Freegold in the Proper Perspective

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Published : December 09th, 2010
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I can see that we have a few new faces here. We even have some fast talkers! That's fine. Perhaps they have something useful to say. Perhaps not. In any case, new visitors often mistake the term Freegold for many things it is not. "Aristotle" is one who I greatly admire, for he took this journey long before me. And the records of his discoveries along the trail have been preserved for all who wish to follow. In my last post were these words from Ari:

"After a period of slower talking and deeper thinking, I arrived at a position with a realistic eye on the middle ground giving me clearer monetary understanding as it works in the real world…"

Freegold, in my opinion, is not a competing monetary theory. Nor is it a competing financial system. It is much more than these subjects of frequent debate. In my world, Freegold is a way to view unfolding events as they happen. It is a view of the valley below, as seen from a high vantage. It is a cypher for understanding what we see. It is not a description of what should be. Instead, it is framework, different from almost everything else you are reading, in which you can interpret unfolding events in a different light.

FOA: I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future; grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light.

Some of you may have noticed that I added a quote at the top of the blog. It is the first line from Another's first post,
found here, and it goes:

"Everyone knows where we have been. Let's see where we are going!"

I think this one line really encapsulates Freegold and the reason why I started this blog 2.3 years ago. It is also the reason why Another began posting. Clarity in orientation like this can often be found in very first posts. Notice that he did not say, "Let's see where we should be going." He also did not say "Let's see what we are going back to."

FOA used the analogy of a river for the forward flow of time. Many times he used this analogy, and the first and fullest description of his view on this concept is found in his first post (imagine that!) on
The Gold Trail which came 2 ½ years after Another's first line above:

We must view the world in a broad context, just as much as in a detail perspective. The larger perception can be just like looking at a river the valley from the ridge above. From far away it's easy to see what direction national trends are flowing. The whole body moves as one, always towards the sea. The problem comes when we get too close and interpret things using only a small river section in front of us. More often than not, the white water we see only hides a deeper flowing truth.

In like sense, national governments and society in general, are the same as those boulders and eddies in the river. Seen up close, they sometimes give the impression that the river is flowing up stream or sideways, when it's only one small section of a larger political will. The same is true in the modern gold markets. The largest part of the river could be flowing in one direction with an unstoppable purpose, but the various swirls and eddies make it look like it's going in circles.

He continues, with a reference to many "conflicting factions":

Within every social order, people have conflicting factions that try to dominate the whole. But if one can understand and pinpoint the logic and reasoning of several dominate groups, we can get a grasp for the overall eventual flow. We have seen throughout history and in our modern life that the human spirit most always reaches for, and leans towards, natural conclusions to ages old problems. There is something in us that makes mankind flow this way. Time and again we build up our emotional will. Then in a great flood we literally overwhelm the branches and rocks that distort our progress through this stream of life.

Today, it seems that the need for this natural flow has been perceived by several of the world's large groups. We see this in the progress of the gold market to date and it is something we have been discussing publicly for several years now. We have given many different perceptions of this changing modern gold market. Each appropriate to its own period of time. Indeed, they were snapshots of political will,,,, each taken in the context of the moment,,,,, all documenting the evolution of gold as a new force,,, a new player in the world today.

Truly, the stream is being prepared for the great flood that must come, will come!

A year and a half later Another withdrew from posting comments permanently. Exhausted from what FOA called "ears that bite," Another declared, "tell them right now our position and walk away, it's over!"

I ask you; were these the words of an advocate, someone who was advocating for a specific change? Or were they the words of an observer, or an inside participant, attempting to share some vital information with outsiders? Were they the words of someone who was proposing a new system? Were they the words of someone who needed you to understand in order to effect the desired change? Or were they the words of someone who hoped you would understand, for your own wellbeing through the change that is coming?

People often demand that Freegold be reduced to a few lines of description. An abstract for the Freegold concept is what they want. They say that if there is inherent truth in Freegold, that is all it will take and the truth of it will be evident from just a few words. This is all well and good. And attempts at this have been made. But experience has taught me that any reduction of this concept and the reflex of the reader is usually to dismiss it. That reduction does no favors for the concept, or for the reader. And that it is only after long consideration that the truth begins to emerge. Luckily, it is not a concept that needs you to understand.

It is also not a concept that you need to fully understand in order to share in the benefits. As long as you are buying physical gold bullion and coins, you are on the right trail. But what I've seen happen is that the more people understand Freegold, the larger the position they take in physical gold. I have yet to meet anyone who has shown me a deep understanding of this concept along with a reason to NOT buy physical gold. In fact, this is my advice to people that ask how much gold they should buy: Buy only as much gold as you understand. In other words, only what you are comfortable with.

Here is more FOA from right after Another's withdrawal:

Looking back, Another was a true master of understanding people's thought processes. He knew that none of us, that's you, me or any of the rest of us raised inside a background of American financial understanding, would ever accept his position thrust; with him just spelling it out in the open. Especially when this whole financial / political transition has been taking place over more than a decade and a half. By the way, he started this some decades ago. So, he decided to ask readers and listeners to think for themselves; by presenting bits and pieces of the flaws in our "Western Thought" as others saw it and as it pertained to his world of gold and oil. Not wanting to prove anything, while asking us to prove everything for ourselves; as these long term events unfolded.

I understand that there are a large group of basic individuals that fully understand our line of what is happening and are buying gold. What I never envisioned was how many groups make up the gold trader crowd; all standing apart from the Physical Gold Advocates. Further, I never thought they would segregate into so many vocal tribes, each trying to advance their own minor position in the gold world and willing to step all over themselves and anyone else in the process. I find it all a real show / play to watch as it truly demonstrates the very human dynamic Western governments have use to distort modern gold thought. I now understand that Another did fully grasp just how distorted this chain of thought was and went around it all by waiting for events to completely destroy their concepts; instead of debating with a host of gold tribes.

