Saturday, 2 August 2014

Starting wars with fellow Judeo Christian societies just to buy some time for the petrodollar.

That is what the Seppo's are doing in Ukraine.

The Petrodollar.


In 1971 Richard Nixon was forced to close the gold window taking the U.S. off the gold standard and setting into motion a massive devaluation of the U.S. dollar.(Blamed Iran for that) In an effort to prop up the value of the dollar Nixon negotiated a deal with Saudi Arabia that in exchange for arms and protection they would denominate all future oil sales in U.S. dollars. Subsequently, the other OPEC countries agreed to similar deals thus ensuring a global demand for U.S. dollars and allowing the U.S. to export its inflation.

Financial impact

In the existing system, all transactions actually must be settled in U.S. dollars, creating a world-wide demand for dollars. The petrodollar system also meant that the U.S., the largest consumer of oil in the world, gained the power to buy oil with a currency it can print at will. Since all countries have to pay for oil in dollars, this also means the US can import anything from anyone, with money it can print at will.

With that fresh in your mind.. Enter Russia

  Russia's Rosneft Surpasses ExxonMobil To Become World's Biggest Oil Co.


 Russia's Gazprom is the world's largest producer of natural gas.

 So is it any wonder why the US is staging coups in Ukraine ? Maybe, just maybe, Russia poses a threat to the petrodollar scam. Its pretty sad that the US is stooping this low in Ukraine. Sure, we all know Saddam was a douche and a Muslim. The US had grounds to knock him off.   But Russia ? Really ?


  1. It's possible to have a secular bear market in bonds and possible real rates concurrent. It's called Spring. Gold Bear.

    Bear market in Bonds/Negative real rates...Summer Gold Bull

    Bull market in Bonds/Positive real rates...Autumn Gold Bear

    Bear&Bull in Bonds depending where in the food chain, up until debt repudiation of some flavor then restart of new credit cycle from humble beginnings/ Negative real rates...Winter Gold Bull

    It's possible to have a bear market in bonds and gold concurrent. Don't get hung up if it's American debt. Think generically. Your anti-American bias is blinding you. It could be any debt market.

    It's possible for a long position in a secular bear market in bonds to still make a real return on bonds.

  2. Hi Grumps

    I am not anti American at all. What I am though, is anti Keynesian. Nothing is responsible for more waste, suffering and cronyism then Keynesianism. Nothing. The US is the Keynesian epicenter of the world. There are 2 things that the US exports. Keynesianism and debt. They exported Mark Carney to the UK and Draghi to the ECB. So far, the Germans have been able to keep Draghi in check. Although the ECB never eased until he was at the helm.

    I have only referred to Seppo debt all this time because the Sep dollar is the worlds reserve currency. The only reason this whole credit cycle started , as I point out in this post, was because of the petrodollar being forced on the world at gunpoint. This caused all recycled petrodollars to be arbitrarily recycled into Seppo debt.

    All other debt markets in world , other then the petrodollar bloc client states like Canada, trade on fundamentals.

    My question to you is, when the petrodollar world order ends, what other system is going to take its place that will arbitrarily force ALL oil transaction money into one bond market ? Thus, creating this massive 30+ year long credit cycle that trades on ZERO fundamentals, which naturally puts a damper on gold ? For basically the duration of the credit cycle ?

  3. This has nothing to do with the petrodollar or Keynes. Once the debt load has been expunged then a real positive rate can exist without collapsing the system. The new system emerging appears to be multipolar. Reserves will likely be held in many currencies. Gold could be a 15% allocation. Silver might be in there as well. Nobody will have to be forced to hold anybody's bonds. Math will be the carrot. Market forces. Have you been following the BRICS story?

    The 60 year credit cycle ( peak to peak) isn't unique to this American cycle. It's seen in all kinds of markets. It's the result of demographics as described by Howe & Strauss' The Fourth Turning. This is what Kondratieff uncovered in his work.

