Monday, January 30, 2012

The LAST Rubicon!

In the mid to late 90’s and based upon the prevailing “market conditions”, I moved 100% of my liquid assets into Physical Gold.

Shortly thereafter, and seeking validation for what was then generally considered a rash move, I stumbled upon the USAGold Forum.

…and there, a plethora of “Heavies”, ably assisted by the CPM Team of Michael Kosares, Randy Strauss, Gandalf et-al, saw this lay-mans eyes on Gold widely and (I feel) completely opened.

It was reassuring to know I was “following in the footsteps of Giants” (albeit initially unconsciously) and over the next 5 or 6 Years drew succour from …and occasionally contributed to the gentlemanly discourse there.

Well I remember the offerings of Ari, A-III, Randy …of course not forgetting to mention the “others” ..and a host of contributors (late-comers including Ender and Belgian who occasionally bob up here) – which often found me punching WAY above my weight division.

Ultimately …after all had been said and done, MK chose to “turn off the lights” as (I believe) the “business” of marketing Gold ceased to benefit from the ongoing diatribe.

Then, feeling a little bit “lonely” and lacking a “security-blanket” it was great in ’08 to stumble upon FOFOA who had recently began his tribute to the “Thoughts of Another / FoA” and he in turn being gracious enough to include my “Time-Currency” Blog in his “links”.

At that time, having said all I could in relation to TIME assessment relative to Markets and, as it became apparent to me that TS probably wouldn’t HTF until we plumbed the depths of the curve ie: right about NOW! …I decided to pull the Blog …and waited.

The gist of my Time-Currency Theory was (is) predicated upon the contention that all Systemic market activity (in this Global Fiat environment) stems from the $IRX ie: - the $US and it’s associated Bond Market forming the basis for ALL other Market activity …including the “current” Gold Market.

What I determined was: - “firstly” there needed to occur a pronounced Loss of Faith in the “FUTURE”
…followed ultimately by a Loss of Faith in the “Reserve Currency” …to wit ALL Fiat Currencies.

Previously identified Rubicons that have (by fair means or foul) ultimately morphed into Maginots, include the Fed losing control of $IRX (as mentioned in a previous Post) …and witnessing the Long-Bond take out $1.24 (Price) …which effectively neutered “acceptable” Insurance measures via Options cover.

This Yield Ratio Chart gives a fair indication of just such a Loss of Faith in the Future which I feel is currently being “managed” (or perhaps obfuscated by) activity in the Long end of the Curve.

The LAST Rubicon then (now) becomes $IRX going sub-Zero …as it currently does on a regular basis …not only in $IRX but short T’s the world over!

Management “MAY” be able to contain $IRX and have it flail about at or around Zero Yield …for some time, but ultimately the untenable repercussions thereof combined with market pressure will see it track and establish itself below Parity (Yield) IMHO!

Moving forward, we’ll look at Gold per-se - try to identify WHY Free-Gold didn’t happen on cue in the early part of this Century, and how and why it might well eventuate going forward.

Prior to looking at Gold, please allow me to elaborate a little on “The Monetary System” in the here-and-now. The implications of a Negative Yielding $IRX cannot be underestimated. Once firmly established …and given cross-pollination into ALL the other aspects of the current System, total market Chaos will ensue …guaranteed!

As we previously mentioned, this phenomenon is driven by a loss of Faith in the Future …and in all probability, the next skittle to fall in this process will be the various longer maturities as the “flight to the present” picks up steam - thusly further exacerbating the problem. It could be said that without overt and covert management input, we’d currently be well down that path ALREADY!

Let’s now then take a quick look at Credit and Debt to see how this might play out in coming months …OR even perhaps Minutes!

It has been said it’s VERY hard to amass a Fortune …and MUCH harder to keep it.
Our Credit(or’s) are a long suffering and largely quiet group who, over the last millennium have seen their “nest-eggs” decimated and in many cases destroyed by “the System”.

Currently, those “fortunate” ones constantly have to surround themselves with Lawyers, Accountants, Fund-Managers et-al …simply to mark time. Even those less-fortunate ie: Pensioners and Superannuants etc. are seeing their quality-of-life …and future expectations reduced to rubble by this down-trending yield-curve in the current environment where with one false move they can be wiped out COMPLETELY!
You can well imagine then – as a collective, Creditors are not happy campers.

On the other side of the ledger, Debtors have been making hay as the System (firstly prudently …and lately far more imprudently) facilitates their every need and aspiration.

