As money flows continue to freeze, sovereign treasuries across the planet are hoping to recapitalize their stock.

The attempts have government banking stewards, beholden to a fraying currency exchange system, at odds with one another.

China, the big OPEC producers, Canada and perhaps Brazil and several other nations steeped in natural resources are sitting in the catbird seat. The U.S., Britain, and most of Europe are not.

“Bank recapitalization means that someone invests money in a bank. Banks are heavily levered,” author and money manager Nathan Lewis in Connecticut tells me. “It's like a margin call -- you need new cash to make up for investment losses.” Lewis, author of GOLD: THE ONCE AND FUTURE MONEY, adds, “I'm not sure what a national recap would be.”

Few do.

A recapping of nations’ reserves requires assets for support. Without those assets, be they rising worker productivity, gold, oil, even land and food crops, bankers have little choice but to boost their balance sheets, as the U.S. Federal Reserve has been doing at an accelerated pace. (See article.)

The result, as any former Marine Corps or Green Beret currency trader will tell you, is that one currency, or several currencies, must decrease in value against the other currencies in the exchange system.

Governments and central banks have a history lesson ahead of them. 

“Let's take a trip down memory lane,” says Internet pioneer Chris Kitze, whose credentials in this matter are that he is a rabid and thorough researcher, he is a friend and I am quite sure he is not lying. Kitze, as are all of the talking heads in this article, also has been spot-on these past several years about the worsening state of sovereign (and corporate) treasuries. 

• “Recap version 1.0,” says Kitze, who lives in California –“Executive Order 6102 signed by (U.S. President) FDR on April 5, 1933, which effectively confiscated everyone's gold. Gold went from $20.68 to $35.00 in a week, an effective inflation of about 60%.”
• “Recap version 2.0 -- Executive Order August 15, 1971 when Richard Nixon announced that U.S. currency would no longer be redeemed for gold.”
• “Recap version 3.0 -- Thom, you need to fill in the blank here, but it's going to bigger and ‘badder’ than versions 1 or 2.” 

This leaves us here, in the camp of folks such as red-flagging economist Stephen Roach, GoldMoney operator and economist James Turk and others who have warned about the vast amounts of debt consumers and nations have taken on since year 2000. 

For my part, I think we are going to see a monstrous move higher in the price of gold and in gold coins in the next week or so, perhaps sooner. I am not one to forecast, to be sure. But 1933 keeps tugging at the back of my head. I hate to have to say this, after going positive on gold in 1999, but the metal appears to be headed to a new, altered state. One that will take it to levels hardly imagined. 

I cannot speak in this space to gold paper, as in companies that explore and produce gold. But they once again will have their day as investors seek ways to own producers of tangible “stuff.” For now, the rising demand for the actual metal, and for gold coins, tied to all of this currency craziness and to a looming recapitalization of sovereign treasuries, leaves me firmly in Colusa land, which is my term for astronomic gold. 

Better to leave off with James Turk, who has coached me as a writer and a gold researcher since 1999. I chatted with Turk Wednesday, and he tells me from New Hampshire:

“Printing up bundles of money is not capital. Capital comes from work and savings, not the printing press, and capital is in short supply after decades of over-spending and under-saving,” he says. 

“Real (inflation adjusted) interest rates are negative. Why would anyone hold dollars, other than their immediate need for living expenses? As I describe it, the dollar is on the path to the fiat currency graveyard. The dollar has bounced because things look so bad in the euro all of a sudden, and hot money is sloshing around looking for a safe home. More and more of it will end up in gold.”

Winners & losers 

So who wins in the current currency exchange system? I asked James. 

“China and Russia are waking up. They are quietly making moves to establish their own international monetary order/system.”   

And who loses? (Gets crammed down, in the language of venture capitalists.) 

“Anyone who owns financial assets denominated in fiat currency loses,” Turk says. “Anyone who owns tangible assets wins. Financial assets get destroyed in a meltdown like we have now. Tangible assets do not disappear in a financial meltdown -- the wealth simply gets re-distributed.” 

Tangible assets include land, food, even companies that produce food, metals, and water perhaps. Even necessary technologies make the list, although iPODS (a true wonder that has changed my lifestyle), alas, might not make the cut. 

James Turk left me with this remark from Ed Steer, a researcher and board member of (yes, I have to say it) Bill Murphy’s Gold Anti-Trust Action Committee: "What the Fed and the U.S. Treasury are attempting has never worked ... ever.  We are watching the death throes of a giant beast, and as it flails about on the ground, it's best to stand well clear of it." 

Sorry to have to say all of this. (OK, I will let someone else say it.) Robert Bishop, a gold mining researcher with whom I lunched this past week, also has coached me warmly over the years. “Monstrous,” Bishop said about where assets such as gold will travel in the near future, “is probably not the wrong word for it.” 

Note: My cosmos of holdings is listed on www.Stockhouse.com under the “portfolio setting.” We own some gold coins and two of the worst performing gold stocks in history, one of them being Colombia Goldfields in a gorgeous nation that was briefly my beloved home. We also own the ETF for silver (SLV is the American ticker). For more ThomWatch, please see ThomCalandra.blogspot.com. 

THOM CALANDRA REPORT: For investors who profited from a meteoric rise of commodities, mining and life sciences companies, Thom Calandra acted as a beacon. Thom helped his audience find value in a quagmire of investment choices. Yet he is not a titled investment adviser. He is, more than anything, a scribe who goes where the action is. Thom co-founded and was the driving editorial force and spirit behind CBS MarketWatch, MarketWatch.com and the long-gone FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom beat bushes for prospects. He fancied $300-ounce gold before that metal became an investment rage. Thom visited numerous biomedical companies, metals mines, and even a haberdashery or two, not to mention thin-crust pizza joints across the planet in his search for profit, fashion and food. Thom's latest project, the novel PABLO BY NUMBERS, was completed in summer 2008. He and Stockhouse this autumn will offer a subscription report with bells and whistles. The service is tentatively titled Thom Calandra Report. Please stay tuned AND PRUNED to Stockhouse.com, ThomCalandra.blogspot.com and to ThomCalandra.com for more.