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"Look at that new guy, he's leaving town with a million! Must be a real successful Bro caus he only lost 9 mil to beach rot! Managed to keep some! Came here with ten million and now is on the airplane bragging to his friends. Talking about how they could leave the islands with a million too,,, if all those listening would follow his lead ////// they be rich too!
Ha! Ha! Cavan Man, I think you (and others) get my point as this connects to our new traders at the forum. With good instincts, they will rot only a little also.
(huge, oversized smile)
Climbing now
So what are we looking for when I watch the paper gold prices and comex? What gets me excited when the market begins a little move? Well, it's not the fact that it's going up, rather we are looking to see if the impact of political change is working the gold derivative's credibility yet? I am looking for some wild spurt of trading that lasts for several days or weeks. Open interest rapidly surging hundreds of thousands of contracts, then just as fast plunging away. A paper gold market, containing tremendous price changes ($100++ or more per day, both up and down) that begin to call into question the ability of Comex to function. Not so much question it's function as an price setting exchange, rather question if it can later function at all in the metal settlement process.
Where the big positions on the opposite side of the longs (shorts) find themselves in a changing world market without physical supply,,,, at almost any price. Brought on by a currency transition. Where big physical bullion dealings (one tonne ++) between real buyers and sellers,,,, outside and away from the exchanges,,,,, begins to run at a huge premiums to our contract based paper trades. Perhaps hundreds of dollars or percent higher,,,,, even impacting the ebb and flow in the coins world as misguided investors quickly sell for profits only to find no market goods later at twice the price.
In this environment, the big shorts on all paper based exchanges will be selling these new "cash created contracts" to the very limits of their capital. And trust me, they will not reach those limits because an unlimited amount of credit will be made available to them. Remember,,,,, for them,,,,, regardless of the supply,,,, the demand,,,, or the price of physical traded metal,,,, as long as the paper contract price doesn't close "up" too much,,,,, there is no risk or call on their capital. They can just keep on selling.
But, eventually (perhaps over only one day!) the outside the exchange demand for physical and it's escalating premium, will most likely see legal force from their physical buyers driving long players to demand delivery. Even if it cannot be delivered. Long,,,,,, longggggg,,,, before these delivery demands ever fully surface, comex will state position limits, cash settlement and trade for liquidation only. For you new people, this is exactly what they did during the Hunt silver fiasco. They have to do this because the articles these exchanges were created under manifest these trading places as price setting and price hedging establishments. Where the greatest majority of their trading is meant for cash contract settlement, not physical delivery settlement.
In this light, only Gold Advocates understand that default on Comex is really the forced non metal settlement of a contract at a contrived paper price. A price far below the physical traded price. Most likely a last day of trading price that settles out hundreds of percent below the world price for physical metal trading,,,,,, as it appears the very next day.
The big difference today (from the HUNT problem then) will be in the nature of this default. His was brought on by private investors buying a commodity. Today, gold market default and failure will be forced upon the dollar gold world by a sudden lack of "price setting" credibility. And that loss of credibility will stem from the stressed conversion of dollar contracts into Euro denominated units that demand "market based performance" (physical priced valuations) or an escalated (higher) Euro based cash settlement. This all will manifest in a lack of credibility in paper dollar gold trading that can no longer be marked to the market at the same value of physical gold.
This failure of price matching,,,,, this failure of contract conversion into metal,,,,,, this failure in the world gold market to any longer be able to correctly price real bullion,,,,,, will lead to a wholesale dumping of all dollar contracts that have US based performance,,,,,,and start a fall away of all dealings based on present protocols dollar market gold exchange.
As a side note: This will not apply to the paper silver markets as silver will not have the Euro vs. Dollar political struggle. A struggle where the ECB members are trying to loosen their main asset (gold) as a reserve wealth backing to replace the massive loss of dollar reserves. Remember, further back on the trail we covered how these reserve dollars will be simply cast down. In this light, silver trading will bear the brunt of selling in an effort to balance loses from a gold exchange that no longer works. Because silver has no hope of an official free market, it's paper pricing system may run amuck until it's price plunges to??? This is the reason so many countries that are contemplating a switch from dollar to Euro use are selling physical silver and buying gold (China, India, etc). It also explains to movement of gold between countries that planned outright Euro conversion.
Back to gold's paper pricing breakdown:
It will not lead to the collapse of world banking so much as it will lead to a reallocation of value between assets vs reserves. Which are and which are not. Further, a loss of paper exchange trading will drive gold to it's true physically traded price. Gold in the tens of thousands per ounce will represent:
First
,,,, it's real currency value in today's expanded fiat world,,,,,,, then later it will advance further on the price inflation coming to the USA. This is where so many thinkers cannot see super priced gold. They are seeing the present illusion of gold value as it's base. Later, a gold move from say, $10,000 to $20,000++ will only represent a 50% rise. Liken to an oh so understandable $300 to $600 today.