In the end, physical gold will win out and prove to be the greatest wealth holding anyone has ever known. Unable to grasp that only a transition of political influence by old world players can break this modern American Western hold on gold, these tribes are vulnerable to the same government influence they long for. Their wealth will be portioned by those same Western governments as world political reality forces our American leaders to embrace a world "free market" in physical gold. While abrogating, thru taxes and windfall appropriations, all forms of paper gold ownership.

Today they chant; "we want our leaders to recognize gold again"! OH, it will all right and the impact such a recognition will have on these various paper gold plays will leave these gold tribes dancing around a midnight fire! (smile) If nothing else, the entertainment of watching them spew brime on each other will be quite an act to follow. If nothing else it will educate future investors as to where to look for reason. Indeed, the law of ages never changes as one's conduct in social interaction still identifies oratory as being worthy or no. People that relish rash interaction always find themselves surrounded by fools. Eventually broke fools! (smile)

We've had a few "vocal tribes" show up here, haven't we? Let's see, we had the
Silverites show up. This group dates back to the 1800's. They never did like the gold standard crowd. Too hard for them. Silver was the "easy money" back then, and today, as then, it is seen as the poor man's gold, or a way to (supposedly) defeat the "old money" "power elite". Certainly this is ground tread by vocal advocates, but not quite downstream from today's flow. It didn't work back then, and…

We've also had the easy money camp show up, on several occasions. They are certainly a vocal group! But then they have a tough road ahead given that we are living through an easy money collapse, which has never in all of history ended in the spontaneous emergence of a new easy money regime.

And we've had the gold bugs here, in many varieties. All with very clever ways to finally make gold a currency that can work, unlike the failed and abandoned tries of years gone by.

It is this blogger's very honest, humble and deeply considered opinion that there is not a single precious metals analyst or gold writer out there today that can hold a candle to either Another or FOA. Not Sinclair, not Rickards, not Casey, Turk or Fekete. Not GATA, not Buckler, not Douglas or Ash. Not any of the Silverites and certainly not me. And I'm not talking about whatever inside information they had, although that clearly exposed a deep and long background in these Thoughts. Nor am I talking about grammar and spelling. I'm talking about a level of understanding and wisdom (look that word up!) unmatched in any other gold writer that I have ever read.

Here was a fun little conversation that happened after USAGOLD added the Gilded Opinion page, featuring one "Professor von Braun" who happened to misspell a word that FOA also misspelled. Hopefully you will get my point and a little enjoyment from this exchange:

Hipplebeck (10/23/00; 06:13:10MT - msg#: 39699)
Trail Guide=Prof. Von Braun?

Humble Pie (10/23/00; 07:31:02MT - msg#: 39703)
Hipplebeck : I'm glad someone else noticed the bought vs brought thing . I wonder!

Mr Gresham (10/23/00; 08:11:22MT - msg#: 39709)

More likely von Braun reading FOA. Our friend IS remarkably consistent with his typing bloops. (I suspect he had a secretary most of his business days.) He's probably not an editor at The New Yorker.

Parsifal (10/23/00; 12:43:12MT - msg#: 39723)
Trail Guide=Prof. Von Braun?
Hipplebeck: bought=brought

Hard to ignore isn't it? Trail Guide so consistently uses "brought" in place of "bought," I expect he does it deliberately. Why? It is a curiosity.

Where does Prof. Von Braun post? The name is familiar to me, and I associate it with gold market commentary, but I've forgotten where I've read Von Braun. Also, could it be that "Von Braun" is another alias? Wasn't "Von Braun" a German rocket scientist the Americans co-opted after WWII?

nickel62 (10/23/00; 13:12:04MT - msg#: 39728)
Von Braun and FOA

I have conversed with Mr. Von Braun and while I was impressed the two times we exchanged emails I do not think he is on the same level of FOA. These subjects are so difficult to convey however, you can never really tell when someone is giving you the simple version of the problem because they (correctly) perceive that you can only absorb so much. I would tend to doubt it though. He posts on the Gold-Eagle forum, and occasionally on Le Metropole Cafe.

PH in LA (10/23/00; 14:45:38MT - msg#: 39734)
Trail Guide*Prof. Von Braun

Just went over to Gold Eagle to review the Von Braun pages and came away with the indisputable impression that he is not FOA. A facile writer with an original and attention-grabbing turn of phrase, the professor does not begin to exhibit the depth and overall understanding of the issues that FOA does. This would be a very hard deception to pull off. Believe it or not, it is very difficult not to let slip what one knows while trying to elucidate a point to further the understanding of others. I doubt very much that FOA could do it. At the same time, he (FOA) would find it very difficult to suppress the natural turns of phrase and liquid prose style that von Braun exhibits while writing as FOA.

Both writers are very consistent in their writing styles. Misspelling the same word in the same way does not overcome that fact. FWIW!

Trail Guide (10/23/00; 19:26:57MT - msg#: 39745)
(No Subject)

My spelling and punctuation is not right? I don't know what you mean? (smile)

This reminds me of an old reply someone put to me when I asked him to clarify himself on a strong position. "What do you want, he asked? Good flavor or good taste? Because you can't have both from me at these wages!" (Ha! Ha! What a guy!) He later took time to explain everything.

You know, hearing every comment today and with posters comparing my speech here:

I used to give talks at small meetings all the time and they never complained about my spelling! (laughing again)

You see, one of you was right, in that I have never tried to publish or write anything. My notes from meetings are what I work from and they are an outrageous hodgepodge of foreign writing no CIA agent or secretary could ever crack! (still laughing).

I'm much more of an eye to eye, face to face, quietly making my position known, kind of fella. Take MK or Mr. Turk; these men can write. Im not kidding when I say that in their presents or in the company of other smart / important people I would typically blend into the shadows.

