Friday, July 28, 2017

Retirement Party - You're Invited!

As they say, gold has no utilitarian value in the physical world. We cannot eat it, it does not clothe or house us, it does not transport us or heal our bodies, etc..etc..etc...

Gold's most important purpose is to store value through "fiat value transitions". In this context, "fiat value" includes the value of all financial paper - all of which is denominated in fiat. The fiat value of financial paper is of course subject to exchange rate variables, and term duration, which can commonly run from 30 years, counting down to the present, depending upon term and maturity.

And this is key. Future dated fiat paper must have some degree of stability through it's term, and that stability is protected by expectations of the price and flow of strategic assets, especially gold. As long as Giants can buy X amount of gold at X price we remain in maintenance mode, even as expectation of long dated paper value stagnates into negative territory.

Giants stabilize the price and flow of gold so as to prevent loss of value to their dollar exposure. This is what we witness today in the dollar's transition. Dollar depth / exposure is being quietly reduced, as efficiently as possible, through management of expectations, re-positioning of gold and various related strategies.

Yes, much value recycles through other physical assets, and those assets may appreciate over time, but ounce for ounce gold stores more liquid value from a trading perspective than any other asset. This is why it is the only physical asset on CB balance sheets - it is liquid, it retains value, it has universal acceptance and steady demand.

These are the important financial qualities of gold (the main characteristics of a systemic nature). Yes it has aesthetically pleasing forms, but Roacheforque prefers other objects for aesthetic pleasure over gold. Gold is the wealth preservation holding.

It also comes with "no class advantage attachments". In other words, it is not a product that is engineered to be manipulated by its issuers to endow a "tremendous advantage to those who understand the system".

Furthermore, though even certain little people can understand the system of privately issued capital, they can benefit little from it. Generational wealth - by virtue of its large capital holding "starting position" through each generation - has the great advantage, commensurate with continuity, opportunity exposure and compounding. In other words, the greatest benefits of fiat wealth are hugely prejudicial to the ruling class - those closest to influencing it's issuance and leverage through financialism (a.k.a. the western casino economy). The little people and their offspring have little chance of ever leveraging FIAT to a similar advantage.

Conversely, GOLD is agnostic, and a-political, though its management is highly political and prejudicial until it is set "free" by the consensus decision that "all gold is now in the proper place" and "we are all ready to retire our dollar assets at the free market price".Again, gold is its intrinsic self for debt serf and giant alike when it is set free. It is only set free when Giants sense a risk of losing their advantage through loss of systemic confidence. Today the gold window is still open at the managed price, and dollar paper is gradually winding down, but there has been ongoing concern, and talk, about the dollar's international status, and its loss of long term systemic confidence and support.

Trade imbalances are denominated in dollars, derivatives are denominated in dollars, pensions and annuities are denominated in dollars, the exchange rate system is "pegged" to dollars. Too much systemic risk is now contained in dollars and these dollars might cause a panic with global repercussions.To avoid this, agreements must be (are being) made between senior capital, countries, SWFs and CBs. This has been known since 2008, and the measures taken since then have included a fairly robust re-positioning of gold to "dollar-heavy" economies.

The US dollar can hyperinflate relative to gold (and to physical imports into the US) with the least disruption to world affairs and systemic wealth. This would be the natural course of the fundamental loss of confidence in the dollar, but that event is being managed by (in part) management of the dollar price of gold. Managing gold (and other strategic resources) is how we manage the dollar. The dollar gets its value from its "pricing" which makes it a "bargain" transactional currency for day to day purchases and even large purchases among many classes. Gold and oil bought in dollars today are a bargain compared to a few years ago, but dollar dependency causes unacceptable problems beyond just debt expansion. Dollars fund dollar faction Imperialism. Oppose it, and it funds color revolutions on your borders. Defy it and feel the wrath of dollar sanctioning AND regime change!!

When important emerging markets begin to reduce dollar dependency ... when Russia and China co-develop non-dollar systems with competing national currencies, the dollar begins to lose it's status not only as a world reserve asset, but as the preferred "capital" (currency fuel) in the context of the international monetary and financial system.

The dollar faction needs a new and improved mascot. The dollar concept of "long term debt as a reserve asset" has run its course. As a transactional currency the dollar will continue to be used, but as a wealth reserve asset - the role is changing, and nothing can stop that change. The undisputed nation that had the best chance of managing a national currency for the good of all has failed. After all "for the good of all" means socialism and God help us that we fall into that. And yet, while each nation does have it's own best interests, having a money that is truly for the good of all solves a lot of problems.

Guess what? It exists - a reserve asset that is qualitatively superior to competing national currencies, and which always has been, for 6000 years.. To help retire the dollar as graciously as possible, gold must once again be set free - or if not ... there will be no gracious retirement ... and gold will set itself free, with a vengeance. Generational wealth knows this lesson well. And as always, the choice is theirs.

To set gold free is to set the dollar free. To set the dollar free, sets ALL currencies free. ALL will show their true value. Whether it is done by intention or circumstance would no doubt effect the timing, and the intensity.  But it will happen either way.

By intention the transition is managed. By circumstance the transition is out of control.

Inflation proceeds slowly, hyperinflation explodes quickly.

The intent is to manage the transition smoothly, but who is the greater master, greed or caution?

So far so good for nearly a decade mon Freres, but we see signs of "managing toward the inevitable". Will the bolero of transition go softly into that good night or finally reach some climax?

Popcorn and lawn chairs are a must  for the little people ...
Bunkers and supplies for the ruling class ...

Time proves all.

3 comments:

  1. Your best essay to date. A concise, well written summary of where we are and where we will go. Thank you.

    ReplyDelete
    Replies
    1. Thank you!
      Timely too perhaps?
      http://www.reuters.com/article/us-eu-banks-deposits-idUSKBN1AD1RS?il=0

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  2. Thanks for replying to the previous comment about the bots and blog being private from time to time.

    I was curious as to your view on cryptocurrencies? Specifically as an alternative to gold, and also how the families and power structures might view it?

    To me, seems like a pretty good idea, and with what you described of the sentiment moving towards a non-national currency, there seems the potential for these private currencies to be the de-facto currencies of the world. Like gold, with a value based in the amount of energy used to create them, as well as the confidence, ease of transfer and use. Is that not a threat as they grow bigger and more stable?

    ReplyDelete