    I saw FOFOA's latest post and you know what struck me about the FOA quotes? FOA was stuck on the goldbug dogma that gold is an inflation hedge. It's not. Let's say by 2020 the debt overhang is manageable with by some combo of default/devaluation/collateral call/bailin and gold is trading between 10K and 12K. The consumer, corporations, and govts are delevered. Real capex happens. Real incomes rise. Interest rates are low b/c appetite for borrowing is still low and lenders got religion, yet a normalized rate can be real positive. Gold may trend higher nominally in this environment, but the real price of gold will likely be falling, underperforming CPI.

    So let's say 10 years after the RESET, gold's 200day MA has gone from 10,000 to 13,000. Nominally that's a 30% gain, but what if avg CPI ran 3% for the decade?

    1.03 to the 10th power= 1.34

    The general price level went up 34%. The gold holder actually lost in real terms. However saver using CD's @ 5% or higher....

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  5. I am just reading the new post now. Hang on.. BTW some of my language (seppo et al) is just a way of making my blog different then all the other politically correct stuff out there.

  6. As I am reading, this is a quote from the new FOFOA post, which is a quote from FOA himself, not the blogger.

    "There is no way the Fed can create a new recession now without everyone jumping ship for another currency reserve. There is no possible way the Euro Zone will suffer as big a downfall as the US in another policy induced recession. Just looking at their closed economy and debt structure tells that story by itself. Any US slowdown means a run for the Euro, yet weakness in the Euro means the US must inflate at a torrid rate. We now stand toe to toe and wait to see who will fall first. All the while our world dollar gold markets are caught in the cross fire."

    Funny how we were talking about this a day before the new post came out. Anyway, you are implying that the Fed or the market can induce a recession until rates become positive. Is that right ?

    Are you suggesting that a new credit cycle based on US government debt will emerge ?

    Are you suggesting that the ECB will introduce stateless Euro bonds and a new credit cycle will emerge from that ?

    Assuming you are an Austrian, I am not sure how you can honestly convince yourself of that. Or do you consider yourself a Kondratieff first and foremost and an Austrian a distant second ?

  7. I consider the Keynesians and Austrians equally corrupt schools of thought. Opposite poles of a Hegelian dialectic. The Keynesians have their allnite party during Asset Inflation , then the bankers roll out their Austrians espousing the sanctity of the bondholder during the hangover of Asset Deflation.

    Will the US have a new credit cycle? Sure. The USD will still be a reserve currency, just not THE reserve currency. We still have abundant natural resources-food, minerals, and oil. BTW I found a good compilation of links debunking peak oil. Fascinating stuff.

    Also check out the Alembic Files on that site. Man, the stuff I'm learning about suppressed history. For example, I never knew that the Canadians kicked our ass back during the events of 1812. I think that was in "Once Upon A Time, in an enchanted kingdom called America… part 2"

    Eurobonds? It looks like a faction in Germany, the industrialists, want to leave the Euro and turn to the Sino-Russo axis. A Nordic Euro? Why not?

    About your question if the Fed can induce a negative CPI to make yields positive, that's the opposite of what it's doing. Falling prices leads to falling income which leads to debt default and banking collapse.

    The Fed is in a box. It can't let rates rise. Otherwise unreserved portfolio insurance ( interest rate swaps) will be called on to perform. In a way IRSwaps usurped the role of gold in this insurance role. During Asset Inflation gold is a portfolio drag as financial instruments with a yield soak up the flows of money. It's when the markets can't offer a real yield that the 5% allocation of gold can offset the losses in other asset classes.

    1. So you are a kondreif. I can pull up articles all day long from 2001 that had kondreifs claiming the winter was months away. And to claim that Keynes and Austrians are diffrent sides of the same coin is pretty ignorant. Keynes recognizes gold like Arabs recognize Israel.

      The market will eventually raise rates. Then the Fed is done. They will try and raise rates like the Asian CBs tried in 1997. It let to 50% currency collapse and that was with no prior QE.

    2. We have been in Winter since the dot com collapse. The Fed has fought debt from deflating all the way. If you price assets in terms of gold you can see the Winter.

