|
|
Feeling unknown and you're all alone
flesh and bone, by the telephone
lift up the receiver, I'll make you a believer
Take second best, put me to the test
things on your chest, you need to confess
I will deliver, you know I'm a forgiver
Reach out and touch faith
Your own, personal, Freegold
Paying for
Profligacy
The financial people of the world, Wall Street, and the "big money banksters"
have all been bailed out by the Fed, the US Treasury and Congress through
TARP and dozens of other Ponzi schemes. In addition to these bailouts, the
Obama socialist dream including the ill-conceived stimulus plan has, and is,
being funded totally through public debt. Does this mean that you will owe it
all back in the future? Does it mean that you, your children, your
grandchildren and your great grandchildren will be paying for all this
profligacy and theft sometime in the future?
No it doesn't! The fact of the matter is that transfers of real wealth always
happen in the present. When you borrow money, you are bringing your future
earnings into the present and spending them now. So, in other words, you are
acquiring real goods and services in the present and promising to work it off
in the future.
But what if you die tomorrow? Or what if you go bankrupt in a year and never
pay off your debt. Or what if hyperinflation makes it possible for you to pay
off your debt with a single gold coin in your pocket?
Let's say you borrowed $100,000 to buy a fast boat. You now have a boat, a
real hard asset transferred to you in the present. Someone somewhere had to
work hard for many months to build you that boat. And now that wealth has
been transferred to you in the present for nothing more than a promise of
future payment. And as I have recently shown, that future payment is far from
guaranteed.
So if all transfers of wealth always happen in the present, how should we
properly view the transfer of wealth to Wall Street and Washington, DC by
pure government fiat, that is happening right before our eyes?
First of all, we must understand that in today's world, this transfer of
wealth will NOT be paid by our children and grandchildren in the future.
Instead, this theft of present real, hard equity will be paid in the present,
right now! It will be paid through the total loss of purchasing power by
anyone holding dollars, dollar denominated long term contracts, dollar
denominated bonds, or dollar denominated Ponzi paper promises of any kind
including annuities, corporate debt, and even those promises made by the
present Congress of the United States of America.
Our future obligations like Social Security and Medicare will not be paid in
this way. In fact, they may never be paid at all. But the current debt will,
as will the present transfer of wealth to Wall Street and Washington DC!
(See: Washington, DC - BOOMTOWN in No
Free Lunch)
The good news is that there is a way for you to avoid paying your share. If
you are a good little socialist that would like to pay your fair share of
Washington, DC's present profligacy, you can stop reading this blog right now
and turn on CNBC. Just follow the advice you hear and you will be sure to pay
your fair share!
Gold Standard?
There are plenty of blogs about what we should
do as a society. About how we need to start a new gold standard; a return to
honest money. How we must return to a hard, commodity-based currency that
will restrain the profligate governments and their greedy bankers from
inflating the money supply at will. But what we must understand, what is
often difficult to understand, is that there is a big difference between what
SHOULD happen and what WILL happen. There is a difference between FIGHTING
for something and simply OBSERVING the real world to plan your next move.
There is a difference between being an ADVOCATE or PROPONENT and being a
PASSIVE OBSERVER of the changes we are actually living through.
This blog takes the latter position in all of these cases. If you would like
to be an activist for a better world, this may not be the blog for you. But
if you are a hard working producer and a saver worried about how to protect
your purchasing power from the hungry collective, this blog may be just what
you are looking for!
Money Versus Wealth
Modern man has dug himself so deep into the hole of debt that he will never
get out!
What I mean by this statement is that he will never again accept a 100%
Pay-As-You-Go monetary system. This is not to say that every man in the world
wants it this way. Indeed, most of "our crowd" would like to go
back to a gold standard of some sort. But for the Global Collective, this is
simply not acceptable.
As we know, some nations, corporations and individuals are already so deep in
debt that they will never get out. But what I am talking about is mankind's addiction to
money being a form of credit. Man can no longer live with the idea of a gold
money that cannot be inflated. Better said, "if you cannot borrow it,
lend it or inflate it, it's not a money we can use."
It is with this understanding that I attempt to show you how natural
evolution is returning to those of us that wish to live a
"pay-as-you-go" lifestyle, the most important role of gold: the
store of value function! The ability to retain hard-earned purchasing power
intact, over any
period of time.
The idea of any "basket" of finite commodities used to back a
"super-sovereign currency" is this same supposed "perfect
vehicle" as the old gold standard. It is the same concept that we used
to tie gold into a credit inflating system. Just as the early bankers did by
first promising to issue singular gold storage notes instead of circulating
actual bullion through the economy.
It didn't take long for the basic cravings of humans to demand a subtle
change in the workings of that system. That is, "lend us some of those
gold receipts so we can buy a better lifestyle today and pay for it
tomorrow". "If later we cannot pay for it, all of us will get the
rules changed so you bullion storage guys can just print some more gold
storage receipts".
