the new value of gold.

Some assets like homes may rise nominally but still contract in real terms because of oversupply and credit contraction/elimination. That's why I'm guessing they meet at an ounce. But I'll leave it up to the superorganism to figure it out.

.

Only if you were foolish enough to buy a wedding ring made out of the Mona Lisa.

It can be funny at times watching individual ants try to think big like the colony superorganism thinks!

Yes, and it is standard practice in science and statistics to go with 50% when you cannot know.

Ahhh, this is a critical point IMO.
Now I see a little more clearly what is expected/proposed.

I don't have any time now.

So I will just say "thanks to Captain Goodvibes and FOFOA"

Actually, FOFOA wrote "Nope.... Metamorphosis was about", but I posted it on his behalf.

I'm going to have to return to Metamorphosis myself, to refresh my memory.

Thank you, Steve. I'm liking the cut of your jib, as they say.
Hopefully, when we run out of questions, we will both find ourselves in a new and interesting place.

In the meantime, I hope to meet you here again, sometime soon.

Bill Buckler says, in the latest issue of The Privateer:

Now that I consider to be a good, wide perspective.
I have always been far more interested in causes than in symptoms, at least in the context of making change.

A little detour into some speculation on my part here, but the resignation today of German president Kohler has caught my attention.
german-president-resigns-effective-immediately

As a former IMF head, it may be that he is/was a dissenting voice within the German government, in the context of the thoughts of Another.
Anothers' contention was that there were essentially two competing spheres of influence in the economic world:

1. $IMF (US/UK/Japan)
2. BIS (Europe/Saudi/China etc.

The IMF faction support a move to SDRs to replace $US as world reserve currency, should change be needed.
The BIS faction favour instead a move to Gold, physical, free market. And ECB mark their gold reserves to market.

Another said:

The 'timing' of Kohlers exit just seems suspicious, is all I'm saying.
At this particular point, when one never knows what may be about to happen next.

Captain, an absolutely fascinating post.
Do you have some links re the IMF/BIS theory.

Yes, I do have some links, but in the meantime FOFOA has just posted this on his blog, which as you will see, is more than just a little related.

FOFOA Stress Relief

I'll post some links etc later.

Thanks Captain, and thanks FOFOA.

Hmm, interesting indeed.

By the way, to point to a specific comment on here, it is unfortunately necessary to include the page number. There's a bug, and IMO some poor logic in the way it's implemented, but at the moment there is little option without some hand crafting from me, which I'm not inclined to do.

So the link to your specific comment should be:

http://www.neuralnetwriter.cylo42.com/node/2921?page=1#comment-3993

and not

http://neuralnetwriter.cylo42.com/node/2921#comment-3993

Why on earth they decided to code it that way when they could have calculated the page number from the comment number is...anyone's guess!

Lets take a very different look, with the benefit of perspective.

http://en.wikipedia.org/wiki/History_of_the_Soviet_Union_%281985%E2%80%9...

Yup, the ruble, without the 'T', was trouble. A collaborative state that had developed, and had the potential to 'see eye to eye' with the US was toppled by a collaborative effort to destroy the currency, and removed the pegs of oil pricing that underpinned thier level of indebtedness. Lets watch the same happen again...

We have a 'new currency' that has been set up for a fall. A big fall. The Euro.

Play along, its not too hard. The USSR were allowed to develop significant debts. Through rhetoric, fear prevailed and very large sums were spent on physical military.

Now to the euro. They knew that thanks to the allied effort, post war, they could not use the same guise of military threat. When the UK was being aligned to join the euro, a series of economic events (the artificial strength of the pound being a key one) forced us out of the union.

We were being seperated from them on purpose.

So the questions that remain are who, and why.

The US is the who - they want the european markets. Especially the German manufacturing expertise, and a physical means to gain entry to these protected markets that they have long held dear (france etc). The coming collapse will 'freeze' the european market in an economic vice.

The US government will then actively act to support US organisations to 'aquire' european assets at cents on the euro.

As with the Soviet affair, the US has had to extend its financial base dramatically. Unfortunately, (as known and understood by the Chinese, and the League of Arab nations), to do so it has had to push itself down the same path.

