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Don Coxe's Fascinating Take On Why The Time For The US To "LBO" The Gold Market Has Arrived
A few short weeks ago we described the transition of America from a government "on behalf of the people" to one "in control of the people" catalyzed, as Bill Buckler, put it simply, by one simple event: the confiscation of America's gold, and the ushering in of the welfare (or "promise") state, the same welfare state that now is supported by a system that no matter how hard one denies, is nothing but a ponzi scheme. Today, we follow up that article, with a very thought-provoking observations by BMO's Don Coxe, in which he describes that just like in the time of FDR, for whom the creation of a "mild" inflation was a prime prerogative to offset the depressionary deflation gripping the land, the moment for a brazen gold revaluation by none other than the US government has arrived. Unfortunately, it likely also means that any scheme in which the government opens a buy/sell gold window at a substantially higher price point, will mean that very soon, either by guile or by force, the US government will once again be the prime and sole owner of all the gold. As Coxe says, "The gold bugs have long proclaimed their own version of the Golden Rule: “He who has the gold makes the rules." By that standard, Barack Obama could become the leader of the world overnight." And while it is described in much more succinct detail below, in summary, Coxe's point is that the time for a government "LBO" of the gold market, one in which every last ounce is extracted from the skittish public, in exchange for pseudo-equivalent assets such as gold-backed bonds, has arrived. The only question is what the acquisition price of the risk-free alternative to fiat would be, and hence how much higher will investors push the price in anticipation of the inevitable 25% take out premium. Once the public realizes that this is the endgame, and that the buyer of only resort will be none other than Uncle Sam... then look out above.
As for the context of Executive Order 6102.2, Coxe notes: "When nearly all OECD economies are running huge deficits at a time of near-zero interest rates, and nearly all governments are looking for ways to raise revenues without imposing economy-unfriendly taxes, why don't the big holders revalue their gold to, say, $2,200 an ounce and declare themselves willing sellers at that price—in bars or in bonds backed by gold—and willing buyers at, say, $2,000? Roosevelt revalued gold from $20.67 an ounce to $35 and declared that the US was a buyer and seller at that price. He also made it illegal for US citizens to own gold. By the end of the Depression, most of the world's visible gold reserves were in Fort Knox."
Most importantly, Coxe observes that "now is a good time to lock in the gold bull market by monetizing the nation's holdings through various strategies and vehicles forty years after Nixon uncapped gold and 78 years after Roosevelt boosted it 70%. Why don't the governments bring out their gold and use it to back their bonds? Obama should, in our view, try to find one non-Keynesian economist who understands gold to advise him. We’re sure he could get an old-fashioned scholar from the University of Chicago to help him out if he made a few calls."
Must read.
Governments, Central Banks, and Gold
Perhaps the most enduring paradox in all finance is the way major governments and central banks treat their gold holdings: they ignore them.
When nearly all OECD economies are running huge deficits at a time of near-zero interest rates, and nearly all governments are looking for ways to raise revenues without imposing economy-unfriendly taxes, why don't the big holders revalue their gold to, say, $2,200 an ounce and declare themselves willing sellers at that price—in bars or in bonds backed by gold—and willing buyers at, say, $2,000?
Roosevelt revalued gold from $20.67 an ounce to $35 and declared that the US was a buyer and seller at that price. He also made it illegal for US citizens to own gold.
By the end of the Depression, most of the world's visible gold reserves were in Fort Knox.
Apart from all the jobs created in Nevada and other gold-mining states, this attempt to introduce controlled inflation at a time of surging deflation was at least mildly salutary. Having most of the world's gold also proved extremely useful in helping to finance the recoveries in war-torn Western Europe.
Gold's roaring run to $1800 must be a huge embarrassment to the central bankers. Why should investors be rushing out of government bonds into bullion? Don't they believe us when we tell them that printing all this money isn't going to debauch the currency?
The best way to take gold out of its newfound role as moral arbiter of governments' fiscal and monetary policies may be to cap it.
Yes, captious critics would say that this is the equivalent of buying a bathroom scale whose highest reading is three pounds above the buyer's current weight.
But desperate times call for desperate measures.
The gold bugs have long proclaimed their own version of the Golden Rule:
“He who has the gold makes the rules."
By that standard, Barack Obama could become the leader of the world overnight.
Proclaiming a cap on gold and making all the gold in Western central banks' vaults available for sale—or as backing for convertible bonds—would be a blow to speculators.
Ironically, it would be good news for most gold mining stocks.
And wonderful news for gold mine prospects that are barely more than a hole in the ground.
Why?
Back in the 1930s, gold mining stocks were stock market darlings. Who else could sell everything they produced to the government at a guaranteed price?
Roosevelt was a hero to miners, prospectors and stock pushers.
It was the golden age for penny gold stocks. Anyone could take a flutter on them. There were no lotteries, and the only legal gambling was church basement bingo games. Anybody with a dream and a drill hole was able to peddle his shares, and securities regulation ranged from lax to nonexistent.
A story about an unexpected side effect of all the prospecting in that speculative era.
Management of Gunnar Gold, one of the numerous speculative stocks of the early 1940s, thought it had a promising gold deposit in the Yukon. There was some funny impurity in the ore, but it didn't seem to worry management.
Suddenly, the Canadian government nationalized the company—paying the stock market price, which was less than $2 a share. Only after the war was over did the surprised shareholders learn that Gunnar's ore was radioactive.
The uranium it contained went to a hush-hush US government operation in Los Alamos and some of it ended up in the bomb bay of Enola Gay to be dropped on Japan.
Without the guaranteed price for gold, that mine might never have been discovered.
We believe a new era in which gold was back into the very centre of central banks' operations would be a great time for gold prospecting and gold mine development.
As for the strong, well-financed producing gold mines with huge, politically-secure reserves—the Goldcorps, Barricks, Newmonts and their brethren— they would no longer be white chips: they'd be blue chips, paying secure dividends which, at a time of low-low interest rates, would be prized.
The upward revaluation would permit some of the better-endowed PIIGS to issue gold-backed bonds at minuscule interest rates. As for the US, which has more gold than anybody else, and doesn't seem to have the faintest idea why it has it—or what to do with it—Obama could apply net sales proceeds directly to the deficits.
The cap on gold would take a major bearish investment medium out of the stock market—gold bullion. For months, on the days stocks have gone down, gold has gone up.