First and foremost, my reasons here are to simply keep the path warm until the real play comes into view. If my poor writing skills don't make things clear enough, it's ok because soon enough events take a hand and clear the path enough to follow. True, talking to me in person, you would say the same thing others do; "Trail Guide, you don't sound anything like you write"! (smile)

Well, that reminds me of the guy with an extremely large nose. He went into a plastic surgeons office to get his leg burns fixed and they asked if they could also fix his nose? He said absolutely NOT! If you did that, I wouldn't be me!

So,,,,, in that light,,, if I gave these posts to someone to edit, or had someone else translate most of Another's thoughts to english, it wouldn't be me. (smile)


Holtzman wrote a good piece some time ago and I lost its location. In it he made the distinction about how we were arguing about the difference between paper gold and physical gold, along with all our other debates. I think he said that it was all useless and some of us risked embarrassing ourselves if paper / real gold spiked together. We should just diversify and watch the show, he said. (I think that's what he said?)

To a degree I do exactly as he mentions, except that I don't trust paper gold at all when the going gets rough. Our difference is the same valley that separates PGAs (Physical Gold Advocates) from many modern hard money followers. It's a difference of "learning location".

You see, it all has to do with how one orients oneself in the world today. Indeed, understanding the word "orient" provides some of the answers. Interesting word, orient.

The old romans didn't have compasses and they depended on the position of the sun to gain location and direction each day. Every morning they would watch to see where it rose. They gave the name "oriens" to this location. In other words, the east. Later, "oriens" obviously a latin derivative, was slipped into english and it became orient. Not only was orient used to describe one's positioning in the world, it also referred to all the lands east of Europe. The Asians, etc..

In time, most of the world's thought could be broadly divided into Western and Eastern. How well one understood such thought and the people forces that created them, depended very much on how well we could orient our own thinking! Are you still with me? (smile)

For myself, I have placed my feet squarely on the ground that faces East to gain a better understanding. Because from here not only do the majority of the world's people live, there also resides most of the reserves of oil. Remember, "oriens" became "orient" and that traditionally was all the lands east of Europe. The Middle Eastern oil fields included!

Now, over time and across the space of human experience, Europe has become much better "orientated" to the "orient" way of trading and thinking than the West. To this end they will always meld better with them economically than the US can.

Indeed, this is something Mr. H had better "orientate" himself with because I suspect he is British. You see, I say this because only the Brits use "orientate" and that back-formation of a word has been in use there for about a century. Truly, plenty of time for him to understand why the Duke of Edinburgh once said,,,,,,, "the English are much more culturally and emotionally "orientated" towards Europe". Check it out for yourself? Perhaps that fine gentleman also knew the "oriens" from where oil did flow!

and that my friends is why their English paper gold is going to one day burn.

Now, did I get those letters and dots in the right places? (smile) I don't think so!

Trail Guide

Ha! Well, there you go. That's a bit of the fun found in the old REGULAR archives. I saw that Jeff found the document Martijn posted on Scribid. Notice that it is called the
A/FOA *REGULAR* archives. That means it came from the regular forum, not from ANOTHER (THOUGHTS!) or The Gold Trail.

Martijn put a lot of work into that document, reading all the regular forum archives from 9/22/98 through 12/16/01 (FOA's last post) and pulling out most of the FOA comments that are not in the main archives. And while discussions like the one above are not in there, it is easy to jump from Martijn's document back into the
regular forum to see what other people had to say about it.

Freegold is a deep concept, with "infinite resolution," a point I have made recently through the use of Benoit Mandelbrot's (RIP) fractal geometry. Along this same train of thought, someone emailed me recently saying, "I am reminded for some reason, of Isaac Asimov's foundation series - Hari Seldon and 'the plan'. Freegold is truly a story of epic proportions." (smile) I replied, "Yes, Freegold is epic. This description of Asimov's 'psychohistory' – that it can predict the future, but only on a large scale; it is error-prone on a small scale – describes the way chaos and fractals relate to our understanding of the Freegold concept."

You see, Freegold is not a competing system or theory. It is a paradigm that, once understood, reveals unending truth (infinite resolution). But it cannot be reduced to a couple paragraphs. It must be tested over and over again, from as many perspectives as one can imagine, which is what I try to do on this blog. As one of my great supporters wrote:

…From what prior principle did Newton deduce universal gravitation? Newton's theory is the product of a grand induction, an integration of prior inductions made by Kepler and Galileo, based on observations of planetary orbits, and of the behavior of physical bodies on earth.

Freegold, too, is a grand induction. Your method of approaching the issue from a variety of perspectives, all leading to the same necessary conclusion, after precisely defining your concepts, is essential to a proper inductive process (which, by the way, the mere enumeration of swans is not).

…given a certain context of knowledge, and given a certain observation (and there need only be one observation, no enumeration necessary), the induced proposition will be seen as necessary. That is, to deny the proposition will be to deny the validity of the observation, or to contradict the entire context of your knowledge.

Because the mind is finite, the immediate context supporting your induced conclusion will be limited. The role of deduction at this point will be to explore the applicability of your result to a broader context. Think of Newton, having just induced the inverse square law in the context of local and orbital mechanics, now asking himself, "How might my equation apply to the shape of the earth?" and then deducing the equatorial bulge and the tides…

There are four key aspects to Freegold. There are also many more, but these four are key. That's not to say they are all necessary. They are not. But it is to say that in order to understand Freegold you must at least understand the significance of these conditions:

1. The end of the dollar standard (the end of its timeline as the main global reserve currency)
2. The end of parity between paper gold price discovery and physical gold price discovery
3. The Euro-Freegold concept/project, (at least) 31 years in the making
4. The flow of oil

I have compiled a few FOA posts here that at least touch on these four important aspects. They are by no means the complete picture, but more of a tease to get you to read the whole thing. Enjoy!