Any "commodity basket" currency will ultimately be inflated beyond
the commodity itself, punishing those who save that currency as if it truly
represented those commodities.
Think of the IMF right now printing a trillion brand new SDRs, supposedly a
balanced "basket" of national currencies. Yet they can print them
at will, whenever the global collective demands more money. Remember, the
collective demands that money be available whenever it is needed, no matter
what money is declared to be!
History has proven that when real wealth units are tied to our credit money,
credit inflation blurs our ability to measure our worth. It is for this
reason the Austrian definition of monetary inflation is so important. To view
inflation only as it is reflected through rigged CPI pricing measurements
removes the perspective necessary to see what is actually happening to our
paper-denominated wealth.
And once again, we as a society make the demand that drives the "buy now
pay later" illusion. So, our demands will be met with bankers' supply in
the form of more Ponzi credit IOUs for gold, or commodities, or national
currencies (or whatever) that doesn't actually exists. Both then, now and in
the future!
Further, people today never value their wealth in terms of other wealth
items. Such as in an ancient "gold wealth barter system" context.
Modern Western thought cannot conceive this because there is no standing
wealth medium that can mark to the real market all forms of real value! Gold
is and was the only wealth asset that could do this well. Again, as long as
gold is tied into a money credit system - as the dollar reserve still tries
to do - its value will be subjugated by the credit inflating needs of
society. In this function, gold cannot be saved as a "wealth asset"
that measures our true worth. A worth that carries our savings from
generation to generation. But it will again... soon.
Be HAPPY that our collective WILL NOT go back to a gold standard, but will
instead leave gold FOR US as a stand-alone wealth reserve asset that will put
anyone who holds it on an equal footing!
Official money has always... ALWAYS been a political beast. As I said in a
recent post, when the collective decides it needs money, it will have it. It
will take it by force, or it will print it. Always has... always will. Even
if we returned to an "honest money", this simple fact of life will
not change!
Another simple fact of life: The people want credit! They don't want to
"pay as you go". Ever since the concept of money and credit
combined, this has always been the case, and it always will be the case, at
least for the rest of our lifetime.
This is the basic reason modern economic systems use a fiat as their trading
unit. Barter along with its finite payment is no longer wanted as a trade
vehicle. You see, once society has a "money" unit declared and
usable, the credit expansion qualities of said fiat money are restrained by
tying the "transfer of ownership" to some physical barter unit. In
other words, gold only gets in the way of man's socialist credit expansions.
If we combine credit with "honest money", the "honest"
money supply becomes automatically inflated and subsequently DISHONEST as a
store of value. This is unavoidable. It happens in a gold standard, in a gold
exchange standard, and today, under the global, purely symbolic fiat
"trust me" standard.
Money is always subjugated to the needs of the state. And when it is, who
pays? The savers do!
Here is a simple equation. (Savings) = (Production) - (Consumption).
And another one. (Debt) = (Consumption) - (Production).
Production and consumption both happen in the present. Savings and Debt
represent the belief that this PRESENT transfer of real wealth will be
settled some time in the FUTURE. This is not the case today! To believe it is
to put your faith (and savings) into highly flammable paper "promises to
pay" as some sort of rickety store of value.
The monetary economy is like a see-saw, with money on one side and all the
real, solid 'wealth of the world' on the other. As the money supply is
expanded and diluted it is weighted down driving up the nominal value of all
real wealth.
In our modern world of collective control over money dilution, any real,
solid wealth item tied to the monetary system is wrongfully placed on the
money side of the see-saw, and must be taken down in value along with the
money.
Freegold is different as it places gold opposite the money supply for the
first time in history! Gold can still be held as a wealth reserve by the
money-diluting collective, but it will automatically offset any profligacy by
rising in price as money is weighed down through printing. Gold will be truly
demonetized. We are almost there. All that is left is for gold to break the
chains of the dollar, the Fed, and its proxies like Goldman Sachs and JP
Morgan. We are so close!
Freegold for
Everyone!
I will now demonstrate from a practical perspective how the transition to
Freegold will work using the ECB as a primary example. This same, simple
principle demonstrated by the balance sheet of Freegold's very own architects
will also work on all scales, even for you as an individual. Yes, you can
have your own, personal, Freegold!
July 7, 1998 – European Central Bank decides to hold gold
The Governing Council of the European Central Bank, in one of its first
pronouncements, decided that gold
should be included in the initial transfer of foreign reserve assets to
the European Central Bank from the national central banks participating in
the euro area, to take place on the first day of 1999 (the date of the launch
of the euro as a single currency to replace the existing national currencies
of the 11 countries initially joining EMU)...
The ECB agreed that 15%
of this initial transfer should be in gold with the remaining
85% being transferred in foreign currency assets. It was made clear that this
would not affect the total consolidated gold holdings of the ECB. Also there was no implication that
the ECB would maintain a constant ratio of 15% of its reserves in gold in
future.