If gold were capped and governments combined their willingness to sell gold with a ban on naked short-selling of bank shares, and on naked Collateralized Debt Swaps, governments and banks might get a breathing spell.
Why ban naked Collateralized Debt Swaps?
Because they violate the centuries-old rule for insurance products—an insurable interest. When life insurance was first created in England, companies let anyone buy a life insurance policy on anyone else. Then they found that those lives insured by people who weren’t personally related to the life insured tended to die violently. So the concept of insurable interest developed—just as the fire insurers had never let people buy insurance on dwellings in which they had no ownership interest.
AIG would never have gone down (at a cost to taxpayers of more than $100 billion), if it hadn't violated its insurance principles by going gung-ho into Collateralized Debt Swaps.
As the eminent Paul Volcker has said so often, why should economies and taxpayers be at risk for banks that get deeply into newfangled financial products? Western economies grew satisfactorily in the decades before all these monstrosities were developed, and the bank failures that happened were easily managed.
Today's announcement that UBS has apparently blown $2 billion in its trading operations is a perfect case in point: UBS had to be bailed out by Swiss taxpayers because it was levered more than 40 to one and had monstrous holdings of putrescent US mortgage paper. A great bank that had survived for more than a century as a pillar of Swiss prudence and rectitude had tried to become Goldman Swiss—and it lacked both the smarts and the capital for that remake. Less than three years later, it's due to report a quarterly loss it blames on a rogue trader. Axel Weber of Bundesbank fame is due to take charge next year of this organization whose financial structure in recent years seems to have been modeled on Swiss cheese.
As the chart shows, he's needed now.
Why do we devote so much space to making political proposals?
Because we are deeply worried that another financial crisis is coming, at a time when governments' bailut budgets are seriously constrained.
President Obama's long-awaited speech about his great plans for creating jobs was greeted with reactions ranging from boredom to disdain. It was a highly-energized and well-delivered rouser. However, all he could do is promote a new batch of "shovel-ready" projects and jobs for teachers that would be financed by higher taxes on the rich. He is seen as someone who spent $800 billion on stimulus that didn't work, and he's now largely devoid of both ideas and money.
Obama and his European counterparts look at the performance of shares of the big banks and must feel that, (as we put it in Basic Points), Naught's Had, All's Spent.
The government-owned gold that could provide such support to the leaders in the US and Europe is a nuisance to them, because its strong performance in the marketplace is a daily reminder of the futility of their seemingly endless crisis meetings and new acronymic rescue mechanisms backed by..........what?
Bernanke has expressed a yearning for some inflation (but not in foods or fuels) to help the hapless housing market.
Obama has failed to put the economy on a growth path. Most of his Republican opponents are as doctrinaire as he—while mouthing different dated dogmas of equivalent futility.
As Reagan put it, when the nation faced similar crisis, "If not us, who? And if not now, when?" (He also summed up the Democrats' economic program pithily, "If it moves, tax it; if it still moves, regulate it; if it fails, subsidize it." That perfectly distills today's Demodogmatism. But the Republicans' dogmatic refusal to permit any tax increases—even on the carried interest of hedge fund managers who create few jobs—is equally unhelpful.
If there were ever a time to start accessing the gold Roosevelt bought at $35—and reducing endogenous risk in the global banking system—this is it.
Gold-backed bonds and gold for sale at $2,200 to all bidders would, of course, be selling off "the family silver." But desperate times call for desperate solutions. The biggest and most obvious asset Obama has is the one asset that he supposedly can't touch.
Why not?
Long-duration Gold-backed Treasurys paying, say, .5% interest would be one way of selling off much of the Treasury's hoard without swamping the cash gold market.
Those with long memories will recall when Jacques Rueff, DeGaulle's gold guru, convinced France to issue some gold-backed bonds as proof that the nation didn't face serious inflation risk. Then came stagflation and the runaway gold market and those gold-backed bonds became fabulous investments.
Most central bankers know that embarrassing story, which may preclude their willingness to make any recommendations now. To be remembered as the guy who sold gold at $2,000 in a long-term bond and gold went to $5,000 would be ghastly.
But the reason why Rueff lost so big was that Nixon closed the gold window in 1971 and then oil prices quadrupled and stagflation—which had never existed before—took charge. Under this tentative scenario, the US would transfer all bullion needed to back the bonds, and Congress would pass legislation guaranteeing those gold bond conversions until the bonds matured.
Finally, the wise, witty folk at the Leuthold Group have published the Chart of the Year showing the cumulative total return on gold vs. the cumulative total return on the S&P since Nixon closed the gold window, repealing the cap on gold imposed by Bretton Woods.
Remarkably, gold's bull market in this millennium has meant that its annualized return has caught up with the S&P—9.9% vs. the S&P's 9.8%. If you'd put a bar of gold in a vault and left it there for 40 years, you'd have slightly outperformed most equity investors. The S&P has been long proclaimed as proof of the triumph of American capitalism with its business schools, management training, and superb collection of so many of the world's greatest companies. Buy and hold the S&P and you're going to be rewarded by the very best wealth-generators. Buy and hold gold and you're as outdated as believers in the phlogiston theory.
This statistic could be used by Obama to argue that now is a good time to lock in the gold bull market by monetizing the nation's holdings through various strategies and vehicles forty years after Nixon uncapped gold and 78 years after Roosevelt boosted it 70%.
The same strategy would apply to some of the more desperate European nations. They have gold; they need to sell bonds and the market doesn't want them; their deficits are scary and they're all supposed to retrench simultaneously. Issuing long-term bonds with a fixed call on gold would make their bonds marketable.
Most of the gold sitting in vaults in the US and Europe was accumulated at significant cost to the taxpayers of the time. It is performing no usual function at a time when it seems as if all governments—notably Switzerland—want the value of their currencies to decline. The reason nations wanted and needed gold was to back their currencies.
Pawn shops and jewellery stores report high levels of gold cashouts from middle class people who are having trouble getting by. The point of gold is that for all of history, it has been the one certain thing that can be used to buy goods and services or discharge debts.
Why don't the governments bring out their gold and use it to back their bonds?
Obama should, in our view, try to find one non-Keynesian economist who understands gold to advise him. We’re sure he could get an old-fashioned scholar from the University of Chicago to help him out if he made a few calls.
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Greenies for you Cavior Emp!.....