Trail Guide (08/21/00; 21:04:03MT - msg#: 35283)

Hello SLF and Welcome!

I say welcome because I think you are new here. But then again, I haven't read back through all the discussion that happened while away. As you know many of the posters on this forum present exceptional perspective. The kind that demands a comment or answer before moving along. Often one must be careful not to read them or risk being trapped here. (smile) Yours is the first I saw today, no doubt there are many others in the archives for later. So let's stop a while.

Your post # 35259:

--- I have been following your posts for a couple a years. I am trying to get a grasp on your current thoughts. As time goes on I am trying to see how current events will affect Gold/Dollar. It is my impression that you believe the Euro will be the currency that dethrones the Dollar as the Dollar hyper inflates. What are your latest thoughts about the weak Euro strong Dollar? -----

SLF, I see this whole progression of events as an international chess game. It's a game that has been going on and evolving for many years. It's hard to discuss it in an investment format because far too many "hard money" traders continue to grasp each move on the board as a short term isolated happening. From this view, they play these events for quick profits. Mostly they lose big, because this particular game is unlike anything in the past and continues to evolve away from past historical precedent.

On the other hand, there is a whole world of people out there that are making a killing for reasons they profess to fully comprehend. Yet truly, their wealth making is little more than a mistake of historic human proportions and they will have it all taken away for reasons fully incomprehensible!

SO,,,, For us to see the whole board we must wade away from shore. Away from all the shallow water traders and into the deep blue. There we can feel the real current.

Our dollar has had a usage period that corresponds with the society that interacts with it. Yes, just like people, currencies travel through seasons of life. Even gold currencies, in both metal and paper form have their "time of use". Search the history books and we find that all "OFFICIAL" moneys have at one time come and gone with the human society that created them. Fortunately, raw gold has the ability to be melted so it may flow into the next nation's accounts as "their new money".

This ebb and flow of all currencies can be described as their "timeline". We could argue and debate the finer points, but it seems that all currencies age mostly from their debt build up. In a very simple way of seeing it, once a currency must be forcefully manipulated to maintain its value, it is entering the winter of its years. At this stage the quality of manipulation and debt service become the foremost determinant of how markets value said money. Suddenly, the entire society values their currency wealth on the strength and power of the state's ability to control, not on the actual value of the money itself. Even today our dollar moves more on Mr. Greenspan's directions than from the horrendous value dilution it is receiving in the hands of the US treasury.

This is where the dollar has drifted into dangerous waters these last ten or twenty years. If you have read most of Another's and my posts, it comes apparent that preparation has been underway for some time to engineer a new currency system. A system that will evolve into the dollars slot once it dies.

Out here, in deep water, we can feel what the Euro makers are after. No one is looking for another gold standard, or even something that will match the long life and success of the dollar. We only know that the dollar's timeline is ending and a new young currency must replace it. No great ideals, nor can we save the world! But a reserve currency void is not acceptable.

Now look back to shore and watch the world traders kick ankle deep water in each other's faces over the daily movements of Euros. From here, up to our necks in blue water, you ask "What the hell are they doing?" I'll tell you. They are trying to make $.50 on a million dollar play! Mostly because they are seeing the chess game one move at a time. (smile) Truly, their real wealth is in long term jeopardy.

Our dollar has already entered a massive hyperinflation. Its timeline is ending and there will be no deflation to save it. The currency and all the multitude of derivative instruments that make up our money system have expanded rapidly over the last 20 years. [1] Even at a super hyper rate for the last five years or so. We cannot read it because much of what we "Western" savers call paper wealth has really become money substitutes thats value is supported by the government. This paper wealth creation cannot reverse and is beginning to enter the "natural world" of real things. The best sign that the currency has entered its last, final inflation is seen in the manipulated price gauges. Truly, this is only the beginning. Eventually we will see roaring price increases in everything, even as our government indicates level prices or perhaps a deflation in our price structure. This has to happen, because there is no saving a society's currency that has indebted itself beyond any known example in man's past.

In our time we will all see the Euro become very strong. You will read and hear this. But, Another and I have known for some time that it will be the dollar falling away that will make the illusion complete. I say this because all currencies are but an illusion of value.

Eventually, either before or after the dollar's transition, the illusion that makes currencies real will also undergo a change. That illusion / vision is the current world paper gold market. Often known as the dollar gold market. This marketplace will fail with the dollar's timeline and so too will its use to value gold. In this time gold will not soar in value, rather all currencies will seek their true relationship to a "FreeGold" market. The US dollar will someday see $30,000+ for an ounce of gold. So too will the Euro price gold much higher ($$3,000 to 6,000???).

It is here that our Euro has planned to play the game to the end. (more later)

In your post:

---- When Another talks about "slow oil" what does he mean? Is the current short term oil price increase the beginning of something larger and more sustaining?---------

Yes, SLF! The transition from a world of dollars into something else is truly an evolution. There is no definite point where political wills draw the line. Once the Euro was born and "online" the dollar evolution began to speed up. Oil, out of a seemingly impossible position, suddenly began to rise in price. The paper gold markets were adjusted in what was the first step of their destruction, the Washington Agreement. Now, oil prices are set to evolve high enough to test not only the dollar's strength, but to force the physical gold market to separate from its paper controlling world. Indeed, our paper gold markets will very much simulate the same manipulation of price gauges as the CPI. All in an official attempt to say that our dollar is not dying. In many ways, it will be the paper longs that abandon the gold markets (forcing prices ever lower) even as the physical price soars. Yes, the shorts may make a killing but the money they make will be worthless!!!!!!

Your post:

--- In reading your last post on the trail, you say "one Gold is coming my friends, one Gold"-----

I think Another means that oil flow will slow until we have one physical gold price. Perhaps this is the end of Another's beginning odyssey of many years ago. It could be that the REAL GAME HAS BEGUN!

