Gold Transforming into a Completely Demonetized Wealth Asset

| About: SPDR Gold (GLD)

Every time gold has a big up day like today I see a lot of forum comments from people that say "you can't eat gold". Or, "I'd rather buy some farm land". Or, "Gold is no different than any other commodity, why not buy silver? Look, in percentage terms silver went up twice as much as gold today!" Or, "Gold is not good for anything. It is useless. Its value is a myth!"

What all these people don't understand is that gold is truly only a wealth asset. It is a tangible, tradable wealth asset that is valued by central banks, by the elite, by the wealth giants of this world, and even by the little guy. Especially in regions outside of the US dollar currency zone.

But what is so special about gold's price movement this time around is that this is the very beginning of a functional transformation for gold. Gold is right now in the process of complete demonetization. It is being set free from the dollar which has held it captive in a monetized (controlled parity) state for a long, long time. Gold is transforming into a completely demonetized wealth asset. And along with this move will come a whole new level of value, completely detached from any linear analysis of gold's dollar-based price history over the past century or two, or three.

People seem to have the most difficulty understanding how gold will have a much higher value as a pure wealth asset than it had as a medium of exchange or unit of account. As a currency circulates through the economy, productive participants squirrel away a little wealth each time the currency passes through their grasp. They do this by purchasing whatever they perceive to be the best wealth asset at that time. This wealth asset accumulation grows, over time, to be much greater in size than the whole of the circulating transactional currency. For example, the global money supply (monetary base) is around US$5 trillion. [1] Yet the global stock and bond markets are currently valued at around US$120 trillion and all the markets combined (stocks, bonds, forex, credit derivatives, hybrid securities, options, futures, forwards, swaps, OTC derivative, real estate, etc...) are currently valued at well over US$1,000 trillion. [2] [3]

Even though gold is no longer used as money, it was still confined in a pseudo-monetized state for the last few decades through the dollar system's paper gold market, which intentionally inflates the supply of paper gold beyond its underlying physical backing in order to keep the much smaller physical gold market locked in a relative parity with the dollar. Consider that all known above-ground gold (approx. 5 billion ounces) is worth only about US$5.4 trillion at today's prices. Does this sound like gold is trading at par with wealth, or with transactional currency?

What Another and FOA came forward to tell us back in 1997 was that the European architects of a new regional currency had already thought this whole debt accumulation process through to the end, and were preparing for just such an unavoidable eventuality. That structurally, the new Euro monetary system had been designed to withstand this single, inevitable event; the complete demonetization of physical gold!

Another and FOA revealed their knowledge under the cover of anonymity on an Internet forum over a period spanning four years. But other clues to this underlying design were also released through official public statements over the past decade. Please compare and contrast these statements with what you get from CNBC, the Fed, the Treasury, and everyone else who speaks on behalf of the dollar.

In July of 1998 the brand new ECB announced that gold would be included as 15% of the required foreign reserve assets behind its new currency and that the gold asset would be marked to the market price each quarter, a decidedly NON-monetary thing to do! You don't mark your "cash" to market, but you do mark your ASSETS to market.

In September of 1999 the European central banks met in Washington DC and signed "The Washington Agreement on Gold". Here was their press release after the meeting:

Press Communique - 26 September 1999
Statement on Gold

Oesterreichische Nationalbank
Banca d'Italia
Banque de France
Banco do Portugal
Schweizerische Nationalbank
Banque Nationale de Belgique
Banque Centrale du Luxembourg
Deutsche Bundesbank
Banco de España
Bank of England
Suomen Pankki
De Nederlandsche Bank
Central Bank of Ireland
Sveriges Riksbank
European Central Bank

In the interest of clarifying their intentions with respect to their gold holdings, the above institutions make the following statement:

1. Gold will remain an important element of global monetary reserves.
2. The above institutions will not enter the market as sellers, with the exception of already decided sales.
3. The gold sales already decided will be achieved through a concerted programme of sales over the next five years. Annual sales will not exceed approximately 400 tonnes and total sales over this period will not exceed 2,000 tonnes.
4. The signatories to this agreement have agreed not to expand their gold leasings and their use of gold futures and options over this period.
5. This agreement will be reviewed after five years.

It is believed by some that while this Washington Agreement was a uniquely positive event for the gold market, that the real purpose of this agreement and its public statements on CB gold sales was the cooperative and coordinated redistribution of publicly held gold in preparation for the coming revaluation that I call Freegold. That the purpose was to use market-priced transfers of gold between central banks, in broad daylight, to create a careful distribution of gold, proportional in size to other reserves held by each central bank, before the inevitable reset the entire financial system.

