FOA (08/19/99; 08:11:14MDT - Msg ID:11517)
Aristotle (8/19/99; 1:07:39MDT - Msg ID:11501)
Oh no, FOA, You came soooo close! You had the set up, and then you blew it!

Yes, I certainly did, didn't I! Completely forgot your challenge. Will work it in another time. Thanks for your suggestion to place my posts in the Hall. Actually I would ask that they remain mixed in with the others in the forum. When someone has interest in this subject, they are forced to dig through all the other fine thoughts and perception presented here. It's important for them to also see everyone else's analysis because it shows how current events are disseminated into the minds of a community. Five people can hear one view and all come up with a different conclusion.
The long process (struggle?) of reviewing these conclusions, then balancing them against ongoing events
teaches people to read the news correctly. No one here is right or wrong, only events will prove all things true. For me, this forum is a world class one of a kind, that is as much about learning the human heart as it is about government and money. Inevitably, we all pour out our fears, dreams and aspirations while delving into the future of out life savings. Michael has done a brilliant job of drawing out the money conclusions everyone is hungry to read about. Just look at the Forum Contest Metal Winners posts, fantastic. In addition, our two Hall Of Fame posters are the written basics of where ORO is comming from.

The Western world is adrift in confusion when it comes to conservative money. We clamor to compare our thoughts to others, just to see if we are on the right track. Most are not. Another would never betray his friends by presenting private facts. This just isn't done in his world. So we
are told to look there, consider this, why not this way, they will do this if that occurs and so on. In this way we will not learn from him, rather we teach ourselves from the actions of others.

My last post (yesterdays forum?) became a short incomplete response as other pressing discussions took precedence. Sorry for that. Now I see where ORO (#11512 and #11497 thanks SteveH and Tomcat) has not only taken the ball, but is running with it. He is a fine example of how
someone has looked in the right places and found the truth. For most investors, this ongoing affair has been torture. They have been caught with the wrong strategy for eventually benefiting from this transition. Without the knowledge of how gold is really valued it's difficult to walk away from old losing ideas. But, the process continues, with or without us. More on GS in a little while. FOA

FOA (08/19/99; 09:42:52MDT - Msg ID:11528)
Phos (8/18/99; 12:10:47MDT - Msg ID:11472)
Gold Shorts
In the GOLD-EAGLE editorials today is a note from Sunil Madhok on the CB gold leasing mess. In the editorial he makes the following points. He mentions the amount of the loans ~14,000 tons although I understand that no-one really knows the true number.
As to the reason for leasing their gold, he states:
"They leased out their Gold not because they wanted to earn the lease money, but to provide liquidity to the markets. The purpose of lending was to prevent a squeeze due to short-term increase in demand and/or cornering of the market by big speculators.
Because we now have a physical shortage, he continues:
"For mining production to exceed demand, the price of Gold must go up significantly. If the price of Gold does go up significantly, then some big bullion Banks may go bankrupt. One big failure would result in chain of defaults. It appears that some CBs now realize this and, therefore, are planning to sell their Gold reserves just to bail out some market players who are short. It is possible that the
Bank of England made the controversial decision to sell their Gold reserves in order to protect some bullion Banks. It is also possible that for the same reason some other CBs may be ready to sell their Gold reserves, whenever the price of Gold starts shooting upwards."
Obviously, the BOE supply is a drop in the bucket compared to 14,000. But the US and other European countries, such as Switzerland (which talked of selling, I think 1300 tonnes?) easily have enough gold.
My question is: Why would not the CBs that have lent the gold simply sell it to the borrowers? as he states. Would this not prevent or at least limit a meltdown in the financial markets that everyone is expecting? Or are the CBs simply not willing to sell it? Or are the problems so much bigger than this that it alone would not undo the damage?

Hello Phos,
First, go to the USAGOLD Hall Of Fame and read the posts there by Aristotle and Aragorn.

To comment on your question: They don't sell because they have the economic lives of other people to protect. As an example, if you were broke and owed a ton of money, would you sell your fully paid for house to pay your debts? In the process put your very family on the streets and subject them to exposure and difficult living conditions. In the human logic of things, most people won't and don't! They let the banker "eat it" first.

In the absolute same context we must view the "Major CBs". Only the major ones count because all the others fall under the shadow of the money systems of the majors. Yes Belgium sold most of it's leased gold to paper holders and other CBs, yet it was coming under the Euro umbrella. England is a case in transition as they must now move from the dollar realm into the Euro arena if they are to survive. So, they also close their lease books. The Swiss thing is a joke because they too are posturing to enter the EMU and will absolutely be selling gold to the ECB for Euros! Believe it! But the Major CBs countries that back the dollar or the Euro?

Look at the US. Will they cover? Well, if they didn't dump their gold to honor dollars at $42 / ounce in the 71, why do it now? Everyone that held dollars as a gold loan, was told to "eat it", we are keeping the gold! Further, why doesn't the US Treasury exchange their gold for outstanding
treasury debt that earns interest. Yes, dump the gold on the market for $42, why not? If we follow the logic of England, they should have used their own created pounds to buy the gold and just given it away.

This current generation buys into these fairy tale assumptions as logical because they haven't seen what happens in a currency "wipeout". We'll get one soon enough and when it does, they will also tell the gold loan holders to "eat it", I'm not putting my country (family) on the street.

No, my friend, they will only cover in tiny amounts if that action can prolong the system. As we head into large scale discounting of paper gold and outright default, they will walk away for the same reasons you would. thanks FOA

FOA (08/19/99; 10:38:23MDT - Msg ID:11535)
USAGOLD (8/18/99; 11:28:21MDT - Msg ID:11469)
Mr. Insider....
Talked with Mr. Insider about this morning's price drop. He says Goldman Sachs is selling on paper -- major selling. Goldman is also taking delivery on another 725 COMEX gold contracts.
(You figure it out.)

Michael, It's kind of "unbelievable" isn't it? Is it possible that "all along", GS has from way back seen the failure of this modern system of pricing gold? When the BOE sale went off, GS starting right away selling against the market. Well, if you were an "in the know" mender of LBMA and saw the BOE sale as a stopgap measure to patch a failing system, what would you do?

As long as the physical community had supply and continued to price it's product based on Comex / London, I would buy (take delivery) whatever physical was offered in size on the off market at ever falling prices. Sell the LME or future dates on Comex then start taking delivery on
spot month as other supplies dry up! Look at how slow it's arriving now. In the old days, several million ounces would be there in a minute. Warren Buffet would have to have a piece of this new action?

Why doesn't some big player call the shorts? The Bunker Hunt fiasco is still fresh in their minds. If anyone tries to call for "big product" on the paper exchanges the regulators will just revert to cash settlement. So there is no way to play it against them on a large scale. It will all end when no supplies arrive for the front months. The whole thing, London and all will go to cash settlement just as the 71 dollar did. The end of the gold market as we know it? So far it's following Another's thoughts. Ideas from anyone else??

FOA (08/20/99; 12:46:41MDT - Msg ID:11630)
Open Reply To Mr. M.
I must reply to this private letter that was sent to me. It was written to Cage Rattler by Mr. Martin Armstrong.

Date: Sun Aug 15 1999 07:28
Cage Rattler ("Gold was a store of value throughout ancient times, however money NEVER was!" - M Armstrong) ID#33182:
Copyright © 1999 Cage Rattler/Kitco Inc. All rights reserved

----------Dear Bob:
You are making the opposite mistake of Karl Marx. Marx assumed that everyone in the private sector was corrupt and therefore that property held in the hands of government would be fairly managed. Marx never accounted for human nature and it doesn't matter if control over money is
private or public, both have historically tended to exploit it for personal gain.
Money is ONLY a medium of exchange and it is NOT, and has NEVER BEEN a store of value. Gold in itself has been a store of value as demonstrated in Korea and Asia. Gold was a store of value throughout ancient times, however money NEVER was! These are two separate issues that should not be confused.-----------

From FOA.
To the contrary, Mr. M, these are two separate confusions that deal with the same issue! Your assumptions always conclude that the values established in a public "marketplace" represent the private views of the majority of people. In other words, if someone trades anything using the
marketplace price and using the accepted mediums, the mechanics of that trade must also represent the mind set of the person. Through out history, it rarely has. Your view is further skewed with the "control over money" issue. The world has always assumed that the "people" want someone to control the money, be it public or private.
When one looks closely into the private actions and reactions of people during various civilizations, the mindset of the majority (the average citizen) was always that we don't need "money at all". Just let us alone so we can trade our things. The modern argument of the Public vs Private "control" always found the banks as representative of the term "Private" and the government put forth as "public". The "free market citizen" was never considered as a viable contender to pick the trading medium.
Banks, long ago assumed the roll of making and controlling money for private interest because they saw that the "free citizen marketplace" seemed to always use gold to trade with You say:

-----Money is ONLY a medium of exchange and it is NOT, and has NEVER BEEN a store of value------

The problem with this is that in the old "free" marketplace, these people never thought of there use of gold as using "money"! It was only a "thing" that most of them found to be the best item to trade with. For them (again average people) gold held it's own particular independent store of value just like anything else they owned. Indeed, in their mind it wasn't the "medium of exchange" money concept of the bankers in a later time. I submit that even the term of "money" in the early bible was not in the same banker context. Back them it was more closely associated with a "thing of personal value" that could just as easily be "used" as traded. Therefore your statement,

---Gold was a store of value throughout ancient times, however money NEVER was!-----

does not present a valid conception for comparison. It was the banks that, in the assumed roll of creating money for commerce, decided to make and control the "CONTENT OF THEIR CREATED MONEY". In this action, by no means did they
represent the perceptions of people who can be depicted as the third party in this debate of control. Yes, banks were owned by private interest, but that should not imply that they presented the private viewpoint. Yes, the people did use the created money (both coin and paper receipt) for
trading, but the mindset of that early evolution did not hold that this "bank money" was solely a "medium of exchange" Rather it was a receipt for a tradeable item of use. The "medium" only concept came into play as the banks lent out more receipts than they had or they could not collect upon failed "real gold loans". That excess of gold receipts in circulation could then be perceived as the "medium of exchange modern banking concepts refer to". We then clearly proceeded to the era you next present ( as it is explained in reverse):

-------- The Greeks, Romans and everyone along the way ALWAYS and WITHOUT EXCEPTION played with the gold content of their coinage which led to Gresham's Law - good money drives out bad money. Whenever money was debased, older issues of higher metal content were hoarded. They then ceased to be MONEY (medium of exchange) and became a (STORE OF VALUE).--

With the clear viewpoint that I presented above, we can see that this next statement does not apply to a post contraction "free market trading arena". Rather it is the present conjecture, using the present thinking in a prosperity mode mindset that assumes the private and public terms as the only viewpoint. They are only two parts of a three part society.

-------If you think that a return to a gold standard in some way will eliminate these issues, you are wrong! No matter if it is the private sector or the public sector, whoever ends up in charge will always play games. -----------

Indeed, if a true free market in gold was established and all gold was coined and sold into the market place, games would still occur. However, new concepts for hard times would require mines to make all coins to conform to set standards and pay their taxes to governments with the same
(however high that might be). In addition, they would pay their help and buy supplies with the same. Private stores of gold (both government and private) could choose if they wanted their bullion coined or not for a fee. Yes, the value of gold would gold very high compared to real things, but it did that long ago, before banks called it a "medium". Anyone that owned gold would be rich. So what? Anyone today with a lot of cash is rich, again so what? Gold money is spent and loaned and in general always circulated. Just as in the early days before banks and gold was just another
thing of wealth, but not the only store of wealth in a persons portfolio of things. Yes, Banks and governments would fail and go bankrupt as they always did. Yet, the money supply would never be changed because of their failures. People that loan gold money would learn not to count that asset loan as part of the money supply as today.

Further on you state:

-----Gold is a store of value today - but it is NOT money. It is NOT acceptable to pay your VISA, rent or to buy food unless on a barter basis. Only dollars ( money ) is acceptable in the US, and now Russia while it may be yen, marks francs, deniers or whatever in other nations.-------

Again, you assume that gold is not money because it is not accepted as "the medium" in the Government / Bank operating economic system. I submit that this perception represents a short conclusion. If we extend the thought we find that no government or bank said that gold was not
money. They only decided to not "use" gold as "legal tender money". Both of these entities chose to pursue this route because they wanted to create more "money" than was in existence. Something they could not accomplish it using a money that possesed a "store of value".
As I pointed out, the "citizen" and their trading are the "private free market" that the world economy is and has always been based on. This market place does not need "more created money" as it worked fine using the old "store of value gold" as long as the market could increase or
decrease it's purchasing power as measured against all goods and services. Banks and governments fought hard to stop this function because it took power away from them and returned
it to the economy.
As a result, history proves how poor of a job government and bank paper money has done without using gold. Your description that follows is an excellent example of the battle between the first party governments and the second party banking systems. The third party private person will
be impacted from this abuse of the money system, however, our heart was never in it. Your words:

----- I simply disagree with your interpretation of 1929, the Fed and the wildcat banking era. Your view of anti-central bank was shared by Andrew Jackson who was bitter because he had lost money and was turned down for loan in his youth. When he became President, he destroyed the Bank of the United States and with no central control, the entire banking system quickly fell into trouble. There are countless "broken bank" notes that collectors can buy today from every little one-horse town in the country. Some were in the hands of local politicans who quickly exploited the system and bankrupted their communities. The Constitution specifically prohibited the States from issuing money and because of the hyperinflation of the 1700s.
You are also misinterpreting dictating private investments with restrictions of asset class and leverage. You now have a perfect example of your no interference policy for the private sector. Long Term Capital has just blown up by leveraging positions to the extent of $1 trillion. The
uncontrolled activity of this one hedge fund is going to disrupt the free markets everywhere in ways you have not yet even noticed. There needs to be a rule of law that establishes the basic guide lines. It should NOT expand into regulation of every aspect over investment. What an individual does with his own money is his own business. However, when institutional money is gathered and used
at the discretion of fund managers who buy into the latest hype like Russia, then allowing this type of investment to be carried out with ANY restrictions whatsoever, is extremely dangerous. LTCM is a significant threat to both bonds and stocks right now. A few other funds are now rumored to be in a similar position. Such unbridled leverage threatens to bring down a lot more than anyone
suspects. I think there will be investigations and a whole new set of regulations that will come out of this debacle. The Fed is currently calling around the street in an attempt to assess the damage. There will come a day when you will see that the proposal of that I have made to merely
regulate asset class will be far more attractive after the next set of regulations come storming out from all government bodies that will seek to restrict every aspect of investment. What they don't understand - they ultimately kill.
Your argument for no regulation will not even be seriously considered by any government body I have ever testified before. In reality, there may be no way out, because the people themselves will demand action because they have lost money in stocks caused by hedge funds in Russia and interest rates like LTCM. They will in the end bare the blame and a host of new regulations will spring forth in an effort to appease the people who demand government action.
Martin Armstrong

From FOA.
Sir, I have commented on your thoughts because it is important to present the flaw in this perception. Some of your analysis is in the context of a rebuilding of the government / banking financial system after a great contraction. It places little support to gold as a choice to preserve wealth during this event as gold will not be in demand.
I submit that you have misread the historical attraction to gold that private citizens impart upon this metal. The human factor always has and always will gravitate to using things as trading items. We were born a people of earth with senses that touch, see and feel for value Weather our trading things can be considered money, a medium of exchange, legal tender or a store of value, was never the issue. Governments and banks made them an issue so as to circumvent our value of trade for their benefit.
As such, when the next downturn threatens to destroy the perceived values created in fiat currencies and securities, people will then circumvent these modern concepts and return to trading the most convenient things. History, not modern computer research, has shown that we will return to gold.

Thank You for your time. FOA

FOA (8/22/99; 15:05:43MDT - Msg ID:11781)
Lost posts?
Welcome Mr. Gresham, looks like you picked a good time to start! These things happen to everyone. I hope we didn't lose too many good posts. FOA

To Jeff, USAGOLD TECH: My system saved all of the posts through Msg ID:11729 yesterday. Even my Power was down for today so nothing past that post was retained. If needed I will post or send what I have? Post instructions,please.

FOA (8/23/99; 8:21:51MDT - Msg ID:11846)
Starting to See the forest, not just the trees!
Gold Price Sinks Due To Sheer Weight of Paper.
August 21st, 1999

Professor von Braun
The Rocket School of Economics.

There is no question that the "paper gold" market is considerably larger than the actual physical gold market. Estimates we have seen range from a minimum of 90 to 1 to in
excess of 100 to 1 paper ounce contracts being written for every single ounce of gold that changes hands. This is mind boggling.

The paper gold market is not in the slightest bit concerned about such things as supply and demand numbers and anybody who is relying on these numbers and such comments as increased demand for physical metal to make investment decisions, fails to see the significance of what's going on here.

We clearly have an aberration here that is unique. No true futures market could operate this way for too long since there is not enough gold around to cover the positions that
have accrued.

In a sense, there is now two markets within one and considerable confusion will result if this is not understood. The usage of gold has changed in the sense that now its the bullion banks that write the paper contracts (using other entities reserves), as opposed to a central bank printing paper currencies that have some form of gold backing.

This activity really began its current expansionary phase after gold peaked in February of 1996. The downside has been continuous since that time and the number of contracts
written favoring the shortside has increased year after year. The price has of course correspondingly declined.

Eventually supply and demand will have its way and the long awaited and often referred to short squeeze will appear, but at present the odds still favor the shortsellers. They are onto such a good thing and still maintain the ability it seems, to stay at least one step ahead of the game. It is unlikely it will end just yet. Lurking in the background is the issue of the IMF gold reserves and a potential sale. Never mind the political resistance to this sale, the odds favor it happening and politicians stated resistance has a habit of disappearing when the time comes to vote. In this case, the IMF needs the cash and the alternative (US taxpayers) may be even more unpalatable.

Markets have a habit of correcting aberrations caused by the greed of the players whether they like it or not. As we all know, most "flavors of the month" are "too good to last", and this paper gold market is no exception.

Casinos, those wonderful places that have replaced the town meeting halls of the last century, have rules and certain guidelines that must be followed. Most of these rules and
guidelines reflect such things as odds given, credit extended, mild (and legal) intimidation, and so on. The gambling industry for the most part, is self- policing because of the risk. It is their cash they stand to lose.

Consequently, while there are some exceptions, the odds given in the various games of chance don't change all that much from casino to casino. But most bean counters fail to
realize that their little universe is not the epi-center of whatever industry they are in and lose sight of the fact of what they are and are not, in control of. From a casinos point of view its Achilles heel is people through the door and money on the tables.

Las Vegas is a good example of this in the sense that you have a market that has expanded rapidly since 1986. Expanded ? How about exploded in terms of growth and new casinos.

Like the current paper gold sellers boom, the industry players all convinced themselves that they needed to expand and many new casinos now dominate the Las Vegas skyline,
such as it is. In doing so the bean counters all ignored their own rules and guidelines and have now created one of the biggest ongoing traffic snarl ups in the southwest, created a shortage of skilled staff and put the towns sewage system under strain. Oh dear. Using greed as a fertilizer for growth always produces unexpected results.

The "too much of a good thing" syndrome begins to come into play and the activity, regardless of what it is, tips itself over, or self corrects. Nature may abhor a vacuum but it
abhors an aberration as well.

So too with the paper gold business which has of course grown out of the actual trading of physical metal, but now dominates it to such a degree that it is beginning to impact on the realities of supply, demand and more importantly, the potential for increasing new supply. Why mine gold at these price levels ? Obviously, more metal is not needed.

But watch out when the paper gold supply turns to the physical market for its redemption's. That indeed will be an interesting day.

Professor von Braun can be contacted via email at

[Return to the Fiend's SuperBear Page]

FOA (8/23/99; 9:14:45MDT - Msg ID:11852)
A run for physical?
Welcome ORO!

Am I reading this market correctly? Is an LBMA member selling future dated gold paper (for all to see) and buying physical (for all to see)? If one member is buying physical "in the open", will others soon follow (in the open)? If the OI on the Comex gold options calls is above 400,000, will a run for physical create a rush to call (convert / take delivery) for Comex contracts? Will OI on Comex then surge the same amount?

ORO, Perhaps we should forget the money and "follow the gold"!

More later FOA

FOA (8/23/99; 21:10:00MDT - Msg ID:11896)
Hello Aristotle, this talk is sent to flow past you, not at you. I'm using a part of your very good post to make a few comments. Your part is in ---- marks.

Aristotle (8/18/99; 9:54:21MDT - Msg ID:11457)
And this was from my
Aristotle (8/15/99; 18:35:22MDT - Msg ID:11214)
----- Doesn't it strike anyone as significant that this Gold was not acquired on the spot market, but rather through the odd route of using futures contracts? If you have explored the link I referred koan to, the analogy here is that Goldman Sachs has only thus far succeeded in getting themselves a fistful of paper dollars in the 1920's, and they have announced their intentions of walking down to the bank to have these paper contracts honored with real Gold. -----------

Ari, I'm going to ramble a minute then get to your comment. It's a testimony to how many major gold players (not talking about GS) use some form of future delivery paper as the real thing. They don't really want to hold real gold as that would require "buying it for delivery". Because paper gold only requires 10% to 20% (or less) to hold, the rest of the money can be put to better use. They pick up the future derivatives (I'm talking about all the various gold arena's) and hold until it moves somewhat close to delivery. Then, before delivery, they sell and run further out. All of this is done with a mind set of "we are only holding this gold as a hedge against our portfolio, so paper will do
fine". This thinking has, over the years, progressed till it represents most of the major Western public investment money.
With this view, is it no wonder that the large bullion houses rule the paper market. It's easy to sell (short) the outdated derivatives because all that is needed is cash! As the market slowly falls, the short equity requirements become nonexistent. To the advantage of the houses, the longs practically always settle up in cash and move on. The large funds don't want the trouble of real gold so they continue to play this game of "let's bet on the gold price and see who is right"! Today, they are learning a painful lesson that the stated price for gold is established by the same derivatives that they don't want to exercise. In their world, they are convinced that massive physical gold is but a phone call away for shipment into certified warehouses, so the derivatives price must truly reflect the real market.
Today, anyone that is "blind in one eye" (Another's favorite) should be able to see how easy it's been to maneuver gold lower without impacting physical. As I pointed out in other posts, it's the private Western stores of bullion that have been slowly fed in to fill most of the physical deficit and replaced with derivatives holdings. In essence, a lot of conservative entities have brought into this new gold market and now hold derivative gold as the real thing. Truly, their trading up has helped to legitimize this market as this "Old Physical" was delivered to some who demanded it.
Add to this, the enormous number of completely new investors that have entered the gold arena as paper players and we can see just how large demand is. When this market fails, those who traded "Old Physical" are going to be head first into what ever physical market is left (or newly
established). To fully grasp their ability, one must realize that they were just "hedging" a much larger portfolio against some future problem. If the world markets begin to falter at the same time that the paper gold market begins to unravel, "extremely emotional money" is going to be moving, big time!
All of the above has nothing to do with the huge international government and private bullion investors that hold and move gold as a currency. During a breakdown, whatever gold they do control, will be "locked down" for the duration! Believe it! Like I said before Yhey will reply
something like this:

"yea, I wrote calls on my bullion, but things have changed and I moved it (fraguently) out of your grasp just in time. So send your army or sue me"

Build this dynamic into the size of the Yen carry and Gold carry trade and you will understand it's impact.
Back to your comment: You bet it's "significant that this Gold was not acquired on the spot market". Even if they (GS) are acting for a client, they, as a LBMA member should have easily been able to secure spot bullion. I can tell you that they are no longer acting out a long term plan to
support the dollar by lowering the derivative gold price. RR is gone and Green S is right behind him. The US official stance is about to change reguarding gold because the entire IMF system is comming apart. The action and price in gold look like the same "low gold / dollar is good" maneuver, but it's not. In reality, their open physical purchase is a defining picture of a failing gold marketplace. They aren't just going to hold this unmanageable position that is simular to those 1920s dollars and watch them devalue. They are out to make something as the paper gold market is discounted into oblivion. Your analogy is correct in the comparison, but there is little they can do. Just as everyone was trapped long ago in old "gold loan" dollars held outside the domestic US market, only one course remained. Short the dollar for all you were worth. It did plunge for some time, back then. Today, with the whole market in denial about what the true price of gold is,
common sense requires one to sell paper gold short if it cannot deliver. Who in the hell is going to arbitrage it from the other side. Will someone put 500 million long and go to court to settle? What if they Bunker Hunt it? You're out, big! I think this falure is going to make Y@K look like a walk in the park. We shall see.
This is the hailstorm of events that GATA is leading gold stock investors into. If the present gold market explodes to the upside in a paper covering run, it will shut down every major bullion bank in the world. It cannot be allowed to happen. I think most readers know just how that will play out. Every bit of financing arranged with just about every mine in existence will be locked down, as in
collateral seizure. Without an established (read that official) gold market (none will exist for some time), no mine will be allowed to sell to anyone. Place yourself in the context of events, the governments will be trying to grapple with the failure of most of the currency markets, let alone hold together these banks. They are not about to let some major underground equity just float off and be
sold as the stockholders wish. Think about it?

Aristotle, a different view from a different perspective for everyone to see. You fully well understand all of this much more than even your finest posts show. (smile) FOA

FOA (8/24/99; 8:15:06MDT - Msg ID:11928)
Aristotle (8/24/99; 4:22:15MDT - Msg ID:11917)

Things are definitely getting interesting!
Is Japan's current absence from intervention on the forex markets (as seen in recent-past operations to maintain strength of the dollar/yen) also symptomatic of the end-game you've hinted at in that passage, or an unrelated affair?

Aristotle, more thinking placed on the table.
End-game? It could be, it just could be. There are so many different windows to view this event from, it makes it difficult to stay in context while discussing the "why's" and "what for" of the various players. Most of my last post to you was given looking through a window at the typical American investment professional. For so long they reached for the "leveraged play" as an avenue to hedge with gold. In their mind, because the recent record of gold indicated it's price would always rise in the face of currency inflation, they didn't need to hold it, just gain from it's rise. Their use of paper is understandable because almost every portfolio in America is some form of derivative, not direct
deed in hand ownership. Be it stocks, bonds even the currency. Sense derivatives are only bookkeeping assets that indicate a value in something else, the concept of paper gold worked fine to balance risk. Indeed, on paper this balance has worked because the bulk of the portfolio that
was to be hedged has performed very well. The risk side of the equation has yet to be tested.

Only now, eyes beginning to open as to what is happening. Yes, the massive dollar currency inflation has exploded worldwide and inflated financial assets only. However, what if the risk they hedged against, real price inflation, will arrive during the destruction of the derivatives market before it devalues the dollar. The markets themselves may fail and no longer function in their ability to offset risk. We are seeing this in the Yen as it's dynamics is crushing the Yen carry trade.
Eventually, there trades will become so far under that they cannot be unwound. The same is happening in the paper gold trade. The very vehicles that people use to manage risk are the items that will fail, bringing on the financial destruction. Now we see why there is no gold of size out
there, even as it's derivatives are sold down. Worldwide, real gold inventories are being locked down as players perceive their predicament. The dollar reserve currency arenas offer little to lock down. How do we "get physical" with the Yen?

Going back further in time: In this fertile ground was born the beginnings of the BIS maneuver to expand the ownership of gold without increasing the demands on physical supply. It solved several problems and yet ironically set in motion the eventual destruction of the dollar from it's own weight. Real gold could be diverted into areas that kept the system alive until the Euro was born (low price of oil in dollar terms). In addition, because the dollar is but a unit of confidence, a spiking "real" gold price (perhaps on a black market) would someday create a stampede out of that currency. That is why a new currency, of size was needed to receive that flow if the world economy was to have any chance to survive. The Euro didn't arrive to destroy the dollar, it was created as a place to run when this present system falls. That is why it's so important to the middle eastern oil producers. The MEast, China, India, eastern Europe and Russia will all eventually fall into the EMU, if not in reality, then from actual trade transactions. The ECB has made it plain to everyone that they will not restrain the Euro up or down. This clean float will be the very reason everyone runs to it, especially the up side of the equation. Every Euro critic in America will be among the first to buy it when the dollar starts to fail.

The events surrounding the Euro and gold have yet to begin. The entire dynamic is only just coming into sight for most thinkers. When Another spoke of gold and oil backing the Euro, it made little sense and still doesn't completely add up in the current context. Later, with the dollar / IMF
system coming unwound, the same writers that speak of the Euro as "just another fiat currency" will be discussing how it's only so strong because of ?????? We shall see.


FOA (8/24/99; 8:29:23MDT - Msg ID:11929)
Al Fulchino (8/23/99; 21:45:51MDT - Msg ID:11899)
Wouldn't we have been smart if the Western governments had gone to OPEC when the prices were low and offered them *help* in the form of buying future production at prices 10,20,30 percent higher than the 10-12 dollar prices per barrel we saw earlier this year. That would have been interesting when you compare it to buying the PM mines future production. yes?

Put yourself in a producer context. Then write out your reasons for accepting such a good deal. Then we can discuss it. (smile) Seriously, it could offer some perception for all of us! FOA

FOA (8/24/99; 8:57:04MDT - Msg ID:11935)
Golden Truth (8/23/99; 23:17:41MDT - Msg ID:11910)
F.O.A i,am guessing you mean the P.O.G would be allowed to rise? So if every Bullion bank in the world can not be allowed to shutdown what does happen???

Cavan Man (8/24/99; 6:32:30MDT - Msg ID:11922)
FOA 11896
I share GT's question. To paraphrase; "the bullion banks cannot be allowed to fail". I posted several days ago wondering if the "crisis" could somehow be managed or negotiated. I realize that was naivete but still I wonder. Why can't the market be manipulated to let the air out a little by sacrificing a few innocent lambs (none innocent really)and controlling the damage as the POG moves upwards? If I understand you correctly, that doesn't appear to be an option as the "damage control" will consist of siezing collateral (mines)in the event of default. That is a logical progression of cause/event but almost too difficult to believe!

GT and CM,
From my standpoint, most of the gold paper market will revert to forced cash settlement at the last trade! That's for long investors only because it's the inability of the shorts to deliver that will precipitate this. They will be taken out and shot because the CBs will be clearing the deals. If it's dropped to $100 and established trading markets halted worldwide because of sudden delivery
demands, everyone will settle at $100, cash and walk away! People that are waiting to sell their hedged gold into their counterparties (mines included ABX?? to the BBs) would have to sell their gold at the new settlement price. Remember, when big international bankers are in trouble on this grand of a scale, the rules are changed into the banks favor. Always has been, always will be.

Understand, that the BIS clears all trade in CB gold. If that gold is tied up in private Bullion Bank deals, it will come under their rule. The BIS tells the Government what needs to be done and the Governments tell the mines. In perspective, this will be happening in every industry, worldwide, not just gold. Everyone will lose some skin.

Perhaps, now we can see why any capital that's left will be pouring into real gold if it can be found anywhere. We don't have to believe it now, unfolding events will drive it home, soon enough. Thanks FOA

PS. ORO, keep writing. Great mind.

FOA (8/24/99; 9:20:35MDT - Msg ID:11940)
Tomcat (8/24/99; 8:31:02MDT - Msg ID:11930)

Mr. T Cat,
You make a good point, but it didn't work that way the last time Precious metal derivatives got in trouble. You write:
----Once the US nationalized the BBs they would have the authority to go to the "physical gold" owner, who wrote calls etc, and, at the point of a gun, complete the call and collect the gold. ---

When Mr. Hunt wanted delivery, the government didn't pull a gun on the shorts and make them deliver. During small cases they do, but the bigger the problem the more irretractable it becomes.

-------Settlements could take place with silver and platinum as well.------

In the same light, they didn't settle silver with physical gold, did they? Not then, not now.

-----------Which government would take over the LBMA?------

The LBMA will be disbanded and it's member banks and brokers dealt with by the governments that each bank is established in.

-----------It will not be a rapid collapse but will be a gradual phasing out of the old system.---

True, not a rapid collapse, rather an immediate shutting down of trading of any instrument that people are running from. The "gradual phasing" part is implemented once your assets are blocked. My friend, no one sits still when they are being relieved of their wealth. Looks good in theory, but in reality we are organic beings of emotion!

Yes, No? FOA

FOA (8/24/99; 9:47:21MDT - Msg ID:11943)
CoBra(too) (8/24/99; 9:08:34MDT - Msg ID:11936)
Endgame among not so clearcut adversaries?!?

Good point. I have one view for what you write:

-----So why hold on to bad debt paper scrip if the endgame between $/IMF and Euro/Bis was so clear-cut policy as FOA feels, all along.---------

There is no possible way that the CBs could ever sell or unload all of those dollars. Presently they are held in the form of US treasury debt. It's owned by the CBs not their public / private interest. So, the CBs would not be looking to "spend" these reserves in the usual sense. They
obtained these reserves as their local economy generated excess sales to the US (for them a trade surplus) and their private citizens wanted to hold local currency assets, not dollars. The Cbs printed Marks (example) and traded with their citizens for these excess dollars. Then they traded these dollars for US debt so as to earn interest.

Now, exactly what good are these debt holdings as long as their country continues to carry a trade dollar surplus? Not much, if the locals don't want to hold dollar assets. In the end, if the CBs were to sell these treasury holdings it would crater the US debt markets long before any value was
received. And, to add further, that value could only come from using the dollars to buy something. Now what does a Cb use it's reserves to buy, cars, TVs, other currencies??

No, the only avenue to balance currency value is through the age old asset of gold. Indeed, if you already hold enough gold, one just uses the dollars to bid for gold until the dollars become worthless (price of gold spikes to the sky). Usually only the intention to bid is enough?

Yes, No? FOA

FOA (8/24/99; 10:20:59MDT - Msg ID:11947)
Al Fulchino (8/24/99; 9:12:26MDT - Msg ID:11939)
------what I was grasping for is the connection with this analogy to the gold industry is how the industry wasn't wary like OPEC with their own product. This manipulation could have been prevented had they OPEC'ed themselves. Do you agree?------

Al, it's true that the mining industry could have done a better job of managing their product. But, would they have been allow to? Just prior to OPEC and the 1971 gold window close, all the major nations were still trying to work out a common ground with respect to gold. The price was so low
that few mines were making anything more than subsistence. The governments were finding that they could no longer use gold as money because they needed to cheat on the currency. The US wanted the price of gold to run up so as to spike the oil price and obtain more local production. Something they couldn't do competing against the nickel a barrel ME producers. As gold rose, the mines didn't need any production agreements so no one sought one. Through out the 80s everyone was expecting gold to regain it's trend, so again , no need for collusion. It's only been in the 90s,
especially during and right after the gulf war that the industry began to smell a rat. Hell, even two years ago, Another's Thoughts about manipulation were dismissed as crazy. Now, the industry sees they are in a battle for their lives as their asset is at the center of a realignment of world currencies.

Truly, if gold is repriced high enough, as a competing currency, the falloff in jewelry demand will negate the need for any additional supply. At extreme prices, the CBs could supply the market for years to come without impairing their asset reserves. Production curbs on the mines could again
restrict them to minimal profits even if gold was in the tens of thousands. A mess indeed.


FOA (8/24/99; 10:28:02MDT - Msg ID:11948)
(No Subject)
Welcome old gold, rainman, and all the other new posters here. I'll be back sometime later. FOA

FOA (08/24/99; 15:58:38MDT - Msg ID:11975)
Please, first read: mellow88 (08/24/99; 11:00:49MDT - Msg ID:11956)
The scene begins as a tall, dark gentleman leaves his mercedes to enter the casino at Mote Carlo.

(He walks quietly up to the card table.)

"Good evening Mellow, I've been wanting to meet you"

Mellow looks up with an uncomfortable grimace: :Do I know you, sir?

You should, My name is ----Bond---,,,,, James Bond.

(Mellow looks down with hardly any expression as James sits down beside him.)

Come on 007, I've given you the stuff, what more do you want?

Do you take me for a fool, my man "Q" in London says your info has been on the streets from before 83!

Agent Another was working that angle before you were born.

But it was mine, I tell you, all mine! Our people said no one else could have possibly known!

Shut up and listen. Now do what I tell you and you'll stay alive. First shuffle the cards so no one will notice.

Listen, I have an American contact, code name Kosares. He pays well for good secrets. Silver and gold coins, the money your kind can move into Switzerland without drawing attention.
Meet me here later and you can post what you've got.
It better be good, I'm giving you one last chance, Mellow!

Trust me 007, I have stuff no one has ever seen before. But I need time?

Five days Mellow, ------five days------- or I feed you to the sharks like all the rest.

(Mellow has become cool and expressionless. Yet his collar is wet with fear!)

Now if you will excuse me, I have an engagement with the princess of Monaco.
Here, keep my chips, and remember, if you lose at this game they won't find a place for you to

(The scene ends as a suave James Bond moves smoothly across the room.)


FOA (08/24/99; 16:03:55MDT - Msg ID:11976)
Aristotle made me do it!
Mellow88, all in good fun. (smile) FOA

FOA (08/24/99; 19:56:29MDT - Msg ID:11992)
Tomcat (8/24/99; 10:49:06MDT - Msg ID:11954)
-----Also, you stated: "In the same light, they didn't settle silver with physical gold, did they? Not then, not now."
Could you expand on this a bit. Clearly I am missing the boat on something fundamental. If physical gold was not available why wouldn't silver or platinum be an option?-

I took your statement to ask the question (in my words), "if gold is unavailable for settlement, then why couldn't they use silver or platinum?".
If I'm in the right context, then my reply was a
comparison to the period when the Comex changed settlement on the Hunts. My analogy was that with silver in short supply for delivery, they didn't try to use gold as a substitute. A reverse to your question.
In my experience, when things become so convoluted a regular "everybody settle up now" doesn't work. So, the system is just stopped in it's tracks. Some lose big, some small.
Hope this helps FOA

FOA (08/24/99; 20:04:14MDT - Msg ID:11995)
RAINMAN (8/24/99; 10:46:24MDT - Msg ID:11953)

--------Working for a large bullion bank , I know for a fact that a lot of Gold accumulated by Middle eastern investors is regularly offered for leasing purposes. This baffles me. They are negating the very reason why they invest in GOLD by lending it with the risk of facing a default by their counterparts. Maybe FOA could give us some of his insights about that fact.---

Hello Rainman,
I can't help you there. Another may if he sees this??? My view of that is much the same as yours, it's baffling. I would also have to ask the question, "who is helping who" in that situation? Perhaps the BB needs some gold? Fees are also a consideration, as in who gets them!

------When considering the Euro versus the US $ , a lot of people on this forum expect the Euro to
eventually overtake the $.--------

I don't look for the Euro to so much overtake the dollar as for the dollar to fall away. I know it's the same outcome, but this perspective brings us more into context. The Euro is much younger than the dollar and certainly has less baggage in the form of a trade deficit overhang. The dollar has been building up a huge float in foreign hands for 20 or thirty years. It's that mass of currency that's unneeded for Euro zone commerce (or the rest of the world for that matter). ORO wrote a beautiful piece the other day, pointing out how the ME countries could ask the question, why are
we using the dollar when the Euro could work just as well? In addition, I point out that the Euro is governed by a diverse group of countries with different interest. That very point sets it in better standing compared to the dollar that is controlled by the interest of one country, the USA.

---However , there is something that I don't understand. Either fiat currencies disappear, and the Euro will have the same fate as the $. (The Euro is no more backed by Gold than the $. The ECB has a certain amount of GOLD in currency reserves and the regional banks like the BUBA , Bank of France or Bank of Italy have a lot more but so does the FED ) Or fiat currencies survive by some mysterious alchemy and from a pure economic perspective , over the long term , the
claims on US assets by $ holders are much more valuable than those on European assets since the US has already won the economic and geostrategic war.-----

Well, I don't expect the fiat currencies to disappear. Look at Brazil or Mexico? Years (decades) of regular currency death and they still use the dam things. A testimony to the persistence of mankind. In a similar light, I expect the US dollar to be devalued on a grand scale. Yes, it will most likely stay in use, only, like these other countries, it will be worth a lot less. Indeed, I can picture the American citizens using cash Euros to store wealth and make trades, just as others do presently using dollars. Say, in Canada?

Your presumption that the foreign dollars are more valuable as claims on US production should be adjusted to include a true accounting of just how many are outstanding. A little research will show that these dollars would buy up almost all of our production for decades! The real problem is that we are still in a deficit trade condition. If these dollars are unneeded to buy now, how could they become more valuable later? If we don't have enough to sell them using current trade, what would they buy using all the additional float? Remember, these countries in Europe have assets for their people to invest in and goods and services for them to buy. They don't need to buy from us on a scale that the dollar overhang would require.
As for economic wars, they are never won, rather always ongoing. Thanks FOA

FOA (08/24/99; 21:06:47MDT - Msg ID:12004)
I'll be back later.
Cavan Man (08/24/99; 20:06:51MDT - Msg ID:11996)
I see there are a couple of posts here this evening that are not pro-gold and perhaps for good reason(s). Do you have a repartee?

Yes, it is sad when someone gets hit without a clear knowledge of why. Unfortunately there will be more of this because investors are unprepared for the times ahead. We could see gold go through tremendous swings as this is unwound.

Long term booms (20 years +??) always die with major loses inflicted on the most leveraged positions. Add to this a once in a century destruction in the most popular currency, and we produce an economic earthquake the likes of which no one has ever seen.

Most investors retain their life savings in a fully invested mode and would not get off these train tracks if they saw two engines coming. They will stay there because it's impossible for them to believe they occupy the wrong position! Who can lay blame or call them fools? These typical western savers have been educated to believe in a money system that serves no purpose, except a medium of exchange. Yet, they perceive that all of their assets are correctly valued by this system.

The gold market suffers the same fate. The same ideals that hold us in bank accounts, using credits to indicate what is on deposit, also drive us to invest in gold assets that must be sold to realize a profit. Modern gold bugs travel from bank accounts into paper gold and back into the
same bank accounts. All the while pointing out the weakness of the system, yet needing the same system to keep score. Without the modern paper gold market, gold bugs, as we know them are lost to place a value on their holdings. That is why they gravitate into familiar gold holdings. Ones that still retain some connection to their paper currency. Mine stocks (and various option / futures) are a likely choice as they sit squarely upon the financial system we know most.

Great swings in asset preference always bring monumental profits. However, these profits will be shared by only a very few. And those few will have to endure gut wrenching blows to their assets when this storm hits. Gold will by no means be safe and it will not be secure. But in comparison to every other form of wealth, it will be the most well known and sought after asset on the planet.

I think, many will be weeded out from this market as events unfold. Most of them never expected the fluctuations occurring now and they would be horrified at what may come. However, what they retreat into will be completely cleaned out. Completely! As for those that are sharp enough to buy when the proverbial blood is running in the streets? Time and events will prove that they were not as smart or quick as they thought.

Having said that, paper gold may rally, gold stocks could storm up and physical could just sit there. But that won't be the end of it and such an action would simply draw more into the fire. I remain steadfast to what Another once said:

" when a thousand hungry lions fight over one scrap of food small dogs should hide with what's in their belly"

This dog is well fed with gold and hidden deep in it's history. Thanks FOA

FOA (8/25/99; 8:51:16MDT - Msg ID:12048)
If you don't mind I would like to carry this on a bit further ( from my post #11995). You mentioned being French. I assume this gives a better perspective of Europe from having lived there (past or present). Good!

--------RAINMAN (08/24/99; 20:46:43MDT - Msg ID:12001)
@ FOA : Thks for your answer
The 2 countries which by far outweight any other country in the European Union are France and Germany. Both of them have retirement systems which are based on active workers paying for retired workers. Unlike the US or UK , unaccounted
claims run in the trillions of Euros in the next 20 years which is a crucial problem since there are less and less active salarymen per active men.---------

Yes, I well know that problem, having studied it for some time. I hae relatives in Germany that also expressed the same concern. What you described above is the same quandary faced in this country by the Social Security system. The comparison between the cost to these separate
societies is clouded from the reporting by the respective governments. In Europe, the facts and figures are very open, available and contain honest evaluations regarding the eventual impact. Alarming as they are, at least no one is hiding anything. In the US, the cost of our SS system is
completely overwhelming to the future generations, yet it is glossed over as manageable. How can anyone believe even these government SS projections (perhaps they are worse) when the same people state that our national debt is turning to surplus even as the actual debt figures are growing
daily. And, unlike Europe, these manageable figures are projected into the future using a continuation of our current GDP. We are currently running at the highest long term rate in history and that is coming off an economic expansion of some eight years+.

You use the GDP in this section:

--------In France , a man making real money will pay a marginal tax rate of 74 % including social taxes. Even though the money supply denominated in Euros is smaller than the one denominated in $ adjusting for respective GDP , the fiscal and social overhang are unmanageable in Europe . (I am french )---------

I point out that historically money supplies in major economies never shrink much. They remain a constant in fiat currency systems. Governments use the GDP as a tool to indicate if their respective social programs can be accomplished What good is that in justifying a debt burden? If a fiat money supply is always static or growing, it leaves the GDP as the variable. Because economic expansions
(GDP) expand and contract it changes the picture of a debt burden dramatically.

If two years from now we see the Euro zone in a major expansion and the US in a contraction, all the critics of Europe will rewrite their analysis of Socialism in Europe. Many say the Eurozone cannot expand without the US, why not? They did before, and that was at a time when Europe had
to import Americas inflation because of the Dollar reserve system. Today, an expansion in Europe would have "legs of it's own" in a Euro currency concept. See today's WSJ for some bullish theory.

Our (US) national debt and SS commitments loom far more ominous when viewed in the light of a reduction of growth back to "normal"! Again, comparing respective social financing needs of these two economic zones pales as a problem when their respective currencies considered.

-------Technological innovation in the US is light years from what you might find in Europe. Civilizations disappear , and the occidental civilization will disappear like the egyptians , the etrusques , the greeks , the romans , the ancient chinese , the maya ....However , Europe will
disappear before the US. Hence my feeling that in the very long term ( and in-between the Euro might appreciate itself up to 2$ ) , the US $ is a safer fiat currency than the euro.----------

Well, technology isn't always what makes the world go round. Especially if it's true benefits are being consumed by the debt created from currency inflation. If one looks at all the fantastic cost saving advances that Tech has brought the world over the last twenty years, where are the price
reductions? To the extent that the world has been on a dollar reserve system, that system has robbed it consumers of hugh price decreases that should have been available from all of these new production efficiencies. Indeed, this is where the massive dollar currency inflation is hidden. The
very fact that prices are flat (or rising at all) is a testimony to the inflation robbery present in the system. If all these advances were omitted, our price inflation would have been hyper in nature. Yet, to date, consumers are pacified by their phantom increased return on investments instead of the real savings a technology driven price reduction would have created. Yes, some costs are falling, but those are few and far between as they do little to negate the static cost of daily necessities that should have fallen much lower by now.

No, I believe the management of a nations money has more to do with maintaining it's prosperity than all the goods and production it's citizens can muster. I look forward to turning over the reigns of the reserve currency to a collection of diverse societies that, together will offer a more "world driven policy view" of how a money should act. The very fact that the ECB has not acted to artificially impact the Euro value is a credit to them. Even though they only hold gold as a reserve, soon, oil will back that currency in a way that will benefit them as much as it has the US dollar over all these years. I don't know about you, but I'll take black gold as backing any day.

Thoughts from yourself or others? FOA

FOA (8/25/99; 11:29:26MDT - Msg ID:12064)
---------The Stranger (08/24/99; 21:34:29MDT - Msg ID:12005)
The Post With No Name
Last night, somebody calling himself Skip posted a sad commentary of his experience in the gold market and issued a plaintiff call for reassurance from this Forum. Tonight, Canuck, in an act hardly anybody could fault him for, suddenly jumped up and made a run for the exits. The last time we were at these price levels (and after years of pie-in-the-sky forecasts) ANOTHER and FOA suddenly reversed themselves and announced that the POG was very likely to collapse. And now, just to be sure we are all scared as hell, Farfel shows up tonight to remind us that the world
economy is about to slip down a black hole, taking gold with it, of course. (Needless to say, I think such pronouncements are as looney as they are facile.) -------------
(to see the rest, read his post)

What do we conclude from the above post? Stranger, I appreciate your presenting your thoughts and perceptions. They validate my own perceptions of how westerners feel about gold. I also used to read Another's Thoughts, as an observer when they were presented by someone else. The one common thread in all of them was his council to buy only gold, physical gold. Yet, it never failed to impress me that every time those considerations were given, all discussion immediately turned to buying gold options, futures and mine stocks. It was like an automatic response that was ingrained in investor psychology from years of indoctrination. Your conclusions fit the same pattern.

Why is it that professional brokers and investment councilors in this country lead the public to this end? Is it because they have on depth of history to draw from or is it that they have "no fear" of losing others money? Mention that gold may rise and could become a bedrock for your life savings and not one paper pusher tells his clients to buy real gold. Yet, we let the facts speak for themselves. The gold price having fallen from manipulation has literally destroyed a large percentage of portfolios invested primarily in gold stocks. Some of these mine stocks have gone to zero and are in bankruptcy, never to return.

All the way down Another (and later myself from association) said to buy gold for the long haul because in the long term it may go very high. Then in typical like form, traders said buy gold stocks for the long term also. Don't listen to Another, it will never go that high and with these paper items you will get rich if it only goes up $100 bucks! Indeed, leverage ruled the day all the way down
with little regard to the fact that the "little guy" could lose it all with no hope to run for the final payoff . Now, here at $250 gold, Another presents a case for the destruction of the pricing market mechanism and still says, buy gold for the long haul. A concept, I might add that fundamentally offers the most bullish case for physical gold, while posing a worst case scenario for mine stocks.
Yet, intelligent thinkers and admitted white collar investment professionals, such as yourself, lay the
blame of of loses to mine stock investors at the doorstep of physical gold advocates.

The whole philosophical reasoning for buying physical gold was always to negate the possible total loses to ones assets from a breakdown of the worlds modern derivatives pricing system. A system that spans our entire financial structure, not just gold. Even with this risk in mind, I submit that it is still the current system advocates that present a "pie in the sky" council to new, unseasoned
savers. Just as you use Bill Gates and other "risk takers" to portray an "American Spirit" of "plunging in", it hides the hideous failure rate inherent such accomplishments. Had Skip not listened to the sirens song of great wealth, he would still have had a chance today to benefit from a
centuries old investment, real gold. So consider this, the next time you drum the march for the average persons savings to the tune of "paint your wagon and come along". For myself and many others, long term playback and asset safety are more important to our family than the bragging rights of day traders.

Please continue. (frown) FOA

FOA (8/25/99; 16:45:26MDT - Msg ID:12083)
------The Stranger (8/25/99; 13:46:23MDT - Msg ID:12068)
Sorry, FOA I didn't make the point to offend you. My intent was merely to share my confidence in the gold market at a time when people were obviously getting nervous.------

Sir Stranger,
no need to be sorry and your post did not offend me. I felt the offense was directed towards intelligent physical gold advocates. When you publicly interpret my posts as a reversal of thinking, you are wrong and send a false signal. To say that I expect the (physical) price of gold to
tumble, is a misleading statement that subordinates my reasoning by talking out of context.

I understand how our gold market presently trades as a paper derivative and in physical form. Every day, new evidence comes out to confirm this concept. TownC offered the excellent work of John Hathaway to further explain this evolution. When Another pointed out that the derivative side
could fail and be discounted in price from the effects of that failure, you obviously did not grasp it. Others did. If you had then you would have noted that I expect the physical gold price in the dealer community to explode as it's supply falls. A process of rejecting the current price setting methods.

--------As to your comments about white collar professionals and "westerners", I suppose you mean well. I would emphasize, however, that, out of respect for our host, I have specifically avoided discussing the merits of stocks vs. coins. I intend to keep it that way.-----

Again, I present a balanced observation that helps to account for the much larger percentage loses to investors that have followed the "established paper rout". Nervous people have a more pressing need to learn why their strategy has failed. Without balanced imput, we often repeat out
mistakes. I learn from my mistakes also.

As for merits of stocks vs. coins? There is no valid comparison. Apples and oranges have never had the same taste. The percentage of loss for one or the other is but a function of the risk one takes when placing savings into that vehicle. Coins will never be as risky as stocks of any kind. Nor will gold bullion in ones hand. The very simple laws of nature dictate that gold cannot fall to zero as
stocks have and often do.

-------Finally, as to who is misleading whom, all of our (your's and mine) posts are a matter of record. I hope I need say no more. ------

I believe we come to this forum to offer out Thoughts for everyone to view and discuss. No one is right, wrong or misleading as only events can and do prove all things. To date, cash invested in gold bullion has lost value much less than if it was placed in mine stocks. All of us can grasp that fact. Indeed, no more need be said.
Thanks FOA

FOA (8/28/99; 7:28:54MDT - Msg ID:12257)
(No Subject)
I wrote an apology to everyone and posted it late on the day everything was lost. In it was offered some of my feelings of why I post. Hope someone saw it, hope someone can repost it. I saved it not.
we talk again. FOA

PH in LA (8/28/99; 8:36:46MDT - Msg ID:12260)
FOA's lost post
FOA and All:

I, for one, can testify that I did see FOA's post in which he spoke about the difficulty of using this "information-moving based medium of the internet" to communicate ideas, etc.

Unfortunately, I did not save it to disc, either, but as with all of his posts, it made a memorable subjective impression.

One concept that struck a resonant chord was his assertion that he is "but a medium for the transmission of ideas between two worlds"...and that as he tries to clarify that message he evolves inevitably into a "translator"...a role he never wanted to play.

As a classical musician, I am reminded of something heard long ago from my violin teacher. He spoke similarily about the recreative artist (musician) who should strive to be a perfect mirror in transmitting the composer's music to the listener. Personal involvement in that music on the part of the performer can easily get in the way of that process. Of course, the performer was always intended by the composer to be there, and to recreate the music in the moment of its performance. So it is no simple process from the beginning, this transmission of ideas from one person to another.

I, for one, have been fascinated by FOA's input and interpretation of the ideas of ANOTHER. It goes without saying that I would like to know who they are; but I do understand their desire to let their message speak for itself. In some ways a laudable goal, and in so many other ways, another hurdle in our quest for understanding.

I included the above link to Lyndon LaRouche's site offering an essay that refers to many of the themes of ANOTHER. Though admittedly not a main-stream figure (and thoroughly discreditted politically) he does offer thoughtful analysis, a professional economist's background, and more than a measure of corroboration of ANOTHER's scenario for me (who does not pretend to fully comprehend everything offered by FOA and ANOTHER on the first try.) Anyone who visits the link will see powerful assertions of the danger of derivetives, gold, world political situation, etc. A fascinating read for the open-minded!

ANOTHER (8/29/99; 15:56:08MDT - Msg ID:12365)
Mr. Kosares,
All be well with you, my friend. The Greenspan is a large topic for this day. His long words pour from a troubled mind. That concern is great for all that can understand his reasons. The next move by this Federal Reserve will change the world, yes? We do not underestimate his problem and do feel his path to be locked in place. As it will be, I have little to say now, we wait for the next
response from mankind. However, this subject is of little reason for my words today.

I request the FOA say no more, as he considers his emotions. An explanation must be considered, even as his years are only somewhat less than mine. His defence of my Thoughts were the misplaced use of great energy and good spirit. However, I require no such army before me, for
my words stand in full view of all.
What of the many that find fault in my Thoughts? I say, attack and molest them as is needed to regain the calm mind. But, let it be known that without " the spoken reasons of logic" others view your sword thrusts as the "warrior that cuts only air"! We chose to ride this medium of discussion, and as such I must remain the "faceless one to all"! Such
as that may be, even the conduct of "well known" posters be at the risk. For all society requires a traveller to receive more than good wine for dinner. Even the guest of your house will see you as "faceless" and without form if he is sold only the "opinion" as rich conversation.

In addition, I stand before all people and laugh at their pronouncements of how important their words be. The creator made us as "fools" of the earth and we be "fools" to our death. To promote oneself as strong, wise and of need to others in this world, is to be seen as little more that the
beggar of recognition.

For all that concern themselves with "Another" the "thief of thoughts"! Be very fearful, my friends, for I have grown as such a "taker in the night". From the womb of my birth to the dust of the grave, I have stolen all my mind does know! My father did say, "breath in all that blows on the wind, for no man owns the storm". Indeed, I add, grasp every dust of knowledge from any breeze that parts your hair! Will this forum be a marketplace of "no cost" or do writers ask for payment of "notoriety" before others may read? I council all, pay noone this commission of "pride" for conversation most free. Force them to walk this lower path with citizens of every make of life. Indeed, I stand low before ones that say "I am new at this and know little", for from their very oratory spring the logic that moves this world into the next day. A world blinded with the perceived
power of control that exists only in minds of unfree men.

We speak again, in later time. I offer Mr. FOA's last item as condition of inducement for "free speech":

"let the knowledge pass through me as a river runs wild
yet don't claim the water for it's free as the nile"

We watch this new gold market together, yes? Thank You Another

FOA (08/31/99; 16:15:01MDT - Msg ID:12506)
FOA (8/31/99; 10:23:02MDT - Msg ID:12471)
Come what may?
I do thank everyone that have voiced support for the continued sharing of my insights. Anyone of you that have been alive for a while must also understand the frustration of explaining a difficult topic. Truly, I (like all of you) am not a machine and the process of walking a fine line between two worlds of thought is a major energy drain. This unique forum gives all readers an opportunity to expand their viewpoints by observing the "real world of money" through different eyes. As such, I deplore any direction that takes us into the ego world of "traders calling the market". It is an accepted fact that many aspire to make that roll their life's work as there are plenty of other net
sites and forums to confirm it. As popular as this may be, it offers little in the way of gaining insights to the perspectives that drive world investments. As a group, the trading society often loses the concept that feelings and viewpoints are the driving forces that shape those little chart patterns so many follow. Because many give up in trying to decipher the meaning of these forces they degrade
themselves to a level of "follow the leader investing". True, it works sometimes, but one's spirit of understanding develops little from the process. As a result, when a major change does impact world thought, people are lost to grasp why the trend reversed, and more importantly, cannot change their strategy with it. Perhaps, something we have seen in the gold market these last many years? So, "let the world have it's way, come what may", I will try to present my insights as seen through others. I hope many will join us on this journey.


I completely understand (as do you) that many people become upset when someone attacks the validity and purpose of their favourite investment strategy. Indeed, if most of your savings are installed in said discussed vehicle, the urge to find a flaw in the reasoning becomes overwhelming. Often one does not have a factual explanation, but we do have the ability to "think out loud" in the form of a rambling discussion. Perhaps, this is how many view my posts? I offer that this form of "rebuttal" is preferable to just stating "he/she is faceless and doesn't have the facts"??? If I do this, I apologize and will try to change. I think Mr. "PH in LA" had it very right when he observed how some internet writers, "come wading in with both barrels blazing" as they present their thoughts! I add that this could be an offshoot of our modern society. Hope we can get past this, soon! Thanks PH.


Most investors that have assets in this broad arena called the gold market, have also come to appreciate just how large an "impact area" gold has had. Not only through out history, but right up to today. The ongoing battle over the "gold concept" has won and lost fortunes, built and destroyed empires and in general has warped the human senses about what money and savings should be. This conflict continues today, even onto the pages of this forum. As the stress builds on our world financial system, the lines of thought concerning gold are becoming more clear. Let's examine some of what I perceive to be some of those lines.

Of course there are those that do not even consider gold as a viable contender on the world money / investment scene. The have lately been a major vocal class that have prospered in the realm of the current financial system. Myself nor anyone else should blame them, as they follow their reality in a world that presently benefits their ideals. I think few of them have given themselves a full study of how world currencies have come and gone through out the years. If they had, the fact that they "have lived in a period of little change" should hold for them that things can reverse
without notice. History is full of recounts that describe the rise and fall of entire social groups at the hands of a sudden rethinking of what has economic value and what doesn't. In any event, ingrain monetary ideals usually do not change during ones lifetime, so the past lessons may be worthless for some. As a result, a large mass of society must always return a great portion of their wealth into
the hands of some "historical event".

Also included in the "gold perspective" are the true "physical gold advocates". They have seen through history how the destruction of various "money systems" always leads to the destruction of the "economic system" built upon the fiat concept. The efficient money system present in those fiat times, help to create the need (and therefore increase the value) for many real assets. The ensuing breakdown of the money always destroys the "efficiency" factor that society used to up-value the assets. Usually, any enterprise built upon the current functioning money contract system is impacted as it cannot change quickly enough to the evolving money system. It's hard to grasp that even real assets like houses, land, equipment, vital necessities and even food, can lose value as their trading pipeline is disrupted because no medium exists to fairly create "market value"! We have seen, time and time again, that real gold can gain value against "everything" during true money destruction.
During these times, the human spirit need for using a familiar process is all consuming. The exchange of goods and services continues, with or without a valid medium of exchange to express it. Still, values become so conflicted and lost during this process that the marketplace reaches out for the most tradable of things that can act as a medium. In that need to replace "efficiency", lost with the medium value of paper money, it upvalues any store of value thing as the new "medium of exchange". Yes, within a large marketplace, the human need for trade gives any "efficiently" attribute more valuable than food.

This is why I smile when someone says, "how will anyone be able to know if the gold is real and what will they value it as"? I say, that the marketplace dynamic will ram this education home very quickly. The above question is asked by someone that accepts and uses paper dollars every day.
Yet, these dollars are paper (how do you know they are real? as often they are counterfeit) and hold value only because the marketplace is using them. During a money breakdown, you will observe trading in the marketplace and quickly come to accept anything, ANYTHING, that even could be gold. Believe it!

Finally, we also have the "in-between gold advocates" in the "gold perspective". Usually, their view of the market is such that it is an industry built within the confines of the present monetary system. They do not hold an extreme view about paper money, and believe that today is different and our currency will only fail "somewhat"! So far, in concept they have been right for many years. Yet, in investment practice, their "gold perspective strategy" is failing. I say this in contrast, in that by holding physical gold, the "physical in your hand money insurance factor" is never lost, even as the quoted gold price falls. Especially, in today's new market dynamics we require the question:

"does the paper security in your hand give you an absolute claim to physical gold, or does it more so give you a "right" to receive dollars that match the increased value of gold?"

This "in between gold perspective" strategy, calls for placing money in various forms of paper gold. All based on the convenient factor of holding paper that gains in price as the demand for gold increases during a controlled slow burn of the world money systems. These paper investments are
expected to all gain because their value is "derived" from the quoted price of gold on established major exchanged, London, Comex, etc. Weather you hold "gold certificates" , mining stocks, gold options or gold loans, an observer can readily correlate their increase and decrease in value to the world quoted gold price. They are derivatives by nature, because there very worth requires the observation of another price setting market.

It is here, in this "in-between market" that I believe most gold investors will first see the breakdown in the world money system. Yet, for them, this breakdown will bring the loss of performance to their paper holdings, because, from necessity, our financial structure cannot allow the established quoted price of gold to rise. To honour the present contracts, would require the supply of millions
upon millions of ounces of gold that simply does not exist. In as much as these players expect a huge payoff on their holdings as the gold market must run skyward to balance delivery, the opposite action will most likely be delivered. Because all of their holdings are valued upon a marketplace that establishes a price with even more derivative trading, the expected failure of those contracts will crush the quoted price. Just as most men will not hang themselves with a rope, the shorts that actually create the quoted price of gold today, will not trade it higher. In fact, I believe they are trying to gather physical gold (taking delivery everywhere) while it still trades in relation to the low derivatives price. Unless you are a major entity in world affairs, holding something the world must have, I
doubt any form of gold paper securities will escape the burn. Indeed, over time, in a up and down fashion, most of the paper gold holdings will be destroyed first, then the physical gold price will zoom in a matter of days if not hours!

How will mining shares respond to this "POSSIBLE" event?
More (sometime?) later. FOA

FOA (9/1/99; 6:11:11MDT - Msg ID:12547)
(No Subject)
Peter, Tom, Junior and others,
Thanks for your ideas, comments and support. For anyone that is contrary to my thinking, feel free to jump on it (hopefully in a constructive / conclusive way). Rest assured, someone a lot stronger than you is poised to cut me off if I spout off again! I will be back a little later today with some replies and more discussion. I think the markets are starting the long awaited "final convulsion"! I'll try to point out what my side of the river sees as significant to watch (if only Jeff/Usagold can remember to change the oil and check the radiator on schedule, smile). FOA

FOA (9/1/99; 6:14:01MDT - Msg ID:12548)
Paris, Wednesday, September 1, 1999

As Europe Grows, France's Jobless Rate Falls to 6-Year Low

------The latest data underscore recent signs of stronger growth throughout Europe. France's main trading partners - Germany, Britain, Spain and Italy - are all undergoing economic revivals. Indeed, Italy and Spain reported separately Tuesday that factory prices jumped by a greater than expected 0.6 percent in July.--------

-------Based on the improvement in industrial output and continuing high consumer confidence, the government predicts that economic growth will accelerate next year to between 2.6 percent and 3 percent, up from estimated growth of 2.5 percent this year.-----

-----Although the latest economic data raised fears that the ECB might increase interest rates, inflation seems firmly under control in the EU. Consumer prices in the single currency zone rose at an annualized rate of 1.1 percent in July, well below the 2 percent limit for countries that have adopted the euro.-------

FOA (9/1/99; 21:12:43MDT - Msg ID:12639)
Peter Asher (8/31/99; 22:35:25MDT - Msg ID:12542)
Thanks for not only reading my post, but for understanding some of it. It's interesting how well we comprehend our own thinking, yet never really know if anyone else is following the same trend. That's why I'm happy to see others offering their viewpoints. It broadens the conversations and allows everyone, in their own way get something from of it. Right or wrong, at least we pick up the drift of all the many discussions that occur here.

Your comments about my #12506: I'll rearrange your words a little.

Does your (statement) describe the same phenomena and event as my #8841 of 7/13.

FOA said: ----Just as most men will not hang themselves with a rope, the shorts that actually create the quoted price of gold today, will not trade it higher. In fact, I believe they are trying to gather physical gold (taking delivery everywhere) while it still trades in relation to the low derivatives price.-----

Peter said: ------I believe they will continue this control of the POG with impunity, until their cohorts have completed the trading activities necessary to protect their positions. They do not have to buy physical gold to do this. As negative sentiment holds the price of gold down and leaves all rallies suspect, larger quantities of long future contracts can be purchased without pulling up the price of physical. The same leverage that created massive short positions will also serve to acquire the longs. It is the writer of those long contracts that is caught short by the breakout. The purchaser has locked in his cover price for a small fraction of the funds that would be necessary to buy the physical. Squaring off the short sales then becomes merely a technical financial matter. Provided, of course, that the 'System' is still in place.-------

Peter, I went back and read your post to better understand it's direction. First, let me further expand on the thought I presented.

The understanding I'm presenting here, is offered to explain why so many are off base and confused about the current gold price. Because I too am "Western" my thinking was also skewed towards a big short covering blow-out, where all "paper would burn". It seemed the only outcome, the markets would lock up and close down as the price of bullion went sky high. That was how Another offered the original thoughts, as he tried to get everyone to see how out of whack the real market was. What would have been required to set off such a run back then? Anyone large enough to buy spot physical gold as an "open order" on the world dealer market. Perhaps, several oil states working with several CBs could have offered, say, a 10 billion book priced above the
London fix. It would have been all over with, as anyone with short exposure would be shut down from margin calls as gold zoomed in price. That didn't happen, probably because the market was in the process of entraping itself with false perceptions. Most of the real gold was corrnered anyway,
so let the world have it's way!

As time has passed, our gold pricing has seemed to become more irrational. Other important analyst are starting to look for different explanations also. Today, Another is no longer "on the fringe of reality". However, there was always more to it than just politically manipulated markets.
The lower we go the more questions crop up. Why does gold still continue to drop in the face of statistics that show massive demand and ongoing supply deficits? Why does it hold here at $250 when this range will obviously destroy most supply from the mines? How in the world can it go even lower when everyone is buying it?

The answer lies in our perception of the modern gold markets. Back in the late 70s and early 80s, anyone "big" that wanted gold simply brought it "spot physical" in "allocated" form in London. The gold was there for delivery if wanted. Others brought through large world class dealers.
Further out on the limb, one could buy Comex "spot month" or "near by" and take delivery of a warehouse receipt later. When large orders went into the paper market, it had a major impact on the price because the price was tied to a "good probability" that real gold may be called for. Paper
buying, back then scared shorts because the longs that brought for hedging and investment purposes, really did take delivery quite often.

Time has gone by and things have changed. I won't get into the political why and what for because that's Another story. The gold market evolved as needs and perceptions changed. Through out the late 80s and early 90s the "need" to use gold as a "security" hedge expanded tremendously. Far more players entered the market to secure a "gold hedge" than physical off take statistics indicated. The physical side of the market was becoming less and less important as
players became satisfied to hold the promise to supply gold from someone else, instead of the actual bullion. Mine supply and scrap was becoming more a product for the jewellery trade and bullion coins. The market then evolved further as large gains from booming world security markets
pressed portfolio hedgers to commit less money for gold hedges. Even though the demand for paper gold was exploding, derivatives were allowing investors to tie up the same exposure with less cash. If they could go a little further out on the limb, away from "deliver ability probability", they could still hold gold using less working money. After all, the world was doing fine as even the worst of problems seemed to be handled by the IMF team. The real need for physical gold was always in the "total currency default / inflation" arena and that seemed light years away. So, over time, the gold market matured into it's present state. Today, by far, most of the holdings of gold are
represented in derivative form. Little more than a bet with someone else about where the price of gold is going. You put up cash, someone else puts up cash and both of you watch the exchange price indicate how you will settle up later. Settle up in cash, that is! The "good probability" of someone wanting delivery was fading away.

What is the problem with all of this, you ask? It's the trading of real bullion that still must set the price of all of these outstanding derivative bets, yes? Well, not really.

The end work of this process has found the 3,000 or 5,000 ton per year real bullion market, is little more that a sea shell on a fifty mile beach. Everyone on the "gold net" already knows how much LBMA trades and that is small stuff compared to the other unseen world markets. The debth
and liquidity of the paper market moved the bullion trade into the "pink sheets". Needless to say, today, the famed "closing bullion price" is set by the cash commitments that bid for derivatives, not the cash that bids for bullion. In the old days, really big traders would arbitrage any such paper overhang against bullion by calling for delivery. Today, with the paper market so large, any such power play would find most traders taking delivery of gold as the market is sold out from under him. Besides, this new market perspective works against any long traders because none of the present "derivative gold demand" wants delivery! They only want to settle in cash, because taking delivery would require selling their other "better performing" investments. The mindset today is that gold is only an insurance hedge, as such "an increase in it's price will settle up in a cash delivery to me, to offset my other risk of cash impairment to my portfolio"! To further develop: "I don't need
physical gold, I only need to participate in it's price movements"!

In complete satisfaction of the current trend, derivatives fill the bill for this current gold market. Clearly, we can see that this new market is not "fraudulent". There is nothing wrong with players pouring margin money into the short side to create a demanded product! It's has evolved into a cash game. This is where GATA is fighting a war they cannot win. Gold bugs (of the last few years) were viewing the present market using 70s eyes. Indeed, they were investing in an industry that was losing primary demand for it's product, even as "the need" for that product was exploding. This new gold market found a way to channel the "modern need" for gold's attributes away from physical demand and into paper supply. You simply can't create a short covering run if none of the current (insurance) longs want to take delivery. Even worse, as this trend was further developed, more and more old private physical holders were selling their gold and holding paper instead. Add to that Western dollar supporters wanting their currency to look good, and we have paper gold supply that's also used as a form of positive currency intervention. Anyone investing in the gold industry, expecting bullion to explode from all the new demand was truly disappointed. For every new Western gold bug that wanted gold for insurance, there were five paper sellers to supply him with all the gold insurance he needed, at a fraction of the cash commitment.

Peter, (if you are still with me) this is only the end of this act, not the end of the play. We have been standing on the trail and looking at where we have just travelled. Now, let's turn around and look forward.