My friend, the future of physical gold is to become a wealth holding of a lifetime. However, the world will not take lightly to such a recognition of private wealth gain. I hold physical gold in good proportion but am prepared to see its current paper fictional value plunge to Another's very low dollar price. A paper price that will be as fictional as $1.00 gasoline during a dollar hyperinflation. This is the reason I hold a lifetime position in a few gold shares. Their value may plunge to zero before things change (an event the shallow water boys could not stand with). Even in the face of a soaring physical price, investors may choose to believe the paper markets over reality. Don't laugh, they believe the CPI today and continue to buy bonds????

Your post:

--- I know you don't have a crystal ball to see the future, but I am under the impression you are a person that has high level information about what is going on with Gold/oil/currencies.--------

AS Another often put it, "I am but a simple person". Events will make this knowledge real, not the words of myself or Another. Indeed, only "time will prove all things".

I hope to continue this, be back next day? , thanks

Trail Guide

Trail Guide (08/28/00; 20:35:52MT - msg#: 35674)
The big trade!

Hello Everyone!

I would like to start this as an offshoot from my post earlier today to Peter Aster (msg#: 35638). It seems we have run into a roadblock of thought. Perhaps a traffic jam would be a better analogy.

Let's talk:

In its most basic form, this presentation has been that;
----in the worldwide modern paper markets, contract trading has taken over the role of setting gold prices at a tremendously understated level.----
Years ago hard physical trading once did that job and did it at a correct level relative the physical product that was changing hands.

For us to follow and grasp this concept change correctly, we must start at the very beginning of simple economic principle.

When someone buys a product and takes possession of that product he impacts the value of that item as it relates to the next person in line waiting to buy. Like this:

When Joe buys one of five apple from the table of a vendor, he leaves only four apples left on the table to be bid on by the next buyer. This ages old act of "hard trading" demonstrates the whole human interaction with supply, demand, need and emotions. When the next buyer sees that only four apples are left, where there were once five, whether he likes it or not his mind will consider the above supply and demand possibilities. All the while personal need and emotions mix in his brain.

The result may or may not be a different bid from the first buyer of an apple. But it will be a true value assessment based on actual, hard, real time circumstances known at that moment.

When Joe brought that apple, he impacted real supply and forced the market,,,,,,, that's everyone trading behind him,,,,,, to form "hard opinions" about "real demand" and "real supply". In this dynamic, the next trade is not priced by "soft opinions" based on conjecture of "will Joe really take delivery".

You see,,,,,, in real life,,,,,,, in real trading,,,,, Joe taking delivery now, hard down, undisputed,,,, and this forms a different "mind set to bid" by the next in line. This mind set is what creates a "real value bid" instead of a "possible value bid". These "hard bids" based on "hard opinions" overshadow and usually bid higher for product than "soft opinions". In times of "Hard Trading",,,,"Soft opinion" bids even fail to materialize mostly because "Joe has shown that he does take delivery"! ========

I had today, asked 10,000 Kansas investors to line up along their border with Colorado. This nice straight border is very long and allows room for everyone to have some space. I asked half of them (that's 5,000 (smile)) to stand on the Western side of the border (Colorado for you non Americans) and the other half of them to stand directly opposite on the Eastern side (Kansas). All of these people did this in a hurry and they remembered to bring the very last $50,000 in cash they had to their name along with a pen and paper.

This was quite a mess to organize, so I hope everyone will appreciate this effort! (smile)


Today, while the Comex was still open and trading,,,, and the US dealer markets were open,,,,, I instructed all 10,000 of these people to enter into a REAL LEGAL PRIVATE OFF MARKET CONTRACT with each other for "1,000 ounces of gold". In effect, I asked that 5,000 of these investors contract to buy from the other 5,000 the equivalent of "ten 100 ounce gold contracts" that would expire in one hour. That's one hour before the gold markets closed today.

Yes, that's 50,000 contracts for five million ounces of gold that existed during trading today.

Further, not only did the sellers not have any physical gold, their last $50,000 in margin cash could not possibly buy the 1,000 ounces to deliver. Nor could the 5,000 long traders hope to use the last $50,000 they had to their name to buy that same 1,000 ounces. But their margin deposits did seem to make the deal real.


While this trade took place and the contracts were in force (they were legal and binding),,,, I called several bullion dealers to ask if the gold market was being impacted. I also watched the computer screen intently to see if anything would happen.

Surely, with five million extra ounces of gold being traded, it would have changed the price of gold.

"Just think, five thousand rich Americans contracting for five million ounces of gold should have done something!"

Well, it didn't. So all 10,000 Kansas investors canceled their contracts by buying each other's commitments and went home a little smarter.==========


The reason this little trade didn't impact the "real value" of physical gold was because they didn't trade any real gold. As big as the numbers seem, the real physical supply of gold was never touched. All they traded with each other was their "soft opinion" about the future price of gold. Again, I say soft because they only traded bluffs that were for far more metal than their real financial assets could cover.

Their trading, like so much paper trading today creates and expands a soft paper market that not only overstates demand, but more importantly allows sellers to "vastly overstate supply without DRAWING FROM THE APPLE TRAY.

Further, the worldwide paper markets our margin money has helped sustain, continue to trade an outstanding interest that is far in excess of real available bullion. ------"""" Yet this outstanding interest is the supply gauge that so understates what physical gold would trade at as it's used to price the much smaller dealer gold demand""" ----.

Oh,,,, I'm sure 5% or 10% of my Kansas traders actually did make and receive delivery while I wasn't looking. They most likely had some gold and extra cash to make the deal. But with the size of the world gold market it didn't really notice.

By far, the majority of these investors were playing out my observed typical "Western Style". They trade the price of gold while waiting for someone else to buy enough physical gold to impact supply. All the while helping support a system that dealers use to price bullion at an understated price. Again, a price that's not created by taking real bullion off the market in a volume equal to contracts traded.

