The Gold Trail by FOA - December 2000

All times are U.S. Mountain Time

(12/02/2000; 11:40:02 MDT - Msg ID: 49)
An analysis for the time ahead.

The Perspective------

The world is not going back in time for a repeat of gold's historic money function. The future of gold is before us and that future holds it as an asset of great wealth, not a currency for everyday spending. Indeed, it will be more than money, perhaps a wealth beyond money!

Hello friends and readers:

For many long years I have been following this new evolution in gold. I have also been following how that evolution is changing Western hard money thought. It seems that our new gold market has only now started forcing hard wealth investors to reconsider their long held beliefs about bullion vs. substitute gold. Many of you, have also followed the Thoughts of Another from the beginning and have recently concluded that this evolution was not only a long term process, but as much political as it is financial. With years of those early writings under belt, it's easier to now see where "the events" Another spoke of, always were "fluid in political dynamics" and their impact upon the gold market's structure left little firm ground for "historic investors" to stand.

We are, today, still standing on moving ground as a new monetary dynamic works it's way through world financial opinion. Not yet completely understood nor is it often spoken of in proper context, it's effects are, all the same, very real. Half of that dynamic is the ongoing destruction of the paper currency system our entire house of wealth is measured with, dollars. The other half of this evolution is within the "transition to" and "development of" the next paper measuring system our trading economies will use. Yes, as this process is played out in our time, it seems that the Euro will perhaps be the system we will all one day use. This transition will have a tremendous impact, not only on physical gold value, it will dismantle the way gold is traded for decades to come.

Our part in understanding this--------

For the casual observer and participator in this evolution everything around us, that is financial in nature, will seem to blur as events write new rules into our once static money history. I believe this storm will become worse as many paper assets are buffeted by it's destructive winds. During this time the transition of currencies will place a more proper price on all the paper values we now hold to be so true.

In this light we should know that our real things in life will not change all that much. Your tools, chairs, cloths and cars will remain yours. Houses and land, TVs and boats, all will retain the exact same "value" they always had. What will change is our ability to use our currency and paper assets as a medium to measure the "real value" that's always so inherent in these items, yet so well hidden in our perception of today. Yes, the currency price of things will greatly change, even as their "use value" moves little. Such is the nature of dying paper money systems. Such is the ending of a currency timeline!

We of Western thoughts and values---------

The world of "Western thought", of all things financial, that we have lived in and with for so many years, was slow to evolve into it's current state. Over time we came to accept that; because "paper assets" were so often used to measure and price the "trading value" of real goods, that these paper items must be equal in "use value" to these same real goods. Holding one's wealth in CDs, contracts of delivery, stock ownership and IOUs of most every form; all constitute owning "trading value", not real ownership value. Never were they equal to the real wealth itself, for only during long-term, major inflationary expansions of money substitutes could such a fraud be hidden. Further, it could
be better said that the "trading value" our fiat money system places on these paper assets is more of an illusion immersed in "conceptual economic value", not the "use value" real ownership implies.

Yes, it's true that accounting books say we can convert all these various paper holdings into their "use value" by just selling them and buying real things. But accounting standards fail to evaluate what a "world money medium change" has done in the past and will do in the future to the holders ability to "convert and buy". As in the past, the world will deliver "real things" against "paper trading assets" as long as the medium is accepted at par with "use value".

But once a nation's medium of exchange is placed in transition to Another nations medium, and subject to revaluation, wealth denominated in the failing over expanded paper mediums must be delivered as "more of the same currency" in place of real asset settlement. This is the true face of hyperinflation.

Behind years of massive paper wealth creation, there is never enough domestic production capacity to settle "in kind"! Relief in the courts from the fraud of real goods settlements reverting into paper settlements is rare in hyperinflation; as "fair value" is often seen as also being the same as "a fair value in legal tender". During such periods, legal tender can buy equal "use value" if only the real ever changing world values would just hold still. It never does because the more intense the transition becomes, the more intense the exchange crisis and the more quickly real world values (costs of goods) will move away from the paper holder.

Reading Western Thoughts---------

Truly, there is a big difference today in Western views of holding wealth, from the "gold coins in your pocket era" from the past. The longer it has taken the marketplace to challenge these differences the more human opinion mutated them into one in the same. We see this perception firmly grounded in written opinions today. The security of holding gold substitutes in leu of physical gold has never been stronger. After 30+ years of children growing into adults in a Western paper world, only delivery default and gold industry bankruptcy will change such paper minds.

The new future of gold is directly before us as our changing money dynamic will find paper wealth illusions running in circles. Paper assets will continue to set the price of things even as the currency price of things rises faster than paper wealth can reprice the same. Round and round we will go as our system outruns itself and strains to match the illusion of past paper wealth creations against the real world of taking delivery. Stranded on the money trail of past precedents, millions of investors will lose fortunes by holding what they thought were gold substitute assets.