Second
,,,,, the total rejection of owning gold in any form except the real thing,,,, no amount of gold supply will come close to equalizing this current ownership imbalance built up over many decades. If anything, sellers will be confounded as nothing keeps pace with the gold rise. Once sold, it only costs double to rebuy.
Third
,,,,, a return of old world values in that gold is worth owning as a lifetime wealth asset beside your cash and other investments,,,,,, While the US will experience a massive retrenchment of it's wealth perceptions, our move into gold will be chaotic and traumatic. Other parts of the globe will fare well. Life will go on. Remember, people talk about how the US makes a quarter of the worlds products and services and say the rest of the world cannot do without our operating as usual. But, they forget that we consume all of it (that 25%) and then import more. Our production fall away will mostly be at the mercy of our own slow down. As the dollar tumbles on exchange markets, so too will our cost rise to produce anything (massive hyper price inflation). Rendering a net / net non gain in world trade advantage. In other words, our goods may very well rise in price faster than our dollar falls. If anything, we become even less competitive with Euro based production.
Further Onward
This new realigned price of gold will offer no threat to the Euro as it does to our Dollar. The open gold value calculations by the ECB proclaim their intention to allow gold to rise as a Euro enhancement. Not a Euro replacement item. Remember, old world values dictated that gold was
not a competing money any more than Microsoft shares are against the dollar today.
Gold, from times past was a wealth asset more so than it was in the form of money. Granted, it became the fastest moving form of wealth, but as it traveled on the road it was still simply seen as a tradable wealth. It has been American and Western ideals that made gold a lend able money and forced it's competition against failed currency systems. We set currencies in fixed gold amounts and then inflated the currency. No wonder gold competed against currencies. The ECB will allow gold to go to the moon and everyone will love them for it. People will use the Euro whether gold is at 1 Euro or a trillion.
Arguments against this new logic (by failing Gold Bugs) are little more than a throw back to their outmoded Western money logic. ET (a USAGOLD poster) even thinks that by freeing gold to rise to whatever level it wants,,,,, we are somehow governing it??? That direction of thinking is caused by "promoted investing". The logic is to somehow invest in gold (the industry or it's paper leverage) more so than owning the metal. Leaving the agenda of physical gold storage to be something the official governments or private enterprise should do for us. They base their concepts on a return of gold recognition as a somewhat official government money after price inflation discredits the local
currency (Dollars).
Such logic suggests we buy into the various SEC sanctioned (government) paper gold substitutes while governments somewhat allow a devaluation of their money against gold. Say to $800? In this way the dollar is saved a little while the gold exchanges continue life as before. This, my friend was a failure in the past and the future will provide a very different rendering.
Higher we go
We have named our big fish and it is Allan himself! The old Gold Advocate, from way back, that knows how to use gold as a system saving tool when backed into a corner. They have reclassified some of the American gold for use later. It is still ours now, to be sure and has not been swapped or sold. It was renamed with the full intentions of our ESF buying dollar reserves from Euro CBs (and others) as the Euro later gains usage (and value) independent of the dollar. In light of the Blair vote, I would rate their move as very smart. This was done (and will be done more so later) to provide backing and settlement against US paper gold commitments owed to and already delivered into oil ownership. This paper is mostly in Euro banks.
This was "part" of the price we paid for oil to flow in dollars this last decade as the Euro was born. This was the price we paid for an extension of dollar use in oil settlement. It will be moved when gold trades at a much,,,,, much higher price. It backs Another's point of long ago that oil was traded for gold in the thousands at that time,,,, we just had to wait for the real price to be shown. It will!
This is the decades long game we are playing for, my friend. This is the big one we own gold for. This will be the defining moment in our time that changes perceptions about the value, reserve currencies and the wealth of ages. Watch with me now, as events prove all things!
Thanks, Cavan Man
TrailGuide
---- good words ----
and reply further myself.
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------ "Thanks for working so hard for us, as always" ----
Thank you, Mr GRESHAM (smile)
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------ "Can ya imagine the parallel to UAW autoworkers in the 80's who were smashing foreign cars?? How about out of work financiers rallying in downtown Flint against those "Euro lovin' traitors" who own gold just to undermine the great USA?? I'm beginning to wonder if finding some cozy place in Europe might be a wise move someday." ------------
Ha! Ha! DRAGONFLY, don't be too hard on humankind! If you decide to go to Europe, keep a place here also. We are not so bad, just like most of our extended families,,,,,, hate some and love the others! (grin)
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------- "And not to forget MK's latest essay - it's a-(u)wesome." --------
COBRA(too), don't ever make the mistake of debating MK! I can see his mind and those letters stand for "Money Knowledge"! (smile)
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--------- "Dollar use has expanded in the world over for almost 30 years without being tied to gold, therefore Euro use should do the same. Dollar used the idea of forced liquidation of contracts in 1971, therefore EU should the same in 2002.---------------
GE, just follow your own trail, sir. It will connect to ours soon enough. See you there.
