Thursday, 18 October 2012

Freegold


FreeGold : A economic regime whereby the functions of money are split over multiple mediums. These mediums are freely exchangeable at a floating exchange rate and contracts are only enforceable in the Medium of Exchange. 



Note - As evidenced by history, gold serves best as Store of Value, and fiat currency serves best as Medium of Exchange, due to their respective unique characteristics. The Unit of Account function can be served by either, depending on the time frame in question.

Peace

The Fool 

51 comments:

  1. Nice summary.

    May I add: "only implementable after RoW retracts UDS privilege as reserves/international settlement medium?"

    ReplyDelete
    Replies
    1. If you wish...to add a timeline. My intent was only to summarize freegold. How one gets there is another matter. In fact...it could have been implemented at any time in history really.

      Delete
  2. Hi MF,
    nicely said, can you help me with the price discovery?

    Let's look at a theoretical "closed currency zone", 80Mio. people, MoE credit/debit and equity distribution across the population just randomly similair to today, these border assumptions are for all examples the same:
    1.) 80mt distributed over the complete population, each person has 1gramm gold.
    2.) 80mt hold by 4million of the poorest indebted people of the overall population.
    3.) 80mt hold by 40mt/40mt only by two of the richest net value persons of the population.
    4.) 80mt in the hand of the richest net value guy.

    When we press the "START"/"Run for your SoV" button:
    a.) in which case will the most gold flow in terms of weight?
    b.) in which case will the least gold flow in terms of weight?
    c.) after the dust settles, in which case will the price equilibrium be the highest in which the lowest?

    Just wondering, your thoughts?
    Greets, AD

    ReplyDelete
    Replies
    1. AD

      Do you mind if I ask some relevant questions?

      Just so I know what you have in mind.

      TF

      Delete
    2. dont know, just asking, cause when I make such a setup in my mind....hmmm...regardless on exact ratios, but the outcomes can not be the same, easy to see when looking at heuristic scenario 4.) comparing it with 1.)

      So what is your take?
      Besides when trying to figure it out, I arrived to the problem how the "auctions" or trades will take place, and if that does influence the outcome as well.

      Greets, AD

      Delete
    3. err... I'll take that as a yes.

      1. Are we assuming everyone values gold as store of value?
      2. Are there any other currency zones?

      TF

      Delete
    4. AD

      Alright. I will try to guess.

      I am assuming we are talking about initial flows here, not eventual flows, as the equilibrium point will be the same for the system no matter the start.

      a. In order of flows : 2, uncertain which would be next.

      b. Unsure. If there are no external currency zones then case 4 and case 3 gold are almost worthless. A large amount of it would have to flow for it to have any value.

      c. I am uncertain that the eventual equilibrium price will differ.

      TF

      Delete
    5. MF,

      so you see by this heuristic (especially when looking at the extreme 4), that the flow in terms of weight, as well the price equilibrium, do depend on who's and how many are holding and not holding the gold?

      IMHO
      1.) So long as I see Cash4Gold shops and nobody knows where that stuff is going, I am fine to be on the buy side as well :)
      2.) But since the coinshops never run out of old gold coins, that makes me wounder.
      3.) It is just crazy to make some nutty price predictions aka la-la-north-whatever, at this period of time.
      Greets, AD

      Delete
  3. Good morning MF,
    1.) Let's put it like that, in that theoretical example nobody values currency as a store of value. OGWarrens equitiy is still equity, or like he says "A bond with a flowting yield".
    2.) Nope, no other zones in that example.
    Greets, AD

    ReplyDelete
  4. Hi MF,

    wanted just to share this unbelievable finding:
    http://www.youtube.com/watch?feature=player_embedded&v=ba8XdDqZ-Jg#!

    MMTs at their best, completely on crack!!!:
    - dont export, imports make happy
    - spend spend spend, only spending is good
    - be grateful for your government spendings, do more
    Greets, AD

    ReplyDelete
    Replies
    1. Hi AD

      Thanks for the link. I'll take a look when I get a chance. :)

      TF

      Delete
    2. AD

      Their views are so far removed from reality that it astounds and appalls.

      Thanks again for the link.

