confronted with a situation that appears fragmented or impossible, step back,
close your eyes, and envision perfection where you saw brokenness."
- Alan Cohen
"To visualize is to see what is not there, what is not real -- a dream.
To visualize is, in fact, to make visual lies. Visual lies, however, have a
way of coming true."
- Peter McWilliams
"What the mind can conceive and believe it can achieve."
Spend Currency, Save Gold
It is the concept of becoming a Super-Producer (producing more than you
consume) that creates the need for savings. We all do this over the course of
our lives if we plan to live a long time. It is a well-known fact that old
people have a difficult time producing. There comes a time when we must
retire on our Super-Producer fruits of yesteryear.
John Locke made the point in 1690 that metal money gives men something
lasting to keep, that will not spoil, and does not infringe on anyone else's
Today, while in our producing years, we transfer our excess value into bonds.
That is, someone else's bondage to us. A SPECIFIC SOMEONE! We hold as wealth
reserve a contract that says someone SPECIFIC will provide for us later when
we can no longer provide for ourselves. These contracts are reputed to be
better than gold! But are they?
This system on its surface is clearly a Ponzi scheme, requiring an
ever-growing future army of laborers lured into debt in order to service the
Super-Producers of yesteryear. But there are bigger problems than just the
pyramid structure of the system.
Rather than staying balanced, the globe has divided into hemispheres where
one side is producing more and the other is consuming more. The producing
side is accumulating enormous amounts of contracts holding the consuming side
in bondage well into the future. So it would seem that future generations in
the West would be supporting an aging East (net-net) at some point in time.
The problem is that the trend is now visible to all. The West is shrinking
while the East is growing, both in population and economically. Futurecrash
is clear to anyone with eyes! So I ask again, are these contracts really
better than gold?
If we hold gold as a wealth reserve instead of A SPECIFIC ENTITY'S bondage,
we have exchanged SPECIFICITY for DIVERSITY. We now hold a claim on the
future services of ANYONE IN THE WORLD who is willing to work for us (for
gold)!! We eliminate the risk that our PERSONAL, SPECIFIC SERVANT may fail to
perform for us in our time of need.
In the opaque world of paper investments we must CHOOSE which entity we want
to service us in the future. Perhaps we choose a Vanguard Mutual Fund. Or a
global company like General Electric. But how do we know they will perform
for us when we need them.
With gold we have eliminated the risk of choosing the wrong entity. Instead,
we have our own small share of a future claim on the entire workforce of the
This simple difference between holding debt and holding gold is getting a lot
of publicity right now, not through the media, but through the window of
The journey through China
There was an interesting article in (I think) early '08 when the dollar was
tumbling fast. It was about Chinese merchants dumping US dollars on their
local banks as fast as they came in. In China, it was illegal to exchange
dollars for yuan anywhere except the banks. And the banks were overwhelmed by
the demand for renminbi. The PBOC was printing currency as fast as possible
to keep up with the demand, but it was not fast enough. Long lines were
forming at the local banks and some merchants were being turned away at the
close of business, doomed to hold their depreciating US dollars for one more
I think it is helpful to consider the journey of a dollar in today's system.
If I am an importer of goods into the US, I simply pay foreigners with my
home currency. But if I happen to be an importer elsewhere, there is a good
chance I will have to first buy US dollars before I can pay for my shipment.
If I am an exporter in China, I am prepared to receive both yuan and US
dollars. But for my operating expenses I need only yuan. So I must go to the
bank often to turn in my dollars.
My local Chinese bank then gives the dollars to the PBOC who prints new
renminbi ("people's currency" in Chinese, denominated in "yuan
and jiao" like "dollars and cents").
Sitting at the core of the Chinese economy of 1.3 billion Super-Producers,
the PBOC ends up with an astounding amount of US dollars which it pays for
with its printing press. This yuan inflation (printing) is a burden on the
Chinese economy which must be offset by the central bank's investment of the
accumulated US dollars in future usable wealth reserves.
Today, US Treasury debt is the primary option for such large hoards of
greenbacks. No other entity offers as large of a future "debt
service" as the US government. So the PBOC ships the accumulated dollars
back to Washington DC who spends them back into the US economy. In exchange,
China receives a contract stating that future US taxpayers will labor in
service to China.
The problem is that our debt has grown so large that we are now servicing it
Ponzi-style and with the printing press.
So the Chinese printing press (yuan) is backed by the US Fed printing press
(dollars) which is backed by Chinese REAL labor (and goods) which is backed by
the Chinese printing press (yuan) which is backed by the US Fed printing
press... and on and on and on....
Jumping back to the Chinese merchant who needs yuan to pay his operating
expenses, we must remember that he is also a Super-Producer, producing more
than he consumes. So he has an inflow of EXTRA yuan to store for future
retirement. His three choices are keep the paper yuan (not a good idea with
inflation), buy a specific entity's future bondage, or buy a share of the
entire future global workforce (gold). This third option has only recently
been made available to Chinese citizens.
If our merchant chooses gold, he settles the world's debt to him for the time
being, a debt which he can reactivate later by selling his gold in exchange
for whatever paper medium is best at that future time for obtaining the goods
and services he needs at that time.
It is helpful also to follow the path of the renminbi he exchanges for gold.
His gold dealer will redeploy the majority of that renminbi in search of
replacement gold, because that is his business. That is his operating cost.