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---------Professor von Braun's latest update at The Rocket School of Economics,,, Excerpt from "Lecture 38"-----
Hi there, RANDY at the TOWER! Your input did not go without thought. The professor is real sharp and understands political power. Just look at how Placer Dome has just been forced to formally relinquished it's holdings in a major south american property. Between Bre-X and government grabs?????? what a place for us to put our wealth?
Further,
People forget to consider that taxing power is greater than takeover power for governments. When gold was money in the US, it didn't generate much tax revenue on it's sale. So, they grabbed the cash that at that time was in the form of gold. They didn't make any friends, but you have to admit it was a smart move.
But now it would most likely be reversed. Especially if the wealth reserve (gold) most world nations hold (the US will have a lot less a little later) becomes better taxable as the result of rising prices. In other words, there is no way governments today will grab gold if they can tax it's trade and production at far higher rates to gain fiat bookkeeping income. This avenue is part of what is behind the Free Gold drive that so few can see.
ORO rightly argues that high official taxes are what drive away all economic business endeavors and kills the tax paying goose. However, if the world's greatest wealth asset (gold) can be put in such demand that it's price starts a long steady climb,,,,,, without it competing with fiat money,,,,,, the mines will stay in production even if production is taxed to death and controlled by a new "Texas Railroad Commission". (Thanks Randy #56039!) Let's see, years from now, a mine produces gold at a gross dollar cost of $1,300 and ounce,,,,,, then sells for $27,225 an ounce,,,,,, the government taxes $23,000 an ounce,,,,,, Yup! they will make some good profit on the amount of allocated production they can do.
Just like oil today,,,,,,,, Free Gold is a good deal for tax income. And most gold industry workers will stay in their jobs (although some layoffs will happen) even though it's a dirty, almost break even deal for mine owners. Their business would only get a fraction of the profits from a huge rise in gold bullion and their shares would wallow in uncertainty as gold soars. But, then again, didn't your buddy Will Rogers say something about American risk takers,,,,like:
"staying out of the governments path with your investments is the second national pass time behind baseball"
Ho! Ho! That Will was something!
So, the future may just be a great deal for bullion owners as gold rises! Yes? Even old Aristotle would not have to sell and pay taxes,,,,,, at least until he wanted to sell to buy a better lifestyle. Yes, this is the reason that gold production is today and will be later such a bad investment.
Compared to bullion and rare coins, that is! *[With their regular capital gains tax rates.] *(Ed. note: appended according to following post)
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---------------- "CALL ME SIMPLE, CALL ME WHAT EVER...... BUT THAT BAGS IT FOR ME" ---------------------
OK, BUENA FE! You are on the team,,,,,, onward! (smile)
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------ "I do not understand FOA's statement that because the ECB decrees it, gold will not be anywhere, lent or borrowed. Seems to me that what I do with my gold is outside any jurisdiction of the ECB, and the same is true of many others" ---------------
Actually GOLDFAN, your feelings were easily comparable to those of drinkers during our American prohibition. Alcohol was against the law but people did it anyway. In many ways people's actions are the free market that is so powerful against government laws. During the war, everything from cigarettes to rubber was rationed and outlawed from typical use. Still, the market often overcame the law. Heck, even today, drugs and any number of other illegal activities are done as the law has little ability to stop the same.
But that's not the kind of law what this vision of a Free Gold market will depend on. These examples above outline rules and laws that restrict actions. For any wealth law to have an effect, it would have to be a known official protocol on the recourse side of disputed claims. Almost like how the dollar Legal Tender is a law in the US and mostly a protocol in the rest of the world. It regulates how you settle currency debts everywhere but has no real jurisdiction overseas. Except through IMF agreements.
On gold settlement, the comex did as much when it changed it's rules on silver during the 1980 hunt fiasco. By stopping the hunts from settling their futures contracts in physical silver, they stopped real people from dealing silver thru contract. At least on that exchange.
I don't expect the EBES (Euro Bullion Exchange System or whatever type name they use) to act exactly, but in the same spirit. No one is going to tell anyone they cannot enter into gold contracts. Sure, we will be able to borrow, lend, option or sell gold all we want. But, unlike those overt alcohol laws during prohibition, today's gold party people be able to drink all they want. (smile) That is deal in all the gold collateral you want. But, if any of those deals go bad because the other side wants to walk, instead of deliver, you will have to settle in cash. In a Euro court of law, no one could bind you to physical settlement if the deal was in Euro Legal Tender. Even if it was in the contract. You would have to accept cash, if contested.
