Tuesday, January 31, 2017

A Flower By Any Other Name

It's been a long while since I've read anything from JC Collins, but his recent post on the Hedge is definitely worth a read. Yes, I do think that the FED needs to be - and will be - eventually integrated into a multi-polar monetary role. The FED has acted as the global central bank under the dollar system for many decades, using the dollar (its product) as a global reserve asset.

It should come as no surprise, given events of at least the last decade or so, that this is a far from perfect arrangement. But we should understand that as the dollar system is a debt based system, the FED was doomed to fail eventually as debt grows exponentially toward the inevitable end of the system's timeline.

Then as we peruse Collin's post about the incremental return to gold backed currencies we see that he truly "gets it" though not in the strict "Freegold-speak" sense that has come to be understood among those "Evil, gold hoarding" acolytes of Another. As Collins refers to gold and "other domestic resources" as the sovereign backing for SDR allocation, he struggles a bit to define GDP as part of the composition. But in essence he is describing the transition from a "debt based" to an "equity based" system of the type that Eurasian infrastructure, monetary constructs, trade deals and monetary alignment (including China's inclusion in the SDR) have already begun to typify.

Just as present FX market valuation methodology includes sovereign variables in the calculation of relative strength, a similar valuation methodology validates SDR composition and value. It is the same, but different, and will overshadow FX internationally as all currencies become "more domesticated" and the SDR becomes the international accounting standard.

Again, the transition from a debt based to an equity based IMFS will weigh heavily upon gold as a measure of currency composition integrity when the currencies themselves, all backed by debt today (in essence all virtually backed by the dollar) transition.

It is hoped by the BIS system - and the bond holders of its primary dealers - that the IMF (in cooperation with newly forming peer institutions in the East) will be able to make this transition without WWIII and without a catastrophic derivative failure (i.e. the "bigger debt collapse than 2008" which everyone is predicting).

It is the hope of the families that all counter parties can see the inevitable superiority of a peaceful and somewhat uneventful transition, as gold has been flowing to where it needs to reside for some time now and we believe that most of it today rests in close enough ratios to optimal to at least begin moving in the direction of transition.

Yes, Trump is a part of this, at least the part that the little people can relate to and peaceably (we hope) absorb. The ultra-progressives will fume and rant but it is not thought that they will blow anything up before they can come to their senses, and the hard right fanatics will be placated by the perception of what is being sold to them as 'Make America Great Again". Trump will help America in this regard, though not exactly as his minions perceive, but they can be held in check nonetheless.

Change comes when the status quo becomes predictably untenable for the primary benefactors of the IMFS and many things do come into the consideration of "wealth protection and growth" that escape the eye of the commoner.

Clearly we had already arrived at this point, and the intent is clear. A return to Free markets is indeed the outcome that many will appreciate over a system where market values are controlled by a US Dollar-centric debt derivative pricing grid for interest rates, commodities, FX and equities. A controlled devaluation (a.k.a. currency inflation against the equity backed SDR and it's constituent "resources") is the only viable approach to this transition.

It can be said many ways. Freegold is just one of them.

3 comments:

  1. Freegold could only be possible with either: 1. no government, or 2. a government that protected free markets, but free and government is an oxymoron. Therefore, freegold is an economic topic similar to the theological discussion of the number of angels that can dance on the head of a pin.

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  2. Possibly, however all signs on heaven and earth point to increased role of gold in new IMFS. Freegold or not one would have to be a fool, not to own some in 'his' posession.

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  3. I agree, freegold is pure theory.
    In theory, we could all get along in harmony forever, with no more war, until the end of time.

    Let me remind everyone reading this that nobody, and I mean nobody, profited from gold all this time other than the miners and the bullion banks. By holding gold outside the system, you are, ironically enough, choosing something worse than fiat money, since you can't transact with it, and something worse than anything else you can buy, whether it is day to day needs, other physical items of value, real estate, paper investments like stocks/bonds.

    Right now, gold is $1200/ounce with all fiat currencies inflating. Where is your $10000, $50000 gold? Every one of you is going to be dead before this happens, and if it ever happens you might wish you were dead because the global system will be bust, and then you won't have gas or food or anything else while you clutch your coins.

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