Didn't ZH just run an article about how the Austrian CB, among others, had lent out or sold all their gold to unknown parties? Right though you may be about the consequences, we're talking politicos and banksters here. They've got no scruples about pawning the whole country off to satisfy their need for porking arrangements. What's a few tons of metal if it'll keep the perks coming for a bit longer. Hey, it was just sitting around taking up space anyway, right?
WTF ZH?
I expected more than this stupid shit!
FDR only got somewhere between 10-20% of the people's gold, as it was voluntary, illegal to own, but still voluntary to turn in.
Anyone who is smart enough to hold gold, is smart enough to NEVER turn it over to the government in exchange for yet another politician's promise.
Fuck! This was the last thing I read before turning in, I hope you're satisfied, I feel dumber for having wasted my time.
All the 'Gold confiscation' paranoia out there is incredible!
Let me guess. You are 22 years old, dont read any history, and assume that anything that happened prior to your birth in 1989 is ancient history and will never happen again because the people of the world are too smart for that today.
Am I right?
How about 'criminalizing' the ownership of a far more productive asset - say, oil - by all those determined to be enemies of the state? I know, I know... it would never happen. Oh, (ku)wait.
In a modern, sophisticated economy, gold, as a medium of exchange, is just another pyramid scheme. The true value of the metal, it is hoped, lies in some still undiscovered use. Probably having to do with space travel or populating distant planets; that the attraction to gold is somehow spun into our DNA for reason we do not know and cannot fathom. If not it is nothing more than a way to impress dames and hedge against one ponzi by participating in a pyramid scheme.
Not much gold used in the Enterprise. Lots of silver, though.
In all fairness Milton Waddams, The 'confiscation issue' is a serious one and I doubt any Gold Bug doesn't ponder the possibility... However, once you go all in! You better have the support mechanism to go all the way...The last thing these Assholes want is to stir up the dust in the Gold Market...That time will come no doubts! But we're fathoms away from that at this point for sure
Gold's value is simple, humans like shiney stuff. Gold stays shiny.
You can't 'jock' a barrel of oil
As far as physical gold holdings , confiscation is really not an option. There isnt enough in private hands to make the fallout from such a practice worthwhile.
Besides, I dont think the people that are holding said physical gold, assuming that the reason they hold it is because theyre well aware of the benefits, are stupid enough to have it easily accessible to those greedy hands.
In other words, good luck finding my Au.
The attention that a gold confiscation atleast in the USA at this time and place would send gold up double or triple and the USD oil proxy would vaporize in an HFT millisecond.... "Come and get one in the Yarbles', if you have any Yarbles"
Horrorshow.
Obama the leader of the world. That might be the most sickening thought of all. The incometent POS should be in prison.
Maybe this is why his mentor George Soros sold his paper Gold. Fuck all of them, I have mine parked in Switzerland.
obama is just a puppet. he's drawing all the aggrevation beautifully, it's his job.
and you don't own anything unless you personally hold it. just sayin'.
Big deal. So you have it parked in a Swiss bank. How is that going to save you? It's still only going to be worth $2,000 when the U.S. starts to confiscate.
He said his gold is in Switzerland. Not a Swiss bank.
ViaMat, bitchez.
Do you really think it's safe there? The LBMA and the CME both naked short the PMs until their registered vaults are naked. Not only that, but they share the contents of their vaults with eachother to delay an obvious bankruptcy. In fact, recently Scotia Mocatta bailed out the CME by sending them a crapload of silver. I wonder how much of it was yours.
There is no reason to confiscate the citizen's gold, all they have to do is say they are now backing dollars with gold at say $10,000 and ounce, and they will defend this price with market actions. Then open the mints to free coinage to bring gold out of hiding and into circulation where it could do some good in the economy. They could also repay external debt with metal set at the new price. This whole notion that we need to punish the gold savers by confiscating their property, or unfairly taxing them is ridiculuos. These are the people that are going to re-liquify the economy. It does far greater good to coax gold into circulation by setting a fair price, based on existing dollar supply, and allowing free mintage of new coins of the realm.
All you say is true, in a mechanical way.
But what about the rich world's universal aspiring to a social-welfare state, wherein public acquiescence (votes) is purchased from the public treasury? That's an unsustainable model for everyone except maybe Scandinavia and Switzerland. Elsewhere, there's plenty enough people and companies to game the system to consume more than they produce. The monetary and credit system provides a cushion, for a time.
What I'm saying is that even if what you suggest were to happen, how could it last? That the US lasted as long as it did (until 1933, just to pick a date) is something of a miracle, helped along by physical isolation and abundant, untouched resources and land. It's hard to see any country going it alone with a gold standard now; even the Swiss couldn't do it. The financial system would have to de-globalize.
Exactly. This is what Bill Still doesn't get.
you're making the mistake of assuming said gold exists (in ft. knox).
additionally, in this information age, people won't be willing to give up their PMs as they did back in '33.
then again, that's the whole tongue-in-cheek context of the article, isn't it?
I do not believe that the Mark of the Beast is going to be denominated in units of gold. More like units of your soul. Does anyone on ZH even read the Bible?
The name of the Beast is supposed to add up to 666.
The Mark could be anything. Just refuse anything that must be applied to right hand or forehead. If that becomes the Must Have, that is the clue.
the number 3 signifies God. the number 6 signifies man. therefore the number 666 signifies man putting himself in the place of God. that person (it's a POSITION, not a singular person) ALREADY EXISTS, and has for about 1500 years. his formal title is 'The Vicar of Christ,' and "vicar" as anyone with a dictionary will know, means "substitute." so, WHO IS THE SUBSTITUTE CHRIST? WHAT RELIGIOUS STATE HAS DOMINATED THE LAST 2,000 YEARS?
(i KNEW you could add two and two!)
Kirkster... Sleep well!!! You're covered...
I'm fucked them because my AG and AU is all marked "666." for some reason.
Now THAT classifies as one of those "things that make you go "Hmmmmm." If it really upsets you that much, just turn your bars upside down as you're counting them. I find that it really helps.
I gotta start working some hipper rooms with my jokes.
Made me laugh .. are you here all night?
You could be holding them upside down.
IF what Mr. Coxe says comes to pass...what happens to silver?
Confiscated at $20 per ounce.
Up yours!
Everyone who now thinks like a predator-bankster-thief should just drop dead.
How can this kind of thinking be tolerated in even slighly-rational company? The author should be immediately ejected out the airlock and shunned by every honest, ethical human being.