Now, some say this will simply drive all gold deals outside Europe. That's thinking in the present context. But in the future the dollar reserve and it's credit gold market will be in a shambles with people running all over the globe just looking for a place to deal gold at all. Credit gold will be a joke by then as trillions of losses will be outstanding.
The effect of all this would be to drive most every portion of physical gold dealings into "on the spot" buying and selling. Mostly in Euros. A mine could still borrow, using the value of gold as collateral, but it would only be the "cash value" of that gold that could be used in settlement (if the deal went to court). OR physical settlement if both sides had no problem (and stayed out of court).
This kind of legal protocol change, not unlike changing comex rules of trade, only affects the financial side of gold and in no way restricts investors from cash spot dealing in physical gold. Again, it would force the world gold markets to adjust away from copying the old dollar markets that so manipulated the physical gold price in the first place. Of course, no one would be trying to deal gold in dollars then anyway.
In reality, very little physical gold would be borrowed, either ahead of production or from world stores to sell into the spot market. If one owned gold and wanted to liquidate to buy something, you would sell it, pay taxes and use your dollars ,,,, errrr Euros! Gold would, over time, rise to reflect it's real reserve value to both central banks and private owners the world over.
OIL, governments, corporations and families would once again all be buying real gold for the historic wealth value such a metal imparted to a portion of their total asset savings. The demand for gold would once again be generated for it's main "historic utility";
"a wealth no social group could inflate thru monetary credit use"
Gold would would then become a moving tradable asset that tended to value currencies in parallel. A wealth without a country or sponsor. If one preferred to see as MK might, as a money without a country, that's good too!
The effect would be the same. The physical price on gold would respond to the ebb and flow of a rare metal no different than the ebb and flow of currencies today. As the always present inflation tax took away from fiat, as it has done from the beginnings of time,,,,, so too would the various gains taxes take from gold as it was traded for cash to buy things. There would be no monopoly of either over the other. The wealth utility of gold would be matched by the necessity utility of digital money. Fiat would be inflated at "whatever rate" as it stayed in settlement use. Investments would be made and lost, no different than today in our largely "ungold" fiat money world. Only for gold, then, it would be purchased for it's longer term ownership by both official and private interest.
If there is one redeeming consideration here,,,, it is that gold, separate from all money issues, would rise to reflect all the wealth inherent in the world. Just as it's value did in ancient times. But remember, when trying to compare values back then, that bottle of olive oil was worth so much more to life than an equal item is today. However, our modern world has a 1,000,000 times the total wealth as existed back then. Truly, gold has a long journey of price appreciation before it even begins to slow. Our children will not see it's full value reached.
Will such a transition be stopped? Not if it benefits the purpose of everyone and this certainly will. Is it the best? No, I think ORO's directions are the best, but the world has proven we will never live with it. Much less even try to return to it. War "times 2" will not bring us to gold money again. Besides, we live in today and tomorrow, not the past and we have changed our economic dynamics far too much for gold to ever be used as credit money again. Yes, the dollar will fail and it's whole economic system will slowly (or quickly) fall away. But, we are an energetic lot and have already planned the next replacement.
So onward we hike to see how the path turns.
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OK, enough for now. (smile) I want to thank everyone that read, commented or considered these thoughts. Both here and on the main forum as well as OROs great works. I'll reply more to other's posts when I return in a few days. Perhaps then Journeyman and I can go out for some burgers and beer on the USAGOLD Forum,,,,,, while we talk about our differences on gold (smile).
Thanks ALL
TrailGuide
OK, good day to all
(smile)
USAGOLD - Centennial Precious Metals does not endorse, assert or stand behind the accuracy or reliability of opinions, advice or statements made by any of the participants of this forum. These postings do not purport to give legal, accounting or investment advice. For that the services of a competent professional aware of your specific situation must be sought. USAGOLD / Centennial Precious Metals disclaims any personal liability, loss or risk incurred as a consequence of the use and application, either directly or indirectly, of any advice or information presented herein.
© 1997-2012 Michael J. Kosares / USAGOLD All Rights Reserved
Hello everyone!
Well, it was some trip,,,,, and yes I did catch some fish. Person has to eat you know (smile).
Now,,,,, fishing is a slow sport at times and leaves time for conversation with others on deck. And because this little boat had room for more than two,,,,, there were a lot of Thoughts to talk about,,,,,, even during the dinners of our catch.
So, I be reading some of your recent conversation on the USAGOLD FORUM, and return to deliver some promised letters, thoughts and hikes. Good to be back (smile).
Thanks
FOA / Your TrailGuide