Nowhere will this process be more vividly seen than in our physical gold markets as they reemerge from a total paper default. During the initial default stage, the entire gold industry as we know it, both paper trading and mining, will utterly fail to perform it's function of tracking the real value of physical gold.. But once the smoke is cleared, physical gold will first soar beyond every other asset medium, both precious and not precious, then it will be at the starting gate with all other real things. Then it will again run the fastest race against the onslaught of hyperinflation.

Nothing will change the trail we are now on------------

Today, at the end of a long history of dollar use, we say that this currency's timeline is ending. We repel from the popular thought, perhaps common thought, that some foreign political order is killing the dollar. It's easy to use war like terms to describe the dollar battle as one side losing the fight against another. I, myself, use it often to make a clear point. But, in truth, it's out of context to present the transition that way. Truly, the dollar is dying from it's own old age and it's debt burden is the final disease.

The arrival of a new system to take it's place will eventually take on all the appearance of a victor plundering the vanquished. Perhaps this is the way it will be played out in our media. Indeed, the stories will be ripe for telling as investors caught holding "dollar system" dependent paper assets will no doubt paint this transition as unlawful. Perhaps even avoidable, if only somehow the right team was at the helm. Yet, reversing this timeline change will be like stopping a surging river at it's historic height of flood. Still, history is perfect in showing that no government, team or individual has ever controlled a transfer of wealth measuring power on a scale such as this. Never has and never will.

So the evolution of hard money opinion will continue and much of that change will be witnessed as the timeline ends and people learn from watching and talking. Much of that evolution will be presented on forums such as this. Some on each side will line up with their wealth bet on their best perceptions of the outcome. Perceptions built on the solid ground of history, but riding our "fluid political events" of today. It will sweep us all down the same river of evolving money history. Down the surge we go, some drowning as they cling to paper based hard wealth illusions, others surviving the trip with the heavy weigh of physical gold for ballast. All in all just continuing the interesting journey we call life.

Thoughts spoken with a background of coming hyperinflation--

It's almost impossible to compare our (FOA & Another) outcome of all this to other opinions because we have built our actions and testimony upon the one-way flow of this timeline transition.

We say "one way and one way only" and waver not! Own physical gold and position one's other
interest with regards to a changing reserve currency dynamic.

Most every commentary written that is somewhat at odds with us, uses a foundation of a continued sound dollar financial structure as it's base. Be it; deflation alone and / or deflation with some return to a gold exchange standard OR a total failure of other world bodies to reach for other acceptable alternative structures. Some say a little inflation will arrive and lift all boats within a "more of the same" dollar world. Indeed, their boats include a paper gold system and it's ongoing use by the gold producing industry. All of these concepts are yesterday's outcomes and will be washed away in this great storm.

We say the timeline is ending and will do so in a great transition of dollar use. None of these other opinion's positions can reconcile the dollars inability to compensate it's debt load at par based on it's exchange for the goods of daily life. Truly the economic structure of the US cannot now, nor ever can in the future pay the costs of supplying real goods as payment for it's debt. We, as a financial nation, have gone that far over the cliff.

Even the most unsophisticated player on the world financial scene will agree that their wealth would be subjugated to a lower par of matching the US's output ability. Today's paper wealth, if held during any pay down period of deflation or the further debt expansion a "little more inflation" would require, will be substantially destroyed. I allowed to happen, the dollar would be dumped in an accelerated fashion as a world trading medium. Indeed, the world today may float in the same economic trading ocean and our goods exchanges may depend on a somewhat level sea for movement; but we no longer all float in the same "medium of exchange" boat.

Yes, it's to everyone's advantage to see the dollar transitioned with the least disruption, but to think that our international governing power structures are all in bed together begs the rhetorical question; governments only represent a following when their private constituency's debts can be settled? I submit that the power structure that offers the best dollar debt transition settlement will receive the most support and use of it's currency bed.

A new reserve currency with gold valued at super high levels will support debt transition into that next currency system far better than a restructure of real US economic production repayment ever will. Such an avenue of escape for investors and world traders completely cuts off any attempt by the US of engineering a deflationary landing. Such a landing can be explained and distilled into many esoteric forms that bear little resemblance to a classic deflation. But all, in the final measure, require deflation and a lesser settlement of debts. It will not happen.

In our time and for the first time in the modern US dollar history, the US will embark into a classic hyperinflation for the sake of retaining it's own lessened dollar for trade use. As destructive as that might be to players in this financial house, it is better than immediate total economic failure. It will evolve in a form much like the course of any other third world country, if it's currency too was suddenly deprived of world reserve status. We will, like people the world over, learn to live with it and live in it. Truly, our dollar and economy will not go away, but it's function, use and value will change dramatically.
Thank you

FOA/ your Trail Guide

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