To propose that a bunch of no-good, scheming, morally bankrupt predator scumbags can legitimately and SHOULD prohibit us from owning an utterly safe, totally freaking inert metal... is worse than treason. It is intentional criminal thinking. It is intentional justification for totalitarianism.
Up yours, author. You are scum.
NOBODY in their right mind will part with their physical gold, because they know the price will skyrocket to infinity if they try any such plan. The federal government of the USSA today has ZERO credibility, and ZERO people who hold physical gold are patriots to the federal government of the USSA (though a great many may be patriots to "america").
Get this XXX rated obscenity out of here.
do you think marc faber is wrong to advise americans to hold their physical gold outside the usa?
Marc is right. But it matters very much where outside the USSA people hold their physical gold. If they leave it in the hands of anyone else, even nominally ethical "pro-gold corporations" like that mint/outfit in Australia, your metal WILL BE handed over to the government of the USSA the moment they "ask" for it.
Most important, people must have their physical assets under their own control, and hidden where NOBODY can possibly find them.
Finally, most important of all is to yourself out of the USSA, with your metal.
Good advice. You should not underestimate the peer pressure to surrender your wealth if/when Obama signs the executive order to confiscate gold for the sake of "freedom, patriotism, liberty, and the American way of life, bloody blah blah". They might not even need law enforcement to raid homes - there will be vigilantes, your own neighbours, roaming around ripping gold jewellery from men and women, public condemnations of "hoarders", and the usual Nazi antics that the USSA is famous for whenever "Patriotism" invoked. When hysteria reaches fever pitch, there will be huge pressure to surrender your "conflict" - "alien" - "foreign" - "Nazi gold from the holocaust" gold for some good, honest Benjamins at a premium. Be careful who you tell about your gold savings.
You "GOLD BUGS" are living in a fantasy world if you think the government is going to allow gold to trade much above $2,500. They will confiscate every last ounce at $1,000 per ounce. Watch and learn. I get such a laugh out of all you people who think gold is going to $10,000. How funny!
Its a world market now son. Won't happen. Either a black market would develop or that Gold would simply leave the country in a myriad of inventive and frighteningly simplistic ways.
Damn straight. They will not get the gold. Fact is, they'd have to set a price around $50,000 to "equalize the monetary system", so almost NOBODY will turn over their gold at $2000 or $3000 or $5000... and probably not much at $10,000.
If the predators claim we have no right to hold gold (an element), they also claim we have no right to hold or breathe oxygen (an element).
If they try this, there will be WAR.
Son? So you're my daddy?
I might have been, but my dog beat me over the fence.
In this particular instance it would appear that I am. Sorry about the predisposition for high blood pressure and diabetes.
Nature is a fickle bitch.
Put your money where your mouth is and short the bull market, if you're that stupid.
The US government holds approximately 8000 tons of the stuff, at least that is what they say they have. It makes the most sense to value gold as high as possible based upon money supply because that would allow for the most orderly pay down of external debt. At 10k per ounce they could just about cover all external debt with 2-3000 tons, leaving them with a solid base for monetary backing. As far as confiscating gold, why not just confiscate land, houses, bank accounts, 401ks or whatever else? The answer is because people wouldn't stand for it, nor should they. They will not stand for confiscation of any assets. We are heading towards a gold standard and a reversion to sound money. Remain in denial at your own peril.
If you think that the government can use their legal tender toilet paper to arbitrarily price a scarce resource, you get the boobie prize. Just slide up to my gold-bug fantasy bar, and my bartender will rubber-stamp your hand with a 666. It washes off in a few days, just long enough for you to think about your foolishness.
you're stone if you think gold is hitting 20k.
That's only about ten times what gold is worth now, which is 10 x what gold was worth in 1975, just 35 years ago. Gold is going to be worth $7k an ounce before ten years is up.
It's easier to visualize if you think of a $10 bill being only able to buy a small piece of candy...
Indeed. I'm 57 and remember when a penny would buy a large gumball from a machine, while a nickel got you a coke (from a machine, the most expensive way) or a big candy bar. I remember visiting a coin show with my mom around 1970 and seeing gold sovereigns (a pound was worth $4.86 then) on sale for $10. I wanted to use some of my savings to buy a few, but my mom said "what? $10 for something only worth $4.86? No way!". What are sovs now, about 40 times that? 40x the current gold price is how much?
Ten dollars was a lot of money, a lot of lawns mowed or papers delivered. In my parents' day it was even more. Find, if you can, some old magazines from the 50s or 60s and check out the prices of the things in the ads.
Typewriters had a symbol for the cent in those days; that's how important it was. Now the penny is irrelevant, an embarrassment, as all the coins soon will be. But when silver still circulated I eagerly looked through my parents' change and often found Barber coins (last minted in 1915) worn flat and still circulating after almost 50 years. That's a level of price stability nobody under the age of 50 today has ever experienced.
The author is ignoring the fact that Ft Knox is empty. Obama sold what little gold remained to India. Why do you think they took half the navy on that trip and built a tunnel from the port to the museum?
Sitting here watching CNBS europe. I love the Brits! How in the heck can the usd stay strong, and have T-10 yields below 2%?
Are we a society of whimps, and fear mongers? Get real people! The usd is just spiking, and the hedgies are looking for a year end bonus! The pound is pounded, the euro is beat down. Asian central Banks are cashing in on their (usd) long washing machines.
I'm short the usd! Why, you ask? If you can't beat them , then JOIN them! Exports, BABY!
When the SHTF miners will be nationalized, so buy and hold physical gold and silver.
Correct. You are better off putting your money on red or black in roulette than in mining stocks. buy physical otherwise, what is the point in owning gold?
Well if the USA was to cover its 14 Trillion in external debt using the 6000 tons of gold held by USA ( valued at approx 396 Billion @ approx $2000/ounce). the multiplier would be 35. Which means the price of gold would then have to be fixed at 2000*35 = 70,000, of course the USA could cover only portion of its external lliabilities say 25% of 14 trillion in which case the value for gold would have to be 70000/4 = $17500..
Feel free to correct me if I am wrong in my understanding..
6000 tons *1000kg*33 ounces per kg = 198,000,000 ounces
198,00,000 ounces *2000/ounce = 396,000,000,000
14,000,000,000,000 (external debt) /396,000,000,000 ( value of gold held at $ 2000 per ounce) = 35 ( thats how I got the multiplier of 35..)