Everything we just discussed was what "Western Gold Bug Eyes" didn't see! Most have read my other posts and have seen how Another has cleared the path without pointing the way. My above is a broad overview without describing the full political involvement. Just as everything is in
constant movement and change, so too is the gold market. The recent evolution in the world currency scene has set in motion a new sea change of events. The same dollar/IMF world that created the seemingly endless wealth for American investors is now entering the end of it's historical
timeline. The tremendous debt that purchased our lifestyle, is slowly being revalued world-wide. Every tick against the dollar currency is translated into more sales by foreign holders of that debt. Soon, the par value of that debt will begin to fade as the negative trade deficit of the US works it's evil ways. At the same time, for the first time sense the dollar overruled the Pound, another currency has been created that is equal to the task. The dynamic of changing world reserve currencies is also going to change the dynamic of the gold market. Once again, the needs of investors will redirect the method of using gold. As the wealth effect of the Dollar/IMF system goes into reverse, the process of receiving your gold hedge insurance in dollars will be perceived as a risk. At this stage, all of the past demand for gold that was channelled into cash settled paper
derivatives will suddenly reverse it's trend. Slowly, more and more of a percentage of settlement will be asked for in real gold. As delivery fails from increased demand, existing derivatives will be dumped upon the market place in an attempt to cash out. This very process will: First dry up all gold supply and lock down any existing private stocks. Second, cash biding on the dealer market will become convoluted and reflect only gold's currency value. It's economic / industrial use will be priced totally out of the market. Third, what was once the world price making market for gold, will become useless for delivery as it's contracts are defaulted on and discounted in price. What price could the world gold price be set at, using these defaulted, bond like securities? How low does russian debt trade?

Peter, using your analogy about how the traders may be buying gold paper long, could be correct for this moment in time. But, as you can see, if the above plays out, they will be in the same boat holding nothing but a ticket for court. I bet, most of the smart ones are slowly looking for available gold, not more derivatives. I believe that in fits and starts, all paper gold (any comex paper outside of spot month) will be sold down. Driving the perceived physical price lower until no more can be delivered. Then, a general default will begin, destroying the entire gold industry as we know it.

As in conclusion to my earlier post, I hope to later describe the trouble this will visit upon the mining industry.
Thank you for considering this, FOA

PH in LA, some post! We will talk here later, across this USAGOLD forum river, that is.

FOA (9/2/99; 9:31:55MDT - Msg ID:12660)
PH in LA (09/01/99; 12:45:07MDT - Msg ID:12583)
Normal view from "this side of the river"
"I think the markets are starting the long awaited "final convulsion"!" FOA (9/1/99; 6:11:11MDT - Msg ID:12547)
These last months have been difficult for those who watch from this side of the river the slow-motion playing out of macro forces that seem so much clearer from over there on your side. It all appears so much more dramatic and dynamic from over there. From here, in a desperate attempt at perspective, I sometimes wonder how dramatic it all really is.

Hello PH,
The drama in any play is only as real as it's impact upon your perception. In real life, and in a similar view, economic events are only an "observation" unless they manifest themselves into a forced change of your life style.

For most people, the wealth they carry is the determining factor in how much they are "free to chose" their living conditions. Further, your freedom to move about in a social standard is governed by how others that network (trade) with you and the world in general value the form of wealth you choose to hold.

Your post is so very "on point", in that it defines how the last twenty years (+/-) have not seen the American Dream altered with some "Historical Event". Even though all the items you described were predicted to cause major problems, none of them destroyed the system. Lives were impacted somewhat and plans redirected, but, all in all our social order continued with the perception is that our wealth has grown a great deal. Yet, there in lies the residue that "1971 was a cataclysmic Historical event"! It did not affect our life style, so much, but it did change our "perception of how we value wealth ". The use and acceptance of a world reserve fiat currency has altered the concept of how much wealth we really own. Many Westerners and Americans feel rich and act out that perception by living life in an "unaltered way". It has worked this long because all of us and the rest of the world "carry our note" in the form of US debt denominated in dollars. As long as we "put on a convincing act" the play continues because others think we are "good for payment"!

In a sense, America is like a stock that has been traded up to par, say $100 a share. Yet, all of the companies capitol was borrowed from creditor banks and spent on a lavish lifestyle. The perception is that: "this stock called America, it's going higher as long as everyone keeps trading it". Yet, if the bankers call the loans, this dollar concept (the above stock) will prove to truly hold nothing more than "the American Dream"!

Here is where we have walked in the misconception that "everything is normal" and "nothing has changed, that much". The truth is that none of these past problems have washed onto our shores because our debt has purchased these years of a "normal lifestyle". Prior to the event of 1971, a
nations "lifestyle" was brought on a cash basis, using a neutral or positive trade balance. Today, practically all of our wealth and economic strength is an illusion hidden in the dollars debts. Without a competitor, the dollar was accepted without recourse. 1971 was a highjack on a world
wide basis. In like form, when a person is robbed of all of their reserves, human logic dictates that they will go to work for the thief (that now has the money) in a effort to stay alive. Needless to say, this working arrangement will change as soon as the victim has saved some money again.

The arrival of the Euro will precipitate our first "historic event" that does wash onto our shores. It will arrive as a failed dollar gold market, rising US interest rates, a falling stock market, spiking oil prices and inflation on a major scale.

Holdings of US debt, world-wide, are now reversing and that trend will only escalate. One has but to review the recent thoughts of ",,,,,,,,,,The Dollar and the "New Era": Are the Rules Changing?

-------The linkage hinges directly on the stock market. Lower dollar equals lower demand equals potentially lower asset prices. If the declining dollar ultimately causes a lower stock market, consumption declines and lower U.S. economic growth results. A lower market and economy would depress tax inflows possibly causing the government to get into the "crowding out" borrowing act again. A lower dollar also creates the unintended consequence of importing
inflation. Another interest rate no-no. Do all of these linkages work perfectly and in a linear manner? Of course not, but one can see that the virtuous circle of dollar upside can quickly turn into a dollar whirlpool to the downside with reinforcing mechanisms that cut in a negative direction. A true and sustained change in the dollar and inflows of global capital to the U.S. would seriously
challenge the "new era" thesis. We're not completely there yet. Like any market, the conclusion for the topping process of the dollar is anyone's guess. We'll gamble that the process is at least officially underway.-----------

Also read: Mr.Richebacher

-----The dismal science will never be the same if Dr. Kurt Richebacher's dire predictions for the global economy should come to pass.

The former chief economist and managing partner at Germany's Dresdner Bank says a deflationary collapse lies ahead that will ravage the world's bourses and usher in a dark period of austerity and financial discipline.

Probably not one economist in fifty shares his views, at least not publicly. Richebacher, now living in France, says many of his American colleagues have been seduced into ignorance and complicity by Wall Street's billions as well as by their love affair with mathematical models that shun fundamental laws of economics. --------------

------* Derivatives can insure individual market participants against risk, but not system as a whole. Ultimately they have spurred higher risk-taking through leverage, exposing the global financial system to the prospect of devastating failure.

Richebacher, who counts former Fed chairman Paul Volcker among his close friends, says U.S. economists of the 1960s would more readily have recognized these problems and acted stridently to counteract them.

Public discussion was still influenced back then by staid economists who represented the banks and who knew their theory. The current crop, however, is "really a part of Wall Street's sales force to sell shares."

In contrast with European economists, their theoretical thinking is "not too deep," and in recent years has been completely eclipsed by mathematical models that fail miserably in reckoning with the crucial variable of human behavior.

The current level of thinking is "unbelievable," he says. "How can you simply overlook a negative savings rate and mountainous trade deficit" in saying the economy is healthy and robust?

"There is almost no one left in America to pose critical questions about economic fundamentals," he laments. "The only miracle about the American economy is the consumer's amazing propensity to borrow" -- a fact which Richebacher says has delayed a day of reckoning. -------------

And finally see: The Magic of Credit & Financial Engineering by David W. Tice

------ This, like most derivatives that have come to so dominate our financial system, works well during bull markets. We, however, see these derivatives much a ticking time bomb. One of these days, we will have a bear market and First Security Capital and other writers of derivative
insurance protection will be forced to sell securities to hedge their exposure. And if enough buyers do not come forward willing to part with their cash in the midst of a sinking market to take the other side of these trades, markets will suffer a liquidity crisis. And we, unfortunately, see no way around such an occurrence as our over-zealous financial system has created truly unfathomable
"perceived wealth" throughout our economy that is supported mainly by overvalued securities and unprecedented credit excesses.----------------

PH, your last item: ------ Maybe that's what the "final convulsion" will be. Just another "normal" convulsion. Over here! From this side of the river!--------

Take your vitamins, sleep well and get plenty of exercise. With a little luck we will live long enough to watch this drama to it's final conclusion.
Thank You FOA

FOA (9/2/99; 16:15:22MDT - Msg ID:12699)
Peter Asher (9/1/99; 22:56:08MDT - Msg ID:12641)
FOA #12639
Thank you for devoting so much writing time to your response. I understood all of it quite clearly. I realize that the operational words are "Cash settlement."

Peter, we talk again! Your comment:

-----One question, regarding your *** I believe that in fits and starts, all paper gold (any comex paper outside of spot month) will be sold down. Driving the perceived physical price lower until no more can be delivered. *** That event would show up as "backwardation" which is regarded as an extremely bullish factor. Would that not trigger a definitive reversal, giving birth to a runaway upward movement in the spot market?--------

You are right, if we use our past gold trading history as a guide. The problem is that there have been only a few full cycles in the gold market. And, just as I offered before, the market has "evolved" after each go around. It's not the same animal most gold bugs started out with. Using the past "probable reactions" of traders to what were bullish signs on established markets then, could send one into trouble today. Look at how many positions were established these past few years, only to see traders reverse and pull out over and over again.

I think, the first time that Comex can't deliver, all future months will be called into question. Most likely, the officials will "Bunker Hunt" the exchange long before anyone knows what's happening. Let's face it, no one has ever seen Comex react when there were almost 500,000 OI contracts on
their option side? Not to mention a world full of derivative contracts looking for relief!

Your call my friend! I'll be watching if you (or anyone else here) want's to try and ride it. I agree with Leigh's take on this (hello and thank you Leigh) , " stay with physical"! It will pay off more than you could spend anyway!

------One thought I am still wondering about, was my conjecture that the apparent motives of Gold carry profits, politically driven debt bubble controls, Central Bank cash needs and collusion driven short sale profits, while all true, could be lesser activities behind a plan to corner most above ground gold and to acquire the ownership of many of the mines.-------

I'm not going to head into the political issue until finished building the basic mechanics of this. It's too confusing not to have a springboard of thought to jump from. I need that background so as to dodge the bullets. I'm smiling as I write this because some out there put an extra shell in their gun every time I write this analysis of Another. Crossroads #12665 wrote a good piece about how we
all see things (hello CR and thanks for the repost). One of the reasons I write the way I do is because I am "born in the USA" and still retain a true "Western view" of things. In other words, I know how some of these conceptions came about and how people will mentally fight to retain that
view. In essence, Another sees that sometimes it's better if hard riding hombres don't fully understand your concept as your words relate it. In the end it still aggravates them enough that they study it hard to find every flaw to throw back at you! Welcome to the new age school of advanced education or is it "if you build it they will come to destroy" (smile)! Just shows you how different worlds think. Oh well, I don't intentionally try to be vague, as it's a very complicated subject.

Peter I'm saving this and will get back into the oil gold politics later.

I may be here over the next few days? Or may not? Thank everyone for contributing (TownCrier, you're the best) FOA

FOA (9/5/99; 15:20:08MDT - Msg ID:12859)
Gold Mines!
When I read this letter from I.V. Holtzman (USAGOLD (09/03/99; 15:13:20MDT - Msg ID:12765)I really had to lean back and smile. That was good, very good. I looked up from the computer screen and gazed easily out the window. Out there, across the ocean, someone sailed the seas with very deep thoughts. Perhaps, what he once saw on the horizon as a mirage was now becoming a little more real.

Earlier I posted an introduction and chapter one (Msg ID:8633) of "Gold: Saving Real Money In A Time Of Transition". It concluded with: "In chapter ((2)) we will build upon the workings of the gold market as it represents oil, the most strategic world commodity.". In that framework, Another is editing each chapter. In as much as I would like to quickly proceed, the question of "Gold Mines" is becoming more urgent. Another sees no need to go into this as his world holds little purpose in these investments. Yet, in my world, "the Western view" these securities are widely held in place of gold. Perhaps it is time to "Stand the ground and do battle upon the enemy before it devours our private wealth."
Mr. Holtzman, FOA here, broadcast being prepared:

FOA speaking:

Mr. Holtzman,,,Over here!,,,,Are you out here?,,,, Can you hear me?,,,,,,Are you out there??

Oh well, Damn this fog. That man must have one good transmitter. Sending messages over such a great distance, yet his signal comes through clear as a bell. Amazing that even his thoughts are not garbled and nothing missing in the train of logic, either.

Mr. Holtzman,,,,,,,,,Over here!,,,,,,,,You out here??,,,,, Hope you can read me!

This fog has been hanging over these waters for as long as it has the recent gold market. Trouble is, as long as it continues, no one can find the right direction. Especially with these GPS units built during the early gold trade. Wish I had a communication system as good as his. Bet he was born
with that transmitter because money just will not buy a message maker that everyone can understand thru a fog.

Holtzman here,,,,,,Holtzman here!

FOA: There you are. Didn't hear me talking to myself on the mike did you? Good! Ok,, sorry about this old mental system, but my next transmission is in the works. Thanks for

USAGOLD (09/03/99; 15:13:20MDT - Msg ID:12765)
From Holtzman....
Tomcat said in (9/2/99; 11:22:58MDT - Msg ID:12671) that "the problem with using backwardation as a signal is that the spot POG is determined from paper gold transactions (thanks for this reminder, FOA)."

Holtzman here,

The measure you seek is not Spot, but Street.

You've correctly said that Spot is a creature of the Derivative world. It's the Paper price of a gold futures contract to be settled during the present month, and almost always to be settled for cash rather than for delivery.

As a result, it's no surprise that Spot POG is a better indicator of the Paper market since it is itself determined by constant repetitions of FOA's analogy of the two neighbours betting over the fence. Perhaps one in a thousand participants in the daily setting of Spot POG plans to buy physical gold or sell it. The other 999 participants are merely there to bet on it and claim their winnings in some other currency.

Put another way, how many people at a racetrack are attempting to buy a horse? If you want to know the going price of a physical horse, don't waste your attention on a racetrack.

If you want to know the going price of physical gold, don't waste your attention on the paper chase. And it's pretty obvious where we should look to find the going price of physical gold... I mean, after all, our very conversations here are being hosted by someone who spends his waking hours discovering that price.

The cash or Street price of gold is the number of dollars (or pounds, or euros) you take out of your wallet and hand to your friendly, neighbourhood coin dealer in return for a one-ounce Krugerrand.

Why a Krugerrand? Because it's the least numismatic, most commonly encountered, least lovely form of gold. It has no numismatic premium and no jewellery premium and no patriotic premium. It's even less attractive than a one-ounce 9999 ingot from JM or Credit Suisse.

That makes the Krugerrand the perfect unit of measure for Street POG. Its only special quality is that it contains exactly one ounce of gold (mixed with way too much copper).

The only thing which would disqualify the Krugerrand would be if suddenly coin dealers were willing to sell Maple Leaves or Eagles for less than Krugerrands. But to deal with that case, interpret Street POG as the price of the cheapest one-ounce coin available for sale at that moment.

The backwardation signal you seek will be when you see Quantity 100 Krugerrands selling on the street for significantly more dollars apiece than the Spot POG quoted by the paper markets that day.

A Krugerrand will always have a little premium built into its price (hi, I just bought these coins and I'd like to sell them to you without making any profit at all on the sale... my, that would be daft).

As things now stand, a month ago when Spot POG was quoted at $260, I bought a single Krugerrand for $268. That's within the range of normality. We're not in backwardation yet.

Let's say that Spot POG drops to $200 (easy, stomach, don't turn over now). What will a Krugerrand cost on the street then? If Spot POG drops no more abruptly than has been its wont in recent months, there's a decent chance Michael and his fellow coin dealers might then be able to profitably sell Krugerrands for $205 each. In that case, we're still not in backwardation and the shorts are still in control.

But if you see Spot POG drop to $200 while a Krugerrand selling on the street never falls below, say, $230-$240, hello new gold market. That's backwardation.

I think maybe the hardest mental hurdle for people to clear in understanding Another and FOA is this notion of two gold markets occurring simultaneously. There's an historical example (and it's Western :-) in which very much the same thing transpired...

In 1864, the USA and the CSA were reaching something of a stalemate in their war. Contrary to what most Americans learn today in (the winner's) school system, had but a very few decisions been made differently, the Confederacy would have won.

This, by the way, is why we see so many Americans (descended from both sides) re-enact Civil War battles over and over. How often (except on Monty Python) have you seen re-enactments of Pearl Harbour? The only battles worth replaying are the ones that could have gone either way.

In any event, to the average person living in Either the USA or CSA in 1864, the near term future was incredibly unclear and terrifying.

In the pre-war USA, national government funding was handled by the levying of import/export duties. The IRS was not yet a glimmer in politicians' eyes. For a nation at peace, duties provided sufficient income to run a minimalist national government.

In time of war, however, expenses magnify dramatically. Both the remnant USA and the new CSA needed to acquire vast funding very rapidly to raise an effective military. The both of them did so in the time honoured way: they borrowed the money. Have a peek at Lincoln greenbacks and Confederate paper money sometime. They are promises to pay the bearer with gold and/or silver at some significant time following the cessation of hostilities.

These documents were by no means the equivalent of today's Federal Reserve Notes (try redeeming a $20 FRN for a St. Gaudens sometime). No, Civil War paper banknotes were the equivalent of today's Gold Futures Contracts.

Oh, Lincoln greenbacks and Confederate dollars passed from wallet to wallet during the Civil War years as if they were currency, and in the first year or so they were regarded as 1-for-1 equivalents of coin. But as 1864 drew nearer, something odd began to happen.

"Howdy, I'd like to hand you this crisp $1 greenback in return for ten silver dimes change."

"I'll give you 8 dimes for a paper dollar, not a penny more."

Realise this happened in the North, in the remnant USA. It happened too in the Confederacy, but modern people remember it there only in association with the final default on paper which happened when the CSA government was extinguished.

But the sole difference between a Confederate dollar and a Lincoln greenback was that one paper issuer was still in existence in 1866 and one was not. In 1864, no one could confidently say that either government would still be there a mere two years hence.

Notice that, in this regard, not much has changed since then. In 1933 for US citizens, then in 1971 for the rest of us, the USA government voided its obligation to pay gold for paper dollars.

If you hand me silver or gold, I won't care whether the symbols impressed on it are from a reliable government, an unreliable one, or a defunct one. But if you hand me paper, I'd better be firmly assured the issuer will live long enough to pay off this debt to me.

Another and FOA, by saying wise people should avoid paper and only hold physical, are indicating that they expect the LBMA and Comex Gold Contract documents will go the way of the Confederate Dollar (or maybe more appropriately the pre-1933 paper dollar).

At the very least, they're saying the risk is so substantial that one should not be standing too near the fault line should the quake come sooner than predicted.

What the both of them are describing is an official Paper Spot POG (and its kindred future months' POGs) which may well plummet to $200 or even, as Another allowed some time ago, perhaps $10. Realise, though, that Another is by no means predicting that Michael will be able to profitably sell Krugerrands at $10 each. Far from it. What Another and FOA are anticipating is a situation much like the paper money situation in both the USA and the CSA in 1864: how likely is it that the paper contract you're handing me today will be redeemable for any amount of gold by this time next year? Tell you what, I've got a spare ten bob I feel no desperate attachment to. I'll buy your one-ounce IOU just for kicks. If LBMA completely expires, I'm out only a small amount. If LBMA unaccountably fails to expire, I've struck it rich.
Meanwhile, those of us with less of a gambling inclination will sleep more soundly holding physical. After all, a silver or gold coin remains silver or gold even after its issuer expires.

The one point of Another's and FOA's that I still don't entirely follow, however, is their contention that all mining stocks will go down to zero along with the Derivatives market. Certainly, any mining company which ties its future earnings to the paper market has also tied its future stock price to that teetering mass (Barrick, for example). And certainly, a low tide drops all ships, so that even those mining companies which are not involved in the paper chase will still suffer in the stock markets.

However, I have some difficulty seeing All mining stocks world-wide being extinguished utterly. Maimed, perhaps, but no matter how much trading turmoil occurs there will still be well-identified veins of gold ore sitting below ground, just waiting for someone to consider them valuable again. Yes, some of them may become nationalised. Yes, others will end up being sold at fire-sale prices. But I can't break myself from the notion that, much like the airline industry, the strong will survive and absorb the weak.

I'd dearly love to hear from either Another or FOA their thoughts on why they feel that not a single mining stock will survive. Or have I misunderstood you?

I.V. Holtzman

FOA (09/06/99; 20:56:39MDT - Msg ID:12946)
Gold Mines: Little more than paper derivatives of gold!
From Mr. Holtzman #12765:

------Put another way, how many people at a racetrack are attempting to buy a horse? If you want to know the going price of a physical horse, don't waste your attention on a racetrack.----------

Thanks Holtzman,
To develop this further: -------------If you ever want to "use" the fine qualities of a "physical horse", don't plan on gaining those qualities by owning a "horse farm"! True, the best avenue to gain exposure to the "profits" (and loses) in the "horse producing industry" would be from the ownership in shares of said farm. However, any viable industry, incorporated into today's fiat currency inspired markets, depends entirely upon those markets to channel profits and increased equity values back to stake holders.-------- Even if the financial markets function, is it valid to compare the real wealth of owning a horse with the increased value that comes from the business of
producing such an animal?

From horse stables to automobiles to gold mines, it's important to understand that the ownership of any industry is not the same as owning it's end product. ---------Every industry's established "worth" is not only "just a derivative" of the value of it's end product, but is also a "derivative" of the "efficiency" and "continuation" of the world financial system that creates the marketplace for that
product.---- Better said: Your ownership in a company may be real, but for others to value your ownership realistically, it requires a functioning efficient medium of exchange. The beginnings of the first waves of currency inflation allows that function to upprice real producing companies. However,
historically, the end breakdowns in fiat money systems along with the rules / laws of the land, have always destroyed the efficiency of any industry to provide a product, no matter how valuable that item may be. Gold mines, like any other service, must operate within the official money system until
that system is completely destroyed. That includes abiding by all laws and official declarations the governing society may bring forth.

Preserving wealth during such times provides that the more clear and clean the ownership, the more likely one may control those assets. Again, even if the financial markets function, is it valid to compare the real wealth of owning gold with the increased value that comes from the business of producing gold?

We walk the trail of common logic:

If you needed a new car, would you buy General Motors stock instead ? Of course not! Why? Because the average citizen has first hand practical experience in the use and need of their car. The notion of owning the industry as a proxy for the car is quickly discarded as ridiculous. Still, some analyst would have you believe that one should hold gold mines as a proxy for gold.

I believe this flawed investment logic has become the "default" norm of most "western investors". While everyone understands the attributes for owning a car, few today have practical experience in the use of real gold as a money asset in their personal lives. For that matter, the analysts that promote this "proxy concept" are in the same boat. Let's face it, none here have never had to view gold as the "only savings to survive as a representative of their wealth"! Nor have we used it as "money in trade" on a regular basis. So, how could you, your broker or anyone else refute the proxy concept?

Heard this pitch before? Perhaps in a different format?: ------" The price of light trucks are going sky high due to world debt problems. So put most of your money into Ford stock and as little as possible in real trucks. Then, because of the way their production is leveraged to the "physical product", their stock will rise 100 times over the price increase of the "truck product"! After that we can sell some of the stock and buy hundreds of the trucks for later use when the money goes bad and times get tough. It's a unique concept inherent only in the automobile industry that few average "physical truck buyers" can grasp or understand. I have clients that have made millions doing this the last time light trucks rose in price. Ford is the best of the bunch because it has all the reserves already "in place" to supply "physical trucks" to a needing world. As such we can presume that those reserves constitute a value that will never be lost during hard times. -------- Compelling? Isn't it?
Of course we could be talking about the gold industry also.

Yes, it's a financially viable concept. Gold stocks "should?" rise as their product soars in price and brings currency profits to their bottom line. Because it's happened before in other industries and has repeated this cycle recently, mines must go up in the next bull market in gold, right? Well, maybe not!

We can see the long road behind us:

Read #12471, 12542, 12660. In those we find my reference to "physical gold advocates", "fiat money advocates" and "investors somewhere in the middle". The "in the middle" thinker looks back and sees a gold market that has responded to a kind of business cycle. To them, from the early 70s
onward, gold moved up from typical supply and demand issues created by the ebb and flow of our inflationary fiat system. The next cycle should take gold up to $400, $700 or even perhaps $1,000. The dollar will remain the worlds premier currency and the US fed will again raise rates to cool
things off. We create yet another cycle. Gold stocks will again be the prime beneficiary as "sophisticated" money moves from the world equity and currency markets into the shelter of "reserves in the ground".

Now, I would like to point out that this gold cycle has only been around, in this present form sense the dollar began it's withdrawal from being a gold loan. That's not very long in this gold world, when one considers how far back it has been in use. For us to draw conclusions that this dollar / gold cycle is of a lasting, repeating nature is stretching precedent to the limit!

Understand this: For countless years, mines have sold their product at established world gold prices. They may sell where and to whom they want, but the price was always a function of government currency valuations. The free markets that direct gold into jewellery and such have never set it's price. Rather they have always functioned under the currency / money use as the value creator. One way or another, the government sanctioned established marketplaces of gold have
always been under control and in evolution as the world currency structures have changed.

During this time the establishment gold price has not always benefited mine profits. During the 50s and late 60s gold was largely unprofitable to mine. Yet, we find no evidence of mines selling gold outside the "official" marketplace price in an effort to circumvent it's perceived obvious low price? I submit that in the past and in the future, they will always subject themselves to the
"established official" gold price, come what may. Any breakdown in the present dollar financial system that results in the failure of the "official established" derivative gold price will find every mining concern selling their production into that market price regardless of profit. To bypass that channel, the mines would separate themselves from the fiat banking establishment that they depend on to function in this world. Even though the "street price" (thanks Mr. H.) of gold soars within the small dealer network, it will be viewed as somewhat "Black-market". Mine selling into that arena would invite laws with "immediate" and total retroactive taxation of those profits. Or worse,
production limits could be fixed upon all mines as a means to prevent the same gross profit margins. Perhaps in the same way as the Texas Railroad Comm. controlled all US oil profits. Further, such a breaking away from supporting the official gold market by withdrawing physical supply could bring on the total closure of what established gold markets that exist. To that extent, mines could find themselves selling all gold production to the official CBs for who knows what price.

Can't happen, illegal, you say? When it comes to gold, nations, governments and Central Bankers change the rules quite often. One has but to look into the laws of every nation to find that " emergency currency flow controls" always include gold! You see, it's never considered money or a reserve until a crisis strikes. Some examples of past illegal actions:

1797 Napoleonic Wars. Bank of England suspends gold payments.
1917 US prohibits gold exports.
1919 UK prohibits gold exports without official permission. UK now off Gold Standard
1919 US gold exports permitted again.
1925 UK Gold Standard Act Currency convertible but only in amounts of 400 oz. Export of gold permitted again
1931 September UK abandons Gold Standard.
1933 US convertibility suspended ($20.67/oz). Export, all transactions and holding of gold forbidden.
1934 US Presidential Proclamation makes dollar again convertible to gold ($35/oz)
1939 London gold market closed on outbreak of war.
1954 London gold market re-opens after World War 2
1968 London market closed at request of US government.
1968 London market re-opens 1 April and now fixing in US$ for first time.
1971 US$ convertibility to gold suspended.
1973 US proposes further devaluation to $42.22/fine oz.
1975 US abolishes restrictions on citizens buying, selling or owning gold (formerly needed Treasury licence).

The above may not seem like much now, but it wrecked havoc upon many investors. Of special note: Was the gold market was closed between 1939 till 1954?


Over the last few years, we have seen how the gold market is failing to act out it's past precedent. Many investors write this off to government gold policies that must soon end. Be that as it may, the process continues without regard to "past gold cycle logic". I point out that the lack of new mine supply did not prevent the low real prices prevalent during much of the 50s and 60s. Will the shutting down of most world mines prevent a low "official gold price" today as many think? Not in the broad political scheme of things.

But what are they thinking as this process is worked?

Would a dealer "street price" in the thousands change things? Not if the only recourse is for private money to move into Euros! The crisis policy will be to maintain the official gold market with low priced mine supply and allow the physical dealer market to run with whatever private stocks that arrive. Remember, the present financial system has a need for new mined gold to flow into derivatives at a low price to support the paper market. The same paper market that keeps oil behind the dollar also holds the dollar together. As of today; To further pull existing "old gold" from portfolios by forcing the street price down now invites a run from the dollar. A high physical "street price" will at least keep the dollar in play when price inflation begins.
If the paper gold price rises from it's present level, will gold stocks follow? Probably! But what if that rise ends quickly as the gold market begins it's next "official" failure run?

We make camp and rest here:

Looking outward:

The next money breakdown will not be a typical inflation cycle. The dollar has reached the end of it's "currency inflation" logistics as it's local debt load now only expands as foreign dollar debt is devalued from par. Yes, there will be "super inflation", but it won't be part of a "perceived" next cycle that extends from the lows of the last go around.

The ECB view:

Because gold continues to be the respected "currency of nations" in each currency block, our physical gold must be withdrawn from honouring the long standing dollar based "derivatives gold market". In fits and starts, the entire gold industry as they know it will fall away as the dollar is destroyed through local US inflation. Because history has never witnessed the destruction of a fiat world reserve currency, many world industries and businesses that grew up within this US system will suffer as investors shift holdings. Any industry that finds it's value from a dollar derivative marketplace will be in disarray. Therefore, we must allow the Euro to float on it's own and thus guard the Eurozone from the shattering effects of this.

To conclude:
Consider how you hold your gold as "we watch this new gold market together.

Thanks for reading, FOA

FOA (9/8/99; 19:02:38MDT - Msg ID:13085)
Cmax (09/07/99; 19:59:17MDT - Msg ID:12996)

Cmax, Hello and welcome again!
Thank you for sharing your present thoughts and very relevant earlier posts. Did you read Holtzman #12765? His excellent post was able to create a nice perception for physical gold, "street gold". A well written analogy that allows the average investor to grasp what I believe will be a new, much larger market for gold world-wide. It also generates a real understanding of how the "street price" would differ from all other established markets. He used the 1864 American civil war to demonstrate how two issues of paper money (as in comparison to paper gold?) were discounted in common circulation. It is a tremendous help to anyone that reads it.

In any event, I believe most of the lesser developed countries will be in the forefront of building a high "street price" for physical gold. Especially China! For them (some Chinese are very, very wealthy), price was never the real consideration, rather it was the enormous amounts they had to bring in well ahead of any supply disruptions. Hence their buying patterns over the last many years. Many very large buyers were moving gold through Hong Kong, before and after the take-over. I believe, far more gold has already entered that country than public figures show. It will not be available at any price when the storm hits. They already have the gold! Any move to announce an open bid, using dollar reserves would be after the fact. The oil producers are very well in the same situation. I think it was the poster "GFD" (hello GFD!) that noted China the other day. He also pointed out how "street gold" could shield many citizens outside the Western block from the extreme fracture that is coming. Y2K will be something to behold, but it will be a side-show when the modern gold market breaks!
Again, thanks for reading from Venezuela and write when able.


FOA (9/8/99; 19:09:11MDT - Msg ID:13086)
Leigh (9/8/99; 9:35:05MDT - Msg ID:13035)
IMF Gold Pricing Scheme
Does anyone remember FOA's June 14th prediction of a major shift in gold valuations? He said theU.S. would openly go along with this change. Well, it looks like this is it. My question, again, is how and why they are only revaluing 10 percent of their reserves.

Hello Leigh,
Let's look at what they propose and lay that upon the 1976 Jamaica Accords. With that background we can work out why the US dollar block is "now" moving in the gold direction.

------------By Mark Egan

WASHINGTON, Sept 8 (Reuters) - The International Monetary Fund will revalue some of its gold to fund debt relief thereby avoiding open-market gold sales, a politically difficult proposition that spooked gold markets, documents posted on the Internet revealed on Tuesday.-----------

First, I want to say that the posting of those documents was no accident as some think. No one wanted to take credit for floating this in public, so an order was given to send it out the back door! This is a major shift in international currency dealings that will eventually impact the LBMA gold
market in a big way. The BOE gold sales to help out some favoured dealers is no longer looking like a bumbling operation. Because no more gold was coming out of Euroland and the USA cannot touch it's bullion, London had to be on track to cover some bases if the original IMF deal fell
through. But, you might say, they always had the Swiss sale to back them up if the IMF went sour? No possible way! The US knew that world liquidity was drying up and the dollar would have to be sacrificed with some move to gold revaluation if congress cut off the sale. Once that "gold currency" door was opened, the Swiss will never sell! Change is coming to the gold world and London had to already be online to the EMU before this hits the dollar. "Street Gold" and "Paper Gold" are going to part ways!

-----------The documents released on the Internet provided few details on the new plan but sources told Reuters the latest plan had already been approved by the Group of Seven nations. Under the plan, countries which owe the IMF money from past loans, such as Mexico, would buy IMF gold the day before loan payments are due and then repay the instalment the next day with the same gold, sources familiar with the scheme told Reuters.The plan raises cash for the IMF because the fund values the gold on its balance sheet at about $46
an ounce. Since gold is actually worth about $255 an ounce, the transaction would net the IMF profits of about $209 an ounce, or about $2.1 billion. After selling the gold, the fund would return $46 per ounce back to its General Resource Account and then transfer the $2.1 billion in profits to a trust fund. The trust would invest the $2.1 billion and
use the proceeds to fund both the HIPC debt relief nitiative and ESAF. The new plan will likely appease the gold industry and lawmakers from U.S. gold producing states since the IMF's gold would probably never leave its vaults. ---------

Leigh, this action is a direct violation of the Jamaica Accords:

2.C Managed floating system and the G-7 Council

-----------In January 1976, the IMF convened a monetary summit in Jamaica to reach some agreement on a new monetary system. The Jamaica Accords formally recognized the managed
floating system and allowed nations the choice of a foreign exchange regime as long as their actions did not prove disruptive to trade partners and the world economy. Gold was demonetized as a reserve asset. The Jamaica Accords were ratified in April 1978.-------------

For the first time sense 1978, gold is going to be recognized and utilized as an "international currency" "in the open" on a G-7 level! They are accepting the gold as a "MONEY" payment and will hold it as a real Monetary reserve to lend paper currency against. This is a HUGE reversal for the Dollar / IMF block and will work to the advantage of the ECB / BIS! If this action holds, the ECB has won the dollar roll for Europe thru default!
The point I made in my June posts (and prior) was that everyone was buying physical gold and "running like hell"! They were doing this because of the risk implications! If none of the non Euro major gold holders could sell gold to further support the paper gold market, it would fail and bring down the dollar. When England announced their gold sale, it was obvious that the political chances of new gold hitting the market had become almost zero. Now with GS locking up "street bullion" and selling future months like crazy, we can see where the split is going to occur. This could mark the turn!

All: I hope to reply to ORO, Michael and everyone, but must take care of several things.

Will return much later. thank you FOA

FOA (9/8/99; 19:50:16MDT - Msg ID:13090)
Link to my last post
------Republican Jim Leach, chairman of the House of representatives Banking Committee, welcomed the IMF's new approach to the thorny issue of unlocking the value of its gold which would see the fund revalue some of its gold rather than sell it on the open market.--------

Cavan Man, nice.

USAGOLD, much thanks for this forum, but just as soon as England is in the EMU I'll still have to collect that dollar! FOA

FOA (09/09/99; 06:00:15MDT - Msg ID:13113)
IMF comment
------jinx44 (09/08/99; 22:49:44MDT - Msg ID:13107)
IMF gold sale - a question to anyone.....
Foa's 13086 was another keeper. I love the tale unfolding and I can only pray this may be a way for us to find our collective way out of the dark times at hand. That being said, I can only wonder how the current IMF plan differs in function than an outright sale? I understand the accounting tricks-wink wink nod nod-but the disposition of the yellow stuff is still into a market of some sort, right? Will the IMF sell to the good 'ol boys or what? The gold is still absorbed into the market place. I don't get it.------

---Gandalf the White (09/08/99; 22:25:25MDT - Msg ID:13105)
Just a few comments! Thanks FOA for the view of the "floated" IMF change of policy thought. -- Years ago, when I was in the other Wash. (DC), it was common technique to float a rumor and see the response before implementing a new policy. No scream heard from either party or the sheeple, and BANG a new law or policy! -- The IMF had already said to the WGC that it could not do as the WGC had suggested, as it was against their own charter, BUT now after the webpage error -- do you hear anything ? --- We watch together, yes? --- BTW the Hobbits each have their "precious" !! ;-)------

Jinx44 and Gandalf,
This IMF change is a fresh revelation on the market and may take some time to sink in. My current understanding is that the G7 accepted it as an inevitable consequence! Yes, it was a "floated" idea, but changes of this magnitude are never "put out" for approval. Rather, it's an "announcement" of direction and "everyone make adjustments" as they see fit.

Jinx, the gold will be sold (to Mexico as an example) at $46 ounce. That $46 in real cash (paid from Mexico) will go fill the hole left in the IMF bullion account. It won't change the rest of the bullion holdings as they will still be valued at $46. The sold gold will then be accepted by the IMF as payment (again example, Mexico) on a loan at the new $255+/-. You should recognize this for what it does. Gold will for the first time in "a while" be taken as a cash payment for a G7 loan obligation. Prior to this the gold had to be sold for currency and the currency used in payment.

Further: This "new money gold" will go into a IMF new account as a real currency reserve (just like dollars and marks) and be used as collateral to lend currency against. Read that collateral word as being just like all the other currency reserves CBs now hold. The big "no no" about this is that from the Jamaica Accords until now, gold could only be held as a commodity to be sold or lent before it's liquidity was recognized!

Leigh; This action opens up the door to use all "unlent" gold resources as currency. It could set off a scramble to "unlend" all "lent" gold. Especially notable is the fact that, through this precedent, the CBs could sell gold reserves to anyone at $46 and receive it back as a currency at market price for loan payments. That is why it's so important for the IMF to hold the other 90% back in another
account! Need I tell you that this action uses "physical gold" "as is", no paper! If, and it's a big IF, this goes through it will be the death of the paper gold era. AND, it will open the door to get the "street price" as high as possible!!! If they don't back off from this, it will open a can of worms the size of the pacific ocean! We patiently watch! FOA

FOA (09/09/99; 06:52:59MDT - Msg ID:13115)
More on IMF!
Paris, Thursday, September 9, 1999

IMF Plans to Revalue Its Gold Reserves

Accounting Step Is Latest Effort to Finance Debt Relief for Poor Nations

By Paul Blustein Washington Post Service

(FOA note: see link for full story)

------According to Reuters, which translated from Dutch the document posted on the Web site of the Dutch Finance Ministry, the plan works as follows: A country that is not having trouble making its debt payments would buy gold from the IMF at the lower price the day before a loan payment is
due and then make its payment the next day with the same gold.

The IMF would then have gold it could value at about $209 an ounce more than the gold it started with, based on current market prices.

The IMF would set aside the ''profit'' in a special trust fund for poor-country debt relief, as well as another low-interest loan program for low-income nations. ---------

FOA (09/09/99; 08:51:54MDT - Msg ID:13125)
Hello ORO,

-----ORO (9/8/99; 10:46:57MDT - Msg ID:13043)
MK, is the IMF a little bit pregnant?
The repricing scheme for 10% of the gold in their vault is not going to make sense to anyone but those who value the gold at the 35 SDR $42 level, who would be the lenders. The result is the use of gold as reserve currency by the IMF. This is a micrometer move towards a gold standard
defacto. ----------

ORO: This was the corner that the ECB was hoping to squeeze the US into. Because the modern gold market was built upon the concept of using "proxy paper" for gold, it was vulnerable to any return to using gold itself as a currency asset. The use of actual bullion as a money asset, negates the use of gold IOUs in the fractional reserve function they now occupy. The trend changes as investors
want to use the "street gold" itself for the payment of debts. The advantage of this becomes evident as this "new acceptable currency" is seen as appreciating against other currencies.

The problem is manifest in every entity that made a market or used "IOU gold" in their dealings. It's much the same way that modern banks fold if all their customers start using cash and depositing it into their safety deposit boxes. Because we are most familiar with a currency fractional reserve, it's obvious that the treasury just prints cash until everyone is satisfied and price inflation has it's way. But, with a return to bullion, the BB have to eat their paper in a general default as all of the
physical gold is diverted for other uses.

The US started this when they nailed gold as only a physical commodity. Now with the IMF in a bind to save the dollar reserve system, they are forced to use gold as a very physical asset and in the process return it back into a medium of exchange currency context! The very dynamics that
destroys the need for a IOU gold market. They ran so fast, they caught themselves!

--------------The building of the gold short position is a necessary step towards a gold standard as well. Greenspan's old competitive gold bond vs. $ bond concept has essentially been adopted by the bullion departments of the banking industry, and their bonds have been found lacking (ref. lease rates going from 0.9% to 3.7%-4.5% is quite a blow for a bond holder). So is what we have a failing gold standard stunted in its infancy by fiat level leverage? -----------

I think this whole market started as a way of absorbing all the demand for gold by diverting it into a paper product. It also allowed important (oil) buyers an avenue to channel surplus cash into gold without driving the price. The more purpose the product served, the more it was accepted. The Dollar / IMF faction brought into it early on because in addition, it drove the dollar price of gold down, thereby making it (dollars) look better. Perhaps it is a kind of "oddball" gold standard! Whatever the case, it became massive enough to make it a threat to the dollar system. A major breakdown in the LBMA gold market, in conjunction with a spiking "street price" will push the
IMF rescue operations and the dollar over the cliff. This is where I see a run into the Euro by default. This brings me to your next item:

------The modern banker would not expect a currency without forced demand to survive and rise in value. The success of the dollar since Volcker has much to do with the $ debt of the resource rich emerging nations (a.k.a. colonies), has much to do with the rise of their $ debt and their need
to trade their resources for dollars to repay it. Hence creating the conditions for prolonged demand due to debt is the prerequisite for a return to a gold standard. Of course, one does not want the gold banking system to keel over before a gold standard starts in earnest, proving to the bankers that it is not desirable.-------

I think the new "gold standard" of the future will evolve from the collapse of the present paper one. They will never revert back to a "gold exchange" operation again. Rather a free trading physical market (again "street gold") most likely based in Euroland. It will give the governments the freedom to run their currencies as wanted and gold will seek it's own level. None of this will extract the old "paper gold" system from a protracted "workout". Look for the Mines, Bullion Banks and CBs to be at it for many years.

I saw your post about putting some numbers and times on this so people can understand it better. Another always had a definite "workout" period for this, but he never wanted readers to trade that knowledge. Too many variables that would entrap most "family savers". Besides, just buying gold and holding during this end time was plenty. Never the less, I'll try to put something together.

Thanks FOA

FOA (09/09/99; 15:22:35MDT - Msg ID:13160)
More comments
WIRE:09/09/1999 13:10:00 ET
FOCUS-IMF plans to renounce further gold sales

WASHINGTON, Sept 9 (Reuters) -

----------The document said many of the fund's directors believed "that a public statement should effectively limit the amount of gold that the fund would use for this purpose and would renounce any further gold sales for a given period of time in the future." --------

ALL: Once all the members get a taste of how painless this process is, the above "" for a given period of time in the future"" will be qiickly adjusted. Besides, who are they really addressing with this statement? None of the world gold advocates would have ever objected to using gold in this fashion! No, this "public statement" is aimed directly at dollar reserve holders! Don't want to start a land slide, do we?

--------"Since these transactions would take place between the fund and a member at a market-related price, they could not be regarded as having been undertaken with the
objective of managing the price of gold in the gold market, which would be contrary to (the fund's rules,)" the document said. -------------

ALL: Here they are trying to balance the old Jamaica Accords, just a bit. Also, when this happened before (see below), it wasn't the same process. Don't have the facts right here, but I know it was different. Hope we can find a record of it.

-------The fund noted that a precedent was set in 1992 when it accepted from Cambodia a payment in gold, which it had sold in restitution to Cambodia at a market-related price in partial payment of Cambodia's overdue obligations to the fund. ----------

Give this some time to sink in! It's a major concession that demonstrated just how much world liquidity is falling. The ECB and the BIS handed them this rope and then pointed to a near by tree.
What a mess??


FOA (09/09/99; 18:33:16MDT - Msg ID:13175)
TownCrier and all:
I have to laugh as they (IMF) keep revising their plan. I can just picture someone faxing out the "last" revision and another official running in saying "no, no, no, no, that won't work. we have to reword it"!

No matter how they cut it, the G7 has given the ok to revalue gold to market. That is where the extra equity will come from to give debt relief. Weather they sell it at par $46+/- or sell it at $300 or buy and sell it ten times, when it comes back to them it will carry more value than when it left. All the jawboning is a smokescreen to get around their articles. Otherwise, they would just revalue all their gold and work from there.

Because none of the rich member countries want to fund the IMF any higher, the precedent of re-valuing gold to market will used much more often. That, in turn will create a changed atmosphere in the gold world as the use of it's hidden equity will be impossible to ignore. If this action is pushed through it will legitimize "physical gold" as a valid currency for the payment of debts
Let's wait for them to issue a few dozen more explanations. Then have another look.
I'll be back later.
thanks FOA

FOA (09/10/99; 19:17:52MDT - Msg ID:13264)
ORO (09/10/99; 05:22:07MDT - Msg ID:13194)

That was a good, well presented and thought out post, ORO. I know you have taken some time to put this information in perspective, so I will not just answer your question simply. This also falls inline with your earlier post, creating a line of thought within a complicated subject. I will reply to your "FOA Is this the US/IMF corner?" using as much of the material presented as possible. Give me some time, I'll get back to this. Thank you so much, FOA

FOA (09/10/99; 19:19:09MDT - Msg ID:13265)
Aristotle (9/8/99; 0:06:36MDT - Msg ID:13011)

Hello Aristotle,
Your post offered a good recount of the very subjects I'll use in reply to ORO. Hope you printed his #13194, good background and foreground there.
Thanks for recalling my words. FOA

FOA (09/10/99; 19:21:43MDT - Msg ID:13266)
Hello Tomcat,

Tomcat (09/07/99; 22:11:23MDT - Msg ID:13003)
Dear FOA, thanks for you post #12765. I was reading it with great interest and then hit a set of walls that stopped me cold. If you would allow, I would like to ask a few questions.
You said:
--------"Would a dealer "street price" in the thousands change things? Not if the only recourse is for private money to move into Euros!"----------

Tom, this statement is an observation of an evolving dynamic. The years have gone by and it's late 1999, today, not yesterday. When gold does break to the upside, it's going there without most of the "Western gold paper market". The Mines, CBs, Bullion Banks, and Exchanges will all be
mired down, working out a failed IOU gold market. It almost has to! Listen to what most of the respected industry analyst are now observing: "a huge short squeeze is coming that will break these evil shorts". It's absolutely true, but the real physical world we live in will deliver an entirely different scenario than what most expect. Tom, just as ten people can't physically possess the same ounce of
gold, nine of them are going to court to make the others perform what physics will not allow!

We will not see a simple resolution (over six months to a year) of an accumulation of paper gold that has taken a decade to build. The result will be a completely failed and untraceable "IOU gold market" groping around as the "street gold" dealer market goes completely through the roof.

This will be happening during nothing short of total "trade warfare". Politically, no one over here is going to shut down "street gold trading" because it would invite people to move into Euros as a safe haven. You have read my other posts and understand the logic behind this position. Consider the "very clear observations of CMAX #13186". Here is someone that understands the dynamics of foreign assets and money during uncertain times. He states: " In all cases, when rigid or "virtual" exchange controls are applied to ANY money, the "street price" always runs the official price out
of the market.". Without the blow off valve of an "official black-market", everyone runs before the act! Without physical dealers like USAGOLD, dollars would more quickly leave the country for the next best world money, Euros. Currently the same thing happens with dollars in other failing countries.

-------"To further pull existing "old gold" from portfolios by forcing the street price down now invites a run from the dollar. A high physical "street price" will at least keep the dollar in play when price inflation begins."--------

Almost the same answer for that one. Except the reference to the fact that for the past many years, old gold, in private portfolios has been in the process of being sold as the owners brought paper gold. The remaining old gold stocks would be traded for Euros if the Street price is frozen Mr.
CMAX also considers the old gold question.

----I don't see how a low "street price" could cause a run on the dollar. In fact, I thought a low paper or street price for gold would help prevent a depreciation of the dollar.----

Again, don't hold still, time is running past you. The IMF story is part of this transition I wrote of earlier this year. The IMF / Dollar block is out of time. Europe has blocked the "low gold" deal of the past and it only continues from inertia. The US is caught in a quandary as they need the price of gold to rise NOW so as to find liquidity for it's foreign reserve debts. However, if the traditional paper gold exchanges allow gold to rise they will implode themselves. Hence, the US is abandoning
the LBMA and England for a high physical gold price. Read that: "street gold" like the kind in the IMF vaults!

---And finally, a question about your last two words. What is an '"official"failure run'?----

Slang for, official paper gold price is going much lower!

Tom, just read this and watch the world turn. Another would say, "time will prove all things"

Thanks, FOA

FOA (09/10/99; 19:23:19MDT - Msg ID:13267)
TownCrier (09/10/99; 14:52:02MDT - Msg ID:13229)
Summers endorses IMF gold revaluation plan
SecTreas Summers said, "The IMF has laid out an approach that will make it possible to mobilize the IMF gold reserves without gold sales."
Now wait a minute...isn't he being a bit wreckless in his use of the word "mobilize"? The IMF won't be mobilizing gold, but instead will be recognizing and relying upon it as a previously under-utilized asset.

If your closing market reports get any better, CNBC will start getting nervous!

Also, Summers said: ``I believe that is a constructive approach,'' he said of using the gold revaluation to fund debt relief. "

I'll bet he was saying debt relief and thinking "dollar relief"????


FOA (09/10/99; 19:24:21MDT - Msg ID:13268)
Cavan Man (09/10/99; 15:27:17MDT - Msg ID:13237)
FT: "Now a dual currency world for bonds"
From Euro-Zone Economy insert in today's FT

To FOA: When can we expect a bonafide "dual reserve currency world" and any thoughts on a complete transition; 2 plus years? Thanks.

Cavan Man, I'll talk about this through my ORO replys. Thanks

FOA (09/10/99; 19:26:44MDT - Msg ID:13269)
Much Later
Hope to return with some discussion tomorrow. I think?

FOA (09/13/99; 09:09:03MDT - Msg ID:13518)
ORO, Some things I know.

This work started back in 1988, not long after the 87 crash. Important people were asking some very serious questions about the timeline of the world monetary system. They expected a longterm evolving report that would expand ongoing events into a format of true life context. A
context to be understood at all levels of economic exposure. In other words, it had to do a better job of explaining the (then) recent illogical swings of world economic affairs and the effects of those swings on various national economic groups. Were we progressing into a new, better age, or was
our system responding in a death like downtrend?

Because the questions grew from a fear that the world economy would indeed contract in the future, leaders wanted to know how one could retain the most wealth during such an event. It was thought that if the basic extended family blocks of a nation could survive such a collapse, savings
intact, those nations and their children would be a benefit to economic affairs of the future. In effect, negate a possible return to the Dark Ages of European history. Our time frame was outward some 20+ years. I cannot offer the full report or it's complete ongoing analysis. But, the effort you have seen to date is one of sharing somewhat for the common good of all.

In a search for reasoning, they looked first, not only at the most broad perspectives, but ones that had the effects of history for confirmation. Often the record of historical human reactions are the only precedent that can refute the use of modern day financial theory. Especially if that Theory is in a "practice for proof" stage that might last for a generation or more.

1. They found one absolute repeating event that shaped the lives of countless individuals. It's effects upon the destiny and life directions of recent society had no equal. That one most striking and frightening observations was of the failure of paper money. With irony, we stood here in the
middle of 1988, a time of advanced thinking using higher education for guidance and could easily document that no paper money ever put into use had ever survived. Weather backed by precious metals or in stand alone form, not one lasted! Yet, we were hip deep in an entire economic world
that based and denominated it's wealth upon the further extensions of "fiat paper money".

2. The second major observation was in the evolution of what debt is. From the very beginning of time humans have borrowed and owed, from and to each other. During most of history, the period of time between a debt owed and a debt paid was looked upon as "a period of risk". The accepted longline historical concept was that the item borrowed may not be returned to the owner. In addition to this view it was ingrained that the primary real loss came from not being able to replace the "item" lent, not the secondary loss of not receiving the medium of exchange. Yet in today's world (1999), the "thing" that is usually at risk in a debt is the currency. Modern common perception stands that no one should have to accept these loses. In concept, governments nurture
these perceptions only because they "can" replace the currency with ease. Yet the actual physical structure of the debt (the economic good that the loan was based upon) is never regained. This engine alone is a major force in the destruction of currency systems. It's effect is to shrink the platform that creates real wealth and expands the financial instruments who's value depends upon that platforms continued function. Indeed, it is a complete conflict to historical, natural human interactions.

From these two grand perspectives we view the unstable trend lines of our modern economic structure. It is from this present structure, that many entities, both large and small now attempt to retreat. But, in order to transport wealth with assets intact, they had to understand these money dynamics as an ongoing breakdown of our economic system. A breakdown that ebbs and flows with a political posturing that makes this journey very uncomfortable without a stable, longterm grasp of the process. As the river Nile floods and withdraws in it's endless rush for the sea so to
will the energies of paper currencies be eventually absorbed into the ocean of history.

Michael Kosares of USAGOLD knows well the very early coins of gold. Money coins that by their very existence today prove victory over the past creations of mankind's fraudulent commerce. The value of these coins now reflect an even higher value as art. Another minor means of wealth
transportation that has historically outperformed money gold.

But, in distant times past these same coins performed a far more noble roll. They remained the only existing money stock after "major economic societies failed". This particular function of gold is not important for 99% of time that economies function. One small evidence of this is present in the old Gold standard. With ragged inefficiency, paper currency circulated as gold deposit receipts along with gold coins during the course of normal financial dealings. However, after we endure that once in a "several centuries failure", the gold money stock becomes the vital building block of the next generation. History has shown that during that brief time, the owners of every ounce of gold provide the only efficient medium of exchange that rebuilds the marketplace. In transition, these latter day gold owners never rule the financial world. Rather they perform the act of energizing a dead economy by transporting buying power into the next expansion. The history of past human interaction was never one of hoarding money so much, as it was that of trading to gain life's things.
Life goes on.

It was pointed out that one need not invest in gold to negate the effects of an inflation. All we have to do is buy real things that increase in currency value faster than the loss of buying power. True, in that light gold is but one of many things that should keep us at least even. However, we are in the process of experiencing a "breakdown" or at the very least a major change in the entire financial system. Not just an ongoing inflation during a phase of a longline expansion. Our goal for certain individuals, is to show this dynamic at work as the real life events unfold and document it's progress. For private individuals that read these pages, historical purpose and present day logic will build further support for the holding of physical gold as these events reveal the true season. In this light I offer Anothers direction given some many years ago, "in this special season, let others buy things to hedge their present worth, let us buy gold in support of our future generations".

After reading ORO (9/8/99; 8:24:51MDT - Msg ID:13029), I wanted to at least be more direct in offering this ongoing discussion of events. You do a wonderful job of writing and I often find my information is just a reword what is said:

---- "In order to gain action from people, one needs to provide a timetable for the events (within my nephew's lifetime, mine, my parents' or my grandparents', or before the year turns, any time now...). This is the kind of support that I myself required before I was willing to accept the need for putting resources into "gilded insurance". The same need for support with numbers and charts that I am working on filling is needed to induce the financial pros to give their clients direction. The issue
is a patriotic one. Small business America will not survive without small capital hoards. The same problem they had in the depression. The reason for the length of the depression, was the confiscation of gold. The inability of small businesses to find capital pools in an atmosphere of credit
unwinding, and the simple death of the money supply in lew of the indestructible gold that was confiscated was the cause for an extra decade of suffering. The only way I see to avoid it is to convince people to build these pools now or end up working for a foreigner for the rest of their
lives, since only foreign pools of gold capital will be available (India, perhaps Europe, Arab countries, Asians from countries that managed to pick up the pieces most quickly)."--------

ORO, on these points I completely agree. However, all that is left to drive the last remnants of this world engine is the "American Dream". The leverage to attain that "Dream" is presently stretched so far that any withdrawal back into reality will implode the dollar with amazing speed. The time may be already past for any large scale building of gold stocks based upon reality. But,
still the effort is not lost.


---- "The key to the numbers is that set of numbers that quantifies the issues. Particularly important is the understanding of how the international dollar system works, how leveraged it is, how that makes it susceptible even to small shocks, how a dollar collapse in international markets would play out in the US. Once the arguments and the numbers are shown and it is possible to convince a professional of the dangers facing the dollar both as reserve currency and the currency of the US, only then is it possible to make the argument for gold as anything other than another paper airplane to ride in the markets. Perhaps you will start a presentation of the qualitative issues regarding the
dollar (rather than gold), interspersed with the data you may want to quote. I am currently working on the data to show the details of the situation."-------------

The best indicator one could find to advance the warning of a reserve currency breakdown is the fall away of price inflation after decades of local currency and debt expansion. To observe the history of paper money is to view it's constant loss of value as expressed in the price of daily things. Weather backed by gold or nothing but "a dream", no world economic power has ever let it's currency increase in value for the long term.

The only way any currency can, in the short haul become price inflation neutral is through the demise of it's competing moneys. This effect is seen as an increase in the holdings of one major currency and the corresponding sale (increase in trading velocity) of the displaced foreign money. In the case of the modern world reserve currency, the dollar, we look to the net increase of foreign holdings of US treasury debt. The proxy for holding US cash.

(Note: A table of this recently appeared on the Investech web site. I cannot reproduce it. Perhaps someone else can.)
From 1979 through 1994, the increase was always positive, but never in fully manageable amounts. From 1995 till mid 1998, the accumulation exploded off the chart as money competitors became the spending currency and the dollar the holding currency. It's well documented how this
effect has kept price inflation in terms of the local US markets from rising. However, this long trend also had the effects of denominating almost all world debt in dollar terms. This was seen through out the 90s and is considered the end time event that will break the dollar. Because the local American economic structure has always been finite, it cannot defend it's currency with the exchange of real goods nor represent the value of the debts of the entire world. The downside, not discussed result of this will be the complete destruction of the dollar as a reserve currency. This begins as an attempt is made to reverse the dollar holding process. The same chart above also presents a massive decline in net foreign US debt purchases beginning in 1999+/-. The trigger of this action was the successful establishment of a larger competing reserve currency, the Euro.

Because a world reserve fiat currency can only represent the tradable value of it's local economic structure, the world markets will now devalue most all debt based upon the dollar. This effort will begin a real "catch up" phase on the US price inflation front, even as dollar debt is burned
with a vengeance world-wide. This loss of the dollar vehicle will also bring the destruction of many contemporary derivative markets that priced commodities for their value as trading items, rather than their traditional good use.

More in a later time. Thank You FOA

FOA (09/13/99; 09:21:00MDT - Msg ID:13519)
Perception correction of last post.
------You do a wonderful job of writing and I often find my
information is just a reword what is said:------

Should be:
You do a wonderful job of writing and I often find my written information is just a reword of what you have said:

Just in case you received that on a wrong note (smile).

FOA (09/13/99; 18:52:08MDT - Msg ID:13574)
Cavan Man (09/13/99; 09:43:46MDT - Msg ID:13521)
I do not read "important people" wanting to know as being academics of any stripe. Am I correct?

Cavan Man,
To the best of my knowledge, the ones that initiated this were major oil producers. Strange as it may seem, the very first questions came from a US natural gas producer in 1985+/-. Later the initiative came from outside the US. Again, all of this was some time ago.

Leigh (09/13/99; 10:10:48MDT - Msg ID:13526)

----- if our policy makers were heeding any of this, we wouldn't be in the fix we're in. The Europeans and perhaps others, it seems, are doing a better job of protecting their economies and citizens. Our leaders are fiddling while the dollar begins to burn.-----------

Leigh, I think that every economic block lives out it's own timeline. These things have occurred through out the human existence. Even when gold was in use as money, I might add. Who is to say that Europe will not be in the same situation 50 years from now? Each generation has to find it's place in the life cycle of currency events. Ours (if I live long enough) finds us in the beginnings of a
transition. Those before us were perhaps in the middle and found the turmoil of nations as the striving to save what gold standard existed.

Obviously, gold plays a major roll in transporting ones savings across the stormy seas. That's easy to say for those that possessed gold even 60 years ago, much more so centuries ago. The more recent owners did not lose money in banks during the liquidity crunch of the 30s. Yes their
gold was taken by law, but their wealth was largely intact if it was held as gold "in hand" (or gold certificates "in hand", as the dollar was). The function of physical, saved the day.

Today, savers face a unique circumstance. Never before in history has a generation grown up essentially using a world fiat reserve currency. Many of our present elected officials are but a decade or two more in age than the mass of humanity they govern. I wonder how many of them are a good study of economic currency history?

----When you said, "Our goal for certain individuals--------

As above to Cavan Man.

---This last post of yours was so sad for us Americans.---

Perhaps yes, or no? People in many countries have managed through currency turmoil. I think many Americans will be a quick study in this area. Many still retain the "spirit that won the west" (Farfel?)!

TownCrier (09/13/99; 12:49:24MDT - Msg ID:13540)
Russian govt signs ruling on 7.5 euros/tonne oil export duty

TownCrier, I don't think we are far from the usage of Euros to price oil. Later the settlement in Euros will be seen as a "natural progression". It's interesting to note how the oil prices have firmed only months after the Euro has found it's base line. Most will write this off to luck. However, this Horseman is riding well in the saddle. Michael, if this rise continues, can a dollar problem be
avoided? We shall see.

thanks FOA

FOA (09/13/99; 20:46:56MDT - Msg ID:13591)
ORO (9/8/99; 8:24:51MDT - Msg ID:13029)

--------Note that since the US has a higher interest rate than the rest of the G7, excepting the UK, there is a disadvantage in US non dollar denominated obligations that has accumulated via the carry trades. The profitability of the trades was based on the fact that they produce more $ than they consume SF, Yen or Euro, by a hefty margin, thus producing another supply of dollars. The meaning of all this is that the US has to export $ as debt payments even if the US were to stop its trade deficit in its tracks. ------

This process has/can feed on itself. If it was not for the foreign Central Banks buying up much of the excess dollars created by our trade deficit, the "past" US interest rates would have been even higher. Today, the ECB has largely withdrawn from this supporting function. See the chart of total foreign net US debt purchases I offered earlier(if you have one?). It has now fallen back to 1980
levels. Without the private foreign citizen purchases, it could be considered that a run on the dollar has started.

This is leaving mostly the hedge fund community to use their 100 to 1 leverage to further accumulating US debt in the carry trade. Yet, these private international funds are not CBs and their trading can benefit the dollar debt only so much. If the market reacts against them they (unlike
CBs) must close out or seek support. From this viewpoint we understand why the Fed is now buying so much debt in open market operations. Truly, they would feel better about it if it was done for Y2K concerns.

You are right in that the exporting of US debt (using carry trades?) adds to our payments deficit. However, I suspect that the US Fed knows that most of this debt will return quickly as these trades are unwound. The negative effects of "outbound dollars as interest payments" is a minor concern when faced with the eventual aspect of buying in all of this "leveraged debt" that has no other home.

With the BOJ now backing away also, any sudden rush of additional dollar export needs to fund foreign purchaces could initiate a crash in the fund sector. I believe the present rising oil prices are just such a play against the dollar. Even though the rise in oil prices still increases the need for more worldwide dollars to settle sales, the rise in local US inflation will force the dollar down at the same time that the fed must buy massive debt. Therefore, rates will be forced lower or held in place until
inflation is completely out of hand.

As for the Hedge funds: One day, falling exchange rates for the dollar against the Euro, will force the Forex markets to spread this drop everywhere equally. That fails their leverage from existing carry more so than a rise in rates. At some strategic point in the middle of all of this a voice will be heard that asks for the settlement of oil in a basket of items (dollars, Euros, gold?). This trigger will
unleash a dynamic more far reaching than the first series of OPEC oil repricing.

--------My current quest is to determine the speed of the action and its timing, without regard to non-US financial or political events that may cause renewed flight into the dollar (China devaluation, War in Europe or Asia, tc.). ---------

I believe a worldwide dollar retreat has started. Hedge funds are trapped into liquidating Yen carry positions at a loss. With the FED already buying this returned debt with both hands, there is little they can now do to slow the rise of the YEN. This rise in the YEN will bring further turmoil to the Asian block and start them moving towards the Euro and gold. Eventually, the imports of physical gold into Asia will create the premium in "street gold" that also breaks the paper markets. We shall see.

More later. Thank You FOA

FOA (09/13/99; 21:16:22MDT - Msg ID:13595)
Be back later.
Cavan Man (09/13/99; 20:20:48MDT - Msg ID:13585)

------is mauled and rucked through the scrum coming out betwixt the legs of Aristotle and back into the possession of FOA ------------

C Man,
I received a few cuts and bruses fighting for that one! At first I thought you were using "runic" characters on your keyboard. Bad eyes, you know. Thanks for the run.

Not long from now, I hope to explain things using real events. We will see. FOA

FOA (09/14/99; 07:52:20MDT - Msg ID:13612)
SteveH (09/14/99; 05:29:06MDT - Msg ID:13600)

-----------This is from Ted Butler's Sept.5, 1999 analysis on the above web site. What I am miffed over is the contention that Central Banks have leased up to half there gold. I thought and believed that the Bullion Banks were the lenders to the markets and that the CB's were lender's of last resort or Guarantor's of these loans and therefore still had there gold. ---------------

Hello Steve,
I don't believe Mr. Butler is right about this. His viewpoint is not uncommon, as many gold analysts also think the Cbs have actually moved their gold. I will not fully repeat my thoughts about this, but will make a few comments.

Yes, some gold has left the CB vaults as it was sold into the marketplace. Weather it was as outright sales or outsourced as leases, that gold was used to supply "real demand". If we look clearly, most of the "outright sales" were done by countries instituting policies that more closely aligned their currencies within new and old economic blocks. Belgium into the EMU or Canada into the dollar sector. Even in these cases, the "real demand" for gold could have been other CBs buying.

Gold sold as "leases" was also real, but in a very small amount. The industrial demand for gold is not that large that the deficit could not be supplied with the draw down of private world stocks. That is investors selling gold and buying paper gold IOUs. Also note that any investor demand for physical gold sold in the leasing process would find that gold left in the CB vaults with only the title
transferred. World players, buying on that scale do not move gold around. Never the less, CB gold held as "storage" would definitely not be counted as Treasury stock.

The WGC has said several times that the "NET" draw down of world CB gold holdings amounts to only 300+/- tonnes over ten years. That 30 ton per year looks about right when one considers the flow of large bank bullion bars into the melting pots.

The CBs would never hold that many "gold receivable" notes as a percentage of actual holdings. Some, yes. Thousands of tonne, never! In some countries, people disappear and are never seen again for doing less of a deception. Ask Cmax?

The CBs still hold and own their gold. They have given their "good name" to guarantee delivery if needed, but until that bridge must be crossed, the gold stays put. This will all come to a head soon. In that time the paper holders of "uncommitted gold" will find that "unsettled market conditions" will allow BBs and CBs to settle most of the ownership problems in cash. This is why a true short
covering rally will mostly fail. However, the resulting blow to the markets will destroy the present gold system as we know it.

There will be bitter feelings by many "thought to be gold investors" when some people have real gold that is soaring in price on the street as the world financial system turns over.

Also: Stagflation? It was never a word in the English language until the dollar went off the gold exchange standard. Prior, there was currency inflation (with price increases) or currency deflation (with prices falling). Explanation: Economist of the 70s would not admit that a currency could not be controlled if operating outside it's connection with gold. Yet, the early stages of a currency
inflation produce the exact same effect we were having. Could not be inflation, so it must be a derivative! Call it stagflation. Much better for the ego! (Smile)

Thanks for posting so much good reading. Now onward to ORO. FOA

FOA (09/14/99; 09:37:13MDT - Msg ID:13619)
ORO (09/14/99; 06:05:14MDT - Msg ID:13603)
FOA $ Death spiral
--- Note that the increase in interest rates from 4.75 to 6% increases $ outflow by 25%. -----

ORO, this is the real glue that holds the FED in place. One of the reasons the DOW "was" allowed to run so long. The old treasury chief, Mr. RR was big on moving US maturities into the short side. Much money was saved here and made things look better without exposing the risk that rising rates would produce. Now the game must go into uncharted territories as any rise in rates spikes not only the foreign payments flow, but blows a hole in our "new national budget surplus"! The long bond at 6% is bad, but it's the short side that moves the effects so quickly down the pipe. Foreign players know this and will run before the act!

Persons that really know Mr. Greenspan think he now must allow the dollar to fall in order to lower the DOW. Some say it's the lesser of two evils. I think it's the least of three dozen evils.

-------------The next issue is the "eurodollar" the non-US $ denominated debt.
1. Emerging Market $ demand to settle $ debt. This has been one of the major sources of support for $ value. (c) Currently, there is a movement of some countries to replace $ debt with Euro debt, reducing it further. This will no longer provide support for $ value against real goods and the currencies of the EMs.-----------

Absolutely! I used your (c) because it has, for myself, the most effective dynamic upon the dollar value. It leaves the Eurodollar base with no purpose. Foreign CBs must take it in exchange for their local currencies because the open market would quickly discount this arena. Yet, the CBs in the EMU no longer have any need for US reserves? I think Another had it on mark when he said they would eventually dump dollars on the market and buy gold. At the same time building the Euro structure. The problem is they will not be using the LBMA. Still another reason that the bulk of the
Swiss gold sales (if they happen at all) will eventually be done for Euros, not dollars.

I think, every time the Euro buys another gold ounce, a dollar will be sent back to the US. If trade restrictions block that flow, they will literally burn cash in the streets. The rise in gold and Euros will more than replace the lost reserves. I read this point in your next item:

---------2. 16 odd $trillion more in Eurodollars have accumulated and compounded from the current accounts deficits of the last 30 years. (a) No amount of interest earnings would be attractive enough to keep it from "going back home" to bid for whatever it can buy. (b) much of it is going to "money heaven" as loans are repaid or replaced with Euro and Yen loans. (c) The small remnant is a cash account that will be spilled into the market.--------

Also, you say:

-------I think the oil backing for $ will fade rather than turn overnight, in the interest of not aggravating the country with so many fighters and bombers in the oil area. (a) Some will buy Euro, (b) much oil will eventually trade directly for Euro. --------------

This will all depend upon how serious Iran and Arabia become. Your assessment is right if they remain distant partners. However, world affairs have a way of changing motives. They may join the EMU, directly. Could you imagine the ECB and their central parliament not openly courting such a move? I also doubt the US would stop defending the region, even if they went off the dollar standard. In a future context, with the dollar already down, such a move might be accepted by the US??


Very interesting!

-----FOA, What do you think is the likelihood of the EU, Japan, and oil producers keeping things in slow motion? How likely do you think they are to succeed?------

One chance in ten! (smile) I think a breakdown will rapidly proceed into perhaps a 20% destruction phase. Then governments will lock up the entire trade finance picture. One of the reasons I believe a Eurozone investment will work better. They will quickly align with China and Lesser Asia as a closed trading block. One of the reasons Japan does not want to create a currency block in their neighbourhood. Their other players would "cut and run" to Europe at the
first sign of dollar destruction. Japan is with the US until the end and will suffer the same fate.