    3. But winter in your Kondreif books is when interest rates rise .....


    4. You're getting rising interest rates due to healthy economic expansion confused with falling bond prices/rising rates due to a credit crunch in which debt can't be rolled over. receipts from stock market bubble stop coming in
      2001...China tapped as next sucker to kept Tresury debt rolling over
      2002...More help needed, Bubbles lowers rates to 1% to keep systemic mortgage fraud pozi from collapsing
      2007...RE and stock bubbles collapse
      2009...QE neede to keep Treasury debt and mortgage securities rolling over and HQ collateral values up ( bond prices)

      You see we haven't had the real credit crunch yet. The debt overhang has to be dealt with before Spring can happen.

    5. You are living in the petrodollar bubble and you are basing all of your cycle theroy on that.

      Asia had a winter in 1997. Russia had one in 98.

  8. I can see how a newbie could be impressed by the FOA quotes. But us grizzled veterans who've been on this road for seven years now and kept our minds open asking questions, this FOA now comes across as a hysterical, preachy goldbug saddled with the typical goldbug baggage.

    "Essentially because Europe will have removed the entanglement of modern fiat competition from said gold markets."

    FOA sees gold and fiat as antithetical. That's not true. Fiat is an extension of gold. A stage in the cycle which begins and ends with gold.

    1. Newbies ?

      You are aware that Paul Brodsky from QB asset management and FOFOA email each other right ? And met in person right ?

      Are you aware that Rick Ackerman was a deflationist and converted to inflationist because of FOFA ?

      Jim Sinclair has also mentioned FOFOA in his work.

      Newbies..... ha

    2. I think a lot of the gold community is confused about inflation, deflation, and HI. On the surface the freegold idea looks like a solution to our problem, but it's based on a misconception on what's gold's true function.

      Freegold as FOFOA envisions is a perpetual state of the K-wave stuck in Winter with an ever-deflating currency gaining in PP. When pressed about this he realized he had a problem, so he tried to make the linkage to fine art. The problem with that is the offer stack in a fine art auction is very shallow, while the deep bid stack is stepping over themselves. How is bullion ever going act like that? The market is too deep on both sides barring systemic stress like HI.

      The Ackerman episode shows how the HI and deflation crowds talk past each other. HI and deflation are not contradictory conditions. Because of the language many in the gold community assume that deflation is along the negative side of the x-axis and HI is on the positive side. That's not correct. HI is a subset of deflationary conditions. It's on the negative side of the axis. The deflationistas are right, but many think cash is the asset to hold. Wrong. Even if on a gold standard, that cash will be devalued against gold. Does $20.67 to $35 ring a bell?

      Brodsky may not have thought the freegold thesis all the through. Some proponents of the K-wave don't make the connection with Barsky-Summers and gold's relationship to positive and negative real interest rates. They only see CPI and fail to look at where interest rates are as well, hence the Pavlovian response "gold goes up in inflation."

      The boys at the Thunder Road Report have got a better handle on this. They understand gold's relationship to interest rates.

      Sinclair is just being polite. He's probably tired of the internicine squabbling in the gold community. Notice how he parsed his words regarding freegold. He knows gold is not going behave as FOFOA believes in the hereafter. He knows that eventually the time will come to exit gold for the world will embark on probably the greatest economic expansions once this debt has been jubilleed. Hell we're going to be looking at biotech, robotics, nanotech, AI, space mining, new propulsion technologies, cold and hot fusion. As gold holders we are going to be at the front line of the start of the next Oklahoma land rush. It will be the stupidest thing to stay in gold after the transition.

  9. I'm sure the freegold crowd will ignore this.

    "TTD earns a collective annual interest of 70 kgs of gold on gold deposits in the aforementioned banks."

    What's that! Interest on a gold deposit to be paid in gold? Oi Vey! And in the Land of Incipient Freegold.