My reply to one investor heard saying, "why does anyone have to take delivery at all?".

My good man, then you would end up just like my Kansas traders as they wade in our modern mess. Always settling up and trading nothing, and doing it at a lower price. Because the paper price of bullion will continue to fall from a continued increase in paper supply. No different than the way our governments lower the value of money by supplying more of it. The correlation between the two concepts is indeed staggering. [2]

This logic is almost like our early currency thinkers asking, "you know, we really don't need gold as a currency. Let's just trade dollars!"!===========

Trail Guide

FOA (2/26/2000; 11:13:56MT - msg#7)
A Day Walk

If I had a nickel for every time we thought the dollar was finished, I would have a bunch of nickels! Remember back in the early 80s or even further back into the 70s. All we heard was how the dollar was finished and going to crash and burn. Books about hyper inflation and the need for gold / swiss francs were all over the place.

I read all of them to gain perspective and also acted on some of their advice. Made some money on it too. But even then, something just didn't completely ring true about the whole scenario. Indeed, in hindsight, gold never did return above $800, the dollar didn't hyper inflate and most of the world kept using the dollar as a reserve.

Today, we can more fully understand why so much of that early insight failed to deliver.

True, the dollar was seen as a basket case back then. It had just been pulled from its gold bond and prices were going up all around us. However, because the world had been on a simi dollar / gold standard, all nations that had previously signed onto using the US buck as their currency reserve now did so with even more resolve. More important, it seemed than using gold itself was out of the question as every country's Central Bank brought dollars as fast as we printed them. The dollar still settled most all trade accounts while dollar reserve buying made an obvious show of support for this world system. No matter how much bad press was offered, they were staying on track and they have continued to do so right up into the 90s!

But all of this flew into the face of what every economist was saying, back then. The common understanding of the era was: if the US didn't stop over printing its money, we would all experience a major price inflation,,,,,, and no one could stop it! Again, "major" inflation didn't happen and to ask a further question: if the dollar system was so bad, why didn't the world just dump the reserve system and refrain from using it further? In other words, let the dollar be "the US dollar" but don't use it as a backing for your own money system.

Thick Brush Now

Going against the logic of "sound money": throughout all the currency turbulence of the 70s and 80s era (including today), the US never did reign in the over printing of its currency. It continued almost nonstop money supply expansion for its local economy and in addition sent a good portion of its cash all over the world. On and on the US trade deficit continued to do its work of feeding ever more US cash into foreign economic systems. We printed paper currency by borrowing it into existence,,,,,, used it to purchase real goods overseas ,,,,,, while foreign governments actively soaked up this dollar flood by expanding their own money supply.

Like this: When you buy an item externally, a dollar is sent overseas to pay for it. Usually, through the world currency trading arena, that dollar is converted into the local currency of the nation which the goods came from. But more often than not,,,,,,, as we print that dollar out of thin air, the foreign government takes the dollar into its reserve account and prints one of their units for deposit in the local economic system. They do this because: if the foreign CB didn't save the dollar as a currency reserve ,,,,,, and sent it back into the world currency markets to "buy" an existing unit of their money supply,,,,, this action would drive up their currency value vs the dollar and make the price their goods non-competitive in world markets. In other words, a US citizen couldn't use a printed (borrowed) dollar to buy an item for $10.00 that outside the "dirty float" of exchange intervention would cost $15.00.

This is how the "dollar reserve process" inflates the money supply worldwide as we (USA) run a trade deficit for our benefit. It keeps the dollar exchange rate higher than it would naturally be thus allowing a US citizen to buy goods at a cheaper price than our expanding money supply and implied currency value would normally dictate. A process in and of itself that invites still more dollars to flow out and purchase still more external goods. Had foreign CBs not taken so many dollars, the ever expanding US money supply would have long ago impacted currency exchange rates and forced a major price inflation internally (in the US). Yes, the major inflation so many saw coming,,, back then,,,,, would have arrived,,,,, then.

So why did these other CBs do it? The standard explanation was that this created a market for their goods here in the US. Yes that's true, but it begs the question; did no one in their land want to buy goods manufactured locally,,,,,, and pay for them with the same printed money supply? Why is it the US could inflate its money supply to buy cheaper goods externally for no more than the price of printed paper? But, in the same country our paper was sent to, they couldn't print their own currency to buy their own goods? Why couldn't they raise their real standard of living somewhat using the same process like the US,,,,,, and doing so without the burden of inflation or importing foreign currencies?

Again, why would our printed, inflated money movements not create price inflation for us (USA) in goods purchased externally? What if they (foreign goods producing countries) printed an amount of their money equal to the inflow of dollars,,,, but, without holding paper dollars as reserves to back it,,,,, brought the exact same goods from themselves. Common prevalent economic theory says price inflation would result? Or would it? Or better said: why them and not us?

Into the deep woods again

Again, and as above,,,,, In the 70s, it was widely held that the dollar reserve system forced other countries to inflate their local currencies, thereby importing dollar price inflation. But, as time went by,,,,, indeed a decade or two now,,,,,, the same process continued nonstop, with no change. It seemed that some "other" countries had found a "new way" to somewhat circumvent the dilemma. Or was this "new way" something sold to them in order to extend the dollar system's timeline?

Many of the lesser third world countries experienced a combination of sporadic hyper inflation and deflation as we forced the dollar reserve system down the throats of their citizens. Their people's living standard constantly fell as they worked ever harder to produce more goods in return for more of our printed dollars. But, instead of using the extra inflow of dollars (positive trade balance) to buy their own currencies in the local system,,,,, thereby keeping their currency strong,,,,, they used that dollar flow as collateral to borrow (from IMF and international banks) more dollars from the world dollar float (mostly called Eurodollars). The lure (or the hard sell) was that they could build up their infrastructure,,, increasing their production efficiencies (human productivity's),,,, thereby raising the national standard of living. Further, they were sold the unneeded idea that even if they didn't completely use the dollar surplus to borrow more, they should hold those dollars in reserve (buy and hold US treasuries) and print more of their own money!