-----Note on "Secret POG", a $985-1000/oz implied price from balancing the current accounts with US sourced gold debt was steady within a +/- 2% band over 1995-1998 Q3, through all the volatility. The implied price seems to have risen rapidly since then to the $1500 range. Numbers are still preliminary and are a "work in progress" without my full confidence.----------

Another knows much more about this. Hopefully will get into it when he posts again.

ORO, these are extremely interesting times. Especially if your holdings are not at risk. I'm leaving for a day or two and will read / post later. Thanks FOA

FOA (09/14/99; 09:52:15MDT - Msg ID:13623)
last note
Chicken man (09/14/99; 09:13:37MDT - Msg ID:13615)
-----------Your statement: This is why a true short covering rally will mostly fail.

---------This whole event is kind of like sitting in a rocking chair on the porch and watching a grasshopper ....and wondering when the grasshopper will jump.......after a while you get to thinking the critter will never jump! that point you take your eye off him for a second....
then he jumps...!--------------

Hello Chicken man,
I completely agree with your view of investor emotions. They will try to enter this area "come what may". However, I see the very people that create this marketplace as standing ready to blow up the whole porch if that damm insect moves.
They have too! They are the marketplace and if they are destroyed with an upmove, the market is gone anyway. Let's watch this progress. Believe me, I would rather see the paper market run to $10,000 over several years. But my wealth and my wishes are in different worlds.

gone for now FOA

FOA (09/14/99; 13:01:37MDT - Msg ID:13634)
My flight cancelled! Be back here later!
Something is going to give soon!

Gold Sep 14 1999

Bid / Change

1-month 4.7800% + 1.0000

2-month 4.6400% + 1.0500

3-month 3.9100% + 0.2500

6-month 4.3410% + 0.3000

1-year- 3.7460% + 0.1980

FOA (09/14/99; 16:46:40MDT - Msg ID:13646)
TownCrier (09/14/99; 11:35:45MDT - Msg ID:13630)
----DUTCH CENTRAL BANK: NO IMMINENT PLANS TO SELL, LEND MORE GOLD London--Sep 14--The Dutch central bank has no imminent plans to sell gold or to lend more than the 150 tonnes it has already committed in the market, -------------

Here is a good example of wording in a statement that says exactly what they mean. Of course, the media may be writing this out of context. Just as Michael pointed out, they may not have asked the right questions??
Unless someone actually saw a truck leaving the Dutch central bank with 150 tonnes of 400 ounce gold bars in it, I expect this bank is "committed" to supply gold the market ("if needed" to support a lease).
Also, if MA is short 200 to 400 tonnes of gold, was it only a paper short with another group of "bet takers" on the other side of the fence?? Would CBs actually play with these people, or did this fund work only through BBs? With thousands of these private hedge deals out there, this could
become some mess!

FOA (9/15/99; 9:04:23MDT - Msg ID:13672)
PH in LA (09/14/99; 17:22:21MDT - Msg ID:13648)
SteveH (09/14/99; 19:25:41MDT - Msg ID:13652)

PH and Steve,
Not long ago I wrote a post to PH about "the final convulsion starting". I thing this PRINCETON deal could kick it off. The repost by SEQUIN from Kitco is a good explanation of how entangled these things can get. Someone here (or somewhere) mentioned that because this is a
criminal involvement, it will not be handled as quietly as the LTCM affair. Indeed, the first of many affairs to be revealed!

Part of SEQUIN:
------Princeton has sold the GOLD borrowed from bullion dealers ( JP MORGAN is the mostprominent of PRINCETON's counterparts ) to invest in leveraged transactions.-----

Steve, In my FOA (09/14/99; 07:52:20MDT - Msg ID:13612) I made a point about how important it was weather the CB vault gold was actually moved in these deals. Again, some of gold is actually moved from the vaults and sold into the open. But it's only a small part of the total structure in the paper gold markets. Sequin's post also makes a point that this hedge fund does deals with a BB, not the CBs. In most of these deals, the BBs are sourcing the gold from world private stocks and using the CBs as the backup. The private investors (who supplied the gold) can then hold a bank certificate, committing the institutions word that gold is credited to the owners account. Both understand that gold isn't in the account but the banks reputation stands behind it. In return, the owner can divert 95% of their old gold capital into other more productive markets. This is how the game is played and it is compelling for holders of old-line gold stocks.

The CBs name is on the deal to ship gold in the event of default. Hence, the low interest rates they (the CBs) receive are nothing more than a very high fee for the use of their name. I put this in the open now and it should tell a new story for everyone. This latest event allows another chess player to be moved on the board. We see better down the trail.

The real problem is not the return of gold to the CB, rather that the CB may actually have to tell it's citizens (using public bookeeping) that they now must write real "ownership certificates" to the BBs. I'm telling everyone "it is not going to happen"! As the owners of the gold certificates, written by the BBs, begin to get nervous, they will liquidate their invested moneys and send it to the BBs
asking for "clear title accounts", replacing the "gold credit accounts". This is where "it" hits the fan!
After years of building these accounts, the BBs now must buy "real street gold" (Thank You Mr.H.) because the CBs will force them to. The Euroland banks (like the dutch item below) will no longer expand their commitments. Weather the BBs borrow it (creating a huge liability for themselves in the process), or buy it from a physical dealer, it must be in "block form". Spot, paper, IOUs will not do.

The impact on the established gold paper markets will be as such: They will try to cover their liability by selling as much "long" "in the distant delivery" gold paper as possible before the market fails. This is why the paper gold markets cannot reflect a spiking, "demand driven" physical gold price in this circumstance. Yes, Mr. "Chicken Man" (USAGOLD poster), the public investors may try to run into the various gold futures markets, gunning up the OI and creating a maybe short-term spike. However, they will be meat with an ocean of selling that ironically, is based upon the demand for real gold???? The lease rate spike is the only paper present indication that physical is in an outright corrnered situation!

Having said all of that, I point out that the Dutch central bank (yesterday) further clarified their 150 tonne commitments to gold leasing. This is in addition to my comments from FOA (09/14/99;16:46:40MDT - Msg ID:13646). (here is part of the later article):

--Dutch netted $100/oz in interest from 1992 gold sale---
Updated 10:10 AM ET September 14, 1999
By Marius Bosch
LONDON, Sept 14 (Reuters) -

The Netherlands currently allowed up to 150 tonnes of its gold reserves to be lend into the gold market, Lamers said.
"An important consideration in planning an expansion was that our share in the size of the gold lease market should not become too large.
"We increased it to 150 tonnes in the course of 1997 and it is likely to remain there for the time being," he said.
Lamers said criticism from producers over the activities of
central banks in lending gold is difficult to fathom.------
So, what do we gather from this statement? Yes, they could have shipped the gold. OR: They could have shipped part of it. OR: They could have it "committed" to the lease market as part of a leasing deal?

As these deals begin to fail from major currency fluctuations, the fallout will become to big to cover up. We shall see.

Also: Leigh (09/14/99; 14:02:03MDT - Msg ID:13636), Leigh, flight to LA overbooked?

More later FOA

FOA (9/15/99; 9:55:12MDT - Msg ID:13675)
If you saw my post FOA (9/15/99; 9:04:23MDT - Msg ID:13672).To continue our discussion:

Using the BBs as pipelines, we can see how gold was sourced from many private western accounts and sold to entities wanting physical holdings. Because no account or trail was ever produced to indicated the flow of this gold it created the perfect avenue for accumulation while
moving the world price lower.

Attention was never focused on who or where this gold was going, because everyone only wanted to know the whys and whatfors the price is going down. Yet, here we are, in the last part of 99, the Euro is firmly established, ECB gold commitments have fallen away and what is the result? Oil is rising in dollars, against all odds! The gold for oil deals are over, leaving the LBMA in a pickle and the new Euros for oil is in the works!

I expect the dollar / yen market to wipe out the currency carry trade for hedge funds and in the process lock up the gold carry trade. Small buyers can still get physical gold, but large players will be competing with the BBs for the big bars.

Look at how the Yen perception is blowing up in a media item yesterday:

---Fears of capital flight
The fall in the dollar is being driven by fears that foreign investors will withdraw money from the over-valued US stock market and put it into foreign securities, especially in Japan, where the Nikkei index enjoyed strong growth this year.

Japanese investors, who have funded much of the US trade deficit by buying US government bonds, are believed to be repatriating substantial amounts of capital.

"Foreign investors are asking themselves why they should keep funding the US to consume itself silly," said Tony Northfield of ABN Amro Bank.

The falling dollar could itself precipitate a sharp drop in the US stock market, which has been boosted in the past year by a massive influx of foreign funds and the strong dollar.-----

Michael's report today is "on point" USAGOLD (9/15/99; 9:35:08MDT - Msg ID:13674).
Did anyone see the film "Rollover" with Jane Fonda? As incredible as it may seem, it's almost exactly what is happening? Someone mentioned it to me and I found it ironic.

More about your GDP and other figures later. Thank You FOA

FOA (9/15/99; 10:23:07MDT - Msg ID:13678)
Cavan Man (9/15/99; 10:05:19MDT - Msg ID:13676)
And then gold will be re-priced, "just once (one time)"?
Oil moving into Euro denominations for contract settlement.
Russia's recent announcement a harbinger and confirmation right?

Hello Cavan Man,
I remember Another's old analogy. Don't take it completely in one context. It's a broad based
statement. In other words, our recent perception of gold value is in the $35 to $800 range. Later,
that will change to the $3,000 to $5,000 +/- range as either governments, black markets, or
commerce in general revalues gold into it's stand alone money function. Not is recent past
involvement with currency paper.
We'll see much more oil /Euro stuff coming out later. The Russian note is but one minor opening

FOA (9/15/99; 13:33:18MDT - Msg ID:13692)
RossL (9/15/99; 10:39:50MDT - Msg ID:13679)
FOA clarification please
FOA in 13672 wrote:

-------I would like some clarification on this, since it seems you are predicting much mayhem in the paper
marketplace. I assume the word "they" in the above quote refers to bullion banks caught short in a squeeze. By selling into the distant paper markets, they (BB's) would just be postponing the day of reckoning while they were confident the manipulation game could be resumed after a spike in the POG. Or is it your implication that they (BB's) wish to commit fraud by intending to default on these paper obligations when the paper market collapses? Settling the obligations with paper money while sitting on physical gold?-----------

Hello RossL,
I think your term "Mayhem" will fit just right. How long will it take for us to evolve into that condition? Could be "right now" or "over many months". My view is that we are progressing into a convoluted state. Are the BBs doing anything wrong? No way. They are operating in the confines
of the system as it is set up. I think, Another was, all along, trying to imply that this perception of
manipulation as seen by the industry and investors was really the reflection of a "false perception of what our modern gold markets had become". People thought they were working an investment angle based upon the usual "supply and demand" concepts with a little "gold is money / inflation
hedge" thrown in. The whole market has changed. The problem was that every time some $50 million asset investor walked in the door with, say one million to place in gold, he had to wade through something like a used car lot of derivative sales people. Never mind the guy has 49 mill still in his pocket, he was labled insane to put the whole 1 mill into physical gold. Use our products to hold this much in .............and then we can.......and don't forget the gold shares....and!!! You get the picture. The exact same happened to guy that had an old storehouse of physical.

Anyway,,, the selling we are seeing that's blocking the price on the established exchanges is the effects of the industry adjusting to a change in the marketplace. People win, people lose and life goes on. You and I would do just the same financially, as soldiers in a trench do when it's all falling apart. When out of bullets, heave your helmet at the enemy.

Any financial entity that is involved in the paper gold game will be buying, selling, hedging everything in sight, in any possible combination to raise liquidity if they are under siege. "Boys, forget how this will play out tomorrow, we must save today"! ORO knows how it works.

Ross, this will not play out exactly as I see it. Football games are fought all over the field, never won or lost where one referee threw the flag. Another only tells me where to look. It's up to us to make sure we see the whole field.

Thanks FOA

FOA (9/15/99; 13:37:30MDT - Msg ID:13693)
PH in LA (9/15/99; 11:16:33MDT - Msg ID:13681)

Question for FOA: When you posit "buying in the outer paper contracts" to cover the problem here in the present aren't you suggesting a spike in those contracts? Wouldn't that blow up the whole game just as well?

We are not dealing with just the Comex futures. There is a whole world of paper trading that goes on off markets. You never can tell if someone is neutralizing their trades in another arena? Unfortunately, it is true that the human reaction to a death in the family, is to grab control of as much of the family business money (or gold) as possible before the courts (or sec) lock everything up. We were not born saints. You and I have been there and seen that. No?

Again, anyone that holds rare coins or physical will stand outside the risk and view all of this as an interesting motion picture. Probably the best run of a screen play any of us will see! Anyone that starts a relationship with the USAGOLD will be dealing with a solid group for an enjoyable financial lifetime. Believe it.

Thanks FOA

FOA (9/15/99; 20:01:19MDT - Msg ID:13709)
ORO Msg ID:13683)

Excellent write-up! I have a few other observations that may be considered.

Your post:----------Morgan is probably borrowing either to sell to Armstrong's account or to have the gold in hand when Armstrong's loan comes due and it can't be payed off.--

This is the same thing that happened when several other small funds (no media news for them) went down. Their gold carry trade was covered by borrowing gold and paying short rates. Usually these deals eventually get signed off for year term at the then high monthly rate. The problem is that
the borrowed gold position has to be carried indefinitely by the bank. Someone (gold lender) keeps a "loaned gold" account open with them and the bank keeps paying interest. Recently, these sort of things are becoming more common and the banks positions of borrowed gold to cover lost gold is
growing. The LTCM deal is still out there, draining someone that has borrowed gold to cover that lost item. This is where a rising lending rate can become very damaging as these "rollover loans" get repriced. Now the Armstrong deal may develop another "long term" gold loan (200++ tonne??) to
cover more un-returned collateral.

Your post:----Remember that these are banks, and they will not own gold outright, ever.

True, they don't own gold because it's not part of their job description. Also, balancing risk is common business as they trade off income against outgo. But, they cannot hedge the risk of them having to "calling physical" from a paper market if the paper market can't deliver! Yes they hedge
the price as long as the futures function, but these "loan loss" accounts are for real gold that someone will want back some day. And this is now a growing bank loss position, not some deal with a fund.

Here is the area of real risk to the market creating power of the BBs. The gold loan accounts not backed by the CBs can blow up if major currency swings destroy the hedge funds. At some point, thousands of tonnes of "real street" gold would have to be borrowed by these banks in order to
return it to the private owners. Funny how a private owner of wealth will lend it to an institution for a business deal (no matter how risky it is) as long as the bank stands behind it. Yet, people "cut and run" if they think they are lending to a bank to cover it's loses.

Like I said in my #13672: -------'Weather the BBs borrow it (creating a huge liability for themselves in the process), or buy it from a physical dealer, it must be in "block form". Spot, paper, IOUs will not do. -----

The high lease rates may be attracting enough interested parties to roll over loans, or they may not. If rates keep rising as the YEN gets stronger (as they appear to be doing), it will signal a changed situation in the Gold carry trade. The simple Arab gold positions that work a trade for
interest are way to small. (I never acknowledge these because it confuses the oil/gold issue). To support a growing default in the BB trade will require the heavy depth of the government (oil) positions to save them. These (the real oil/ gold positions) will do nothing without ECB / BIS

Let's let this cook for a few weeks. If the fallout grows large enough, no amount of paper hedging will cover the calls for real delivery. I bet GS hits the OCT contract for more material ( if any is left by then).

Thanks for discussing. FOA

FOA (9/16/99; 9:42:28MDT - Msg ID:13774)
Aggie (9/15/99; 14:19:11MDT - Msg ID:13696)
FOA where does y2k fit into this mayhem? Was it supposed to be the scapegoat for the dollar collapse or was it not supposed to happen?

Hello Aggie,
I can't spread myself over too many subjects, but lately I've had more time. Your Y2K note is of concern, but I don't think it will be the disaster many think it will become. Some oil supply and end product problems, yes. Some banking functions lost, yes. Lots of government downtime, yes. Third
world, developing nation and trading partner upsets, yes.

Still, all in all, a big aggravation but no total loss of economic function. BUT, our place in the timeline of economic change could magnify these problems into a larger scale. Mathematically, we are ending the ability of the dollar to function as a reserve currency. It's debt load (offshore) simply will not expand any further. Someone's dollar holdings must be destroyed if another is to be
created. Hence, the major currency destruction in other countries.

Look at this chart (found it somewhere?) of the US trade deficit over the years. It's exploding now and should be performing it's past function of expanding world liquidity in proportion to it's yearly increases. It's not! We are sending dollars overseas in an ever larger pipeline and economies are still contracting. Japan is going down and the YEN jump is the effect of that continuing downturn. I don't care what anyone says, a falling YEN has always been a precursor of a rising GDP in Japan. Their currency only rose in 1985 because the G-7 forced it up. Otherwise it would
have fell in a normal context of their trade. Their whole structure is unique in that it is a sub function of the US economy. Their downturn from the early 90s is an example of the forces in effect that are taking the dollar out of reserve status. Again, people talk about the Yen being the foundation of a new currency block. Not if the major components of their GDP is a function of selling products into the US markets. If the US sinks, taking the dollar function with it, Japan will be mired in a 30s style

All of these cross currents are "out of norm" so the computer models keep turning out losing trades. The YEN carry is caught, big time in this. If the loses keep building right into the Y2K problems, public perception is going to be hurt as the media hurls this "new economic news" at them. Will K2 be the scapegoat, you ask? If this downturn gets a big as I think, the K2 news will be washed into the background as "not that important". And you understand that is saying a lot about how bad this may become.

Thanks and welcome FOA:

FOA (9/16/99; 10:40:45MDT - Msg ID:13775)
PH in LA (9/15/99; 20:48:44MDT - Msg ID:13711)
Unfounded rumour? Question for FOA (and others)
is no one going to even bring up, much less comment on the idea making the rounds (heard at a large, well known gold retail brokerage) linking the 200-700 ton (possible) shortfall about to be defaulted on by Princeton International with a rumoured Swiss offer to cover the deficit with leased metal?

Hello PH,
Sure, that will work! While waiting for the time to sell our gold, we can make some return on it by lending it to several BBs that are already paying loan interest on over 1,600 ton of previous loss covers. And yet if the YEN just stays where it is, some 2,200 tonne more would also be at risk. Don't mention what will happen if the YEN goes to 60?????? UH-OH, did I say all that? Must be another of those silly rumours going around.

It all just goes to show you how small these gold sale announcements really are. Not only that, why these real gold sales are happening at all. The BOE sales are only a stopgap measure to keep the system operating. They knew they didn't have anything close to enough gold to reverse the trend. Hence their banging on everyone's doors for more sales. I tell you the IMF "new deal" was a "MAJOR" reversal for them. The members of their gold association are going to be paying on mountains of reclaimed gold debt if someone doesn't hurry up and sell some physical before the paper gold market fully crashes.

Does anyone here see what I'm talking about? Is it no wonder GATA is barking up the wrong tree, thinking that the hedge funds are going to start a big short covering rally. The CBs and the BBs would take them out and shoot them before allowing these funds to cover outright. Oh, a run could get started, but it will quickly die.
Yes, the gold was sold and is owed to someone (mostly not CBs). But, if the funds lose the money created from those sales, the BBs and FED banks have no choice but to cover the bad gold debt. Still, at some point even they are way over their head! The whole gold price making system will have to fail and shut down completely before they would allow those loans to be market to a real "street gold market"! They will Mark those loan losses and carry them at $250 or lower to retain bookkeeping assets. Then keep paying interest to customers that won't have a dream of getting their gold back. Then shut the market down and the street price will zoom! Just wait and watch, it will all play out.

With all of this in the background, gold option investors really think their broker will be able to match sales and credit their accounts with profits???

"Hello, Mr. Broker, now that the world gold market has collapsed, I have decided I want to take delivery. Here is my money, please deliver the two Jan $360 Comex future contracts that my option says I can call. After that I want to exercise one $360 future for physical and close out the
other for cash.
What did you say? It's all shut down? But my coin dealer says gold is at $3,247.17 an ounce. I've got good profits on this trade. What, call the SEC and the CBT? I don't want to talk to them, hello,,,, hello,,,,hello???

PH, how's that for a silly rumour? (smile) Have a good weekend, all. I'm gone for a while. FOA

FOA (9/19/99; 20:23:17MDT - Msg ID:13947)

A few more parts to the puzzle may be falling into place. We might even say that the next act in the play is starting.
It's a foregone conclusion that the IMF has been forced to revalue their gold. Most everyone gives the US congress credit for this action. True, they did make it clear how the voting would go if a "sell gold" proposal came before them. But, the selling of gold was only one part of a larger
proposal to further fund the IMF. Given the terrible record of "good money down the hole", not only was the single debt relief provision for poor nations at the center of the funding debate, so too was the question of the existence and need for the IMF in the background.

The current problem facing the IMF is in justifying more member commitments that allow the continuation of their operations. It can be looked at two ways: 1. They either are in a squeeze for funds because the extraordinary failure of their policies now require much more money. OR 2. They have been put in a squeeze, more so because major member contributors will no longer support a policy of maintaining foreign dollar debt at the expense of nations outside the IMF/Dollar block.

Indeed, politically one must wonder; why support a system that is built upon a "strong dollar" policy for the benefit of only one country? This rift was opened wider during the last two years as the very "strong dollar policy" that flowed from the US, is the very catalyst that has helped destroy the assets in nations now absorbing most of the IMF flow.

A major item that has been part of this US support structure for the dollar was the G-10 policy on gold. The falling gold price, as seen in the world reserve currency has contributed immensely to the ongoing settlement of all trade in dollars. Indeed, the very continuation of the world trade system. Leading the dollar support component of trade was the use of crude oil settlement in dollars. That one item required practically every nation on earth to buy dollars (or at the least run a positive dollar trade balance with other dollar holding countries) to pay for oil. (NOTE: this post assumes the reader has retained the knowledge presented in the USAGOLD Hall of Fame posts)

If a low gold price (indicating a strong dollar) could induce an overflow production of oil, then oil prices in dollars would fall. A steady, neutral or falling price of oil was always an indication that the settlement of oil in dollars would continue side by side with the purchase of BB leveraged gold securities. In addition, the continued physical function of the established world gold markets was
paramount in holding this oil support for the dollar. When the day comes that the paper contract gold markets are seen as "in question", the flow of oil will slow and it's price in dollars will rise. From early this year, this process has begun.

The beginnings of this change was born in the success of the EMU. With that Euro creation, the ECB/BIS has slowed, stopped and now reversed it's support to lower the price of gold in dollars. In effect, for them, the worlds reserve currency position is now slowly changing towards the Euro.
Every day, new evidence emerges that shows Euro liquidity becoming as deep as the dollar with little threat of "dirty float" interventions in exchange rates. The fact that Euro interest rates have remained below the dollar rates indicate this currency's long term perception of strength.

The ECB can now slowly phase out dollar reserves as the Euro assumes more of the world trade settlement function. A function in and of itself, that will further lower the dollars world need, use and therefore value. Because the US still runs a trade deficit, it still ships a surplus of dollars to most countries. In today's new Euro world, the dollar exchange rate will eventually be forced to fall
enough to balance this flow. Further, a falling dollar will release ECB dollar reserves as fair game to buy physical gold from any and all entities. However, this buying will most likely be through the BIS and member CBs, not the over leveraged LBMA or world gold paper.

In addition; Because the Euroland external debt is very low compared to the US and they posses a positive trade balance, a rising price of gold reserves (in Euros or dollars) will support their currency with extra reserve value. Their policy of marking gold reserves to market (on a
quarterly basis) and eventually establishing a "true physical" marketplace offers every enticement to get the dollar (and Euro) price of gold higher. Because this process creates a unique reserve benefit, not used in the old gold standard. they will never officially back the Euro with gold. Rather allow a new "free market" in physical gold (not paper) to supplement their currency operations. The
efficiency of modern trade require a digital currency. That need alone will always support the use of a currency. If gold can trade beside paper money, neither will drive the other out of circulation (as old money gold coins did to paper gold money) as long as they can each seek their own
values. ( a very interesting concept??)

During the last several years, the dollar established gold exchanges created more paper gold than existing gold could ever cover. All done in an effort to create additional world support for a strong dollar. The middle of last year, it became apparent that the successful Euro launch would,in time remove most of the major physical (sales and lending and lending guarantees) support from this marketplace. The result was an IMF/dollar move to sell the physical gold of others into the paper gold arena. In as much as this supply would help, the continued further building of "fractional gold paper" has completely overwhelmed any ability for large physical stocks to cover it. I believe, the BOE sales have been part of a last ditch effort to salvage their London gold operations. Truly, the last round fired in this final battle.

Today, all roads point to a break-up of the world established gold pricing system, as settled in dollars. The IMF gold hoard is constrained to stay in place from lack of further world support for the debt of the dollar block community. The US has changed it's view of gold and views this IMF holding as the only asset that can still be used to support their floating dollar debt overseas. They did this because when a chain reaction of defaulting on foreign dollar reserve debt begins, the dollar would quickly crash!
In choice, the IMF must either release/sell their gold back to the original countries that committed said gold into the IMF, or revalue and use it as money. I think the USA congress knew they needed that gold to remain in the IMF system. They used the "gold fire sale hurting debtors"
story as a political ploy to block the gold returns. Let's face it, IMF members would have been glad to return unusable dollar reserves into the IMF for gold. Especially with the ECB thinking of buying other CB gold through the BIS using Euros! In any event all now know, the IMF gold path has
been chosen. This will become the trail of no return for the dollar.

Each new revaluation and money usage of gold will bring further reductions of member dollar support for IMF operations. Perceptions will slowly change, especially when oil is seen priced better in a gold "friendly" currency. In a reverse of policy, higher gold will bring cheaper oil. With each further IMF budget reduction, gold will be revalued again higher to create more reserves. One has but to grasp that this is no longer subject to SDR (also a dollar/IMF creation) paper calculations. This is the absolute revaluation of physical gold for official world debt settlement. The SDR articles will slowly die in this atmosphere. As will the Arabian currency link to SDRs. Perhaps a link to the Euro or complete EMU will occur?

Today, gold has just become set free as "money". In time, officials will review their need to "lend" gold for a return, where as they may "revalue" gold to create a increasing reserve source. As gold rises, there will be "no contest" in this conflict of thought.

With physical gold being quickly withdrawn from a position of support for the established world paper exchanges, the imbalance will become very visible in "lending rates". As these rates rise, the gold pricing market as we all know it will grind to a halt. I am sure it will be closed for "renovation", use your best imagination. In 1968, on 15 of March, the US asked for the closure of the London gold markets. On 1 of April it reopened, fixing in dollars for the first time. This time I expect the official dollar gold markets will not reopen for a long time.

It was pointed out to me that our great world gold market is the most liquid it has ever been. The members have many reserves and even insurance companies to back them. I completely agree! They will not fail one investor with the lack of cash settlement for all remaining, unsettled claims.
The dollar/IMF block of countries will print whatever money is needed to clear out this arena. Just as the US, once before called in gold and settled up in "local gold backed cash" because the foreign dollar gold loans had failed , this time will they call in "real gold paper" and settle in "absolute fiat cash".

Some say gold will be confiscated! I reply as in the "Bear Joke" about two hikers confronting a bear. I don't have to out run the bear, says one to the other, I only have to out run you. My friend, in that day of gold turmoil, I will hold my gold and have but to only outrun you! For people with goods to sell will SEEK MY GOLD FOR ECONOMIC TRADE, not the government collection man.

Buy physical gold to hold. In the time to come, this money in the hand will out perform any investment you have every known. Few today accept just how high physical gold will rise. Be a part of the "physical gold advocates" and tell a story your grandchildren will grow tired from
(large smile)

Thank You for reading FOA

FOA (9/20/99; 17:03:25MDT - Msg ID:13998)
(No Subject)
A quick note to say "thank you" everyone for the response to my post. I will be back a little later with several replies and further discussion. FOA

FOA (9/21/99; 8:45:42MDT - Msg ID:14031)
The Road to $30,000
Peter Asher (9/19/99; 22:10:12MDT - Msg ID:13951)

Thanks for offering your comments and reasoning. We are entering a period unlike any of recent experience. Using the Western view, we rely on our own extended family lifetimes as a history reserve to build a perspective for upcoming events. After all, America "the new country" has been a
financial power for only half it's lifetime. The recent hundred years or so does not present an honest picture of true human financial dealings. The world has been recently dominated and fixated with the use of one currency system to express all world trade dealings. Yet that system has repeatedly failed the test of measuring it's function in gold.

This time period holds no tested precident and only shows an onrush of changes in a kind of high speed evolution. As such, all of our present acceptance of holding each others debts, as "evidence of real wealth" has never been tried in fire. Each controversy was meet with more promises of a better tomorrow, only if we accept just a little more debt as savings. Again, to date that debt has
never been measured in the real purchasing power environment of a "great" world economic downturn. Rather, it has always been held and measured within the realm of "good times". It's only during a "real downturn" that your wealth "quality" is measured in a comparative true historical
backdrop. Not the brokerage reports that hold that the early 70s was rough!

This generation will experience what happens when a competing medium is allowed to function beside our accepted measuring stick (the dollar). The resulting contraction into a "normal" world trade environment that destroys bad "economic functions" will leave the current dollar system in

Many seem to express a sense of loss with this view point. I submit that you can't lose what you never owned? When an entire society upvalues their savings (stocks, bonds, savings accounts) because the world supplies them with real wealth in exchange of their IOUs; those savings are always open for revaluation in the event the IOUs are no longer accepted at par. Shifts in world financial structures render uncertain times. Those times require the valuation of assets upon what they will buy "now", not what they purchase in the future.

Events proceed, with or without our understanding of them. In the past, those without understanding held physical gold and slept well without knowing why. Such will be the case for many during this "Time of Transition".

Thanks again, and keep poking a contrary opinion through every hole. The football game is won on the entire field, not just where the water boy like myself stands. FOA

FOA (9/21/99; 9:04:24MDT - Msg ID:14033)
el St.One (09/20/99; 02:22:29MDT - Msg ID:13958)
I think you and I must have gone to the same school, and travelled some common roads. Wish I had stayed awake more, so I could express my thoughts half as well as you do.

Thanks El,
I'm glad you make something of it. This English language is tough to master when discussing a difficult subject. The "common road" we will most certainly share will be the one to $30,000. No sleeping in the front seat on this trip!

Gold, Yesterday, Today and Tomorrow

FOA (9/21/99; 9:06:53MDT - Msg ID:14034)
Aragorn III (09/20/99; 04:02:26MDT - Msg ID:13959)
A simple view...

Hello AIII,
My good man, a simple view? And expressed for everyone to see? Yet it required such a talented mind to create. Thank you for taking the time.

On the road less travelled.............. FOA

Aragorn III (09/20/99; 04:02:26MDT - Msg ID:13959)
A simple view...
Your hard work finds its reward according to what effort you choose. You may stack, then unstack stones, or carry them randomly, gaining nothing to show for your labour other than a salty brow. But if you stack stones with a PURPOSE, you will gain a wall. Or, you may break the ground and plant seeds, battling weeds and nature's many competing hungry mouths. There is no reward during the growing season, but the bounty gained from the final work of harvest compensates for all.

As demonstrated with the stones, if there is no meaningful purpose to guide the effort, there follows no meaningful reward. But each carefully placed stone brings you incrementally and irreversibly closer toward the real wealth of a wall and lasting shelter. As seen with the garden, each nurturing effort is made with good faith and much hope held for a successful future harvest. While many uncertainties of nature offer calamities beyond the gardener's ability to defend, it too often happens that a sudden event (hail storm or untimely frost) renders for nought a long series of otherwise purposeful efforts.

Money allows for the division of labour such that specialists may participate incrementally in a purposeful
process of efforts, and yet be able to share (in due measure) in the wealth created through the combined efforts. A stonecutter and bricklayer may each participate in the building of many walls intended for the use and benefit of others. It is the meaningful payment of money that allows them to willingly walk away from the real wealth of these walls finished for others; receiving as substitute the equivalent wealth in traveling form. Similarly, a planter and an irrigator may walk away from a maturing field after accepting a meaningful equivalent payment of money for their appropriate earned share of the total real wealth to be reaped by the harvester alone.

Money is seen here as the portable proxy for real wealth. Payments received may be viewed as equivalent to the incremental efforts made toward the finished shelter or the mature crop. As you take care to provide a meaningful effort within a civilization of divided labour to merit some payment, so too should you take care to ensure the money you hold is a reflection of effort of a kind that is meaningful, certain, and IRREVERSIBLE.

Accepting Monopoly money when working for others is as moving stones randomly without have the sweat on your brow to show, and no more.

Choosing instead one of the many national fiat currencies is better than Monopoly money, but it is a money akin to the efforts at gardening during the growing season. The culmination of a long series of meaningful efforts may too easily result in "no harvest" from events beyond your control. With actual gardening, the lost efforts of one growing season may be a blow you might painfully absorb. However, with this "garden of currency", a failed harvest negates not only one season, but indeed may destroy a lifetime of efforts.

Best of all choices is that for gold. Each payment held as gold is akin to building a wall for a shelter--an irreversible placement of stone, ever progressing toward successful and certain completion. Or put in terms of the garden, gold most nearly represents the successful harvest, completely avoiding the risks of the uncertain growing season.

Do not make the mistake of trying to compare the "performance" of money with the performance of stocks. To have a stock is to have spent your money on rights to a share of a corporation's profit, if any. You are buying partial ownership of other construction firms or agri-businesses. If no dividends are paid on earnings, then you must question the merits of holding a share of such a corporation. Perhaps you are relying upon the "greater fool" theory, hoping to sell at a higher price to someone else. Or perhaps you hold with hopes of future dividends to be paid on future earnings. In turn, consider the wisdom shown in their own choice of monetary earnings. Do they transact in Monopoly money, or pesos, or roubles, or dollars...and what happens to the fortunes of that corporate entity when an unstoppable hail storm damages their cultivated garden of currency? Any corporation may either prosper or fail, and perhaps your stock with perform accordingly. But it must be recognized that it is money that facilitates efficient markets, division of labor and specialization. Sound money held simply as the ample reward for your labours should not bring you a feeling of shame for from further investment risk on other Builders and Growers Incorporated. Invest a little according to your desire? Sure, but not all.

You should know by know that interest on money is not an inherent parameter of the money itself, but is instead a product of business arrangements, most often found as a share of profits made by banks that risk your money on investments of their choice (typically writing loans). You may keep paper cash in a shoe box, or gold in a shoe box, or invest cash in a bank for interest, or invest gold in a bullion bank for interest. This is how you must evaluate the merits of gold; against other moneys (fiat currencies). There is no fiat currency to be found that bears now a greater value against gold than it did upon its birth. Simply observe the face value printed on any old gold coin to see how far that same stand-alone unit as a fiat currency has fallen. Twenty U.S. dollars, and also twenty Argentine pesos, were once equivalent to nearly one ounce of gold. Eighty German marks was once equivalent to nearly one ounce of gold (the same mark that a short time later intermediately fell to approximately one-trillionth of its former value!). One British pound sterling was once the equivalent to one gold sovereign. One-hundred French francs was once the equivalent of nearly one ounce of gold. Any check of modern gold "prices" will show that these many currencies have fallen significantly in real purchasing value after separation from their original gold definition. Some currencies, notably the dollar, has recently gained back some of its steeper losses only because a current inflated supply of "paper gold" is being priced into the market. (This has been thoroughly discussed at this venerable round table. And further, history reveals that such developments are resolved by a "run" of the competing owners for the limited asset.)

Here is an important "hint" to help your view. Gold need not bear the mark of any national currency to "gain validation" as money. As seen in the preceding paragraph, at one point in time gold held concurrently the many names of dollar, peso, mark, franc, etc. Many names or none, gold remains the same as it ever par excellence. Examine the economic climate of the day and choose your allocation of monetary wealth among currencies and investments accordingly. You will find one question to be more pertinent than others...

got gold?

FOA (9/21/99; 9:55:21MDT - Msg ID:14040)
SteveH (9/20/99; 5:55:11MDT - Msg ID:13961)

The comment I saw was prompted me to comment: I got the
impression that Another is now reflected in your words, indicating a passing through of ideas. In other words, he seems to be corresponding privately with you and we see some of this in your recent words.

Hello Steve,
Yes. When time allows, he will be in here. Or when I say something wrong (read that stupid). He has never been interested in overstating where we are going. Time to rest until events evolve to the next stage. The politics of world money is like chess, one player makes a move and they wait
for the counter move. Will the BIS make their move to buy gold from CBs in conjunction with the ECB? Did they not buy at $280 ($25 higher from here) because the Euro was still unsteady? Or will they wait as the current paper gold markets burn themselves into oblivion? Will the oil
producers utilize gold in a basket of currencies (perhaps the Euro is a basket compared to the dollar?) as they reprice crude? Or will they wait until the SDR is a complete fiction and useless from IMF workings?

Many things are still on the horizon. Exciting times if your wealth is not at risk. Thanks for your
efforts, FOA

FOA (9/21/99; 10:01:04MDT - Msg ID:14042)
The Road to $30,000
PH in LA (9/20/99; 12:33:17MDT - Msg ID:13984)
India's Gold Plan: More Reckless Abandon by the IMF
Where will it all end?

Everyone is holding up the new India plan in the light of BB gold loans. Don't be so sure it's headed in that direction. Banks in India can lend currency against gold holdings. It's not entirely viewed as a currency asset, but it is seen as a worthy collateral to be held as reserves. As such they don't have to lend gold to make a return.

Watch the physical gold import figures and we should see that no major bullion is leaving that country to satisfy world BB paper. The IMF and LBMA would love to paint a picture showing India gold flowing out to balance loans. Especially now that they are trapped. No. The India
operation is going to fit well because the new Dinar offers a different context for that part of the world.

I look for China to flow in the same direction. Absolutely huge amounts of gold were brought into China over the last several years. Yet, these physical flows were not reflected in official Hong Kong bookings, nor were they placed into the Central bank of China accounts. They were holding there cards back from US / IMF eyes just in case they needed to dash for the Euroland economic arena. These people are sharp and can play us for fools in the financial chess game. Just like the India scheme, that gold will not be lent out for IMF / dollar paper. Believe it!
Several large traders brought this gold some time ago through the LBMA when paper was still exercised. Most likely they used the BIS to move that gold. Hence their (BIS) new offices in HK.

It's going to end, PH. But some gold assets will not work during most of this change. We are,
"On the Road Now"......... FOA

FOA (9/21/99; 11:03:13MDT - Msg ID:14050)
The Road!
Aristotle (9/20/99; 15:51:33MDT - Msg ID:13995)
"I hope he has no similar qualms about allowing this particular one to hang on the walls of the HoF."

Hello Aristotle,
No qualms! We can now watch how the oil price rises in fits and starts as the paper gold markets slowly unwind. I would dearly love to see gold run on the established exchanges. Even a $20 or $30 move would really make them sweat as the public guns money into leveraged gold, trying to ride the price increase. Even so, the banking system will most likely sell the public all the gold securities they can buy. They can sell them derivatives to the limit of fiat money creation, in an effort to satisfy paper gold demand. But they can't deliver gold. Watch the OI on Comex and their
Options exchange. Just as ORO presented, the BBs and most paper traders are only interested in laying off risk, not owing gold. As the "modern goldgugs" pile in, so too will the players. All in an effort to balance accounting risk without delivering gold.

With Western thought so ingrained in equating the owning of a "gold price" as the same as owning gold, "this new gold market" will supply them until it fails from it's own weight. All part of "The Road To $30,000". I once expected a huge short rally to break the back of the "gold bear".
So too have most other gold investors. Over many years, now, it never happened as the need to preserve the dollar system was more important than the gold industry itself.

We are clearly on track as the oil producers revalue crude by forcing the dollar prices up, way up! Eventually, the resulting bad debts denominated in dollars will overwhelm not only the IMF but the entire US financial structure. With the Yen killing Japan and leading that region into a further economic contraction, that portion of the currency derivatives trade will become a "black hole" for the US dollar and it's equity markets. Oil will have no choice but to eventually be much more favourably priced in Euros as the process evolves. All of this happening during a backdrop of a crashing paper gold market and a soaring physical price.

How long, oh lord? Obviously, it will not happen within a "gold traders time span". Most will be crushed in their short view operations, if not actually consumed as their asset holdings are revalued. Anyone, (GT?) that can buy physical and hold through out the devastation will financially outlive an army of their trading contemporaries. But, therein is the failure of Western thought as it cannot
contain both the loss of the dollar markets and the skyrocket of physical gold in one mind. Aristotle, we can see the concept as;

"if the price of bread is $50.00, what would the price of gold be?". Not the other way around.

We are "On The Road"........... My friend. Believe it!


FOA (9/21/99; 11:04:21MDT - Msg ID:14051)
elevator guy (9/21/99; 0:10:38MDT - Msg ID:14006)

Buy gold in time, you ask? I think the average person, buying less than, say 10 ounces will be able to get delivery at least until the end of the year? After that, the price and availability may create a premium of hundreds over the accepted world price. We shall see. FOA

FOA (9/21/99; 11:26:23MDT - Msg ID:14054)
FOA (9/21/99; 10:01:04MDT - Msg ID:14042)

One more point to clarify my post. When I said: "Banks in India can lend currency against gold holdings". I meant that they can use gold somewhat as reserves to make new loans. Just in the same light as dollars deposited in US banks pay interest, but also create loan reserves to earn that interest. Of course, the gold deposits in India will carry a local "gold price" risk, but it's all a function of the internal market. We'll see. FOA

FOA (9/22/99; 7:01:21MDT - Msg ID:14114)
PH in LA (09/21/99; 20:26:07MDT - Msg ID:14091)
To: FOA Re: The Indian Gold Plan
FOA: Your remarks on the Indian government's interest-bearing gold plan are well-taken. If I understand
them properly, you are suggesting that the intention is to open a sort of government pawn shop where private gold holders can take out collateralized loans by offering their gold as security for currency loans.----------------

No. I'll try to do a better job. Let's say:
I take Rupee money to a bank, deposit it and get interest on that account. The bank then uses that cash as a fractional reserve and creates loans to others to make said interest.
In another light:
I take gold to the bank, deposit it and receive interest on that account. In one of several options, the bank then "mostly" uses the gold just as it uses "rupee" reserves and creates further rupee loans.

The only difference is that they have some market risk in the price of gold. But, India is very different from the rest of the Western world. Over there, gold is already like money and often used in commerce dealings. This new policy initiative is aimed at expanding the use of gold as money, or at the very least viewing it like stocks or bonds. Watch their import/export numbers. With this new policy in place, I bet even more gold flows into the country. If they are loaning out the gold internationally (I doubt it), in the usual way, gold exports will rise. I think they are paving the way for a simi gold currency in the middle east region. We shall see.

Also: The $30,000 number was always nuts to me. Now I see where it came from. I know, it hurts the credibility to even talk about it. But I'll do it anyway because the odds are for it now, it may work out?? Besides, if we get only a third of the way there I can cover my side of the London/Euro bet with Michael! (smile)


FOA (9/22/99; 7:02:53MDT - Msg ID:14115)
Leigh, What a post!! You must be a big time hollywood writer!

TownCrier (09/21/99; 21:02:42MDT - Msg ID:14096)
I visit a friend and what is printed out on his office desk? Several TownCrier closing reports! Pointed out that there are many other, very good items that should be printed. Yes, he says, but I disk save those and circulate the TC Closing.

This is getting out of hand! Michael, can't you do something?

ORO, good write-up. Will discuss as time permits.
Be here later, FOA

FOA (09/23/99; 07:18:25MDT - Msg ID:14178)
Few miners can stand this tall!
Once again, my posting time is being taken up by these market wanderings. As always, I'll reply / comment as able.

USAGOLD: Your note about Goldfields buying physical was a welcome news item. I think you were the very first dealer to publicize this Reuters item. I have decided to purchase a thousand shares of their stock (internationally) and take delivery of it. In a small act of moral and financial
support of their actions, I will publicly burn that certificate so as to permanently remove it from the
marketplace. Never to be sold again, at any price! My contribution to a management that must have agonized over their actions in that it was a first of a kind public display in complete contrast to most modern miners.
I will do this and encourage any others to put their money behind this company that has so openly moved as a "physical gold advocate"! Some may downplay their actions as unimportant. I applaud them for their bold dynamic leadership during these uncertain times. While other miners
quietly settle hedges by buying in paper commitments, this "GOLDFIELDs" (GOLD) purchase points the investor public towards what is real and what is not.
Thank You, Mr. Thompson!


FOA (09/23/99; 16:20:54MDT - Msg ID:14216)
Chicken man (09/23/99; 08:08:23MDT - Msg ID:14182)

Hello Chicken Man,
I think you took my statement the wrong way. My purpose is to endorse the actions of Goldfields. The few people I will do this in front of will easily grasp the symbolic meaning of burning the stock. You should also. They have the ear of many influential / political players and I consider
the money well spent to further a cause. My friend, please understand that the ownership of a stock is not lost just because the certificate is gone. I view this as a political endorsement of their "right minded" management. No different than a donation to a good cause. The world gold market would
not be in this fix if investors had allocated the majority of their funds to physical gold first and foremost. After that a small placement of funds into only "right minded mining companies" would have starved the "promoters" into funding "clean gold" companies. I know the hour is late and the end is near, yet, never is there a time not to pursue a just purpose. Others are not asked to follow my exact action. The object of this exercise is to encourage investment in companies that support your thinking.
As for "A guy who has more money than brains"? C Man, all of us have a proportion of wealth that can be used outside our own wants. No? For some it is large, for some it is small. In my position I ask for myself: "if not I who, if not now when? Perhaps this was not appropriate for this
venue, my apologies. I will not comment on this again.


FOA (09/23/99; 16:22:28MDT - Msg ID:14217)
ORO (09/23/99; 14:18:53MDT - Msg ID:14205)

---The first is an indication of paper coverage which may cover them from small moves but will beinsufficient if the "big one" happens and swipes the equity of their hedge counterparties.-----------

Considering the location of our "currency transition timeline", I think the G-7 meeting is going to make or break most of the world markets. If the Yen is allowed to run it will clean out most of the carry trade players that work our currency / debt markets. In addition, because most of them are also part of the "speculative" gold carry crowd, all of them can't possibly be fully hedged with quality counterparties support. This casino has run for so long that good paper is considered as "on par" with any Mexican bank!!

I bet as little as a $30 run in gold will "LTCM" the whole London market. When you consider the derivatives LBMA trades every month, there isn't enough "real equity" out there to cover them. Even if it wasn't already "somewhat" encumbered" by other derivatives.

The figures of what a Yen and gold move would do to the market are truly staggering. I'm afraid you are right in that the equity markets will decimate the gold mine stocks. Long before my function ever kicks in, most every perceived form of wealth will be attached or sold before this is over. With this bear hot on our trail, surely someone must be slower than me? I hope!


FOA (09/24/99; 07:41:18MDT - Msg ID:14257)
Time goes by
USAGOLD, Michael Kosares, thank you so much for sharing your energy and resources to make this happen. I hope your commitment to this platform provides you and the participants the rich return of knowledge and direction that is so often lacking in our modern world.
From the birth of this venue we have witnessed but the format of the coming gold bull market. Indeed, our discussion has only begun to touch the events to come. I welcome everyone to participate and educate as we enter an era that I consider: "The Road To $30,000".
Direction on any trail is difficult to know without a map. Yet, for us, footsteps in the night have marked this aged path. For many, this first year was like the beginning: "the first step is taken and now defines the trail, a second step brings others and upon this journey we now make sail".

Within this shelter of stone walls so high, we gather our thoughts and lie low from the storms that rage. Here, O Mighty Oaken Table of Yore, share our dreams and fears in the warmth of a common goal. The quest for light in the unending darkness that so hides out destined way.

Thank you, one and all. FOA

FOA (9/25/99; 12:15:48MDT - Msg ID:14354)
I see where I.V. Holtzman has reworked his "Street Gold" post so as to make it more on point and in context. It is a remarkably clear description of how the dynamics of a market can distort "real price reality". I think it will be a major reference item as our gold markets evolve. Therefore,(I
don't often do this) I FOA nominate it for HOF. Also consider that Another seconds that nomination (I'll ask him to make that official when here). Can someone else also second this, please? Thanks FOA

Note: for the Holtzman article see: USAGOLD (09/24/99; 13:03:31MDT - Msg ID:14297)

USAGOLD (09/24/99; 13:03:31MDT - Msg ID:14297)
Latest from Holtzman...
Holtzman here,

More than one POG

There are many different prices for gold. Or, more accurately, there are many different ways in which gold is formed and stored, and those differences cause prices to differ between the resulting products.

A one-ounce gold JM bar, a Krugerrand, a 1999 U.S. gold Eagle, a slabbed 1908 MS-65 St. Gaudens (ignoring for the moment that it's not precisely one ounce of fine gold), a one-ounce portion of a London Good Delivery bar, a one-ounce portion of a vault claim ticket for same, a one-ounce portion of a futures contract, a one-ounce portion of a derivative contract for same, and one ounce of fine gold formed into a piece of jewellery, all have prices which are somewhat independent of one another.

True, at their core, they all centre around what the market currently feels an ounce of gold is worth, but each has its own additional factors (premiums, risks and quantities) which cause its price to differ, often substantially, from the others.

The U.S. gold Eagle differs in price from both the JM bar and the Krugerrand because of a Patriotism premium. The St. Gaudens differs in price from similarly sized bullion coins because of a Numismatic Rarity premium.

The officially quoted Spot POG differs from the price of one JM bar bought at a coin shop because Spot POG is the price per-ounce at which very large quantities of physical gold trade. By large quantities I mean hundreds-to-thousands of ounces and upwards. Some of these sales are between mining companies and refiners or mints or jewellery manufacturers, where the buyer intends to reshape the metal into some new form, be it ingots, coins, or next month's necklace special at Marks & Spencer.

But in many cases, the purchaser has no plans to remanufacture the gold. Rather, he simply wants to own it. In such cases, the gold itself typically remains in a third-party repository in forms such as London Good Delivery bars (400 ounces), with only the Right to Claim those bars being transferred from buyer to seller.

Since these rights can be transferred electronically, this allows Spot market participants to make brief forays into the market, then retreat, with minimal overhead expense. Money centre banks are better known for their similar operations between paper currencies (buy Swiss Franc sell Yen this morning, then reverse that this afternoon, etc.), but no doubt a great deal of daily Spot POG setting is the result of trading rather than buying to own. Regrettably, I do not have detailed information on the various global Spot markets, so I have no way to discern the proportion of speculators to commercial traders.

In any event, this speculative access to Spot POG makes it susceptible to the same sorts of "professional" day trading which is usually associated with paper markets.

In addition, most of the gold sold at Spot POG has yet another factor influencing it, one which can easily place it more in alignment with the various paper forms of gold when market conditions become abnormal: the risk that the gold is not entirely under the supposed owner's control.

If you have a few gold coins buried in your back yard, and if you bought those coins anonymously with cash, you control that gold. If you have a claim ticket for a few hundred kilograms of gold held at the Federal Reserve Bank of New York, or a few hundred tonnes of proven reserves in a mine whose location is known to tax assessors, or even a few dozen U.S. gold Eagles in a unit trust, don't be so sure you're the one in control of that gold.

If or when a breakdown in the paper gold market occurs, it's quite possible we may see the officially quoted Spot POG remain in lockstep with paper prices, very possibly plummeting even in the face of blatant shortages of physical metal. But all this would mean is that a make-believe price is being impressed on market participants who are large enough to be easily identified and coerced.

If a private citizen holds the claim ticket to a London Good Delivery bar stored at the Fed, guess who has the power to insist on knowing details of any sale of said bar. Even if a private citizen takes possession of the bar and buries it in his back yard, Uncle Sam will be very keen to periodically bother him about its whereabouts. Although Spot POG is a measure of physical gold, it adheres to the paper world more so than to the physical world because of this one point: the risk of governmental intervention.

This ties in with points about gold mining shares made by Another and FOA: mining companies theoretically are at liberty to sell to the highest bidder, but governments have a way of convincing their subjects to accept less and be happy with it. If during an emergency the U.S. government were to declare Spot POG to be $50, and if Homestake Mining were to begin selling gold privately at a higher Street POG, the U.S. government could very easily make life unpleasant for Homestake.

By contrast, the government would have a much more difficult time coming after you and the handful of gold coins you've anonymously buried in your back yard. Most likely, they simply wouldn't attempt it. A wise politician never frightens his citizens too much, most particularly during emergencies. A government can achieve its goals by oppressing the majority owners (few in number) of a desired commodity while graciously allowing the minority owners (vast in number) to retain their property.

The confiscation in the U.S. in 1933 was along such lines: the government's intent was to take direct possession of the vast majority of gold within U.S. borders (common gold coins) by pulling them out of circulation, yet not overtly injure citizens who had sentimental or numismatic attachments to specific coins. There weren't any jack-booted thugs banging on Americans' doors after midnight in search of every last gold coin, and I can't imagine any present or future administration doing so either. It's far too expensive to be worthwhile... not to mention that it's far too likely to start a revolution (or in your case, re-start one :-).

And yet, despite the very convincing scenario of complete meltdown painted by FOA and Another, I still find myself clinging to the hope that the supply/demand cycle will re-assert itself as has happened in other industries (the recent history of the airline industry being my beacon in the darkness).

I would never touch futures or their derivatives even under normal market conditions, but a small stock investment in the most efficient, best established global mining companies seems to me still to be worth the risk (note again my use of the word "small"). Whether those shares are ultimately sold for Euros instead of dollars, I still am optimistic enough to wager that they will indeed trade on some market for some price in some currency. In any event, though, I plan to keep an eye on potential warning signs that such optimism may be about to be dashed.

So where will we find a "real" price of gold amidst the make-believe? Clearly neither Spot POG nor futures POG will be realistic during a full-blown emergency, nor will the share prices of gold mining stocks. Of course, if I find myself still in possession of such papers during an emergency, their official resale value will be all too real to me.

Even under normal market conditions, the paper price of gold is not the perfect guide because it is determined by constant repetitions of FOA's analogy of the two neighbours betting over the fence. Perhaps one in a thousand participants in the daily setting of the official prices of gold plans to acquire or deliver physical gold. The other 999 participants are merely there to bet on it and claim their winnings in some other currency.

Put another way, how many people at a racetrack are attempting to buy a horse? If you want to know the going price of a physical horse, don't look to a racetrack for answers. And don't assume that being a partial owner in a horse farm (thanks FOA) in any way assures you of being able to own a physical horse at some future date.

Likewise, if you want to know the going price of physical gold, don't look to the paper chase, most especially during any sort of financial emergency when paper-related numbers will become very distorted. Frankly, even though the emergency has yet to be publicly declared, things in that arena are already becoming increasingly distorted.

Most of us here at the USAGOLD Forum do not buy and sell thousands of ounces at once, and most of us take immediate possession of our purchases. From that, it's clear where we should look to find the price of physical gold which is most appropriate for our activities: in fact, our very conversations here are being hosted by someone who spends most of his waking hours discovering that price.

Street POG

The Cash or Street price of gold is the number of dollars (or pounds, or euros) you take out of your wallet and hand to your friendly, neighbourhood coin dealer in return for a one-ounce Krugerrand.

Why a Krugerrand? Because it's the least numismatic, most commonly encountered, least lovely form of gold. It has no numismatic premium and no jewellery premium and no patriotic premium. It's even less attractive than a one-ounce JM bar.

That makes the Krugerrand the perfect unit of measure for Street POG. Its only special quality is that it contains exactly one ounce of gold (mixed with much too much copper).

The only circumstance which would disqualify the Krugerrand would be if suddenly coin dealers were willing to sell Maple Leaves or Eagles for less than Krugerrands. But to deal with that case, let us define Street POG as the price of the cheapest one-ounce coin or wafer available for sale at that moment.

You will know that the governmentally influenced markets are becoming highly distorted when you see a Krugerrand selling on the street for significantly more dollars than the Spot POG quoted by the paper markets that day.

A Krugerrand will always have a little premium built into its price (hi, I just bought these coins and I'd like to sell them to you without making any profit at all on the sale... my, that would be daft).

At some point in August 1999 when Spot POG was quoted at $260, I bought a single Krugerrand for $268. That's within the range of normality. We're not in uncharted waters yet.

But let's say that Spot POG drops to $200 (sadly still not out of the question even with the September 1999 rise in POG towards $270). What will a Krugerrand cost on the street then? If Spot POG drops no more abruptly than has been its wont in recent months, there's a decent chance Michael and his fellow coin dealers might then be able to profitably sell Krugerrands for $205 each. In that case, the shorts and the financial ministers are still in control.

But if you see Spot POG drop below $200 while a Krugerrand selling on the street never falls below $230-$240 ... or if you see Spot POG remain at $256 yet Krugerrands leap to $300 and Eagles to $310 ... hello new gold market. That would be a clarion call that things are starting to become seriously distorted.

The American Civil War

I think maybe the hardest mental hurdle for people to clear in understanding Another and FOA is this notion of two gold markets occurring simultaneously. There's an historical example (and it's Western :-) in which very much the same thing transpired...

In 1864, the USA and the CSA were reaching something of a stalemate in their war. Contrary to what most Americans learn today in (the winner's) school system, had but a very few decisions been made differently, the Confederacy would have won.

This, by the way, is why we see so many Americans (descended from both sides) re-enact Civil War battles over and over. How often (except on Monty Python) have you seen re-enactments of Pearl Harbour? The only battles worth replaying are the ones that could have gone either way.

In any event, to the average person living in Either the USA or CSA in 1864, the near term future was incredibly unclear and terrifying.

In the pre-war USA, national government funding was handled by the levying of import/export duties. The IRS was not yet a glimmer in politicians' eyes. For a nation at peace, duties provided sufficient income to run a minimalist national government.

In time of war, however, expenses magnify dramatically. Both the remnant USA and the new CSA needed to acquire vast funding very rapidly to raise an effective military. The both of them did so in the time honoured way: they borrowed the money. Have a peek at Lincoln greenbacks and Confederate paper money sometime. They are promises to pay the bearer with gold and/or silver at some significant time following the cessation of hostilities.

These documents were by no means the equivalent of today's Federal Reserve Notes (try redeeming a $20 FRN for a St. Gaudens sometime). No, Civil War paper banknotes were the equivalent of today's Gold Futures Contracts.

Oh, Lincoln greenbacks and Confederate dollars passed from wallet to wallet during the Civil War years as if they were currency, and in the first year or so they were regarded as 1-for-1 equivalents of coin. But as 1864 drew nearer, something odd began to happen.

"Howdy, I'd like to hand you this crisp $1 greenback in return for ten silver dimes change."

"I'll give you 8 silver dimes for a paper dollar, not a penny more."

Realise that this happened in the North, in the remnant USA. It happened too in the Confederacy, but modern people remember it there only in association with the final default on paper which happened when the CSA government was extinguished.

But the sole difference between a Confederate dollar and a Lincoln greenback was that one paper issuer was still in existence in 1866 and one was not. In 1864, no one could confidently say that either government would still be there a mere two years hence.

Notice that, in this regard, not much has changed since then. In 1933 for US citizens, then in 1971 for the rest of us, the USA government voided its obligation to pay gold for paper dollars.

If you hand me silver or gold, I won't care whether the symbols impressed on it are from a reliable government, an unreliable one, or a defunct one. But if you hand me paper, I'd better be firmly assured the issuer will live long enough (and be inclined) to pay off this debt to me. Even if you hand me a paper claim ticket to silver or gold stored in a vault somewhere, I'd better be firmly assured the vault keeper is of a mind to let me take possession of that metal without the slightest hesitation.

Another and FOA, by saying wise people should avoid paper and only hold physical, are indicating that they expect the LBMA and Comex Gold Contract documents will go the way of the Confederate Dollar (or maybe more appropriately, the way of the pre-1933 paper dollar: "Yes, a dollar is still a dollar, we just won't live up to it in quite the way we used.").

At the very least, they're saying the risk of such a systemic change is so substantial that one should not be standing too near the fault line should the quake come sooner than predicted.

What the both of them are describing is an official Spot POG (and its kindred future months' POGs) which may well plummet to $200 or even, as Another allowed some time ago, perhaps $10. Realise, though, that Another is by no means predicting that Michael will be able to profitably sell Krugerrands at $10 each. Far from it.

What Another and FOA are anticipating is a situation much like the paper money situation in both the USA and the CSA in 1864: how likely is it that the paper contract you're handing me today will be redeemable for any amount of gold by this time next year?

Tell you what, I've got a spare ten bob I feel no desperate attachment to. I'll buy your one-ounce IOU just for kicks. If LBMA completely expires, I'm out only a small amount. If LBMA unaccountably fails to expire, I've struck it rich. Of course, I may still not receive a physical ounce of gold on settlement day. I may find I've become the proud owner of a 1/400th part of a London Good Delivery bar, which I'm then told may not be removed from the vault. If I'm lucky, I might be able to sell my claim ticket for some amount of whatever paper currency is still worth accepting.

Meanwhile, those of us with less of a gambling inclination will sleep more soundly holding physical. After all, a silver or gold coin firmly in your possession remains silver or gold even after its issuer expires.

I.V. Holtzman

FOA (9/25/99; 12:28:42MDT - Msg ID:14356)
Goldspoon (9/25/99; 12:08:04MDT - Msg ID:14353)
One reason $ilver may do better than gold in the late stages is because $ilver is also known a Poor Man's Gold... There is alot more poor people than ritch ones...Poor people generally come late to the party and buy what they can afford ($ilver) so $ilver will be a late bloomer but Oh what a flower....

Hello Goldspoon,
Could you please elaborate. Your above comment that "silver is more affordable than gold", brings my question.
Which is more affordable $100 of gold or $100 of silver? Even if gold was $1,000 an ounce, why then, at that time would $1,000 in silver be more desirable as a "poor man's gold"?

I'll be back with more. thanks FOA

FOA (9/25/99; 12:31:19MDT - Msg ID:14357)
(No Subject)
Thanks for the second! Watch out for my question below. It's a tough one! (smile)

FOA (9/25/99; 14:29:40MDT - Msg ID:14367)
When a person tries to protect their assets against the effects of fiat money, what are they really fighting against? The first inclination is to say "rising prices". Yet, it's much more than that! Most everyone agrees that interest in the bank never covers the loss of buying power brought on by price inflation. Especially the "after tax" return. It's the same old story, played out decade after decade. We must "invest our savings" (or become a day trader?) because the money will erode in value! Even at 3%, price inflation can eat away at any cash equivalents.

But, price inflation isn't the only story that impacts us. Rising prices come and go, but money inflation continues to effect us without fail. So why do people feel better when price increases slow or stop, even as money inflation runs ever upward? The good feelings usually evolve from the
effects that money inflation (increases in the money supply) has on financial instruments. These assets take on the very same characteristic that the rising prices of goods once exhibited. They run up in currency price.

During these periods of "less goods inflation" another sinister form of mind set lurks in the shadows. Credibility inflation! Yes, it has been here many times before as every fiat currency alternates it's effects upon the feelings of the populous.

Fiat currencies must, by definition always expand in quantity. Their continued usage and acceptance is always obtained with the bribe of "more wealth to come"! Without that bribe, humans would never fall for holding a debt to receive the same goods in the future if they could get
the real thing today. Human nature has always dictated that we buy what we need now instead of holding someone's IOU to receive it later. That nature is only changed through the "greed to obtain more". Like this: "I'll hold my wealth in dollars currency if my assets are going up. Later those
increased assets will buy me a better lifestyle as I purchase more goods and services than I could buy before".

This is the hidden dynamic we see today and the exact antithesis of the past price inflation's. Just as destructive as "goods price increases", "credibility inflation" impacts our emotions to "hold on for the future", more is coming! In every way, "credibility inflation" is just as much a product of an increase in the money stock as "regular price inflation is. As cash money streams out to cover any and all financial failures, we begin to attach an ever high credibility to the continued function of the fiat system. In effect, the more money that is printed, the higher we price the credibility factor.


ORO, the GDP is one of the great deceivers in the Fiat money world. During the last century (??) or so, some form of GDP has always been used to measure the great mass of human endeavours. Yet, through out this time, some form of fiat currency has always been in effect. Even during the Gold standard, fractional reserve banking expanded "gold note money" more so than the "gold money in existence. Prior to 1929 this effect, if not creating outright "price inflation" during a time of Gold standard policy, was creating "credibility inflation" in the minds of investors. Using the backdrop of a growing GDP, people brought into inflating financial assets and ignored these signals as evidence that the fractional currency system was failing. Even though the dollar contained a policy statement to supply gold, back then a gold loan was still only good until everyone asked for gold.

The same thing is happening today. People destroy the currency structure by thinking it can deliver more than reality will allow. Instead of all debt failing slowly with each upward march of price inflation, prolonged "credibility inflation" snaps all at once as investors try to suddenly revert to a "buy now mentality". The inability of government authorities to contain the fiction of "good debt" is usually the feature behind the investor mood change. A currency run induced by an IMF stalemate would qualify as just such a function change. The "snap back" into a sudden "real price inflation situation" caused during this stage by a currency failure always breaks the whole structure. We approach this end today!
The GDP has been the relative gauge to mark all other measurements against. Even so it's numbers reflect little more that the result of an "expanding fiat money supply". Yes, there have been recorded downturns in GDP, but these contractions would have been worse if measured in real
(gold) money. In opposite fashion, expansions paint a much brighter picture as all financial liabilities seem less a threat if held against a rising GDP. I submit that the GDP figures offer little more than a way to entice investors to increase their "credibility image" of our monetary system. Fiat moneys are always on a long term upward expansion, and they can hardly do less than bloat the picture.
Someone I know said; "your wealth is not what your money say it is"!

What should we be looking at to see the real picture? Be back a few hours from now.

Thanks FOA

FOA (9/25/99; 19:11:59MDT - Msg ID:14375)
When it comes to silver, I agree with all of you. But then "along comes reality"! Many of the current analysts persist with their analogy that "silver is used to make change and small transactions". A concept I completely agree with, only if we sink to that point? The valuations placed on silver will mostly be established by the kind of "currency turmoil" we experience.

Look at today's US paper currency. It's all dollars and yet $100 bills are used readily right along side $1.00 bills. It seems that we found a way to create ever smaller denominations of dollars to satisfy the demand for making change. I don't see anyone carrying around Canadian currency for the small purchases a US $100 would not work for.

My point is that gold has in the past and will again in the future be broken down, "if needed", into alloyed coins for the very smallest of transactions. One can easily carry a one gram gold coin that is made the size of a quarter. Even a 1/10 gram will do the trick. As Mr. Gresham points out, someone will always be around to create money change. Be it in silver or gold, the most efficient money will rule the day. In the worst of war like conditions, paper money is traded. German marks were spent as the booms fell!

My question of which is more affordable $100 in gold or $100 in silver? A poor man will accept and use either that is offered, no contest.

Again, the future demand for "Metal money" will be established by "how the currency markets evolve". I believe (and have written on this before) that through out all that is to come, US dollars will continue to circulate as will most all the established currencies today. "Come what may", we will use them for whatever value and efficiency they will offer. Just as the much lesser moneys of the world presently circulate, while their citizens hold dollars, gold and silver, so too will we act in a similar fashion.

The question for our immediate future is in what form will you hold metal money to represent the "bulk" of your tradable wealth? As all the currency and economic turmoil swirl around us, the pressure will be to not only hold reserves that will not be at risk, but hold them in the largest "tradable form". Gold and it's high future price will certainly fit that bill. Again, contrary to what
many think, when the dollar falls off the reserve currency tower, most everyone will still be getting paid in dollars. Yes, they will be greatly devalued from price inflation, but buying your gas with dollars will still be a weekly chore.

The future will see the Euro currency as the value reserve all other currencies will trade off of. Beside it will trade a "free gold" market denominated in Euros. The implications of this will be for US nationals to continue using dollars while holding gold (or Euros?) for a bulk, risk free tradable reserve. One can see that in this picture, the purpose for silver is greatly diminished, no?

Got silver? Don't need it, cause I got gold!

We shall see, back in an hour or so. FOA

FOA (9/25/99; 20:31:48MDT - Msg ID:14388)
Gold Dancer (9/25/99; 18:36:32MDT - Msg ID:14373)

Hello Gold Dancer,
I think I paralleled some parts of your thinking. Thanks for offering your reasoning.

Goldspoon (9/25/99; 15:37:33MDT - Msg ID:14370)
Some have suggested confiscation....possibly. --

I think the confiscation item has always been blown completely out of proportion. Some even go as far as saying that there is no use in holding gold if it gains a lot because it will be taken away from you. Then in the same context, it's offered to buy gold stocks to gain from a more reasonable increase in the gold price! In addition, for the same reasons they see silver as an item that will not be touched. One has but to review "Holtzman's "More Than One POG" #14297" to get what is his beautiful rational and reasonable retake on what confiscation would really mean:

--------If during an emergency the U.S. government were to declare Spot POG to be $50, and if Homestake Mining were to begin selling gold privately at a higher Street POG, the U.S. government could very easily make life unpleasant for Homestake.

By contrast, the government would have a much more difficult time coming after you and the handful of gold coins you've anonymously buried in your back yard. Most likely, they simply wouldn't attempt it. A wise politician never frightens his citizens too much, most particularly during
emergencies. A government can achieve its goals by oppressing the majority owners (few in number) of a desired commodity while graciously allowing the minority owners (vast in number) to retain their property.

The confiscation in the U.S. in 1933 was along such lines: the government's intent was to take direct possession of the vast majority of gold within U.S. borders (common gold coins) by pulling them out of circulation, yet not overtly injure citizens who had sentimental or numismatic
attachments to specific coins. There weren't any jack-booted thugs banging on Americans' doors after midnight in search of every last gold coin, and I can't imagine any present or future administration doing so either. It's far too expensive to be worthwhile... not to mention that it's far
too likely to start a revolution (or in your case, re-start one :-).-----------------------

Thanks Holtzman, incredible job!

Again, if you think silver is going up because of currency turmoil, is it reasonable to believe it will
increase as it did during the 70s style Hunt fiasco? I'm not sure that event wasn't but a one of a kind move. Everyone considers that performance (the only one we have had ) as an example of how silver moves when gold goes up. However, it's entirely possible that that gold move was but a minor side show and in the future gold will dwarf any percentage rise in silver. We didn't know silver could move like that until it happened and we may find that few will understand how gold can outperform everything in the future. As I offered earlier, the coming currency transition may render the "many present reasons" for holding more silver than gold useless. Especially if currency stays in circulation as the demand for industrial silver falls from a economic contraction. If such is the case, the percentage move will fail to match gold.

I know many own silver. I offer this as a balance observation. Good luck to all of us, may we all win! FOA

FOA (9/25/99; 21:11:01MDT - Msg ID:14392)
Leigh (9/25/99; 19:36:56MDT - Msg ID:14378)
Do you think silver is worth holding as a commodity, the way you would hold platinum? Don't you think the prices will go very high as silver reserves as depleted? Or do you think gold will rise the highest?

Hello Leigh,
All of the investment attributes for these metals are conflicting. On a commodity basis, silver would be the best. Warren B. brought it in his company name expressly for it's industrial prospects. He views it in the same light as a stock investment. I doubt he took it for any of it's monetary reasons.
Again, invest to make a return. Take your best shot. But for today buy gold to preserve what you have during a global dislocation of currency systems. Because the future may play out as I have outlined, gold will out perform (on a real basis) most any past investment made during the last 30
years. Not because it's a good investment with great prospect demand, but because it will again perform it's ages old function as the worlds money. Something it hasn't done in stand alone fashion for perhaps 60 years?????? That return to money use in this modern world is the attraction that drew in the Giants, in whose footsteps physical gold owners now walk. The rise will make most people feel very foolish not to have purchased at $1,000 while it was cheap (smile)! We shall see.