This decision indicated that European central bankers continued to believe
that gold
strengthened the balance sheet of a central bank and enhanced public
confidence in the currency it issued. As one of the
world’s major central banks had with this decision reaffirmed that it
needed to own gold
and to show gold on its balance sheet, in that sense this
decision symbolized the
failure of previous attempts to write gold out of the system.
So, upon establishment of the Euro, the plan was that each of the 11 initial
member states would have to transfer reserves of a value around 40 billion
Euros per country (depending on the size of the country), and that 15% of
those reserves had to be gold
metal! That was step one. Put 15% of your savings into physical gold!
Step 2 said that going forward there is no need to worry about keeping the
physical gold portion of your savings at 15%. Just do it once and watch what happens!!
Remember, this was 1999. And ever since they have been net sellers of gold
under the control of the Washington Agreement which was signed on Sept. 26,
1999, renewed on Mar. 8, 2004 and again on Aug. 7, 2009.
So in 1999 they put 15% of their savings into gold. Since then they have
liquidated a small, controlled amount of that gold on a regular basis. Now
let's take a look at where they stand today, in 2009!
ECB International Reserves
Today the total ECB reserve assets stand at 428 billion, including foreign
currency reserves, IMF reserve positions, SDRs, foreign assets and, of
course, gold! 428
billion Euros total. And the gold reserves now total 233 billion Euros.
So in the past 10 years, through many liquidations, that 15% has now grown to
54.4% of the total
reserves!!
But wait! There's more. Have a look at this news article from last Wednesday,
Oct. 7:
ECB-Gold reserves up 6.26 bln euros after repricing
FRANKFURT, Oct 7 (Reuters) - Gold and gold receivables held by euro zone
central banks rose by 6.26 billion euros to 238.169 billion euros in the week
ending Oct. 2 after a quarterly revaluation, the European Central Bank said
on Tuesday...
Gold holdings rose because the
quarterly revaluation more than offset the sale of 15 million euros
worth of gold by one euro zone central bank, consistent with
the 2004 Central Bank Gold Agreement, the ECB said.
So in just this latest quarterly report filed on October 7th covering through
Oct. 2, 2009, despite selling more gold, the ECB's total gold holdings ROSE
another 6 billion
Euros through the simple process of marking to market the
gold held in reserve! You can see it here on the official quarterly financial
statement, line 1 (a seriously bold position to place a very serious wealth
reserve... LINE 1)...
ECB Consolidated financial statement - as of Oct. 2, 2009
So let's see. Just in the past quarter of 2009 those ECB gold reserves have
swollen from 54.4% to 55.6%!
Can you see what is happening? Can you see what will happen when gold heads
for the moon? Can you see how "dollar reserves" are becoming less
and less significant at exactly the same time as physical gold is taking over
the balance sheet?
This is why China is buying gold. Very soon China's balance sheet will be
swelling in size even as it writes off its remaining dollar holdings. They
will become worthless. Even so, their balance sheet will EXPLODE in real
value!
Now think about your personal balance sheet. Think about your savings. Would
you like to lever your savings so that your
purchasing power is preserved even as the dollar is devalued? Or would you
rather lever your savings to EXPLODE in purchasing power as gold explodes in
value?
In the 90's it was fairly common advice to put 10% or 15% of your portfolio
into gold. What do you think was the reasoning for this advice? Can you see
now that we are living the last days before this "insurance" will
pay off big time?
Somewhere between 0% and 100% lies the exact percent that will perfectly
preserve the purchasing power of your savings today. Anything above that
number will EXPAND your real savings as we transition into Freegold. Anything
below it will DIMINISH your purchasing power. So what is the magical number?
No one knows. It is unknowable! Is it 1%? Is it 5%? In my view it is probably
somewhere between 3% and 10%. But as I say, know one knows. This is why FOA
said the REAL LEVERAGE is in physical gold in your possession. Not in
leveraged contract paper!
When you buy gold coins, you remove your savings from the reach of the
collective. You remove your wealth from the expansionary, dilutionary
practices of the entire financial industry. Have you noticed how even good
companies like to inflate their stock by issuing more? It's called stock
dilution! The entire international financial industry is at risk right now.
Remove your wealth from the system! Don't end up paying for the collective's
profligacy WITH YOUR SAVINGS!
Some day in the future we will know what that magic number was on October
10th, 2009. And anyone who went double that number, doubled their savings...
and so on. Imagine if you put 20% of your savings into gold coins! Or 40%!
How about 80%? Or even 90%! Or, God-forbid... 100%. So grab your calculator
and have some fun with numbers! Just remember to go with a percentage that
matches your personal level of understanding and comfort. This is the best advice
I can pass along!
Sincerely,
FOFOA
FOFOA is A Tribute to the Thoughts of
Another and his Friend
Donations are most appreciated, just click
here
Also
by Fofoa
| |