Capitalism unlike other 'isms' has not been portrayed as a empire building operation. However, like all 'isms' it must by its very nature, capture to 'win'. It does not do so through government, or occupation, it does so through financial destruction and forced devaluation of assets. (Sound familiar ?).

The oil of the system is debt.

If we look at the growth of a natural organism, this works in the same way - a ring of growth expands from the center, but eventually there remains nothing but a shell, and a desolate center is all that remains.

So what about Gold. Well in terms of currency, it will appear to gain.

Governments are not about to fall, but history is being written - this is probably the biggest, nastiest war in human history.

Finance. gotta love it

Owen

Hi Owen,

Good to see some fresh input on this thread.

I really like your angle there. The big picture is all that counts at this time!

One question - is it not possible, in your theory above, to reverse the lead roles, and replace the Euro being ambushed, with the $US?

If Freegold occurs, and gold is free to float, the ECB have both good gold reserves, and they are marked to market.

I don't know if you are familiar with the Thoughts of A/FOA/FOFOA or not, but they indicate that the Euro was created for this very purpose.

Hi Captain,

Yes, I am very familliar, and hold a 3rd perspective on Gold and that is convenience. It is easy for BIS and IMF to move vaste currency values in a tonne or two of cargo - whereas the physical currency would occupy a vast space. In electronic terms this is of less relevance thanks to modern banking techniques, but banks are reassured by having a few gold bars stashed away.

Now in terms of the ambush, I believe that it has been initated by the US, but they have, (with the same laxity that they report thier reserves), underestimated the EU gold holding and sentiment from key nations (The Arab League for example) being thier way.

This has meant that the 'push over' hasnt been easily pushed over, except in the margins, and now in some ways has the upper hand, and that is the sentiment that I suspect you are picking up...

The questions will be will the ECB have the stomach to swallow the task it must do to 'finish the job'?

Owen

Refreshing to be exposed to a new angle.

I don't see the relevance of the convenience factor in the digital age. Can you elaborate?

Owen said:

Agreed, it couldhave been initiated by the US, but how could they have underestimated EU gold holding? Current EU members caused Nixon's closing of the gold window by relieving the US of most of its' hoard, so they know there is an appetite there.
Saudi Arabia for a time would only take payment for their oil in physical gold (1950s), and oil problems of the 1970s were direct result of the petrodollar no longer being exchangable for physical gold. How could they underestimate that?
Then, we must consider that the pervasive sentiment towards gold throughout Asia has not appeared to waver for hundreds of years, at least.
The masses in Asia never stopped regarding gold as real money.
How could the US underestimate all this?

If you are familiar with Another et al, you would be aware that the basis of his thoughts is that the continental Europeans have been preparing for this very point in time, and that the Euro was created as the specific tool for the job.
How could anyone expect them to be a 'pushover'? You are implying that the US sees the world as depicted in this map:

which, while very funny, is unlikely to be true of US governmental strategists, IMHO.

When considering the potential dumping of the $US as the worlds reserve currency, and the ensuing loss of their 'exorbitant privilege', how could the USA possibly be 'lax'. With regards to the reporting of their reserves, or lack thereof, this seems much less likely to be 'laxity', as it does to be something to hide. Over 50 years with no proper audit? No one is that 'lax'.

I look forward to your response; I may be completely misunderstanding your points.

Gordon Gekko made the following comments on FOFOA regarding Sun Tzu and the current economic 'confusion', which seem pertinent:

Viewing Owens comment above in this context leaves us with an interesting question-
It would seem likely that one side of this economic conflict is likely to be employing Sun Tzus' strategy. But which one? Maybe both?

Time will reveal all...

I have copied this from another thread, where I put it yesterday, because I think it fits even better here:

Originally posted here.

I believe that the US has a 'view' on global Gold. That view is based on assumption, as all views must be, because, no one publishes their actual real position. Especially those who have additional tangible reserves - the realm of dis-information.

Look at the LBMA and the registered holdings of the BoE as a classic example. Both have significant variance outside of 'normal' error. If the accounting was transparent, we would be able to total world gold, and physical production and be able to 'account' for over 99%, the remainder being sold to make jewelery. The fact thier is variance, highlights 'non-disclosed' holdings.