Thank you and good day FOA

FOA (9/25/99; 21:12:34MDT - Msg ID:14393)
Twice Discipled (9/25/99; 20:40:54MDT - Msg ID:14390)

Point 1)
If my above interpretation of your suggestions is correct and the events play out as you see them then with further thought I may comes to agree with your remarks regarding silver.

Hello Twice D,
There is actually quite a large group of people that see things this way. Nothing is written because they are very private.

--Point 2) If we move to an environment where bartering becomes the standard, then I would still think silver would be appropriate in some degree because of the smaller value associated with it. I would also ask who I would trust to take my .1867 oz Napolean III and melt it down into a 1 gram
gold coin – definitely not the government, I would never see it again. I would also be skeptical of any other organization given that history shows us examples of "shaving" whereby the gold content of coins was reduced.------

-------Of course, when the time arrives we will no longer speculate, but participate in what

I agree! Indeed, if history is any guide, we are walking a well worn trail. After this weekend, Another may have to update his view of current events. Things are moving now!

Sorry for the short reply as I must go now...........thanks FOA

FOA (9/26/99; 9:54:32MDT - Msg ID:14425)
Aragorn III (9/26/99; 2:53:37MDT - Msg ID:14408)

Hello Aragorn,
Nice application of clear logic! Let me see it I have this right for a future context:

"Get your scrap iron now because gold and silver have already run up in price. Iron is the only affordable metal for late buyers. You get many more ounces per purchase because the gold / silver / iron ratio is so far in the favour of iron. When the teaming masses can no longer afford "real money" they will most certainly buy iron in 1/10 ounce form to use for small purchases"

I expanded your post with my slanted view to drive home a point to others. From the time that silver ran in the 70s, on one ever had any historical precedent that it could move so much. Yet, from 1980 on, every silver promoter has used the Hunt squeeze as the basis that it will rise again in just such a fashion. It has been the ideal "leveraged sell" for every boiler room to sucker in paper traders. I bet
there are many who have lost the most money by taking on silver as a leveraged play.

I say all of this as the proud owner of some silver! Just as Aristotle (and yourself at other times) pointed out, in a complete "currency: breakdown, silver will be needed and used. Yet, in this modern day and age, ironically, inflated fiat currencies will most likely continue to be used for most purchases. I bet CMAX could add some light on this as he is in an "inflating country"!

Further: During the runup in gold during the late 70s, the governments were selling gold all the way up. In the same light as we look at the YEN today, gold buyers were always afraid of the "next" intervention. Yet, even with the official gold sales, gold soared. During that time silver was never the application of any widespread major sales. Today, we must consider the effects on gold that a major 'Official" policy change would do. While everyone is waiting for the next big sale, others are anticipating the total withdrawal of government selling/ leasing from the markets. Indeed, if the ECB or oil or china start buying official stocks through the BIS, the results will be the reverse
of the 70s markets. "Street gold" will be the percentage out performer!

We must bear in mind that there will be a big difference between Official BIS buying through the CBs as opposed to them buying paper gold on the LBMA. I think Mr. Holtsmans "More Than One POG" #14297 will be a hated factor for many current gold mine owners for years to come. With BIS buying from all CBs, the supply of gold will collapse, forcing the "street price" through the roof. Falling demand (buying) for paper gold will drive those securities to the floor because of their inability to secure and deliver enough physical gold. This dynamic will absolutely force the IMF/
dollar governments to lock the trading price of paper gold at below most production costs until new mine supplies can work off some of the paper commitments. Even though cash settlement (at the locked price) will be used, it will cover but a fraction of the outstanding paper. Counter party
default will rule the day. No doubt, the majority of the mines in operation today will close, thereby forcing an extended workout period.

It's a simple choose of what is more important to the majority of people? Save the major portion of the banking system whose menders are the who's who of the LBMA, OR save the worlds gold mines? No contest!!
This is where we will see competitive revaluation's upward of IMF and existing CB gold stocks. These source of new equity will be needed to cover aid to failing countries
(some from shut down gold mines) and back the massive loses a collapse of the dollar reserve currency will bring.

For years everyone looked for the nations to block any large rise in gold, so they invested in assets that would benefit from what would be perceived as a reasonable gold
increase. One that the governments would begrudgingly allow. Of course we think of Gold stocks. Yet few considered the true ramifications if countries suddenly revalue gold not as money, but as a world reserve asset! We approach this dynamic today as world dollar debt has reached it's limit. Exciting times for those that "walk in the footsteps of giants", awful times for those that have invested in the gold industry. It's not to late to change course and sail with the wind. With the direction of someone that understands, I have done just that!

With the wind...........we are on the road now!!! FOA

FOA (9/26/99; 11:22:32MDT - Msg ID:14430)
Leigh (9/26/99; 9:50:43MDT - Msg ID:14424)
Questions for FOA

------------When you and Mr. Holtzman talk about a black market for gold, do you mean an illegal black market? ----

Hello Leigh,
If I answer for both Mr. H and myself, it may get him riled up enough for him to post more of those great works. So I'm going to do it this one time! (smile) Also, it will be best to stay in close contact with Michael Kosares, as he will know the very first changes in the markets (if they occur).

However, in my view: I bet we end up with a very strong "dealer market" with companies like Centennial Precious Metals in the forefront. The difference will be in that they will price their product based on the real investor supply and demand as these dealers trade among themselves. Yes, an official gold market will be in effect, but "street gold" will will carry a huge premium over the official "trading price". A premium that will not be profit for the dealers, rather a reflection of the true price of gold.
(TownCrier, you had a great explanation of this somewhere, no?)
Over time most dealers will slowly disregard all paper trading. The present major banking houses that trade
bullion and paper will most likely drift far away from the gold business if their loses in that arena build. So; It won't be a black market like in the movies. That will only come about if things "really get out of hand". Something I doubt will happen, even during a Y2K breakdown.

----Do you think it is possible transactions in gold will be outlawed? That wouldn't do our government any good,would it? -----

Outlawed? No possible way! The thing everyone forgets is that during the 1930 gold call in, the governments were trying to place gold in a tight price range. They still had a good dollar system and wanted to keep it for the worlds sake. Today, the problem is different in that they have created so much dollar based debt that it can't be serviced any more without a blowing up the world reserve money supply and hence the system. The US knows it's over and must accept a partial defeat. To accomplish this, in opposite fashion from the 30s they must raise the price of gold, not keep it

It works like this: To keep the gold price stable you have to get your hands on more of it. Then use that physical to balance existing dollar claims (as in the thirties) or sell it into the marketplace (as in the last 20+ years). For today; To make the price rise, you don't need more physical to use as supply, you simply withdraw supply from the marketplace and revalue what you have.

The US treasury has some 8,000 tonnes ++/--. They can't back the same dollar with gold that they removed from the gold standard in 71. Major legal problems there (BIS???). Nor can they create a new dollar with the Euro on their backs. They can follow the ECB and the IMF lead and begin to revalue the existing US gold stock to use as equity against the massive reserve loses that are coming. No it won't cover even half the liability (even if it's over $10,000), but it's the only fallback asset any nation has. It will prevent a total World and US contraction.

The trading and owning of "street gold" by the US public will be encouraged, not outlawed. Any demand that raises the gold price further will be welcomed as a "new concept" to save a contracting economy. This was the real reason the Gold Eagle program was started in the first place! Political bases covered when the time comes.

---Wouldn't they want us to spend our gold so that eventually they could get their paws on it?---

No Leigh, in the future they will ask you to spend "your" gold, but not for their accumulation. They have plenty of gold and will just devalue the dollar further by raising the gold price in stair step fashion. Your spending will be to build the economy again. In reality, you will be selling some gold to a dealer for depreciated dollars. Then spend those dollars internally, within the country.

Gold coin sales will be a hard act to follow as we cross this valley of money transition. Mine owners will be screaming for controls of the street price so they can sell into the defunct LBMA at a higher price. It won't happen. Later, everyone will be glad they brought physical while the going seemed rough. Needless it's going to be interesting as this all unfolds. Eventually, paper gold will be out of the way (covered) and a real "mining boom will ensue". That's when we sell some of our gold to buy gold mine stocks! (big smile)
Get ready for that gold now!

Thank You FOA

FOA (9/26/99; 16:16:08MDT - Msg ID:14449)
Leigh (9/26/99; 11:58:37MDT - Msg ID:14432)

---- One more question: Will the government tax us gold owners to death, since we'll be among the few who have any money?---

Ha, Ha,,,,,,, Leigh, what do you think?

FOA (9/26/99; 16:18:59MDT - Msg ID:14450)
koan (9/26/99; 12:32:58MDT - Msg ID:14433)
Silver and gold - relative appreciation - a theory

-----If silver goes to $10 per oz you just doubled your money i.e. now you have $10,000 (1,000 oz times $10). That other $5,000 you put into gold for 20 oz will need to go $500 per oz i.e. 20 times $500 = $10,000.) Elementary my dear Watson.-----------

Mr. Koan,
Watson wants to know why gold can't double at the same time that silver doubles?

He still want's to know why a poor man will buy $100 worth of silver before he'll buy $100 worth of gold?

Does that also mean he will buy ten pounds of dirt for a $1.00 first, if one pound of sand is also
selling for a $1.00? Hmmmmm!

I have a few dumb friends but they are not stupid. Seems the most "dumb" among them always understand the relative worth theory better than most any PHD scientist. I also know I'm smarter than they are, even if they have more money than me? (smile)

It's going to take a whole world of "special people" buying silver to make this work out. I'll watch here with everyone to see how this works out. Thanks FOA

FOA (9/26/99; 16:59:38MDT - Msg ID:14456)
Chicken man (9/26/99; 15:30:12MDT - Msg ID:14446)
FOA @ The Tale of the Golden Egg..

C Man,
That was a good one!
One of the reasons I advocated buying Goldfield stock was to support their actions. I Know most didn't understand, but burning a property deed (or stock certificate) in some cultures is synonymous with stating "you will never sell the investment".

Here, this company does an industry supporting move and no one (even GATA) advocates investing in that company for their strong anti gold selling stance. Instead people see what happened and went out and brought ABX (or as much)? This Goldfield action was the major catalyst that sparked new interest in the gold arena. It called into attention the delicate nature of the paper gold position if physical is taken out. If everyone starts charging the auctions, this paper gold market will close in a hurry!

Goldfield buys and everyone comes out of the woodwork to proclaim a new bull market for reasons other than what happened. Then they direct new buyers into more paper gold investments, regardless of weather they are controlled "shorters" for the BBs. The Goldfield action clearly stated
that they alone (along with Anglo) are independent from the paper control. I support management that take "right minded stands" weather my investment will pay off or not!
Chicken Man, watch this market run for another ten or twenty and see what happens to it! With the G7 fiasco concluded, we may get a blow-out this week!
Thanks for your reasoning....... FOA

FOA (9/26/99; 17:11:30MDT - Msg ID:14458)
Golden Truth (9/26/99; 16:56:35MDT - Msg ID:14455)
Hello F.O.A tomorrow i will be taking all my SILVER Maple Leaf coins and exchanging them for GOLD.

Golden truth,
Don't forget the iron bullion! (SMILE)

-----One question i do have is, could you please explain the comment you made about the "massive reserve loses that are coming" what will cause this? and possibly when? I,am sorry, i know this is a basic question but i have some trouble with figuring this one through Thanks as always G.T -----------

One of many examples. You are a foreign CB that is holding 100 billion in US treasury debt. The dollar loses half of it's value. Treasuries now worth 50% less! The US declared "foreign exchange controls". Good thing you held gold that has now more than ?????? gone up! Throw the
treasuries in the trash and forget about them. Now the ECB is offering to buy gold with Euro treasuries, if anyone wants a "special relationship" with europe. You know the rest!!!

I have to go now..........This week will be something FOA

FOA (9/26/99; 18:58:01MDT - Msg ID:14480)
It's all over people!
See link above:

TEXT-Statement on gold by European central banks

I'm going to be very, very busy for a while. Be back when I can! Good Luck ALLL FOA

FOA (9/27/99; 6:54:58MDT - Msg ID:14563)
No time for discussion!
SYDNEY, Sept 27 (Reuters)

``The Europeans have set gold free,'' the dealer added.

FOA (9/27/99; 20:03:37MDT - Msg ID:14642)
No time, one post only!
USAGOLD (9/27/99; 15:07:02MDT - Msg ID:14618)

Why did they do it? Why do the Europeans want the price of gold to rise? Why didn't the U.S. and Britain stand in their way?

That's a good one. I think they are following the rough outline we have talked about. If you have absorbed most of TownC's (Europe) news today, several things come to mind.
1. England is doing what Another thought, moving from the dollar system into the Euro world. Let's face it, they are "lost" in their current position if the US economy contracts and Euroland grows internally. Europe has made it clear on several occasions (including today) that they are a closed
system. Yes, the world can trade with them, but the conditions are better on the inside. England no longer has the same ties to America that their political dogma suggests. Every day Europe more becomes their family through proximity, if nothing else. Hey, the Euro tunnel may have been a bad investment, but it has finally tied the isles physically to the mainland!

Their push for EMU is right in line with their completion of bullion sales. Don't read their sales as
a reserve balancing act, like Belgium. The BOE is indeed trying to clear out some bad paper before their move. Like it or not, when England, Swiss and the middle east all tie to Euroland (through EMU or by trade), the LBMA will become redundant. I bet in five years or less (mostly much less)
the ECB will sanction a major bullion association of it's own. The time frame here is much too short for the LBMA to clear out the paper it took them a decade to build up supporting the dollar.

2. How can the US stand in the way of rising gold? It's only been the (needed) continued use of dollar that constructed the "Low Gold" paper markets for oil. The US mostly used it's currency powers to augment the plan as others carried it out. Now with the successful birth of the Euro, many other nations are scrambling to at least build a backup bridge into that arena. The US is not blind to this and will certainly not commit it's gold reserves to buy in it's own currency debt from it's competitors. If someone is about to kill you, you don't offer to pay back your debt to them before they act!

Neither do I think the Fed (or treasury) has been trading paper gold. If the right entities wanted to expose this (the US is very open in these regards) they would get their hands on those items and exercise them in a very visible way. One that followed the paper trail with the media in tow. Weather the FED brought gold to fill the order or used Fort Knox, it could be seen. Besides, with Congress so obsesses with not letting our gold flow into other hands (or however the IMF deal works out), one whiff of Fed gold commitments would blow the whole story.

3. The ECB announcement was used to close the final door, in public view. They now have the Swiss and English on their side and it's time for gold to become Euro Money. Let's see if the ECB / BIS don't eventually arrange for the purchase of most of that gold. Goldfield and Anglo may eventually have some big bidding competitors the next time around. No hedge funds allowed next time. This last auction was done with the full knowledge of this ECB announcement in the
background. No wonder the bidding was over subscribed just in the last minute.

The US stood quiet to this dollar killing move because they now need gold to rise also. This concept was quietly circulated around Washington this past spring. Now with this new ECB move, you can bet that the IMF is going to lose it's funding (from everyone) on a systematic schedule. IMF gold will be the only equity the US will have to continue supporting the international dollar debt (and therefore the integrity of the dollar) for the time being. Note: Did they lob off of the term "FUND" from the IMF name because funding is being phased out? (don't laugh, Washington is

I look for the US economy to drag down Japan, Canada, Mexico and all of our major trade partners as foreign dollar debt slowly fails. India, the Middle East and China will all create a new "Orient Express" trade route with their old European partners.

My take on it Michael..........We are on the road FOA

Goldspoon Msg ID:14620,
Golden Sun is some stud, right? I know you are having fun, good stuff my friend. I bet KOAN could kill me for my luck. Here I grind on silver all day long and Gold supports my words almost as if I knew what was going to happen. (smile) Bet silver goes up a dollar tomorrow in good faith for the Silver Kings!

Looks like everyone made a tonne of money on gold stocks! Good for all!! Even my Goldfield went up! (I hate it when it does that!)(smile). Me and the "Bullion Boys" at USAGOLD FORUM will just have to settle for our little 5%.

Make what you can because the game is all over, people! If you are happy holding after tax profits from the mine shares, that's good. But, physical is going "shortage" big time now. Bet there is major 5 and 10 tonne order flow through the BIS right now and it's looking for 30 day full
allocation. If it doesn't hit the CBs desk for filling, the scramble is on. So, during the next many weeks or few months, your profits won't find much "physical street gold" around at a price you're willing pay. Indeed, the paper gold price we all follow may crunch down hard as this unfolds. Buy it if you think it's the same equivalent, I know it isn't. Lot to think about, no?

PH, yes, we are on the road!
I can't wait to see how those 400,000+/- gold options work the Comex price with no gold in the warehouse! I heard they will be serving "Bear Steaks" for lunch on the trading floor!. Later, everyone's beef is going to burn!

Don't know when I'll be back? FOA

FOA (9/28/99; 8:10:36MDT - Msg ID:14695)
ORO-- 1 Month forward is .80%!!!!!
Lease Rates

1-month 4.5800% +0.8000

2-month 0.0000

3-month 4.5080% +0.6030

6-month 4.8360% +0.2570

1-year 5.0060% +0.3060

ORO, I think one small "counterparty" just "got eaten alive". Should hear of it in a day or so. No supply from that opperation.

ANOTHER (9/28/99; 16:15:40MDT - Msg ID:14770)
USAGOLD (09/17/99; 21:11:52MDT - Msg ID:13862)
Another, my friend,
I have missed our discussions in recent months as it seems that you and I, both, have been occupied elsewhere. Much has changed since our last exchange(s). I sense that our friends at the central banks have begun to worry about their outstanding gold, as should the private lenders. The Dutch central bank felt it necessary to call off the dogs by saying they are no longer an easy mark. And now Japan tells us that they will buy if the IMF should want to sell -- a gold poor island nation in the East with too many dollars and no longer enough time. So is lending gold at 4% a good deal? Or should we consider anything we lend at that price, "lost assets"?........Is the golden intention floated by Japan today as important as I think it is, or something to be discounted? I remember your words of wisdom on England...a lost land. I remember your words warning us of the state of the LBMA which is now so apparent. What next? my good friend. Is this "a night to think about gold?" What say you about Japan and Europe and the future of gold?

Mr. Kosares, we speak again. This gold market, it be not as before, yes? For six years and a time, we build the "alliance". Now all join and say "no more" unfair currency. This day I stand with Europe on ground that is stable for the future of our children. Ground made hard with gold that
moves "no more"! Your dollar will now fight the "good battle" on it's own. From early this year it finds no support from "cheap oil". Soon it will find no support from "oil settlement".
Without the "good backing" that comes with others "holding dollars", the world must now settle dollars in a true gold price. It is time, gold again becomes the money our fathers knew. It's dollar price will run now. Fear this as the banker is afraid of his creditors, for it now runs long my friend and stops only for the destruction of its market. From the days of our youth we see not again a
market such as this. All will soon race for the bullion metal and few will walk away with gold. Your mind does consider the "right number" for gold yes? I say, add that ten times and this you will pay if one waits.
Japan? With no trade how will a nation supply its oil? The oil that built them does now break them. Buy gold we say, years ago, hear us they did not. The yen eyes and ears always face across the pacific. Even as their future was thru Hong Kong to Europe. Now this yen will fail a nation that forgot how it's sun still sets at their backs.
Sir, the bullion in the many thousands will change the common landscape of your land to as rocks and bushes. It will also grow the most green lawn for holders of Euros.

May many flowers present your home in the good light of old wealth. The old wealth that we find in the new value of gold!

Thank You Another

FOA (9/28/99; 17:12:39MDT - Msg ID:14775)

What a day it was! The "Bullion Boys" at USAGOLD Forum got to march at the front of the victory parade. How about that Golden sun? It's a triple crown winner again! Up over 8% while the other metal horses had to eat his dust. Even most of the major gold mines went up, but are still out on the track coming in as stragglers (except for Goldfields, up about 17%) (I hate it when my only little mine investment goes up) (very bad for credibility) (smile). Somehow I think this is a bad precedent to start doing this. I'll stop while ahead.

We can be sure that some Bullion houses are now the proud owner of defaulted gold paper. More of it will come pilling in through out this week. This is just the beginning, because this house of cards just collapsed. For a while there (back in the summer), it looked like the ECB was just going to let the dollar / IMF slowly flood itself with gold paper until the market failed. Truly, the only way
to make it more valuable, was to sell more of it and make the paper price fall. Now, they pulled the plug on them and will let the market eat itself. Make no mistake, this is no too way trading market! It's going to run until someone big fails and shuts it down. We don't just work out thousands of
tonnes of short gold positions with a few days and $50 up. I think the gold shares see this and are trying to realistically price in what several locked limit days will do to the infrastructure. Yes, everyone is hedged and covered, but this little move has most likely cleaned out the present counterparties equity already. If the dow, bonds and dollar start selling off big, they (funds) have run out of money and are selling for more. More cash will bring waves of paper selling on comex. Yet, the very equity selling that raises the funds for those waves will bring even more loses to the hedge funds. They used the old gold financing to buy what will be sold now. So look for intraday
waves of more exaggerated form than today's +44 move. Still, all in all, if the banks or the Fed can stand it, this market will run through 500 or 600 on this first kill off.

I'm standing here and watching all this with no risk assets. For me it's all very interesting. As for the bears being cut into bar - B - Q stakes, they can't lose what they never had. Most of the US paper game is all in ones mind anyway. I have a mountain of notes to cover, so I'll step away.

Thanks FOA

FOA (9/29/99; 6:37:28MDT - Msg ID:14853)
All: Very fast note:

Everything is now officially "on fire"! It's exactly as Another said last night, "it's not as before"! ORO, do you see the rates???? Some people are going down, bigtime!!!! For the Bullion Boys, watch your stuff, make sure it's in your hands! Steve, I see the GATA note. At least they now acknowledge that there is a "risk" if gold guns up. We all have know "Another's Thoughts" for some time that gold would run like never seen before. I think this truly is it. Mr. Kaplan may have sold out of his mining shares for the wrong
reasons, yet still made the correct call!!! What a world?? I'll try to post later, big things happening in Euroland. May have to leave? Don't know?


FOA (9/29/99; 8:28:33MDT - Msg ID:14861)
Be back later today, I think!
Swiss Franc, Deutsche Mark, Euro all UP! Crude oil UP .70+/-!!

Dollar, British Pound, Japanese Yen all DOWN! Lease rates indicate total blow out of gold pricing infrastructure!

Is there a picture here? Gold turning into Euro Money!

If you want to be "on the road" risk free, buy physical gold, only gold!

FOA (9/30/99; 5:53:07MDT - Msg ID:14958)
elevator guy (9/29/99; 21:49:39MDT - Msg ID:14932)

Hello elevator guy,
I'm still alive after all this excitement. No calls to travel, yet? Your post carries the exact same flavour that many other analysts are coming to grasp. Each person must see it in their own way, but I believe you understand it well. As the events unfold they will reinforce your convictions to hold the course.

The wind is at your back,,,, sails full,,,,,,,,, far ahead of the rest. Don't make the mistake of looking right or left, your success is directly ahead. We are on the road now...........FOA

FOA (9/30/99; 7:05:31MDT - Msg ID:14963)
Why did it stop?

It didn't!

Part of the process of buying "real gold" is in the waiting for allocation. Be it actual delivery of metal, receipt of certificates for "real vault deposit" or just clearing out the cash settlement of trades gone bad. This all takes time, especially when such a large segment of the
market has just been "cleaned out" financially. On the surface, new traders continue to put up their $2,000 or so of margin money and trade the Comex for some paper cash. Underneath it all, a mad scramble is going on to find gold to meet all the failed commitments. For many of the major trade houses (and BBs), they now must use their own capital to carry the dead positions of others. Most of them will (or already have) covered their financial (read that cash) positions in the paper markets. However, they must still process the real nature of the trade, "find new real gold to
replace what was lent". Like this: "We sold the gold and lent the money to a fund to trade with. If that fund cannot put up more capital to back the loan (because the price of gold has gone so far against him), and pay the higher rental rate (now in effect) when his 1 to 6 month loan comes due;
We will attach his assets and sell them off to buy the gold back ourselves."

This whole cat and mouse game can take a while as everyone sweats the outcome. Right now, many of those funds are so far under water on their "financial trades" (example: short Yen at 125), that a sell off of their "book" leaves little. SO, the bank has to borrow gold against it's own capital and pay the new "lease rate" as it "fully allocates" (returns) the gold position to the lender (mostly private entities). The gold owner (and lender) cannot and will not just sit there and watch the collateral (the trading book of the hedge fund) for the loan go up in smoke. Especially if the lease rate is skyrocketing from an "obvious major world shortage of gold"! Even if the bank is successful in borrowing gold, they still must one day buy in the open market to refund the second gold loan. They can go round and round, borrowing gold to replace the "last" deal. All the while driving the lending rate higher and higher as more and more lenders back out at any lease rate offered.

The LBMA statement about high lease rates bring out new gold for leasing is flawed. Often 20% (and higher) currency rates in failing third world counties does not bring in any new private capital. Usually government money is needed. In like view, we see how the ECB has now blocked new official gold to support a market that private lenders are now running from. It's like the US saying:

"we will no longer back the Mexican treasury market and the private sector will have to do it".

All of this takes time as it slowly unwinds (fails). Without major official gold supplies, this gold market is going to grind to a complete halt. The day traders (that currently run in and out) will one day find the entire system "force major" and their margins frozen. Of course, they will be settled in cash, but only after the "street gold" price runs into the many thousands.

With this in view, do we now see why "taking delivery" of each and every ounce (just like GS and ML are doing on Comex) is so important. Your "big" paper gains from settled cash trades (and mining shares), that will look "oh so huge", will be almost nothing to buy gold with after the turn.

In fact, they may unload a paper selling spree on the markets, that crunches the price down, "just before it completely locks up"!!!

Think about it? Then: Think about how your assets will hold up?

Got the view of what is ahead?

On the road to $30,000,,,,Yes? FOA

FOA (9/30/99; 7:18:47MDT - Msg ID:14964)
I'm doing this in a big rush, so in the last post,

Force Major = Force Majeure = can't honour commitments

Also, Even if the Russian gold is lent, it only creates a liability to Russia and another gold loan in the future will be needed to repay that loan. Through out history, panics are created when people run from lending assets for the purpose of covering someone else's loses. Usually, exposure, is what brings on the run. The ECB has just exposed the system. The run has begun.

Thanks all FOA

FOA (9/30/99; 7:59:42MDT - Msg ID:14965)
(No Subject)
Someone just shot the "horse with no name", Platinum? Leigh?? (smile)

SteveH, Mr, Smith used to think gold was a commodity, just like silver or copper. I bet his clients are about to make him an "unneeded commodity" also?

I'm stepping away for a while, FOA

FOA (09/30/99; 08:17:39MDT - Msg ID:14966)
Had to come back for this!
September 27, 1999. Shades of de Gaulle: The New, New World of Gold

By its stunning announcement Sunday evening, the new European Central Bank served notice that it will not tolerate politically motivated Anglo-American interference in the gold market, and that the Bank of England is now on probation as the central bank with principal responsibility for overseeing this important market. The details of the announcement have received full coverage by the financial press and wire services. Only time will reveal its full significance. But what already seems clear is that not since
Charles de Gaulle and the Banque de France mounted the Franco-American gold war in the 1960's has a European central bank so directly confronted Anglo-American hegemony over the international monetary system. And this time it is not merely a European central bank, but the European Central Bank.

The classical international gold standard became an unintended casualty of the First World War. Ever since, first the British and then the Americans have essentially dictated the basic features of the world monetary system: the gold exchange standard after World
War I, Bretton Woods after World War II, and floating rates after Viet Nam. Each time the new system finally led to an unprecedented credit expansion and an equally unprecedented bull market in stocks. But the process of unwinding the great bull markets of the 1920's and the 1960's brought down the very international monetary systems that spawned them. The final outcome of floating exchange rates and the great bull market of the 1990's is yet to be written. However, the advent of the Euro was intended to make Europe what perhaps no single European country could be: a necessary player in any future fundamental restructuring of the international monetary system.

For now, the gold market itself may provide sufficient fireworks. One-year lease rates today hit 4.7% as existing shorts scrambled to secure adequate borrowings. Under the circumstances, the odds for one or more high visibility failures or defaults cannot be insignificant. In the longer run, Sunday's announcement by the ECB may be just the first shot in a far larger battle for long overdue and much-needed reform of the world's monetary system. But in any event, it is a reminder that what General de Gaulle termed
"an exorbitant privilege" -- the dollar's key currency status -- cannot be maintained indefinitely by a policy of trashing gold.

FOA (10/01/99; 20:11:14MDT - Msg ID:15148)
I just finished reading all the posts today and must say that this is a wonderful group. It's not just the information that's presented as it's great to see it all assembled. Rather, it's good to see everyone offering their feelings (not just their projections) as this market evolves. It's becoming impossible to discuss with everyone because so many people are entering here. Each with their
own slant or take on the day's moves. Very, very good! Michael has created a "one of a kind".

Gold always has been an emotional subject. Especially if you buy it for it's future monetary value instead of trying to quickly trade it for cash. I know there are traders here. It's seen in their cool style and council. For them gold is but a quick paper liquidation and "if I ever need to" it's "off to USAGOLD" to purchase. Hmmmm.

Yes phaedrus, in your world "it ain't going to happen". The failure of paper, that is. But please consider that I move in a different world from you. No, not the high speed "connected" "mover" environment. Rather it's a world attached to a timeline of "ages old" events and "reoccurring human nature". This realm exists today in the minds of a people you will mostly never know. Yet, they hold the very destiny of our modern currency system in their hands. Intelligent, sharp, and filed with "the simple Thoughts", they do very well understand the western differences of common sense. Up vs down, rough vs smooth and most especially "I have" vs "they owes"!

Presently, in your world, the concept of holding "paper gold "they owes"" can and does gain the great percentage returns you reference. I expect your ability to trade will move you quickly ahead of all others before you when the time comes. Then again, it strains credibility to suggest that one could "out trade" every other player when "lightning strikes in the night". I think I saw a movie
where it was counselled "a man's just got to know his limitations". I have been given a view of this storm and my feet are not that fast.

My message (as an extension of Another's) is for the ones that are so very slow. That's me, too! We are doomed to trod the slow path as do the giants, because, in the end things go up faster than traders can revalue paper. Funny as it may seem, all of us will most likely again meet the "fast
traders" though our location in the race will somehow change.
Imagine, if you will the logic of Another:

"This world be still round, my friend. And days have changed with modern toys for boys to play. Though they circle the earth with much speed, full circle bring them but one step "behind me""

Some people may not like the connotations that presents, but boy, it sure keeps my brain clear.

ALL: The end of this currency game will see people trading their hearts out only to use all their winnings to buy the same amount of gold (or much less) they could have purchased in the first place. They did the same thing in Rome, still fighting over economic contracts as the war raged just outside the walls.

Trading IOU paper will never create more gold for anyone until they liquidate and buy. Mostly we don't and what we usually truly gain is only more paper with an "attitude" to prove it. It is against human nature to expect anyone to leave a paper crap table while they are ahead. Millions
and millions of gamblers try to convince themselves and others that they can do it. 99.9% of them never have and never will. It's a siren song as old as time itself. It's the same in the modern stock markets. When the game "truly" ends, few walk away with what they thought they had.

We are on the road of returning to the natural, true monetary values of gold. Values that will not be the one ounce for a suit some still proclaim relevant. It value will be magnified 100 times by the modern advances this society has created. Some will lose their jobs, some will lose money, but the world will not end. Babies will be born and employers will employ. Only the yardstick for measuring wealth will have changed. As events unfold this truth, Another will respond to reference this journey we all will travel. Truly, "events will prove all things".

Thanks ALL FOA

FOA (10/01/99; 21:59:26MDT - Msg ID:15158)
PH, Everybody,
I have more to say than could possibly write now. When I get back we will have an awful lot to cover. We'll all understand later.

Golden Truth,
The "Bullion Boys" did OK today. Golden Sun just about outran (percentage wise) everything. Easy to do when one horse (Silver Moon) hits the rail and flips his rider, "backwards", no less! (smile)

Goldspoon, my vote is "horse with no name" for Platinum. I now remember the song by America.

The Russian announcement was in some ways like the English sale. They were asked to publicly say it to drive others to lease before they did (and lower the rate). A ploy only, as some bank shorts withdrew their bid to cover now, waiting to see what would happen (this also lowered
demand (and rates)). The USSR was always the very best at gold trading. Cut your shirt clean off and you never knew you lost it! Dumb, stupid Russian dealers??? No more so than us. Russians good at poker, oh yes. Russians announce deal before the fact to bid themselves a lower rate?? Did anyone buy that one?

I bet Michael still has gold for sale. Still at a good price for a while at least. All you paper traders better take the advise of this old Western Scout, "watch your top knot out there"!

Be back when I can................FOA

FOA (10/06/99; 20:19:41MDT - Msg ID:15713)
Where gold is now going, no other investment can follow!

We have been on the gold trail for a number of days now and it's time to stop and talk. Everyone has read the USAGOLD HOF site and understands the tie in of gold and oil. Now lets look at how these factors are beginning to close in on our gold markets.

Earlier this year, when gold was just falling into the $280 range we discussed how then was the time to buy large blocks of bullion. Many large entities were taking delivery to avoid the approaching storm. It seemed that $280 had been the magic number. If gold fell below that value there was a risk that the number of paper creations, known as gold derivatives could explode in a final frenzy. Indeed, in the march to $250, the fractional nature of paper gold trading has created a massive glut of "paper gold commitments" that have no gold behind them. Prior to this $250 fall, the gold market was already bursting with derivatives. Enough so to destroy the credibility of any form of real "gold delivery". Today, those numbers are off the charts. Had the ECB and it's consortium of major Euro supporting Central Banks not stepped in to stop the madness, the gold market would have been crushed to the price floor. Long before that floor was reached, the valuations of paper gold would have begun a discount phase. Where their traded price reflected the inability of the bullion markets to supply even a tenth of the real gold that these contracts stood for. Yes, for big investors the time to take delivery was before the lions begun to fight over an ever smaller supply of gold. I thank Mr. PHinLA for posting Another's analogy about the coming "Gold Lions".

One way or another, the modern gold market of today is going to fail. Weather the trading price goes to $1,000 or falls to $10, the massive overhang of gold derivatives cannot be honoured. What physical gold that remains in private hands will be cut free by this failure and trade for a while in "street form". (see Mr. Holtzman in the HOF for a better understanding of this)

I have discussed before how the modern "fractional gold system" was used to multiply the outstanding ownership of gold while the actual physical gold stocks remained static. This allowed the price of gold to fall as this new paper covered the massive demand. Physical gold could then be
used to support fabrication and, more importantly flow in a direction that increased oil supplies. Mr. ORO has searched for a formal agreement or even numbers that account for this process. The numbers are evident as presented, yet the agreement was political in nature.

A few years ago, continued good oil flow required gold below $360. But, below that number, the asian Trader would emerge with tremendous accounts. It wasn't long after the fall below $360 that the LBMA had to make public the enormous buying of their paper commitments. Even as the
Main Central bank committed to keep gold above $280 to preserve value, it was obvious that the paper market would one day implode itself from "fractional gold" creation. The end of our markets was written the day we fell below $360. We embarked on a trail of no return.

Over the last few years the gold market developed with a two tier nature. Entities that had massive oil to supply a needing world would most certainly receive their gold in "allocated" form if they asked for it. Weather it be from private investor who exchanged their physical for holding
paper derivatives or from the vaults of Major CBs, this gold would come from somewhere, "come hell or high water". Truly, with the explosion of gold commitments outstanding today, we can now clearly see how this will unfold.

The modern financing tool we call the "gold carry trade" is now becoming the poison that will kill this market. The demands of gold lenders to return their "at risk" positions are creating an atmosphere where no amount of physical gold exists that can supply the outstanding paper claims. Great blocks of gold are now lent into the markets at 4% or greater, where once 1% was considered a good return. As each new group of lenders enter the market they are followed close behind by former lenders demanding their gold return. Fear begins to grip those who were once bullion owners as they now became paper pawns. Each new demand for "full allocation" creates yet further demands to borrow. The supply of new lenders grows smaller and smaller as the
possibility of default increases.

The ECB moved to block any further erosion of the Euroland position. Most certainly, all world gold contracts denominated in dollars would have gravitated towards Euro conversion to best advantage the EMCB gold stocks. Indeed, in a brilliant move they have blocked that escape and
doomed the dollar gold market to collapse from non delivery. The ECB can now effectively support it's gold commitments thru either bullion allocation or Euro settlement. By marking to the market their gold reserves they will contrast the advantage of a dollar gold market collapse no matter what form it takes. Weather discounting of paper gold from non delivery as derivatives are sold in mass (plunging dollar gold price) or a complete run for delivery (what we are seeing now) that leaves 95% of the market shut down and still holding paper demands ( paper gold priced in the many thousands. prior to lock up), the Euro will gain reserve backing.


The mine defaults seen today are just the beginning. For every mine that fails it's stockholders during a $70 gold price increase, fifty will fail from a $2,000 run! Weather the bullion price reflects the "street price" or the "run for delivery paper price", the turmoil will devastate most contract strategies. Why is this happening? Modern people, be them investors, mine managers or "carry trade" operators alike have never seen a true gold market. Their perception of a gold run is where jewellery demand and 6% inflation gun the price to their historical "natural level", $500! Truly, in this world, $500 is where gold starts it's great move.

Our dollar/IMF currency operates on contract liquidity by creating paper IOU that are never called. Be they cash, bonds, CDs or stocks, they represent elevated wealth only because they are never liquidated into real things. If humanity ever decides to sell them (something they will do only if forced from fear), the value of real things quickly increases to a level much higher than the total value of such paper. It does this because, in a panic, things are held back, thereby lowering supply.

The recent (last 10+/- years) gold market has reflected it's transition into a similar paper "contract liquidity" system. This was done to enhance the credibility of the dollar in the eyes of it's trading partners. Today, the Euro system has offered a reason to test the credibility of this gold system. This "new gold market" is not as before and will run in dollar terms unlike anything anyone has ever seen. Gold is now in the process of becoming money and that pricing process will destroy most any contract ever written against gold.

In the future, no investment on earth will keep up with the real value of gold, nothing! It will run until the dollar system is destroyed and a new system takes it's place. The effects and beginning events are starting now. In the background the gold market is under stress, even as small traders make quick paper gains. When the stress breaks into full view, all traders will be "eaten alive" by the next biggest trader. And so on up the food chain. So, why trade. Already, gold bullion has done very well against shares and other metals. What ever small percentage gain one has made above this is for how much risk? I would like to see the owners of Ashanti Goldfields Co trade their paper
gains for bullion tomorrow? We have discussed this often and this is only the first good example. Yet gold has only just begun to move! No option, futures, silver, platinum or gold stock will match gold when it runs $100 a day for days on end (perhaps in a Euro marketplace).

Our road has just begun and I will walk it also. Hold a tight line as we proceed down this dangerous path. It will be a wonderful hike for everyone that can stay on the trail and understand the sights along the way.

On the road to $30,000...........thank you FOA

Nice joke PH! My wife almost killed me! (smile)

FOA (10/07/99; 07:40:11MDT - Msg ID:15741)
Central Bank Cheating!

Central bank policy is never offered to the public in it's true context. They can't afford to! Open directives that involve "historic" changes are usually never interpreted successfully until their "real life" effect is truly seen.

When the ECB, Swiss and BOE all made their announcement, it was publicly taken in the current context of falling gold prices. When I posted "it's all over people", my response was in reply to the future. A future that evolves an escalating gold price environment, the very conditions that the ECB statement would create and was aimed at controlling.

This agreement was more of a commitment to "continue" a certain amount of gold supply "even as the prices rise". Understand that; When an important body states that they are ready to slow an approaching forest fire, every else immediately starts preparing for a fire. Even if it's not in view yet. It should have been obvious that during a surging price period, most (if not all) CBs would stop selling gold and call in lease guarantees! Such a move would lock "all" the markets instead of creating a "controlled burn" of the dollar.

Watch these events as they unfold. True, there will be cheating! However, that cheating will take the form of "CBs buying gold" (and hiding the transaction as well as able) to balance their sales. If the Swiss do sell, we can bet their selling will be delta neutral. Their most likely move will be to commit their gold into the EMCBs in exchange for Euro type derivatives (even if sold for dollars). If anything, the effect on the markets will be to cut physical supplies, in complete contradiction to the ECB / BIS directives.

Mosel, our problem today is not so much a rising price, rather the lack of physical to close outstanding contracts! You are right, dollar liquidity can and will be expanded to cover "bookkeeping defaults", but it will only "extreme" the physical defaults as private lenders demand their gold back! Your deep mind will burn in overdrive as this plays out. I'll keep the fire extinguisher ready to cool off the grey cells (smile).


FOA (10/07/99; 08:13:47MDT - Msg ID:15745)
Like this: "The time has come to support our own currency system. Let any other CB that wants to work with us, also announce this agreement. (I think Japan did also?? Were they hoping against hope??) We are going to stop this thing before it infects our economic system. Tell everyone we will now limit our lending and allow it to shrink through payment liquidation. In addition, we must offer this supply to keep it from burning out of control."

I would have added: "it all over people"! Somehow that would have been seen as gasoline on the fire. No?

FOA (10/07/99; 08:28:36MDT - Msg ID:15747)
(No Subject)
If that "horse with no name" passes me, I'll lose all credibility! I can see it now, my head in a chock in town square with the villagers throwing stones and melons (especially Koan). Don't worry for old FOA, he will just smile through it all. A little later others will spend time on display and I have kept some eggs on the back porch for the occasion. (big smile).

FOA (10/07/99; 08:38:17MDT - Msg ID:15749)
Hello Hipplebeck,
Each of us will follow our spirit as this unfolds. If you hold gold in your hand, count it as one ounce they will not posses. Come what may, their contracts are only good if someone delivers gold against them. In like view, Libya never delivered oil to the Hunts. Even though the Texas boys had a contract for it. We shall see! FOA

FOA (10/07/99; 08:47:31MDT - Msg ID:15751)
(No Subject)
Goldspoon (10/07/99; 08:33:19MDT - Msg ID:15748)
FOA is very close to this thing...Another is on the inside..

I'm just a dog on an Alaska sled team. Look closely and you'll see me close to the back. I'm so small that my barking is all most people notice. The "big huskies" are up front, in the lead. As such I am Truly "on the road",,,,"in the footsteps of giants"!

Can say no more.......FOA

FOA (10/07/99; 08:53:37MDT - Msg ID:15754)
(No Subject)
Hipplebeck (10/07/99; 08:42:20MDT - Msg ID:15750)
What if they offer you $30,000 for an ounce? Will they then get your gold? They will get mine.

You will do this because of your great wealth. Myself? As a poor man, I can afford either gold or currency. A dollar will always be as affordable as one dollar's worth of gold! Yes?

Thank you all,,,,,,,,,,,,,,must go now FOA

FOA (10/07/99; 17:11:21MDT - Msg ID:15796)
Orca (10/07/99; 09:59:09MDT - Msg ID:15763)
(No Subject)
The Economist .. Peter Drucker says it all

Hello Orca,
Just wanted to say thank you for that article. Every investor needs a base perspective when listening to all this modern input. All of us should hear things spoken in different ways as no one person can ever make the best point for our individual ears. FOA

FOA (10/07/99; 17:13:01MDT - Msg ID:15797)
SteveH (10/06/99; 22:20:05MDT - Msg ID:15718)
To a friend Leroy,

Leroy is in for some show if he only follows this trail with us. With this crowd getting much larger it increases the chance we won't miss anything. Even if one does not invest, it's worth walking from a historical view point. "we watch this new gold market together, yes?",,,,,, Yes! Thanks for writing FOA

FOA (10/07/99; 17:15:32MDT - Msg ID:15798)
ORO (10/06/99; 23:44:47MDT - Msg ID:15721)
SteveH - Your letter - a mechanism

With that fine post! You have opened up the "essential concept" for viewing. This is indeed where we are going on an "official basis". It will be one great chess game to watch. Thanks FOA


Simply Me (10/06/99; 23:59:12MDT - Msg ID:15722)
Thank yoo, Sir FOA.
Your words of encouragement are needed now more than ever.
Many of us are "in" gold to the hilt...according to our means

Hello SM,
If you are "to the hilt" in gold bullion, "according to your means": Then you stand square in the middle of the preferred "real security" holding through out our history. Come what may, if the price rockets or plunges, all paper moneys have failed as society returns to gold. Believe it! FOA

ORO (10/06/99; 23:44:47MDT - Msg ID:15721)
SteveH - Your letter - a mechanism
FOA has, once again, portrayed the basic concept of the future he sees from his position, which you assume is a Saudi point of view. For myself, I do not know and will not venture a guess. The form of expression is appropriate to a Saudi official.
The thing most of us miss most of the time, is that the simple fact that everybody's interests, save the governing class in the US, are stacked up towards this new format for floating currencies and reserves. It puts everybody on an equal footing and opens the possibility of a level playing field for both banking and trade. It also eliminates the segnorage of the US in printing the world's medium of trade and debt settlement and has a chance of revaluing the debt of the EMs into insignificance - freeing them from the trap the US bankers sprung on them. (see Mozel post) One more issue is that the gold accumulated in Europe, Asia, and Arabia through trade, and in the US through payments for services in war is given its original weight as the representation of a whole nations' past financial achievements. (again a good Mozel point)
The US elite is very much like the elite of Johnstown before the flood, enjoying the night in a cocktail party as the engineer tells them of the near certainty of the collapse of the dam if the storm outside continues, and even if it stops. As the custodians of the dam run for their lives, having seen water coming through the cracks, the elite continue talking of the new library they will have built, the wives talking of the benefits to the poor, the husbands organizing their conspiracy to rig the bidding. Notice that even the engineer, convinced of the impending disaster and its ramifications - including the high probability of his own death - still comes to the party. (This account is partly fictional - so take no offense)
The working mechanism of the new currency system ANOTHER foresees and is involved in implementing is very straightforward, though only somewhat less fictional than what we have today. It just happens to artificially favor gold.
The manner of strengthening a currency is the main difference from the current system. Each country, and the IMF as well, strengthens its currency by bidding for gold within its borders. As the price of gold increases locally, the backing of the currency has both increased in quantity and in price - and therefore in percentage of backing. Other countries respond according to their need for a stronger or weaker currency for domestic or international political or economic purposes. Through the importation of gold, there is something gained for a net exporter. Through the import of goods, one's currency is necessarilly weakened as it is eventually used to buy gold by the exporter, strengthening their currency relative to the importer. It restores the best aspects of the gold standard in trade and in the settlement of debt, but it will enslave the countries that do not have their own gold and are net debtors. Countries that are US creditors but have no gold will be left with whatever the gold value of the $ would be relative to the Euro, SF and other major currencies.
The gold price in this system has no cap. All have a vested interest in keeping the gold price high. In the meantime, the gold miners will be taxed at incredible rates and gold holders will be picked at as the capital gains taxes on their gold sales are raised over and over. Initially, there would be a strong push to have the gold holders spend the money unhindered, to jump start a shocked economy. After the initial spring time for the gold owners, there would be the atmosphere of growing taxation of gold profits (inducing people not to spend their gold).
Monetary policy would ammount to the throwing of unbacked paper into the market, which would cause the decline of the currency and a surge of exports. The exports will garner a large chunk of gold coming in, and would either displace the currency (if gold is not bought to increase its backing) or will be used by the governmnet to support the currency.
Contrast this with the current system, where one needs to devalue the $ in order to strengthen one's currency, by throwing $ into the market and buying one's own. Thus the $ gained in trade are lost in defense of a currency in what is a sure defeat if you are a debtor nation - the US Fed/banks can invent as many $ as are necessary to borrow your own currency from your banks and dump it on the market. As you raise your interest rates, your economy grinds to a halt and as you supply more of your currency to your creditors as a result of higher interest rates, you are either more in debt, or the funds fall into the market where they eventually lower the value of your currency. If this attack on your currency was accompanied by a rush of hot money out of your financial markets, your economy would be destroyed. Your $ denominated paper would be defaulted, and your debts remain hanging arround your neck like an albatros. These will force you to sell your products and real assets at a discount to their cost and real value, in order to settle $ debt.
The US has been trapped in this way too. It is by far the largest debtor the world has ever seen, in relative size to the world economy, or in relation to its own. The list of creditors is growing as each country resolves it $ debt. Japan made it in the 70s, Germany and France in the 60s, China in 97, Korea Thailand and the Phillipines (almost) in 98 and 99. Russia, Malaysia, and Ecuador are just saying "go #$^& yourself".

I will say this. This new international monetary system too will fail in one way or another, and produce unpredictable results. It is such a new concept that I can't say with certainty how it would work in reality. I have a vague thought that gold would displace the currencies in this system, since it would be the most reliable store of value, less subject to the whims of government.

FOA (10/07/99; 17:17:32MDT - Msg ID:15799)
Cavan Man (10/07/99; 09:24:38MDT - Msg ID:15758)
Darn. I missed you. Cavan Man here. I am not interested in "timing" but, time frame or range of time would be helpful. Thanks.

Hello C Man,
For anyone that wishes to hedge their other wealth with a portion in gold bullion: We are on the road NOW! FOA


AEL (10/07/99; 15:09:55MDT - Msg ID:15786)

AEL, very good link, sir!

FOA (10/07/99; 19:12:16MDT - Msg ID:15803)
USAGOLD (10/07/99; 15:18:27MDT - Msg ID:15788)
The Monetary Triangle

------------From reading your most recent thinking as summarized in Msg#15713, I get the distinct impression that you believe that the Europeans have mandated their version of closing the gold window, thus making gold dear for any purpose, the settlement of gold carry trades being the most
severely affected. Some have said that this event of September 26th by the European central banks ranks in the annals of monetary economics with Nixon's closing of the gold window in 1973 and letting yellow metal seek a free market price. Following the Nixon decision, we had ten years of dollar devaluation. On the other hand, the European closing of the gold window could lead to ten years of euro appreciation against the dollar -- the exact opposite of the 1970s U.S. experience.--

To the above---- "Absolutely"!!
I don't know if the timeline will be that long (ten years). The dollar will most likely fully collapse into some form of controlled inflation with exchange controls and all. ORO (#15721) wrote a good outline using Another's, trying to conceive the form of a new currency structure without the current dollar system. Today, in the middle of all of this, the pressure is indeed on to increase the value of gold "in all currencies". Make no mistake, no one wants this, but the majority has accepted that this is the only way out from under the dollar.

You write:

----At the same time, if you superimpose a chart of gold in euros over a chart of gold in dollars, a startling observation can be made -- one that graphically shows how much the world of international money has changed. The movement of gold in both currencies is nearly exactly the
same! Having watched the Asian contagion unfold and run the graphs on several sick currencies, there was one relationship that always held true -- as the currency depreciated against in gold, so it depreciated against the dollar. This led me to believe that once the euro was established as an international reserve competitor to the dollar that when the euro went up against the dollar, it would be able to buy more gold. I waited to see if this would be the case and am somewhat surprised to see a new phenomena -- as the dollar has depreciated against the euro, both have depreciated against gold.

Continuing from my above: It's going to be a two phase operation. For the Euro to continue gaining credibility against the dollar, it needs a rising gold price in both currencies to build the Euro perception. In this stage they don't want the dollar exchange rate to collapse, but rather draw trade flow settlement into the Euro. It's expected that a steady interest rate policy and the lack of aggressive intervention will place them in a better light. But, most importantly, a rising gold price will detract from the dollar on a world basis more so than it will the Euro on a Euroland basis. Using points we have covered many times, the ECB will have more than enough resources (read that dollars on hand) to keep a firm bid under gold. This act of bring in gold as Euro reserves (not currency backing) and cannot help but undercut the dollar's world position. Especially now that the world dollar gold market is "on the ropes" and about to drive the dollar gold price to the sky.
Their item about commiting gold supply to 2,000 tonnes was a farse. Yes, the supply is needed to controll the burn, but a gold rush will cause much greed to retain the bullion. The BOE may continue, but all of them will cut and run when the gold price starts to rise. I bet they still sell for show but hold a backdoor deal to retain the metal.

Your words,

----How do you interpret this new phenomena -- this new and to my knowledge unique triangular relationship? Does it not give Europe the opportunity, to issue bonds to finance whatever Europe would like to finance including the military, public works projects etc without damaging the euro's credibility or injuring its market? And by this, do not the Europeans solve a sore problem -- getting their new currency into circulation (something you and I have discussed before). If so, this could be a clever political/economic move indeed and might answer the questions why Europe made the September 26th Gold Sunday announcement as they did when they didn't have to. In other words, at the beginning of 1999 EU launched the currency. Now EU is going to get it into circulation internationally in the form of bonds held in national treasuries. The next step will be make it stick. At that point, I would agree with you -- Europe could become a gold buyer unloading unwanted dollars perhaps through the unwinding of the gold carry trade.
Wouldn't it be a total irony, if the gold carry trade turned out to be little more than a detour that brought us the back way to the same being used in international settlements as the currency of last resort?-----

Yes sir to all of it!
This will process over one to two years. Or does it work out into the new 5 year plan of the ECB? We shall see. The dollar crisis should be worked over by then. Perhaps our much needed time frame to work gold into the thousands?
Once the Euro begins to see a run for it's currency (next year or so?) the gold price in Euros will stop rising as fast as the dollar gold price. Simply stated, the dollar/Euro exchange rate will halt most of the depreciation of Euros against gold. This is the second phase that Another spoke of long before the Euro was even born. Here we see gold at perhaps several thousand Euros, yet in the many many thousands of dollars. This is why it was so important for them to hold ECB committed gold paper. Euroland could later lock a low oil price using high gold as partial settlement. It will be a spectacular boom for their economy.

Michael, it's world class history in the making, Yes? Thanks FOA

FOA (10/08/99; 07:55:38MDT - Msg ID:15841)
Have waited for the day when I could lean back and read these events in the words of others. We are all riding a new "bullish investment trend line" called "understanding"! It's great to see so many at this forum (and others) cutting through the fog and seeing a new world of "gold bullion".
Not just the trader world of paper profits.

Look at this new item: "The Debacle in the Gold Market" and it's link above. Here are a few pieces of it:

-----History has shown us that this type of activity always ends in a disaster of sorts for theplayers and indeed for most market participants. ---------

---We have stated before that in some ways there were two markets, one running on the back of the other. ------

----What was being created here was the mother of all debacles, simply because the paper market was deemed to be real, when, in fact it was as illusory ----------------

---------All the players in this paper market are at risk, and in fact were at risk the moment the made their first foray into it. The extent and ramifications of that risk will become clear over the next several months but it carries far greater implications than most commentators are awareof. ----------

-----Currently most aspects of the gold market (one notable exception being ownership to physical metal purchased prior to this latest rise in price) including gold stocks are at best a pool of very muddied waters and will remain so until this artificial paper gold market ceases to exist and we are some time away from that event. --------------


This along with all the other "finds" here tell us we are well into a "changing of the tide".


FOA (10/08/99; 08:32:54MDT - Msg ID:15846)
TownCrier (10/07/99; 19:15:20MDT - Msg ID:15804)
After the Close: the GOLDEN VIEW from The Tower
"ECB's Duisenberg rules out EU gold-selling agency."

You can bet they are well into creating a Euroland based gold market expressley denominated in Euros. The day will come that even MK will check the price of gold in Euros first before a sale is made. Believe it!


Good point about helping others learn. Most Americans have grown up with a Western viewpoint. They have little background of the true reasons for gold. Their knowledge comes from stock broker reasoning that sees the entire gold market as the 70s thru today. It will be a costly
mistake. You are right, MKs book would help many, if only they knew it was "out there". I thing the changing gold market (bullion way up as ALL gold paper falls behind) will make people curious. Even flierdude (10/07/99; 19:31:37MDT - Msg ID:15806) would benifit from a call to

Thanks FOA

FOA (10/08/99; 08:37:15MDT - Msg ID:15847)
Al Fulchino (10/07/99; 20:11:46MDT - Msg ID:15811)
FOA? What does this ounce in my hand buy if....? Forgive my intrusion, but just what does this $30,000/oz. of gold purchase?-------

Intrusion is the reason this forum exists. (smile)
The old concepts of "one ounce buys a suit" was never honest. It just so happened that during that timeline of "relatively" free markets the value worked that way. Today, gold's value in no way comes even close to reflecting all the technological advancements that have impacted our buying power. Yes, in currency terms a suit is priced well, but our buying power was robbed from currency inflation. Here is where the years of money "overproduction" have taken their toll. Because of manufacturing advances the cost of goods
should have been far less than today. In reverse terms, if the true dollar inflation was evident, a suit would cost several thousand. This is how we can see gold in the many thousands even before dollar price inflation impacts it's price. We will live to see gold gain value in "very real terms" against every form of wealth. Gains that will become evident well in advance of the dollar price inflation that is to come. Holding physical gold today is a "real value" asset, far in excess of what the current trading
proclaims it to be. You have but to walk this trail a little further to witness "nature in full bloom".

Thanks FOA

FOA (10/08/99; 08:47:06MDT - Msg ID:15848)
ORO (10/07/99; 22:31:54MDT - Msg ID:15823)
FOA the new Monetary order
Has there been any thinking in this regard?

It's not as cut and dry as your post displays it. Yourself and Michael have just recently embarked us into the complicated world of "money management politics". I can take us very deep with this but fear we will all come up dry with "understanding". With so much happening now with the changing perceptions of the gold markets, I want to stay current in this area. Post your excellent works as you will, I read every thing sent to me. Yet, I hold back for now. Thank you so much for all you offer as your writings are the best wine before and after dinner. FOA

FOA (10/08/99; 08:56:14MDT - Msg ID:15850)
(No Subject)
PH in LA (10/08/99; 04:41:43MDT - Msg ID:15834)

HA!! Very good, I love it:
"far-out thinking in the fringes of sanity..."

I'll be back a little later. FOA

FOA (10/09/99; 19:21:08MDT - Msg ID:15945)
Where gold is now going, no other investment can follow!
Tomorrow, this trail will begin an incline that few of us will make. After we make camp, consider this before the sun rises on our worst expectations:

Leigh and ALL,
I just had a glass of wine to quiet my apprehension of what is to come. It is my belief that the "Gold wars" are about to begin. Please consider this "a very open viewpoint".

I think it's now to late for the dollar to "initially" surge with gold during this crisis. As an old, indebted currency, the dollar will have to share any flight to quality with the Euro. I say this in the same light that Michael stated in his: USAGOLD (10/07/99; 15:18:27MDT - Msg ID:15788) The Monetary Triangle.

------------From reading your most recent thinking as summarized in Msg#15713, I get the distinct impression that you believe that the Europeans have mandated their version of closing the gold window, thus making gold dear for any purpose, the settlement of gold carry trades being the most
severely affected. Some have said that this event of September 26th by the European central banks ranks in the annals of monetary economics with Nixon's closing of the gold window in 1973 and letting yellow metal seek a free market price. Following the Nixon decision, we had ten years of dollar devaluation. On the other hand, the European closing of the gold window could lead to ten years of euro appreciation against the dollar -- the exact opposite of the 1970s U.S. experience.-------------

The ECB/BIS declaration was little less than an announcement that the dollar will now have to stand on it's own. The implications of this are awesome for all of us! Look at the link above and look slowly at the charts. I expect a type of currency war to now begin. No, not one of competitive devaluation's or tit for tat interest rate changes, rather a war about "long term viability " and "ability to weather the coming storm". The rules of engagement have changed and now include "real reserve values" in the battle. Truly the race to increase the value of gold has started. Review the words of Mr. Greenspan as given in PH in LA's 15926: (Note: There was rumour in Washington in the spring that the major powers were rethinking gold. I think PH's quote was made in that time!)

----------Greenspan told Congress then: "We should hold our gold. Gold still represents the ultimate form of payment in the world. Germany in 1944 could buy materials during the war only with gold. Fiat money in extremis is accepted by nobody. Gold is always accepted..."--------

If one stands high upon a hill and views the future battle scene, we wonder how in the world the hapless gold shorts could have wondered into the middle of this. Couldn't the entire gold industry see that this could not end without an asset war? They will be cut to shreds in the early attacks. Not unlike this first shot fired. Mines, the finance houses that support them, dealers that must cover their risk,,,, all of them must feel the rumble of heavy CB armour as it approaches. Make no mistake, the valves that control the flow of lent gold "guarantees" are being closed. In addition, from what I have just understood, I now fully well expect we will not see the 2,000 tonnes of gold sold into this coming crisis. In an earlier post I felt they would at least stay with the spirit of the agreement and
sell some of it. The hard line I hear now is "damn the implications"!

The thousands and thousands of contract derivatives that now are outstanding today, cannot possibly be covered now with delivered gold at any price. This situation is going to "seriously" escalate.

When people say that they will gladly sell gold at $5,000, I counter that they must have never experienced war, "up front and personal". Remember, battles don't become "HOT" because everyone is "gladly" selling their "now in demand weapons" to the highest bidder! Gold will cross
$1,000 because everyone is buying it at $1,000 and asking for more. Trust me, when your neighbours are buying 1/32 ounce wafers with whatever money is in the house, you won't be unloading bars to buy a new house. Nor will any strong spirit trader be selling short a ten lot on comex !
Believe it!

This same dynamic is not lost on the human controllers at the CBs. Yes, they breath and feel the same media vibrations you take in. During the events directly before us, any and all contracts will be swept along on this raging river of economic turmoil. Be they contracts for, gold, currencies, bonds, stocks or commerce, all of them will lose credibility as the worlds massive trade settlements shifts from one medium to the next. Just as in Greenspan's line of thinking, when the armies invade the grab the rare coins, art work and gold. Forget the currency!

As these events progress real assets don't devalue. No, just your ability to profit from their ownership comes into question. Like this: If a forest fire suggests that all forest owners may be at risk, then any gold miner will share the risk of his "rooted gold" being burned also. The currency that is at risk of change today is the dollar. Therefore we can be assured that any company that owns what has become a "currency war weapon" (gold) will own "questionable assets", especially US assets. With England now running into Euroland, the Anglo/Euro mines in South Africa may be less in play? The risk of a plunging American stock market is enough for US mines without the influence of the "gold money" issues that now impacts the dollar. Outside of the "Gold Fields" play for bullion being in the best interest of all bullion owners, I feel all world mines are at risk. However, for ones that must hold a portion in these asset areas, consider what I have said. Choose your
holdings well!

All of this sounds a bit extreme, yet what I see directly ahead is extreme. Look again at the above chart and follow the gold lines. Unless the Dollar/IMF forces place several billion dollars of margin at risk to sell tens of thousands of contracts, gold just may run off that chart in the next week or two. Or less! Truly, the world has changed and I believe most of the gold industry is now caught
up in this financial change. A realignment of epic proportions. As of today, I see the money for rescue is not coming. This market is about to be fed to the lions because this battle involves something much larger and important than the industry. The new gold valuations alone will negate
the need for fresh supply and therefore lower the strategic need to maintain the owners value in these assets.

In addition, the two engines of wealth that were so long the saving force in the American economy are about to react to this major change of world value perceptions. Watch the chart above as the US stock markets parallels a failing currency. The next month or so may indeed make history. We shall see.

PH, you are right, in time perceptions of real events overcome a persons fear to react.

In time,
"""all true journeys eventually converge onto the same curve as they approach their destination"".

Rest well my friends, soon we will run like the wind blows! FOA

FOA (10/09/99; 20:04:37MDT - Msg ID:15946)
Hello Cassius,
The Comex margins increase will hurt the shorts as bad as the longs. It is different this time. Most of the big trade houses are going to be carrying a ton of defaulted gold paper. In this new environment they can't cover their commitments with real bullion either. Because there isn't enough around at "any" price or lease rate, period! So, they need the Comex speculators now more than ever as these BBs will also be buying long to at least "paper hedge" the bookkeeping side of their position. This is why the option OI and the futures OI are about to go ballistic (at least until they shut down the market). Some people hear me say this and they think a $100 or $200 move won't close anything. I agree, but that is far from what is coming. Like this:

"HK opens up $35. London AM fix +$97. Comex opens lock/limit +$75 on far out months and trades only front month. London PM +168. Comex front month trades "one contract" +$223 then no floor person will move. The exchange closes for the day. HK opens +354, on about 1,000 ounces and closes. Next day, London doesn't open at all, no fix possible. Indications +1,500.""

Now, my friend, do you really think anyone will be settled? This is the type of market that is coming. After a few months to a year or so, somewhere a gold market will reopen. All the while, "street gold" will work at (use your best imagination)?

Can't happen you say? It already has. The markets just don't reflect the corner in place. They will!

thanks for writing FOA

FOA (10/10/99; 9:54:23MDT - Msg ID:15971)
Neo (10/10/99; 7:34:08MDT - Msg ID:15966)
A question for FOA
On your proposal for Gold to reach $30000, could you please give me a value in Euros, which you feel Gold could reach.

Hello Neo,
I use this big gold figure because that's the best reference to understand just what the dollar is going to do. Another's group understood this some time ago and projected a trend line into this area. Basically the concept stated, in gold terms, just how far the world trading/economic system would withdraw from using dollar reserves. Obviously, it will take some time and a grinding realignment to reach anything in that level. Never the less, it has now started and will initially run into the thousands before anyone knows what happened. All currencies (the Euro included) will fall against gold at first. The turmoil will be too great to suggest otherwise.

The big difference in the Euros favour is that they are a closed economic system. Their economy can work running a trade surplus or a neutral position. Initially, any increase in gold reserve values will balance their new "financial" exports as the the crisis creates a run to hold Euros. They will not be exporting inflation, as the US does, rather external foreign holdings should balance increased gold reserves. Especially as they cover some of their portion of gold commitments by paying out currency or issuing treasury debt. This is the real reason gold will initially rise so quickly, this massive reserve build-up is exactly what will make the Euro work as the world's reserve. Instead of
selling debt based upon the taxing power of the state as the US has done for so long. Instead of trying to hold the dollar price of gold, the ECB will let the Euro price run. There is no need to worry that gold will drive out the currency from use as we have become too advanced to operate without a digital settlement. That function alone creates a new "value" function for paper currencies that never existed in days gone by.

Today, one can hold a Euro account at any Euro bank. It's there now for the taking. True, gold will outrun this currency, but even major bullion holders still must hold a digital currency for trade. And by the very nature of the present market, not everyone can own bullion to the full extent of their holdings. Physically, it can't happen for years (or until gold hit's the high numbers above). Most
big hedgers will own "allocated" gold and Euros, waiting for whatever mix their remaining " Euro paper gold" will be paid in (in a year or so?). We can all expect gold to be broken into very small trading vehicles as it's price rises. I doubt we will ever use it in actual trade outside the Middle East Dinar arena. Yet, even there paper money will still be used for international settlement.

I think few investors truly realize the "knife's edge" this dollar based gold market is on. Most of them cannot see that it cannot be "played" using paper. We must look past the "currency war scene in the valley" to grasp where gold will be valued after this transition works out.

Currently people talk about the US selling gold in some form of options or physical. Clearly they did not hear Greenspan's words (see PH's post) about the need for our gold to be totally "uncommitted" at this time. The only thing the present banking structure can do is throw more
money at the paper gold markets. In as much, they use cash margin bookkeeping to create more "gold-less" contracts to drive the price down. That's all, nothing more. For the paper player (most mine stock owner included) such a move would crush them. Yet, it can only end with a defaulted
gold delivery and a closed marketplace. Investors say the officials will never do that, but how will they continue to function this market? Presently, virtually all lenders are calling for their gold back or at the very least converting to a self liquidating schedule. As this first round of defaults roll in the managers are frozen to borrow gold so they stay off the bid side of the lending rates. Yes, they are using options, futures and the world OTC arena to cover their "bookkeeping", but it has the effect of building the eventual amount of physical cover needed.

England has done all they can do to help and now even they have signed on to the Euroland arena. Truly, this gold market is being sacrificed in the face of a major transition of world financial dealings. Perhaps the ECB will reconsider and cover some important people? No, I doubt it as gold has just been placed squarely in the middle of this realignment and the LBMA is in trouble, big time.

Besides, even the dollar/IMF faction are clearly behind a big rise in the gold price. They don't have to choose between making the industry whole or not. That decision has already been made, right there in Washington. They know the dollar price of gold is going way up because the oil/gold
connection disappeared with the Euro. You know they took the crude oil rise seriously now, because they are buying time by selling off the strategic reserve. If they do, we will look back on that move and see that the reduction of this "emergency" holding plays right into the hands of the oil
producers. We shall see.

On the Road..............
thanks FOA

FOA (10/10/99; 10:19:23MDT - Msg ID:15974)
One last thing then I'll be away for a while.
I often hear about ABX having hedged with "spot deferred contracts" that allow them to defer the delivery of gold to cover. Perhaps for ten years! During this time they mine and sell gold at whatever high price comes along.

One thing they never offer is how they are going to cover their additional margin (do they need margin??) as these contracts are deferred. Are we to believe that the gold lenders are just going to sit back and allow the company to sell off gold in the thousands, making tons of money as they deplete their reserves? I don't think so! I would think that all the money ABX could make would be needed needed to cover margin in a big gold rise?? In addition, in the event of market disruptions (read that long term market shutdown) real gold would be "forced diverted" by the lenders to cover contracts. And let's not even think of the massive "inflationary" price pressures a dollar decline would bring to the operating cost of their US based assets. Just something to consider while we are "On the

Good luck this week,,,,,,,,,,,,,,,,,,,,,FOA

FOA (10/10/99; 10:40:41MDT - Msg ID:15977)
Chris Powell (10/10/99; 10:16:02MDT - Msg ID:15973)

Hello Chris,
What a great read from Mr. Murphy! Ph is right, all trails lead to the same end! Thanks

FOA (10/10/99; 10:44:17MDT - Msg ID:15983)
I'm sorry, I'm trying to run out the door!
If you want to learn something about ABX, just read Bill Murphy's below. What an eye opener!!!

Gone now FOA

FOA (10/11/99; 18:13:17MDT - Msg ID:16080)
I just read this link as presented above. Do my eyes deceive me or is "this new gold market" now being understood!! YES! My friends, events are progressing and change is in the air! I find it all so incredible that only a few years ago most people invested in the gold industry as a clean "supply and demand" product that also offered a little "gold money" / "inflation protection built in.
Manipulation was only for those "on the fringe of reality"! Yet, a small group choose to look at it as the true "Political" metal it has always been. Michael Kosares, Bill Buckler (privateer) and a host of others understood the real realm of "gold money" and "gold power".

Strangely, it wasn't until "this new gold market" started killing the paper investments that other people really stood up and asked questions. So I ask, if the political gold manipulation had driven gold paper higher, would anyone have bothered to search for truth for the average investor? Hmmm!
Don't get me wrong, today is a good day for "understanding". Because, as "we watch this new gold market together" this "now exposed manipulation" isn't going away. Truly, what makes this such a good day is the fact that the "ECB/BIS is now going to "manipulate" the dollar market in the goldbugs favour. Nothing more, nothing less. Indeed, anyone that has read Mr. Kosares's books and seen the posts on this forum (especially the Hall of Fame site) has seen this coming for some time. Truly, we know there are several more acts in this play. It's not just about the gold industry being vindicated or a group of major gold bears losing face (and money). It's about a changing way of "Western" life and most of us are going to experience it.

Still, I must openly congratulate Mr. Bill Murphy and thank him for all his great efforts. He alone has placed himself in harms way in order to "get the word out". It's working.

I know that only a few more moves on the world economic chess board will bring Another out writing again. If what I understand is true, the most interesting part of this game lies "dead ahead".