This path leads ultimately to either the public's gold, the CB gold, or new
gold from the mines. This path of yuan seeking gold bids for the best value
from each of these three sources. This yuan is now a heat-seeking missile
aimed directly at Freegold. Multiply this effect over the entire globe and
imagine the force of trillions of heat-seeking missiles all seeking the same
thing! What do you think would be the result?
Note also that China recently offered its own bondage (backed by the printing
press) as an option to help absorb some of this massive yuan monetary
inflation, an offering that was basically rejected.
No Reserve? Yin and yang!
Let us now visualize what global trade would be like without a global
reserve currency. Most people seem to believe that a global currency is
necessary for global trade. That if the dollar were to lose reserve currency
status because of mismanagement, it would have to be replaced with a One
World Currency, or an SDR, or some other existing currency like the yuan,
euro or dinar. But is this really true?
Importers from many countries other than the United States must already use
currency exchanges in order to transact business. It is only the privileged
importers that are allowed to skip this step. In many cases, the trade is
done in US dollars even if the US is not involved in the transaction! This is
because of the wide availability and convertibility of US dollars. But if the
importer, instead of purchasing US dollars, purchased the local currency of
his exporting country, the whole process would be simplified by one step. All
exporters would receive payment in their local currency and would avoid the
need to visit the bank so often!
The only transactions which would be complicated by this change would be
those originating in the zone of the reserve currency. There the importers
would have to do the currency exchange from dollars to yuan INSTEAD of the
This simplification of global trade would eliminate the journey the dollar
makes back to the Washington DC spending machine. Each currency would only
circulate between the public within its own zone, importers and exporters,
the banks and the currency exchanges. And the exchange rate of all currencies
would match the purchasing power parity (PPP) between countries based on the
balance of trade! If the PPP got out of whack, then arbitrage would
automatically step in to equal it out. How? Through the free trade of GOLD
within each currency zone!
You see, with no global reserve currency in play, no single currency zone
will have the wherewithal to manage the price of gold. It will float FREELY
against all currencies within their own zones! And the only entities that
will NOT benefit from this transition are the US Federal Reserve and the US
Treasury! Yes, all other "evil powers that be" will benefit along
with J6P! This is why there will not be resistance once the dollar goes!
If one country exports more than it imports, a shortage of its currency will
develop on the currency exchange. This will drive up the price of that
currency, also driving up its purchasing power relative to gold which trades
in all currency zones. If exchange rates resist this gold PPP then gold will
become underpriced within that surplus zone and the arbitrageurs will swoop
in and bid it back up!
Thinking back to our Chinese merchant who buys gold with his extra yuan,
under this new system, without a global reserve currency, his purchase of
gold is one small piece of the global puzzle that both settles AND balances
Ender says it well
If you and I are allowed to buy gold with our currency, we have settled
other's debts to us. On a personal level, acquiring gold allows you to settle
other's debt to you. This act of settling others debt to me (as the case may
be) does not destroy any currency nor relieve those that are still in debt to
others of any burden. What it does offer is a means for me to buy a wealth
reserve that stands on its own merit.
Doing a little calculus, if you sum an infinite number of little gold buying
transactions you end up with a means of settlement for economies as all the
little gold bugs enter the market and buy wealth reserve with their surplus
currency. The currency remains in circulation and gold moves into its
settlement role. 'Nations' and 'States' worth of people may be seen as
settling, but the Nation and State still have the same amount of currency in
Independent of the nation state, those with surpluses that are currently held
in currencies may find that the nation state is placed in a position to
create MORE currency rather than less. That design in the system will always,
over time, create a situation where more currency will be available to chase
items that work as wealth reserve.
Now, back to the Freegold concept. Because gold is a wealth reserve, it will
work just as well for a person as it will a nation state. In the marketplace,
if gold is plentiful, its 'price' will be low. Likewise, if it is scarce its
price will be high. If a nation state marks its gold to market and thins the
gold market, it may find a high 'price' for all the nuggets the nation holds
on reserve. This implies that if the nation state does NOT SELL gold in the open
public market, all us little gold bugs (advocates) will be the ones that
offer up our gold (in exchange for currency) that helps settle the imbalances
that occur in global/national/local trade. If 60 billion needs to be settled
every month and only a few ounces are available, those few ounces may absorb
In a Freegold system, the actual gold metal market determines the exchange
rate of a currency. The nation state can liquidate/acquire less/more gold but
the balance sheets will show the change allowing the businessman to determine
where or not the currency is being managed respectably.
In a Freegold system, the incentive is for the nation state to create an
environment where the gold price is continually falling in that local
currency. If so, people will want to hold that currency knowing that they
will be able to buy MORE gold tomorrow (or in the future). It will setup an
environment where the businessman will WANT TO invest in that economy knowing
that when the payoff comes - years from now - they will be able to convert it
into wealth reserve.
Freegold is beneficial to everyone - except those that can print a currency
out of thin air that can be used to buy goods anywhere in the world. You and
I CANNOT print money. You and I can only go into debt for currency today
(Committing future work for currency today). That going in debt subjects us
to the political ramifications of the management of the currency. That may be
good or bad depending on how it's managed.
Gold stands separate of this mis-management.
And, as you may have already figured, the way the reserve-currency of the
world has been managed, gold is extremely undervalued. We are going through
the process of discovery - where those with paper riches figure out that it's
really not real until it is settled. As the settlement process accelerates,
so will the scarcity of gold.
Stand for Gold settlement. It is the honorable thing to do.
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