In 2002 in his acceptance speech for the International Charlemagne Prize which was awarded to "the Euro" that year, ECB president, the late Willem F. Duisenberg had this to say:

The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.

Why would he say it was the FIRST CURRENCY to sever its link to gold? Hadn't the dollar done that in 1971?? Perhaps he meant something deeper!

In 2004 the European central banks renewed the Washington Agreement and this was their press release:

ECB Press release
Joint Statement on Gold
8 March 2004
European Central Bank

Banca d'Italia
Banco de España
Banco de Portugal
Bank of Greece
Banque Centrale du Luxembourg
Banque de France
Banque Nationale de Belgique
Central Bank & Financial Services Authority of Ireland
De Nederlandsche Bank
Deutsche Bundesbank
Oesterreichische Nationalbank
Suomen Pankki
Schweizerische Nationalbank
Sveriges Riksbank

In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement:

Gold will remain an important element of global monetary reserves.

The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons.

Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement.

This agreement will be reviewed after five years.

During the next five years to 2009 the central bank gold sales gradually dwindled, not reaching their prescribed limit, until finally in 2009 the central banks, as a community whole, actually became net BUYERS of gold rather than sellers! [4] [5] [6] And when the central bank gold agreement (CBGA is the same as the WA) was renewed this past August, the ceiling was lowered from 500 tonnes to 400 tonnes per year. Not that it mattered anymore with the banks being net buyers now. It was simply a formality this time. Here is the latest CBGA press release, again reaffirming the importance of gold:

7 August 2009 - Joint Statement on Gold
European Central Bank

Nationale Bank van België/Banque Nationale de Belgique
Deutsche Bundesbank
Central Bank and Financial Services Authority of Ireland
Bank of Greece
Banco de España
Banque de France
Banca d’Italia
Central Bank of Cyprus
Banque centrale du Luxembourg
Bank Ċentrali ta’ Malta/Central Bank of Malta
De Nederlandsche Bank
Oesterreichische Nationalbank
Banco de Portugal
Banka Slovenije
Národná banka Slovenska
Suomen Pankki – Finlands Bank
Sveriges Riksbank
Swiss National Bank

In the interest of clarifying their intentions with respect to their gold holdings the undersigned institutions make the following statement:

1. Gold remains an important element of global monetary reserves.

2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on
27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 tonnes and total sales over this period will not exceed 2,000 tonnes.

3. The signatories recognize the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceilings.

4. This agreement will be reviewed after five years.

And just Monday, during the LMBA conference in Edinburgh, Scotland, keynote speaker Paul Mercier, 'Principal Adviser in Market Operations' and 'Chairman of the Working Group on Monetary and Exchange Rate Policy Instruments and Procedures' for the ECB said, "gold is no longer important from a monetary point, but is important as an asset."!!!

Did you catch that? Here it is again... is no longer important from a monetary point, but is important as an asset.

Here is a little more context from Dow Jones:

Gold To Remain Important Asset Of European Central Banks-ECB

EDINBURGH -(Dow Jones)- Gold will remain an important asset for European central banks as risk diversification becomes a more significant issue, the European Central Bank said Monday.

Speaking at the London Bullion Market Association conference, Paul Mercier, deputy director general of market operations at the European Central Bank, said gold is no longer important from a monetary point, but is important as an asset.

"Gold makes sense as a contributor to risk diversification," Mercier said. " Even if some central banks continue to sell and there is a new potential seller with the IMF, I wouldn't conclude that gold holdings in central banks will decline in the coming years."

He said the Eurosystem holds 10,800 metric tons of gold, roughly one third of world gold reserves.

-By Devon Maylie, Dow Jones Newswires

And then of course, Tuesday we learned that the IMF has "redistributed" 200 tonnes of gold to India! Surprise surprise!! One can only wonder what message was intended with this sale. The message I take is that there is a new floor under gold now! A new put. A new bid. And clearly more than just the Chinese want it!

Nov. 3 (Bloomberg) -- The International Monetary Fund said it is selling 200 metric tons of gold to the Reserve Bank of India for about $6.7 billion...

The transaction, which involved daily sales from Oct. 19-30 at market prices, is in the process of being settled, the IMF said in the statement. The average price in the transaction with India was about $1,045 an ounce...

The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say whether other central banks have expressed interest in purchases.