We are on the road................. FOA

FOA (10/11/99; 18:29:33MDT - Msg ID:16084)
Tell Leroy to watch oil. We are going to know that the political game has shifted to Europe if the producers cut production again in response to opening the "strategic reserve". If that happens, from whatever level gold is trading at that time, it will explode. After that, this whole story will come out.
We watch. FOA

FOA (10/11/99; 18:31:20MDT - Msg ID:16086)
PH, in a min.
Be back

FOA (10/11/99; 19:24:47MDT - Msg ID:16092)
PH in LA (10/11/99; 18:25:20MDT - Msg ID:16083)
Platinum Lease Rates
While you are here, can you say anything about the exorbitant lease rates currently being published for platinum? Three-month rates are up over 9% to 68%(?) today. Sounds like time to start leasing out my platinum Visa card. Any takers? Yet through all this, the price has not really reacted.

Goldspoon's Platinum horse is something else. I drugged it when he wasn't looking and it still ran?

We all have to look at the metals rental rates with a questioning eye. During normal conditions, such high platinum rates (and even gold rates a week back) would indicate severe "risk" in loaning out metals. Today, all of these rates are way out of any "operational contract usage". I speaking of major volume usage here, not the small dealer fabricator level. Let's call it the "money gold" arena!
Anyway, the entire metal funding market is practically frozen in low volume. The rates could just as well say 200% and wouldn't mean anything.

Right at this minute, rates aren't moving the markets because all the "workouts" to cover the exposure are concentrating on the "bookkeeping" side of the equation, paper gold and to a much smaller extent paper platinum. If the firms cash capital isn't enough to cover the "workouts', then someone must go to the physical markets and outright "buy physical" or "borrow physical". Here is where the "big sweat" is happening "right now"! For many months there hasn't been enough excess physical supply for buying to cover any "non rollovers", so they borrowed it against the firms capital base. Now, no one wants to lend "new" and everyone wants to at least convert to a "self liquidating" term. So, if you read my post (yesterday?), if "official" money doesn't come in and cover the loses or sell down the paper price, the workouts are going to fail, big time! In that event the rush will be to buy physical because even at huge rates, big risk is keeping supply small for lending.

Now to answer your question, the Platinum lending market is small and physical owners are watching gold (sorry for that Goldspoon). If gold breaks to the upside, now, it will cascade into an avalanche of wiped out lenders (the actual physical lenders and the naked short kind) and kill all
credibility of the lending market. For the next two weeks or so if gold doesn't fall , forget the rates, we have escalated far beyond any point of significance for them.

Spot buying and selling of physical is still happening. Even though some bottle necks are there. However, once we move a little further over the edge of the cliff, physical may freeze up too! Note: I saw where some mine management's are now "actively" working with the BBs to try and work out a process to get the price of gold down! I wrote that this "mindset was coming soon" in one of my posts not long ago and someone over here thought it was "out of order". In other words such private discussions would never make mainstream! It did!

On the road FOA

FOA (10/11/99; 19:54:41MDT - Msg ID:16095)
elevator guy (10/11/99; 19:02:16MDT - Msg ID:16091)
am I to understand that Gold Fields is uniquely positioned to weather the onslaught of dollar devaluation, due to some bullion holdings? Or am I delusional, thinking that any paper investment could outperform gold, as the rug is ripped
out from under our world of financial instruments?

Hello Elevator Guy,
Gold Fields LTD. (GOLD) bid for physical at the last BOE auction. They even got some 12% of it. To my knowledge they were the first mining company to openly support the "bullion advocate" community by buying gold instead of just optioning more of it. Yes, they do have a tiny hedge. It is nothing for them. Their actions were openly out of line in the BB sector.

I purchased their stock and presented then as an example of a gold mine for "bullion advocates" to purchase. Symbolically, I burned the stock to indicate I would never sell it at any price. In some cultures, burning a property deed means you will never sell the land. I believe a good number of physical gold owning entities are and will follow this concept in support of Gold Fields. In addition, any other mining company that buys in it's hedge by purchasing gold will see the same activity. Perhaps a bit late now.

EG, sometimes we do things not to make money. Better to support what is right, no? I walk in large foot prints, come what may!


FOA (10/11/99; 20:06:08MDT - Msg ID:16097)
(No Subject)
USAGOLD (10/11/99; 18:39:21MDT - Msg ID:16088)
FOA! From the World Gold Council: "We have now entered a new era..."

Thanks. If only a few more parts of the puzzle come into view this will be all over the media. Anyway, I say Congratulations to the USAGOLD FORUM and all who post and read there. This is truly a one of a kind.

Have to leave now. Thanks all FOA

FOA (10/12/99; 20:32:26MDT - Msg ID:16195)
My turn to Comment!
canamami (10/12/99; 16:18:35MDT - Msg ID:16174)
Bad Day for POG Anyone care to speculate as to why?

Hello Canamami,
Yes, I'll have a word. But first to all.
I found an old Another post(see below)written for him in Dec. 1997. In it he described what may be about to happen today or perhaps during tomorrow's tomorrow. Surely it is a council given to high profile people of means. Entities that can't turn on a dime what it took a lifetime to build. Yet, even us regular people must walk the same road of reason.

My purpose for showing it was to point out the longevity of gold and how it transports wealth better than paper. Anyone that purchased bullion around the $360 or $370 range at the time that post was written, is only down some $30 to $40 and is currently in an atmosphere that may even erase those loses. Yet during this past time span, gold options, futures and leveraged contracts savaged an investor's account. In addition, most all mine shares were crushed and some disappeared all together. Ironically, some mine shares may now suffer if gold does rise. Insult heaped upon misery?

All the while, a bullion holder was in total control, never waiting for the annual report or the unsettling news. Truly, they were holding an asset that could "run like the wind blows" when the storm clouds gather. With a full understanding of gold money dynamics, they were all the while expecting a greater real return with less risk. You see, for most conservative investors and portfolio hedgers, gold only needs to make one real run in a lifetime. Indeed, in some crisis circumstances, even running in place will win the race and be more than one could ask for! Gold works, because the history of paper money has shown that the timeline of every "extended family" suffers through at
least one such world crisis. During these times wealth holdings of most every other asset is lost or impacted beyond one's years to repair!

Today, I believe we stand right at the edge of one of those moves. A gold move that will more than justify ten, twenty or thirty years of bullion accumulation. Unfortunately, most Western minds will not or cannot imagine gold ever running so far, so fast. So they grasp for leverage in every form of gold paper, even extending that reach into Platinum and Silver. I, and a few others of "Western mind" now fully see this storm and anticipate it's unruly effects on all asset classes.


If we look at the last few days, Dec. gold trading during comex hours has bottomed right at $318:
10/12 $318.00
10/11 $318.20
10/08 $318.00

It has done this as oil has crashed from liquidation of paper traders. Yet, gold does not fall as it should. It doesn't fall because the supply of crude is being cut further and the oil futures are about to reverse this drop. This is a public statement that goes far beyond OPEC considerations. It points to a transition of economic structure such as we have never seen. The risks to world wealth that this change will bring will now drive major portfolio adjustments.

I think massive physical gold buying has arrived in the form of "full allocation" demands from all gold depositors and lenders. Those demands will now fracture our modern gold markets. Be they from Hong Kong, The Middle East or Europe, these present bullion holders are buying more gold by recalling their paper derivatives. Truly, a gold run of world class proportions laid upon the steps of a failing price fixing arena. These demands constitute the "exercise of a corner" on gold that has long been in place.

This demand will now not only make an end run around the carry trade, it will gun the price so fast that most all "working gold contracts" without "official guarantees", will fall into negotiations and litigation. This corner will crack the markets because the ECU/BIS has said "make it so". These effects will now be seen in our entire financial structure.

Is this a good viewpoint to hold? We shall see!

So today was a good day for gold, if you are a bullion holder, that is. A good day, indeed!

thank you FOA

Date: Sun Dec 07 1997 18:45
Will we have "Deja-vu" again?

Some people have followed the gold market from 1970. Some have followed it all their lives, depending on when you were born. Some say they were right, as the market has fallen and they held "no gold". They council from experience and a short life.
But, some have traded gold from times before. Those who trade with the sun know we will never have "Deja-Vu" again. This market is unlike anything from the past. And those with a "short life" of investing will learn from this coming future as gold will show their knowledge was limited to where they stood on the mountain!
Unlike the past, this market has an end. And this end will not be for those who have waited to buy! They see this bottom at $100 or $200 or $250, and they will buy at the turn as no fool should have held from $360! But, I say they will buy only paper if lucky!
All should make ready and be holding metal only, as the turn will move $100+ the first day and $200 the second day as comex is closed! It will trade no more from the 3rd day on! The gold market of your youth will be no more! For those who were smart from experience not to buy at
$400, will look at $600 as "the deal of a lifetime".

To close,
Try to live in this outcome and see how different the world will be. It will not be the end of all things, only the changing of most things in "western thought". The "Digital Currencies" will still trade, but we will value them as not before. Anyone who has sold gold they do not have will not be allowed to cover that position. Anyone who has brought gold they do not have will not be allowed to cover that position. Many will lose all they have in a world without honor! Looking back , one will ask, "how could I have thought that noone wanted gold, when more of it was being brought than existed"?
Indeed, more gold than exists or will be produced in the next ten years! And some say, "only a fool would say the market was cornered". During that time, a gold stock in the hand will not trade on an open market! And the government of the country, of the land, of the mine, will no doubt speak with you of new taxes on GOLD!
A year has passed as the winds of change have started to blow. Waste no more time on paper gold, you have suffered enough. Play paper games no more, as the future of your family waits a decision.

FOA (10/12/99; 20:58:20MDT - Msg ID:16196)
NEW YORK ( CBS.MW ) -- Oil futures on Wednesday are poised to rally for a second straight day after the latest inventory data revealed a drop in crude oil supplies more than three times market expectations, restoring market watchers' faith in OPEC's promises to control supplies.

"This is going to be a shocker!" exclaimed
Phil Flynn, vice president and senior
market analyst at

The data on crude oil will "catch
everybody off guard" and make investors
think the recent selloff was probably
overdone," Flynn said. The market
appears to have hit its low and could test
the highs. On Sept. 29, the November
contract hit an intraday high of $25.12 a
barrel, only to plunge to a low of $20.55
only nine days later.

After the markets closed on Tuesday, the
American Petroleum Institute reported a
7.14 million barrel decline in crude oil
inventories. Analysts had expected
supplies to fall less than a third of that
figure, with estimates averaging around a
drop between 1.5 million to 2 million
barrels for the week ended Oct. 8.
Supplies now total 298.9 million.

"So where's all this cheating by OPEC?" asked Flynn. The enormous drop in crude oil supplies could renew the market's confidence in OPEC's attempts to keep a cap on global oil production levels, after weaker-than-expected compliance last month, shook investors' faith.

Ahead of the news on the New York Mercantile Exchange, November crude gained $1.03 cents to $23.30 a barrel by the close. As soon as the API data was released, however, November crude exploded, jumping 50 cents in overnight trading.

FOA (10/13/99; 20:05:55MDT - Msg ID:16279)
Strad Master, welcome and glad to see you here!

Today was a good day for gold, again. It looks as if the beginning realignment of the dollar against the Euro is beginning to affect the financial markets.

I have seen several write-ups by our well paid "bold bears" Mr. Smith and Mr. Arnold. They certainly do have a good understanding about how Euroland values gold. An understanding that, in their reference of experience must span all of twenty years+/-?? Truly, their full life comprehension of assets must have never seen total loss due to war, economic failure or political injustice. Why else would they so boldly speak for an entire continent of people and the official monetary stance of their leaders.

These "paper boys" would have the EMCBs sell off gold because holding more interest earning dollars will back the Euro more effectively, right? Conversely, even a fool would see that the US should then print more of it's currency and buy the debt of any higher yielding countries. Why miss
out on all of that return by just "holding the ability to print money and not use it"? Their concept would see a printing press as an asset with no return.

Again, the "paper boys" are following a path that's made "sensible" because in their lives they have most likely not been defaulted on. Gold does not pay a return as a reserve asset because it isn't lent like the currencies. Lend it out and it's at risk, just like the currencies. Hold no unlent gold (or paper money) and you have no reserves outside of risk.

It begs the question; why not lend out all real assets? Lend out every thing that's held in quantity, the chairs, books, lights, bricks, food! Get a return on everything useful? If it's usable, someone will borrow it and pay a return. Truly, young boys always look smart until the world makes fools of them. They pretend to speak for the masters as long as followers listen to and act on their concepts. I think that, this whole group has entered a play written by oil and the BIS. What they are about to experience is "the last act".

Today, the real ECB masters have brushed aside these loud youths as concern for their Euro Gold takes precedent. As the need to hold an "unlent currency of world class" becomes undeniable, the "paper boys" will suddenly mature into "grown wise men". With new jobs perhaps? and much poorer for the ware?, no doubt, but wiser in the future, never the less.

Presently, the US holds (percentage wise) little foreign exchange currency because it's position is one of setting interest rates on the world reserve currency to effect it's value. The years of being the major trade settlement currency allows such a luxury. Negate this position in it's present economic condition and the US will have to face severe inflation. I believe, investors world-wide will attempt to run from the dollar by buying gold. This fear is manifest in the ongoing success and advancement of the Euro.
If the "paper boys" (above) even half way understood this position, they would see that it's the dollar reserve holdings of the EMCBs that are "dead assets". As the Euro ascends to the world reserve position, it will, like the present US dollar, be able to affect value through interest rates alone. Foreign currency reserves will begin to fade in importance. Indeed, what good are interest bearing dollar reserves when the country of origin is running a trade surplus? How does one use a dollar (and it's interest) if the trade flow never flows into the US? Indeed, how does one effect a "profitable interest return" on dollar reserves if it takes a major devaluation to reverse said trade flows?

If one does not buy goods from America then a further rebuttal asks; if the alternative to buying goods is buying assets, then why invest more money into a foreign country if your own is growing faster?
If Euroland begins to run as a currency transition tears apart the Dollarland, our "paper boys" will find that the only "dead asset" in the EMCBs reserves may just be Dollar!

ORO, I read your ORO (10/13/99; 17:12:48MDT - Msg ID:16267)------ and vote for a combination of (2) the severe devaluation of its currency both at home or abroad, or (3) the default of external debt, Russian style. Also add extreme foreign exchange controls aimed directly at the
Euro. One of the reasons internal "street gold" will run so far! Question, when do your posts stop getting "better" (smile).

Thanks FOA

FOA (10/13/99; 20:27:47MDT - Msg ID:16282)
(No Subject)
I was just thinking. (smile) Perhaps you should switch to a fine Arabian horse? Like Golden sun,no? They are proven winners from long before your entry was ever seen. They even run strong during economic storms. Just a thought, my friend.

Call your bank and say "get me ten tonnes".
Yes sir Mr. PH, it will be on your statement next month.
Hey, my gold isn't on the statement?
Well sir, we have a little problem. Let's talk? Can you come
down here and....................

Time, PH, time. FOA

FOA (10/14/99; 9:20:06MDT - Msg ID:16318)
Strad Master (10/12/99; 23:48:43MDT - Msg ID:16216)

---- My first question, though, is this: If gold should rise to, say, $30,000 per oz as FOA predicts, how, at that time could one's gold holdings be unwound? For what? $30,000 in paper money? Or would the actual gold bullion become the only negotiable currency? If so, what good would a one oz.buillion coin be? It can't be cut apart into small pieces
with a pair of garden shears. Beyond that, Goldbugs are notorious for holding onto their physicalholdings long past the time of maximum return. ----

(((NOTE: Strand: I find it interesting that goldbugs have become "notorious" for bad moves when their present universe has only existed some 20 years? and the lady has not sang the song yet?)))

You continue:
---In fact, I'm sure that some older people who post at this forum have held gold through several (albeit relatively minor by comparison) upmoves in gold only to kick themselves for not having sold at or near the top.----

(((Note: I know people that have been buying through this entire span of time! True, they have timed their buying on a cost averaging basis, but that concept has made then almost even today. In the believe it or not department. Ask MK about "cost averaging" using a fixed dollar amount. Then
I suggest you see the show "Rollover" with Jane Fonda. You would not believe how true it is!)))

Hello Strad,
I'm going to ramble on a bit, so I hope this helps your perspective.

Back in the early oil days I was very close to some of the largest oil men in the country. When in Texas we would visit at the country club and shared a lot of our perceptions. Usually over a poker table. Looking back, I find their (and mine) viewpoints had much in common with the gold outlook today.

When oil went from around $3.00 to $5.00 everyone that had local reserves thought they had made a fortune. You wouldn't believe how many sold off not only their storage barrels but their best (lowest cost production) reserves for cash. The feeling was that oil had just zoomed in price
and would quickly go back down. The percentage gain on those leveraged assets was simply huge.

Then oil went up to around $8.00! Good god, we were so stupid to have sold. What a bunch of buying fools out there. Those idiots buying $8 are going to get killed. Everybody knows the major producers can pump for $1.00. Oh well, it just a political thing.

When oil hit $15, some of them knew they had missed out on a train to $20. But they still thought oil would one day return to around $5.00. So as not to miss out completely many of the early sellers jumped on the Natural Gas wagon, using everything they had gained from their first sale. At first this new move made money, big time. Then something funny happened, oil soared and later returned to a more normal $18 to $25 range, but gas plunged from the higher supplies. The "oil boys" turned "gas boys" lost it all. Even into today, gas has never returned.

Truly, they used the silver vs gold concept, thinking the more leveraged natural gas would out run oil and regain their fortunes. It made sense as gas (like silver) was more industrially useful and "CHEAPER". You might even say it was the "poor mans oil" (smile)! Also: Just like silver, gas
proved to exist in much larger amounts that the "statistics" demonstrated. As it's price "coat tailed" oil, it brought out the massive increase in production that wasn't needed as long as oil was available. Incredibly, this was the exact same story for silver. All the stories about people buying silver as gold went up saw them sell the silver and keep the gold because people just didn't need both of them. The same will happen when gold runs this time. People will keep the high unit cost gold in their vaults, use the digital currencies for trade and sell the silver as it floods out of the woodwork.


You see, oil in the early 70s is like seeing the prevalent gold concept today. The perception was that oil could never go up from the $1.00 production range into the $20s (just an unimaginable increase to those in the business) because such a price would flood the world with production. It was thought that there was so much unfound oil in the world that every home owner would have an oil drilling rig in their back yard at $20+. Just as $10,000 gold will have people taking gold from sea water.

Here is where reality gets in the way of concept based on perceived conditions. Yes, the $20 and $30 oil did bring out the rigs and production soared. But, even at the higher prices, the world found uses for this great new gusher of oil. The same human traits that dictate that "you can never
have enough money in the bank" also said "we can never use too much oil"! If all the oil reserves in the world could produce at $2.00 then the price would return to $2 plus a profit. But, we want and use all oil produced from fields that pump from $2 cost on up to $30. Gold and oil are not like any other commodity, because under the right circumstances, people find both of their qualities useful
and can never get enough of them at any price. It seems we accumulate assets until we die?!

The "paper boys" try and paint a picture of gold like "old oil men" looked at values "back then". They were wrong and so are the "paper boys" today. The Smiths and Arnolds of the world try to convince us that the supply of gold is never used up and creates a glut as it grows. They say that
unlike oil that is consumed, gold holdings have become a stockpile that refining cannot use up. I bet these guys would have also sold their oil reserves in the mid 70s also.

Where they miss the boat is in their assumption that people will get enough gold. Not if it's money, they won't! People do consume money just like oil, rather it's just in the form of "savings consumption". Gold, just like money has an "unlimited demand". Again, have you ever seen anyone
that said "I have too much money and have no more use for it". "No, don't give me any more of that cash, I've got a glut of it now, go away"! Yea, right!

Often, we read where people say, "oh what am I to do with all this gold if it hits, $30,000?". Funny how Bill Gates never says "what am I to do with all these MS shares". Well, you too will act like anyone with to much cash or assets, just stash it away until you need to spend it. The old "what will I do with all this high priced gold I can't get change for" logic just doesn't compute when dealing
in reality? Ever see someone in a flea market rolling around a cart full of $100 bills,,,and frantically trying to unload it because it buys so much and they can't get change? Help me out here, am I not seeing something?

I'm afraid that even the very poorest of people have a better grasp of spending and saving value than some of the "big time investors" present about gold. (I'm talking about the brokers, Strand)


Anyway: The amounts of gold in vaults today is no where near enough to represent the only circulating world money. It would have to be priced at $++++++ to do that. So, if mine production can continue, the world will take any and ll they can produce. Be it 3,000 ton a year or 10,000 a year because the demand for money (even a parallel supplement money) is unlimited. Personally, I would take all of it (smile) and let the rest of you keep the paper.

The reality of this is that people hold cash in banks as it is lent out and earns interest. If no one lent their cash and just saved it (like gold) to spend in later years, it would take an enormous amount of paper money. This is why the US goes to great lengths to identify gold to the public as a commodity, not money. They want you to know that it must be sold as soon as it goes up. Trade it, don't save it. Most Western investors have brought into this and are going to pay dearly because of it. Again money demand is "unlimited". The same will be true for gold. As people begin to buy gold as a currency supplement, to be spent "as needed", the price could reach enormous levels.....and
be seen just like oil............a useful asset you just can't get enough of.

On the road.........FOA

FOA (10/14/99; 13:24:13MDT - Msg ID:16347)
(No Subject)
PH in LA (10/14/99; 12:24:58MDT - Msg ID:16337)
FOA & Another's Meaning

Thank you for the explanation! Exactly right!


Peter Asher (10/14/99; 12:37:58MDT - Msg ID:16341)
Michael, Jeff, All
Re DD (10/14/99; 12:25:30MDT - Msg ID:16338)

Peter, I agree. It's a prime example of an individuals personal experience. DD allows us to see the economy through real eyes! 2nd it!


Buena Fe (10/14/99; 12:49:33MDT - Msg ID:16344)
all Au correction

Buena FE, they nailed silver today. I just read where even Ted Butler (good kitco poster) is disgusted and promoting physical as the way to go.
They managed to get some margin money to throw at the paper gold markets. In a way this may be educational as we can now watch and see if some real bullion flows from this. I did all of my buying much earlier (in the spring), yet I'm about to bid this dip for physical. If I'm right, the people
that need physical the most will now be "right in there" also. I said this would not be a trading market (talking physical) because the spreads and premiums would not allow one to gain much advantage on any dips. We shall see!
Talk about spreads?? Is spot platinum wide open or what? Goldspoon, it's just you and me, silver dropped out (smile). I hope everyone knows we are just playing a game here. Anyway, lets watch the HK market later. FOA

FOA (10/14/99; 13:34:56MDT - Msg ID:16349)
I see where Ashanti Goldfields (ASL) is down and discounted from their takeover bid?? Michael, something is very wrong with this picture. I heard one of those rumours (???) that some banks could be actually buying out the gold loan package so as not to force margin. If yes, some major
backup money is being applied for free here. This could get explosive is someone decides to "cut and run"!


FOA (10/14/99; 14:09:03MDT - Msg ID:16353)
More on story rumours?
The CB of China is rumoured to be in the background to take delivery of ASL gold, without holding the BBs to further margin? Put this in the FWIW department. I won't say anything more unless this is confirmed. Perhaps their talks for WTO is involved? Oh well, we shall see.

FOA (10/14/99; 15:13:31MDT - Msg ID:16357)
Thanks for taking the time to offer your thoughts. This is indeed a giant chess game that will keep everyone guessing on the sidelines. Interesting about the CNBC question.
As I said earlier, I'm going to bid on some bullion during this break (if it turns out to be a real physical one) and may add some platinum to the mix. I offered before that My mix had some silver (small amount) and now I must buy some of "the other white metal" just to keep up with
Goldspoon. If it falls some, I'll have it.
Now if only the spreads on (all) the metals will fall some, we just may find something. I have my doubts that this is a real pullback because every large player is looking to not only buy metal for cover, but to also buy time. In addition, some real long "hard hands" are into adding any physical they can get as this proceeds. We shall see. FOA

FOA (10/14/99; 18:44:58MDT - Msg ID:16369)
Hello Yellin of Troy,
Nice write up in 16355. I have a question? In the minds of average citizens, what would you think the difference is between a $10,000 dollar bill and one ounce of gold at $10,000?
I know that these old "big bills" are out of use, but when they were around their buying power must have been at least equal to $30,000. Of course I'm assuming that one of these currency units managed to slip into circulation, but it was still legal tender never the less. So, do I spend it, no way it's to large, yet it's still worth $10,000. Let's say I put it under the bed with the gold piece. As a simple person, how do I come to the conclusion that gold must be sold before it loses value and not the large dollar bill? Especially if people are trading with both of them. Is one money and the other not because I can pay taxes and debts legally only with the paper unit?

I have often found that the saving of wealth is an end unto itself. The more people hold what is perceived dear, the more dear it becomes. Irrational human nature that defines the physical laws, no?

Somehow, I believe the CB of China is playing a part in today's gold moves. They may have replaced a lenders demands for gold by not calling for delivery of some other contracts. Thereby balancing (or should I say unlocking) the market. It's not as it seems because their move may be
what was needed to force trading to continue?? Honestly, this is totally conjecture on my part coming from some items heard. I do know that demand for physical is strong now as I am "in line". We may run tomorrow if this action has free up the gears?

On the road................FOA

FOA (10/14/99; 20:52:14MDT - Msg ID:16382)
Paris, Friday, October 15, 1999
Blair Gathers Force for Battle of Euro

Cross-Party Coalition Seeks to Counter Conservatives' Anti-EU Thrust

By Tom Buerkle International Herald Tribune

LONDON - Assembling perhaps the broadest political coalition since Britain joined the European Union a generation ago, Prime Minister Tony Blair on Thursday began an all-party campaign to extol the benefits of EU membership and promote the Labour government's finely nuanced position on the euro.

The appearance of Mr. Blair and his foreign and Treasury secretaries on the same stage as two prominent pro-European Conservative politicians,Michael Heseltine and Kenneth Clarke, and the Liberal Democratic leader, Charles Kennedy, was an extraordinary event that underscored Europe as probably the defining political issue in Britain today.

With William Hague, the Conservative leader, under increasing fire within his own party for having hardened his skeptical stance toward Europe last week, Mr. Blair sought to exploit the opposition's divisions.

He labeled Mr. Hague an extremist flirting with withdrawal from the European Union and contended that EU membership was a ''patriotic cause'' vital for British jobs, investment and influence in the world.

''To be part of Europe is in the British national interest,'' Mr. Blair said at the inauguration of a cross-party lobbying group called Britain in Europe. ''The people here represent a patriotic alliance that puts country before party.''

Mr. Heseltine, a former deputy leader of the Conservative Party, sought to contrast Mr. Hague's Euro-skeptic attitude with the pro-European policies of former Tory leaders like Edward Heath, who led Britain into what was then the European Economic Community in 1973, and Margaret Thatcher, who signed the 1986 act that created Europe's single market.

"Each weighed our national self-interest and took us further, deeper and more irrevocably towards that vision'' of European integration first sketched out by Winston Churchill after World War II, he said.

He also gibed at Mrs. Thatcher, who whipped up Conservative skepticism last week by saying that all Britain's problems had come from mainland Europe. ''You can't wield a handbag from an empty chair,'' Mr. Heseltine said.

But for all the rhetoric, it was a measure of Mr. Blair's own hesitations and conservative instincts that he carefully avoided any suggestion of campaigning to join the euro, which was the original purpose for forming the Britain in Europe group. He simply reiterated that he favored the euro in principle but would make British entry conditional on several economic tests laid down by the government two years ago.

That was ''a sensible position,'' he said, while Mr. Hague's promise to rule out joining the euro in the next Parliament, and perhaps even longer, verged on ''madness.''

Mr. Hague accused Mr. Blair of hiding his real intention to abolish the pound. In an article in The Times, he promised to step up the Conservative campaign to keep the pound and to renegotiate EU treaties to allow countries to opt out of future policies. ''The battle for the soul of our country
has begun,'' he wrote.

In the short run, Mr. Blair should have little difficulty in maintaining a pro-Europe stance without becoming pro-euro. Mr. Hague's stridency and the growing opposition to it from Conservatives like former Prime Minister John Major and Britain's EU commissioner, Chris Patten, threaten to split the party or narrow its appeal to a nationalist core.

Mr. Heseltine said he saw ''some similarities'' between the Conservative turmoil over Europe today and the divisions over nuclear disarmament and nationalization that split the Labour Party in the early 1980s.

''The Conservatives are a party in the throes of a nervous breakdown,'' The Guardian said in an editorial.

''Not since the gang of four broke from Labour has a party witnessed such passionate dissent voiced, in concert, at such a level,'' it said, referring to the establishment of the Social Democratic Party by disenchanted Labour politicians in 1981.

In the longer run, however, many politicians and business leaders believe Mr. Blair will have to give a clearer commitment to the euro or risk seeing the prospects for entry recede. Some pro-euro Labour members believe it will be difficult to call and win a referendum on the euro early in the next Parliament if Mr. Blair continues to sit on the fence in the next general election, which must be called by May 2002.

Major companies also will need a clearer signal from the government in ''months, not years,'' before they will invest to prepare for the euro, said Graham Bishop, an economist at the brokerage firm Salomon Smith Barney.

FOA (10/15/99; 6:45:48MDT - Msg ID:16419)
Trader_vic (10/14/99; 21:01:28MDT - Msg ID:16383)
My all time high for gold will exceed $10,000/oz on the final blowoff....

Hello Trader_vic,
Welcome! You sound like my kind of goldbug. As you know I don't trade and buy and hold only bullion. But, I do have close access to some very interesting simi-traders that, for lack of a better term, "trade the dealers". They see the Yen carry trade and the gold carry trade funds trying to cover today and the first of next week. This should stampede the other shorts into biding for whatever physical is out there. There is some talk that a "logjam" of sorts was broken yesterday. I think we will break "massively" to new highs, then pause for a while. This is the current assessment
because so far, the BBs have been able to contain a full blown run!
I'm offering these "ongoing" because I have the time right now. As we all know, free time doesn't last very long. These are my thoughts, your thinking?


FOA (10/15/99; 7:03:57MDT - Msg ID:16425)
(No Subject)
This is going to be something!! I hope this forum can stay open?

FOA (10/15/99; 7:22:14MDT - Msg ID:16431)
(No Subject)
This big break in the US markets is going to force all parts of the carry trade to cover. If they don't, they will be "the walking dead" as their books will all go negative. Look for all the currencies to run against the dollar, big time, especially the most heavily used "carry", the yen. The run to safety will see the Euro first (as the dollar will be sold for position squaring), followed by gold. Physical gold being the most lopsided carry instrument, will be in major demand. Mostly physical because this crisis will immobilize most "bookkeeping" hedges. THis run should continue for some
weeks! We watch all these new forces together, yes!

FOA (10/15/99; 7:49:09MDT - Msg ID:16434)
Euro surges to near 7-month high
Gold bullion may come into short supply if the dollar fall forces players out of the dollar gold paper markets and inti the physical.

FOA (10/15/99; 7:56:53MDT - Msg ID:16435)
Gold Fields Limited Repurchases Its Hedges
Some companies just know how to attract Euro money! I also saw where South Arica signed a "free trade" pact with the EU. Euroland needs a good source of mineral wealth for growth!

--------Chris Thompson, Chairman and Chief Executive Officer of Gold Fields, said: ``Having looked at the fundamentals of the current gold market and the implications of the Ashanti situation, it seems inevitable to us that higher, if not much higher, gold prices are possible. Accordingly it seemed
prudent to retrieve our hedge positions.''--------

FOA (10/15/99; 8:05:53MDT - Msg ID:16436)
(No Subject)
January platinum down $6+/- ! I brought some last night (along with gold) to save face with the forum neighbours. Goldspoon, I have a horse to sell you, cheap! (smile)

I will step away for a while.

FOA (10/15/99; 12:41:10MDT - Msg ID:16462)
ALL: I China making a play to become the world physical gold trading capital? If yes, it's in their best interest to keep our present markets fluid. There is more to this news than meets the eye.

Hong Kong--Oct 15--The Chinese Gold and Silver Exchange Society, the physical gold market in Hong Kong, is considering adding the trading of US dollar-denominated Loco-London gold to its existing Hong Kong dollar denominated tael-gold trading, the exchange's president Raymond Chan told Bridge News today. He said the exchange's members held a meeting Wednesday to discuss the
possibility and they will come to a decision on the matter by the end of 1999. (Story .12569)

Hong Kong--Oct 15--Hong Kong-listed precious metals producing and trading firm Tem Fat Hing Fung (Holdings) Ltd. plans to launch in the Jan-Mar 2000 quarter an Internet website that investors can use to trade gold around the
clock, the company's chairman Raymond Chan told Bridge News today. Besides US dollar-denominated Loco-London gold, the planned website would allow global investors to trade Hong Kong dollar-denominated tael-gold and Chinese
yuan-denominated gram-gold, Chan said. (Story .10418)

FOA (10/15/99; 14:50:00MDT - Msg ID:16479)
See 16465 for his full text.

Yellin' of troy (10/15/99; 13:03:53MDT - Msg ID:16465)
FOA -- the demand for gold is not insatiable

-----What you are missing is the distinction between wealth and money. ---------

Oh Yellin of Troy,
Your modern thesis comes from a viewpoint that wealth and money are different. I had the same debate with Martin Armstrong. His whole basis for de-wealthing gold was built upon the modern man concepts and how he stood higher than his brethren of old. From the beginning man traded wealth, not money! We brought things with things and found little need for a different concept of wealth. Gold became the wealth item that was most efficient to use. It was only the modern (modern for that time) bankers that said it was money. Your modern paper started as a contract for wealth in storage, then proceded to become a digital receipt for the completion of commerce. Today, it no longer holds the title of contract and is failing in it's ability to effect digital trade.

--- And while there is certainly considerable benefit and joy in knowing that you *could* do something, isn't the value of having gold to spend much reduced if you not only never actually spend any of it but are bound and determined that you never will? -------------

Cross the globe many times my friend. During your travels observe how spend able gold has become in every nation on earth. It is an old wealth/money that still buys anything. Black market, white market or no market, one can exchange gold for currency privately or officially at any time and any place. There are some on this forum that like I have run the world and know this currency well. Your pronouncement that power can prevent a peoples from maintaining wealth and spending it in gold simply does not stand-up to history, past, present and no doubt future. Even when the US stopped gold usage, most of the world continued to use it. Some of my forefathers were also "against the law" in those times. Find me a better reason than supposition?

---Have you sold everything you own, turned it into gold, abandoned your family, and taken to living in the gutter with your bag of gold hidden in your underpants? If not, there are things you prefer to their price in gold. And I don't imagine your present holdings of non gold assets are
unimprovable; wouldn't you buy more if you were richer? Whatever your level of wealth, you only want some of it in gold. And even if you are an incredible miser who only wants to caress his gold, there's a limit to how much you can afford. You're not infinitely rich, and you can't get richer by forgoing your dinner and deodorant for gold, and your fairy godmother will not bring you free gold every day.---

Indeed, I must ask the same question, for it is not I or my friends that walk your alley trail. Our gold is for the preservation of wealth in a world that is lacking "contract honour". Truly, it is the future that we defend against, not the past. Every investor gains and maintains his winnings during the here and now, not the past. Default is before us, therefore protect the family by owning real wealth now. All of the great families of old brought freedom from failure using gold a part of their wealth. We doubt they considered it as their day to day money nor do I. Our times have changed that concept. You, and humanity will continue to use the digital currencies as money for needs. Just as in the
past, the difference between retaining what you have and giving up a good portion to the fraud of currency is gold!

----------- The key point, and the fact responsible for the wealth of the modern world, is that you can expend your money on *investments*. You can use some of your gold to build awidget factory, or buy one, or if you don't understand widgets you can be a passive shareholder or
a lender in an outfit run by somebody who does, or you can lend to a banker who knows how to find and oversee such people and will spread the risk.----

-----However you do it, you can expect to get back, eventually, more money more gold, if that's money or if you insist -- than you started with. The whole thrust of your argument was that there is no limit to how much money you dream of, you want as much as possible. But then, if you
have a huge stash of gold, more than you have any intention of spending, more than you could ever suddenly need to spend, why not apply some of it to getting more? If you would never refuse a free gift of gold, why refuse an offer of interest on gold sitting idle in your vault, for which you have no other present use (and derive no other benefit) anyway? The sensible thing to do is to keep on hand only as much money as you might actually need or want to spend (before the investments pay off)

-- this is your demand for money, and it is finite and indeed rather limited -- and direct the rest to where it will be most useful, most productive, most profitable. And the people you let have it aren't going to put it all in their vaults and just revel in its glitter -- how would they be able to pay you your interest? They need your money for expenses: They can't sell any widgets until well after they have paid a lot of suppliers, secretaries, and salesmen a lot of money. They do need to keep some cash on hand, but only some; their monetary needs are limited just like yours, except that they are trying to reduce outgoing interest payments instead of increase incoming. The secretaries don't put all their wages in the piggy bank, either; they spend most of it. No one's pile of yellow is a black hole; each
economic actor has only some limited target for cash on hand, and the sum of all these is some definite aggregate demand for money, not a bottomless pit.--------------

Oh Troy,
Again I say, the demand for money is unlimited! I never said that it would not "circulate"! Into the great economies of the future will flow our gold. Yet, we will lend it or spend at our choosing to buy things. Be they investments or pleasures our wealth in gold will circulate most freely. For every person that works 10 hours instead of 8, his two plus efforts will make demand for gold. So, how much is too much? The world has never seen this end and I hope it never does.

------Of course, if gold is grossly underpriced, it can be a very fine investment itself. If you believe others will soon come to understand its merits and correct its price upwards, then you can increase your buying power, your wealth, for the future by merely buying and (for a while) holding gold. In some circumstances this could be both safer and more profitable than that uncertain widget business. But this is a disequilibrium, a temporary condition, and the whole (expected) gain is in the correction. You can't perennially suppose that gold is on the verge of an upward surge that
somehow never happens; such expectations would be irrational and you wouldn't make any profits. --------

No, no! Gold is not grossly under priced, far from it. I say that gold is grossly under used! People have been defrauded into using paper as money instead of using gold as wealth in trade. How can the price be correct when no paper money can define wealth? No person knows the true wealth of gold. It's value will increase with usage in trade not trading it for gain. The true advantages we attain from gold are found in it's transformation in use. History has shown the most stable money was always gold itself, not the modern currencies. Paper will come and go as nations persist, but gold holds the value through it's own usage, not the digital numbers we give it today.

---- And of course gold is not totally secure: The price does fluctuate, the lock on the treasure chest can be shot off, and let's not forget that one of the great inflation's in history happened in gold and silver, after the Conquistadors. In fact, at the prices you are foreseeing, gold would be not only a low return, risky investment, but a risky, unstable money, susceptible to a near total crash -- see my post yesterday. So the wealth will go (mostly) into more productive uses than gold. This is a case where as soon as you are proven right you have to change your strategy. ------

As Another said, we only limit our view by choice as our feet place us on the mountain. Consider your alternatives during the time and space these events unfolded. In context, gold would have been the choice of most every actor in the play of history. We do not look for a return that is created by accepting risk, rather gold becomes wealth of "least risk" in a world gone mad. In every war weapons must be used. I look through the pages of time and order the timeless one, gold.

-------I won't deny that there are cultural influences at work here. If you live (or your ancestors, whose ways you follow, lived) in a country where invasions, political upheavals and injustices, pogroms, and similar unpleasantnesses must be expected, factories are too easily burned or confiscated, and you will prefer concentrated, universally saleable gold, which you can run with.---

Truly, a testimony of the time of the US civil war! Perhaps a time of confusion to be revisited, yet without war?

---If your society conceives of wealth as primarily something to display to show everyone (including yourself) how rich you are, gold will serve admirably. If, furthermore, commercial activity in general is felt to be less than honorable and "money-grubbing" is disdained in favor of status-grubbing, if interest in particular is considered sinful (even if evasions are routine), then the
daydream of heaping up illimitable gold will be a lot more popular than in a more Modern (and especially American) society.------

Your description of the USA today, no doubt. I have seen your country use it'd dollar currency in this very same fashion. All the while grinding the average citizen into a more lower position. Mostly they wear their gold in the form of a house too large and a car too expensive. All the while
forsaking the debts they build and can never repay.

-----But even Victor XXI had to spend his gold on paying his soldiers, without whom he wouldn't have kept it long, and had to borrow more. And a society like that, or a person like that, will be, in the long run, comparatively poor and unable to afford much gold.----------

My friend, life goes on with or without us. We will live out time in a manner that fate prescribes. Truly I have seen my destiny down this trail we walk. And travel it we shall, as a group or alone.

On the road to $30,000,,,,,,,,,,,,,,,,,thank you so much for your most excellent works FOA

FOA (10/16/99; 16:23:27MDT - Msg ID:16574)
Once again I ask everyone to take a good look at the above chart. I offered it some days ago as a witness to what is about to take place. To date the dollar has fallen and US stocks have begun a revaluation that is far from over. Both of these trends will continue as the whole financial system
changes it's tools of valuing assets.

The gold chart shows no signs of falling as would have been the case in recent years. Yet everyone sees this recent slowdown in advancement as a sign that the BBs are again working the will of the CBs. They are not! Indeed, is the fall in lending rates a sign that fresh gold is being
supplied to cover the shorts? I tell you the lending arena of the gold market is frozen in loses.

Today the lease rates offer little direction because none of the major gold sellers have covered or intend to if they can help it. Yes many of the paper shorts have covered, but the thousands of tonnes of gold contracts have yet to be made whole for the "originator".

Is this how the game is played? Consider this as you watch the gold charts.

Two types of contracts exist in these numbers that will create the crisis. These are mixed in with "clean" deals. Yet they (90% of the short gold) create the real demand that will drive prices much higher unless the paper markets are sold into oblivion.

First, some are held by actual gold lenders (mostly private entities) that are now demanding a speedy end to these relationships. Mostly this gold was put "in play" not for the low returns but for the "fees and favours" bullion would generate. So, in order for these lenders to be made whole the gold must be purchased by the dealer in the open market or it must be borrowed from someone else to complete the transactions. The "BB dealers" have the option of arranging this return as able. Presently they are doing neither as they wait and assess the situation. This process is a game we now play as they wait for gold to fall and new supplies become available. All the while the lender
sweats his position.

Understandably, they fear for the return of their gold at all. If defaulted on, they will most likely receive a cash payment that theoretically could be used to replace their gold. Still, if this process begins, a mad rush to buy gold using "default payments" would telegraph a full crisis into the trading arena. Gold would soar long before any large portion of bullion could be brought.

Second, many contracts are outright "naked short" in that it's the contract creators responsibility to supply gold when the term ends. In this position, usually gold was never lent or sold into the marketplace. The deal was little more than a play on gold falling with the writer risking the firms capital to profit making the difference in the gold price. Often a long time physical holder brought his fully owned bullion into this play and received most of his cash back plus a contract to receive gold (unallocated??). His gold could be sold outright or held by the bank as partial reserves to cover the writing of many other "naked short" contracts. This was the real engine that sucked private gold into the "supply for fabrication" deficit. In the process paper gold was sold to drive the prices down. All of the new investment demand for gold was supplied using a glut of paper instead of physical gold. Unbelievable as it may seem this is where Another said years ago that gold was falling because so many people were buying it! What seemed nuts then is understandable today.

In any event, the holders of these contracts are the ones that will be demanding "allocation" as they withdraw their investment funds from the falling stock and financial markets. Just as above, the physical markets are so tight that in order to close these deals, gold must be borrowed. That is if lenders can be found!


We have entered the largest gold bull market in history. The Major world central banks have made it extremely clear that this bull will run as never before. Michael Kosares pointed people to the WGC site for an explanation of the recent "agreement", yet no one must not have read it for
they still talk about CB and BB lending. People, it's not happening! This small lag in the price spike is only about shorts in major trouble trying to assess how they can bail out. Here is a partial breakdown of the parts we should grasp. See the site for a full write up.

World Gold Council Review of:
The Washington Central Banks Agreement on Gold 26 September 1999

--First, it is an explicit signed agreement among the European central banks, which goes well beyond earlier 'clarifications' about their gold holdings by central bank governors. -----
----it has been signed by each central bank governor, all of whom (except the Bank of England) have legal responsibility for their gold reserves.-----------

During the recent fall in the gold market nothing was said to clarify to the public. All of the "official deals" were done for political reasons. Read our USAGOLD HOF site for background. Once the Euro was born, the reasons to drop the price of gold were removed. However, during this entire, multiyear operation, an enormous "sideline play" of selling gold developed. These people never would openly give their reasons for "coat tailing" the fall in gold. None of them understood why gold was falling and still don't. We can understand why they continue to think gold will fall as
they have bet the bank on that outcome. The very ones in this sector are the same entities that will suffer the most as the IMF/dollar world is destroyed. For them it's going to be a double hardship.
Today, the ECB/BIS has "openly stated for all to see" that gold will fall no more! It is indeed interesting that we spent but a few months below $280 and will now zoom through $500 in no time at all. Note these next items:

--It is our understanding that the Agreement will be monitored by the Bank for International Settlements (BIS).-----
---The International Monetary Fund and Bank for International Settlements are to abide by the 'spirit' of the agreement-----


---The US has already announced its intention not to sell or lend gold and Japan followed suit the day after the Agreement was announced.---------

The US had changed it's position on gold in the early spring of this year. Those that still think the US Fed is selling any form of gold short just do not understand how this market has changed. Waiting for the price to fall as "official sales" or "lending" confirm the recent price action will find you on the the outside of a bull market.

---In addition Australia has said it will not sell any more gold, and South Africa is unlikely to sell part of its reserves given the government's vehement opposition to the UK sales.-------
----bringing the total amount of official gold covered to 85%.--------

We have but to wait and watch as the pressure rises under the price of gold!

------We understand that the quotas are not transferable, i.e. if the Swiss decide not to sell 1300 tonnes in the next five years but instead only 1000 tonnes, then no other institution can sell the remaining 300 tonnes.--------

So, how does one prepare for the coming historic bull market in gold. Follow in the footsteps of the only correct Giant in South Africa. Read the Gold Fields report presented here in partial review":

---Gold Fields said on Friday it had completed the repurchase of its gold hedge (forward sales)

---it seems inevitable to us that higher, if not much higher, gold prices are possible.----

---Gold Fields continues to hold approximately 660 000 ounces of rand-gold call options at an average strike price of R2 171 per ounce.---------

---Thompson commented: "At higher gold prices the restrictive impact on our balance sheet and the drag on earnings from a continued hedge position would limit our ability to make acquisitions and develop new deposits". ------------

I would say that these people must be the only truly progressive miners in the world. Not only did they buy physical gold at the BOE auction, they are "LONG" gold on contract! Other miners may have "bid low" to show suport, but only Gold Fields got real gold and now is long. They not
only understood where gold is going, they positioned their company as a private person should in protecting their estate. We can now most easily see the other hedged miners are trapped in the Bullion Bank web as they can do nothing. These companies will no doubt go down with the ship. If
they can not unwind their position today during a standing price, they will die during the coming run!.

With 85% of the official world gold holdings effectively blocked from lending and most all the private lenders wanting out of this game, how could any major forward seller close out? Price has nothing to do with it as the bullion will not be there for 5 years, if even then! These miners will now sit and watch as that gold chart (above) runs out of numbers on the upside. While everyone makes noise about how the market is still controlled to the downside, Bullion owners and Gold Fields will run with the wind of this historic "OFFICIAL" bull market. If only other miners would put on a Texas Hedge, at least there bookkeeping entries could benefit even if the bullion market cannot supply!

Good Job Gold Fields,,,,,,,,,, FOA

FOA (10/18/99; 05:42:35MDT - Msg ID:16762)
Number Six (10/18/99; 03:08:25MDT - Msg ID:16757)
Would anyone care to comment on this POG exhange I had tonight... This is No. 6 aka Andy in Denver.

Hello Number Six,
I want to thank and reply to all the fantastic thoughts given here the last day or two. But have no time right now. So, I'll work it in as I can. It's going to be interesting this next few days.
Six, Yes, a good portion of the short may have been covered or maybe not! Yet, the tonnage has not moved! It's going to and when it does this last move will look like a "wiggle". For now we must wait and watch the paper game. Thanks all FOA

FOA (10/18/99; 19:58:38MDT - Msg ID:16835)
Haruko Fukuda is telling thr real story now!!!!! OH YES!
ALL: I can make but one post now, so I will reply to Michael's observations. Will try to broden some thoughts as I comment.

--------------USAGOLD (10/17/99; 9:54:50MDT - Msg ID:16650)
I can say with pleasure that the markets have become infinitely more interesting, and with no pleasure that they have perhaps become infinitely more dangerous. "Indeed, is the fall in lending rates a sign that fresh gold is being supplied to cover the shorts? I tell you the lending arena of the gold market is frozen in loses." --FOA 10/16/99

I agree with this, FOA. I think the lending rate is falling not because of a new supply of gold but because there are no takers. This gold carry trade is indeed locked up. I think many are losing their career positions over this debacle and many more are on the verge of losing their positions. The
proponents of gold sales, leasing et al are in the process of being severely discredited both in public and in the professional investment community due to its burdensome excesses -- excesses which could have severe repercussions with financial firms up and down Wall Street. ( I saw one report where it was rumoured that Goldman Sachs losses at the moment could be as high as $2 billion.) It appears to me that the gold carry trade battle is now over and all that remains is burying the corpses and removing the debris from the battlefield. There will be further attempts to drag these firms out of the fire, but when the day is done, I think the gold carry trade will be taken out of the
financial firm training manual and rendered a much deserved place in financial history books.--------

Hello MK,
Yes, I think we are in the middle of an extended workout. None of the BBs are in a rush to cover these (carry trade and other) bad loans because in doing so they must borrow gold to do it. There is no way they could bid the physical market. If they did it would completely dry up what
gold is supplying the retail markets. If they must return gold they must borrow to do it and create same problem in the lending arena. Their image is seen on the borrow side and the rates spike. We saw this recently. So they fall back into the financial workout mode and the rates relax.
The ECB/BIS really nailed this entire play to the wall. An entire industry was built on expanding the liquidity for international traders as our Washington officials looked on with approval. The top people knew why gold was originally (starting years ago) being taken down, yet they smiled as
these funds (and others) "coat tailed" the fall. And why not smile, these trades were using huge leverage to build (and support) the American market mania. The ECB said "enough is enough" earlier this year, but no one listened. I guess they thought these people (ECB) were nobodies? Then the BIS said they were going to cut it off short and the US asked for some time to work it out. Ha! They worked it out all right! Our treasury head watched them flood the gold paper onto
the markets like madmen.
What amazes me is that most of these "big inside" operators create the market and really didn't know why the original gold (and loan guarantees) was being supplied by the Euro arena. I always thought they did and their stories to clients about "CBs no longer using gold" was just a "good retail story". When the ECB and the BIS told Greenspan "it done", it hit these BBs like a nuclear blast! I don't think anyone yet understands that these people are now the sole backup for an entire asset class that cannot be made whole. On the surface, they may have to make good on 5 or 10 billion. But underneath, the ECB could crush them by running gold into the thousands. That's why I say "it's all over people", because this bull is going to run the equity of the dollar creating banks into the ground. And the US FED has no power to stop it. There is no way the US will use one ounce of it's gold to support a "banking crisis" if a "currency war" becomes the result! Some think that if we have one it's as bad as the other. They should study "currency war" history, preDollar!
The BBs can go for the ride slowly (and be controlled) or they can kill themselves by attempting to cover. What a master play this has been.

--So FOA....This new gold market; it is a free market, yes?

--In the Robert Mundell speech for which Steve H provided a link, the laureate said as early as 1997 there would be a new gold market and that central banks would look to settling with gold at free market prices. He suggested that this would occur in the 21st century. Was it last year, the gave Prize was awarded to Black and Scholes -- and then LTCM -- where Scholes was employed --promptly went under water? Now Mundell wins the Nobel Prize while the gold carry trade
implodes. The former honed tools for statist economics; the latter honed tools for free currency and gold markets and a much-needed competitor for the dollar. One became the tools of the status quo; the other the tools for a new economy.----------- ----------------------

Boy,,,, Michael, I have to tell you, Mundell knew the story and no one listened! Now the whole Dollar/IMF system is in change and most of the nonEURO US trade partners have bet their entire economic society on a prosperous, buying American public. The next few years will be history to
remember. By the way, any thoughts on a "Britian in the EU"? (smile)


-----In talking with colleagues in the gold industry, the feeling is that it will be a long time before the Wall Street trading firms and mining companies sanction again something like the gold carry trade -- at least to the degree that it was utilized in the late 1990s. Perhaps this was a usable idea that had got out of control? There is little doubt that the European action with respect to gold,
sanctioned by Alan Greenspan who attended the Washington meeting, was aimed at the hedge funds and foreign exchange traders at the big banks. Leveraged trading was beginning to frustrate some nations' foreign policies and the mechanisms previously established to keep crisis situations from getting out of control. What good is it to try to save a country like Indonesia with fresh loans, stiff political and economic sanctions when hedge funds can easily destroy the Indonesian currency through derivative plays and leverage and undermine the intent of the international agencies. (Please don't construe from this that I back IMF actions during this Asian contagion lending crisis. I do not. I simply offer the foregoing as an explanation for the cb's actions.) So they acted to cut off the life-blood from the speculators -- the gold and yen carry trades.

The two pronged attack on the bullion banks, foreign exchange desks, hedge funds, et al co-incided with the latest jawboning by Alan Greenspan with respect to the stock market. He has to be getting a little fed up with being laughed at and ignored by the speculators whenever he warns
of the excesses in the equities markets. Perhaps now they will find out the central banks still have teeth?

This all goes hand in hand and marks a turning point. The financial world has changed in the last few weeks and I think the man on the street is just now finding out that something has happened. At the moment I can say with pleasure that the markets have become infinitely more interesting, and with no pleasure that they have perhaps become infinitely more dangerous.---------------

Dangerous is the right word, MK! Indeed, I did little more than "extend" my context into your "just written" perception. As events have unfolded we can clearly see what this gold market means to Euroland. Traders are busy trying to build a strategy to gain from a move in gold while the very trading arena they use may go up in smoke! I know that the BIS wants gold over $400. Yet, for the same reasons they didn't buy at $280 they don't have to buy physical now. The BIS is responsible for all gold movements between CBs, it's in their charter. Few know what they are doing untill after the fact. Today, they can let the BB "paper crunch" do their work for them. Soon. How fast it gets there will be determined by how the BBs can workout their problems. I suspect we will see rental rates rise each time one of them has to slice off some capital. When this process is wide open Another said he will be writing again (above $360 should do it). The changeover of oil to Euro settlement is the next area to discuss and I am intrested to follow how this ties with gold.

On another note:: With the EU recently (last week?) accepting South Africa into a "favoured nation" trade status, I suspect that any of the SA gold shares that survive this may be left alone (just a guess). The EU needs the SA minerals as much as oil and that country may become very important to them. We will watch as this all plays out.

Also to ALL::: Everyone is down on Bill Murphy for the wrong reasons. They don't have to do anything but continue to discuss this in public to be a huge success! What ever else can be done will indeed help more! Investors can and do think, read and hear much better than most advisors give
them credit for. With the "right insights", they will know to move their assets as events unfold. Walking assets have more impact than standing armies. So don't discount what GATA is doing.
From my perspective, most all mines will have a rough time (not only from hedges) in this new bull. If people keep reading GATA they will at least know to run from BB controlled shares as they will be the first hit. I always say, bullion first and foremost. But, human nature as it is, the biggest and most free mines are the next place to be. They won't run as bullion will later, but everyone can't
be totally in gold. It's a physics problem at these low values! So "GOOD WORK" Bill, I know the sweat is running on the other team!

Thanks to everyone for reading and discussing FOA

FOA (10/19/99; 06:24:25MDT - Msg ID:16853)
Paris and Berlin Look to Offset U.S. at IMF
There is a Dollar/IMF faction!

---In a book published last week on the period leading up to his resignation in March, Mr. Lafontaine quotes from articles describing Treasury Secretary Lawrence Summers of the United States and his predecessor, Robert Rubin, as regarding the IMF and the World Bank as organs of American policy and the IMF as coming under the dominating influence of the Treasury Department and Wall Street. -------------

FOA (10/19/99; 06:24:25MDT - Msg ID:16853)
Paris and Berlin Look to Offset U.S. at IMF
There is a Dollar/IMF faction!

---In a book published last week on the period leading up to his resignation in March, Mr. Lafontaine quotes from articles describing Treasury Secretary Lawrence Summers of the United States and his predecessor, Robert Rubin, as regarding the IMF and the World Bank as organs of American policy and the IMF as coming under the dominating influence of the Treasury Department and Wall Street. -------------

FOA (10/19/99; 19:54:16MDT - Msg ID:16931)
The Euro Area: A New Monetary Colossus
PH, I trust you have been reading this gentleman lately. As one reads this entire article we can understand what "Yellin" cannot.
Paper gold may be sold down at anytime but in this new atmosphere of an Official physical gold bull, there paper bluff is being called. Did anyone witness the huge call on london today? Buy physical while you can get it under $360 as we will be there soon enough. Gold will outperform!


October 21, 1999. The Euro Area: A New Monetary Colossus

The 11 nations of the Euro Area have a total population of 290 million and a combined annual GDP of almost $7 trillion, comparing quite favorably in size to the United States with a population of 270 million and a GDP of $8.5 trillion. Impressive as these numbers are, they pale beside the monetary numbers. Source: IMF, International Financial Statistics, October 1999 (most figures for end of June 1999).

With over 400 million ounces (12,560 metric tons) of gold reserves, the EA has almost 1.4 ounces per person compared to 262 million ounces(8150 tons) equating to just under 1 ounce per person for the U. S. More importantly, with the equivalent of around $1350 of cash currency per person in circulation compared to more than $2000 for each American, the EA could provide a 40% gold cover for its currency outstanding (i.e., the combined total of all 11 national currencies outstanding) at less than $400/oz. The U. S., as I have noted before, would need a gold price in excess of $800/oz. to do the same thing. Total U. S. foreign exchange reserves are some $30 billion; those of the EA over $220 billion. And with a 1998 balance of payments surplus in excess of $120 billion, the EA is running trade surpluses almost as large as U. S. trade deficits.

The implications of these numbers are huge, particularly for anyone contemplating any sort of currency competition, let alone a possible currency war, between the Euro Area and the United States. What makes them even more frightening from the American perspective is the fact that Euro currency itself does not yet exist but must be introduced by January 1, 2002. Why?

One of the most intriguing questions about the U.S. dollar, or more precisely the 550 billion of them circulating in the world, is: where are they? No one really knows, but it seems almost certain that a great many of them circulate outside the country in parts of the world where the local currency is unreliable. Something of the same phenomonon is seen with the German mark, of which there are the equivalent of almost 1675 Euros (approx. US$ 1800) for every German, and even more spectacularly with the Swiss franc (over 4500 (approx. US$ 3000) per citizen, for each whom Switzerland also has gold reserves equal to almost 11.75 ounces before the currently proposed gold sales). On the other hand, Belgium, France, Italy and the Netherlands, taken together, have currency outstanding equal to about 1000 Euros (approx. US$1100) per citizen.

The problem with a currency held in large quantities outside its country of issuance, where it is legal tender, is its potential for causing destabilizing inflation in its home country should a large amount of it be repatriated suddenly, as might be caused for example by a sudden loss of confidence. Indeed, just this problem led to some discussion in Congress a few years ago about creating two dollars, one to circulate internally and one externally. The problem with such an idea, of course, is that even serious discussion of it can trigger the very consequences it seeks to forestall.

In this context, the planned issuance of Euro notes and associated elimination of national currencies, particularly the German mark, should hold some potential concern for the EMU. What is more, and even more importantly, the new Euro currency will have to earn and secure acceptance by citizens of the Euro Area. But look at the numbers. It is well within the realm of possibility: (1) to back the new Euro currency with a 40% gold cover, whether it is actually redeemable or not; and (2) to mop up all excess German marks and other EA national currencies circulating externally with EA dollar forex reserves. Indeed, what other use will there be for the bulk of these reserves? If the United States can get along with its gold and $30 billion of forex reserves, surely the EA -- with more gold as well as balance of payments surpluses -- can do the same. And however attached EA citizens may be to their old national currencies, a new Euro currency -- backed by gold -- might command not only monetary allegiance ("a Euro as good as gold") but also greater allegiance to the whole concept of a United States of Europe.

FOA NOTE: Much more to this at this site.

FOA (10/19/99; 19:57:36MDT - Msg ID:16932)
You arrived there first! Good.

FOA (10/20/99; 17:17:09MDT - Msg ID:17014)
A simple message
ALL: a few things to follow as this unfolds:

Dollar chart: (see above link)

We can look at the dollar chart today and see the the future. The US dollar has broken down and will continue this trend as the Euro becomes more accepted. Unlike times past, this trend will not stop. It will continue and in doing so impact every financial asset in Western hands.

US interest rates chart:

Once the trend of the dollar is clearly established it will force interest rates ever higher. This will happen well before any obvious inflation because this time the dollar isn't falling from inflation worries. This run is caused from competition. Even though rates are now on the upswing, they will rise even faster in an effort to keep the dollar from falling too fast. True, imported goods inflation
will drive rate worries also, but these perceptions will be "behind the curve" and "after the fact". Again, switching ones reserve holdings into another currency because it offers a better use function is a different kind of run "from" the dollar.
This new trend, created from a different concept will be the "wrecking ball" in the American economic system.

Gold chart:

The new bull market in gold has begun. Large buyers of bullion should have already completed their trades some time ago. Indeed, most of the major players that are holding for the currency transition turmoil have been buying for several years. This past spring ended the "easy times" of bullion accumulation. All buying now (except for small private holdings) will be difficult if not risky.
It will be difficult if not impossible to trade physical bullion during the swings of this run. Even now selling the recent high to buy the current low offered a poor return over the dealer spreads. Truly, the risk will be found in the sudden spikes created as physical is brought to return loans. Add to that the rush to purchase by short term traders that makes it impossible to "buy under your last
Again, the price action will prove this is not a bullion trading market.

Gold stocks chart:

The major shares did not lead the dynamics of this new market. Contrary to all the last 20 year history of gold shares, at best, they only kept up with gold bullion. To date, some have lost much more on this correction. The next major move up in bullion will lead the shares by an even wider margin. Some shares will fall away into legal proceedings as we run past $360 and $400. As this market works it's will, gold is destin to outperform all other investments by a wide margin. This market is not as before.
The above chart can be seen as adding silver to the list of fallen competitors. At best silver will struggle to attain it's recent high during gold's next rise. Eventually, gold will pass and much more than triple the dollar price of platinum. No other metal will be pursued as money like gold will during this transition.


I have not offered such an outline before because the political turn had not materialized. It now has! True, the paper markets will work their effects on dollar pricing, but the now developing shortage will overwhelm even these areas. Leasing rates will rise and fall precipitously as trapped
players borrow to replace accounts. Then they will borrow again to replace those accounts, never able to fully escape as the price runs away. Eventually, the rental markets will stop from inactivity. Paper markets will stop from inability to match "street gold" prices.
So, read the above charts, not as a TA trader, rather as an asset holder that follows the breaking news. As this unfolds we will be glad to own, "only gold"!

On the road..............FOA

FOA (10/20/99; 19:25:56MDT - Msg ID:17025)
Cavan Man (10/20/99; 17:28:27MDT - Msg ID:17016)
Hello. What is your personal target for $ price? How do you come by it? Have you abandoned any hope of 10K or 30K?
Cavan Man (10/20/99; 18:42:24MDT - Msg ID:17020)
Dear FOA
Your "wrecking ball" metaphor sounds ominous and unlike your previous references to "controlled burn" and to paraphrase from a more recent post; life will go on pretty much as normal or something like that. Can you explain please?

I almost detect a hint of glee. I must be mistaken. I agree we are in deep #@$%; but, devastation?


Hello Cavan Man,
I expect to see gold quickly running through $360 because that is the area a great many buyers began locking in forward gold. Don't confuse these with Comex or OTC deals. These were "long term" in nature and were but supplemental to substantial bullion already held. I think some of these "buys" are now in question of delivery. If this perception takes hold, real buying will ensue buy
these very persons that were to receive gold. It's mostly market dynamics at this point, because only a very small percentage of bullion can be purchased, out of the thousands of tonnes needed.
We will run well past $400, but I use this as the first area that the ECB would like gold to attain. The "controlled burn" comment should be applied to the gold markets. The ECB does not want to see a total run-away and will try to slow the gold rise. This comment is better applied to the Washington Agreement as that signed paper was really two statements that: (1.) applied to the need to sell gold in a future context (going out 5 years?). This would control the rise. (2.) The halt of the expansion of lending was what killed the current markets. Like fractional reserve currency inflation, stop the presses and banks fail. Therefore, stop the fractional gold lending and the market
"officially" changes!
The "wrecking ball" metaphor is applied to the world IMF/Dollar economic structure. Not so much the gold markets. Note the charts it applied to.

Scrappy (10/20/99; 18:26:19MDT - Msg ID:17019)

Welcome Scrappy,
I addressed the $30,000 concept a while back. It's more a projection taken during a study (I was not part of) that indicated just how much the dollar would lose "reserve use"! Truly, the price is unimportant as value assignment can take many forms at that stage of failure. Let's say, at least
$5,000 in the five years the ECB has allowed.
Yes, total change is a time consuming affair. Yet, it is longer than an eternity for investors that cannot recover in their lifetimes! The major story here, is the transition of currencies. Earlier, Another was pointing to the various political leverage that made this outcome proceed. Gold, being the historic world currency of "all" resort, will benefit from this transition in that it's use will greatly
expand! It's price in currency terms is meaningless as it's new value in today's modern world is made clear. No one knows where it will finally level out.
Truly, until the IMF/dollar pricing system fails, gold's paper price can run literally "anywhere" as the values indicated in dollar currency are completely false! As Another says, "time will prove this out".

thanks FOA

FOA (10/20/99; 19:40:24MDT - Msg ID:17027)
SteveH (10/20/99; 18:56:02MDT - Msg ID:17023)
No, your messages have been very direct for some time now and what you say is the ultimate outcome of your theme. What you are saying is what I confirmed before in my thoughts when I said you waited to come public until the outcome was already in your favour. It is truly a chess game of
worldly proportions that is played here and you have just called, "check."

Hello Steve,
Yes, "check"!! You better believe it. I have no knowledge of other counter moves until we at least pass $400. We might say that this is will be a "time out" period from play as some "taken players" are removed from the board. If the BBs persist in writing down the paper markets, against the "spirit" of the agreement, I would look for some serious international capital flows placed on bullion! The BIS has this responsibility and authority to make it so. We shall see!

Thanks FOA

FOA (10/20/99; 19:43:01MDT - Msg ID:17028)
Should read:

" international capital flows restrictions placed on investment bullion"

FOA (10/20/99; 19:58:56MDT - Msg ID:17033)
Gold Power (10/20/99; 19:33:55MDT - Msg ID:17026)
FOA: two questions
Am I correct in understanding you to say that the street price of physical gold will runaway from the printed price of COMEX gold and other forms of paper gold until the authorities realize that the contracts don't mean anything anymore because they are not shadowing any tangible reality, and then the paper gold will quit trading?

Second, what political event has transpired to enable you to say: "I have not offered such an outline before because the political turn had not materialized. It now has!"?

Hello Gold Power,
Read the USAGOLD HOF (especially Mr. Holtzman). The whole point about contract paper gold being discounted is found in his post. Also read some historic accounts about the events that transpired during the Hunt silver affair. I clarify today's future this way:

When the day comes that 150,000 Comex contract longs ask for delivery, it will not happen! Truly, it will never get that close. In the event of a disorderly market, the exchange already has in it's articles the power to declare "liquidation only trade" for cash settlement! That's means no new longs can enter, only close out.

Consider that the comex is the very smallest of the world gold arenas. If all the current bullion derivatives were to ask for delivery tomorrow, the world would be short some 500 million ounces. So, use your best imagination when looking down the long road before us.

GP, the "Washington Agreement" that was recently signed, is a first! I trust you know about it? Could someone here point this gentleman to the WGC site?

Thanks FOA

FOA (10/20/99; 20:06:13MDT - Msg ID:17035)
(No Subject)
Cavan Man (10/20/99; 19:51:44MDT - Msg ID:17030)
How long will it take for gold to trade at $10K US?

Mr. Man,
Just as soon as the dollar trades at $1.00 to 1 / 10,000 of a gold ounce! (smile)

FOA (10/20/99; 20:26:51MDT - Msg ID:17036)
Stand strong in your beliefs, for in large numbers we find agreement. And in full agreement we reach accepted conclusions. Yet, reason states that reality is the strongest of all conclusions. And reality arrives on the rarest of occasions, when mostly the few accept it.
The history of the world is filled with common perceptions that lasted for lifetimes. Only the few are fortunate enough to experience "massive change" against the established way. For the mind it is an experience to behold. For the pocketbook it becomes an expensive lesson.

Follow your spirit, my friend,,,,,,,, and we will meet the future down the road,,,,,,,down the road to $30,000

Thanks all FOA

FOA (10/21/99; 05:29:58MDT - Msg ID:17060)
Netking (10/20/99; 21:56:53MDT - Msg ID:17047)
FOA - Comex paper
FOA RE: Message 17033
Would I be right in saying that the many people who do hold
long contracts would be "unlucky" to loose their investment
ie there will be a cash settlement/guarantee regime put in
place that is likely to return them their capital plus
prof accrued until when the plug is pulled.?

Hello Netking,
They can print all the cash necessary to cover everyone. But, they can't print any more bullion! Will the cash cover everyone's gains? This question is aimed at only the longs. It takes a short and a long position to create a contract. If they cover the longs + profits, will they cover the shorts + loses? It was a big mess the last time this happened and it will be bigger this time.
Note: Usually, the market makers of paper exchanges are protected so as to at least keep the exchange alive. Again, this can involve "liquidation only settlement" that favours a crashing price. (See the silver history line) Because bullion is not used, it impacts the accounts of the players, not the supply and demand in the physical dealer markets. Even so, many dealers do use the paper games to carry inventory? What will happen in such a convoluted mess? I say total market shutdown!

Strad Master (10/21/99; 00:57:44MDT - Msg ID:17056)
Question for FOA
--You mentioned in your postings today that silver and platinum would greatly underperform gold inprice, yet I seem to remember from a posting of yours a few days ago something that implied that you were also holding physical silver and platinum.-----Do you think that holding silver and
platinum will prove useful in the coming times - just not as spectacularly useful as gold? Or, do you feel that if someone had the choice to be diversified in all three metals (albeit largely weighted in gold) versus holding only gold and nothing else, that the latter would be the better option? Thanks in advance for your comments. All the best to you.

Hello Strad,
Yes, I do own some silver, about 1% of holdings. I recently purchased some Platinum, 1/4%. These metals will rise a lot in the future. They just will not come anywhere close to the run gold will have as it is taken into it's new money asset image. These metals are held for use and have a
definite limit to their demand, subject to a higher price. No, gold will mostly not be circulated as money, just as stocks and bonds are not used to buy auto fuel at the station. However, physical gold will come into tremendous (unlimited) demand as it becomes a savings asset.

Thanks FOA

FOA (10/21/99; 07:02:42MDT - Msg ID:17064)
You can bet this deal was done "off market" at a loan rate much higher than 10%. Physical gold as the interest with "down line" attachments to "in ground gold". Along with Arabia in this "ASHANTI" workout points to what is really happening behind the screen. And some people thought everything was covered because rental rates were low! Don't believe it! The whole rental system is moving "offline" to hide the effects. We must ask, from who will they borrow the next time to repay this new loan? A trap that the "Washington Agreement" has closed.

