(Artwork by Warren James, Screwtape Files 2012)
"It is a story about how gold was officially removed from the financial system in the early 1970s, but in fact never was. About how the US$ was kept strong by selling gold to the oil states for cheap. About how the Europeans were pissed off about oil being priced in US$ and how they positioned themselves for the case that the US$ would lose its reserve function. And, of course, about the US$ and how it will eventually end." -VictorTheCleaner
The story is the story that FO/FO/A have explored, and many have visited. Essentially the EURO structure was implemented as the master stroke in the currency wars - which took advantage of the flawed dollar/gold structure, with an outcome guaranteed for the europeans. This strategy is well described by ANOTHER who expected events to quickly cascade. The bullion banks were caught with their pants down - the gold market for new mine output is/was already cornered and a even a small loss of confidence in the dollar similar to the 70's would trigger a run on the bank (physical gold withdrawing) and immediately expose all the gold contracts which were created during the 80's and 90's. The move was pretty clever - after all the ECB could essentially print as much money as it likes to raise the price of gold and hence the value of their central bank reserves. It was a great plan - all they had to do was sit tight and cash in as things took its course.
The Americans were never going to be beaten that easily though, and perhaps ANOTHER (whoever he was, and regardless of his motives for writing) had wished he hadn't given away the gameplan. the outcome of this freegold threat is more or less what we have observed over the last decade, namely:
1. That the banks have wriggled out of their gold obligations by leeching more gold out of the marketplace. A steady price rise of gold in USD has effectively guaranteed the flow of 'just enough' physical. If you want evidence of a steady vaccuum cleaner hoovering up available gold - you don't have to go much further than your local 'cash for gold' shop to see this in action.
2. A series of wars has ensured that demand for USD currency is constant (because oil is priced in USD, kept in place via military force), which allows them to further perpetuate the ponzi. The wars also keep pricing pressure on oil - Victor's reasoning is that a high oil price is in America's interest because it forces other nations to find more USD.
The Europeans at the minute appear to be bluffing - they can print as much money whenever they like to cover the bad debts inside the eurozone, and it only serves to strengthen their position. This is demonstrated by the FACT that Greece has NOT YET imploded, despite all indications that it SHOULD and that it will (evidence, it's already defaulted officially and nothing came of it).
|Why do guys with beards have so much fame? It's uncanny.|
Overall, it's a curious standoff, with a mutant global monetary system slowly lumbering to its death and the little guy ultimately paying the price. Martin Armstrong believes that no one is at the helm - that the central bankers have neither a clue nor control over what is taking place. Some others (at FOFOA) like RJPadavona believe there is teamwork going on between the two superpowers to ensure a safe landing for this crippled financial system.
I personally believe the teamwork option is at play, and that some players (aka The Bernak) know exactly what is going down (after all we're in a new age of science and data modelling). But there will be other myriad factors involved as well - for example the Americans can also extend the game duration by preventing a run on the banks (physical gold withdrawal) - e.g. create massive gold contracts which lower the price of gold, forcing many to give up in disgust (aka GATA thesis), or use social media campaigns and psychological tricks to pursuade people to dishoard their physical gold (aka anything that Jon Nadler writes). NOTE: If you haven't read about how credit denominated in gold changes the pricing of gold, Victor's latest is a great read. It's clear that more gold contracts exist than there is gold to cover it (probably at a lower ratio like 10:1 like Bron Suchecki suggests), but definitely not the 100:1 which is regularly pumped (check About.ag for a great rebuttal of that meme). If I have been following events correctly, then the big bullion banks have used the last decade to cover roughly half of their obligations, which is why I think we're in for another decade of slow-and-steady gold price rise. At the end of that time (say around about 2020) the bullion banks will probably have had enough mine supply, and at game end they can do a final smash on the gold price as the last problematic gold contracts get sold in a frenzy, and quietly buy back massive amounts of physical just before the price skyrockets (aka SPROTT/TURK playbook).
That's my brief summary of Freegold as I've been following it. I like Victor's modern interpretations because it contains an explanation for both the freegold thesis as well as observations from the market over the last few years. The full detailed story is well described by FOFOA, which may indeed take two weeks or so to digest:
It's the Flow, Stupid
The View: A Classic Bank Run
Once Upon a Time
Return to honest money