So back to the question. Having worked for some major US corporations, it is sadly, us 'n' them, and yes, that badly distorted view seems to hold true (if badly wrong). In my last role, they were actually very, very upset that our revenue in the EMEA way higher than any other region/country on the planet...

Enough for the moment.

Owen

In the same way the fed has failed to correctly accountr for their gold holdings (GATA). They have been consistently overstating to under value Gold on the ETF's. They believe in many circles that, that is the free market value, and if that is the case, then it must be true...

yes the EU has appetite, but they dont know how much is held in Switzerland, Saudi, or other key states, or in private holdings. Many historic families have significant holdings in Europe have significant holdings and underwrite the various central banks. A prime example is the Rothschild family.

Nigeria 2009. OIL = GOLD, nothing else was accepted as payment. All of the activities of the 70's were due to the artificial repression of commodity pricing (inflation), and the return to normal of such schemes. The little man lost a whole heap. And there were bank casualties too.

Nor have key families in Europe. And many have stockpiled at any cost, I feel.

the same way they underestimated the growth of debt, the size of the bailouts, the growth of the internet, the scale of a company called microsoft, or the creativity of thier accountants to double, or triple account for holdings. Remember the scale caught them completely by suprise, and US organisations were the prime protagonists of the great debt lever...

Have fun

Owen

OK, a simple argument. Do you think I've got this wrong?

1. Gold is money.

2. As such, other things, things you'd like to buy, have a price measured in oz of gold.

3. Oil currently has such a price.

I simply ask, what do you think the price is likely to be?
I am not assuming it will stay the same.
It may be that you don't know, which is fine.
Presumably you expect the price of oil to rise (with all oil related supply/demand factors staying the same)?

=============

Edited to add:

I've been re-reading this thread from the start.
There are many subtleties, which require more than one reading, for me anyway.

I think my question has already been answered:

Looking at houses priced in oz of gold, we can see that in context:

For NZ:

For the UK:

from Appromity:
http://gold.approximity.com/since1930/UK_House_Prices_in_Gold_LOG_GUESS.png
from this page:
http://gold.approximity.com/gold_charts.html

An average US house costs about US$260,000, so at GoldUS$=1220, that's about 213 oz of gold.

Notice how houses in the 3 countries are very similar when measured in oz of gold.

This comment seems relevant to this thread:

from:

Top 10 at 10: 'Take vote off pensioners over 75'; Should the US print or default?; Send in the nukes?; Dilbert
http://www.interest.co.nz/opinion/top-10-10-take-vote-pensioners-over-75...

It seems to me that this is the classic paperbug paradigm, where paper fiat currencies are money, and where debt can only be repaid by more of it.

Most central banks hold gold, and for good reasons. Not enough money in the world? Only at the current purchasing power of gold. Raise it and that becomes untrue.

Steve Netwriter said:

1.
Gold is money. This statement depends entirely upon which of the 3 attributes of money to which one is referring.
Medium of transfer, for most people, the only way they define money.
Unit of account, almost no recognition by the general public that this even is an attribute of money, though unwittingly they use it many times a day.
Store of wealth, seldom, if ever, included in general public's perception of money.

Gold is the store of wealth, par excellence. Because most people regard 'money' as simply a transaction medium, gold does not meet the definition. It is not that gold is not money, rather that the term 'money', as generally understood is not broad enough to include gold. The general definition has, over time, been narrowed.

2.
Everything has a price measured in ounces of gold. But because the general public does not consider gold as 'money' (transaction medium), they do not use gold as their 'numeraire', or unit of account.

3.
FOFOA said:

Another said:

Oil Gold

Very good answer
I've highlighted that because I think everyone should read that carefully and think about it.

I don't believe it...because I don't think oil would get to $5,000/bbl
If it got to $500/bbl demand would plummet
In the recent oil spike we saw a sudden change in behaviour here in NZ. Buses became full. Car travel became "too expensive".

I'm going to have to think about this one.

Re the graphs....I'm stunned. I didn't think at the start of this discussion that I'd get any answer to my questions. That's an impressive answer, thank you

This has proved to be a very fruitful discussion IMO