      TF

      Delete
    3. Hi MF,
      looking at that video just scares me really really badly. Those people apparently really deeply believe that crap they preech. How is it possible that they ever got their PhD?
      I mean Krugman is already bad enough, the new Keynes, but some of those MMTs are so badly f'd up, I really wonder how the world can continue under those more and more spreading ideas.
      That's also part of my doubts about FG: How can FG work at all, if you completely turn fiat into a complete joke? I mean, if you screw up fiat like the MMTs suggest (=seeking salvation in permanently forced credit expansion by principle), IMHO everything goes down the drain, so you end up with your stash of gold, everybody else is a multi-trillionair, but the world looks like the UdSSR or Somalia, so what is the gold actually worth in a world of idiocracy?
      Greets, AD
      P.S. Google has somehow eaten my account...

      Delete
    4. Hey AD

      I'm not so worried. Hell I say give em what they want, give it to em hard and good. The dollar or any currency try try it with will hyperinflate so quickly they will be a laughingstock. Oh and it they try it with the dollar that initiates Freegold of course.

      These clowns don't bother me at all.

      TF

      Delete
    5. I'm with Moldbug: don't try to drag this shit out - let's get 'er done. :-\

      Delete
    6. Good morning,

      Re: Moldbug. I personally agree as well on that one. Therefore I partied here in Europe when Holland was elected. The only person to get it finally over with the EUdSSR, quick and dirty. That dude will destroy&consume more wealth, Germany can never ever produce as a replacement inside the EU to stablelize the €.

      MF,
      Re: Hyperinflation. Is there a possibility that "honest money" supporters, (FG)Goldbugs etc... tend to use the term HYPERINFLATION quite inflationary due to confirmation bias?
      Just watched a clip I found interesting to verify different perspectives on where we are right now and possible outcomes: http://www.youtube.com/watch?v=PUyaH2CRcEM

      So IMHO I am still on the "super stagflation" perspective.
      Greets, AD

      Delete
    7. Hey AD

      Re : Vid linked

      Ron - Standard Austrian school definition of deflation and inflation. Thus...clueless idiot.

      Another's standard criticism of these deflationists is very apt.

      While the $IMFS lasts, stagflation is an option. Of course we don't expect it to last very much longer.

      Like all Austrians they ignore the demand side of money while focusing on supply side. The host however seems to get it, in his comments of Iceland's Krona.

      I think the host seems to have the most balanced view. "that asset deflation will be met by an enormous creation of raw money"

      Another paraphrased : What these deflationists miss is that governments will buy up any and all debt with printed money.

      Anyhow.

      TF

      Delete
  5. Motley

    who is your coin dealer in CT? Just read your recent comments at FOFOA. Do they have a JHB branch? I like paying low premiums...:D

    Cheers

    ReplyDelete
    Replies
    1. Hiya

      I responded there. :)

      Further responses here would be better I think, as this is kinda off topic.

      TF

      Delete
    2. I sent a mail to the address you gave.

      Delete
    3. My dealers in BG are still getting scrap (folks give scrap away on gram basis and pay extra for the workmanship) but not as much as they want. I used to buy scrap myself 1-2EUR per gram below spot but it doesn`t pay off; once you melt it, it will always be below the standard purity not to mention the losses from body oils, all the dirt filling the hollow parts of the jewellry etc.
      Making custom gold jewellry also doesn`t pay off. I tried this for ny wife`s ear rings.
      Took, some cute imitations, did silicon imprint 10EUR, wax casting melting scrap(incurring still the same losses mentioned above not to include the time lost, because you would want to be physically present all the time so that the craftsman doesn`t steal any tiny bit, weighing everything in every stage of the process, avoiding dilution etc.) another 10EUR, polished myself too much lost as gold dust....

      Delete
    4. Bright Aurum

      Thank you for the response. So scrap levels are declining where you are too. That is kinda what I am trying to establish.

      TF

      Delete
    5. MF,
      Yes sources of scrap are drying up. Many jewel sellers here are earning up to 50% of their gross income as cash-for-gold people and undercover gold coin sellers, because it is very difficult to obtain licese for selling bullion. Only two banks do it and they charge VAT. Gold coins are available at the CB cash desks only VAT free with ridiculous premia for the "nomizmatic" flavour attached to them.
      As a side note, I think the initial network of dealers post freeG is being established right now as the competion drives those people to enlarge their connections to aquire both better prices for coins(lower premium) higher volume (access to paper liquidity)and this network can eventualy see the light of the day once the nanny state withers.

      Delete
    6. MF & BA,

      what's about the famous SA Krügerrand legal tender coin? It would be great to know how it is considered in all day life. @BA, how is/can such coin considered in regards of VAT?

      I havent found much info about the real (legal) and all day issues about the Krügerrand. Would be great if you can expand on that one.
      Thanks&best regards,
      AD

      Delete
    7. Hi AD

      It's VAT free, though capital gains tax still applies. As per the norm gold is seen as a obscure and stupid investment by most, even the local flavour. Barberous relic supreme!