Kuwait--Oct 21--Kuwait's Central Bank announced today that it had decided to deposit 79 tonnes of its gold reserves with "reputable" international finance institutions. Central bank governor Sheikh Salem Abdul-Aziz al-Sabah said the bank would invest its gold through limited-term deposits, without giving up the ownership of the reserves. (Story .13467)

FOA (10/21/99; 07:45:58MDT - Msg ID:17067)
You assume the gold is being loaned into IMF/dollar players. I could be, yet it most likely is flowing through these BBs to cover an old Euro borrowed position. It is the ECB faction that has stopped further lending and could be repositioning to "self liquidating status". Again, the major
dollar BBs will get cover in this "controlled burn" if they agree to pay the "undisclosed rate" price.
This latest move shows just how much the deals are in trouble. It's obvious that most of the transactions are "off-line" because the lenders "announce" their intentions before the fact. Neither the Russians or Kuwait bid themselves a lower rate by publicly talking the deal. Rather they are asked to "Pre announce" so as to influence what is becoming a largely non investment bullion "retail lease market". Such an action telegraphs to the community that everything is OK.
Once these initial workouts are done, some of the players will be removed from the chess board and the "official bull" will run again. That is run until some more players are "taken".
We have but to buy physical (if you can get it) and watch the destruction.

Thanks I must go now FOA

FOA (10/22/99; 07:05:02MDT - Msg ID:17163)
(No Subject)
Some people have held this view for a long time. Now it's becoming more main stream. See link for story:


"""Now that gold isn't a surely bearish play and could conceivably rise toward $350 or even $400 an ounce over the next 12 months, gold bars and coins are preferable to gold stocks, Mr. Lucas believes. The next safest gold bet would be an investment in a mine that either doesn't use the derivatives market or transparently explains its hedging"""

FOA (10/23/99; 17:01:18MDT - Msg ID:17268)
One long post.
I also read the article in Barron's offering Mr. Gartman's views. Thanks to poster "Number 6" for placing some of it here (also welcome to you, sir). It is indeed a benefit for all of us to find the gold story becoming more mainstream. Slowly the future effects of the ECB deal is sinking in. Still, I think most all established analyst are going to be very surprised at how this eventually plays out.

As gold begins it's rise, the numbers will verify to many traders that another bull market is intact. Each in their own way will attempt to gain from the price run. That is until the price starts to run "out of sight"! You see, the gold market began to change back in the late 80s and early 90s and that evolution has shaken everyone that followed it.

Too date anyone that has invested in gold using the "traditional" vehicles has been "dead wrong"! If I had to guess, it would not surprise me to find that 95% of these players have lost their shirts on a "net basis over 10 years". Even the shorts lost money as none of them saw gold ever falling so far. Often switching sides to catch the turn-a-round that never came.

Truly, investing in gold "as an industry" or "as a long leverage play" was not the game to be in recently nor will it be for the future. Because gold has entered a new era that will eventually find it being held as "private money" in the form of "real wealth". Something our "extended generation family" has never seen or understood. More on this in a minute.


A very large group of world investors have been buying physical gold for many years. These people have been "dead right" on "their reasons" to buy gold. Another has said that "events will prove the wisdom of their ways". I agree with this even more so as real actions slowly prove their

On the other hand a very broad spectrum of "gold bulls" can be seen on the side of the GATA group. They believed in gold as an inflation hedge and a good "supply / demand" investment situation. I'm sure most of them own bullion to some extent, but am guessing that most of their "working money" was involved on the industry side (gold shares). Truly, this segment of the community has found their investments on the wrong side of a political currency transition that was destine to change the gold markets for the rest of our lives.

Most everyone that analysed gold from a "dollar devaluation" standpoint was sure that gold (and the producing industry they brought into) would soar from such an event. Few could accept that for the dollar to fall from world reserve status would also require the total destruction of the "dollar paper gold market". Nor could they imagine how the years preceding this would see the world flooded with "dollar paper gold contracts". Yet, as this progressed over many years we saw how the political manipulation that GATA rightly exposes was being used in a way that will "eventually" destroy the confidence in the dollar. For truly, in today's world, if one loses the ability to contract for gold in us currency then the reasons for holding dollars at all begin to fade. From a country that runs a never ending trade balance deficit, foreign dollars and the interest they earn become a purposeless hold. If dollars can never flow on a "net" basis into the US in a trade surplus situation, the end result must be a bubble of dollars with no home or value.

Political currency war as seen in simple sequence:

Build a bubble within the dollar gold market by selling paper gold far and wide. By selling paper derivatives of gold we free up official and private physical stocks of bullion to quench the demand for coins, bars and fabrication deficit. Because the world gold market is priced in modern terms by "derivative contract", flood the paper market and drive the price lower. In an never ending circle, the market expands in ownership as the price falls.

"Coat Tail" this process on the IMF/Dollar need to lower gold to support it's currency with a low inflation perception and the political will to proceed is reinforced. For those major bullion buyers of the world (oil) that would object to this, build a new currency upon the standard of a future "free world" gold price that can become a trade settlement reserve item.

Once the "timeline" of the dollar is near the end of it's mathematical ability to expand world trade, destroy this "new fractional reserve gold market" by adopting "self liquidating rules" into the official sector lending game. With this turn, oil and gold prices begin a dollar rise from which there is no return. Eventually, the world gold markets, as built in dollar reserve contract terms can no longer function. As events slowly sink in, all foreign held dollars (mostly held in US treasury form) are liquidated from dollar terms by buying physical gold and Euros. For without contract gold, in functioning form, physical must eventually be bid at any price!

In real time production, we see this beginning in the US fed buying US treasuries almost everyday in an attempt to stop the rise in rates. A rise that comes without inflation. Truly, a rise that comes from "reserve currency competition".


For today, the modern gold investor faces a dilemma in concept! None of them have ever seen a gold market that finds it's total demand coming from buying "physical gold" as a "wealth money" asset! Buying that arrives in official as well as private sources. In their (gold bugs) limited
experience with so called "free market gold" dating from 1975, physical gold buying was never the full price driver. The price always rose from, at best a 50/50 mix of paper leverage buying and physical buying.

Nor can they envision gold rising so much, so fast, even before dollar price inflation takes hold. Our total "real life" education about gold prices ($100 to $800) were all explained as "dollar price inflation" dynamics. Never was it approached as gold becoming a new parallel "private reserve
asset". Just like stocks, bonds and currencies.

Add to this, the very real prospects of their "gold price making markets" falling into complete turmoil and dysfunction. Every Western investor knows how to convert and spend their stock and bond portfolio. Yet, the concept of actually selling some personal gold to a private dealer, without an official quoted market, is seen as an "end time event".


During the next five years, physical gold is going to outlast and out perform not only the current world derivative gold market, but outlive a large portion of the stockholders equity in most gold mines. During the "death throes" of the gold marketplace, the dollar price could be all over the map! Simply put, most short term traders and long term paper gold (gold stocks included) investors
will be eaten alive as we witness a transition unlike anything ever seen. How can one be ready for this? Some people are 80% gold bullion, 20% in the few largest unhedged mines (only 3 or 4 exist) and hold plenty of cash that is expected to devalue greatly. Their mindset is ready for gold to be priced somewhere between 0 and infinity! In other words, gold in their eyes will outlive it all.

Some writers do a wonderful job of proposing that gold is dead and holds little more use than a tradable commodity. The most eloquent poster, Mr.Yellin of Troy, has produced many fine articles that expound the current feelings of Western life as expressed in it's need and view of gold. Still, all of these concepts were built using the "American Experience" of the last hundred years or so. I submit that this has been little more than an "experiment in progress" that only now comes to completion. In the end, the laws of nature always control out destiny and the outcome is distilled into this common reality:

"The only real earthly wealth is one we touched in person as all honour is fleeting"


Is this how it works?

When a major Middle East oil producer lends it's last 79 tonne of gold into the marketplace, one should know he will get that gold back. After all they are not like you or I or the average globe trotting hedge fund. They are the oil producers for the next hundred years!
As I offered before, that gold was loaned for a "HUGE" concession that will never be made public. For the marketplace to approach them is indicative of the massive strains in the lending arena. Because these people will not lend "CHEAP"!
Understand the dynamics that are now in effect. Somewhere gold lenders and gold contract derivative holders are exercising the very limits of their "fine print" to get their gold back in "allocated form". As the brokers in between these deals have lost the ability to "control" their
counterparties, their firms must use their own capital to buy physical gold and blow up the price or "borrow" it in order to cover their old lenders. It's no contest and is done "off the retail lending market" so as to not gun the rental rates.
In the past, the news of 79 tonnes lent into the marketplace was an announcement of fresh supply to lower the gold price. Today, these announcements are for the purpose of replacing defaulted loans. It's important to understand that on an ongoing basis, these new loans do change
everything as the broker now must eventually cover this new loan "from it's own book".
The present fear is that gold lenders that cannot regain their bullion will start buying on the physical marketplace as they call their lawyers to discuss just compensation. This is the only kind of fear that will compel some "expensive deal making" with people that usually don't lend.


Every central bank in the world is looking at it's reserve dollar holdings and watching this latest gold spike. I can tell you that they are closely analysing this new risk because the potential exists to cut them out of the gold market at what was perceived low prices. As the Euro gains use, dollar reserves will become a huge dead liability. Especially if the BIS is stopping inter bank gold sales!
Truly, for China the risk is clear. I expect them to become more active in buying "defaulted gold commitments" that can function except for the lost margin, even if the price paid is much higher than market. The recent deal making by a large Arabian investor will lead the way.
In some ways this action is a precursor of a two tiered market for gold. With future delivered "higher priced street gold" taking the form of "defaulted new mine production". We shall see.

Thanks for reading and discussing FOA

FOA (10/25/99; 19:53:55MDT - Msg ID:17445)
seeker (10/23/99; 18:15:53MDT - Msg ID:17269)
-----Kuwait is now lending their gold into the market, fully expecting to get all of this back. Isn't this just adding fuel to the fire? Where will the gold come from to pay this loan back if there isn't any gold to be had now? Do you see gold shorts eventually going to the comex type markets of the world trying to get gold from the other shorts of the world, or will they look elsewhere?------

Hello seeker,
Where will the gold come from? Well, we must know that these broad "official" announcements don't give the details of the transaction. Just as many gold mine (stock) owners are finding, a simple statement like "we are 30% hedged through 2004", doesn't really tell us what they did. There was a lot more to the transactions than the public report discloses.
The same is true with the entirety of the modern gold markets. Weather lending, leasing, forward selling or trading large scale OTC futures, puts and calls, our gold market is a complex network of interrelated commitments. For the most part we can just call it a huge derivative marketplace or paper gold for short.
The Kuwait 79 tonnes could be: (a) sold outright into the physical market (b) held on account for them in "allocated" form as they sign a contract to place the gold in "unallocated" form if needed (c) held in a BB account for the benefit of Kuwait as OTC puts and calls are balanced against the holdings (d) held in a BB account for the benefit of Kuwait as OTC future contracts for delivery are
written against the holdings (e) sold not on the street, but directly to the bank as the BB writes a derivative contract back to Kuwait for delivery (f) too many more to Offer??? My point is that the gold doesn't necessarily flow. Usually these deals are leveraged into paper gold many times
the actual amount.
However, that is not what this one was about. Somewhere in that maize of paper gold above, some lenders were saying "we will have our physical" "NOW"! So, as is usually the case when a business contract slips into the crisis stage, someone in the community gets a slice of their capital
taken off. The contract is filled at a big premium to market. I think we have seen (in the US news) how some of that premium was paid in this deal. Certainly, that was only part of it!
Back to your original question: If a crisis of supply erupts, Kuwait will get it's gold back because someone less important will be denied theirs! In other words, if two contracts are to be filled and gold is available for only one. The paper you hold will go without. Nothing new, as the world has worked this way from the beginning.
Seeker, You should read / learn / study more about how Comex works. They are not a gold warehouse, rather a paper gold hedging arena. If the world trading houses cannot fill an order, comex would be the last place to look for it.

Thank you for discussing FOA

FOA (10/25/99; 19:56:02MDT - Msg ID:17446)
Cavan Man (10/23/99; 18:38:39MDT - Msg ID:17271)
Which stocks? (please) (thank you)

Cavan Man,
The very largest ones that are not hedged. Preferably, they are also long gold! You know one I have mentioned. Truly, if one must play these stock papers, don't trade them. Expect the swings in the paper gold markets to price these mines all over the place until the market disintegrates! During this time these true "blue chip" mines will move far away from the others in price. However, bullion will still outperform the mines by a wide margin. No one is going to trade any kind of gold paper and come out with enough cash to net out more bullion than they started with. The dynamic of this bull is going to unnerve every paper trader that thinks they can make money against bullion. We have but to count the chips five years from now to see this truth. Until then we stand and watch this
Thanks FOA

megatron (10/23/99; 18:35:32MDT - Msg ID:17270)
Sir, how do you see the short term value/movement of the Swiss franc against the $US playing out in a quick rise POG situation?

Hello and welcome megatron,
They still trade it like like the old hard currency it was. But times have changed and the franc is getting ready to enter the EMU. Even the EURO will not run against bullion until much later. Yet, none of us can hold 100% bullion, so one should consider the next world reserve currency and
position themselves now?


FOA (10/25/99; 19:57:57MDT - Msg ID:17447)
elevator guy (10/23/99; 21:30:08MDT - Msg ID:17282)
Why will gold stocks be a risky place to be?

Hello elevator guy,
We have covered this area many times before. Simply put, when this new gold market runs as never before seen, shares will under perform bullion because they only represent the ownership of a business not money reserves. As a mining business, they must overcome the negative effects of a
banking crisis, massive cost inflation and taxes old and new. Their dividends will never return the equivalent of the increase in bullion nor will the equity. Most investors do not retain a good historical perspective between government confiscation and government regulation. Production
regulation and taxation are a different control of mine reserves that greatly impacts stock values. Many stock promoters often try to inject the "confiscation issue" as one for bullion holders while ignoring this other dynamic as it pertains to mine shares. The race will be for bullion and large international players will discount the leverage of mine reserves in terms of the crisis financial atmosphere they must invest in.
Even so, some mines will be sought after as they will be perceived as the best positioned of the lot and the last to be interfered with.

Anyway, it's a long hard subject that many will pay dearly for as this transition proceeds.

We will talk again on this. FOA

FOA (10/25/99; 20:00:19MDT - Msg ID:17448)
Scrappy (10/23/99; 22:13:50MDT - Msg ID:17283)
Gold will be, (is?) the only constant common denominator amongst the countries, as the value of goods and services changes with needs & desires. It would seem to me, that the rest of the world is trying to eliminate currency based on debt, (a good plan). But, if this is the case, what is to become of the U.S.? The only currencies we have are I.O.U.'s. Will U.S. workers be paying off U.S. debt for the next century or two? Or,(more likely), will we be forced to return to a partial gold stndard, or even a nothing-but-gold economy, just so we don't starve to death? Will the rest of the world allow us to come into the new playing field 'even?' How will this all be dealt with? (bearing in mind, that about the only 'products' the U.S.A. has anymore are miniscule compared to what we import. We are a nation of paper-pushers-what value will that be in the new scheme of things?) Forgive me if I am sounding foolish-but I am suddenly afraid for all of us very spoiled citizens. Indulge me, please?---------

Hello Scrappy,
I think you are seeing some things in the right light. It would have helped if you could have lived in several other countries that carry major inflation's all the time. In this one could easily see how things are handled as your nations currency is destroyed. People do learn from others and survive the worst. It's always better if one can plan ahead!
This downturn for the dollar has been building for 20+ years. Some people say they have heard this all before and buying gold is just an old story. Well, the dollar currency has been inflated off the face of the earth during this 20+ years and it's comming price inflation will reflect that fact. The Euro is going to allow everyone to see just how much this currency has been over saved as an international reserve. Oil prices will lead the way because oil replaced the "dollar gold standard" in 76. Just as gold spiked when we went off that standard, oil will spike next as it moves to back the Euro. Physical gold will simply explode because no nation will try to stop it as this unfolds. Every
Western citizen has the right and obligation to retain their life savings against such changes and gold is the historical way we do it. Even so, one must be prepared to watch our modern gold price creating marketplace be destroyed during this process. Just as Germans of the old order were told
not to trust the Mark to show long term value, we must not trust the current gold price to indicate the value of gold.

Thanks FOA

FOA (10/25/99; 20:28:28MDT - Msg ID:17453)
ORO (10/25/99; 18:34:41MDT - Msg ID:17441)
DD - Phrase of the day
"papers and their mutant ninja derivatives"
Just love it

Ha! Ha! Yes, that was good.

Cavan Man (10/25/99; 20:10:23MDT - Msg ID:17451)
Dear FOA
Does the US have any options? Won't a wobbly US economy have negative repercussions around the world? This is the only question you have not satisfactorily answered for me. Thank you.

Cavan Man, Sure! The whole world economic structure is going to shake. This is one of the reasons why gold will run as commerce fails. Because everyone is going to lose something from this. Unlike past downturns, this one will find people looking for what is perceived as a "last man
standing asset". In the same light "fortress Euroland" will look like a survivor to investors.
For the sake of the most people, I hope the gold market is "taken out" on the down side not the upside. In this way many average citizens will have a shot at the remaining tradable reserves before it all changes. I know this is not good for gold bugs to hear, but it won't last that long.

I'll be going now. Will reply / discuss later. FOA

FOA (10/26/99; 20:26:03MDT - Msg ID:17534)
Aristotle (10/26/99; 10:31:17MDT - Msg ID:17491)
Swimming in the Sea of Tranquility

Nice of you to see the forest and not just the trees, Aristotle! There is a whole world of people out there that "like you" do not trade gold money using the Western mind's logic. Good post, sir!

ALL: I have several things to say about the paper movements, but must post and reply another time.


Aristotle (10/26/99; 10:31:17MDT - Msg ID:17491)
Swimming in the Sea of Tranquility
Hi everyone. Found the briefest of moments to stop by before I must be dashing off again. Days like this are great--if you're not leveraged to your eyeballs on Gold derivatives or stocks, that is. When you've got simple metal, your emotions aren't all churned up when you see the price take a dive like today. In fact, it confirms better than anything else could the reality that the derivative markets are clearly setting the price for the physical markets. Nothing has changed worldwide--the ECB is utilizing Gold as their supreme reserve asset, at the Asian people are buying gold at a record pace. Price movements like this signify little other than the fact that the traders are selling paper Gold derivatives and essentially nobody is buying them. Hence, the price falls, and the physical gold gets snapped up that much faster by the rest of the world.

I expect that the typical American is holding out on Gold purchases until it is demonstrated that they will definately get a dollar-return on their investment. They will be in for a rude awakening. You can be sure that under the international currency strains of the day, the U.S. Government will do all that it can to prolong the illusion that the dollar is stronger than its true merits would allow. By the time the dollar turns sour like so much old milk, the physical Gold market will have been completely plundered while the gettin' was good by the rest of the world and the various Gold-hearts that frequent this excellent roundtable. Price-drops like today's simply demonstrate how out-of-whack the balance is, and the further off-balance, the sooner it all topples down. The more I see, the more I doubt there will be any warning before the Gold market as we know it seizes up and the world stands around until a free market can be sorted out. I doubt that during the transition anyone will be eager to part with their real Gold. Gold in hand is your only guarantee--meanwhile all others would be waiting for adjudication to reveal what their paper derivatives might entitle them a claim to...which might point them to nothing more than a bankrupt counterparty. We' least I tried to warn you about going down that road.

Gold. Get you some--and be at peace. ---Aristotle

FOA (10/27/99; 6:15:53MDT - Msg ID:17588)
DD (10/26/99; 20:36:59MDT - Msg ID:17535)
The diversion of paper and physical??
-----The sheeple of western thinking know only one road, the one paved with paper. This path may see the price of gold go lower or even much lower. However, this is the road to ruin, a pot hole invested ride with each flat being reinflated with a fresh blast of paper.----------

Hello DD, I have a few comments to make on several areas. Your full post hit it right on the head. No matter how much we talk about it or events point in this direction, most investors just don't see the big picture. That is: "the international trading marketplace that represents and creates our present gold price is going to break down and eventually completely fail"! The death throes of this process can and will lead to increasingly violent swings in our world price of gold (the modern paper price). In like fashion the mining industry that is financially built upon the use of these modern derivative markets will also fluctuate violently. Perhaps to a greater degree!.

Anyone that has been reading USAGOLD discussions from the beginning understands why we have come to this juncture. We have been hiking this trail "of understanding" for some time. Looking forward we can visually follow that trail to see what must transpire. On one side, if the integrity of the dollar is "at risk" from a high gold price and Euro competition as a reserve currency, then the very members of the LBMA and the banks that own them are also "at risk". These financial giants are the "who's who" that the present dollar sector that the world economy is built upon.

This IMF / Dollar group is trying to keep it's gold marketplace "viable" because in it they can work their will on the price. Until recently, making gold "LOW" was a perceived common goal in world affairs as it supported the dollar not only in perception but with cheap oil settlement on "dollar terms". This year's successful birth of the Euro has cleared the fog and exposed a different presentation of European affairs. Euroland likes gold, marks it to the market and benefits from any increase in dollar price. All at the expense of dollar reserve perception. They would more than welcome the benefits of having the world market for oil settled in Euros and introducing the use of gold as a reserve settlement asset. The dynamics of this would create lower oil prices in Euros and a resulting Euroland economic expansion build on a solid world currency. Further, it would allow a world-wide super inflation of the dollar that would wipe the slate clean of overhanging dollar debt.

Now that the ECB / BIS has sanctioned a policy that must "deflate" the paper assets of our modern gold market, the players in this arena are battling an "inverse gold paper deflation". Having flooded the world market with paper gold contracts during this many year joint Euro / US effort, the London market is now facing the equivalent of a bank run. If everyone wanted their physical gold at once, there isn't enough to cover all the accounts. Official sales and lending will no longer back this "fractional reserve" paper gold market.

To keep the gold marketplace "viable", the dollar group must maintain the appearance of "contract credibility". The only way that can succeed is for the paper price of gold to fall. Because of the "derivative nature" of many modern gold accounts, a falling gold price cancels out the potential physical demand in many accounts. This doesn't stop the "run", but it at least moves their books towards a balanced direction.

If the price being paid to buy or borrow gold to cover contracts comes into full public view, it indicates just how far the market is out of line. The more visible the "cost to cover" becomes the greater the crisis of confidence and the more it inflames the "gold account holders". Yet, even today we can see the tell tail signs of manipulation "on the gold trail". The "paper market price" and the "real price to settle problem contracts" are not the same. Large blocks of gold are loaned by people that do not usually lend. Their reasons for entering the game are stated as "high lending rates" and "a good return on assets". Yet the public rates are far lower than during the crisis. Even the US military is seen delivering a "bonus" concession that I'm sure one could consider as part of a "return for lending". At least in the view of some people. In addition the BOE is rumoured to be acting to "settle the marketplace" by selling gold. What gold, who's gold and at what price did they obtain it? They have little left to "settle the market with" because of their sales and the crisis is created because no one can find physical at today's paper price. So they must borrow! By borrowing gold at a very expensive private rate they cover the true cost of physical from public eyes. Still, any additional gold borrowing to settle accounts, just creates a larger more expensive future physical demand that must be covered on their own books. Indeed, the difference in the cost of "problem gold" is comming into view. Read all of TownCrier Msg ID:17567 After the Close.

--" Ashanti's sanctioned change in mid-contract that would allow for "margin-free trading,"---

Thanks TC! If we accept their concept of a "margin free account", then one must agree that it became "margin-free" because the cost to cover that account with physical would have brought light to the true price of physical gold today. Even in the middle of all of this we can see just how "controlled" most mining operations are. (See TownCrier Msg ID:17567 After the Close)

-----New York--Oct 26--Battle Mountain Gold Co. said it has taken advantage of the rising market to hedge a total of 300,000 ounces of production for delivery-----

Truly, many mines are dependent upon the very "paper gold" market that keeps their product cheap! If they lose the marketplace (due to a spike in prices), their assets remain, yet their shareholders are wiped out.

Again, To keep the gold marketplace "viable", the dollar group must maintain the appearance of "contract credibility" at all costs. Yet, even in the face of this massive manipulation of a paper gold system the effective use of this marketplace is coming to an end. The "Washington Agreement" has made this a reality and the ECB has the political need to force a change in direction. Like a cork being forced lower into the water, the lower the paper price is pushed, the higher it goes as the next default takes hold. And default they will as no new official gold comes into this arena. Over and over again, the swings will occur until the perception of all "contract credibility" is destroyed. We will see $360, $400 and on, yet in-between we may see $100 or $200. In the end, a pure physical market will evolve that will take us into the many thousands. However, if you plan to ride the derivatives during this process, prepare to be wiped out. I and many others are almost entirely physical while some larger players are part into major / world class "clean" mine equity. We stand with no leverage and hold a mindset that sees $0 to infinity in the paper price as the gold marketplace is destroyed.

I challenge anyone to make this statement wrong: "At the end of five years, no trader will "net out" more wealth than one that holds simply gold coins (rare included) or bullion, Physical will outperform by a factor of ten"! Keep a fictional account on this forum and prove me wrong!

Physical, buy it while you can get it because one day it's production will be regulated. We are on the road to $30,000....................Thanks all for offering your personal thoughts, FOA

PS: In time I hope to reply to most everyone.

FOA (10/27/99; 18:08:43MDT - Msg ID:17648)
The Washington Agreement on Gold!
Canuck (10/27/99; 17:06:35MDT - Msg ID:17644)
It's all here at the WGC site. Here are a few items.
We at the World Gold Council have christened it The Washington Agreement on Gold. I hope you will all also use this name.
On Sunday 26th September - just three weeks ago - a new era dawned for gold. For the first time in almost exactly 28 years, since convertibility of gold into US dollars for official holders was suspended on 15th August 1971, the governments with the largest gold holdings made a positive joint statement on gold.
While the agreement is between European central banks, including the ECB, it was put together through the Group of Ten central bank governors who meet regularly in Basle on a monthly basis. It therefore has a broader dimension in that the United States and Japan have been at least present at the G10 discussions and in agreement with the spirit of the agreement.

FOA (10/27/99; 18:28:58MDT - Msg ID:17655)
SteveH (10/27/99; 4:49:51MDT - Msg ID:17585)

-----------TOKYO, Oct 27 AFP - Investors scurried to snap up the yen today on news that Japanese authorities may upgrade an official forecast ---------

Hello Steve,
Don't know how many people have called for a weaker Yen over the last few months. Yet it still goes up. Even Dennis Gartman in this weeks Barrons is looking for the Yen to fall. I understood years ago that their economy is so tied to the US that their currency would lead them into a depression prior to the dollar falling away. Truly, their financial / economic system is so manipulated it makes our gold market look "Free"! Any country that can take it's rates down to 1/2% (or 0%) and still have a strong currency, is going to go into a major downturn. Usually a nation could inflate their way out of it and bring on a falling currency. Yet, their system is radically different as it was / is built as a suburb of the US. Any upturn brings then a higher Yen that chokes them back down. This very dynamic is the poison that is killing the Yen carry trade and by association is forcing the same funds to cover their gold carry. It's been going on from the summer and has accelerated after the Washington Agreement! All and all, another reason why the Yen will not be allowed to spear head a new pacific currency unit. I look for China to side with the Euroland system before it's all over. Let's watch this action play havoc with the US marketplace (not to mention the gold price).


FOA (10/27/99; 18:37:29MDT - Msg ID:17656)
Julia (10/27/99; 08:02:18MDT - Msg ID:17590)
FOA - A couple of questions please Sir Hi FOA,

Hello Julia, I see you have your questions answered. As a further: You could call any large commercial bank and ask them for directions. Such as: "Who is offering Euro accounts in their foreign corespondent banks?" Or if you know (or have relatives in Europe as I do) someone there, call them for advice. Also: PH in LA knows the story in Spain, I think.

Good luck FOA

FOA (10/27/99; 18:49:22MDT - Msg ID:17660)
phaedrus (10/27/99; 08:41:26MDT - Msg ID:17592)
@FOA re $30,000
Just curious:
Hello phaedrus and welcome, Here are two old post that should outline our thinking. I think your professional training may have taken you to these thought before. Thanks for discussing here FOA

FOA (10/20/99; 19:25:56MDT - Msg ID:17025)
Reply to Cavan Man and Scrappy
Scrappy (10/20/99; 18:26:19MDT - Msg ID:17019)
Welcome Scrappy,
I addressed the $30,000 concept a while back. It's more a projection taken during a study (I was not part of) that indicated just how much the dollar would lose "reserve use"! Truly, the price is unimportant as value assignment can take many forms at that stage of failure. Let's say, at least $5,000 in the five years the ECB has allowed. Yes, total change is a time consuming affair. Yet, it is longer than an eternity for investors that cannot recover in their lifetimes! The major story here, is the transition of currencies. Earlier, Another was pointing to the various political leverage that made this outcome proceed. Gold, being the historic world currency of "all" resort, will benefit from this transition in that it's use will greatly expand! It's price in currency terms is meaningless as it's new value in today's modern world is made clear. No one knows where it will finally level out. Truly, until the IMF/dollar pricing system fails, gold's paper price can run literally "anywhere" as the values indicated in dollar currency are completely false! As Another says, "time will prove this out".

thanks FOA

FOA (10/20/99; 20:26:51MDT - Msg ID:17036)
Stand strong in your beliefs, for in large numbers we find agreement. And in full agreement we reach accepted conclusions. Yet, reason states that reality is the strongest of all conclusions. And reality arrives on the rarest of occasions, when mostly the few accept it. The history of the world is filled with common perceptions that lasted for lifetimes. Only the few are fortunate enough to experience "massive change" against the established way. For the mind it is an experience to behold. For the pocketbook it becomes an expensive lesson.

Follow your spirit, my friend,,,,,,,, and we will meet the future down the road,,,,,,,down the road to $30,000

Thanks all FOA

FOA (10/27/99; 19:10:56MDT - Msg ID:17664)

Hello Michael,
It's interesting how they try to make it all go away. Yet, nothing has changed one bit! If anybody "cuts and runs" for real physical to cover, the price spikes again and the same problems appear. Up and down we go as a whole prodigy of BB players find they can only fight each other for position. In the end, investors in the usual gold market vehicles are whipped by the volatility. In the end, this contract gold market is repudiated into nothing but a huge court action. A new physical market will begin to appear as one of these sudden spikes takes us past $360 into the $400 range. Perhaps Hong Kong will be the new center for physical trade?

We shall see........ FOA

Note: Thank you for the update on the visibility of this "Major Forum". The world will see some very exciting news discussed right here in the near future. Extreme economic transitions are a rare event to behold, let alone follow the daily action via internet. All roads lead to gold!

USAGOLD (10/26/99; 19:43:36MDT - Msg ID:17526)
A bit of diversion....
According to our Summary Report for the month of October thus far: USAGOLD has received an average of 8000 visits per day thru the home page and 12000 page hits per day from 69 countries worldwide including Canada, Australia, New Zealand, Belgium, South Africa, Germany, Austria, United Kingdom, Singapore, Malaysia, Switzerland, Netherlands, Israel, Japan, Saudi Arabia, the United Arab Emirates and of course, the United States, to name a few. It would probably easier to try to run a list of the countries not represented here. --more--

FOA (10/27/99; 19:26:52MDT - Msg ID:17669)
Canuck Gold (10/27/99; 10:54:59MDT - Msg ID:17605)
Seeing things from a different perspective
Outside North America, gold may make a sympathetic rise in relation to local currencies but not to the degree espoused by some in this forum. The only way that gold could move higher in relation to all currencies would be if there was a total collapse of all the major currencies at the same time. Judging by the way the ECB has rallied around gold by their declaration that it is an important component of their reserves, it seems to me that they're positioning the Euro to replace the dollar when the pigeons come home to roost. When the dollar takes the hit, OPEC isn't going to tie their oil to the dollar because it will be too unstable. They may want to tie it to gold but there isn't enough physical gold available to realistically make that a viable alternative. That leaves the Euro which, though not officially tied to gold, will nevertheless be proffered, and accepted, as the next best thing.

Hello Canuck Gold and welcome, In reply to your thoughts I say "fair enough", let's see how it works out. Tell me, why do you see that there is not enough gold around to become a "viable alternative"?
Thanks FOA

FOA (10/27/99; 19:39:29MDT - Msg ID:17671)
The Stranger

Hello Stranger, enjoyed your post and hope to see more of them. FOA

FOA (10/27/99; 20:01:55MDT - Msg ID:17677)
Strad Master (10/27/99; 18:41:16MDT - Msg ID:17658)
Question for FOA
Thanks for your kind response to my question a few days ago. I remember the experience on other forums I often had wherein I'd ask a question and then have it go ignored. Very frustrating to say the least. Your willingness to answer our questions indicates what a gentleman you are. Today's question: If the POG goes up to that stratospheric height of $30,000 per oz why wouldn't the governments who need it merely confiscate all the buillion and coins held in private hands? I think I understand the difference between the paper price and the "street value" you mention but what good will a high "street value" of gold do if a person trying to use it will just get thrown in jail for hoarding? Am I missing something? Thanks in advance for enlightening me. BTW, I see that the POG has just spiked up considerably. Do you or anyone have news as towhy?

Hello Strad Master, Thanks for discussing and your compliment. How is your music these days? Tell me, I heard that the dry weather in LA can change the sounds from a Strad? Is that true? If you have time.

I think that most people read this ridiculous figure (30000) in present day context. True, today it isn't an issue. But place yourself in the popular perceptions of a future time. Gold will not be trading at these levels as "street gold" between US dealers or on an official physical Hong Kong market because "everyone is trying to unload it for cash"! Mostly, it will be a dollar problem as the US endures a major hyper inflation. Foreign dollar stocks held outside the US will be useless holdings, trapped from re-entering the US by foreign exchange controls. This is where the engine of "gold bidding" will get it's fuel. These dollars will circulate, round and round flowing through what free gold reserves are a available until the price runs outrageously. In this time, no government will be grabbing gold from it's citizens because it would be political suicide. Besides, the attitude will be "what's the worry, it's only a dollar price?" Get my drift?
Thanks FOA

FOA (10/27/99; 20:12:33MDT - Msg ID:17679)
Solomon Weaver (10/27/99; 19:17:40MDT - Msg ID:17666)
one meaning of the dollar ------If the value of one ounce goes anywhere near $30,000 dollars, whatever those new dollars mean to the rest of the world, I hope they will still mean the same to my bank. Talk about paying back with inflated dollars.-------- ---------------

Hello and welcome Solomon Weaver, Ha! Ha! Yes, that is the way the game works, some times. Of course it's easier if one has no debts, but currency destruction's usually allow us to get our assets for a song. Unfortunately, someone else must suffer. It would all work out so much easier if everyone had just a little gold. Just a thought.

I have to go now, looks like things are heating up again.

Thanks ALL.......on the road......... FOA

FOA (10/28/99; 06:26:55MDT - Msg ID:17707)
(No Subject)
Jeff or USAGOLD,
Saved all of it through my last post below. Some 145K of posts. If you need it let me know soon, I'll have to call someone to send it.

FOA (10/27/99; 20:12:33MDT - Msg ID:17679)

TG(10/28/99; 05:15:50MDT - Msg ID:17704), will reply much later. thanks FOA

FOA (10/29/99; 6:21:14MDT - Msg ID:17801)
Ashanti Goldfields Co
Is this the future for other (if not all) hedged mines when gold spikes through $400 and up?
ALL: I hope to find time to make replies and comments in a day or so. There is much to observe and discuss right now.

-----------LONDON, Oct 29 (Reuters) - The President of Ghana, Jerry Rawlings, wants to play a leading role in determining the future of Ghanaian mining company Ashanti Goldfields Co Ltd-----------

``The gold of Ashanti is a symbol of our national sovereignty and we will not do anything that is tantamount to a betrayal of posterity,'' Rawlings added.

FOA (10/29/99; 18:21:31MDT - Msg ID:17855)
Lost posts?
I have early posts from #17694 to #17799 that seem to be gone. Are they lost or are they to be reposted by Jeff? Should I post them now?

FOA (10/29/99; 18:27:10MDT - Msg ID:17856)
(No Subject)
OK, I see what happened! It's all in order now. Boy, what a problem Jeff is having!

FOA (10/30/99; 11:13:52MDT - Msg ID:17917)
tg (10/28/99; 14:41:16MDT - Msg ID:17731)
I think you've missed my point regarding the intended Swiss gold sales. What I am asking, is why would the Swiss who I am sure are privy to similar information as FOA (because of their strong connections to the BIS)would want to sell any amount of gold Would you sell an asset if it was about to become as scarce as hens teeth and go through the roof
in price


Hello tg,

We walk for a while, yes?

The Swiss sale is a real complicated affair. There are several factions within their political framework, all working different agendas. If that's not complicated enough, these forces are interacting within the Euroland structure. So, what will be the eventual outcome and why did they
"do it"? Ha, Ha! You see this modern gold market is one huge "political chess game" and a good "international murder mystery" all tied into one.


The Swiss economy is going to have a real problem operating within the shadow of a united Europe. With so much gold held as reserves, the franc, their currency, would become way overvalued as a trade settlement item outside the Euro arena. Yes, it would balance against the Euro well, but the Swiss Franc will never become the next world reserve holding. And that would creat a problem for them. It would be far easier to proceed into an EMU and establish themselves as a dominate financial leader within a Euroland structure. This would look to be a smart play, as some of their factions agree on this, especially so when gold makes it's initial run against all paper money, the Euro included. By converting a large portion of their gold (per the sell portion of the "Washington Agreement") into Euro reserve assets, they would still gain all the benefits of a gold
reserve that helps value a world reserve currency. And do this without killing their foreign trade (outside EMU) as continuing to use the franc would eventually do. We have to look at the direction Euroland is going to understand.

Look over here:

ORO, this is in the "for your eyes only" file.
Like this: Basically, the Euro structure is heading for
using the "free market" to value physical gold. By holding gold as a "free reserve asset" and not an actual "currency backing" asset, gold can be used in nation to nation trade settlement without damaging the money supply. In reality it is reborn as the true world class currency it always was
and independent of government treasury issues. Governments can manipulate a "paper gold" market, weather it's working as a "gold exchange standard" currency system or our present gold market. However they would not stand a prayer of a chance of working a world "free physical market". Especially the colossal "wealth money" reserve market gold would become at very high prices. In this respect it would dwarf the current trading of US treasury debt.

This is an enormous advantage over the old gold standards because, back then any country that ran a trade deficit found it's domestic money supply being drained. By treaty and international protocol if gold was shipped "outside", the local central bank had to drain cash or print "unbacked fiat" to cover the void. This process was required because each cash unit was backed by a fixed amount of bullion. The dollar at $35 / ounce as an example. This was suppose to tie the governments hands and force them to speed up or slow down the economy as the flow of gold dictated.

In reality, the in and out flow of gold worked havoc with national economies and produced boom and bust cycles. As above, rather than controlling the inflation of local currency supplies, the banks just printed money anyway and were later caught short the gold. Soon enough the
contraction arrived, even during an economic expansion built upon the real wealth of good productivity advancements. This rigid control, imparted by "fixing the gold price per currency unit" did not allow for a "higher gold price". Truly, as technological advances moved "real" GDP forward, gold should have reflected this "wealth gain" by rising somewhat in price and value as the local currency was static in price inflation. And this rise in price of gold should not have been viewed as a future price inflationary signal, as indeed it was so often the case. If gold was allowed
to rise, the currency was viewed as being devalued without taking into consideration that the local economy had produced greater domestic wealth using it's advancements. This was the main reason behind the political evolution away from gold money. Countries more so manipulated gold (even
into this day) as a way of protecting their currency values instead of working their money supply to match the technological and intellectual growth of their people and infrastructure.

Truly we see some of this demand today in the US. In spite of it's failing inflated dollars and the bloated world debt liabilities that come with it, investors attribute more value here than simple money policy could represent. A product of the modern need for digital settlement. Yes, if the currency is really hard, then production advances should "Lower" the local prices of things, not remain static. As such the fiat dollar is not "hard" and we have massive currency inflation hidden in static inflation indicators as the technological production advances cannot offer lower prices. Yet again, the need for an expanding digital currency to settle trade in this fast modern society is seen in the present demand for worthless fiat money. All of our modern advances would fail if we continue to use only digital currency without a "wealth money" trading in the background. This is /was so because there is no means to sepperate "good currency inflation" from "bad currency inflation" based upon modern advances. As such, a world reserve money based on the political needs of one society (the US), was abused as it purchased a local lifestyle based on debt, not hard work and good thinking.

Yes, a circulating "gold wealth money" will drive "fiat digital money" from circulation if they are denominated as the same. But, by allowing them to "compete" in free trade, gold would compliment the "Good" expanding digital currencies that are based upon "true economic advances".

Had money supply risen only nominally while the free trading gold price rose 2x nominally, purchasing power would have been retained in gold using it's old store of value function while the need for more digital currencies to transact advanced trade was utilized. Good inflation based on modern use! You see, our high tech world has given modern digital currencies an intrinsic value that gold, "trading in a gold standard" cannot represent today. As such they (digital currencies) must trade against physical gold in a format of the "Old World" wealth currency it used to be held for. Not be locked to each other.

Onward: for another view of the same mountain:

By allowing gold to seek it's historic money use value in a free physical market, it retains it's store of value function and use as an asset for some trade settlement, be it official international, commercial or private. In this function it still holds it's "honest weights and measures" (thanks Mr. Parks of Fame) use in evaluating national currencies. Of course it must regain a new natural money
price level first, but after that every currency will be measured by the economy that it's money represents to see if it is holding "advancing productivity value" by comparing it to gold. High speed computer trade settlement and the bookkeeping that follows it will still impart the need for digital currencies, but in this format they would be truly free to represent the economic dynamic of each nation. Even during a rising money supply, some currencies may advance in value.


For better or worse, this is the road ahead as the Euro becomes the first multinational digital money to be held in a "modern world" reserve currency system. No longer tied to the political pronouncements of one government as the needs and conflicts of many diverse peoples will be represented. Initially, gold will rise tremendously as it regains it's "wealth money" reserve function in the eyes of private and official sectors. It has been so long sense gold was really held independent of currencies as an international currency, it's rarity will require a "reprice" (or revalue) into the many thousands in current terms. As a "world wealth money" that returns from ancient times, the need and demand for
gold would be "unlimited". So too will be the use of gold as it must partially fill the voids of massive defaulted debts, inherent in our now failing dollar world.

This first run will be a benefit to Euroland as they will be called to cover the needs of many other nations that once depended on dollar based assets. But later, the world will have a reserve currency and gold to trade with and against each other. The Swiss must free up their gold by selling it for Euro reserves (in a round about way, I'm sure). In the end, weather they join the EMU or not, the ECB will eventually absorb most of the "need to sell gold" as stress becomes apparent. This settlement of many of the Euroland gold loans in Euros, will not in any way make gold less valuable. Indeed, it will keep gold liquid in the face of an initial "lock up" in contract settlement.
In the end, GATA will be proven right about the manipulated marketplace. I'm sure they will be in the middle of this as the court action begins. Still, all in all, it's strange how a new faction is now manipulating the marketplace into a "free status" to benefit them. What effect this will have on the gold mines located in the lands of the losers is another tail. We shall see.

tg, I hope this answers your question (smile)!

I will return later to make some of the older replies.

Thanks FOA

FOA (10/30/99; 18:22:13MDT - Msg ID:17930)
Some old items:

Al Fulchino (10/11/99; 21:18:37MDT - Msg ID:16107)
FOA///Post War Gold?
FOA? When you get a chance, I feel it is always appropriate to look further along in the chess game. I am nowhere near your understanding, yet I am also so much further along than I was. I wonder what strategies you see, or scenarios that will unfold, ***after*** this war. You and others may say to me, that I am jumping the gun, not having even engaged the enemy yet. I respect that view. However, it is never to early to realize that there always is another game or series to play. Thank you.

Hello AL,
If you read my #17917 today, we get a picture of what is mostly before us. If you are new to the "goldbug game" it's to your advantage. Far too many "seasoned" players (traders included) are working this market with an eye on near term profits without considering it's powerful political and
currency potential. I bet MK knows this well from his many contacts. Just look at the ongoing "long money" destruction in the gold options markets. Truly, these gamblers do not know who they are dealing with. Yes they can move in and out with profits on the spikes, but they never tell us the "net
out" trade over years! Was it a sudden shift in jewellery supply and demand that stopped gold .50 short of $300 and my profits? Has to have been as no one can control gold! Oh right! One can get a better return at playing a paper game like blackjack with less risk.
As this "market destruction" process moves into better view, the swings and manipulation will only increase. Oh yes, just as in Rome with the last merchants still trying to convince the newcomers that there was unrealized value in local property; so too will options and future players
show us how to "work this move". Eventually, no one will play the game and it will end there with a whole world of investors trying to collect what they never had. Indeed, many will be happy to just get back what they had!
Just as in the past, some said that the future belonged to the dollar and not the British Pound. It's the same today with most of the developing nations seeing that the Euro has a much better future for their people than the current dollar system. It's all unspoken now, but later "visible walking assets" will create a clear trail. The actual proof is being driven home almost every day by the IMF dealings. Anyone that is plugged into the pulse of the "quiet crisis" that is out there knows where this is going.
To answer your question:
Here is how it was told to me: "If one wants to take advantage "after the war", he must be unleveraged in every way, today! Major currency transitions have a way of killing both long and short leveraged plays. No one wins in paper, not because they were right or wrong on direction, it's
because everyone runs from the marketplace. For local Americans physical gold will be the very best even if it eventually attracts a higher tax rate than other investment classes. It will still "net out" well ahead of the pact. Holding Euros will only benefit if you are going to have a second house "outside" or are travelling the world. If you are substantial and want to invest in Euroland later, a
commercial account on the continent will do well."

All this talk about riots and blood in the streets if gold rises is rubbish! Gold will gravitate into another "competitive currency with a much higher value" just as the dollar competed against the mexican Peso. Yes, citizens will lose money, go crazy, fire their political leaders and act as they always have. But, then they do this now without a crisis.
So AL, for me it's Gold, Euros, 1% silver and some of Goldspoons platinum to save face at the forum! (smile) When the dust settles, our families will gain just as other third world families were ahead holding dollars instead of local money.

I'm sure we will address this again.

Thanks FOA

FOA (10/30/99; 18:25:28MDT - Msg ID:17932)
Some old items:

Cavan Man (10/22/99; 06:33:57MDT - Msg ID:17161)
TC 17134 (and FOA)
RE: Saudi Arabia

Could another "income source" possibly be gold? In the coming transition away from the US/IMF, could Saudi Arabia become a major international economic player; this in addition to their history of recycling petrodollars through international banks as detailed so well by Aristotle?

Hello C Man,
That is a brilliant observation and one that will be the topic of future discussions as this progresses. Please keep it warm on the "back burner".

FOA (10/30/99; 18:28:56MDT - Msg ID:17933)
Atahualpa (10/29/99; 18:37:11MDT - Msg ID:17857)
Question for FOA
Hello from Peru, FOA. I will be quick and to the point. Over the last year or so, peruvian private pension funds have accumulated shares of a local unhedged gold producer to the point of making it the largest single equity holding in the whole fund. The strategy has worked out beautifully so far, as the returns have been great. However, in the past few weeks, your misgivings regarding the paper gold market have been nagging me relentlessly. Do you think it would be a good idea for the pension funds to lobby the local authorities and press for physical gold to be included as an
investment grade asset class ? Do you know of any similar experiences ? Thank you in advance. I have learned a lot from you and this Forum, even though I have not participated actively. I dropped by on times to reinforce some concepts learned over the last year or so.

Hello and welcome Atahualpa,
Are the pension funds part of or are important to the governments economic well being? If so they may already own "physical gold"! Get my drift? Truly, governments may make use of any advance in gold value by taxing the added value as it is mined. Perhaps returning the taxes as benefits to the local pension funds. Follow the recent Ashanti situation for direction.

Gold mines will be important to governments that are on the changing end of the Euro / Dollar action. It's a far easier political proposition to tax the mines for revenue as you placate the citizens by letting them own "savings gold". It's just the way the world works. Indeed, some countries may encourage mining "untaxed" as they tie themselves into a trade status with Euroland. The recent trade agreement between South Africa has all the earmarks of such a situation. By no means definite, it is encouraging.
Investors that now recognize the current gold market manipulations and still turn a blind eye to future gold mine regulations are in for "Another" rude awakening.

Thanks for discussing FOA

FOA (10/30/99; 19:04:46MDT - Msg ID:17935)
Simply Me (10/29/99; 1:22:51MDT - Msg ID:17794)
"Wasn't it just a couple of years ago (or is it still going on) where Brazilians were spending their money as fast as they could before they devalued?"
That's how it was in the U.S, the late '70s. Only the cause was inflation (inflation/deflation...seems to have the same effect on the working man's paycheck). In those days (oil crisis days/skyrocketing gold and real-estate days), you got your paycheck and immediately spent it because, with prices going up every week, saved dollars would only buy less in the future.
I'm not just reminiscing. If a $30,000 price for gold is half gold going up and the other half dollar coming down, we're in for those days again...and maybe worse. Physical gold, silver, and maybe real estate (maybe some highly sought after antiques, art, numismatic items)...will be the only value holders again.

Hello Simply Me,
Yes, gold went from $35 to $850 or up 24 times. What you offer above was the result. So, what if gold rises some 30 times during the next five years? Same effect, no? I submit that this time, it will not go down again. In fact, it will rise further as the world elects a new reserve currency.
Will the US no longer protect it's interest in oil or other arenas if this happens? If they don't, someone else will and things will only be worse for the US economy. No, our current lifestyle has a long way to fall before it becomes "more normal". So you won't be able to buy your running shoes for $125, that are made in a 3rd world country for $5.
SteveH once said that I talk my pocketbook. Well, perhaps it's the more realistic position than "talking your current lifestyle"? Real life feelings of national peoples create the trends, not the paper opinions of traders. Let's watch how this works out "on real terms".

Thanks FOA

Be back next day, more old replies.

FOA (10/31/99; 18:56:22MDT - Msg ID:17990)
That is some good point you are making!

TownCrier (10/29/99; 19:33:12MDT - Msg ID:17861)
-----the CFTC should treat financial futures [such as those for Treasuries] in a fundamentally different way than futures based on metals, agriculture or energy." ----
----that financial markets did not rely on financial futures for price discovery---------
----Clearly, the case is clear that the aforementioned real underlying assets, including metal (gold), DO rely on the futures markets for price discovery.----
Everyone should read your entire post to grasp it's full impact. I took part of it to create an image.

Slowly, everyone is coming around to understanding how our gold markets got so far off track. The official determination of what constitutes "buying and selling gold" never started this way. In the beginning gold was wealth and people traded it as money. Jump ahead to the US timeline and we see currency a gold loan that didn't pay interest as it was the US dollar. You loaned your gold to the treasury and they gave you a contract stating that your metal was held until asked for. Your contract stated that 1/35 ounce of gold was owed you, on demand. Because no one asked for their
loan to be repaid, the treasury just kept creating more loan contracts even though there was not enough gold to repay with.
After this "gold loan scam" went bust around 1971, they went back to using real gold again. The government allowed trading in physical in the US just as it was done in the rest of the world prior to this event. Then someone used the gold fabrication industry as evidence of a "need" to create a US futures market so suppliers could paper hedge risk. No need to make the point that this paper market was of little need as the gold industry had worked well for thousands of years without it. Indeed, another form of gold derivatives was just born. The gold market was destine to evolve
again as the distinction between trading real bullion and betting against someone on the direction of the metal's price movements became one and the same. People accepted that a gold derivative was just as good as gold as the pre-1971 dollar was. We came full circle.

How could we now expect modern traders and investors to mentally see that our modern "gold derivatives" were not the same as bullion when they viewed Comex futures and options as buying real metal in paper form? Today, investors see the "intent to supply gold" (a short) as bullion in someone's warehouse. Conversely, they also see "the intent to buy gold" (a long) as the total purchase price in cash waiting in the buyers bank. Both of these perceptions are false conclusions that a leveraged contract is enforceable by law even if the collective total performance is impossible. Just as the US dollar could always cover some gold conversion demands, it's credibility was destroyed when full conversion was asked for. This is the same fuel that drives the paper gold markets today, as long as people ask for more new contracts replace old contracts the game physical supply perception works. In like form, just as currency inflation cannot stop as deflation will ensue, the inflation of modern gold paper cannot stop as a run on the vaults will result.

After the Washington Agreement we can see that this entire arena is a house of cards built in the middle of a political currency firestorm that will strain the credibility of these contracts to perform. Eventually, as these market contracts deflate the loans will fail as the physical product it's legally required to deliver cannot replace the total number of paper demands. This house is going to burn along with everyone (long and short) that's in it.

Further to your report:
---That is important to grasp (and is why we repeated it) because there is currently a disparity between the availability-vs-demand of real gold when compared to the abundant trading of "paper gold." When real gold can't be moved adequately at the "paper gold" pricing levels, there will be a sharp adjustment in which all hell breaks loose due to the global scale of the gold derivative markets. Read on...-----
----Traders said that rumours are circulating suggesting that central banks, especially the Bank of England, had been lending more gold to the market in the hope that lower lease rates would keep the prices down and help producers to cover positions.-----------
----With the Bank of England in the midst of a series of auctions, all circumstances and developments reveal clearly that their goal was not to garner the highest price for their convert a "sterile asset" into a great number of dollars, euros, and yen with which to draw interest.
First, you already know that gold can earn interest. Second, the pre-announcement of the sales was a sure-bet to shake the confidence of gold-holders with the hope of stemming demand and dropping the price. And third, now you see reports of them lending in the hope to lower lease rates,
which in turn is hoped to keep prices down. Does this sound like the actions of an entity that is looking out for an interest to gain the best possible return on an asset that is being auctioned? Say it with me now...."No!"-----
--------when the wheels come off of this gold derivative market, the only position you will want to have is gold in hand. The dollar itself will slide right along with spurious gold contracts as it will be the denominator of those failed contracts. Oh, sure, more dollars are better than fewer dollars; but gold in hand will be better than any amount of paper that tries to play as its suitable substitute.---

Someone is trying to keep perceptions going that real gold is in good supply, even if it is loaned gold. Look at MK's report:

USAGOLD (10/29/99; 9:57:36MDT - Msg ID:17807)
MARKET REPORT(10/29/99):
------...Several weeks ago, gold bears cited the lifting of a Russian export tax on precious metals as good reason to sell the metal. That tax was extended for six months yesterday with no comment by the anti-gold group frequently quoted by the mainstream financial press.---------

Thanks Michael,
I posted right after that announcement that the Russians were the best gold traders in the world. Did anyone believe that they would Preanounce their lending gold so as to drive the lease rate down for their own loss? At that time the rates were way up as all the major players were still using
the public rates. They truly needed someone to scare some business into a "let's work this out privately position". The Russian statement did the trick as rates retreated, but it didn't cancel anyone's liabilities because no gold was loaned.

As TownCrier makes obvious, this huge paper market is in real stress and the signs are leaking out. Now look at the Cambior news as posted from SteveH #17867:

MONTREAL, Oct 29, 1999 ( BUSINESS WIRE ) -- Cambior Inc. ( "Cambior" ) announces that it has reduced its gold hedging position by 1.3 million ounces. This reduction, made with
a view to improving its aggregate hedging position, results from the purchase of one million ounces of gold ( the "Purchased Ounces" ) at an average price of approximately $300 per ounce and from the closing out by counterparties of other positions totalling 300,000 ounces. The one million ounce purchase was completed primarily through the bullion markets with the assistance of various parties to the recently executed standstill agreement ( the "Standstill
Agreement" ) among Cambior and its lenders and hedging counterparties ( collectively, the "Financial Parties" ) . The terms of the Standstill Agreement are summarized in a press release issued by Cambior on October 27, 1999. --------------------------

I have to ask the question: In today's context of what "gold is", does anyone know exactly what they did? Did they actually borrow that much physical gold to initially create this deal that went bad? If so was the money created as the "gold was sold for the loan" still waiting in a bank. If not, where did they get the cash to buy the new 1.3 +/- million ounces? Did the gold that was now purchased, come from a "new borrowed deal"? If so, who owes physical to who now? ---more from the SteveH post----

The above mentioned purchase and close-outs are expected to generate a net crystallized liability for Cambior of approximately $33 million which will be reflected as a non-cash, pre-tax charge to earnings for a corresponding amount in Cambior's consolidated financial statements for
the third quarter.

Under the terms of the Standstill Agreement, the above-mentioned liability will be treated as a demand loan to Cambior by the Financial Parties. The determination of more specific repayment arrangements will form part of negotiations with the Financial Parties under the Standstill Agreement regarding the elaboration of a plan for the orderly fulfillment of Cambior's obligations to the
Financial Parties over time ( a "Definitive Plan" ) .

In the above, if a "net crystallized liability" is the same as the "liability will be treated as a demand loan to Cambior", then who covered the real gold cost and who is in debt now? Or was the first above statement
"from the purchase of one million ounces of gold ( the "Purchased Ounces" ) at an average price of approximately $300 per ounce"
just the buying of "paper gold ounces" to settle a physical problem with a new "bookkeeping problem"?

Truly, every investor should follow these deals gone bad and ask questions so as to understand what they are really doing. In the case of Cambior, I need someone to clarify it to me? If all the counterparties cannot clearly identify whether they are working to settle loans with "real physical
gold" purchased without liability, then investor assets may start walking. When someone says they covered a hedge, the company owners (stockholders) need to know if it was a paper hedge covered by trading more paper or was a new gold loan used by a broker to supply the cover.

Just as TC pointed out above, why does the gold price need to ne so low for the conclusions of contracts based on physical metal in good supply? Indeed, in a free market everyone must lose a little money on both sides, right? If it's not free, investors may just start walking from this whole paper arena and begin to buy only physical. Or is that the reason the major market makers are so quiet.

In the case of our modern gold markets, I ask the same question that Robert Redford asked in his movie "Three Days Of The Condor";
-------"Why is everyone so shy?".------------


FOA (11/1/99; 22:02:01MDT - Msg ID:18115)
Strad Master (10/29/99; 12:54:43MDT - Msg ID:17827)

Mr. Master,
Thanks for the information about your Strad. I had heard some discussion between friends that sounded incorrect (they did not own one). Your experience is more believable. While I do not play, have owned one of, if not the oldest Stainers around. A real one in a world of fakes. Did not buy it as it was a private gift, papers and all. It doesn't have the sound of yours but for me it's was just as valuable from the spirit it was given in.
Good thing you did not sell yours as it certainly is like the rarest of gold coins. Such wealth is always in demand. Usually people imply that it is useless to own gold or art works during bad times. Yet history shows that even in the worst of it, wealth appears and investors bid for rare coins, art works and yes, old violins! Someone once said that "when dreams are lost, real life is our only dream". I think that to live life in reality is the most unattainable dream for most. My friend, your strads fine sounds are a wealth few can know
No need to send your concert as I have heard it as a songbird on the wind. You no doubt know your ageless strings have sounded many times and such beauty never leaves this earth. Thanks so much for the offer. FOA

FOA (11/1/99; 22:04:23MDT - Msg ID:18117)
Canuck Gold (10/30/99; 22:41:40MDT - Msg ID:17946)
Reply to FOA's post #17669
Hi FOA. At last I have some time to flesh out my response. You wanted to know why I think there is not enough gold around for it to become a "viable alternative". I meant as payment for oil and I'm assuming you realised what I meant and we are talking about physical gold.
Hello Canuck Gold,
I was able to follow all of your reasoning and assumed you have read most of the background writing here about this subject. Still, there is one area that is making your calculations suspect.

Here in this part:
------(In my initial post, I made reference to the intrinsic value of gold. I also believe there is an intrinsic value for oil and I would find it hard to believe that the values of gold and oil could diverge to allow the ratio-----

I consider the "intrinsic value of gold" to be found in it's "demand usage" as "wealth money". Something no one has been able to observe in modern times. Today, gold is worth far more than the value of one man's suit, as is often proclaimed. Mr. PH in LA offered a fine post about this
some time back.
Considering the modern advances in today's world along with it's massive population, one must grasp the enormous "unlimited" demand gold would have if it became a "background currency". At such a price there would more than enough gold wealth to settle trade of all kinds.
In like concept, people settle debts using the wealth contained in their stocks all the time. They just don't spend them as money. We do not find anyone using them to buy gasoline.
Like this:

""How much for the fillup? Ok $25, let's see here. I have one Microsoft share in my wallet and two IBMs. Shoot, I didn't bring any smallcaps or penny shares to make change. How about if we just use this dollar digital currency, all right?""

You see intrinsic value is found in demand and demand is a function of use, need and the retention these functions demand. In many third world countries today we can find people using their local currency as a sub currency of the dollar held in the background. It's a demand precedent
already in place that demonstrates how the demand for gold will be created.
So, please recalculate your position using gold in the many thousands. I think it does work.

Thanks for the reply,,,,,,your thoughts are an education for me FOA

FOA (11/1/99; 22:07:02MDT - Msg ID:18118)
PH in LA (11/1/99; 14:40:20MDT - Msg ID:18054)
Are they "Back in the Saddle Again"?

First, I didn't thank you for the compliment given me the other day because your support was too much. Truly, I'm not very tall (smile). Your reading and writing is more than enough. Thanks so much for all you do, my friend.

In the Saddle?
With 17 Bullion Banks being forced to fund standstill agreements from their own capital, you ask

-------"Now we see that they are seemingly back in the saddle again". ------

No, they are still on the ground. So too are many other deals that the public cannot see. Truly, the price of paper gold does indicate the structure it's built on. The dealers are now largely working a vacant market against themselves. I said all along that the marketplace could go way up or (as Another pointed out recently) way down in violent swings from paper plays. We will see $360 or $400 and perhaps $200 in between. It's all meaningless because the bullion that must eventually be used to fund the contracts is largely gone. They didn't offer new airstrip improvements in K land because gold was flowing so freely.
We are entering a completely new era in pricing gold, but first the old system must die. The XAU is evidence of this as it has returned all the way back to where this rally started. Strong equity values in the gold industry require a stable marketplace to price their product. The wisdom of sharp investors in the XAU is seeing a storm in the making. They will discount the business value of the mines as a result. Even the unhedged mines are sliding. Look at silver, it didn't even retain a small bit of this advance. Indeed, silver always tries to coat tail gold, but it can't ride this new beast today. Physical gold is the only way to retain wealth as this process proceeds. If long leverage
traders are lucky (and I hope they are) some event will break the system while it's on the next default spike. I did not think supplies would last for the small bullion trader, yet they still are available without a large premium? I would not count on that lasting much longer.
Anyone that isn't buying real gold and holding it until after this market fails, will be mentally whipped to death. It's that simple.
The ECB have cut the dollar gold marketplace off short. That did not mean they would jump in the middle of it and buy all of the LBMA paper gold so traders could be made whole! Why, pray tell would they do that? No, they will let the system cycle between "selling down paper and the
false price it represents" and "burning up each others capital with each new, more costly default"! Higher highs and lower lows, all occurring in an ever expanding crisis. Even watching as these market creators hold certain price levels as option expire to their advantage. That's how a paper contract market loses it's credibility until it completely fails. I suspect that reserve gold flows
between CB will be stopped as this gets more volatile.

Soon enough, we will look again at that chart I posted showing the dow, the dollar and gold. Soon enough, it too will begin to register the strains on the system. I think someone here posted that the dollar would rise with gold as Another (and I) once stated. No, those opportune days are
long gone, now. At best, the dollar will try to keep up with the Euro, but I doubt it.
So PH, what does one do when prices run wild? There is a whole theatre of players out there that will try to tame this beast. Let's watch the entertainment for a while.

We are on the road,,,,,,,,,,,,,,,,FOA

FOA (11/2/99; 4:43:50MDT - Msg ID:18151)
The lending gap that brought grief to gold


The turmoil in the gold market is a classic City row. Nothing is visible on top but the most furious and bitter dispute rages just below the surface. Occasionally it becomes more visible, as when yesterday three European gold producers wrote to the Financial Times demanding a statement from the Bank of England on its attitude to gold and the
gold market. The Bank typically had nothing in detail to say but it nevertheless is just the latest sign that producers of the yellow metal have become seriously fed up with those who prefer simply to deal in it.

It does appear that the degree of speculation in the gold futures markets had reached quite astonishing levels. The dealing report of the London bullion market for September, for example, says: 'The average net daily clearing turnover in London rose by 2% in September to 37.1 million ounces (1154 tonnes), the highest level this year.' In isolation that figure may not mean much, but when you remember that annual new mine production of gold is about 2500 tonnes a year, it means that total production of all the world's mines is sufficient to keep the market supplied for only about two and a half days (yes, days) of trading in the whole year.

Alchemists tried to turn base metal into gold. Modern-day rocket scientists seem to have turned it back into paper, or perhaps just an electronic blip on a screen. But by any measure this is a vast amount of derivatives trading to be supported on such a small physical base.

Perhaps to get more supply, but more likely just to turn a profit, most of the world's gold producers have been bounced by the financial community into selling their gold production forward, many on a quite heroic scale - not just Ashanti, which is now in trouble, but right across the industry.

The counterparties to these deals are financial institutions - some like Chase, which has doubled its position in the gold derivatives market in the past 18 months, some like Goldman Sachs, and some like Long-Term Capital, the hedge fund we were led to believe has been looking for safe
investments since its debacle last year in Russia.

What caused the turmoil in the market, therefore, was not the decision by the central banks a few weeks ago to stop selling gold. Rather it was their decision to stop lending gold that caused the huge rise in price and, of course, has left a large number of those short of the metal with no
mechanism to deliver on their commitments.

It is also increasingly clear that this problem is not going to go away and runs a lot deeper than any of the authorities are prepared to admit in public. These shenanigans have devastated the gold producers. There are also several financial institutions rapidly coming to wish they had never heard of the metal.


What has surprised me in the falling-out between members of the Bank of England's monetary policy committee is not that they should squabble about the use to be made of the Bank's resources but rather the fact that the Bank has well over 100 economists on its payroll for them to fight over.

With all the economists in financial houses, in pressure groups such as the CBI, in City boutiques, in organisations like the National Institute or the Institute for Fiscal Studies, and in the academic world, there is surely quite enough research already into the various aspects of Britain's economy. Particularly given the flakiness of the statistical data and surveys that provide the raw material from which this mountain of opinion is constructed.

Indeed, if the independent members of the MPC read even a tenth of what is routinely produced every month, it would so overwhelm them that they could not possibly harbour thoughts of adding still more bumf to the pile.

The one law of economics that seems to hold good whatever the circumstances is the law of diminishing returns. So if the Bank were to increase its complement of economists, the extra resource should not be expected to lead to a corresponding improvement in the quality of economic thinking. Indeed, one might even argue that if there were fewer economists feeding into the MPC it might make better decisions, and fewer of them.

© Associated Newspapers Ltd., 02 November 1999

FOA (11/2/99; 5:50:52MDT - Msg ID:18153)
Solomon Weaver (11/1/99; 22:21:10MDT - Msg ID:18120)
price of oil (energy) and gold.
------Gold has an immense above ground reserve compared to yearly production (about 60 years at current demand), as well as significant below ground reserves. Oil has little (maybe 6 months at best) above ground reserves. How does this fit your analysis? Poor old Solomon

Hello Solomon Weaver,
I enjoyed your item about the wood stove. (smile) Life is truly an on-going, longterm negotiated affair, no?

Please read all the items in the Usagold HOF, as in there is written your answer. When it comes to our worlds two modern economic reserves, gold and oil, the cost of production does not control their value. Nor do stockpiles have the major influence many traders interpret.

When the time is right, officials regulate the production of these items. The Texas Railroad Commission (TRC) and OPEC for oil and The London Gold Pool and ECB for gold, are examples. We will eventually see the regulation of gold production in the form of output limits and taxing schemes. This will become official policy because the only to truly control oil is by controlling it's real price in gold. A deep subject for another time.
You mention: "Gold has an immense above ground reserve compared to yearly production (about 60 years at current demand)". Tell me, in today's paper gold marketplace, how does one know the true current physical demand? With LBMA trading some 250,000 tonnes a year (yes, it's true. You read it correctly!), if only a bit of that demand became physical due to a breakdown in the marketplace, your 60 years figure is wrong.
Solomon, current wisdom of our gold needs is running far behind the curve. Traders and investors are trying to surf a tiny swell while ignoring the sunammi in the distance.

Give it some thought,,,,,,,,,,,,,,FOA

FOA (11/2/99; 5:52:10MDT - Msg ID:18154)
Aristotle (11/2/99; 2:02:33MDT - Msg ID:18148)
You just get better and better!

Aristotle (11/2/99; 2:02:33MDT - Msg ID:18148)
A semi-rhetorical line of questioning to all
First, the great post by Solomon that inspired my post (I've enjoyed your input to the forum)--
Solomon Weaver (11/1/99; 22:38:07MDT - Msg ID:18122)
While I was doing some stocking up, I had the chance to get a palette of rice...100 x 20 lb, a ton. Total cost, $500. It would have been easier to lose $3000 on a "long contract" in today's market...its all hedging anyway...well the moral of the story is if you want your back to make it through 3 cords of wood, try carrying a ton of rice into the house for training.
Poor old Solomon
The mention of the small cost involved in stocking up on a relatively huge amount of real goods compared with the amount of money someone might spend on gold futures speculation made this an obvious line of questioning. Hopefully, the answer is equally obvious.

If you have a reasonable expectation that rice will be in need at some point in the future, why on Earth would you waste this knowledge AND your financial resources on simple accumulation of physical rice? Wouldn't you be much better served to forego the physical rice purchace, and instead leverage your money through rice futures? You'd surely make a killing from the skyrocketing price when when the rice shortages became manifest.

And wouldn't it be great if you could leverage your efforts on a futures contract for firewood? You'd surely make another killing when everyone else is clamouring for firewood that was never chopped. Clearly, those multitudes must be idiots. There they'll be, paying a premium to obtain these rarest of commodities, when you knew all along that the smart money should get in early on these cheap futures.

And there you'll be, buying a little vinegar and oil to make a nice dressing with which to eat some of your paper profits as a salad, and burning your remaining paper profits for heat.

I would hope that the moral of this story is so obvious that it is unnecessary for me to iterate, but I will anyway, for fear that I've communicated the lesson less clearly than was my hope. MORAL: You may find to your dismay that the cash profits derived on an underlying real asset are a dismal substitute for the real thing. What is true for rice and firewood is true for Gold, too.

Gold. Get you some. ---Aristotle

FOA (11/2/99; 5:54:04MDT - Msg ID:18155)
Hermit Club (11/2/99; 4:32:57MDT - Msg ID:18149)

Hello Hermit Club,
It would be a long post indeed. I ask you to first find a reference book (there are many) that chronicles the great German money inflation. Then observe the recent and current news items about many of our Asian economies that were wrecked from price inflation.
The recent US inflation of the 70s was almost nothing of the scale of the real thing. Just review all that happened then and increase it by a factor of 3+++. Gasoline at $5.00? That is only the first easy level. It's almost that much in Europe now and they are better for it.

Thanks FOA

Note: I'll be away for a number of days.

FOA (11/11/99; 5:14:09MDT - Msg ID:18894)
(No Subject)
I find myself involved in extended dealings that will require more time. Sometimes these things happen? In any event, I hope everyone enjoys the current rebound in gold! As soon as possible, I will read through all of the excellent commentary presented here and offer some of my own.

thanks FOA

FOA (11/25/99; 16:40:30MDT - Msg ID:19698)
More in a few days?
Hello everyone! The best of the holiday season to all.