So the gold which is today say at 2000 will become 2000*35 = 70000 ( i know gold is at 1800 odd and not 2000). :) :)
What a nice wet dream at 3.15 AM in the morning..
isn't it 8133 tons, 'officially'
Yes, but actually (as in physically), it is ZERO. All sold, stolen or leased.
Can some one please take these 2 ass hats on CNBS off the air These 25K pound morons are tanking my trade!
Effin Limeys!!! Discussing capx about airlines? WTF? Get it together CNBS!
Banking futures, China, F..ked up european politics! ECT...
"why don't the big holders revalue their gold to, say, $2,200 an ounce and declare themselves willing sellers at that price"
There are already plenty sellers at 1800, that is why it is 1772. What kind of nonsense is it to 'anounce' you gold is worth 2200$. It's only worth that is you can sell it for that. Announcement or not, big or small
Too long and too full of personal opinions. My take who knows what to make and I read most of it but wasnt the time to read all of it.
What was 'fascinating' about that?
I think you all need to relax. The dollar price of gold will become increasingly irrelevant if the dollar and other currencies lose the faith and confidence of the people. Gold's true value will only be gleaned by its relative value to say the price of oil, housing, stocks, wheat and other such items.
A gold standard of any sort implies an end to ZIRP money, an end to deficits, an end to wars, and an end to pork barrelling etc. Does any think that Washington has sufficient will and intellect to stop its addiction to borrow and print and adopt fiscal and monetary discipline?
The world and its financial systems are far too disjointed and damaged to see the emergence of a gold standard on a national basis for a long time yet. Gold however will continue to be the best protection and investment on a personal level.
Wow, the ZH'ers seem somewhat discombobulated here.
This article is somewhat similar to Jim Rickards theory and FOFOA. They all seem to think that the "end game" or final solution or whatever is a simple gold revaluation and all will be well for the government. The problem is they would still have to massively reduce their own size and rate of spending to adhere to a new (old) gold standard. Gold standard today means reduction of government power to a tiny fraction of what it enjoys now.
Won't happen. The government will simply not be choosing the next monetary system. This will be chosen by the market and no one else.
One last thing: "He who owns the gold makes the rules" only applies to rules between governments. It does not apply to rules governments make for the people. The US and all their banker buddies could own every ounce of gold in existance and have absolutely no control over the population. Control and power have nothing to do with money, everything to do with passive or active consent of 99% of the poplulation.
This article is somewhat similar to Jim Rickards theory and FOFOA.
Concerning FOFOA, this is true as far as revaluation goes, but not a gold standard. FOFOA thinks that such a standard is a pipe dream, that fiat is here to stay. He advocates separating the two functions of money (medium of exchange and store of value) with fiat for exchange, gold for store of value.
Something of this sort is already underway in Europe, where the CBs mark their gold reserves to market, where gold can be bought at any bank with no value-added tax (silver, sadly, is taxed at 21%) because it is considered a form of money.
As long as there are ANY forms of paper ANYTHING or any form of fractional reserve practices, NOBODY in their right mind will trust that paper. PERIOD.
Excellent idea these gold backed bonds, but you have to be the first in line to do it, in huge size, because the moment the first such issue hits the market, the price of gold may very well slump, which may also have a very good side effect on the equity markets.
Fascinating? Nothing to see here folks. Baseless drivil.
No one will ever take my gold away
Those gold bars of yours don't have 666 on them - its 999, turn that fucker over! That's the percent purity of the bar.
Sheesh - sorry I have to tell you this.
(OK, I made that up, but its really late and some of you folks really got hooked by this rather less-than-elegant, disjointed ramble on gold, which is NOT up to ZH standards.)
Hey, is this Fight Club, or just a nobody country club? And I see that you stuck your face outside of the transporter beam, just like I told you not to.
This what we said on Sept 5. premium subscr:
Bloody september. How true was that. Only prem subsc had access to it then.
http://capital3x.com/?p=711
And this is why I'm not a goldbug -- this is a confiscation event: pure, plain, and simple.
Confiscation doesn't work if the majority of personal gold is held outside the USA by US and non US citizens.
Asia Russia etc can make a mockery of whatever the US decides on gold/silver. Especially when paper gold becomes paper and physical markets are found in Asia.
Gold still doing ok in AUD.
not explaining the acronymn LBO destroyed the article for me..Big failing of ZH is the ignorant laziness in not explaining meanings and acronym's they are perpetuating the lack of transparency they always criticise the elite for..
I do know many good contributers do stop to convert things to layman speak and many thanks to those few..The rest of you can swim like lawyers in your own narrow band of exclusive techno speak..
and congrats on losing your USA sovereignty to your new Israili leader Benjamin..AS YOU SAY GOOD LUCK WITH THAT
Leveraged BuyOut. Let me add my two cents worth on this amusing article. FIRST: Who made the USSA the "Gold God of the world? Does anyone out there really believe China, India, and the REST of the world is going to value THEIR gold at whatever price the USSA values/mandates it at? fuck no! China will fulfill their destiny as the supreme super power/reserve currency owner if these morons would try at set a price(aka confiscate gold from the American people). China would DUMP all the worthless paper they have on us and buy every oz. of gold available, leaving us with a zero worth FRN, and all of the gold. "He who dies with all the Gold, WINS". All I can say is Buy the proverbial Fucking Dip! We have a year-2 years before the price of Gold now will be history in the rear view mirror.
Questions for the gold haters:
Do you think that gold haters have been around as long as gold has been used for money (i.e. 5000 years)????
Do you gold haters ever contemplate WHY gold was used as money, or reverted back to it, time and time again???
Can you gold haters deliver an alternative currency that IS NOT dependent on the whims of a man??
Have you ever though as to why God put gold on this earth? (hint: honest, incorruptible money)
Put your trust in Ben and the boys. I prefer gold and silver.
the USA is a big sausage party gone wrong.
you guys really need to get laid.
TOMORROW BELONGS TO ME!!!
http://www.youtube.com/watch?v=DCnpVNg-s3E
WEAPONS NECCESSARY : TO COLLATERAL DAMAGE
I EAT RADIATION FOR BREAKFAST
A good overview of pax americana's hubristic evolution. What lacks here is the basic fundamental philosophical question that faces all civilizations : What is our collective goal apart from survival?