      Nobody uses it as legal tender.

      Hope that answers.

      TF

      Ps. My debrief went up today. You may find it interesting, or not. ^^

      Delete
    8. Hi MF,
      to have capital gains on legal tender on and in itself is a really really strange idea (specially the domestic currency).
      As you know, in Germany VAT & capital gain tax free (as well as a very long list of other gold bullion (coins)). :) I am really interested in that issue, because I am still seeking what coins are the most reasonable to purchase in that matter.
      But on the other hand, Europe has no more rule-of-law in legal tender itself on the other side as well: e.g. in most PIGFS you are not allowed to pay in legal tender if exceeding certain limits. Or, e.g. personally in Germany I am not allowed to pay my taxes in legal tender (=>"money") any longer (since AFAIR >7yrs(?)), but now only by "credit"....

      Re.interview. Yes, was really a pleasure to get to meet you :)
      Without meaning to be arrogantm but: Watching those debriefings, I always wounder where the FG-folks get their certainty or life experience from, e.g. to state stuff like that: "While the $IMFS lasts, stagflation is an option. Of course we don't expect it to last very much longer."
      Greets, AD

      Delete
    9. Yeah, capital gains tax on legal tender doesn't make much sense, then again governments are not really sensible creatures. ^^

      It's becoming obvious, even to regular joe, that something has to give soon. Things only go on the same as long as they can, and then, suddenly they don't. The more one looks at the topic, the clearer it becomes, I would say. :P

      TF

      Delete
    10. "Things only go on the same as long as they can, and then, suddenly they don't.
      Sure, but I dont see why there should ever anybody have any interest to stop that. I just simply dont see it in the cards and technically there is no limit. I mean, seriously, WHO HAS ANY INTEREST? Except some FG basement keyboard commando folks or some tea party grassroot hoppers?

      I would appreciate an answer on that, and please dont gimme any kind of "giant" BS.

      Greets, AD

      Delete
    11. Very few, except for some fringe cultists( and though you don't want to hear it, some giants :P ).

      Technically there are mathematical limits to an exponential system, before it skyrockets. We are approaching those. So interest or no interest, something has to give.

      TF

      Delete
    12. "So interest or no interest, something has to give."
      jep. And we have seen which way is chosen: no interest. So what?
      e.g.:
      Germany borrows at zero to negative yield and transfers it to Greece, so Greece can continue to buy german submarines and pay for old debts. The industrial giants transfer the profits to Switzerland, SNB buys german bonds and dollars..... Everybody is happy.... In case even there might be somebody not happy, we have the ESM with absolute dictatorial powers to force the ponzi scheme to continue... Almost all CBs of Europe are run by GS guys, you think, seriously somebody will f*ck with them?
      So I dont see any technical limit to that at all. But I have some faith in the nature of human mankind left, therefore I'd say: this will end with a lot of blood on the streets.
      Greets, AD

      Delete
    13. I am sorry, I should have been more clear. I did not mean interest on money. I meant whether or not people are interested in what is happening, something has to give.

      TF

      Delete
    14. The sheeple are so f*cking dumbed down or already have giving up. I just wonder how it must have been 300yrs ago, when you where trying to explain to a slave, that he might want to consider to change something about the situation... Remember, did not happen. Slavery was _NOT_ ended by the slaves themselves!
      The rest:
      1.) have no interest, since the incentives are so huge to keep the can kicked.
      2.) have no money at all anyway and depending on the social welfare system.
      So, who is left? Yep, ME! The frustrated german libertarian mini giant :D Who else? Nada!

      Greets, AD

      Delete
  6. MF,
    Besides, who cares about wearable savings of unknown purity and variable price. It is stupid to risk it on the street; to pay 5-20% for workmanship and to loose 4-5% when dissaving.
    The real question is whether the already coined gold flows or not. And you can deduce that from the quality of coins beeing resaled. Weak hands have as a rule lower quality stuff as do gypsies in BG looped wearable ottoman coins etc.
    Cheers,
    BA

    ReplyDelete
  7. @AD
    Hi. I really have just 1 krug and so out of curiosity. They are not popular here(BG) and it`s a 100% rule that one should stick to the most common gold coins in its region all arguments to the contrary not withstanding. VAT? What is it good for in 100% black market?
    Greets BA

    ReplyDelete
  8. Hi MF,
    I was checking to see if ratioarbitrage posted his rebuttal yet :)

    ReplyDelete
  9. Hi JoJo and MF

    It is on my blog at http://tyrannyofthepresent.wordpress.com/

    I tried to post a bit here, but it vanished. Comments are welcome.