No, I am not gone for good. This started as time away and has become quite an involvement in the debate over world economics. There seems to be no such thing as a quiet period or place anymore. Have everyone's post's saved and hope to begin reading and making comments next week (if time allows).
Another has indicated he will write again as gold runs through $360 ! / ? I know some readers will take that to mean he will not post again (smile)! Rest assured that this market is only just beginning to demonstrate the realities of our time. Yet, if things continue changing at their current pace, some thinking will come out regardless. I expect we will see and feel Another's posts in a
different light soon.
Great writing, everyone! Thanks FOA

FOA (12/2/99; 18:06:06MDT - Msg ID:20082)
An eye for gold!
After all these days,,, did Another "time" the gold market correctly? No, not for traders he didn't! But, then again, his whole message and proposition was never for a traders mindset or time frame. Indeed, his direction was for simple savers, like you and me. As a conservative group, our
holdings represent the most long lasting, stable assets that presently exist. Such assets collected over a lifetime should not be lost to a world gone mad! Truly, Another's thoughts represent the values held in the old world. For many these are in competition for our hearts against the current facade of economic reality.

We now understand how short-lived the current misconception of money must be. Other fast paced modern investors have accepted that "money was never wealth" and paper currencies need not be real things to represent their savings. Lost on these "educated of the Western world" is the knowledge that "wealth in the form of real things" was the first thing humans traded. It was only later that someone labelled these things as money. As a people we once knew the special value of gold and held it beside our other tradable property. We held this gold more dearly because it made the best form of "tradable" wealth. In this context, it's demand will remain, as always, infinite. It mattered not if one had one ounce or one million ounces, as gold money was/is but a representation of the real tradable wealth you saved over a lifetime of work. How far must modern gold now climb as it is reintroduced to the world as a new "tradable money wealth"? As far as the unlimited
efforts of humanity!

Truly, as gold is once more used as "wealth money", this action will again impart an unlimited value for gold in use. The more we built and created, the greater the gold value must always be in the future. Neither time or new ideas have changed human nature as it seeks to run from the modern uses and valuations of "IOU" wealth. A wealth that was never as great as the dollar said it was. As a system it could never represent a lasting "wealth of nations" as held in the account of "common man". Gold will come pouring in to fill this void.

This coming new level of value for gold is the "proposition" Another presents. A concept that is now being embraced as "something new" for a failing economic system now based upon an over leveraged world reserve currency! Truly, the old ways will not fail those that see through our
modern money fog. Another once put it somewhat this way; Nothing has changed our need for real things as tradable items. And this earth is still round my friends. As I hold my gold for the money it is, traders will work all these markets as they must. With the speed of light they now circle the earth, only to find their future as but one step behind me!

Yes, Another once said that. Differently of course, but an incredible bit of insight it remains. I also accept that most "physical gold" savers will find themselves "many steps" ahead of the "Western trading community" as this plays out. This "long term gold accumulation" proposition was given some time ago, to induce conservative people to begin saving gold "now". At any dollar price, be it $600 or $10! Such direction was given in the face of unprecedented choices from where someone could make fortunes using our modern vehicles. Yet, through it all, the revaluation must
come as gold will return as money to represent all of this wealth many times over. For truly, all modern wealth will be directly or indirectly denominated in gold as our dollar reserve fails. To this end, the physical gold holder will stand "one step in wealth" ahead of every worldly paper trader. Weather they trade paper gold stocks or dow stocks, real estate deeds or CDs, in the end their paper winnings will compete with the spoils of all others of "Western thought". These "non physical owners" will seek to buy what gold they can at a price many will refuse to understand. If one made a million by paper investing, he will buy no more than a million in gold. Still, for every new buyer that wishes to escape the old paper world there will be the lowly physical buyer from the past who will already possess two million in gold.

You see, there is a world of difference between saving real money as a "wealth of ages" and trying to trade this world's "paper derivatives". The lasting wealth of physical gold does not have to be "converted" into real things prior to a currencies destruction. It already represents the new
holding everyone will want. The coming "Western" economic dislocation will devastate all forms of assets that are held in "contract ownership". Be they stocks (most gold stocks included), bonds, businesses or savings accounts, etc.; the loss of a major currency will consume most of the equity
these paper items represent. It has happened with every currency ever created and will happen again with our dollars.

So, the next time you read that someone lost their "bet on gold", remember, they lost because they made the wrong bet. Only a "bet" of "buying physical" over time represents the FOA/A true position.

Another recently said:

"The time? These years be right for ones who save gold. One good ear knows meaning of wind in trees. The leaves come down as seasons change. Fools see falling price of gold as "death of tree", they chase it's price as leaves on the ground. Know you all, it is the season that has died.
Time will prove all things. Ones of simple thought, such as I will save the wood, not the leaf as they buy the gold, not the price! Thank You Another

I will be posting and replying this weekend. Thanks FOA

FOA (12/4/99; 9:50:30MDT - Msg ID:20235)
Hello everyone! This will be one of many posts I hope to offer this day. I'll be in and out, so my response will vary.

I suspect most of you have been in a casino at one or more times in your life. Perhaps a Bains in Monaco or one of the many in Las Vegas. It was years ago in one of these gambling establishments that an old gentleman once gave me an education about people. He invited me to sit down at his
private spot and observe life "on the edge". Here is what I learned. In some ways it can be seen as a parallel to investing in our modern gold market. I adapted it a little for today's thoughts and actions.

You can discover the most about someone's character when they are losing their money. To a lesser extent we can understand their feelings as they are winning. I watched and listened as one player was winning. He gave advice and addressed how his timing was absolutely to the point.

The short term winner:

" " "All right! I just made 50% on that investment and it took only five minutes. I've been doing this all night, so all you "want to be's" gather around and watch how it's done. Before long, I'll clean them out and be rich. If you watchers are smart, you'll catch my "developing record" as it points out that I know what I'm doing. Done this before, some years ago and I'll do it again. All you other players at this table, give up on those losing hands and follow my lead. As you can see this crowd is behind me, so I must know what I'm doing! " " "

My friend pointed out: This guy had indeed beat the house before and made a bundle. Even though the crown around him was growing large, none of them had watched his play last week, or last year, or five to ten years ago. He was cleaned out several times and will never get all his money
back. Just like our modern markets, the tables are rigged against him. He wins just enough to keep his hopes up. We cannot tell his record by watching the crowd. Watch the pit bosses (monsieur in some classy casinos) and the cameras instead, as they are "not" focused on him. The house isn't
worried about this type of player, doesn't care what he says and neither should we.

I watched an listened to a player who was losing. I also saw that the house cameras weren't on him either. He addresses his problems in a covert fashion by looking for flaws in others, even the quiet player next to him.

The "I would be right if everyone else wasn't so wrong" loser:

" " " When this thing turns the money will come rolling in. It's just that right now the cards are wrong, the house is wrong, the waitress is disturbing me. Mostly, it's the way this guy next to me is playing the game, that is throwing me off! No wonder I can't win with someone sitting next to me playing so conservatively. He even expects to make a chunk of money, if he ever bets. And has the
audacity to tell anyone that will listen! Hey, don't you know others are watching you! Your actions are affecting them as much as it is me? None of us can win if you keep playing that way. Look at this, not only are the cards coming up wrong, my gold stocks are going down again. Who do you think you are, sitting at this table with "professional" gamblers? Then there is that guy who keeps saying "I don't care, I'm betting more"! Is everybody watching this? No wonder this isn't working, these kinds of people are dragging us down." " "

My friend pointed out: He must be getting killed! Can't change his strategy because he only wants to play his "paper cards". Typical gambler; he wants to prove to everyone that they can win using the "house deck"! People like this keep the modern system going. If you think he is bad now, wait till the others start winning as his hand keeps folding. I've seen this before and it's best to move to a different table before his end comes.

Then there was the simple quiet one at the end of the table. He had not made anything, but his phones were tapped, mail monitored and weird people followed him at night. Six monsieurs stood watch on him as he played and the cameras were well focused on his game. Even though he talked
funny, a few people understood what this guy was about. His actions could bring down the house, even all of Monte Carlo! Clearly, something was very wrong with this picture. I walked to the table and talked. I was seen then as the only publicly known observer that knew of him.

" " " FOA: Sir, I see that your people keep bring in "golden chips" and stacking them on the table. For years, you just sit here and watched this pile grow. Still, you have yet to place a bet.

Another: My friend, I only bet when my play will win.

FOA: Sir, how can you win if you don't play the "paper cards" like everyone else?

Another: I do not intend to play the "rigged paper game of fools". I will bet but once.

FOA: Sir, Excuse me, but you have to play if you are going to win, no?

Another: I will bet only once and that will be enough.

FOA: But sir, how will you know when to bet?

Another: When the stakes are so large the house cannot afford to accept my wager. You see, I will play "my game" in "their house". In that day, in that time they will be the ones that fold. It be for the benefit of this new marketplace.

FOA: But how can you win if this house fails.

Another: Presently, this gaming house plays with their chips and their cards. Not real are these. This action has imparted the false value on the world money many use. The closing of this marketplace will impart a new value on my holdings and the holdings of all that know what is real.
The game I play is the game "ALL" win! It is "the good bet", yes?" " "

FOA: I get your drift, my friend. Let's stay in touch as I want to follow how the politics of this plays out.

Another: We watch this new gold market together, Yes?

FOA: Yes!" " "

My friend in the booth pointed out when I returned: Did you notice how he didn't get excited or mad as the value of his chips went up and down. That's because he is not betting yet. Everyone that hasn't taken the time to talk to him thinks he's nuts for building that chip pile. They think he is losing his shirt while waiting to bet. Still they are being taken to the cleaners as the "house politics" keeps
changing the card game right under their nose's. Don't think for one minute that this guy works alone. There is a huge amount riding on how this plays out. The rise and fall of nations are being bet on that very table. What a game of human interaction this is. All the other players at the table don't know that this old, little man controls whether they even have a card house to play in.Hope you enjoyed my view from this seat, FOA? "Yes I did. Hope to return in five or ten years, say 1999 or 2000, and visit again.

later FOA

FOA (12/04/99; 14:44:17MDT - Msg ID:20256)
Bonedaddy (12/04/99; 13:07:01MDT - Msg ID:20249)
FOA, If I may....ask of you.... a few philosophical questions?
What gift is it, that allows us to see our mistakes clearly in retrospect, while we remaincompletely blind to them as we walk the path to distruction? Blind to the point of becoming angry, if someone dares question our present direction? Could it be that there are certain unalienable truths? Certain rules that guarantee consequences if broken? Is wisdom truly born from pain? If you are indeed wrong in your prognostications. I will not begrudge you for your error. I see that your frame of reference is not that of these present halycon days.

Hello Bonedaddy,

Halycon? Indeed, these times will seem as such.

-- Alky-one, the daughter of Aeolus (god of the wind) was sick over learning that her husband had been killed in a shipwreck. She threw herself into the ocean and was changed into a kingfisher! The Greeks figured that she built a nest on the sea, every year around the solstice. So, for a time
every year the seas were still"--

No, bonedaddy, the tranquil, halycon times we now experience will not last. Modern gold bugs search for financial refuge during these smooth times and find themselves in a tempest not of their making. They chase only the price of gold and find the ships they choose to sail upon being sunk on calm seas. In their anxiety about the future, they listen to the siren song of leverage. They board the very vessels that offer the least in stability. As Another points out, Westerners buy the price, not the

They see the trail we discuss and follow only half the map. Then, when the "price" of gold fails, they visit their bitter venom upon us. Not because we were wrong, but because they want to follow their old charts.

But, how does one talk to a group, yet address only a concept of simple spirit? Buy the gold and forget the price. The present marketplace for gold does not establish it's value, only it's dollar exchange rate.

We are "on the road". The process has begun. Many once solid BB's are in trouble from this first strike. The Europeans have withdrawn and left the marketplace to drown in a flurry of "paper gold IOUs"! Eventually, the larger scope of this political game will assert itself. That being the dragging down of the dollar from it's "reserve currency" perch. But, before that must come the end of our present price making system for gold. This destruction may show itself in many faces. Here is where the "old gold bugs" cannot quite grasp it.

One of the "unalienable truths" that you speak of is that one cannot own what he does not possess. The entire dollar/debt economy is built on the exact opposite of this concept. That being, "if you hold it in contract form, you possess it's "physical equivalent". This can be extrapolated to include US stocks, treasury debt and even dollars themselves. The American Experience says that one only need to hold the "right to buy something" for such to be counted as real wealth.

This wholesale acceptance of "fraudulent wealth" has lead an entire generation of "Western workers" into saving nothing and thinking it's something! Once any tiny part of this concept is broken, it will call into question the validity of the entire "paper asset" world. Break the gold market pricing system and you will break the dollar. Break the dollar and the complete dollar based business system is market to the market. A marking that brings currency pricing in line with "on the minute supply" of real things. Not the price of things I can get in six months. The resulting dollar inflation will wreck the ability of most businesses to function at a profit. The gold business included!

This is why our present dollar based gold market does not and will not accommodate gold investors outside the physical market. The Washington Agreement has unleashed a paper flurry of gold IOUs, all running from account to account. Running just ahead of the accountants before these
contracts are market to the market. The next "equity killing" gold run will soon destroy another batch of BB traders before the paper price plunges again. A vicious cycle that will continue with wider and wider swings. $100, $500 then $1,000 swings until the LBMA stops all fixings. All the while these moves will drain the equity premium from every mine stock until only the fully unheadged retain any value at all.

If you think our poster's comments were rough on me, wait until others start getting hit "Hard"! These people hate what we have to say because it destroys their investing world and therefore there professional record. As my friend said in my last post, ""Can't change his strategy because he
only wants to play his "paper cards". Typical gambler; he wants to prove to everyone that they can win using the "house deck"!"" I add that it's a deck rigged against most "gold industry" investors. Another said this long ago and he "WAS NOT WRONG". This entire industry and marketplace is
going to fail!

Bonedaddy, I offer a truth that most don't want to see publicly written. Not because of their concern for other's accounts, rather because it opens too many eyes! When all your money is on the wrong horse, you don't want to hear someone talking about how it's going to die. We shall see.

Thanks FOA

FOA (12/04/99; 16:31:54MDT - Msg ID:20263)
Leigh (12/04/99; 15:34:26MDT - Msg ID:20261)
Question for FOA

Hello Leigh,
You know,,,,,,,, I have thought for some time that the whole issue of gold confiscation keeps being dragged out to serve special interest. It always comes across with background overtones of: "Americans don't need physical gold, so why bother with the worry". Usually the paper pushing brokerage industry and miming industry enjoy using this angle so as to sell their product.

Like this: " " "it's the foreigners that need the real gold anyway, so let's use their problems as they drive the market higher. That will benefit our paper gold holdings and we gain without thinking about government law changes" " "

See where I'm coming from? Truly, the last time the US called in gold, it was because they needed it to square "official bookkeeping" and create new banking reserves. This happened because we were on a "fixed gold price standard". Had we not been on this, they could have just raised the gold price to $100 without calling any in from the public. It would have achieved the same reserve effect. Honestly, foreign governments did not credit the dollar as worth more because the US robbed gold from someone to pay it's debts?

Then we have the precedent of 1971? Now why on earth would we now take gold from our citizens when we just denied delivering it against the dollar? Because, you say the new price today will be so much higher. Well, they could have marked their gold to $1,000 in 1971 and still not delivered it against dollars. It would have created the same reserve increase the IMF is doing today.

You see, the whole song and dance is about dollar supremacy. If in the near future the dollar reserve function is degraded, the US will have no reason to grab gold from anyone. Hell, they could mark what they already have, market to market. Say $8,000??? Those that run the US political
machine will be under the same gun as you and me. Just like a failing Russia, the leaders will be getting their hands on all the gold they can buy and shooting down all laws against
private ownership. Let's face it, they won't be able to ship it overseas (foreign exchange controls) so you can bet they will want a good free dealer market for physical: "right here in the go old USA for the benefit of the voting citizens ".

Leigh, the big Western money is going to run for physical as this unfolds and they will be paying up for it with inflated dollars. At prices none of us will understand.

My take on it,,,,,,,,,,,thanks FOA

FOA (12/04/99; 17:18:48MDT - Msg ID:20265)
TownCrier (12/3/99; 22:45:13MDT - Msg ID:20205)
Town Crier: Your following note is right on:
"""these discussions should focus on sleuthing out the various intrigues of gold rather than the identities or moral character of other posters."""

I want to thank every person that has come out in support for "civil conversation". Thoughts can never be discussed in an atmosphere of disparagement and personal attacks. Human nature has always set us on the road to warfare without rules of conduct. My only open attack came in self defence after a departed poster accused me of "fraud" several times. Presently the Stranger displayed all the signs of using degrading remarks when intellect was in short supply. It's the old "I'll shout him down until he shut's up". This has surfaced several times. It will return again when least expected. Maybe it will be sent in someone else's direction and hurt their efforts equally?

We all post here at the expense of time and energy and no one wants to have "volunteer" work destroyed. Rules build a civil world and allow the thousands of lurkers at this site a good experience. I say, let him post through someone else or from under another computer site. Mine and Another's thoughts are free, simple and clean for each to interpret as they will. I have no need to remain and debate a rude person who makes commits at my expense. Especially on this stage.

Thanks FOA

FOA (12/04/99; 18:02:12MDT - Msg ID:20271)
lamprey_65 (12/04/99; 17:11:13MDT - Msg ID:20264)
Gold Marked to Market

Hello Lamprey and welcome,

The latest discussion I have received?

This IMF action was political money warfare at it's finest. The US faction fought for all they were worth to reverse this. It's a major blow! Even though the US dollar group still control the marketplace price for gold, they cannot stop the official revaluation of national holdings. Now that the IMF deal was forced through, these national holdings are free to be raised without "marketplace price settlement"! That is the key from which the ECB/BIS can spring gold higher in increments. It's also the reason the "Washington Agreement" seemingly came out of nowhere so as
to free European gold away from the English marketplace.

If you have followed this discussion here, you know how sensitive the books of the LBMA are to a rising gold price. Now the IMF deal has opened the door to a world with two prices of gold. In time, as reserve requirements demand higher than market prices, the ECB will begin to do their
quarterly gold revaluation using official gold prices instead of the fictional "dollar paper price".

Between now and then, paper lease rates, comex open interest and paper gold prices will be all over the map. The paper price could run to $500 next week and sink back. Or run and keep running. This is the undercurrent that has the BBs in hot water. There are some serious issues of "who's side are we going to go with" being discussed right now. If gold is forced up, it will bring the oil producers to settle in Euros so as to benefit their contracts. These contracts are dead without the Euro group. I believe this is the enticement that a Euro at par is offering. A clean transition before the fact. We shall see.

Who would have ever thought a small ME country's 79 tonnes were so important to the survival of the LBMA? Yes, they got a good return of military commitments for their lending gold, but that 79 tonne was nothing compared to the contract loss if the markets failed before they fully integrated with Europe.
Indeed, we shall see!

FOA (12/04/99; 20:23:19MDT - Msg ID:20279)
lamprey_65 (12/04/99; 18:35:54MDT - Msg ID:20274)

That W. Buffet is something else, isn't he! No one has ever played modern paper market investing as well. I think (I THINK!) he even converted he silver holdings into lending contracts. Perhaps that was his intent from the beginning. Because his holding strategy is so public, buying hard silver cheap and then lending it for "who knows what" return looked good for his profile. With the market in a squeeze after his "news break" he could have got 20% to lend it??? Again, that's just like his kind of deal.

All in all,,,,,one day, Berkshire will buy some gold to hedge their massive portfolio against international investment barriers (if they haven't brought it already). Not even they can ignore this as a risk from a market meltdown. You can bet that when that time comes, this gold will not be lent.

Every day that goes by, the Dow Stock market looks more and more like the old Japan bubble. Only they didn't have a world reserve currency to worry about. When the US bubble blows, every asset holder outside the Euro zone will be running for cover. It's not going to be nice.

On the subject of physical metal; not all Asians run from gold stocks. Some of the major investment families over there own claims as private companies. Only they market the gold to themselves as they see the bullion itself as the value, not the possible earnings of the company. Big
difference from our concept, no?

Thanks for talking FOA

FOA (12/04/99; 21:34:03MDT - Msg ID:20282)
Lafisrap (12/04/99; 18:51:51MDT - Msg ID:20275)
Do you have any ideas as to what is going on in the LBMA? ----------------------
So, if that is the case, who is doing all this trading? And why? I may be missing a lot of important information, much of it may even be obvious, but I see no other explanation than that the LBMA is a dollar/gold laundering machine. ------------------------------

Hello Lafisrap,
"a dollar/gold laundering machine",,,,,Ha Ha! Good lord, I think you have it! No, seriously they do move a lot of gold. Only most people have the wrong concept of what moving gold is all about. On the retail side they mostly set up a lot of the "big" trades of gold from the mines to the
fabrication industry. They also move any physical needed to cover the industry deficit. And a lot of investment physical is shipped all over the world. Still, all of this is but a drop in the oil barrel compared to what they trade.

Practically all the fully paid for investment physical is traded without movement. Just the ownership is transferred. For what it's worth, even this small amount dwarfs the new bullion coin sales world-wide. To me this demonstrates why fresh (new) coin market sales cannot move the physical price. It does make an excellent indicator of private physical purchase intentions. Usually if coin sales are up, most likely large physical bullion is in demand also. But, coin fabrication is small compared to bullion.

Earlier this year, old bullion supply dried up and it looked like the last of the private "old stocks of gold" had finally run out. Then the price shock from the Washington Agreement flushed out some more. I've written on this before (and ORO told it better than I), but the more the old holders sell out in return for holding "unallocated gold accounts" the worse the shortage will be when the
marketplace fails. Slowly, over many years, the people that now hold the real bullion that was sold to create a lot of paper gold, have literally locked up the ownership. The old liquid gold market we used to know in years past functioned because of all the private physical holders that traded it.
Now, it's all paper being shuffled around.

This gets back to your LBMA item. The old, deep private bullion pool has been replaced with a paper commitment pool. In the past, if someone defaulted, we just grabbed their bullion. Today, if they default, they just default! Again, if that big African mine does tell them to take a hike, the
whole modern gold market could just collapse. This is why I smile when I hear someone question why the big funds and traders don't just take delivery against OTC paper. The question is just exactly what are they going to take delivery of?
All the gold movement is just for show. Same for comex. Sock a little gold in there and complete a few deliveries so it all looks right. It's all the same game we played with the dollar before 1971. Only when everyone asked for delivery did we find out that the world was awash in paper gold,,,,,I mean dollars! It's going to happen again, real soon.

-------------I have read that there is a world drug trade that is extremely large and traces back to the British East Indies Company, and this world-wide drug trade still flourishes, using much gold that must be laundered into dollars. ------

------Also, what is "market to market"? I am guessing you mean "marked to market". That means to price something at the price the market will pay, correct? ------------

As for drug money in gold? Shoot, I bet more illegal trade of everything is done in US dollars than gold. From what the Government tells us about the new copy machines now-a-days, they don't need to break into banks any more! They just print the stuff?? What a mess!
Sorry, Market to Market is a slang. You are correct.


FOA (12/04/99; 22:20:32MDT - Msg ID:20285)
Peter Asher (12/04/99; 21:44:15MDT - Msg ID:20283)
FOA, Buffet
Any flaw in this script?

Hello Peter,
That could be right. There are several angles floating around. Your thought would make the best play for silver longs. Don't forget, I own a little silver,,,none of you would talk to me if I didn't (smile).
Anyway, tightening screws is not the Buffet profile. My take is that he brought long before $7.00. The price run started because committed traders knew his announcement was a threat to their hedged plays. You know, deltas all out of whack. The price worked it's way back down after he leased high (10%, 15%, 20%???) as commercials pulled their emergency long trades.
In reality, the silver he locked down was already in use, so to speak. It was held as a function of inventory. So, all he did was lock a claim on the inventory metal, then contract it's ownership back for a fixed time. All the while receiving ransom money. It fit's perfectly because that's the same play he uses to grab preferred stock of companies. If the collateral goes up in value, that's good. But, his
aim is a higher return than "market" and be first in line in ownership.
He would do the same thing using Iron if the rates were right.

Thanks Peter, I have to go. FOA

FOA (12/5/99; 10:22:02MDT - Msg ID:20311)
canamami (12/04/99; 22:46:25MDT - Msg ID:20286)
1. In Don Coxe's weekly conference call, reference was made to some agreement or proposalwhereby "two zeros" will be dropped off the Japanese currency. This forms part of the "parity" notion - that one US dollar will equal one Euro will equal one yen.

Hello canamami,
Ok, fair enough, I'll take this a little at a time.
In this context we back out the flows of equity investment motives and look only at currency derivatives as official treasury debt held in lieu of cash. US debt is held in foreign countries by two classes. Some of it is private (mutual funds, citizens and companies doing dollar based business) and government (official Central Bank). Usually, the private holdings are done because someone has an idea (right or wrong) about the direction of their local currency values and interest rates (yen, Marks, Euros). Just like you and I, they may want to diversify their assets. "In times past", for every foreign buyer of US cash, their was a local (US) citizen that for the same reasons, wanted to diversify outside of the US. So they kind of balanced this flow and this action did not impact balance of trade accounts. Again, we are talking about cash flows for the sake of owning savings, not any form of equity flows.

In the private sector, it was always the business trade that built up excess dollars as they sold more "goods" to the US for dollars than the US businesses sold to them. Using Japan, the net effect of all their private companies selling into the US created a huge negative balance of trade account. For many years now, if these countries walked into the foreign exchange markets and sold these excess dollars for Yen, it would have drove the yen way up. If done early and before a large position builds up, this is the "natural way" a true fair currency exchange market should work. If the US continues to buy more from Japan than it sells, the currency markets react until the goods being traded are evenly priced.

This action would protect the workers of both countries from being exploited, even though their productive efforts are equal. Contrary to the "business community propaganda" a worker in Japan does not tighten a bolt better or faster than one in the US. Take all the technology innovations and
pour it into a big pot along with natural human nature and add some cultural differences. Boil it down and we find that through the world over everyone works the same for the same incentives. Of course the business community always leaves out a "true" incentive / compensation package when comparing national productive effectiveness. Trust me, I've been everywhere and seen it all. You would not work as "effectively" and as productively in, say India, if you received the same pay they do. No, by far and wide, the real national industry productivity measurements are all
skewered from "engineered" exchange rates between nations.

So, back to our currency rates. No person or nation ever extended it's wealth by selling two TVs in exchange for one TV. The US knows that the road to national wealth is not in a strong currency by itself, rather it's through operating in a manipulated currency market! If your workers can tighten one bolt in exchange for foreigners tightening two or three bolts, your wealth, standard of living and voting citizens are better off.

Under the old dollar / gold standard, no foreign government wanted to see it's people tightening 3 or 4 bolts in trade for every one the US worker did. Perhaps a ratio of one turn for two could work for a while until their economies grew. But no one wanted to get locked into doing this forever, as this modern dollar standard has forced then to do.

It worked better back then as they traded two turns of the nut for one US turn and they retained a little gold wealth in the form of US dollars. Are you still with me? This is important to grasp.

------- A foreign nation traded real wealth for real wealth, even though gold was part of the wealth equation. No, I'm sure it wasn't equal, but it was close. In return, the US gave up some sovereign power over it's gold hoard by allowing gold claims,,,,dollars,,,,to be held overseas. In return they still increased their living standard by getting more value than they sold, even though some of it was
in gold trade.---------

All of this started the "new era" of a negative US balance of trade deficit. No ORO, it didn't show up on the official money flows because the US did send the dollars out. BUT!!!,,, they didn't record the trade on the negative side as the """gold loan"""" it really was! Yes, we shipped some bullion out, but more often than not, nations were content to leave the gold in the US where it was to back the dollars held overseas. The proof that this occurred comes in the fact that by 1971, the dollars outnumbered the US gold five to one.

So, as we can see, nations starting holding dollars and US treasury debt because it represented a wealth for wealth exchange. Nations, Japan included, were content to have their Central banks enter the currency exchange markets and buy up the excess dollars their businesses created when
they sold more to the US than they brought. In that time they did not think they were exploiting their workers into making two turns on the bolt for one US turn, because they were trading most of the additional "twists" for the wealth of gold.

By 1971 the "dirty float" of currency exchange markets was normal practice until the US closed the gold backing for the dollar. Suddenly, all the dollars that were purchased overseas to adjunct the exchange rates were now worthless! The only recourse for governments to regain real wealth
for all the additional "nut turns" was to use the dollars to buy local American goods. One problem though, all the dollars were collected while the gold standard impacted exchange rates! Now, with only a pure dirty float for an exchange market, any reverse selling of the dollar into the US would drop that currencies value. So, the good purchased from the US would only represent a tiny return of the wealth value these dollars were originally traded for.

It is here that the story begins to change and the world heads for a new alignment. Everyone in the world was impacted by this move. From oil producers to auto makers in Japan. Everyone lost, big. If gold had become so worthless, as most US politicians proclaimed, why didn't they just
revalue what they had left to, say $2,000 and call in what dollars were out there? They didn't because in that scenario they would have drained the dollar as a reserve unit and killed the notion of dollar supremacy. Gold would have regained it's exact value as money to the world prior to
currency / exchange / standards. Perhaps $3,000 or $4,000 and ounce (back then) and the US would have run some real inflation.

The world Central Bankers (and oil producers) took a real hit when this all happened and it won't be allowed again. They have supported the fiat dollar standard and even helped "pump it up". All in an effort to keep business rolling until a new currency could be created. One based on
several economic national arenas, no dollar reserves and a world market price for gold. As opposed to the present IOU paper dollar gold system. Even though the Euro is born, this package is not complete, but it's getting there!

Truly, You have to have been around the turn a few times to understand that no one (and I mean NO one) is wanting a larger piece of the old dollar pie. The notion of currency parity for the purpose of trading up debt reserves is something being floated by the Washington think crew!

Are these nations trying to pay up for past US military action? Oh boy, not a chance. Why don't we pay Italy for all the good the Roman legions did for everyone!! No one is worried that the US will back away from protecting it's interest after it's bankrupt. Whether it's oil or national security, they will act as best as able. See ORO's post about this, it's real good. Besides, look at Russia. No
money, no nothing but still out there firing away!

Also: The present paper gold market depends on new hikers entering the gold trail towards it's end. They buy paper gold as some kind of stock market / investment hedge without knowing the big picture. In the past their actions would have worked their purpose. But, not in this transition. A
currency exchange storm is going to sink a lot of these paper boats and kill the very assets many wanted to protect. Buy the gold not the price!

Thanks FOA

FOA (12/5/99; 17:33:42MDT - Msg ID:20346)
Hipplebeck (12/5/99; 6:24:30MDT - Msg ID:20292)
oil and gold
My opinion is that there is far more oil money being spent on weapons than there is on gold. After all, what good is having a bunch of gold if you cannot defend yourself from someone taking it away from you.

Hello Hipplebeck,
Armies take more than just gold. Every physical thing is in contention. Perhaps they can't afford anything else, either? What about all the paper dollars or bank dollar accounts? With the threat of ending your life most will withdraw that too and offer it up! So, let's not keep any money.
Do you see where this line of reasoning is going?
Truly, people buy gold as an asset that stands right along with all their other things. Buying weapons never stopped anyone from buying assets.


FOA (12/5/99; 17:38:01MDT - Msg ID:20347)
canamami (12/5/99; 11:54:47MDT - Msg ID:20321)
Reply to FOA - post# 20311
Thank you for your detailed reply. Would the manipulation not have been prior to August 1971, when the US printed dollars alegedly backed by gold, but which weren't backed by gold. Once the bluff was called in August 1971, what manipulation occurred after that date? The rest of the world
could have just "eaten" their loss, just as creditors always do when a debtor goes bankrupt, and accepted no more US dollars as settlement. That didn't happen. The question being: Why not?, and why should it be different now?----------------

The world did begin to walk from the dollar! It plunged and remained on a downtrend for several years! The US knew their option was to raise gold prices prior to 71 (just as I offered in the last post). But oil was the major problem link! Every oil person in the US knew we were running out of local reserves at the old "gold backed" dollar price. All the Middle East had to do was wait us out as they were happy to out produce and supply us in exchange for "real dollar
backed gold". You see, oil was and is the real driver of all economic production.

We could have raised the dollar price of gold to settle our accounts but that would not have raised the local oil price enough to make deep reserves available. Yes the dollar would have depreciated somewhat and foreign oil would have went up, but not enough. The need for more local reserves and the higher dollar prices that could make them available is what drove the 71 gold closure. They had us and we had them.

Without another functioning reserve currency system in place, our modern world would have shut down to a level of pure physical commodity trade. Perhaps worse than the 1929 era. With every other country about to stop trade for dollars, it was the Oil group that literally saved the
current system by backing our now fiat dollar with oil. This "black gold backing" took the form of accepting settlement of all world oil trade in dollars. And boy, did the world ever send them dollars! No body was going to walk from dollar trade as long as they had to buy their oil with it. It was that simple.

Don't think for a minute that people weren't running for gold then, either. Had the US, BIS and IMF not sold some gold into the demand the dollar exchange rate for bullion would have hit $3,000 or $4,000, easy! And that was back then, not now. Even then the gold rise was a controlled burn
to show people that they couldn't escape from all these dollars into gold. It would gun the price through the roof long before the exchange was complete. Why not just write the dollar holdings off, you ask? Hell most of the average trading partners didn't hold much gold! That was what holding the dollar was for. They would have completely wrecked their entire local economic / money system if they did walk.

As long as gold could remain in some form of ratio to oil )for conversion purposes), the dollar settlement was assured. At least until another reserve system could come along. It took the US 50 years to establish a reserve currency, so if it took the "Old World" ten years that was not long to hold gold at static dollar prices. Well, it took longer but so what? In the scope of things the transition to free market gold and Euros was the only choice. Hence the 20 year time lag that gold has gone nowhere. Yet, gold was being acquired through out this time. And it will be repriced in proportion to that time span.

A bunch of years ago, when the Euro looked to be late (very late), the drive to free up private gold holdings started. Yes, gold was being recycled by oil, just as the dollars were recycled. But, there was a physical limit to how much could be moved. For the last several years, it's been imperative to keep the price of gold down or it would kill the system. The US / IMF faction did all they could to help. But, understand this,,,,,,they never expected the Euro to work and fully well expected oil to run back into the dollar when it failed to be born! My god, when the Euro was
formed in the first few weeks, we almost had people talking about shredding documents and leaving town,,,,the game is over!

Do you remember the old Hunt brothers saying about an ounce of silver was worth a barrel of oil? Well I have news for you, it was rumoured long before that that a gram of gold was worth a barrel of oil. Forget the price of gold! Forget the price of oil! If a barrel of oil flows one way gold (or contract equivalent) must move the opposite until some ratio is reached. (oro understood this and posted it). They never flow in the same direction. When gold flow is disrupted, as in the mid and late 70s, oil prices rise! When gold is liquid, oil prices fall. From the beginning of this year, after the Euro was born, gold flow has slowed and oil is up. Another was telling me over and over that gold was being cut off then. Yet, we read gold expert after gold expert, telling us that the CBs were selling it all.

Next, the Washington Agreement was announced and these same people are on the wire telling everyone the CBs are lying,,,,, "They are still going to sell it all"! I can't wait till the ECB starts buying official gold from others using dollars! With this job off the BIS back sense the Euro was born, it's been in the ECBs court to support gold under $280. They didn't this summer (we took a lot of heat because they let it fall to $250), because they were putting together the Agreement for press, I guess. When the next official move starts, I suspect the gold experts will be saying,,,,,,,"they are only buying it to sell it" Ha Ha!! Oh well.

Truly, the Washington Agreement is "the" confirmation that the currency war is in progress. The LBMA has been left "hung out to dry" as they scramble to gather any and all gold political favours can muster. We can expect a flurry of paper gold, sold into every taker until something else breaks and then the rush up. After that, another truck load of paper. All the while the market credibility slowly wanes. Forcing physical gold trade and oil settlement into Europe. Without a functioning "dollar / paper gold marketplace, gold will gravitate to the oil price until "gram parity" is reached. I expect that long before we reach parity, physical gold trading will outprice the paper market. Confirmation of the "visible" gold bull market, that everyone needs so badly, will appear when London closes for good.

For all "Bullion Boys",,,,,,, Bullion Men,,,,,, for us old guys, (and ladies) (my wife included);;; we are on the road!
For all paper traders, good luck timing the motives, needs and thoughts of Political power brokers. (smile)
I have said enough for a while,,,,,,thanks for all your time and thought energy,,,,,,,,FOA

FOA (12/6/99; 5:29:23MDT - Msg ID:20396)
The Dutch sale is right in line with the 2,000 limit in the Washington Agreement. In fact, it's very possible they may not reach that limit if the Swiss sale is constrained by their public. It's important to remember that in the past Dutch sales, the buyers were never known! This sale could be the return of the 79 tonne into Kuwait, replacing that deal and others that were forced by the LBMA?

Or, more likely we will see the books of the ECB slowly expand over the five year period as whatever amount of the 2,000 comes up for sale. Because we are under $280 now don't expect the ECB to be buying LBMA paper to bolster their paper credibility. Expect them to take in "real gold" on the official market. We will know over the next weeks and months, especially if the sale essentially becomes a "transfer" off the open market.

Now you know why being "on the road to high priced gold" will not be the fun easy ride to riches. These swings in the paper market prices are nothing compared to what is coming! Like I said in my last post; forget trying to time buying paper gold derivatives or gold stocks, you'll get killed in the political motives, feelings and forced plays! Buy physical for the eventual outcome. By the gold, not the price.

ORO, thanks for the post, I'll work on it later. If things don't get too out of hand!


FOA (12/6/99; 17:43:49MDT - Msg ID:20435)
Thanks for all of your good coverage. Earlier today I noted that this Dutch gold sale could end up being no more than a " "transfer" off the open market". Your Msg ID:20414 is telling the world this same story. This is an exciting "block buster" item as it is the first "official" move by Euroland after the WA (Washington Agreement) that confirms their direction. By having the BIS move this gold they are avoiding giving LBMA and it's paper market any more credibility. In fact, one may see this as starving them. I think this gold will end up in the ECB or be held there for the account of Kuwait.
This falls back to the heart of my post (one of many) on the Sat.4th. The stronghold of the Dollar / IMF faction is being broken by establishing gold's value through "official channels". If they gravitate from using derivatives to establish price, the ECB / BIS will eventually create a two value market. The IMF revaluation of gold without selling it is the groundbreaking for this.
In the past (70s), we had an official price much lower than the so called free market price. Confirmation to the gold bugs that we are in a new era, will be when the ECB official price is higher that the "discounted" (read that failing) London fix! Of course we are not there yet, but, politically we have been moving in this direction from the first of the year.

I'm making a long post for ORO now, so will be back later.

Thanks TC, good work! FOA

FOA (12/6/99; 19:46:00MDT - Msg ID:20446)
ORO (12/5/99; 21:42:51MDT - Msg ID:20366)
FOA - Questions & a bit more
FOA - All of this started the "new era" of a negative US balance of trade deficit. No ORO, it didn't show up on the official money flows because the US did send the dollars out. BUT!!!,,, they didn't record the trade on the negative side as the """gold loan"""" it really was!

I understand this. I understand that the gold obligations were not listed on the debit side of the US books. Specifically avoided was any entry of gold loans or anything containing references to it. Indeed the job of maintaining dollar - gold relationships has been a G7 and Oil country effort, and the bulk of it occurred in London with the participation of US creditors aiming to get something, for
the nothing (i.e. dollars) the US so happily issued them in payment. From the days of the London Gold Pool, to the spot markets of the 69-74 period, to the hybrid paper markets from then to 1980, and the mostly paper markets of the early 80s, and now the wholly paper markets ruling since.
To make one point about CB behaviour, the modern CB is accustomed to controlling the economy through the dictation of short term interest rates. A number of CBs work in concert to attempt getting the right balance. If a currency is to be weak, the interest rates are lowered, using the higher interest rate at the country, who's currency was to strengthen, to produce capital flows from the weakening to the strengthening one. Gold has been manoeuvred in this way as well. Low interest rates have caused a carry trade in gold without the CB doing significant lending. The CB offers
guarantees of liquidity - a promise to put its gold at risk, not directly putting the gold in harm's way. The issuance of calls, particularly currency settled ones in which the CB is not limited as to quantity, serves as a proxy for lending. But in this "foolproof" plan there is a snag, the abundance of currency settled gold calls issued can endanger the currency by creating a currency pump - a Buffet style
convertible bond with no floor for conversion - that can pump unlimited currency into the market in a death spiral. The Fed is repeatedly rumoured, now by more specific people, to have manipulated gold in "emergency situations" using either currency or gold settled gold calls.

FOA, do you know if the Fed is indeed issuing these calls, if so, do you have any idea of how much? Order of magnitude? ---------------------------

ORO, you are making nice orderly posts. They are slowly putting the whole act on stage for everyone to understand! Good stuff!

To your question: To the best of my knowledge, they are not! I'm 95% certain none of the independent (or dependent) fed branches are using their desk's to create (write) gold calls! ORO, the fact of the matter is that there are big people out there that would risk billions in loses, just to
grab a bunch of these and call for the contracts! They would do it, not as goldbugs, but just to expose an action such as this.
No, it's the BBs that carry the political load on this venue. They write whatever amount of contracts they want, mostly on the OTC. They can do it because just as the fed has the franchise to print money, the BBs can print gold. As long as the price is moved where needed, official CBs stayed
out of their marketplace. The private / public demand usage of derivatives (paper) gold could never move the price against them. It's that simple.
Actually, the risk has been building against the BBs for three or four years as the buildup to Euro launch was giving off warning signs. London, LBMA and IMF/US have owned the gold market from the get go. And they ramped up the drive for lower gold to benefit the dollar and dollar/oil settlement deals. Everyone, including Europe was pulling for the same outcome until someone saw the risk that the Euro was aligned with the Old World BIS. You see, only the BIS could destroy the present gold game because they represented the ability to price and move physical gold independently of london. Literally, off market (today's dutch deal??). It's in their charter.

Most of the time, they go with the flow, but today, they are aligned with the principals of the WA. Guess which oil producer is a big member of the BIS? When Big Trader (Chinese Central Bank) wants to be closer to the Euro, guess where the BIS opens an office? Get the picture? We are walking a different trail today.

Your other items:--------However, there are still these questions from my studies: How large is the Eurodollar market? (I have a current accounts based estimate of 21-24 $trillions in loans outstanding) -----------
ORO, it could be twice that big? This is another tanker of gasoline to throw on the fire. Most American gold bugs are waiting for some event to drive their people into gold. Yet, when it comes to moving physical gold, a run from the Eurodollar alone could take every thing offered at a huge
price. I absolutely know that modern gold analyst are lost as to how leveraged the world's physical gold is. It's mind boggling!

----------Does gold play any part in supporting the Eurodollar markets? I have seen the proportions of goods traded for dollars rise tremendously, as the productivity of the emerging market nations has risen but the number of dollars received for their production has not risen in proportion. The $ debt machine has been run by Europe and Japan to shift the cost of maintaining the US onto Emerging Market economies. Whereas the purchasing power of the dollar
in the Emerging Markets rose tremendously, the major foreign currencies - those of Europe and Japan, have enjoyed a 90% higher increase in their purchasing power vs. the Emerging Markets -relative to that of the dollar. This allows both Europe and Japan to increase their import volumes even more than the US, without even showing the slightest disadvantage in the balance of payments. I believe that this is the reason that Europe and Japan maintained the value of the dollar as long as they have. Now that the Emerging markets have buckled under this debt and are in the process of repayment, and the carry trades are breaking apart, there is no way to obtain any advantage out of it.

FOA, was this an intended occurrence, or was the crisis just one expected by the BIS? I seem to have found some indications that it was intentional.---------------

I think it was intended and driven in the direction that would eventually benefit the Euro. For one, China and most of Asia were taking so much gold that it threatened the pre Euro drive to hold gold down. The flow of physical became unstoppable. Stories that some large traders were calling
contracts and shipping through Hong Kong. Acting as pipeline for the China CB.
The dishording of private Western gold in lieu of derivatives was barely keeping a lid on this demand. All of a sudden, sweeping changes were made for collateral requirements through out the region. Business with the western world (and Europe) now required more reserves. It was hard to see this in the confusion of currency devaluation's and bank loses, but the overtones were present. It was if someone knew that one gentle nudge would kill two birds with one stone.
The IMF was known to be politically inadequate in dealing with the different cultural valuations of assets in this arena. Sure enough, they blew up everything they touched and turned what was a dollar debt power keg into a mushroom cloud. Today, the Euro salesmen are all over the place. Oh, and as a side note, gold demand was killed just long enough for the Euro to come onstream.

------However, The mechanism, like the Gold mechanism is a carry trade, an interest rate driven engine that forces itself to stall, i.e. Long $/short Yen trades have gotten so out of hand, that the slightest rise in Japanese interest rates would crash the system. A similar situation is close to being reached in the $/Euro trades.

FOA, was this the intent of the interest rate manoeuvres of the last few years on the part of both Japan and the EU?-----------

It was the BIS that rammed home the new capital requirements that they knew Japan's system could not live with. And Japan has been on a down fall ever sense. Any country that has 0% interest and a strong currency is a nation where assets are failing to pay their return. Cash becomes the most valuable item because local contract law requires Yen for settlement. Everyone looks at these people and comments on how rich they are. Yet, they are rich, not in Yen, but in non-functioning assets. The Yen is going even higher because of this and that will further kill their
economy. Kill the "rising sun" and you remove one of the largest supporters of the dollar!

True, Euroland is somewhat a closed system like Japan, but they have everything they need. Oil is their only weak link and I think you know what that story is. I don't know about the Euro carry trade yet. Too young of a market still.

ORO Something is in the works, got to go. More tomorrow. Thanks FOA

Finally, a rush of questions to you; how inclusive is the BIS group? Overtures were made to China,
Malaysia (included for a fact), and many other Asian nations. Is India included or being pursued?
South American countries are being wooed by both the US and the Euro faction. Do you see the
mangy US offer of major participation in seigniorage being preferred to the Euro side's "fair money"
offer? Are the BIS group members succeeding in recruiting South American participants?

A few more charts: trade Deficit1.gif

FOA (12/07/99; 19:34:40MDT - Msg ID:20527)

A day hike off the main trail:

When I read the posts of Farfel, to me they represent the honest feelings of many gold bugs. Many of whom are caught up in a trading environment that is not playing out to match it's past format. But why did so many investors fully expect it to "play it again, sam"? It starts in the mind.

I think much of the frustration comes from accepting the "Western view" of gold values, in that "it can't rise in price that much"! Everywhere we turn conservative people consider the return of price inflation, oil shocks, economic slowdown and money security as evidence of needs to "hedge
their bets". Yet, of the many who use gold as this hedge, probably 99% hold the view that gold will only rise into the $500 to $600+ range, at best. This acceptance of such a mediocre performance is what drives the gold leverage game! Hell, if I thought that all of my assets were to be protected by something that only runs up 100% in an environment of wealth disorder, I wouldn't buy it either.

Again, through out all the endless discussion about gold's prospects, we always hear this same finite price position expressed. That being: " " "During an inflation of the dollar we can expect gold to move into it's safety value range of $600+/-. This price represents it's true commodity / money hedge demand fundamentals as detailed in industry research reports. Of course it could go into the $2,000 range but that would be the end of life on earth as we know it" " " There it is again. The whole hearted promotion of a limited rise. Anything higher and you are in the hard-core camp that sees world war.

This "play it again, sam" scenario is wholly supported by not only the "official anti gold" government groups, it's also pushed by the mining industry in general, to sell their stock product. I submit that this conditions investors to stay out of "gold bullion" and into leveraged forms of "paper gold". After all, if I can "time" my entry into futures, options or gold stocks, why hedge my wealth with something that can't move over %80 or so? In other words, "buy the price, not the gold" or expressed better "invest in the price move and you won't need gold". Indeed, all we are doing anyway, is trying to match dollar loses on our other wealth with dollar gains on these hedges.

Here, inside this mindset we can clearly see this magnificent evolution of "Western perception". Once a people that held great distrust of anything that wasn't real wealth, they now equate personal economic safety to anything that keeps their bookkeeping entries in balance. This is the modern feelings of life within the dollar world. Life on the inside looking out.


Ever have a neighbour that brought goods from someone in a truck, at night, on a side road? They purchased tools, TVs, stereos, anything that seemed good for them. Of course, when asked they noted that the guy selling the stuff seemed OK and he assured them he got it "wholesale" Later, this same neighbour shows up at the town hall meetings and goes on and on about all the stealing that's occurring in their fair city. (((I'm sure all of you get my drift)))

And here we have the investor that goes on and on about the unlawful writing of "paper gold" by the BBs and brokerage houses. He say's, "These guys are stealing from us by writing obviously "unbacked gold paper! They offer options, futures and all sorts of derivatives! It's got to stop!" Then, in broad daylight, in front of everyone, he runs to the truck in the alley and buys some of those "obviously illegal unbacked gold calls and futures". He even buy's into the mining companies that use these same "paper promoters". Turning a blind eye to the reality of his actions.

You see, in this context gold bugs support and nourish the very industry that is dragging them down. The modern marketplace that sets the price for gold, exists because "Western Investors" seek bookkeeping hedges, not physical wealth hedges. They not only support the false price
discovery of this gold marketplace, they are the reason it exists. Further, it exists because they believe real gold will not work for their purpose of hedging.

As distillers produced alcohol "against the law" to supply a demand during the American prohibition, so too do the "paper gold brokers" give the investing public what they want. It's that simple.


It's true that the physical gold market is dwarfed by the paper gold market. Yet, the physical market is so thin in relation to total assets outstanding, even a small shift into it play's havoc with the supply and the price. Still, paper contracts, using fractional banking methods can be created to meet any demand. The key to changing the negative dynamic created from paper gold, is for investors to move from investing in all forms of paper gold and the mining industry that utilizes it the most. Encourage companies to challenge tradition and circumvent the bullion banking world by marketing their product directly into fabricators and end users. Instead of promoting their shares, educate investors as to the real valuations possible for gold using a true physical hedge marketplace. In addition, encourage investors to invest mostly in gold first, then gold stocks. Undertaken together, all of these moves would break the present "dollar lock" on gold employed by this same faction.

Unfortunately, the educated understanding of this current generation will not change without major loses incurred to their paper gold portfolios. With the ECB /BIS having all but guaranteed a "quick to the point" wholesale destruction of the dollar gold price making market. Investor
education and evolution will tread far behind the fact. Until that time comes we will continue to follow the play as bewildered "paper gold" followers bemoan these days because
"Sam, won't play it again"

Thanks for reading FOA

Bill, your post is in the works.

FOA (12/07/99; 20:24:19MDT - Msg ID:20535)
Bill (12/7/99; 0:04:55MDT - Msg ID:20460)
Question to FOA and/or ANYONE ELSE

----------------Hannibals have managed to press the POG down to nearly what it was before the announcement. By now, anyone in his right mind has to know the POG is manipulated. The natural price pressure would seem to be up. -----------

Bill, the problem begins because you (and most everyone else) associate the price pressures on the supply and demand of physical with price pressures on the supply and demand of (comex) futures. For discussion we will leave out all the other paper gold items.
Today, we look to the last contract traded to tell us what the price of gold is sold for. Even though the demand / supply for physical may indicate "up", the demand / supply of comex paper can be altered to force the last trade "down". Truly, if most of the players don't take delivery, and I have an unlimited fractional reserve bank account, I can print contract supply well over demand. As this natural demand / supply function works it's magic, the price falls until discouraged longs fall away.
So, the natural price we refer to must be clearly understood.

------The ability to force the POG down much further doesn't seem likely. -----------

It all depends on how much cash reserves I have to create long or short contract positions. I, as a market mover am in control as long as the other market for physical can be satisfied with metal at the paper gold settlement price. Too date, this is something the system has been able to do in spite of the supply deficit.

---------Any call options that were sold before Sep could be bought back now cheaper. If you were part of this manipulation. Would you not now liquidate your upside risk and reverse your position???? (now collecting profits on the way up). ------------------

Bill, the question here is our perception of risk. For the past many years, I (as the manipulator) have contained all risk thru price direction. I don't liquidate because the other side does not want gold, they only want to hedge against price. As long as I direct price through my paper supply, you hold the risk and must fold first. I don't reverse position because I hold this franchise as long as I
can direct prices in a "political direction". To date that has been down.

-------Unless the huge short positions have already been covered and from the constant manipulation, that doesn't seem likely. It would seem that a huge short covering rally could be gained as players don't want to be caught in the same position as Oct.------

Yes, the game has changed from the Washington Agreement. But, this short position constitutes the paper marketplace as we know it. As long as it remains, the gold market does "price discovery" through the paper auction method. Cover the position through offsetting cash (or gold) settlements
and the entire marketplace is destroyed from equety reserve loses to the members. Then we revert back to a physical only arena. In other words. No body is going to cover anything because it's like shooting yourself. Therefore, this system will have to be destroyed from a competing physical arena
that conflicts in price settlement. In other words, physical priced higher than futures. Get my drift?

Thanks FOA

Be back tomorrow.

FOA (12/8/99; 16:06:40MDT - Msg ID:20601)
beesting (12/8/99; 1:03:24MDT - Msg ID:20563)
REALIZATION-The Birth of the new physical Gold market.

Hello beesting,
I think you are getting your thoughts in order. This may not be the only story, but it will become the one that's most important to gold investors. There are a lot of players that are pulling in this direction and would like to see it begun before our economic cycle is brought to a close. We can all be a successful part of this "before the fact" if gold bugs buy gold and wait it out.
I hope to reference this more in future posts.

Thanks FOA

FOA (12/8/99; 16:07:59MDT - Msg ID:20602)
Aristotle (12/8/99; 3:58:13MDT - Msg ID:20565)
Thoughts on the issue of TIMING IS EVERYTHING

Very nice post! Good food for the brain. I always leave your table with a load of calories
(smile). FOA

FOA (12/8/99; 16:10:18MDT - Msg ID:20603)
Cavan Man (12/08/99; 06:16:41MDT - Msg ID:20570)
London Times: Thatcher Blasts Euro Army
Lady Thatcher says a standing EU armed force could threaten NATO and could create a Euro superstate. Isn't that "the road ahead"? FOA, better give LT a "heads up". She's OK by me.

Hello Cavan Man,
Yes, that is most likely the road they will go. I think the Lady will have a better "feeling" about this when (if for MK?) England becomes part of this "super state". Then she will be printing her opinion about the "rouge US military machine".
Contrary to most analysis, I think the US does more good in the world of "war stuff" than bad. But, we can never anticipate how a superpower will "evolve" as economic conditions tear apart a political infrastructure. For our present context, the US is on a timeline that's winding down as Euroland is ramping up. So, the US may evolve negatively as Europe evolves into the good guys. This is a hard thing to consider for anyone that is "true blue USA" from the get go (like me!). But, generations come and go and the world changes. We shall see.


FOA (12/8/99; 18:36:48MDT - Msg ID:20607)

Returning from our side walk in #20527, I have a few more things to add.

As I offer it; anyone investing outside of physical gold, isn't in the gold market. They are simply playing derivatives of gold that create bookkeeping dollar value if the price is going in their favour. Whether gold stocks or Bullion Bank forward loan paper, Options or Futures, if your financial position in life isn't strong enough to convert these values into real bullion, the house deck is rigged against you because you cannot play a physical card.

Lost to ones paper position, you can never make the substantial value gains that will be inherent if a sole physical marketplace takes over. True, there are some major
political players that will have their contracts honoured at all costs, but "you are not them"!

This is the "reality" of today's modern gold market. A reality that is proven in the mind of the investor, not in the "bemoaning cries" of fallen "paper gold bugs".
Like in Another's Thoughts:
"In this world, truth, dreams and reality take on different meanings to different people depending on where
they stand on the mountain".

As time matures, we will witness louder denouncements of this gold market as it works it's will on the bookkeeping of these past and present "paper gold bugs". For them, they expect "their reality experience" to be as an example and the same for "bullion buyers". Yet, it's obvious how their loses do not equate or compare to bullion. They "extrapolate" that if one cannot invest in the "paper gold market" without it's manipulation, he should not invest in "any gold market". All for the proposition that "if paper manipulation" cannot benefit them, physical gold cannot benefit you. Further, if the price of gold in derivatives form is discounted into oblivion, there can be no physical market. Nor can the price of physical gold rise as their favourite investment medium falls.

I submit, that their reality and ours are different. We will hear the testimony of many more players as they offer proof that the "gold market" is "washed up". Many will read these and fully understand that it's "their market" that is "washing out", not the real gold market. So, trade the paper game for the "shot in the dark" today's marketplace demonstrates it is. But buy gold first and most for the future!

Onward, back to the main trail:

I know many stock market investors that understand what is happening with a keen feel for "true reality". Even though these people are not in any main stream majority, they are conservative and possess very, very long term track records.

As an example (he's not Another), one gentleman that is 80++, has had 2/3rds of his substantial wealth in the largest US Mutual Funds for over "" 25 years"" !!! And he has never sold!
He speaks to me with an impressive, clear perception of what is going on. Confident that 75% of the valuation of the US stock market is related to nothing more than dollar inflation. He feels that this phenomenon has happened in other countries during other times. The difference was that their money inflation's also created price inflation because their currency did not hold the World reserve status. (Used the old German inflation as one example). This usage of the stock market as an inflation hedge has served him well and did not influence his perception of economic "reality". Not
accepting the current argument that the markets represent a "new found era of US global economic strength", he still expects the equities to run further with this dollar inflation. Yet, believing that this trend will end with a tragic, sudden collapse, his success has not clouded his perception of what is real and what will show value "after the fall".

Three years ago, he began buying large amounts of gold on a monthly basis and does so into this day. Completely unconcerned that gold is not responding to our current dollar inflation,,,,,, "his reality" is:

---that long before dollar inflation creates a price inflation that drives stock investors into other "inflation hedge securities" such as Real Estate (REITs), Oil stocks or Metals Stocks,,,,,,, the pyramid that is our financial system will fail. Forcing a return to gold, not as a Central Bank reserve, but as a international currency. And this action is expected well within his lifetime!

He may be right or wrong, but here is one of many persons that understands what the "real gold market" is and why it is reacting to a different "reality" in the world today. And by the way, he knows nothing about "oil for gold" and doesn't care! Needless to say, I didn't go further.

Hope some of you found this interesting,,,,,,,,,,,,,,thanks FOA

FOA (12/09/99; 05:05:18MDT - Msg ID:20625)
ORO (12/09/99; 00:38:13MDT - Msg ID:20619)
FOA - Iron Lady and EU arms - Questions of the LBMA

GOOD discussion! I'll be back much later with my thinking and some of Another's (if he is around). The whole question of the very power and existence of the London gold market is whether they can function using a realigned price? I doubt it. In the same way a newer software
package makes the old "unneeded"? Be back late,, FOA

FOA (12/10/99; 7:50:49MDT - Msg ID:20685)
ORO (12/09/99; 00:38:13MDT - Msg ID:20619)
FOA - Iron Lady and EU arms - Questions of the LBMA
FOA, I believe that the EU countries will find it difficult to cooperate, which is always a plus when attempting to minimize war driven monetary inflation. But as a defence system, the independent EU military may be a positive in a way not possible before. Namely, to supply the world with a military force that only operates by wide consensus and is sensitive to issues of sovereignty, as opposed to the current US/UK system that tends to act in the interest of odd humanitarian concepts and for the furtherance of the misunderstood and misapplied concepts. The world is suffering today from the tyranny of the US humanitarian conscience. Being blurry in focus and misguided by self delusions of its own propagandists (particularly of Ted Turner and bride Fonda) they may well level a country that has done no one any harm. With the example of Yugoslavia behind us, I am certain that the whole of the sovereignty minded world will obtain the needed "weapons of mass destruction" to protect against the US delusions of sainthood. I would not be surprised to find Latin American buyers in Russian, Chinese, Paki, South African, and other
military shows - perhaps in Europe too - looking for the very weapons they are prohibited from obtaining by the non-proliferation treaties.

FOA, do you think that this is the trend before us? How do you view the outcome?
ORO, It's late but here goes,
It's easy to be hard on the US as we watch the results of their "mostly good intentions". No one can control the outcome of major campaigns to correct human atrocities. The process takes on the form of "management in progress". It's either "let them all kill each other and everyone close to the fire" or try to "manage a better outcome". At the very least, a "situation" degenerates into just as bad an affair as if we never entered it. But, still it's more controlled! I know, hard cold thoughts indeed, until we "walk a mile in their shoes". Truly, anyone that tries to, at best "control" the blatant effects of human hostilities assumes the position of being blamed for the whole mess. It takes broad
shoulders to carry that load and the US still stagers under the weight. It's a tough job handled by tough minded individuals who's harshness few could accept.

Will Euroland do a better job? I doubt it. Looking through world history we find these times offer a disrespect for order that's on a different scale from before. The present process we are seeing is about "as good as it gets". So, what do we do, take the next plane from mother earth?
No, we all learn to manage our affairs in the context of the world political evolution.

I don't expect Europe to dominate in this regards. Like Japan, they are constricted by their history and will tend to underweight the need to react. Just as I pointed out before, national power blocks tend to work well in the worlds eyes during the initial build-up phase of their rise in economic status. In this regards, Euroland has the best of everything before them for the rest of most persons investment timelines. Conversely, it's time to leave the dollar based assets before they are discounted from the political degeneration that must follow.
You write:
You indicate that the UK has understood that its economic future is with the EU and the BIS organization, and has been dragged kicking and screaming (however muffled these screams may be) into the fold. The Iron Lady seems to have been left out of the loop, and I would venture a guess as to the Torries' being in the dark as well, all but the few in key leadership ("king making") positions.

FOA, how much of a done deal is the inclusion of the UK into the EU? The LBMA, would it be "saved" if it were willing, under the BOE leadership, to play along with the EU plan?

Trust me (smile), she is in the loop. It is a weak political figure, indeed, that allows their people to see them quietly go along in a major change. In full public view one must "show the sword" first, then "over time" we hear: " " "Well, because they put it that way it sounds more practical. Had I fully understood the positive side of this earlier we could have found positive ground. You should
have been more open with me in the past so we all could have come together sooner." " " Get my drift?

The UK is no different that many other countries that have completely tied themselves into the dollar. Just like Canada, they are drained from the process and have much less to offer. The EMU for the UK is a done deal, if for no other reason that they will sink until they join. The big plus for
them is their past and present ties to Europe makes it all feel confortable, like an old chair you have used before. The only question is raised in the minds of the people. It's really a perception problem because they still think they have some major national economy an a sovereignty to go with it. In reality, the UK will have more political force and a more powerful economic platform within the EMU. Just as our California is a "state of mind", so is the present UK.

The LBMA is going nowhere. It's quickly becoming a distinct eyesore on the world bullion trade. Now that the dam has been broken to revalueing gold off the current market, their political use by the IMF/dollar faction is waning. Every day that goes by, the need to keep gold down is disappearing. In fact, any transition from the the current IMF / SDR articles will negate it's use in present format. They even changed the name. As the world works it's way away from dollar reserves (China?) and dollar commerce, the need for liquidity to cover the old IOUs (IMF and
others) will be all consuming. It's all really very simple if viewed in the right context. If denominated in the true price of gold reserves, the dollar had bankrupted itself long ago. It's only more bankrupted now as it's only a bookkeeping problem. In other words, where do we allow gold to level out in dollar terms $3,000, $8,000, $10,000 etc.? Understand, that new equity is not being created here, only marking current world dollar holdings to market. As the dollar comes off the reserve standard, they have no use at present exchange rates and will flood the US until "foreign
exchange controls are in place". The resulting US inflation will make those foreign gold reserve prices look "about right".

Note: ORO, it's the political exchange controls that will block your contention that the US will become a major "low priced" exporter. Your process would be good and a natural one except it would result in the "pooring of America" (at least politically). The US became wealthier by importing things and paying for them with an exchange rate that is "out of whack". A crushed currency enslaves a nation to work hard for less in return. History shows that every national block resists this "downfall" through money flow controls. It doesn't work, but it's the political choice.

So, Where is the LBMA in all of this? Over their heads and far too committed with supporting this present pricing system for gold. It's a system who's time has come and gone. Of course they will fight to preserve it, because without it the reverse leverage of a rising paper gold price will take
everything they have. Does anyone in their right mind think they will just stand up and say; "OK, we cannot supply physical to cover all this gold debt, so we will just fold!"? No, As time goes by the physical gold market will rise as it discounts their paper. It's a real process because you will always have gamblers that hate to lose the this "old leverage play". They will buy future gold right down to $10 to the ounce on the idea that something may save the program and perhaps, just perhaps somebody will supply $50 in gold against the paper. You, know the old junk bonds bet.

As the physical price rises well past the paper price, every miner and user in the world will be trying to get out of their commitments. Even Barrick now admits (finally) that above $600 they have to start supplying margin. After all this time of telling everyone that they could defer their contracts for 10 or 15 years. This goes back to my post about "Westerners" not thinking that gold will rise.
Because investors thought it was impossible for it to go above $600, to consider that long term goldlenders would not ask for margin al was nuts. If gold hit $5,000 does a lender just depend on ABX's good word?? It shows the beautiful evolution of "Western investment thought".

Again, LBMA will not be in a position to advise anyone as this plays out. Truly, this relic of London's past will be put on a shelf.

Another question: The level of awareness of the bullion banks as to their vulnerability to a "bank run" is obviously high, the question is whether they are aware of the closeness of the end of the line.
(1) Do they understand that the EU is no longer aligned with the US in protecting the dollar?
(2) Are they aware of the gold revaluation concept for backing the Euro?
(3) Do they understand the situation which they are in regarding the consequences of the Arab Oil being pulled away from its role of supporting the dollar?
(4) Are they aware that the Oil Royal's gold will be both pulled out from further cycling through the lending schemes and revalued by the direct trade of oil for gold without 100% transit through the dollar?

ORO, Even a person "blind in one eye" can see a mountain. Of course they see the risk! But, if you are the last man on the front and the war is lost, you will fire your last round. Don't forget, there are a lot of major miners and fabricators that could not operate without them. They would literally go down with the ship if this doesn't change. The whole industry is built into this present gold pricing
structure. Yes, the gold in the ground stays, but their whole equity structure is obliterated with this shift. The forcing of the paper price, the price they all sell to, will clean out their bookkeeping because they cannot sell into the price of officially revalued CB gold reserves. Yet, that will become the new physical price structure. Sure, they will mine again, just not on your present equity. And the
good mines that are trying to wiggle free will face enormous structural tax and national royalty changes.

Finally, do the bankers that run the bullion banking business understand that the days of the dollar are numbered? That the dollar has no intrinsic value, and that it can't obtain value from being a medium of exchange? That the quality of the cash dollar is undergoing a substantial and fundamental change from that of being, in effect, an oil receipt backed by gold exchange (at a controlled exchange rate approximating redeem ability) in the LBMA, to that of being nothing in particular at all
finally trading as fully floating currency as it had before 1980?---------------

Again, of course they do! We must grasp human nature, we manage our business and then we manage our "personal affairs". Two different perceptions, right? You run your business in the current political climate as you invest
your wealth for the future political climate. We have to see the fact that the gold markets have been used for the past 20+ years in preparation for the next 20+ years. Their real transition only began a few years ago. The road to $30,??? / gold begins with the dismantling of the past dollar / gold
exchange rate mechanism and everyone that trades it. For these last few years you can't see it in the price because it's in the flow. What you see and feel right now is what being on the road is all about. A period of transition.

It arrives in the cries of investors clinging to what they thought was gold, only to find it wasn't. Owning physical during this transition may not show a wealth increase until the old paper markets really start to dissolve (or then again it may?). The people who think they are going to just ride paper and transition over after they realize their leveraged profits, don't have a clue. When the
discounting begins (for real), the paper markets will close and bullion will disappear. Even the physical dealers will stop for a while. You can guess where trading will start again, in the $?,??? range.

Is the gold redeem ability point lost on the LBMA members as it was lost on most actors in the financial markets? Is the "de facto" dollar redeem ability (into paper gold) - through exchange at the LBMA - a true representation of the system till the advent of the Euro?

I'll work on this later,,,,,,thanks ORO, hope all this makes the click go off.

USAGOLD: Good UK post. Will add that to the "to do list".


FOA (12/10/99; 18:23:05MDT - Msg ID:20712)
USAGOLD (12/09/99; 13:23:11MDT - Msg ID:20641)

Hello again Michael,
That was some good post. I received a lesson on Mountain Economics and learned of the driving force in Mid America. I agree with you in that Euroland will grow as a defence machine is produced. It seems that self defence is an ages old component of daily life and commerce. Yet, the
process of building it is always more employable than using the products for their intended purpose.
Yes, Margaret Thatcher understands the outcome and is positioning her thoughts for the entertaining discussion that will come. We will have to watch this closely because it isn't often one gets to watch a nation "talk themselves into doing something" that helps all their citizens.
We also have to correlate into the equation that; if building a defence in Europe is economically good, then dismantling NATO will further slow this part of US GDP. If it's good for the goose, it's bad for the duck!
England knows that if they go with Europe, their political reason for defending the dollar will be gone. No reason to hold dollar reserves; no reason to support a paper gold marketplace; indeed, no reason to trade with the US. Except to sell us their beef (smile). Yes, as the UK slides into the Euro fold, others will take note and follow. America will be forced to withdraw inside itself and
increasingly share the world with the world. None of this would be so bad if only the dollar was not so dependent upon others "holding it for reserves" as opposed to "using it to buy US goods.

Thanks USAGOLD,,,,,,,,,,,,,FOA

Note; I reread my earlier post and am sorry if it was not well put together. Am very involved right now. Will reply to others later tomorrow.

FOA (12/11/99; 16:21:18MDT - Msg ID:20767)
PH in LA (12/09/99; 08:21:12MDT - Msg ID:20632)
As Time Runs Out

Today Bill Murphy writes: "Some in our gold crowd talk of settlements of physical gold. The Frank Veneroso's of the world believe the big guys are SO SHORT gold they cannot get out. That is the reason for this continued manipulation. The gold loans are over 10,000 tonnes now. The shorts are trapped. Thus the gold loans are not loans because they cannot give back the asset. Ted Butler (I Accuse) is right. The loans are a fraud. THERE CAN BE NO SETTLEMENT - what BANK makes loans on something that cannot be paid back?"

If I read your thoughts correctly, the evolution of this situation has been as the intentional laying of groundwork in preparation for the new reserve currency status of the Euro as it takes over from the dollar. If the bove -mentioned 10,000+ tonnes is truly "unrepayable" and the ultimate solution (after the collapse of the current dollar-based settlement system) is intended to be the establishment of a Euro-based gold trading mechanism with final settlement being allowed in Euros to establish it as a
viable reserve currency, would it not be fair to say that the new trading/market system in Euros must be openly established soon to provide for a (quasi-?)orderly transition as this all unravels? With the public accusations now being launched at Congress by GATA, isn't time running out even faster for the Euro organizers? It seems unlikely that they would have anticipated such a developement to be coming from within the United States in this way.

What a story!


Good Day PH! I'll build on your observations.

It has been quite a process and is becoming more open as time goes by. Even now, regular gold bugs that are high profile traders are coming around to the implications of all of this. The public is learning about all of this well before the fact. Something Another wanted to happen. GATA is doing a great service without the legal actions. If they wanted some real support they should jump on to the direction this is going and advocate a new physical marketplace. Having opened some Western investor eyes, this direction would impact the thinking of the mining industry. Before it's too late.

Still, a large segment of the Western mindset has been trained that gold should be in the $500/$600 range because fabrication demand says so. They give no thought what - so - ever about what gold would be trading at if it were supplying the demand of a pure physical market. A market that must satisfy the void created when the dealers that trade 30 million ounces of paper gold a day, have lost so much equity that they cannot quote a paper price any longer. Add to that the further demand equation of world investors "holding real gold" as a "background currency"! An action that will mimic the ESCBs in their new style of using gold as one of two currencies to settle real accounts. The IMF has already begun new action of accepting gold as a real account payment and now the Dutch follow this trend.