But what is most significant about this ongoing redistribution of gold, the "important element of global monetary reserves", in preparation for the Freegold value reset, is that in countries like India, China and in the Eurozone this redistribution is even inclusive of us little people, not just the central banks, elites and giants! In China, the government is encouraging its citizens to buy gold and silver. In fact, it only recently opened up this market! And in India the State Bank of India recently announced in its annual report:

The number of branches for retail sale of gold coins has increased from 250 in 2008 to 518 in 2009. The Scheme will be extended to cover all important centres of the country in 2009-10 by increasing the number of branches selling gold coins to about 1100.

They are trying to make buying gold coins EASIER for the people in India! And so it is in Europe as well! In the Euro currency zone, the VAT (value added tax) was removed from gold but not from silver (or anything else for that matter), and gold is now sold to the public right through the commercial banking system!

It is only here inside the wonderful dollar currency zone that we are "sheltered" and "protected" from the truth about gold! Did you notice that the UK central bank, The Bank of England signed the first Washington Agreement but not the second or third? The BOE is a staunch supporter of the Fed and the dollar system.

But outside of the dollar faction, serious preparations are underway for the end of dollar supremacy and the emergence of the completely demonetized gold wealth asset, and all that it will mean! And it will mean and reveal a whole lot of truth about the world we live in! It will reveal the end of dollar and US hegemony. And it will reveal the emergence of a de facto worldwide meritocracy. It will reveal that most of what we thought was real wealth based on an unsustainable debt pyramid was just an illusion of wealth! Gone... to where all illusions eventually go.

I read where some of you say I am wrong about Freegold. That it won't or can't happen because country A isn't ready for it, or country B doesn't want it. Or that "the elite" will never allow it. Etc... etc... Blah blah blah...

Well, Freegold, or whatever you want to call it, is kind of like a runaway freight train coming right at us. It is not stoppable and it is not controllable. It has a mind of its own and too much momentum to do anything but prepare for its arrival. It is not for any elite or any country to decide when and if it happens. It is only for them and us to be as prepared as possible when it does.

Here is one more interesting story from this week:

Saudi: dollar role 'confused' in oil pricing

KUWAIT - Saudi Arabia's top monetary official said denominating oil sales in dollars does not necessarily mean that payments from those sales are received in dollars or that investments would be done in dollars either.

"The pricing issue has no relationship with the payment issue and doesn't have a relationship with the investment issue," said Muhammad al-Jasser, Governor of the Saudi Arabian Monetary Agency, at a financial conference. "There is a big mixup between the three roles for any currency."

"The dollar is the most used currency in pricing all imports and exports, especially for commodities and not only in the Gulf -- even the Europeans still price in dollar," Jasser told reporters.

"But pricing in dollar does not necessarily mean that you receive in dollar and does not necessarily mean that you will invest in dollar," he said

"That's why I think that it is important not to confuse between the three roles for any currency, whether it is the dollar, sterling, the yen or the euro," Jasser said.

Allow me to translate this for you:

"For the time being, we will continue using the dollar in FOFOA's "pure concept of money" function, the mental unit of account, because that is what the world is used to. But soon we will no longer be using the dollar in its other functions vital to US hegemony. We are already phasing out the transactional function, the medium of exchange role, and we are no longer using the dollar in the store of value function for our wealth."

Does it strike any of you as much as it does me, how insignificant another $6.7 billion in the IMF coffers seems when compared to the quite significant 200 metric tonnes of physical gold being transferred from one single entity to another? This is the largest single publicized gold purchase in at least 30 years! When you think about the Fed literally PRINTING $300 billion for the US Treasury over the last 6 months, or the $500 billion in currency swaps, or the unknown $trillions in Fed quantitative easing, it really makes you wonder if this was the best way for the IMF to raise another $6.7 billion.

This striking paradox WILL be corrected, by the way, through Freegold.

For a bit of perspective on India's score, the heaviest load ever carried by the largest airplane in the world was 253.82 tonnes, but that was a short, low altitude test flight exceeding its rated capacity by 4 tonnes. The heaviest single job this flying behemoth has ever been hired for was a generator weighing 187.6 tonnes. It has also carried train locomotives that weighed less than India's new gold. So India's gold would certainly be considered a "full payload" for the largest plane in the world. And there is only one of them! With any other plane it would take several trips. This is the Ukraine-based Antonov An-225, which can be hired for a job like this through a broker in Beverly Hills.

So India, if you would like some help bringing your gold home, let me know. My fee will be modest. I actually have hired this plane before. It is true! Although it was not for transporting gold. So what do you say? Let's make some history, set a world record for the most gold transported on one plane, and avoid that Somali coastline in the process!

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