As Jefferson wrote for all of humanity in that age of enlightenment : Pursuit of happiness. Through collective rectitude and goodness.
Not so said Hamiltion : It is collective greatness, grandeur to the Europeans.
This is the root of the philosophical divide in all civilization : Logic of Power vs Logic of Knowledge. Alexander vs Aristotle. Which logic guides man's ascension to progress, if such a thing exists?
So nothing new, but a recurrent debate as for Cicero against Caesar, Seneca vs Nero, Galileo vs Papal Inquisition, Goya against Napoleonic rape of Spain, Picasso vs Nazi/Franco's repeat performance, Tolstoi vs Napoleon in Moscow to be followed by Hitler in similar fashion.
Hubris vs Rectitude and goodness.
If global finance is the language of Hubristic Power play based on the new philosopher's mantra : the so-toxic combination of the economics of Supply side Monetarism (Reaganomics) and Clash of Civilization ideology (Bush's NWO), it has shown its sterile, self-destructive limits to the world.
The USA, as top dog, has to go back to moral rectitude to survive, Jefferson's vision has to become the new mantra of the new age. Forget Hamiltonian hubris and centralised empire building. Its an ironic quirk of history that the Hamiltonian vision of US hegemony was fed by the Louisiana purchase made by his arch-rival, Jefferson, which fueled the subsequent dream of a nation to "tower like a colossus" over all others. If only Jefferson had realised then that he had become unknowingly, through the shrewd and relatively cheap acquistion of this huge span of land that ensured the new puny ex-colonial structure to breathe and grow beyond the reach of the "redcoats", the instrument of destruction of his own philosophy for his progeny...
Meanwhile, on the other side of the pond, the man who sold him that expanse, knowing full well the USA woud become a redoubtable naval power to challenge his rival for European dominance, something France could not achieve on the seas, became the nemesis of Europe's peaceful construct. The arch example of hubristic power play in Europe, Clausewitz's example that fed Kaiser's militaristic dreams a century later. The wheel had come a full circle in Europe's subsequent Armageddon.
The Europeans now try and eat humble pie in their new continental construct, bastard five legged animal spawned by technocrats in its current form. Will it transmute to something more potent and beneficial?
To be or not to be rages on! But it could be tipping point western civilization if the outcome is continued denial of fundamental lessons of history. Achtung, Rome fell to the barbarians.
nice post. what does falak pema mean specifically? google shows no results beyond you. whatsoever.
I see FEMA KAMP. trigger happy and full of blood
your post is leading me to believe in eternal recurrence etc. So whats the point. Ya like Nietzsche?
rome? Armageddon? you're investing time to post educational 'fore'ward discussion, but what
is your destination.
quite the script we have here every day. what happens to those who deviate from your script?
falak pema : he who measures the height of the sky. A bit like...Astrolabe, of medieval days. He was son of Abelard, so his father named him after that measuring instrument. Omar Khayyam, poet and mathematician, also wanted to measure the height of the heavans.
Just a hommage to a man who once lived and used it as his nom de plume.
History repeats itself : absolutely my point. ...Humans are very predictable and fall for the same 'atavism'. Sad but true.
I've learnt one thing : don't pretend you know the answers to life. It's just fine if you know how to ask the right questions of your times! That in itself is a blessing.
I apologize. thought you were very intentionally messing with people in your name.
Communication.. If you ever dealt with a woman,you can change the world with communicating, but somehow it hasnt moved on between men and men.
this history repeating itself trap, i appreciate your fair response, and sorry again for being rude.
right now, its us, not anybody in the past.
The united states has enough land and sunlight to supplement all of us. 300 million people. i cant speak for the world issue.
So any story deviating from that I consider a lie and a diversion and am willing to die before I say 'we are doomed'.
if fraternal orders have info of catacylsmic events well then, history does repeat itself.
but man-made history repeating itself into destruction, I dont/wont believe. its predictive programming.
and even if we're all dead,
we might as well enjoy it and stop bitching and drink some ice cold beer and see our signifigant other girl naked.
try asking very beautiful, healthy girl what she thinks about the end of the world. economic collapse, shtf.
she doesnt care.
Thats how we need to feel confident as beautiful beings
flawless.
i'd like to see your significant other naked:) just sayin............
this guy sounds truly poetic in the nude with chilled beer!
"To be or not to be rages on!" falak pema? o'rlly?
condescension =To be or not to be rages on? does it? we're at a philosophical journey question ponder?
Should we rehearse/embed our children into and of the past so they can re-enact it? make them RE-MEMBER?
needs a story. fine as we are and were. but no. needs a story.
Redcoats and Lousiana, Washingoton, fuel, mantra, Hamiltonian, vision, USA, seas, humble, construct
BLUE RED YELLOW AND GREEN.
What the fuck is ACHTUNG? Who are the barbarians, specifically? why are you so interested in other men? can anybody say ACHTUNG and not be gay?
lets get it moving. I got shit to do.
WEAPONS NECESSARY
Key change was the language to communicate which clearly lay down that FED has now become more worried about global markets than US economy. “Significant downside risks to outlook, including global financial markets”. Quite clearly there are are exposure to EU crisis being hinted here and while it is the EU banks who are in the limelight but I also believe there US brokerages and banks who are exposed. Time will tell.
August 9
September 21
Can anybody tell if this guy says "buy gold"?
The 600 million Socialist Bureaucrat Brotherhood (people like DSK) have immediate dependents that swell their ranks to one trillion Succoring Sucotash Socialist Sheeple who live at the Fiat Fountain and have no visible or meaningful means of making a living by serving their fellow citizens in the market place ! That's a least one in every seven earthlings live by pure Socialist Suck ! They get theirs no matter what.....cradle to grave ! They are the eye of the the Tyranisaurus Cyclops that needs a sharp stake stuck in it ! They are fighting to maintain their privileges.......these underpaid teachers and prison workers ! Are you going to be intimidated into returning the Gold you stole from them ? They will gladly buy it back ! No questions asked ! Monedas 2011 They are riding ponnies on the Counterfeit Carousel and they don't want the music to stop......money, money, money, money, money, money makes the World go around...the World go around ! (Sucotash - an indigenous American dish consisting of a medley of vegetables such as corn and assorted beans.)
Making it illegal to own Gold did not work then nor will it work now. Today, you would have to be a billionaire just buy all the early American Gold coins still for sale on the market. Guess they never got turned in during the last suppose confiscation. Might as well take people's land and homes while your at it. Times are different, civil discourse will be more of a concern under such extreme measures.
