The purpose of thew thread is to keep a rolling conversation of my GLD/FRN type Gold /Dow market ratio concept.
If anyone wants to add to any nuances to it or suggestions please feel free.
It's just a concept of what could be implemented and not a prediction of what will happen.
The gold/ dow market concept I'm proposing is just that, a concept and not a prediction.
Thanks for your feedback @ bern.
The Fed and Congress could make it a stable metric and change the financial rules again. Just look what they've been willing to do so far that we know about.
It wasn't a prediction. Merely a concept that could be used to support a multitude of things besides the gold price itself in the future. The bigger picture was the expansion of the QE theme and the expansion of the monetary system to allow growth through the continual feeding of the machine that will be the gold/dow index or whatever name they attach to it.
It's that the trend worldwide is the distrust of paper. Just look at all the worry over bonds and people taking haircuts or just getting screwed outright. Interest rates are pretty low over here and where they aren't then there is higher inflation. There appears to be no real safety in paper anything.
At some point the Fed. will need to go back to the gold standard in someway (GLD/FRN) and a fractionalized quasi-gold backed dollar system. Just like GLD and SLV are allegedly backed by only a fractionalized amount of the PM's. The gold/dow backed dollar could be set up similarly.
Look at all the money pouring into GLD, and SLV to a lesser extent based upon the faith of investors into a paper precious metal fund.
My premise is...how would that be different then carrying around currency (for now and the foreseeable future) that is a gold backed FRN? We hold GLD/SLV in a trading account and never get to really hold that paper, much less the real metal.
Our currency long ago was actually redeemable in gold for that exact amount of denomination on the FRN's. What if the system is set up so that you can redeem your fiat for GLD-like credits or small amounts of gold that will be sky high in price at some point? I don't see many people being able to purchase mass quantities of gold due to the price at some point going forward. A single ounce of gold will probably be realistically out of reach at some point for most households within 2-3 years imo. Most home budgets aren't equipped to go out and spend $1,700 on a small coin even if it is gold. Things are tight.
I think we'll start to see small amounts of gold available to the general public within 2 years. Not like coin shops etc. that are available for business right now. But vending machines and smaller secure kiosk-like operations in malls and banks (most definitely). When banks start to telegraph their intentions in any small way about getting into gold is when we know it's going to surge in value and importance. China actually has done a 180 degree turn on this after many decades of banning private ownership of PM's and actually allows the PM's to be sold from certain banks.
After that GLD/FRN system has sunk in and is accepted is when we go to a gold-like card that will replace the FRN in a way much larger then just that card being a monetary instrument. It will be much more important then just a debit card. That's down the road.
It's just a concept they could use, not one I'm predicting that they will use. I have much more on this, but not now. The point I made about redemption and credits going somewhere else is a whole other facet to this and gets more complex and wordy.
An epic lack of foresight, accuracy and rationale... https://www.tfmetalsreport.com/comment/170246#comment-170246
Stashing this post here for you to take a look when you have time. You have a good lawyers way of analyzing and checking for merit etc. and condensing. Your focused and articulate.
I blurted this out of my head today a little while ago and I 've been thinking about it for awhile. You posed the fundamental question today I think of what will make our PM's more valuable?
I'm proposing that they need gold to go much higher and will do so in a GLD/FRN manner that incorporates the use of the broader market to set the price of gold and a floor under it.
See what you think about my concept that's admittedly a rough mental draft. There are some elements I left out at this time.
DPH - I Just Don't Get It
I enjoy reading your posts. I find myself thinking deep and hard, and I enjoy that.
But, saying that, I am still trying to figure out your basic point! Are you saying that TPTB want to set the price of gold at some ratio of the Dow? If so, I am having a real hard time figuring how the price of gold can be artificially fixed at some arbitrary, moving target rate, such as the Dow. Remember, I am no wizard like the others on this board, I am just trying to wrap my head around your concept.
Is there any way you can make it clear for me?
"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."
October 24, 2011 - 12:44pm
Yep. That's pretty much it. Like I said, that just came flowing out from brain to monitor. I've been thinking about it for awhile. My main points I guess were the big banks telegraphing higher gold prices in the future all the while trying to keep them down during NY and London trading for the most part. We all know there suppressed to some degree.
Why would they want people to start going the other way? I believe they want to create a environment where people start to get into the gold market. They want to and need to control the frenzy. It will be like GLD to large degree except shares will be like FRN's instead in the beginning. Then the plastic card introduced later.
Just like the Govt. and Treasury/Fed. set the gold price during the 1930's when gold was made redeemable and illegal to hold privately (for lack of a better description).
They could again set the gold price and fix it to the dow at a price of double (triple, 5x, 10x ?) whatever the dow is.
15,000 dow (or whatever they call it) and you have $30k gold at 2x . It slides around to be sure but the price value that it gets pegged at initially is the key. It would give enormous cushion if the overall market slides way down. Gold at a higher initial ratio would all but guarantee that the USD would never get too weak. Just weak enough at certain times but never really crash. Nor could the market if it had a underlying gold foundation.
I see this as the ultimate control tool coupled with the other aspects I haven't mentioned yet.
I've been thinking about this for awhile as you can see. I think you'll find it gets better.
It's just a concept but if GLD is any indication of what can be accomplished on faith and trust then a gold FRN system for the public might be the way. GLD looks like the perfect trial balloon to see how the public reacts to paper gold.
Looks like it worked pretty well so far.
(I have to go get my daughter and will finish this a bit later)
October 24, 2011 - 2:34pm
Don't want to hijack your thread so I'll wrap this up as best I can and in a short way if possible.
I think with the increasing distrust of paper debts instruments globally that eventually that some other concept will have to be put forward to breed trust and confidence again in countries monetary systems. I'm talking about our U.S system and it's role as reserve currency and keeping it and strengthening the grip and not letting go.