    1. Again, why has there been no bear market in gold priced in Rupees in 60 years ? If poz interest is the end all ?

  10. Oh there was in real terms. Gold did not protect against inflation at all, but the rupee sitting in a bank account did.

    This Thunder Road Report will help. Very interesting.

    Seymour Pierce
    equity research

    " The two key themes of Kondratieff Winters,
    , willalso play out in the resolution of the current long wave, just as they did in earlier cycles. However, due to extreme policy activism in creating money on the part ofcentral banks, they will be in a different form:
    •Debt reduction via INFLATION
    in the prices of almost everything in terms of gold." page 6

    "While the long wave is primarily defined by prices (inflation/deflation), one of the
    driving forces of the long wave is DEBT
    . Typically, there is a rising trend in debt formost of the cycle’s duration followed by the extinguishing of some of that debt in its(painful) late stage, which is known as a “Kondratieff Winter” (K-Winter)" page 16

    This is what Sinclair means by "gold is debt". The future valuation of gold lies in that mountain of doomed-to-default debt across the globe.

    FOFOA is even quoted in the report.

    1. First of all, the petrodollar has everything to do with the length of the ability for the US specifically, to print money and not get much price inflation.

      And I already know what happened in the past. That's not what freegold is about.

      Post freegold is a deep subject. Do you agree mostly about what will happend to the price of gold and the $ ? Or are you a blinded dollar bull ?

  11. You're stuck in a logic loop. After the debt load is restructured, then what can happen? Think generically.

    Even if the country no longer has the exorbitant privilege, even if other countries no longer accumulate a single country's debt for oil transactions, it doesn't matter after the debt load has been expunged. So what if a country can no longer export inflation.

    Even if the USD is no longer the reserve currency, this does not mean a real positive rate is impossible. DEBT is the problem. When constipated with excessive debt service, gold is the ENEMA to unclog the pipes when all else fails. After the enema then credit can flow again. After accomplishing its purpose gold will gradually recede into the background. The price of gold will continue to rise, yet gold's PP will decline for a decade or two. Notice I am not saying the NOMINAL price of gold will decline, but the REAL price will. On a trade weighted basis the USD will probably oscillate between .20 to .30. Whether it goes up or down from there will depend on much the Silk Road block outgrows NA and how much energy is imported from NA. You see don't be so confident the USD is going to zero. North America has vast resources of oil. Peak oil is a bunch of garbage.

    Big Oil to GRUNCH (Crush) the United States

    1. I am not the one that is fixated on the US. You are.

      I know full well that peak oil is bullshit.

      But why do you think that after the US dollar is done as the petro currency that it will have any more meaning then any other currency ?

      The Euro is , right now a net creditor. Do you not think that it will be the currency of choice after the US ?

  12. Try one more time to embed a preview.


  13. I can't help but shake my head when I see the tide turn in financial reporting. Oh, so now miners are a great investment. I thought they were doomed and going to zero.

    3 Reasons to Bet Like George Soros on Agnico Eagle Mines Ltd

    "Agnico has also forecast full year 2014 all-in sustaining costs of $990 per ounce, which is comparable to many of its peers. Barrick has issued a guidance of $980 per ounce, while Goldcorp’s is $1,000, Yamana’s is $925, and Newmont’s is $1,175 per ounce."

    Yeah, what I have been saying. And these are All-In-Sustaining costs which can be artificially inflated at times. Cash costs are much lower. I don't know where some writers get the 1400-1500 dollar figure. Shills, I tells ya. Lazy chuckleheads if not disinfo agents.

    1. I'm all with you on the miners man. If anything , they will be the last bubble. As Soros the son of a filthy bitch said himself.

      I tend to wonder how the miners ever got attention from the momentum crowd in previous cases like 1929 and the 70's

    2. Pension funds will rebalance portfolios. Right now, at best they have a token 0.1 % allocation to a Newmont, Barrick, or Golcorp if anything at all.

      They are relying on derivatives to perform as portfolio insurance instead of having bullion in a vault or as reserves in the ground.