Those who took a look at my “Systems” post (yes, BOTH of you …;-) will appreciate our current global monetary system is well down the path back to Chaos, as “timeline” issues with Fiat per-se compound the DEvolutionary process. When did we roll-over from E to DE? …don’t really know …but at a guess I’d say right about when I began thinking it prudent to go to Gold (or roughly speaking mid-90’s)

Another point worth a quick comment here is the generic “THEY”.

We often find angst being directed at “they” (them etc.) almost as if there is a concerted effort by a (usually clandestine) group, hell-bent on finagling us out of our Money, Gold or whatnot. I don’t think that to be the case and cited (in the Systems piece) the example of the two Footballers, mortal enemies “on-the-field”, but brothers-in-arms …off it. You might like to consider the various factions within the Fiat Management Structure in a similar vein. The will “as one” defend the System to the bitter end even though, within it they can be and are perceived as “enemies”.

Which (finally) brings us to why we’re all here …GOLD!

To understand Gold and to try and determine the hows, whys and wherefores of it takes a bit of preamble –

We’re all familiar with Golds past history - the in-Specie systems, the Gold Standard, the closing of the Window etc. What this attempts to cover is the recent past, that period from when, to all intents, Gold was “deemed to be” an unnecessary and barbarous relic of times long past …roughly the mid- 80’s onward. All the $US / Oil deals were in place, the IMF gave credence to their SDR as a Paper-gold substitute and the US found itself being the ONLY Superpower ie: marketeers therein had unfettered access to the “front-of-the-queue” in all things relative to Systemic structure.

Futures Markets were ratcheted up to aid and abet “systemic management” …and in there somewhere, some bright spark figured there was “money” to be made in the Fractional-reserve Gold space. So it came to pass, on the back of the NEW $US / IMF-centric paradigm, the “$-price” of Gold began to fall until it arrived at or about the cost of production.

In the mid 90’s, it became apparent that IF the current trend continued, Gold was indeed headed to the trash-can of History. Fractional-reserve aspects relative to gold at the time by some estimates had it at 1000-1 ie: 1000 Oz of Paper-Gold to 1 Oz REAL Gold …this Market being carefully managed via Futures, Options and whatnot.

In ’98 …or thereabouts, …talk of Free-gold began to circulate with luminaries Another and FoA to the forefront. The Washington Agreement came to pass which (apart from the “for consumption” fanfare) pointed out that Gold is and will be an integral part of the System …and the $-pricing mechanism needed to better reflect this fact.

Circa 2000, the Euro …long in the planning stage, was launched, and it’s structure gave nominal authority back to Gold …should the “need” arise. By ’01, within the “gold fraternity” Free-Gold was on many lips and the consensus was - implementation of same was imminent. Unfortunately 911 came out of nowhere …and IMHO this event put paid to any notion of introducing such a radical reform …then and there.

The ensuing decade has been witness to some weird and wonderful goings-on …and as a bonus $PoG is now flirting with $2000 / Oz. …still however determined by a Price Discovery Mechanism essentially at the beck and call of the systemic gurus via Futures, Options, Certificate Programs …and whatnot.

So …that brings us to the present: -

Gold – eg: the 24K 999 400 Oz +or- Good Bar, is unique in that it represents something that is (to all intents) ETERNAL. It can also be said one can see GOD in GOLD (I’m not going religious here …just waxing lyrical ;-). The point being an Oz of Gold is an Oz of Gold …today, tomorrow, 1000Yr’s ago and 1000Yr’s into the Future.

Now, assuming we accept the current System is about to implode into virtual Chaos, whereby all the aforementioned management tools are rendered useless and the $US (and it’s “close” relative $IRX) goes into the stratosphere, what might be the fate of (firstly) $PoG - the many-times leveraged proxy …and (secondly) GOLD - the Here and Now Asset par-excellence, the unencumbered, unfettered unequivocal Wealth Asset du-jour.

FreeGold-by-accident, FreeGold by necessity - To replace FreeGold by design.

It seems to me (as described in “Systems”) the ability to introduce a FreeGold-by-design would have been akin to introducing a rigid Traffic-control regime to the streets of Shanghai (ref: Dragons post) and anyway the Devolutionary state of the System at that time simply couldn’t have coped.
On abandonment of THAT plan, it seems to me factions “within” the current system are content to let it be …and ultimately Mr Market will “love the Dollar to Death”.

As Another was wont to say – Time will prove all things.

Time, though I fear quickly running out.

-One Bad Adder-

1 comment:

Nick said...

Succinct analysis OBA, keep it up.

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