Sniff... you lost me at LBO...
Don Coxe loves big ideas, and delights in his own genius. But he is totally wrong.
"A problem well defined is half solved." Don figures the problem is not enough money to spend, so use gold instead. Has he seen the cost of money? It's close to zero. The US can borrow trillions at low rates as long as China plays ball, and they will. It does not need gold to add to its spending pot.
The problem is too much consumption, not enough production. Trade and fiscal deficits. These are not solved by price-setting gold. The solution is to fix the problem. Very unglamourous small ideas like cutting regulation, changing labour laws, curtailing tort litigation, closing the Federal reserve, ending all subsidies, dealing with corruption.....the list is depressingly long, and mundane.
But the fix will not not happen before total economic collapse. Don Coxe knows very well this lesson of history.
I agree with this very much. There will be no reform or solution with the current "system" in place.
The US has no real gold. If a country cannot audit it's gold how can anyone trust that country's currnecy?
If a country cannot bring to book the financial criminals on Wall Street how can anyone expect to believe in it's financial system ?
The main stream media is complicit in the crimes.
Only a fool can think or believe the US $ is a safe haven.
The swiss have 'blown' their money have they ? Hmm, not so sure about that.
$2200?
lol!
try $22,000 and we're getting somewhere...
So, if any of you can find a super hot, like 10/10 female who is in prime physical shape and mentally healthy, who is a survivalist, goldbug, or SHTF fanatic,
POST them here.
if you PLAY a healthy woman a video of a high resolution meteor, confirmed by NASA, coming right for earth they wont ruin their day over it.
Your entire universe is dictacted by your own self-image and belief in the world/optimism.
Otherwise post extremely hot girls who are obsessed with 2012 comets, or the economic collapse and prove me wrong.
There ARENT ANY!! Because they dont find value in external things. THEY are the value.
Do you think girls, even Harvard educated give a shit about Benjamin Franklin?
Harvard educated women are making money, not discussing world war gay.
Headline should read: Zero Hedge's "Must Read" Devalues Itself.
WTF...The tags are nonsense too.
http://www.youtube.com/watch?v=DCnpVNg-s3E
i made it .
mossad didnt kill me.
yay.
yet..............
Why does Coxe speak of Obama doing this and that as if he 1) has a clue, 2) has a choice of who advises him, or 3) has a choice as to what the telepromter tells him to say. Obummer is a plutocratic cartoon facade pretty boy front man fall guy in black face.
Slight problem with the $2000 per ounce figure. 8000 tons x $2000/oz = ~$0.5T worth of gold-backed bonds. This does not come close to the $15T US debt. So gold would need to be valued at $60000 to cover the debt.
I aint turnin in my gold and silver for some kinda paper?! That's why I bought the stuff in the first place! What do you think this is, Monopoly? Every time things get rough, they say you can't own any shiny stuff and you've gotta take some silly paper from em? This pump and dump, boom bust then war thing every 30 years or so's gotta stop. I'm off the merry go round boys, and I ain't takin paper
yeah! lock and load brother.....................
Backing our currency with gold? How would this play out? What happens to someone with a lot of currency but no gold? Wouldn't their currency have to be backed by gold also? Or would I along with the rest of the 0.5% of the population owning gold have all the currency backed by gold? Somehow, I don't think Uncle O, or the banks for that matter, would let that happen.
BTW, I knew here and learning a lot from Tyler and you guys. Thanks.
This article makes some interesting points, but it fails to see the bigger picture, which is that the US is not in a position to be calling all of the shots. In case you haven't noticed, there is a major global currency war in progress. Even the crudest of calculations based on money supply suggest that a price MUCH higher than $2000 would be needed to attract large amounts of PHYSICAL gold. So what would happen if the US announced a plan to buy all available PHYSICAL gold at $2000 - or even $3000? I'd bet other countries holding lots of dollars and US debt would immediately offer to do the same thing at a higher price. This probably would continue at an accelerating pace until the "real" value of gold (i.e., unencumbered by paper claiims) was established. Think about it: even with laws against selling to somebody else, who you sell gold to the US for $2000 if China soon started offering $2500, followed by the Saudis $2600 - and so on, back and forth, until the price was much higher. A what about the huge derivatives markets that are tied to gold and interest rates? Wouldn't they immediately come unravelled. TPTB will try to avoid this for as long as possible. And it certainly won't be intentionally triggered by US politicians and banking interests, who both have much more to gain by trying to solve our financial crisis through the usual means: financial repression. Only this time the repression will have to be much more aggressive and it will involve breaking many promises about the future. The only hope for the current clowns in charge to maintain the current system and power structure is to titrate everybody until they are on the verge of rebelling violently. That's the path we are on and that's the paty we'll stay on unless blood starts to flow in the streets.
For those of you who have difficulty thinking about gold at very high prices, I suggest that you change your frame of reference. The value of gold is not going up. It's staying the same. 1 troy oz will always be 1 troy oz. It's the dollar and other fiat currencies that are changing in value. Today, the Gold(mg)/USD exchange rate is 56.26, which is about $1750/oz. If this exchange rate were to drop as much as other exchange rates often do, a move to 40 over a few years would be no big deal. If something really ugly were to happen with the dollar or in the US, an immediate 50% drop to 20 wouldn't be unusual, followed by another 50% drop to 10 as TPTB struggled to deal with things. This (and worse) is what happens to freely trading currency exchange rates when a country gets itself into trouble. It's better to focus on what should happen to the dollar rather than what should happen to the price of gold. If you can accept the dollar falling from 56 to 20 or 10 relative to any other currency, you should have no trouble with gold at $5,000-10,000/oz.
If you don't believe that the USD dollar is capable of falling this much (or MUCH more), then you aren't seeing the big picture in the world today. The forces of deflation are enormous right now and a world-wide depression would occur quickly if there wasn't aggressive intervention in global markets. But markets aren't free because the folks calling the shots are absolutely determined to generate enough inflation to avoid a depression. They are trying to save debt at all costs because the huge derivatives market would destroy our financial system if default on debt occurred wasn't managed in an orderly fashion. Inflation is the only hope for saving the current system. Unfortunately, several thousand years of financial history teach us that nobody can do this for long. The US has been doing it for decades and there are clearly indications that the end-game is coming into view. The usual outcome is massive debasement of a currency. The USD won't be able to avoid this fate. The only question remaining is the extent to which the USD loses its value. You can see the range of possibilities by looking at the examples in wikipedia's entry on Hyperinflation --> http://en.wikipedia.org/wiki/Hyperinflation
+1750.00
me thinks that the elite globalist's see only one way out of this for their fraudulent fiat paper system, that at some point in the near future it should be allowed to crash and burn and then implement their plans to pin all the blame on obama and his trons. next up they plow all their resources and influence into their new selection of a guy named Rick Perry to put it all back into a manageable and sustainable new order.
