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 ..is quickly running out.

-One Bad Adder-

Systems

The Human Condition dictates the need for Systems.

THC can generally be categorised thus - 92% The Majority, 3% Termites, 5% Remnant. (Dynamically speaking ie: %age's constantly in flux.)

The Majority are content to pursue their aspirations etc. generally within parameters they encounter along the way.

The Remnant are ALL those who (for whatever reason) don't make the cut in the Majority group ...(X the Termites.) This group includes: chronic Wrong-doers, The Elderly, Aged and Infirm, the Dysenfranchised etc.

Termites are generally a group (singularly or collectively) who feel it their God-given right simply to interfere (usually for self-advantage).

Systems always seem to follow a pre-determined course - Chaos - Evolution - DEvolution ...and back to Chaos when the process is repeated ...ad nauseum. It's rare indeed (one might say even "impossible") to reverse this process. What can SLOW the process to a crawl is the addition of a Supra-organism to oversee the System (as proffered on FOFOA's blog.)

We may like to consider LIFE itself as a “System” …whereby the issuance of a Birth Certificate is an unequivocal “guarantee” of a Death Certificate …Yes?

A human goes through the born – evolve – devolve – die process…and (as espoused by many) are then “Born Again” either back into this World …or Another. There are those who are encouraged to be “born again” within the parameters of the above process …but we won’t go THERE!

By extrapolation it then can be said - the “need” for …and the implementation of, a System, “guarantees” it ultimate demise.

So our proverbial Group put’s a System in place to constrain uber-miscreants etc. (them being a part of the remnant), and the broad guidelines of the System are determined, Laws enacted etc.…with associated penalties for wrong-doers being VERY severe. Offenders are vilified and essentially removed from the System. (eg: Kill and be Killed)

Those deserving of compassionate treatment are in some small way catered for as the limited resources of the new system are able to accommodate.

As we travel through the process, well-intentioned ideologues (initially a part of the Majority) surface and suggest Systemic improvements to aid and abet better management practices thereof …and many / most of these prove to become a huge success and benefits flowing to all. Those deserving of same ie: of the Remnant, see their portion of the benefits of the System marginally increased.

We arrive at what might be described as a Laissez-faire state of evolution where essentially the Majority are left to go about their affairs, subject of course to operating “within” the parameters of the aforementioned guidelines …and generally those involved in Management are content just to “let-it-be”.

However, the seeds of Systemic Destruction have “already” germinated and sprouts broken through the surface as the Termites are actively (usually covertly) interfering generally by (amongst other things) – narrowing the parameters of the “guidelines” and reducing penalties associated with “offending” …ostensibly perhaps for “compassionate” reasons. (eg: Kill and …spend your Life in Prison)

The process continues …and at some point, thanks to the various and nefarious activities of the Termites (now enamoured with a vast array of allies at their beck and call (State-istics, Technology, Seconded ideologues and a fair slice of the Majority who now look to the System for their succour etc.) …our System thus begins to Devolve.

Of course during the process, the Guidelines have been replaced with an interminable array of rules and regulations where even a minor infraction of same is deemed to be deserving of not only ostrasization and vilification …bit usually accompanied by disproportionate Fines and (in some cases) imprisonment.

At the other end of the spectrum we see the uber-crime penalties further watered-down (eg: Kill …and go to Jail for 15 Yr’s …however, be good …and be out in 10.)

As the process devolves further our aforementioned Ratio might be closer to Majority – 70% …Termites (and their associated hangers-on) – 15% …and the Remnant – 15%.

Ultimately, these proportions are reduced to a point of unsustainability …and Chaos once again ensues.
As I said at the outset, the existence of a Supra-Systemic organism can and does slow the process dramatically …however, as the System in question becomes more and more complex, this Supra-Systemic arbitrator becomes a System itself …and succumbs to the process in similar fashion.

Sub-systems within a System (and a Supra-System) will generally be not too far removed (process-wise) from one-Another and can be VERY complex in their makeup. To help identifying a specific “system” and perhaps determine “where we’re at” Systemically, it may be a worthwhile exercise to consider a sub-system one is quite familiar with …and extrapolate that into the BIG picture.

A thought on “Existing Systems” to help avoid traps for the unwary “Systemic Identifier”: -
Two NFL Footballers – fiercely competitive “on-the-field” will …in a Heartbeat, become as Brothers-in-Arms if called on to defend their “code” when compared to (say) Baseball.

A Clash of the Systems: -

The Internet is a good example of a Systemic Interloper. Here in Cyber-ville, I think we are roughly at the Laissez-faire point of the process. Uber-wrong-doers are ostracised, vilified and generally sent packing. Real-world Laws are catching up to and dealing with these miscreants …and in-the-main that’s a good thing.

In the commercial space however the Internet is wreaking havoc. Global Systems are generally at a loss to accommodate and / or manage this phenomenon. Local taxes and duties are being side-stepped, information quickly disseminated etc. …and you can rest assured the Termites are “doing what they do best” attempting to contain the current Systemic damage being wrought.

Next, (as time allows) we might try and anticipate how a properly set up Free-Gold entity (as opposed to a managed System) may perform the function of a Supra-Systemic arbitrator in the context of the architecture of a yet-to-be-engineered new Global Financial System.

-One Bad Adder-