Tuesday, December 3, 2013

Going Further

Revisiting some of the FOA discussion of years ago reconnected me to the last post in affirmation of the following, but yet calling for clarity:
When debt is no longer accepted as a means of international settlement, and gold is demanded instead, gold will have been remonetized. Its definition will have changed (from commodity to international monetary settlement unit).
Let us clarify the premise above to include some additional insight.

As we have been noting of late, there are some currencies which represent debt as a store of value more so than others. And surely you know the one of which I speak, because it is by far the largest circulating FIAT the world has ever known.

If there ever was a "philosophy" or an "economic principle" which defines the dollar faction, it is this notion that the debt of the issuer is the ultimate store of value ... for the little people, for investors and for nations alike.

We see many notations from the late 1960's and 1970's coming out of the woodwork lately, between Federal Reserve and Government Officials discussing the "mastery of gold" as defined by its de-monetization. Such motives and operations span a 40 plus year process of "reshaping hearts and minds" to accept a paper gold proxy as "good as gold" ... even to the present day dollar "price" being driven below bullion's production cost, and soon to be even much lower.

Let us now quote a discussion years later, but still some 12 or 13 years ago, from goldtrailfour:
I think however that you need to expand your understanding of what Another/FOA are trying to convey, because it is not a simple advocacy of the euro over the dollar -- but a much deeper and important advocacy of competition in currencies, much as we have competition in other realms within the economy ... I do not believe that Another/FOA are advocating a fiat euro which would "replace" in toto the dollar. Instead they advocate the euro, dollar and gold should "compete" for the hearts and minds of ordinary people (in terms of the currency they employ to store wealth), important financiers (as a hedging methodology), and, yes, central banks and nation states (as a reserve asset). In the case of nation states, the competition would inherently create circumstances leading to each doing what is necessary to make their "reserve" better than the other "reserves." 
Thinking back to "when and how debt fails" .... perhaps, in this regard, when we say that whenever and wherever "the dollar is no longer accepted" as a means of international settlement, in effect debt fails.

This leaves us with "gold is demanded instead". Yes, by favoring a competing currency that is "denominated in gold" we do indirectly demand gold. And we do know the Euro concept treats gold as a freely traded reserve asset, not a currency "backing" or "fix".

It is worthwhile to (re) read ALL of goldtrailfour to get a better sense of this "great divide". And do consider that 14 years is but a sand in the hourglass of the present system's original inception, and its original intent.

Then I would ask you to consider this.

Understand that the competing currencies today, those which compete for "preferred trade settlement status" do not all share this philosophy that the issuing authority's sovereign debt is "good as gold" but rather are re balancing the world's gold reserves to restore the economic principle of gold for their currencies. Will China treat its vastly accelerating gold reserves as a freely traded reserve asset, or will they attempt to repeat the error of Bretton Woods?

I cannot say ... I merely point to the fact that gold does flow in the direction of economic power, as defined by enduring values of production, and that barbarous notion of physical supply and demand.

As another once said: "Time reveals all."

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