This article is wrong on so many levels.
As one poster correctly pointed out to cover the amount of fiat in circulation with gold would require a 70K/oz price. This premium over the mining cost is indistinguishable from any other form of currency (say paper/ink) that commands a premium over its production cost. Whether that fiat premium over the cost of production is 100/1 or 100,000/1 is not important. In the end all that matters is who controls the ‘quantity’ of the currency ‘not’ what backs the currency.
Too little currency per capita and you get deflation; to much you get high inflation. If you control the money supply you can use the opposing forces of inflation and deflation to act as pump transferring wealth to yourself. That is the key problem under the world’s current international banking cartel debt based monetary system. Whether we speed up or slow down the train we are still on the wrong track.
We absolutely need to get rid of this international banking cartel or else ‘all’ other attempts at a solution will fail utterly. It’s just as easy to be made a serf under a gold back currency as a non-gold backed paper currency. It could be back by moon dust for all it matters.
The ‘only’ solution is for ‘all’ nations to go back to issuing their own debt free sovereign ‘paper’ currency with the total supply regulated by a super majority law (i.e. a Constitutional amendment in the US for example). The currency supply should be regulated by law, and only be allowed to increase based on population growth plus about 1-2%. The fractional reserve requirements for banks would also be set in law say 5/1. All of which is tied together with a year/year balanced budget. Budget levels for a given year are 100% based ‘last’ year’s actual tax receipts. All that the elected representatives can do is decide how the pie is distributed and adjust taxes for the next year. So all this forward projection, ten year plan BS is put to a stop as well. The over and under projections will just result in minor deficits and surplus that will cancel out overtime. Heck we even get a dash of Keynesian economics as result of this dynamic. Don’t worry Ron I’m getting to you next.
Added to the legal tender paper currency in circulation above would be legal tender minted gold and silver coins in which the ‘market’ sets their price per oz in terms of the ‘local’ paper currency above over time. The key is that the owner will not incur a capital gain nor will they be allowed to claim a loss when exchanged for the ‘local’ currency. As such this hard money also in circulation, which is readily exchangeable for foreign goods/services as well in their local currency, keeps the paper currency system locally and globally honest over time.
In fact why stop at Gold and Silver? Any durable assets held within nations could be exempt from capital gain/loss and thereby serve as mechanism in which to balance the global trade between nations when the exchange of local paper currency won’t cover the difference (i.e. trade deficits). Even now ‘most’ trade can be accomplished via net zero paper currency exchange. The problem comes when one nation produces more value than another one and as a result accumulates the debt based currency of the other nation. This debt based money is then recycled back into the trade deficit running nation, basically reinforcing fiscal deficit, a dangerous situation for both nations.
Basically in free market the price of these durable and universally useful assets (i.e. gold, silver, wheat, oil, etc) must rise in price in the local currency or else a nation is left holding excess reserves in the local currency that ‘cannot’ be recycled as national debt. All nations may elect to hold some reserves in the currency of major trading partners in order to facilitate trade, but to hold significant reserves would be foolish because they earn zero interest because they can no longer be recycled as sovereign debt.
As a result neither a debtor nor lender will any nation be and yet global trade can still be efficiently accomplished leveraging the unique capabilities each individual and nation brings to the world economy.
"Apart from all the jobs created in Nevada and other gold-mining states, this attempt to introduce controlled inflation at a time of surging deflation was at least mildly salutary."
Inflation and deflation are only issues for borrowers and lenders in a long term debt relationship where changes in the value of the contractual loan and payment currency destroys the contract. Otherwise, when wages and prices slowly rise or fall at the same rate, then relative economic relationships are preserved.
It does not matter when gasoline goes to $3,000 per gallon, as long as the minimum wage rises to $8,000 per gallon. The converse is true: It does not matter if the price of a $4.00 Big Mac falls to $1.00 when the staff's pay falls from $8.00 per hour to $2.00.
The party in this who suffers the most, by far, is government, for it addicted to rolling its perpetual debt and its other addiction is to a graduated tax on incomes.
When the overall level of wages and prices falls, government borrowing becomes progressively more expensive in terms of real wealth.
"Most of the gold sitting in vaults in the US and Europe was accumulated at significant cost to the taxpayers of the time. It is performing no usual function at a time when it seems as if all governments—notably Switzerland—want the value of their currencies to decline. The reason nations wanted and needed gold was to back their currencies."
- This is the key point to ponder in the entire article, and it ties nicely with Buffet's ridiculous claim about martians scratching their heads watching as gold gets dug out of the ground, then re-buried and guarded somewhere else....
Warren clearly doesn't get it. The only reason Gold isn't moving in a circulatory sense is because of an inconvenient (but infallible) truth that is perfectly described by Gresham's law... only the subjects of least common value will circulate in an economy, while subjects of higher common value are preserved and maintained beyond the reach of the general price level -
Ergo- you don't see many people driving their restored 68 Plymouth Hemi Barracuda to work and back every day. Instead, you see them driving disposable Kia's and Scions.
Gold will gradually re-mobilize as real money as the sum total of humanity continues to learns/realize that credit is not the same as savings, and that debt is not capital, and that credit only proxy's for money effectively in the short term, due to that other stubborn little reality that all debts must eventually be paid back with something real (and new debt will only work to dissolve old debt if it is offered with a higher rate of "incentive", aka interest)
When US dollars can be produced for free, and sold into the market for free, and every new dollar represents a maximum 2% encumbrance on the US population over the next 30 years, then the game is virtually over.
The only weapon the Fed has left is to simply to declare that they are going to buy every US Security in the market at par value and take the entire yield curve to zero - free dollars for all....
The end.
An "interesting" idea, but what if there is no gold in Fort Knox? When was the last time anyone looked. Also, can the author provide an example of price controls which have lead to economic prosperity for the people. I'll hang up and listen...