The Chinese seems to have a plan involving gold (and silver possibly) towards developing a stronger and internationally recognized currency (not reserve) that trade openly. The PAGE opening will be big and is a step towards it. Their banks are selling PM' s inside of banks. (can you imagine that here?)
I just think that if we were able to successfully take away the gold backed system in the 1930's and replace it with a non-gold backed system for 60+ years and all we backed it up with was the full faith and confidence in the U.S.A. that whole time was a incredible run that might be over. And the continuation from that greenback to a GLD/FRN (goldback) system could take place if the psychology and confidence in it could be established over time.
GLD seems to have established that it is possible to fractionalize gold into paper and people will buy it like crazy! The 10 to 1 ration (gold to the dow) seems like the way to go.
If the U.S. declares someday that they are converting or backing our money to our entire gold supply and the future gold that we acquire (quasi-nationalization at some point) and everyone buys into it as a viable alternative and see's it as a return to a new modern gold standard then I think it takes off. Basically, people wouldn't haver a choice just like they didn't previously either under whatever system the Govt. rolls out.
As far as creating a controlled frenzy of people's money back into the market to keep the market higher and thus gold higher would be a self-perpetuating machine that oils itself. the overall appearance of an incredibly stronger dollar lets the Fed. print away as it now has a giant market beacon that shows the strength of the dollar and gold everyday.
The ability for the Fed. to QE as they see fit will go unquestioned as it feeds the machine...for the good of all as no one will want it to crash...ever.
It's all a concept of course. But GLD was a concept at one point also and now look at it. Just imagine if the Treasury/Fed. ran the biggest GLD/FRN system ever put in place because they had Congress establish it along with whatever financial reform they needed to do so.
If the Fed. or Treasury or the WH came out one day and made the declaration about this concept is when money comes flooding to the U.S. in a unprecedented manner. In the end, it's all about borrowing as much of OPM's as possible to spend even more recklessly into the future. Tying gold to the dow will let them siphon as much OPM as possible into the system because everyone will need that valuation system of the dow and gold to remain strong and as high a number as possible.
QE at some point merely becomes the oil to keep the machine going higher and higher so that gold goes higher and higher and the dollar gets stronger and the ability to QE/print and borrow because of the "perceived" strength is what keeps it all flowing upwards and the QE never stops.
At some point soon, QE will seem routine and necessary to prevent a great collapse. Being the reserve currency allows us to call the shots as we've all been witness to. If the U.S. does this and also has the largest gold holdings by far then the instant credibility can't be overlooked when the faith in the old system might be at it's weakest. It's all about timing and selling it.
GLD demonstrates what is possible.
ttyl about this at some point.
I would like to thank him for basically establishing my gold/dow concept this weekend with his CB vision.
He uses a direct establishment by the CB for a fixed price much higher then now which makes the most simple sense. I used a sliding scale based on the dow action at a higher ratio to give the debt ceiling more height and the ability for the price to be steered higher by the market actions and "other forces" as it is now.
QE and POMO etc . will always be here and in the future also. If the gold to dow were established it would be even more so. If they (Fed.) fix the price of gold they are stuck to a certain number going forward and debt ceiling height and the ability to borrow even further. As they lube the dow with more QE the price of gold goes up thus creating more room for expansion monetarily.
A self-oiling QE /gold price machine is what it would be. Turks numbers are too small for his concept.
If the U.S comes out tomorrow and says their gold is valued at $44 for the foreseeable future, we would all be screwed and gold would tumble I think in some meaningful way.
If the U.S. tied the price of gold to something or just declared a revaluation of their gold holdings to some huge number then gold would jump appreciably I suspect also. What if they tied it a 10x to dow ratio (for cushion and expansion/contraction of money supply and strength) and let it slide according to the market? Think of the potential upside and speculation on gold and what it would do to the upward price.
My concept is just that, a concept. Something drastic will need to happen at some point going forward to make this happen. It seems we may be at that moment as the trust in bonds themselves are in doubt. FRN's to follow shortly I think after the Euro.
Is it so far fetched to think that a return to a non-redeemable GLD/FRN system could be put in place when the entire planet just used a non gold backed greenback for the last 60+ years and it's still going strong?
If the U.S. Treasury or Fed make some announcement someday and Congress backs the proposal it's a done deal and the rest of the planet will still follow our dollar if it's thought the entire nations gold supply was being used to back stop it...non -redeemably of course, just in additional fiat like Blythe pays to the people who don't hold for delivery at O/E
Think about that.
Does it seem so impossible? What would be the difference from what's already taking place? GLD has successfully proven you can take in many, many BILLIONS of USD for a fractionalized paper gold supply.
Just imagine if the U.S./Fed did so. Think about the Blythe thing and non-redemption.
October 24, 2011 - 3:58pm
You'll like the link below and wanted to make sure you see it at some point. Turk gives compelling and accurate reasons for what he says. I think he's being too conservative and missing the bigger picture.
He talks about the undervalued currencies and the lack of trust in them and gold being the 5,000 year old established historical currency etc. I think my concept takes it to the next level that the U.S. could establish by Congressional/Fed decree. It's not like anyone would have a real choice if we do it first before China does.
I'm going to establish a forum for this topic so I don't lose track of the flow of conversation. There are many facets to this I haven't spoke of here or in my initial thrust into a posted format.
The non-redemption of the GLD/FRN and the Blythe-like premium is one of those facets I mentioned on the main thread a little while ago. Owning of private gold would be encouraged. The initial purchase into the GLD/DOW market and redemption part gets interesting.
But not right now. Maybe in the thread I establish tonight. I'll leave you the link.