Again, it seemed they had no advocate to push for their own best interest. No one told them that their people already worked cheaply enough to more than offset the competitive loss of a stronger local currency. No one told them that with a strong local currency structure,,,,( that using the dollar surplus to buy their own currency would create),,,,,,,, would allow them to borrow in their own capital markets. A more go slow approach that builds long term benefits. This process would free them from the entanglements of making international debt payments in another money. Indeed, the costs of those involvement's later proved overwhelming!

Now the trail becomes more open

For third world countries their international dollar debt exposure eventually locked them into a servitude to the dollar reserve system. Despite all their natural and human resources, currency involvement had taken a lion share of any productivity increases and increased lifestyle this modern world offered.

However, it did help the cause for the dollar reserve system. By creating an ever growing international debt in dollars, eventual dollar demand to service this debt would only increase. Thereby keeping its value artificially high. In addition, any leftover floating dollars quickly took the form of US treasury debt held in these small countries treasuries. There they were used to further hyper inflate their own currency supply.

For the more developed gold owning countries of the G-7, they had a different question in mind. Again, if taking in inflated dollar reserves was the act of importing US dollar inflation into ones local economy,,,,, and in the process creating a market for your goods overseas,,,, why not just print your own currency without taking in dollars,,,,,, and in doing so give the same buying power the US citizens have in your market,,,,,, to your own people?

If it's not price inflationary to take in part of a world "inflated dollar supply" and create jobs for your people locally,,,,,, why would it be any more inflationary to print your own currency outright? Indeed, why does one need a dollar inflow to legitimize the same money inflation process? That being currency inflation to create jobs?

Why should we (as dollar asset holders) think about this question? Because someone else is and doing something about it today!

Back to a marked trail

Today,,,,,, and after all of this,,,, the dollar never did crash from price inflation. At least nothing like what was expected earlier in the last two decades.

The dollar reserve system was never going to fail then because the major world economic powers were willing to use (waste) all the productive efforts of the world's people to keep it running. Looking back we now understand the thinking behind this. Without the dollar acting as a reserve, we would have had to go back to a gold system. There was no other currency structure strong enough or deep enough to carry the load.

But, gold had been proven to be much too easy to circumvent as a national or world currency. It seemed human dynamics would never allow an economic system that operated on a pay as you go process without gold debt. If history had proven anything it was that if we have a money,,,, fiat or gold,,,,,, we are going to lend it, borrow it and in the process create debt. Yes, even using gold!

Even if we have a pure gold system, human nature will find a way to turn it into securities. In doing so we will,,,,, come hell or high water,,,,,, lend more gold than we have and borrow more than we can pay back. One has but to return to the history books to see it all in plain print. Over and over again, we start with a solid gold foundation and soon degrade it into trash. It's not just the American way,,,,, it's the world's way.

Because the modern world had progressed into the efficiencies of using high speed digital fiat currencies, no one at that time or today, was willing to crash the whole system by returning to gold. I suspect that the world's richest would have lost a lot, but so to would "us regular" people. Even with our savings in the form of a "digital illusion", at least we had a job to go to and a dream in our bank account. Removing the dollar and returning to gold would have erased the illusion and temporarily shut down the jobs.

So, dollar hyper inflation never arrived and gold did not make its run because world CBs bet your productive efforts on supporting the dollar reserve. In the process, the US standard of living was raised tremendously on the backs of most of the world's working poor. But this is not about to last!

A broad view from the ridge

Not long after the US defaulted on its gold loans,,,, dollars held as gold certificates,,,,,, major thinkers began the long process of forming another world currency. One that would not maintain the fiction of a gold standard with the somewhat fixed gold prices inherent in such a system. The creation was distorted, to say the least. Just as the River in my first post was often seen in distortion, so too was this currency issue. It began with the European Currency Unit (ECU) and has later progressed to its present state of the Euro.

After operating on a fiat system for 20+ years people are starting to realize that the only thing that backs a currency is the real productive efforts of their people. Yes, over time we always borrow more than our productive efforts can pay back and proceed to crash the money system.
But what else is new? (smile)

We call this a money's "timeline" and it's as new an idea as life, death and taxes! Time and debt age any money system until it dies. The world moves on. Only this time gold is going to play a different part in the drama. We will all watch it unfold.

It seems people saw something else that would make the Euro unique. Paid-up assets also stand behind circulating money. Indeed, if someone owns a $100,000 dollar piece of land , has a good producing job and borrows $50,000 against his land,,,,,, the world is likely to circulate that debt note as a fiat land backed currency. But, if his gold (the land) is worth $1 million in a free physical market,,, AND RISES FURTHER IF CURRENCY SUPPLY OUTPACES REAL PRODUCTION,,,,,,, and his other debts are relatively low ,,,,,, the same note would circulate just as effectively if the $50,000 was borrowed against his name alone.

In essence, the jump into the Euro is more based on a new currency that is more honest in dealing with our historic human dynamics. Let's try not lying to ourselves and admitting that gold alone in a currency will not remove our will to borrow and lend and therefore eventually defraud each other! Would it not be better to at least not shackle the money to gold? Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term. While removing the need for CBs to maintain fixed exchange structure through a dirty float against gold.

But, the most important aspect is in the escape valve gold would provide to developing countries with positive trade flows. Those that wish to settle their debts outside the currency arena using gold as a settlement. Or, if they wish, to buy gold in the open market with their trade reserves.

The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force its payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force its return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them [fiat currencies] in addition to general use demand.

The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be [enforced] in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way.

