Saturday, April 2, 2016

Their "Store of Value" is Debt

Our esteemed friend, Mr. F. W. Engdahl, asks the relevant question: "Why are Russia and China Buying Gold, Tons of it?"  It is good to see our friends catching up on the topic of gold, and William does a very good job of explaining the evolution of thought behind the recent accelerated accumulations of gold. But to pick up where he left off, I think it can be said there is a bit more going on than for China and Russia to make their currencies "as good as gold".

Today, for the moment, it can be said that the world is on a dollar standard because it meets 2 of the 3 essential qualities of money, meaning in part that the dollar is the world's standard unit of account and means of exchange in international commerce for financial products (derivative instruments) and for physical products (oil and gold, for example). The dollar is a common denominator, a measuring stick for comparing values between things, and international systems (like SWIFT) have evolved around it, which have been reliable and convenient for many years.

This is changing, and perhaps it can already be said that the dollar is truly becoming a "barbarous relic". But for now, it still maintains those 2 essential qualities of money, at least in the West.

The third component of money is that it is a store of value. This concept brings us closer to the "good as gold" statement because gold has traditionally been a superior store of value, and to make this component of money valid for a currency, the currency must be able to purchase gold at an attractive enough exchange rate that it can be conveniently "stored" as "value" - or at least as conveniently as the items of value we can reliably purchase with it at relatively stable currency exchange rates.

Our Western central bankers are trying desperately to remove the "store of value" component from our traditional definition of money. It is odd that no one has really endeavored to explain the actions of QE, negative interest rates and the elimination of cash (paper money) as an attempt to negate money's "store of value" function, but this is exactly what is happening. Their monetary theory, and this is important, is that value cannot be stored, rather it is created in the act of incurring debt.

Think about this. Every CB action you see today is designed to radically change our money concept's store of value function. CB's and their network of enablers want to maintain the power to create value by decree, by issuing debt. That is, by creating new debt in the act of issuing credits (debt) by their will alone, with no regulation or governance outside of their own decree - the very definition of FIAT. Add to this, the temporal moment "investors" seek to front run CB actions, as when HFT algos front run the herd. Increasingly, "value" by today's definition, is a moment in time - there is nothing durable to store. Thus (as we will soon see very clearly) value is subject to the same momentary risk as with its acquisition..

We talked a bit about money's unit of account and means of exchange function. The CB's (and their owners) want to place more emphasis on the convenience and necessity of these elements by replacing the store of value function with a "threat of destruction" function. This is where we say, "use our dollar as a means of exchange and unit of account, or taste the world without its use." But that exercise, dollar system sanctions, has backfired, because the countries sanctioned have responded, "FRACK you and your dollar. It will be tough, but we can kick this dollar heroin habit, and we are building methadone factories today, in an anti-dollar economic bloc". Then the dollar says, "beware our military that the dollar has created. Use our dollars - or we will - to fund color revolutions and regime change in your countries, and if need be, we will activate our dogs of war, or were Iraq and Libya not proof enough?

And China and Russia say, "We call your bluff."

You see, China does not want to rule Russia, and Russia does not want to rule China as the Western CBs want to continue ruling the world today (for their owners). In truth, there are some among us, who never did want that privilege, but it was given to us by the world, and that power corrupted us, because we could control the "dollar price" of the worlds true "store of value" money anyway, once we figured out how.

But Western CB bond holder special interests aside, China and Russia, and their developing counter-systems to the dollar want to have balanced trade and free markets, just as America's founding fathers wanted, and achieved for a time. We in America, have become the English empire we fled from over 200 years ago, and the BRICs have become the new "us", in this new revolution against the imperial dollar.

What is different is that the whole world is now caught in the dollar trap, and to become untangled from it requires time and finesse, balanced against withdrawal and repudiation. There could eventually be a major dollar-denominated derivative default between Western and Eastern banks - though you may never hear of it. If and when it happens, it might be labeled as an act of cyber aggression - such an event is one of many possible triggers which would accelerate a systemic shift.

Meanwhile, in the background of all man's conflicts, gold endures, teaching us the lesson of power and greed among men, and its corrupting influence in the aggression of imperialism through the ages. And this my friend, is why the central banks still store it as a balance sheet reserve, a love / hate relationship like no other.

And China and Russia (and their systemic partners) will treat GOLD as their store of reserve value function, not so much to protect their currencies, but as to govern their trade practices and their foreign affairs policies. If one or the other partner, incurs a trade imbalance of some type, the free market price of gold in their currencies, will allow gold to flow in the direction of the imbalance. And this measure of value will correct the imbalance, and gold will be freely exchanged elsewhere to manage any other currency that freely trades in it.

This is all that is desired. Fairness, cooperation, development and peace ... balance and harmony. This is why China and Russia are accumulating gold. They want asset based reserves that can balance world trade by restoring the third quality of money back to money. They want their currencies to act as a store of value in reserve function by creating a free market in gold, traded in their currencies.

They want to eliminate the concept of "store of value = indebtedness to empire" from the modern money equation. Feel free to replace "empire" with "dollar faction", "western banking cartel" or any similar term you prefer, they are all one and the same. The sad part is that our U.S. heritage is lost. We cling to the concept of exceptionalism that our founding fathers incubated, and then we gradually abused our exorbitant privilege to become the new, even bigger empire, and many among us cannot accept this truth, and that denial breeds such perverse situations as the rise of Trump, and similar ironies.

The wheels of change move slowly and the injustices of men leave many tribulations in their wake. But gold will remain, long after man has rendered himself extinct, lying in waiting for the next intelligent ape to stumble upon, and learn the lessons of.


  1. Excellent work! I know instinctively that the cartel wants to eliminate the function of SoV in money. You make something foggy crystal clear.
    However, what else can we do to restore our heritage if we don't vote for Trump? Sanders is not bought by the cartels either but he will turn us into Argentinians.

  2. There are many layers to the deception of "who serves who". Gold is the only master that serves all classes, backed by "effort". Though the election will never be recorded, voting for gold is the only answer.

    But to be less cryptic, I have not seen an American presidential candidate worthy of my vote for many years. Most just vote for the best of the worst. That decision is yours JT.


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