      What's going to happen when trillions in pensions goes to a 5% allocation? Nobody owns mining stocks. Not yet. We are just early nerds.

  14. Negative real rates since the dotcom implosion

  15. "Interest rates are the heart, soul and life of the free enterprise system."--Ronald-Peter Stoferle of Incrementum AG.

    Notice how nowhere on the FOFOA blog there isn't any treatment on interest rates. It's merely dismissed with a subjunctive wave of the hand "that people won't participate in debt ponzis anymore" , end of discussion. What kind of analysis is that? After listening to a Mark Passio interview on Red Ice my meager two neurons managed an insight. The FOFOA blog is an exercise is right brain dominated thinking. There is no hard analysis when it comes to junctures that provide danger to the viewpoint. Instead analysis yields to how things should feel. And pervasive throughout the blog is a slant towards passive acceptance of a freegold rapture relieving the goldholder of ever making any financial decisions again as oppossed to seizing an opportunity of may lifetimes by moving from gold at its peak PP to cash-flowing assets at fire sale prices. There are a lot of parallels between the blog and New Age paradigms.

    BTW Ciga Bo says the summer low is in as of Aug 1st at 1281. 2000 ahead by year end? Sure if Saudi Arabia announces that it will take any currency for oil.

    June 30 2011 gold @1500
    Sep 6 2011 gold@1920 400 bucks in only 10 weeks

    1. When interest rates are manipulated into the ground, there will be a paradigm change. Your interest rate theroy and cycle theroy is the reason why a lot of people commited to it, sold real estate in and around the year 2000. How did that work out ? Your cycle theroy makes sense , but it didn't work out that way. I was 18 when my dad talked me out of real estate. I am 30 now. My Dad's main point was that interest rates were due to go up. And all sensible people realized that. But it didn't happen. So i leaned a hard lesson. I've heard your interest rate theroy all too much. It cost me millions. So I have no choice but to take an alternative view. That view is freegold . Apologies for not getting back to you sooner.


    "Separately, Newmont is embroiled in a major dispute with the government of Indonesia, and said on Thursday it is applying for an injunction to get workers back to its Batu Hijau mine as it fights a controversial tax on copper exports that led the company to halt shipments from the country earlier this year."

    What do you know, the Laffer curve in action.

  17. Interest rates have been kept down not only by CB intervention but by the derivative markets. IRS swaps, default swaps, and other exotics took over the role of portfolio insurance that was traditionally gold's. Most money is managed as OPM. And a money manager is forced to dance to the music while it's playing. As long he can stay with the pack of his peers he keeps his job and gets a bonus for just being mediocre. That's why Amazon, Priceline, Apple and others are so widely held by fund managers. It's where the flock is murmurating as Dines puts it. If he tries to protect his clients by going to cash or gold then redemptions follow. Why am I paying you to hold cash?

    Rates will go up when the Phoenix is ready to rise. When the BRICS contingent is ready and has its dollar holdings fully hedged.Get a load of this 1988 cover.

    2018. Remember around 2000 we heard on financial radio like Bob Brinker's show that we would be in a 17 year bear for stocks. I was like why such a odd number like 17 years? Where are they getting this? Well some people were looking at the K-wave. You never heard this on CNBC and even the radio shows only hinted. Somebody over at the Economist sure was a K-waver back in 1988.


    The TIC data. Six Trillion in external debt.

    The Mathematics Of Gold

    Cranking out that formula now yields a $17,600 target for gold.

  18. Very quietly Goldcorp overtook Barrick as larget market cap miner. Still only a measly 23B. Compare that to Apple, XOM, JNJ in the hundreds of billions and you can see to what heights the teeter-totter will swing the gold sector.

  19. M,

    Doesn't it seem odd that the Shanghai Gold Exchange will be going online with Yuan based contracts on Sept 26 which is a Friday. Why a Friday? Well guess what. That's when the 2009 CB Gold Agreement expires. Coincidence?


    My storage locker of CIGA Bo blowup dolls are worthless. I took a real bath on those pups.

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