We rest now

True there is a lot more to this story. Some posters have been discussing it publicly for some time on the USAGOLD forum. If you want a wonderful background reading on what "Freegold" would mean,,, get your laptops out tonight and read the entire link below. There is also considerable agitation voiced against this view.

First read all of:

Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589) It begins!
-----* Executive Summary --an Outline of Observations *----- [3]

My position: The world is going to change its currency system before long and this will greatly impact the wealth of dollar asset holders. Not to mention physical gold holders. As a note for further consideration and talks,,,,, we have talked before about the "Texas Railroad Commission" and how it once declared oil a public utility and later controlled its production. In the future, international law must declare all large gold reserves to be "public utilities" in the countries they reside. Mines will be very profitable and good investments after they recover from the destruction of our existing paper gold market. Still, their total production will be controlled and somewhat taxed. Small private operations will more likely be heavily taxed.

We will pick up the pace later (smile). Eventually getting to oil and the markets today.
Fires out.

Thanks for reading,,,,,, FOA/ your Trail Guide


[1] For more on this topic, see
Credibility Inflation
[2] For more on the subject of "soft supply and hard demand" see my old post,
The Call of the Century, named for Another's open-ended call to buy physical gold in the $200's.
[3] I second FOA's recommendation. Read the link.

PS. I have received two separate submissions from readers for Freegold theme songs (I would not go so far as to call them anthems). I think they are both excellent candidates. So over in the right-hand column you will find a poll where you can vote for which one you think is best!

In this instance, I recommend that you first read the lyrics, pass judgment on the lyrics, and then watch the video. It may help counteract "artist bias" in the voting. Remember, you are voting for the most Freegold-worthy song, not your favorite artist or even your preferred music style. Here's the first one:

Do you ever feel like a plastic bag
Drifting through the wind
Wanting to start again

Do you ever feel, feel so paper thin
Like a house of cards
One blow from caving in

Do you ever feel already buried deep
Six feet under scream
But no one seems to hear a thing

Do you know that there's still a chance for you
Cause there's a spark in you

You just gotta ignite the light and let it shine
Just own the night
Like the Fourth of July

Cause Baby you're a firework
Come on let your colors burst
Make 'em go "Oh, oh, oh!"
You're gonna leave 'em fallin' down-own-own

Boom, boom, boom
Even brighter than the moon, moon, moon
It's always been inside of you, you, you
And now it's time to let it through

Cause baby you're a firework
Come on show 'em what your worth
Make 'em go "Oh, oh, oh!"
As you shoot across the sky-y-y

You don't have to feel like a waste of space
You're original, cannot be replaced
If you only knew what the future holds
After a hurricane comes a rainbow

Maybe your reason why all the doors are closed
So you could open one that leads you to the perfect road

Like a lightning bolt, your heart will blow
And when it's time, you'll know

You just gotta ignite the light and let it shine
Just own the night
Like the Fourth of July

Cause baby you're a firework
Come on show 'em what your worth
Make 'em go "Oh, oh, oh!"
As you shoot across the sky-y-y

Baby you're a firework
Come on let your colors burst
Make 'em go "Oh, oh, oh!"
You're gonna leave 'em fallin' down-own-own

Boom, boom, boom
Even brighter than the moon, moon, moon
It's always been inside of you, you, you
And now it's time to let it through

(I'm sorry that this video doesn't include the last verse of the song, but it compensates in other ways)

Katy Perry – Firework


When the time gets right
I'm gonna pick you up
And take you far way from trouble my love
Under big ol' sky
Out in a field of green
There's gotta be something left for us to believe

Oh, I await the day
Good fortune comes our way
And we ride down the Kings Highway

No you can't hide out
In a six gun town
We wanna hold our heads up, but we gotta stay down
I don't wanna end up
In room all alone
Don't wanna end up someone that I don't even know

Tom Petty - King's Highway

PPS. Here is a list of recommended reading for anyone who would like to delve deeper into this fascinating concept of Freegold.

FOA's The Gold Trail
Hall of Fame Posts
Regular Forum

On this blog (in no particular order):
Bondage or Freegold?
The Shoeshine Boy
How Can We Possibly Calculate the Future Value of Gold
Relativity: What is Physical Gold REALLY Worth?
Gold: The Ultimate Wealth Consolidator
The Debtors and the Savers
"It's the Debt, Stupid"
Open Letter to EMU Heads of State
The Dukes of Wetton
All Paper is STILL a short position on gold
Your Own, Personal, Freegold
Call Me Contrarian
The Triumvirate of Wealth
Dead End
The Bermuda Triangle of Currency
Mona Lisa or Ben Franklin?
The 21st Century Bank Run
Greece is the Word
Living in a Powder Keg and Giving Off Sparks
Gold: The Ultimate Hedge Fund
I can feel it coming...
Gold: The Ultimate Wealth Reserve
Gold is Wealth
Gold is Money - Part 1
Gold is Money - Part 2
Gold is Money - Part 3
Fair Value Gold?
Say Goodbye to Wall Street
Shake the Disease
The End of a Currency
No Free Lunch
Confiscation Anatomy - A Different View
Confiscation Anatomy – Part 2
The Waterfall Effect
Taking Delivery of Physical
The Underwater Beach Ball Effect
The Judgment of Value

On the relevance of oil to Freegold:
GOLD & MONEY: More Than Meets the Eye
The King and his Gold
It's the Flow, Stupid

Also, Ender's comments beginning
here: "The concept of Freegold is something that means different things to different people. It is amazingly simple, yet curiously complicated. We are on the path, yet the world races at a snail’s pace.

"From my point of view, Freegold is not a “solution for” but will be the “result of” the current financial mess that we are in today. To better understand what lies ahead, one must be willing to have an open mind and think objectively. More importantly, the seeker must be willing to set aside triggering emotions that prevent thinking as the ‘other’…




FOFOA is A Tribute to the Thoughts of Another and his Friend


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