    ReplyDelete
    Replies
    1. @MF and tyranny
      Hi,
      Silver sucks! Historical arguments to the contrary notwithstanding. Tyranny, you are describing the historical perspective like a painting with no facts about how and why it was painted so in respect to the modern situation. Hoarding silver/oil is like trying to make a deal while holding a loaded gun at s.one`s head. The real bills doctrine or this > http://www.youtube.com/watch?feature=player_embedded&v=nORI8r3JIyw < in a pure fiat system are infinitely better. Competing/supplementing metals in a monetary role - what are they good for - absolutely nothing. There could be only one!
      Send my condolences to the silver suc...er.. stackers.
      Greets,
      Bright Aurum

      Delete
  10. Gold is can be a good store of value, but as an investment it pays no income, unlike other real asset alternative options.

    ReplyDelete
    Replies
    1. One may consider it as insurance. A small allocation to your portfolio of say 2-5% would not be amiss.

      Delete
  11. http://neuralnetwriter.cylo42.com/node/4014

    I saw your comment on this thread.....'Curious'....curious how Fofoa ran away with his tail between his legs perhaps.

    Why do you think Fofoa bans discussion of realpolitik at his blog?

    Seems a big piece of the picture to just ignore doesn't it?

    But it didn't fit his view of the world. 9/11, Iraq, Libya, now Syria....all irrelevant it seems!

    Any thoughts?

    ReplyDelete
    Replies
    1. just noticed:
      In earlier days FOFOA just deleted comments that were contrair to his view of the world, so far so funny.
      Now he changed and only allows "personally approved" comments. e.g. I just try to help "M" with a question, as always polite and spot on. FOFOA apparently lost it so much, that he is not even interested in content but rather only in persons that 100% pray and follow his cult. But in that case these people are allowed to spill over the comment section with some crap like "free energy" and "gobal spiritual awareness" etc....

      I mean, okay, he is welcome to do so, but it tells me, that he just interested to keep his church and religion clean. Remember how dear old Mortymer (who actually is a freegolder as well, but with some own brain and research) was bashed out of the blog?
      But basically common sense tells you when looking at such churches and business modells... most of the time, they ask for donations.....
      And even right now as the falling price for physical gold has wiped out more of my personal "nominal wealth" than most of the ignorant suckers will ever held, even after revaluation, I love it seeing it fall and imagining the faces... :D
      Greets, AD

      Delete
    2. What? Just. What are you even on about... just never mind.

      Delete
  12. And this...

    http://xltweet.com/show/?id=53535E595040

    ReplyDelete
    Replies
    1. Ok Gary I'll play. What exactly is your issue? That FOFOA thought the system would collapse by now and it hasn't? Hell I am guilty of that too. I never thought we will still be chugging along by 2013.

      Delete
  13. Hi TF

    I've found a very disturbing piece re the preparations for the Tranatlantic Trade Partnership. They seem to have brought it quite quickly1
    I am extremely concerned about it and I suspect they might have agreed to a reset (FG) AND the TATP!

    Here is the transcript - very fresh, may 21th!

    http://www.cfr.org/economics/eu-ustransatlantic-trade-investment-partnership/p30766

    As you see it comes from the much beloved CFR!

    Please take a look at it. it is very strange what our Masters are about to dish us with!
    The Germans - those discussing this subject on web refuse it and I see it as a great disadvantage for the EU!!!!

    Regards
    Fauvi



    ReplyDelete
  14. This article is mind blowing I read it and enjoyed. I always find this type of article to learn and gather knowledge.

    fire restoration monterey

    ReplyDelete
  15. 'Yeah, do that. Today was the official announcement of Cyprus' partial sovereign default. You may also remember the Greek default last year, the bank restructuring in Cyprus earlier this year and the haircut on the subordinate debt of those Spanish banks that got European support. Hmmm. Over there, they seem to be reading a different book, eh?'

    Amazing how you were a committed real bills believer, and now you're totally unable to think objectively about issues as obvious as this. Very sad to see you so lost to the dark side.

    Still, old rain bow above had his mind blown by your last post, so that's good.

    ReplyDelete
  16. This article is mind blowing I read it and enjoyed. I always find this type of article to learn and gather knowledge.

    Elektrownia sloneczna

    ReplyDelete