Under these circumstances, most modern investors cannot see the leverage that holding just one ounce of pure gold implies. Yes, everyone accepts the point that a huge domestic dollar inflation would justify a super gold price. But reject the fact that a coming currency crisis could trigger this as a sudden event. They wait for a "typical" price inflation, like in the 70s, to point the way, but it
never comes. However, present the facts that the dollar has already been inflated more than enough to bring such a high gold price prior to big price inflation and they do not believe it.

On top of this already in place dollar inflation, the Washington talk is all about the Fed's current "largest expansion of dollar liquidity" ""ever""! Within this environment, create a situation that cuts off all foreign dollar holders from domestic US gold and watch the fireworks. They must chase the Euro physical markets with dollars that can't go home and are no longer needed for savings reserves.

To build further: Again, the present circumstances do not require a real high domestic inflation rate to drive gold to extremes. Once the dollar begins it's retreat from being used as official "reserve holdings" overseas, the US treasury must shield the local economy from this coming price inflation by erecting a whole wall of controls. In other words, "if you don't want to play with our currency,
we'll show you"! Import limits on goods and currency, duel exchange rates for dollars, etc., all put in place before the fact of a major price inflation. We are talking about 5% inflation on the way to 30%+. The realm of super gold before the super inflation can justify it.

Yes, this will create shortages ( and the usual big mess), but it will also hold the goods price line to just a panic level (using the same precedent of cooking the current CPI books?). During these times, the price of foreign "official gold" will be traded on and off the books at sky high levels. The LBMA will be in a crisis and physical gold will be in the many thousands. Local gold will move at even higher levels. Again, all taking place with only 5% to 12% inflation. This is a text book example of a process that has always followed when a currency is devalued, internationally. Only, this time it's a reserve currency not just being removed from settlement use, it's being replaced as a reserve holding.

MK noted that the ECB needs to get the Euro "in use" for it to gain acceptance. Yet, the stage is being set for a virtual "run" from international dollar trade settlement. OIL, GOLD, minerals, food, you name it, it's just as ORO is following; "refinance all debt and trade into EURO accounts while the dollar is strong and liquid". Once the tide turns, the need to pay off trade financing in this different currency creates a spectacular demand, even if one does no business with Euroland.

Why do it? If one owes dollar debt that's subject to nation to nation trade outside the US, it's better to transition into Euro payments because "eurodollar" (dollars outside the US) price inflation will play havoc with your business. Opposite, if one holds dollar notes the resulting dumping of unneeded CB dollars from the ECB, China, etc. will also kill your return. In other words, no one wants to trade in a currency that is about to see it's float mushroom from a fixed holding into a liquid holding on world markets.

What of all the gold contracts being settled in Euros? You bet! And the DRAW here, is that the ECB marks it's gold market to market with the process, later, extending to using "official" gold deals as the market price, not the paper LBMA. When push comes to shove, they will settle
Euroland gold notes at the official gold price, "in EUROS"! They can do this because their currency holds exchange reserves in gold that adds value as gold rises. The extra Euros printed to supply this demand will only fill the dollar void and be represented with gold reserves. When the dollar "paper" price starts it's "final" dive into the pits by discounting it's present credibility, it will drag every
contract holder with it. This risk is real and will fuel the drive that demands a new Euroland physical marketplace.

Until such a market is created, miners will continue to settle their production at the dollar / IMF market price. They have to because the Bullion Banks of the LBMA and their affiliates, handle almost all mine finances. To this day they direct most miners marketing practices in the interest of "collateral security". Besides, no one is going to be selling gold into the private BIS system until they are ready to accept it. Even as the "Official" prices begin to gravitate above the paper price. Most likely a local US dealer physical market will appear that also sells "hard to find" "on the spot" physical at the higher than paper price. All of this fuelling the rush into physical and away from the risk of paper. Even mine paper.

Hope this adds a little to your perception and shows what we should watch for in the news.

Thanks PH and everyone, I enjoy this quiet time to understand your thoughts as you understand

FOA (12/11/99; 20:53:10MDT - Msg ID:20779)
Joey (12/10/99; 10:08:48MDT - Msg ID:20693)
FOA: Re Physical vs Paper Gold

1) To my mind, the two prices can only explicitly diverge (setting aside forward pricing considerations of course) when some of the writers of paper contracts actually default on calls to deliver and that fact is recognized by the broader market. I add the latter qualification because both
Ashanti and more particularly Cambior in effect did default but the fallout was absorbed by the financial institutions most closely involved and so a public default was at least postponed.


Hello Joey,
Ashanti and Cambior did not fail to deliver gold, they failed to deliver margin. A big difference. Prices for contractual instruments can diverge greatly from the items they represent. Even when a bond is defaulted on (it fails to pay interest or return the principal) it continues to trade at a discount to the physical (currency in this case) it represents. I submit, that when a gold loan is actually
defaulted on, it can and is often sold into the secondary market at a discount. There is always a "gambler" ready to buy anything discounted in the hope it will pay off.

Comex gold is discounted in price, everyday as players speculate weather gold "could be delivered" at the "current physical price" settled at days end. To date, these futures have mostly shown a "premium discount" because no one has defaulted "in size". Some see the "premium" of future months as somewhat of a "contango" that represents the current interest and lending rates. Yet, in reality, the pure recognition of this is that it is a "premium discount" that compares to present returns on other instruments.

Most likely, Comex would not allow the discount to go "negative" from a lack of physical delivery because the leverage is so great against their members. A cash settlement on close would lock all contracts into accepting whatever discount to physical existed at that time. In a true disorder, it could be in the hundreds, or more!


2) Once a public default does occur, then to my mind one of two things would happen. Either, as you say, the markets would in effect shut down for a period, probably with official "encouragement" (ref pt. 4 below) and when trading resumed, gold's nominal price would be a great deal higher.
Meantime, presumably, black-market trading around the world would have worked its price discovery magic.


Joey, I a true international default, "price discovery magic" is usually created from extremely thin volumes. In paper markets, high prices bring supply. In commodities markets, high prices cause dishording. In a currency crisis of biblical proportions, gold is held "at all costs" for things dear. History shows this as fact.
Yes, trading will resume in gold. But it will be for physical only for some time.


3) Alternately, if the initial defaults were peripheral as opposed to occurring at the clearing level of COMEX or the LBMA, the markets might continue to function while attempting to discount the risk of further defaults. Paper contracts would then trade at some discount to the physical gold price, the degree of which would be determined by the quality of the individual issuer. Given the extravagant degree to which this de facto fractional reserve system has extended credit and fiduciary media, I rather suspect any such interim period of paper discounting would be brief and
ultimately unsustainable.


Sir, the present leverage inherent in our gold market will render any peripheral default as lethal. Even though many fractional reserve dollars will be made available to settle claims, even these dollars will be discounted against physical gold. The markets know better than you and I that "par" is an even trade when perception is lost.


4) When the gold liquidity crisis finally does occur -- and I confess to being surprised at the continuing survival of the current farce -- my best guess is that the mechanics for dealing with it will be that most paper contracts (such as those on COMEX and the LBMA) will end up being mandatory settled (in cash) at a price or range of prices determined after much intrigue and high drama. If you like, a sort of industry wide and officially managed force majeur.


I agree! Many gold traders will be depositing "force majeur" into their bank accounts. These loses will drive the run into physical all that much more.


5) From that point on, any future paper contracts -- or any which have survived the carnage -- will be accepted only very warily and writers will have to regularly establish that the backing is in place. In this, I would have thought it won't be all that different to the aftermath of bank runs back in the good old days before central banks, deposit insurance and lenders of last resort. As one example, high quality, well financed miners might well choose to sell gold bonds direct to investors rather than going through the extraordinary sham of recent years.


After the fact, we shall discuss #5 again and compare our observations.


Well, FOA, it certainly seems the few comments I'd intended to make have grown somewhat. Always seems to happen when I start trying to explore a good, juicy topic! I hope you find it so as well and greatly look forward to hearing your thoughts.


Thank you sir, please continue,,,,,,,,,,,,,,,FOA

FOA (12/11/99; 21:13:41MDT - Msg ID:20781)
beesting (12/11/99; 17:51:29MDT - Msg ID:20772)

I just wrote a full post to you and my system lost it?? Oh well.

Your question of time? I expect it will begin as the present markets start to fail. Trading will be driven to another arena. Prior to the Euro, the BIS would have been seen in the physical markets creating a premium over paper. Yet, I now think that the decision was given to the ECB and they
concluded that it was politically better to allow the IMF/Dollar gold faction to self-destruct. In retrospect it was a good choice rather than be seen as the aggressor. The same holds true with the establishment of a Euro market for gold. This question was put to them in public and they denied it. Again, a smart play.

Thanks FOA

FOA (12/11/99; 22:24:54MDT - Msg ID:20785)
ORO (12/10/99; 14:19:38MDT - Msg ID:20704)
From the role of LBMA as the main conduit for gold exchange and the core of physical gold distribution, where both buyers and sellers meet incognito, there would obviously be a problem for producers to sell their gold without a location for meeting their buyers. The need to start with cash for gold trades of producers and buyers on a bilateral trade basis would obviously cause many of the gold producers problems, since they do not fabricate and have no direct connection to the retail markets.
Marketing concepts evolve in funny ways. Miners assume all the process of finding, mining, milling and then shipping dore bars. Who said it should start or stop there? The term mining could have only included the actual digging, leaving out all the rest.
Following this same line, why could they not have included fabricating the gold into industry standard certified bars? I know, the gold used to be shipped to the government and stamped into money bars and coins. But, after the governments "publicly" got out of the "gold is money" business, the miners left themselves open by substituting the BBs as the government arm for the process. Today, they should include the cost of fabricating the gold to industry standard and selling it directly to the end users, be they are investors or manufacturers. Let's face it, it would have been better for them to cut deals with the actual buyers of the product than let a middle man control them for the
privilege. For every ounce of gold borrowed and sold to create a forward deal, the mines could have just sold their own production with an interest rate premium. You know, the reverse of the forward deal.
Currently, in a straight deal, the gold is borrowed at a few percent and sold. The money earns interest and some of that interest becomes the premium that the mine brags about as selling over spot. In reality they are just earning low interest on their unmined ore. Yet no one talks about the
interest the person loses that purchased the borrowed gold. That's right! The money man buys gold and receives nothing on it. So why can't he cut a deal with the mine to buy it's gold over the time of production and pay him an interest premium over a fixed spot to do it. Then the buyer does the
same thing the mines now do. That is earn interest on the unused money until the gold is mined and sold. He splits part of it with the mine.
Honestly, it was the greed of the mine owners that stopped this. They said "we mine gold for our stockholders and will never lock in the price for such a small return". Then they turn around and entangle themselves in the same deal, except it's sold to them as a hedge for a falling market.
You see, they left the physical arena and jumped into a political game with wolves. And never knew they were being eaten up!


The emergence of the BIS as the trading organization for cash based trading once the LBMA (mutant ninja derivative of the old London gold pool) is closed, should provide a market for the producers and buyers to meet. The transition would not be smooth, however, if the producers are allowed in by the BIS, or their CBs are allowed to participate, the producers should fare well till their home countries start laying significant royalty and export duties, and should still do well afterwards.


Well, I think a physical market will arrive using the new BIS official price averages. Then it will transition into some ECB sanctioned Euro Physical market. Perhaps conducted by the Swiss as Beesting suggests. Still it's going to be a rough process for mined gold to travel.


Why should there not be a way for them to trade? Would the (unhedged) producers be excluded purposely by the new BIS based market? Would the (surviving) producers be allowed to trade with the fabrication buyers? With the retail customer? PDG's old coins come to mind as one way of doing this.


All good questions we will have to follow as this evolves.

Thanks FOA

FOA (12/13/99; 16:44:34MDT - Msg ID:20942)
Joey (12/12/99; 02:30:15MDT - Msg ID:20792)

OK, I see how you perceived my reply. Let ne go further with you and then I'll present a different light to everyone in the next post.

Your words:
1) You're quite right, I should not have suggested that Ashanti had in effect defaulted. Cambior, however, is as far as I can judge in a slightly different class in that they had sold considerably more calls maturing in 1999 than warranted by their production capacity. In this sense at least, they only avoided default by an effective "restructuring" of their committments.


Again, I point out that both of these companies did not default. They failed to place more margin (cash money) behind their hedge positions. It made no difference to their broker Bullion Banks that gold was not delivered. As long as they covered their risk with more cash, the position could stand or be extended without physical. The outcome, as we all know was that they had no extra cash!
Recently, in London a big deal was made over the fact that many players in the paper gold arena were not being required to carry appropriate collateral against their short gold position. Whether they were miners, hedge funds, commercials or whatever, they shorted gold in the form of paper and bullion and this was being treated differently from all other asset trades. I submit that this practice has evolved from the past political position of supporting a lowering gold price with official gold sales, lending and most importantly "guarantees". Now that the Euro group has walked away from this position (at the absolute correct time for them), all the players in this field are left holding
positions that suddenly require much more margin, even with gold at these levels. No one is playing the gold lending game today except from being pressured from the possibility of severe risk if they don't. They now perceive this real risk in that physical gold could be withdrawn from supporting the paper marketplace by moving to physical trade only and doing so first on the official BIS levels.
Under these circumstances, commodity gold could become "super gold" and the reverse cash margin leverage against shorts of all kinds could be just enormous. The $600 "drop dead" level for Barrick could seem like the good old days of no margin exposure at all.

Now, with that in mind:


2) In response to my point (1), you suggest that defaulted paper could trade at varying discounts to physical. As is I think apparent from my earlier post, I agree with this but believe that given the degree of leverage extant, any such interlude would be brief and the markets would soon "lock up". In your comments on my point (3), however, you seem to imply that any peripheral default would be lethal. No doubt I misunderstand your intent but these two reponses do appear to be in some slight conflict.


The discounts will first appear small for some time as players assess the situation and begin to conclude that default is possible. First notice day on comex will find some players actually getting bullion at a discount, but most will begrudge the cash close as not representing a fair market. They are the ones that always roll over or close out without delivery. Not that default has happened or will soon, but that it is a possible risk that will create the first uncertainty. We are "on the road " in this direction as I write. It is becoming apparent that some OTC paper gold may be at risk of forced settlement in some kind of "physical discounted price" of dollars if any "peripheral default" does show it's face. Again, I submit that the discounting of all paper will begin small prior to the real
default and this action will slowly kill the modern paper gold markets. Until! Like this:

Some 95% of the Western traders in paper gold today, do not take delivery. They are in this game only to receive the cash price gain (or loss) as a means of gaining the increases value of gold. For them, the integrity of the market is not in it's delivery ability, rather in it's ability to mark their long contracts to the market price of physical. In their perception, their only risk (outside of price movement) is that these contracts are not settled at a cash price, close to buying spot physical. This is the little known "weak spot" in this system.

If delivery of physical does become somewhat of a problem on the massive OTC world arena, it would show itself first, not in an increased price of futures over physical but in a discount of futures to spot physical. Yes, the futures would rise in price as some shorts cover and the contracts try to keep up with physical. But remember, in a real physical shortage, the world BBs that make this paper market will be selling paper to the very limit of their ability to keep the paper prices from going against them. For them, the physical price is secondary as it's the paper market that creates price discovery and controls the settlement margins. Our recent run was not how the end will
appear. When the real play begins, physical (not futures or paper) will soar ($100, $200 or $300+++) the first day! The futures will try to run and then fall far away. Some in the media will no doubt say that the physical bars are trading at a strange premium to the real price of gold. It will
come across that the paper price is not in discount, rather it's at par as the coins show this huge premium. I know that's nuts, but we will hear it.
This dynamic will manifest itself in the form of futures being bid to discount not only from the BBs but from the commercial traders not wanting to risk a "par" trade for what may be cash, not gold. In the end, because the spot month creates the settlement price, trading could be forced into immediate cash settlement on close before delivery and not marked to the higher physical market. Or, all futures could see a "cash liquidation" decree as trading locks. Indeed, a close that will find physical trading much higher than that cash close. Large players will understand this well before the fact and dive head first into whatever physical can be had, further gunning it's price.
This is the realm of "super gold". It's what being on the road will feel like. However, the ending of our present paper gold markets will not end the coming rise in gold. No, that rise will have only just begun.

Please read my next post, FOA

FOA (12/13/99; 19:15:01MDT - Msg ID:20954)
Mr Gresham (12/12/99; 14:04:52MDT - Msg ID:20807)

" " "Econ 675, Advanced Graduate Level Money and International Banking: Market Disequilibrium Scenarios, otherwise known as USAGold Forum" " "


Hello Mr. G,
Ha! Ha! That is some class you are taking. One of the things Another wanted to accomplish is happening. That being, getting Western citizens to reconsider exactly what gold was in the eyes of other real people. In order for that to happen, people had to understand the evolving modern
politics of gold and how it has created a "New Gold Market". One far different from the one goldgugs of the 70s had grown to know and love.

In the beginning, many readers had no basis for comparison when reading most of Another's Thoughts. Yet, we walk this evolutionary trail of gold today with eyes wide open and better able to grasp the impossible road ahead.


I have seen one sure sigh that Westerners don't really know what has happened to their wealth. This is demonstrated when one "bemoans the loss of good times" if gold goes very high. It comes across the same every time; " " "if gold goes to $30,000 we won't have a dime and everything will fall apart" " ". Well, Another made his point that the dollar said your wealth was worth more than it really was. Let me demonstrate.

Like this:

Ever been to a high priced auction. They bring out the "Strad" violin and start bidding at $500,000. After a while it goes for $1 million flat and it's over. After that we listen to the perceptions around the room.

One guy in the back, who has 10 million cash, thinks the Strad was cheap at one mill and will pick one up next year. In fact he may get ten if they are offered. Some rich woman has 3 million and she figures her wealth is equal to three "violins" if she ever wanted them.

All around the room the feelings are the same as perhaps 100 million in assets are represented. They all equate their buying power to this one auction. Even though only one walked away with physical, everyone knows they are "strad rich" in wealth. Each goes home for the evening cognac
and relishes in this knowledge. Their lifelong effort of hard work and shrewd investing has positioned them to own the wealth of many rare violins. Life is good, very good.

The one problem with all of this is that they based their "wealth holdings" on the outcome of just one auction. Truly, had they all bid, the violin would have gone for much more and their wealth would seem "not so much".

In much the same way our world of dollar assets carries the same risk. All of us stand in the same world auction room and watch the daily bidding for goods and services. We watch the prices of cars, gas, houses, clothes, etc. and conclude our wealth balances based on what we could
acquire at this auction should we choose to bid. We see our economy in a light of infinite goods and services but fail to balance this with the potential of others to bid, "in mass". In this light, few have a valid perception of just how many dollar assets are out there. Indeed, without this grasp of "dollar inflation" we blindly consider out wealth and position in life using the present price structure of
"things". A system in which we trade paper IOUs of infinite number for real things of finite number.

So, our belief that life is good, largely rest not on the confidence in the dollar. Nor is it in the confidence that others will value and accept our dollars. Life is good, because all of us do not "bid" at the same time! If we did, our life would not be as good as our dollar wealth says it is!

This is the deception in our Western grasp of what wealth is. Our life savings are valued at what they can buy today, even though, in reality it is based on an unknown purchase price in the future. Just as all of the wealth at the violin auction was a phantom in self delusion, so too is our present good life and bank account numbers. The evolution of a people that once griped gold for the real
wealth money it was, has proceeded to the hoarding of bookkeeping entries of account credits. History has proven that once humans begin to question the value of this dollar "wealth owed them at a future unknown price" they run a race to outspend their loved brothers. Buying goods now at the "known" price quickly balances the books so no one is any longer fooled. The currency equivalents remain as a trading medium, even as real things are held in the background for value proof.

No, a high price of gold will not rob us of our wealth. It will rob us of this perception of money value that was but an illusion in the clouds. Wealth for tomorrow is found in this context for today; one cannot lose something they never owned. Buying physical gold at today's prices ($200 to
$500) will not help you maintain this modern illusion of wealth we never had. But will allow us to later spend the true value of gold that presently exists today. A value few will accept or believe.

Thank you all,,,,,,,,,,,,,,,FOA

FOA (12/15/99; 19:54:05MDT - Msg ID:21108)
A large thank you to everyone that enjoyed my #20954. Fortunately for us, it is but one in a very large selection of good thoughts presented by all the writers on this forum. Later I will pick up where we left off "on the road", as we consider "what to look for in this political game" and "what
to do as events progress".


Strad Master (12/13/99; 23:12:31MDT - Msg ID:20985)
My friend, you are no doubt very "Strad Rich" in your ability to play. And yes, I did think of you when writing that piece (smile).


PH in LA (12/13/99; 22:58:37MDT - Msg ID:20984)
PH, your statement that --------" money invested in rare works of art has no need to be invested in stock markets or anywhere else"------- carries your years of wisdom. During all the great wars, invading armies carried off little currency, bonds or stocks but fought with themselves over the paintings, jewels, rare antiquities and certainly old gold coins! Our friend "The Master" can thank the stars they, at least cannot take his "talent".


Peter Asher (12/13/99; 21:11:36MDT - Msg ID:20972)

Mr. Aster, Sir,,,,With this one statement you have said what it took me pages to describe!!

----- "Put their money to work?" But, money doesn't 'work', people use money to buy thing to work with. The passive investor abrogates his responsibility as a capitalist, and he does so at his peril!"---------



Crossroads (12/14/99; 11:18:44MDT - Msg ID:21003)

Thanks for your comments!


GFD (12/13/99; 20:58:41MDT - Msg ID:20968)

Hello GFD, you write: ---------- The irony here is that most would not even consider going to the strad auction - they feel that they have to keep their money working so that it will be there for them in their 90's. --------------

Yes, I know. But the whole world of money is not wrapped up in Western Thought as is evidenced by asking the question; "who has been buying all the gold?" Out there, somewhere, people are buying a value that is not expressed today but will be spent tomorrow. Indeed, buying one ounce of physical gold today is like buying a highly leveraged investment for retirement. That is, leveraged to the extent that the dollar has been printed.

We can do nothing to change the mindset of everyone, yet a few will understand now. Later, if a person has even "one good eye" and is shown where to look, the progression of events will mark the trail. Of course, the price and availability of bullion will be much higher them. This is why I fill in for Another until "politics makes a grand stand" "for all to see". After that will begin the "real" bull market in "physical gold" that I believe will bring more Posts from him.

The whole reason behind this effort, is to implant what is evolving in our gold markets in peoples minds, before the fact. This market is "not as before" and has evolved several times during the past few years as the chess players are moved on the board. Truly, an international power and money
game that gold is but one aspect of. It may very well be the most profitable investment for our time, but it still remains only one act of a large play. For this segment, the eventual outcome will remain the same, the rejection of the modern dollar based gold marketplace and it's effects on all the industry that uses it.

If one knows where the fire exits are ahead of time, some will get out without getting burned. But, some still think gold derivatives (gold stocks included) amount to the same exits. When this market matures, they will find those doors locked. Even more so today than in years past, investors are finding this to be true. And the real fire hasn't even started yet!

So, don't worry about the ones that are well fixed in their overall investment mindset. They may not make a good exit, but exit they will. This world has a way of teaching old dogs new tricks.


FOA (12/19/99; 9:25:05MDT - Msg ID:21318)
Quality counts!
Long ago society recognized the need to control "confrontation". The history of human behaviour demonstrated that "uncontrolled disagreement" always degenerated into it's lowest form of communication. War! Too avoid this, nation tribes responded with unwritten and unspoken "rules
of engagement". Early on, during individual field negotiations, generals would position themselves so their opponent could clearly see the large forces that stood behind their words. In other words talk came first, and if the rules of talking did not allow some common ground, a
ruthless slaughter would follow. After some bloodletting, they talked again.

Time and death forced a maturity of sorts upon the worlds social skills. It became apparent that human existence along with trade and commerce required lawful conduct to be extended to lawful talk. Without this, the trading of coherent thought was lost at the slightest disagreement. Of course, there would always be some that required a "physical removal" because they did not wish to be part of these national, state or private rules of discussion. We witness this today on the internet.

These "rules of engagement" marked the early stages of our progression to a "more civilized society". The rules were reworked many times and eventually became part of civil conduct on the individual level. Slowly, we created private person social rules and mores that limited just how far
we could take a "verbal disagreement" without evoking physical force upon each other. In addition, police were authorized to stop people from using "the verb age of location" from creating a "hostile environment" disruptive to the common good of all.

Yes, we have the right of "free speech" to say what we want "without slander", but we cannot say it anywhere one pleases if it breaks the rules of that location. We may not stand on an airport runway as we exercise our right. Highways (or freeways for the West coast), sea ports and
railways are all governed by these same rules of the road that some would even think infringe on their free speech. Still, "majority law" and national law rules where and how loud we may talk. As an example, one may not use a radio transmitter so large that it blocks out all other waves, in an effort to make your point.

Every "private" communication medium has rules and laws that govern how much we may "degenerate a conversation" before it creates a "hostile environment", causes "emotional pain" and eventually impedes the flow of discussion. Again, this action is in the "common good for all", in that
it affords us the other right. "The right of free choice"! Because of this, we today may choose to meet at a "town hall" or a "local church",,,,, a "gun shop" or a "protest meeting",,,,,,a dinner club or a local bar", each with it's own "verbal contact rules". The law says a restaurant owner may remove a person for conducting himself "out of fashion" from traditional clientele.

Today, the same majority law allows "private rules" to establish "private meeting sites" on the internet. As a people, we may "freely choose" to occupy our "place of discussion" in accordance to it's "owners rules". Indeed, the owner may fashion those rules in accordance to the clientele he may wish to attract. Using a business decision where demand creates the need, his "rules" can structure
the product offered as the continued success of a site dictates. Be it at the "USAGOLD town hall" or somewhere in the back alley, our freedom of choice is not jeopardized. Nor is our free speech lost as we may go where the "level of hostile environment" meets our needs.

To date, the incredible success of USAGOLD, indicates the demand and approval for the "private rules" and "private enforcement" that govern this site. Here we stand upon a stage and present our views to tens of thousands in the audience. An audience that packs the house and overflows into the streets to hear discussion of the logical progression of world events. Not the "slanderous" accusations of week minded children. My friends, we are on this stage before Centennial clients and mature adults of this world. They pay for their seat by offering their attention to our thoughts. Many have brought season tickets because the house rules create the format they seek.
Thank YOU Mr. Michael Kosares for your "rules of engagement" and supporting our right to choose!


More on gold later today.

FOA (12/19/99; 16:55:07MDT - Msg ID:21351)
Look at it this way!
JA (12/16/99; 0:08:58MDT - Msg ID:21128)
Questions for FOA
In your post of: FOA (12/15/99; 19:54:05MDT - Msg ID:21108)

Hello JA, If you reread your post 21128, my reply will be more clear.

Our gold market is a confusing, non definable place for most people. Few have the immediate grasp of it that only 30+ years of eating, drinking and living gold can bring. On top of that, even fewer have accepted the impact that an "evolving" market can have on a static mind. Frozen in past
beliefs and concepts, modern long traders have been ruined as gold crosses an unimaginable gulf of time and space to regain it's roots as real money. Such are the days we witness in our time.

It would offer very little indeed, for us to stand on stage, puff our credentials and say, follow us because we know! In that crowd of "longs" there are perhaps hundreds, no thousands of gold security analysts that have lead their clients and friends down the road of "past performance tells us where we are going". Technical analysis, contrary opinion, supply and demand figures, traders commitments and yes, even future price inflation projections have left them all performing the duties of "managing their substantial, long term cumulative losses". The only group that has survived this ongoing transition are the "physical gold advocates". They have counselled against leverage and
espoused the use of real gold as a long term hedge against their other assets.

We have taken a step further and proclaimed that gold should be held as "real money" in a savings account concept. A concept supported by overwhelming evidence that the world's paper currency system is at the threshold of a major change. One of such scope that it has initiated the
world-wide buying of gold by large players that also hold this view. In this light these buyers of gold presently own an internationally accepted currency that is highly valued by the ECB nations as the Washington Agreement spells out. A currency who's exchange rate fluctuates only somewhat more
than many others. Still, a money that has the potential to become the best investment of the new millennium. And today the loses on this physical position pale in comparison to the performance of all it's derivatives.

As the world loses it's decades old reserve currency system, official gold usage will only accelerate as nations mark their holdings at an increasing premium to the leveraged paper gold markets. A premium that this modern market cannot match as it's magnitude will destroy their over extended equity. This process of discounting paper and building a premium on physical will become a visible example for citizen savers who wish to escape the effects that deleveraging a world will bring . International trading of physical gold will be used to fill the equity void a fallen dollar and fallen dollar paper gold market will leave. The initiation of returning to gold in an account settlement
function will drive the demand of physical gold and be a benefit of common people. Background gold currency will be held as a new paper digital currency takes the stage of account settlement. I believe the evidence points to the Euro as that digital money.

But who am I and why do we say all of this? I am the voice you cannot know, therefore cannot measure. The reader must build their own understanding of this as "events build the credibility", not our words. No favour will flow to us for your success! For, we believe that it was the wholesale,
blind following of accepted "Western money views" that created this generation of question less savers! They gained their understanding by accepting "past track records" and "credentials" instead of striving for their own reasoning ability. A mindset that is destine to lead to a massive loss of wealth as this unfolds.

You are offered more truth in these Thoughts than many will admit. We say that the major core Central Banks of the world are truthful when they give their gold statistics. Yet some say it was this CB gold that has covered the physical supply deficit. I ask, how can that be when the World Gold
Council figures show that most of the sold CB gold has stayed in their system over the last ten years? I say that this deficit is covered from the discarding of gold by Western investors as they exchange their real physical in return for modern gold derivatives holdings. The CBs only offered political backing for this to occur. One has but to examine the LBMA volume figures that Another said would verify this trend. It was noted that this form of trading would explode if gold went below $360. It did and it did as the London pool was several years ago forced to publicly offer their numbers! Today, others declare we are spinning a tail without proof and the CBs are lying.

Even today, the acceptance that CB gold is largely transferred within their system has turned the search for guilt to Fort Knox! Again, we state that the official gold stays put. I submit that the eventual acceptance that paper derivatives are at the heart of this problem will only confirm the eventual destruction of our beloved paper gold marketplace. A change that many in the industry "do not" want to happen. Once all other explanations are exhausted, all doubt will focus on this modern over leveraged marketplace. As official gold prices begin to climb, only then will the "loss of supply credibility" begin the paper discounting phase. Investors will realize the tremendous
leverage inherent in holding just one ounce of physical gold and attempt every means to demand delivery. From these paper markets they will find mostly cash payments that will greatly discount the ongoing physical price.

I openly state that the present paper gold marketplace is not the same as the physical gold market. This will become apparent as the paper market wildly fluctuates between $0 and $xxxxx, all the while discounting an ever increasing official and private physical gold price. Yet, the "static mind" of yesterday year cannot comprehend how physical gold can be priced in the thousands while paper gold contracts and the industry that depends on them fall away. Truly an example of the impact "western thought" has had on real values in our world. The grasping for bookkeeping entries of
account in an effort to save something that is nothing.

A bull market in physical gold is coming as this paper marketplace fails. Indeed, an even larger gold bull is coming after that, as "Reality" and "Modern Western Perception" converge. Here, at USAGOLD we will "watch this new gold market together". Truly, a market that is "not as before"!

More later,,,,,,,,,,,thank you for reading and thinking FOA

FOA (12/19/99; 17:12:15MDT - Msg ID:21355)
Good words Mr. Farfel, good words indeed.

" " "When I finally see the gold price soaring, then and only then, will I believe that America is re-embracing pragmatism and common sense in the financial markets." " "

Ha! Ha!, sooner than you think.

FOA (12/19/99; 17:47:33MDT - Msg ID:21359)
Aristotle (12/16/99; 2:20:51MDT - Msg ID:21132)

Hello again Aristotle,
In light of what is being discussed I had to offer your wise words for review:

" " " The destination in any journey is always the easier vision to perceive than the forecast of details to be encountered in route to that destination." " "

Truly the road to super gold will offer interesting encounters! Also:

" " "My best advice to anyone pondering the future of Gold is to always remember that it is a globally recognized and utilized asset, and that not every person's experience and perspective (6 billion of them!) is the same as your own or that of your neighbor. Your perception of Gold could be rocked overnight by a development in China that you never saw coming." " "

Did you know this was coming before Farfel? (smile)

Peter Asher,
Thanks for the words. With this nice meeting hall, we are all going to learn a lot about gold in the
years ahead.


FOA (12/19/99; 18:04:39MDT - Msg ID:21361)
Cavan Man (12/15/99; 19:20:25MDT - Msg ID:21105)
Well, if it is intellectual combat I am engaged in then, I am woefully unarmed. Here's a thought on FOA/Another and OIL/GOLD:

Probably not in my lifetime (I'm 41) but oil will eventually be displaced as the #1 "resource" in the world by something else. What? You decide. Without even reading the article, I will agree that the role of oil in the world economy has been marginalized and diminished by the author's uppositions
simply for our conversation's sake. The Arabs know this. So, not only is it important for them to obtain REAL VALUE instead of FIAT for their oil product while the world turns, they have a strategy to utilize the REAL VALUE they've accumulated when the world's monetary reality goes into paradigm shift overdrive. I believe the ultimate end game is not for the ME to sit on their chips and continue to supply oil but rather, to become a dominant entity in world finance. Well, they have been for years if you read Aristotle in the HOF (petrodollars). They've simply traded one valuable resource in this lifetime for another to be deployed in ANOTHER lifetime. We're dealing with a lot
of wisdom here. Their genes go back over 5K years. What do you think? You have a better mind than me (in all honesty). Tell you what though; I strongly believe I'm right.

Sorry for the shabby thought processing. Perhaps the forum can help me out.

FOA: Do you agree?

Hello Cavan Man ,
You are certainly taking a large jump ahead in our timeline, but this concept must be correct. I know Another has more imput on this your take may be some of it. I, personally think they will join the EMU eventually and use their oil, gold wealth to build a financial empire. Under the umbrella of a united europe, fairly priced oil could propel this entire block into this new millennium as a super commerce arena. We shall see!

Good tidings to you also,,,,,,,,,,FOA

FOA (12/19/99; 18:40:19MDT - Msg ID:21366)
USAGOLD (12/17/99; 9:31:27MDT - Msg ID:21207)
Today's Gold Market Report: Gold Zooms Higher; Armstrong Closet Gold Bug (Literally)

Armstrong is a good example of how many high profile people do own physical gold without the world press knowing it. The more money people have the more they buy gold insurance. And they do it in private, not because they are afraid of government controls, but because they want to buy
more at lower prices. It's only the leveraged gold bug that bemoans the falling price because it destroys the short term bet. Just like Farfel said, if the paper players ever grasp that this is a "house game" rigged against them, the market will zoom. Still, the odds are that they will ride the paper
train all the way down, without ever understanding it's a separate market.
I wish some readers would come out and discuss this without going into "overload". Myself and many other physical gold advocates are also "gold stock owners". Only difference is that our perception keeps us most fully in physical. The real gold stock boom will come after all the controls have impacted their current prices and gold is much, much higher. Then, even with official taxes and all, their profits will run up a great deal. Just not as much as current conditions will allow.
In any event, the worlds real money is into physical gold, waiting for the transition that must come. Does anyone really think the Bill Gates and W. Buffets of this world don't have a block of gold? It would not surprise me if Centennial was their broker! (smile)

thanks FOA

FOA (12/19/99; 18:59:35MDT - Msg ID:21368)
PH in LA (12/18/99; 18:14:17MDT - Msg ID:21282)
Questions About America's Gold

Ph, I think just about every other major country (outside the IMF / dollar faction) has private audits of their gold. Too date, it's mainly been the US gold stocks that have worried people because the dollar is so leveraged over this holding. I understand that the gold is intact, but they don't want to draw attention to it. Any audit only highlights how little gold is backing the trillions of dollar assets. That's the reason for the stonewall.

Too a lesser extent, any audit carries overtones of eventual dollar backing. Something the BIS would have a major say in as they could attach it at the old $42 rate. Let's be serious here, if current international law demands the compensation of German slave labour and Swiss Gold value
reparations, all hell would break lose for the payment of dollar backed gold confiscated in 71. Both the official and private levels would be after any gold backing our present dollar. The only way the US gold could come into play would be with a new currency. And any whiff of that process (an
audit is the beginning) would literally tank the dollar big! Well before the fact. So, good luck to GATA and MR. Turk!


FOA (12/19/99; 19:03:30MDT - Msg ID:21370)
(No Subject)
Time to go.

Good luck all,,, FOA

FOA (12/22/99; 17:53:18MDT - Msg ID:21522)
Town Crier,,,, ORO,

You both are moving now! Good work. I want to add some things, but cannot comment now. A few things going on, taking up time.

Season greetings to everyone. I'll be here this weekend. FOA

FOA (12/28/99; 8:34:38MDT - Msg ID:21734)
TownCrier (12/22/99; 13:16:51MDT - Msg ID:21505)

Hello TC,
You and ORO have opened this up. Below, I reword some of what was already said and add some things. In reality, the IMF could have just accepted a cash payment from Mexico and left gold out of that picture. Then they could revalue a separate portion of gold and issue equity to the BIS for poor country payments. This would have been much too great of a shock to the dollar system as it would openly appear that "gold" was saving the dollar! No, a slow boil allows the transition to work. See below.
Also, the IMF is keeping their gold at different valuations. Profits and loses on assets need not be totally realized. Only the items mobilized. By selecting this process of "revalue after use", it sets a long term precedent that allows the ECB to "transfer" gold from it's ECBMs OR the BIS can use available CB dollar reserves to buy gold at higher rates, as needed to mark the dollar lower!

If everyone does not fully understand the IMF gold deals, that's ok. The IMF managers, who for the most part have long been dollar advocates, are still fighting about the real meaning of it themselves! They make statements, then backtrack. Make more statements, then backtrack again.
It's the same as when a politician makes a "clean explanation about policy" on a live camera; then realizes that by making this revelation public it may end one of his departments. Then they say's all sorts of strange things trying to cover their obvious (to them) slip of the tongue. The media falls all over the stage wires, trying to be the first to offer their assessment of the meaning of official words. In the process, the news wires are filled with conflicting, ridiculous accounts.

Like this:

" " "WASHINGTON, Dec 17 (Reuters) - The International Monetary Fund, raising cash to pay for debt relief, sold gold to Brazil this week and bought it back in a complicated deal." " "

Too put this into true life context:

Tell me this,,,,,,,,,,The last time one of you went into your bank and made a car loan payment, did any of you ever hear the banker tell his associate "Old Jim just came in and made his payment. I sure enjoy buying dollar from my customers in this fashion."

Now, in IMF context:

"Old Brazil just came in and made a payment on their loan using gold instead of paper currency. Yes, you heard me right! We " " brought " " gold from them"

Here is another one:

First in IMF context:

" " ``We sold slightly more than 7 million ounces of gold to Brazil and accepted it back immediately from Brazil for payment of an obligation due the same day,'' IMF Treasurer Eduard Brau said in a statement. ``Thus the gold did not enter the market.'' " "

Now in true life context:

" " " Old Jim just called and told us to use his saving account balance to TRANSFER cash into his checking account. Then he wanted us to withdraw from his checking to pay on the car loan. Thus the DOLLARS did not enter the market." " " (Didn't want anyone to worry that those dollars would be sold into the marketplace and depress it's value???)


Get the picture?
By announcing these deals in this fashion, the whole process becomes lost in a twisted logic that forces us off the trail. Just as banks make currency payments and transfers "in house", they also do it with gold against currencies. And have been doing so quietly for a long, long time. The problem with the IMF action, is that it was forced out in the open by Euro advocates, "for everyone to see".
Even the congressional denial of IMF gold sales was presented as an effort to stop the price of gold from falling. In reality the IMF no longer had the support of Euro / BIS cash contributions. Without new wealth for the IMF to draw from, international dollar debts were going to fail. A process that would have quickly marked dollar assets to market. Deflation, is the word! Without new contributions, selling the IMF gold would have exposed the system. For, without gold, there was nothing else to "upvalue" for the purpose of maintaining dollar debt. And by extension, the use of the dollar as a reserve currency.
Indeed, a western public, completely unaccustomed to the thought of gold being used as money, has a hard time of grasping this. Let alone understanding it in the fashion as it is reported.
We think of dollars as a real value only because they continue to buy "things" at a relatively static price. All
thought is focused upon the amount of gold that CBs could sell and no consideration is given to the amount of dollars that could be sold. As gold continues it's journey to becoming an official "currency in the open", the public will make a comparison of outstanding dollars to "available outstanding gold". By available gold, we mean whatever gold the physical market will provide (sell) as backing for the dollar. Not how many paper gold contracts can (be created to) back the dollar, as is currently the fashion. As this understanding advances, the leverage inherent in just one ounce of gold will cause "thinking people" to run for physical, in mass! They will forget the present day need to leverage gold using risky paper derivatives. A need created because gold was not allowed to rise to match current dollar currency inflation (perhaps 18%??) Later, physical will be seen as more than enough.

Today, gold is once again being shown as an "official" wealth, currency and money asset; and it becomes such too the loss of the dollar.


TownCrier (12/17/99; 16:36:43MDT - Msg ID:21217)
" " "Sure, the gold value would be viewed as the equivalent value necessary for payment on their loan, but there would still remain the lender's obligation to remove the principle quantity of dollars from existence." " "

ORO (12/18/99; 2:35:37MDT - Msg ID:21249)
" " The IMF, acting as a bank, can issue cash in amounts equal to booked financial assets that include country bonds and loans - and gold. Gold reserves are the only way a bank can issue cash that is not backed by debt." " "

The IMF currently holds loan paper as assets. Once paid with revalued gold, that portion of gold is held as the new asset. It replaces the portion of the loan "taken down" with that payment. So, the dollar portion of this loan does disappear, just as in a cash payment. Yet, the dollar supply is maintained as the "cash dollars" the country used to buy the gold, is used to maintain other dollar debt. That being the "fund" at the BIS that's used for poorer countries. It was essential for the BIS to pull the dollars away from the IMF bookkeeping so as to keep the dollar floating, if you will. A destroyed currency does not float against anything and creates havoc. A floating system, "in transition" can slowly reflect new values in the marketplace. All along, this has been the goal of the ECB/BIS. Transition the dollar reserve system so as to allow dollar asset holders time to hedge.
Today, this message arrives at your doorstep, on this forum. Consider it well.


Again, This process is a major blow to the dollar as it introduces gold back into the system. And does so by showing gold as a growing reserve currency alternative! By using gold in this manor, it precludes a deflation of the dollar system by slowly marking down the value of dollars by raising the official price of gold. And doing this outside the valuations of the paper gold marketplace In effect,
new dollar inflation is not created, where as the existing dollar currency inflation is maintained and slowly becomes apparent in the gold price! Yes, rising official gold prices, in dollars, will eventually lead to price inflation, but only to the extent that "real goods prices" were not evident in our present world dollar money supply.
Note: The "money pump" term ORO uses to lable this is more like a pump that keeps our system floating. Again, in Western eyes, it's wildly price inflatiobnary. Yet, in reality it only turns lose the price inflation the dollar already has built in! ORO, your view yes? No?
The current dollar reserve system has hidden these "true gold prices" and "real goods prices" for many years. The above process will allow the orderly transferee out of this system without imploding the banking sector through deflation. Only dollar asset holders will lose wealth. But, as I offered before, it is wealth they never had in the first place. We own only a bookeeping entry that described what one "could buy" as long as everyone doesn't buy together. Looking closely, we can now see how "physical" gold dollar inflation will "lead" dollar goods price inflation. The end of a reserve system requires such a transition. A reverse transition most gold bugs do not expect.
All of this brings us back to the present price setting mechanism for gold. The LBMA. Their entire paper gold marketplace cannot survive a return of gold as official money. Reflecting the present world dollar inflation in dollar gold prices will wreck this market and most of the mining companies that need it as a financing tool.
As we walk this trail of gold, official gold transfers will first mimic the paper price. Then, they will exceed the market as they are labelled "premium trades". Then, the paper discounting will begin as "premium bullion" in the public dealer market no longer allows paper to be "marked to the market".

Gold, the only investment needed for the next thousand years!


FOA (12/29/99; 7:51:39MDT - Msg ID:21774)
Leigh (12/28/99; 20:15:43MDT - Msg ID:21752)

Hello Leigh,
My reply to your comments / questions:

-----I have a few questions to ask, and I hope you don't mind if they seem to cover old ground. I'm trying to clear up some fogginess in my understanding. First, regarding the proposed three world currencies -- will they be gold backed (like the Euro), based on a true gold standard, or backed by nothing at all? Will the three currencies compete against one another? Do you think that eventually the three currencies will merge into one world currency?-------

-----------Also, you've mentioned about digital money, and I assume you mean that a gold owner's gold is placed in the bank and he can draw upon its value. What if the gold owner (or cash owner) doesn't trust the bank or the government to take good care of his money? Could he refuse to use the smart card and function on a cash basis?----------------

Let's take a short walk.

I don't propose three world currencies and neither do our Euroland friends. There is only room for one world reserve "digital" currency that would take on the trade settlement functions of our present dollar system. We understand that the Euro alone will become that "digital settlement reserve currency".

The Euro is not and never will be gold backed like the various gold standards of the past. The ECB / BIS have no intentions of making that mistake again. The whole reason for allowing gold to return to it's free market "physical" price value is to use it as a background official / private
currency. A real money (gold) that will trade at whatever level it seeks because "this new" Euro currency will not be defined in a set amount of bullion. It's price (gold) will rise as a function of world supply and demand based on gold held and used as a "wealth asset", not it's commodity use.
"Wealth asset" money is an old line function gold has always had throughout history. This use exists today, even as it's value is hidden in the fiction of a "paper gold" marketplace. This "Wealth money" is the very attribute the Western financial system has so much tried to destroy as it competes against the retention of our debt structure. A structure ingrained in the dollar world and requires that
no one discount dollar debt.

The old gold standards needed gold to completely back their moneys because without gold, they (cash) had no purpose of exchange. Except to denominate a fixed gold transfer during trade. Today, modern commerce has evolved to the point that paper "digital" settlement is the cornerstone
of an efficient trading system. Indeed, without international computer settlement, using fiat currencies, our system would not function. Too this end, our modern commerce and lifestyles require "digital" currencies and that need imparts a new value to their use and existence. One that did not exist during the relative "slow society" of the gold standard days.

Therefore, this modern reserve "digital paper currency" will not be backed using a fixed amount or price of gold, rather it will "use gold" as a real money reserve. A reserve that can be traded, lent or retained as national savings. As such, any world "free market" value rise of gold will only be seen as an "good" increase in savings and therefore better "reserves" for a national society. Not to mention any "physical gold savings" held by the private citizen. Contrast this with the today's Western view that any rise in the gold price means a loss of wealth and a economic disaster. Truly, this will not be a disaster for the majority of world citizens. Just those that tie their saving assets into the illusion a dollar presents.

The modern reserve currency will be in demand for trade settlement in conjunction with gold, but will not be in competition with it. Their values will move up and down against each other using their true attributes. Gold as a "real wealth settlement money of slower speed" and Euros as a "modern digital money of high speed".
Our modern currency history (the last 20 years) has shown that the world needs both of these moneys, but needs them in a different format from the past. Our present dollar could do the same but it carries the baggage of huge unpayable international and local debts. Debt made non payable by the dollar reserve system that forces the social needs of just one people upon upon the world using unbalanced, rigged exchange rates. It eliminates the escape route of a "free market" gold price and therefore locks down the ability of other nations to trade outside this system. Free the world of this system and a great deal of American wealth will be seen for what it really is, an illusion of
bookkeeping. Indeed, create a workable reserve medium, based on world needs and wants in a settlement format and the race will be on to use your product. I submit that that product is in the process of being built today. A return to a new one world currency is the best thing for all of us.
Especially if it "includes" the money the world has wanted for all it's history. Gold!


Mr. Holtzman, does not understand how the diversity and different social nature of Euroland will become it's most profound currency strength. It they were a more homogenizing people like the US, the Euro would become just another dollar! Their "Old World", "Hard Money" conflicting nature will be reflected in a "New Gold Market" and a responsible world currency. Their practical "Real World" focus will not allow them to reject this "digital currency" as we move forward in world trade. The very best balance for the next 1,000 years.

National states and broad based cultures, such as China and India will wholeheartedly embrace such a system. The prospects of using the Yen in such a world demonstrates the lack of understanding about how that currency and it's society functions. More later.

thanks FOA

FOA (12/30/99; 6:30:21MDT - Msg ID:21836)
Cavan Man (12/29/99; 8:55:03MDT - Msg ID:21777)
FOA 21774
"The whole reason for allowing gold to return to its free market physical price value is to use it as a background official/private currency". Hello FOA. Isn't gold an official/private currency for central banks, ME oil, large blocks of wealth etc today? What I mean to say is; gold for those "in the know" and fiat for the masses? Thanks.


Happy Y2K C Man (and to everyone (smile),

Consider Historic Reality:

Yes, gold has for some time been accumulated as a savings / reserve currency by people "in the know". What do they know as opposed to the masses? They understand how gold gains in value directly in proportion to the amounts a currency is inflated. Even though the long term inflation of
our paper money has yet to be reflected in real goods prices, gold holds these gains "before the fact" of this price inflation. Hidden from view to the masses, these (gold) gains date back decades and form a kind of savings account that always balances once the currency begins it's final timeline.

A Dangerous Trail; walked by many people nations in the past:

The quest to "get something for nothing" is what the modern "Western View" is built upon. Sold by a political machine, this concept nourishes this grand illusion. An illusion that requires leveraged paper wealth administered by a super leveraged paper currency. This quest for wealth from leverage is what drives the "Fiat for the masses" mentality.

We Walk This Trail Today:

The balancing of this "Western" bubble by a revaluing of the currency will not break the dollar system as most think. The US and it's dollar will continue, yet it's only the illusion of this bubble wealth that will meet world reality. That reality will be in the form of a super price inflation that demonstrates the real buying power of "something for nothing" saving / investing! Denominating your wealth in today's dollars is like numbering your savings with commodity futures contracts. Truly Dollar credibility is completely dependent on others delivering physical goods against our dollar contract when we demand real delivery! Many will find their dollar assets in "Force Majeur" from this new and changing world.

The Leverage Of Physical Gold Against Dollars; it dwarfs the grasp of a Western Mind:

Today, the (gold) price making function of the dollar based gold market is affording the opportunity to trade an "illusion of nothing" for "something". A process of lowering the paper price of gold until physical delivery is no longer an option. All in an effort to buy time for the dollar. We may have already reached that point (dollar price) where physical gold will be purchased no lower.
Or more Western gold hoards may yet come to market in exchange for the fraud of paper gold. In time, the holders of leveraged gold paper will find themselves caught in a maelstrom of events that crush the the entire concept of our modern gold market. This firestorm will burn through any entity that makes this marketplace it's financial lifeline. We have seen only a tiny beginning of this today.
When the gold market break's, it (the rushing price of dealer physical gold) will lead the downturn of the dollar and mark the great price inflation that follows. Gold will run in dollars as never before seen in history. It will become the investment few "Americans can understand". A
savings account already full with the years of interest and gain. All equal to the past printing and leveraging of dollars world-wide. As a people, citizens of Western Thought and investing concepts are free to choose their future wealth. Some will buy a value that is not expressed today, yet as real tomorrow as rain from clouds in the spring.

"Gold, The Wealth Of ations, Gold One's Future In Our Hands"

As Another would say;
"We watch this new gold market together, Yes?"

Thank you all for reading and thinking,,,,,,,,, FOA

More later.

FOA (12/30/99; 6:40:45MDT - Msg ID:21837)
the finish?
Well, I didn't quite get this one right. Must be Y2K! Here it is again.

"Gold, The Wealth Of Nations; Gold, One's Future In Our Hands"

Be back later

FOA (12/30/99; 16:38:17MDT - Msg ID:21859)
Hello and welcome Permafrost,

I'll comment on your items in order:


PERMAFROST (12/29/99; 3:21:27MDT - Msg ID:21765)
FOA Msg ID: 21734
Dear Sir, Based on your logic, two outcomes are possible.
1) If you're right and we are witnessing the re-monetization of gold than all those that benefited from the fiat money scheme will lose their power. ------------------

Mr. Frost,
Not all of them! Only the ones that did not hedge their power effectively. Surely the Euro will carry some of the same political agendas the dollar currently does. Only, it will be controlled more so by the cross currents evident in the various old world countries. Let's face it, we all need a dollar like currency if our modern economy is going to function. What we don't need is a single reserve
currency that precludes any avenue of escape if it hurts other countries.
If gold is trading in a free physical market, no one is going to run to gold as a single currency and leave the Euro entirely. Indeed, a free world economy needs and demands a currency that can expand and contract with changing conditions. The curse of the old gold standard was that it didn't allow this latitude and always created a crisis when needs required this flexible money supply. Only a separate gold market can offer a means to truly measure the success of the money creating treasuries. This is the direction we are heading, for better or worse.

-----------A gold backed and restrained financial system (An oxymoron, in my belief) will simply preclude them from accumulating goods and services against monopoly money -- the source of their power.--------------

Well, the power you speak of can also be held through the use of gold itself. Many a king and monarch ruled the land with the effective use of bullion. Your oxymoron is not in the restraint of the monopoly money, rather in the present lack of a free choice between "gold wealth" and "dollar
wealth". The blending of these concepts will create a new power block that must conform to the needs of all.

----------2) If you're not and gold is merely being used as a relatively-untapped "new" source of non-debt-backed dollar creation, than it's a very old game we're playing, indeed. Was not gold itself responsible for one of the greatest INFLATIONARY explosions in History when the Conquistadors "expropriated" Aztec gold and brought it all to Europe to consume (chaseafter) a "limited amount of goods and services"? Colombus turning over in his grave? -------------

During the time of the Conquistadors, we must consider that goods were not being inflated in price, rather gold was being devalued! At the very least gold did not disappear as bank notes do. No, the coming run in gold will be a reflection of the tremendous dollar inflation already in the system. It's only in the eyes of the Western dollar saver that this price inflation is unwarranted. Again, they are
only loseing something they never had. An illusion of wealth on a grand scale.

------QUESTION: Do you know of any emperor (I think you called them 'Grandees' here on this forum) who's willingly abdicated power--Besides God himself?------------

My friend, power belongs to the swift of heart and mind. This world waits for no one as power flows from peoples to peoples. Even the strongest emperor knows to occupy the high ground before the flood. The powerful in tomorrow's future will own gold today.

Thank you, FOA

FOA (1/1/00; 8:24:33MDT - Msg ID:21968)
Good day everyone!
Looks like the world will have a chance to move on with life without any of these Y2K problems. Good! There will be enough monetary action to follow and understand without the
added impact of computer control problems.
Jeff (of USAGOLD) good job keeping the system up. And while I'm at it, good job to all the other thousands of dedicated computer professionals who made the turn over work.
Michael, TownCrier, ORO and everyone, our golden century begins today. Preordained to be in our financial future by the planers of tomorrow. I'll do some thinking ,writing and make replies later.
Thanks ALL FOA

FOA (01/01/00; 14:40:22MDT - Msg ID:21992)
Cavan Man (12/30/99; 6:43:30MDT - Msg ID:21838)
Hello FOA and, Many Thanks
Please consider this:
I am 42. Will I live to see it and perhaps enjoy the knowledge that I made the right decision???????????

Cavan Man,
42? Oh boy, I didn't know you were so old! Well, at that age one should be careful with your body. Get plenty of rest, eat well and take your vitamins. If lucky, one could live another 40 or 50 years! (big smile)
Seriously, it was so long ago that I passed that age I lost the records. And for the record, I know I'll see this gold change. So, all in all, you don't have to live long enough to see the next gold bull, "you just have to outlive me"!! Ha Ha (huge great big smile!)

Happy new year CMan.

FOA (01/01/00; 14:42:33MDT - Msg ID:21993)
Golden Truth (12/31/99; 15:09:49MDT - Msg ID:21912)
Paranoid Thinking Runs Amuck Here!
Now a year later i still have an enormous amount of respect for your knowledge about Gold. Yet, I still respectfully say, the World markets are just to big and to unpredictable for one person to know with any certainty.------------------

Hello Golden Truth,
Reading all of your post tells me the (non physical) gold markets have been rough on you. I can understand your feelings if you can grasp what groups we are talking to.

All of Another's Thoughts and my comments are directed toward "physical gold owners and by extension "physical gold advocates". These people have read all of these ongoing posts (some have been involved privately long before the current "gold forums stage") and know the thinking is
strategic as it applies to a moving, evolving political target! Each group of posts are but a snapshot in time as it applies to this changing chess game. Yet, the end results remains the same, the destruction of our present pricing system for gold, a huge increase in the dollar price of physical gold, the eventual use of gold a Euro reserve settlement currency along with the new free market that must evolve with it.

"Physical Gold Advocates", such as I (and readers) have brought gold from the high $360s into the low $280s because of this ongoing timeline of events. A timeline that is now quickly being depleted as the Euro builds it's position in the world. I submit, we are not hurting in any comparable
way as our gold holdings are in a good large proportion to our total assets. And certainly our asset values have not been impacted as the gold derivatives players have (gold stocks included). When behind the stage power plays are in progress, the possible short term outcome is presented. Yet, it is presented with the knowledge that readers will think bullion, not derivatives. As such, if the chess game moves into another stage, no hard loses are taken by anyone.

The historical record of physical gold alone is enough to justify a real gold holding. I add that the record for mining shares and the other leveraged derivatives are lacking in their long term comparison. These items are as new and peculiar to the modern investment scene as is the current dollar "off the gold standard"! Players often tout these paper investments to be as good as gold, yet they are truly only as good as the dollar marketplace for gold! Still, I own some gold shares (gold), but only in a small proportion.

We conclude that the coming bull market in gold will be unlike anything before it. Today, the leverage is in physical gold, not paper gold. This latter day track record of derivatives, gold stock options, gold options, gold stocks, etc. all clearly demonstrate this changing function. The horrendous ongoing, long term loses, built up by these paper bull traders is evident. With each downturn, they search for greater and greater leverage, in a attempt to return to "even". All the while, the bullion buyer slowly amasses a large "highly leveraged" position, just by channelling his would be trading loses into paid up physical and rare gold coins.

One day, the dollar paper gold markets will be driven into "Force Majeure", during a transition from the current dollar reserve system. With each political announcement, the stress on the London market will grow. We know this position and understand it well. Yet, no one can guess when the
last bullion delivery will spell the end for paper credibility. I only offer the month by month level of stress and how it may impact bullion.
As for this Y2K item. I fully acknowledged it potential for impact on the dollar. Yet, in my posts, I offered my feelings that it would not be severe. Clearly, we have larger items to address that this.

More later. FOA

FOA (01/01/00; 20:34:38MDT - Msg ID:22008)
mhchuck (12/31/99; 19:13:55MDT - Msg ID:21928)
Just Another Squashed Bug.----------------
mhchuck (12/31/99; 19:22:25MDT - Msg ID:21931)
Do We Have Free markets?
Yuk, Yuk, what an industry, if the price of the item they are producing rises...they all go bankrupt. Please come and get me, I'm ready for the nuthouse.---------------------

Hello and welcome mhchuck,

Well, if you have come this far down the gold trail, we might as well finish the hike.
The end of this is closer than many think. My dad always said don't worry about the big bully in town. There is always someone bigger and tougher than him wait for the chance to ?????
The same is true in the money power game. I never said that the Euro was not going to be a tough "dude". He is and he will work the dollar over with the help of gold. We are only pointing out (to the average person) that the timeline of the dollar is ending and the transition will be sudden and harsh on dollar asset holders. Truly, gold will not be an "innocent" bystander in this fight. It's historic power to break empires will certainly come into full use.
Again, bullion will be the survivor with the most leverage in this battle. Yes, the gold mines will still have valuable reserves and be in full operation as this all unfolds. It's only the equity holdings of these "businesses" (not all, just most of them) that will be ransacked as the gold marketplace is up-ended.


FOA (01/01/00; 20:36:19MDT - Msg ID:22009)
Golden Truth (01/01/00; 18:17:00MDT - Msg ID:21998)
TO F.O.A---------------

Golden Truth,

No, G.T. I am the one who thanks you for telling us what you think and how you feel. And doing so without using a sword to try and cut my head off (as some have done)! Truly, all the success, wealth and social standings are lost if we as people cannot clearly air our thoughts without physical
and verbal violence.
No one can walk this gold trail without a modern, updated map. And no one can read this map without a good understanding of the road signs that daily events create. Further, human understanding is developed by allowing ourselves to weigh "reason", by viewing these new events
as others see them. Not just accepting them in the light of past performance.
Things change, life evolves and so too do the reasons and motives for gold. In this respect, oil influence has played a major roll in the evolution of our gold markets. Not to mention the birth and success of the Euro. There will be much more on this later.

Thanks FOA

FOA (01/01/00; 21:19:45MDT - Msg ID:22014)
USAGOLD (01/01/00; 20:07:21MDT - Msg ID:22002)
Series of posts....

I have really enjoyed your recount of the Golconda writings. How true to modern life it is.

Philosophically thinking about our present situation; the current run up in the stock market is a perfect end to a long play. This mad rush to buy anything at any price is indicative if a financial order run amuck. I am struck at how the same process is repeated again and again by our Fed,
each time with greater intensity. Starting with the 1982 Mexican default and the Dow at 700+/-, the federal reserve pushes money into the system. Right into this present day, each and every possible threat to the dollar system is addressed with a more intense cash flood. Now the flood
becomes outright and open with little consideration of the eventual repercussions.
Yet, the entire population accepts this illusion as real wealth for the long term. Truly, a mass of deluded opinions ripe for reality.


I could not agree more with your #21977! In present time, the Washington Agreement has turned the "Thousand ton Gap" into a ticking time bomb. Even before the agreement, stocks of gold were being drawn down. I have often stated that this gap was being filled by private gold holders
exchanging old line physical for derivatives. Because this process was backed by the CBs, there partial withdrawal from the business has set off a mad scramble in the BB camp. Far from the past official leasing announcements and sales, guarantees were hidden from view. This loss is the real
story behind the market facade. The recent small official announcements to lend by other countries indicates that we are at the end of private stock supplies. I expect that the "gap" will now work it's magic in short order.
How this will end in a pricing format is completely uncertain to many. The world has never had to wait out a transition from paper into physical. Usually, it's been the other way around (the dollar in 71). We watch for physical to move as paper becomes frozen. We shall see.

Thanks FOA

FOA (01/01/00; 22:49:45MDT - Msg ID:22020)
canamami (01/01/00; 21:08:25MDT - Msg ID:22013)
Question re Remedies for US Breach of Contract
This is open to the entire Forum, though it may be of particular interest to FOA.

Hello Canamami,
Your thoughts:
--------Is it possible to distinguish between pre-August 1971 Bretton Woods/gold-backed dollars and post-1971 dollars? It would seem that only those dollars which existed prior to August 1971 represent a breach of contract by the US. ---------

I have to put your items in context. Why would it be important to separate the pre and post gold backed dollars? That was not the thrust of the logic presented. The point was that foreign entities would take the US to task in trying to reclaim their gold at $42 per dollar. Simple international contract law does not allow the same contract to be honoured today and not yesterday?? Our present dollars have not changed in legal interpretation from their beginning. Only the Treasury committed an outright default by not supplying gold back then. Truly, the government should have reissued a new currency at the time of default.
Today, any return to backing the dollar with gold would open up a can of worms for the US. Especially in light of the success of the German and Swiss WW2 payments. Again, the whole reason for pointing this out is to highlight the political repercussions from backing the dollar with gold. Many suggest such an avenue and we point out that a new currency would have to be printed to avoid this. It's just another reason why an argument for backing the dollar with gold is impossible and dollar assets are at risk. The US gold stocks valued at any price will not save the dollar.

------Further, even on a purely moral basis, given that the rest of the world accepted US dollars after the 1971 breach of contract, would such acceptance constitute a waiver of the breach, thereby nullifying even a moral claim to US gold? ------------

Would the US risk such a move using this light argument as a loophole? I doubt it and so do a lot of others.

--------Moreover, it appears that by the early 1960's the world knew that the dollars outstanding exceeded the gold backing, yet the world continued to use the dollars? Again, the world accepted the US dollars knowing there was realistically no gold backing, thereby nullifying the moral

So, in the same light, if the world stopped paying off dollar debts they could not pay, does this action nullify the moral claim that everyone should pay dollar debts? Further, if you buy a junk bond that is trading without payments, does your purchase relinquish the issuers obligation to pay you any interest? This logic does not work in your presentation or mine as offered.

-------Does not the continued prominence of the US dollar reflect value to US currency which stems from more than mere "gold backing" or "acceptance for oil settlement"?---------

I ask you, does not the high level of the US stock market reflect it's prominence rather than mere earnings or rational P/E ratios? Truly, the mind in a crowd thinks the common thought, no? Again, Western views are skewered by group acceptance of the contract that "bookkeeping entries" are representing real wealth. It's a fragile view that can be fractured from the competition of a less leveraged alternative. The Euro!

------(Kindly note I am not diminishing the possible importance of the Euro as a competitor to the dollar, or that at some point the huge overhang of foreign held US dollars and the trade deficit will have an impact. ---------

It is impossible for the production of any country to support it's currency if it's currency always flows "out" in a trade deficit. In this country, the negative effects of a reversal of this long term trend will bring on a dollar currency crisis that runs the price of gold well before local price inflation. This is the primary reason why recent investment profits will never transition into gold before it overtakes the illusion of these realized gains. This is the focus of our "reasoning" and push for the purchase of
gold "before the fact". Gold will run well before price inflation is evident (in a large degree). And before resource stocks create an up-trend based on this performance. All in conjunction with a severe downturn in local equity markets that will overwhelm all forms of paper investments (gold stocks included).
Yes, we may see minor runs in these areas prior to the crisis, but these moves will not be connected with the major bull market in gold that is coming.

Thanks FOA

FOA (01/01/00; 22:50:45MDT - Msg ID:22022)
JCTex (01/01/00; 20:59:08MDT - Msg ID:22012)
FOA: end is closer than many think
Any truth to the rumor that the Saudis gave the CBs an ultimatum concerning gold sales?

Hello JCTex,
You must not have read the Hall Of Fame posts by Aristotle and others?


FOA (01/01/00; 23:16:07MDT - Msg ID:22023)
canamami (01/01/00; 22:36:25MDT - Msg ID:22017)
The gold "subculture" - Reply to Number Six, koan


In the future we will read of the paper gold "subculture" that invested mostly in gold derivatives instead of gold. Even with the leverage of mining shares clearly working against them, this group will be questioned as to why they stayed the course. I suspect that they will eventually be buying gold at ever increasing prices, kicking and screaming all the while. Eventually enjoying the benefit of the only way to beat this dollar manipulated marketplace. Physical gold.
I never thought that I would see the day when investors brought into a business that tried to sell it's product (gold) down?? And defended their action with more suggestions to buy! Then when someone suggested to change their investment mix to buy mostly the product (gold) and less the business (mining),,,,,a move I add that would drive the product (gold) price up,,,,,,,,,,,,,that logic is
attacked with pitchfork and fire?????????? Indeed, this logic does belong in a "subculture".

Be back later FOA

Note: ORO, I'm still working on a reply to you.

FOA (1/2/00; 11:36:40MDT - Msg ID:22048)
Mr Gresham (01/02/00; 02:30:24MDT - Msg ID:22030)
FOA -- 30k?

Good stuff Gresham! Re-read your post for a refresh then come here. This is something we can air out. I'll just rummage around some and see if any of this hits home. Will place some of your post comments inline where usable.

Two additional observations came into play years ago when this whole timeline was being worked out. One of them:

---A major flaw in the fiat system was in selling people the idea that money need not be wealth.--

This is something Martin Armstrong pushed a great deal in his pronouncements. I made an open post to him on this forum because his position was in direct conflict to human nature. Lo and behold his personal clandestine actions later proved out my point. Truly, most modern thinkers don't trust
contract fiat money and understand "things" much better. Only they try to hide their perceived weakness. Indeed, he quietly owned a bunch of gold!


In real life, everything is our wealth and simultaneously our money. Houses, cars, furniture, pots
pans, you name it, it's all tradable in a duel format as money. In fact real things were what people traded in the beginning. Modern economist love to regress this function and use the term "barter" in a way that "dirties" it in the eyes of modern educated man. The use of things as money has always been the natural way people trade and the most understandable method to compare value by applying an "efforts to acquire" worth to unlike items.
Advancements in our infrastructure brought on the need to use contract wealth (receipts for delivery) as a means to trade efficiently. (You know, the old receipts for gold in the vault story bankers started.) Over time we lost the grasp that by using money to buy and sell real wealth we
were still just trading real wealth as in the beginnings. Only now we are using money to denominate the trade. Again, modern economists contradict the facts by trying to convince us we are really trading dollars, not the wealth they represent. As if I buy a house from you, I get the house and you get the dollars as the end trade. In reality you have only taken what the dollars can buy, "real wealth", not the subjective paper value. I could have just as easily given you ten cars for the house and we both would know exactly where we stood.

So, in a larger sense the entire world economy is in effect trading "things wealth" for "things wealth". The nation state's moneys have nothing to do with how rich we are. Today, the grand illusion of paper money has evolved into -------we equate our life savings with how much we can
buy, not how much we have------. The concept holds little reason for most people to worry as long as the world works. But, if the world changes, our savings are suddenly not what our wealth really is!


The second flaw arrives in the form of: --------"currency inflation slowly transforms fait money into a futures contract"-------
In a broad sense, IF the money supply is created in "lock step" with the ability of the economy to produce, everyone could take their money and buy a "newly made" item the first day,,,,,,, And the persons that received those paper dollars could turn around and buy another "newly made" item the next day and so on. In time, more and more items would come into ownership and there possible supply on the resale marketplace would increase. But, as the money supply was only fixed to the new production ability these increases in real goods, the increase supply of "owned" goods in the
marketplace would drive up the value of paper money.

This would not be a problem except that our money makers decided to name this affect "deflation" as the paper value of goods in existence fell as the money value rose in direct converse fashion. This process would not effect anyone if it was a known effect that everyone planned for. But bankers and governments never plan for it nor do they want it.

So, along the way path to money inflation, someone decided that the money supply should increase in somewhat matched step, not only with the production of new goods, but rather with the total supply of owned goods. This was accepted as good economic practice and it's application
ordained an ever increasing world money supply to match the perceived world wealth in existence. Our constant building money supply is always viewed as a good thing. Indeed it is even a major component of all relative tools that measure our economy. An illusion that says "if our money is
increasing, our economic system is growing". Again, at the very least, this guaranteed that the value of money would not "increase" on it own (hence the need for a "return" on cash in the form of interest) and the money denominated value of "goods" would not deflate. But, perceptions changed
and the process evolved further.

In time, the perceived purchasing power (and worth) of dollars was extended to include what goods could be produced and therefore brought in the future. Not just today's production plus the existing supply of owned things, but also future delivery from a perceived infinite economic
production base. This is where they justified the long term, massive debt build-up that has leveraged our economy far into the future. And done so on a scale unknown to mankind.

In effect, the world has accepted a money supply that created a money supply in gross excess of the worlds present things. Truly, this present reserve system does not price our real wealth of today, rather it prices our "perceived" wealth today as if it is produced or purchased today. Yet,
this "real trade" for "real wealth" cannot happen until far in the future. This is the fundamental reason why dollar inflation on a massive scale has not produced a matched price for wealth owned today. People hold the ideal that any amount of US debt is as good as "real wealth in the bank", also known as "money in the bank". All the while lacking the grasp of any tools to measure just how far out of reality "existing debt money" is in relation to what it can buy, in mass.

-------------Your words:----They see it as wealth storage, FOA says. It also turns out to be a wise use of Gresham's Law, encouraging the use of a wisely-managed ("I only have to run faster than you," said the Euro to the Dollar) fiat currency in trade, and keeping the gold slightly off-stage
(or well-displayed in the bank window as in the old wildcat banking days in US) for effect in earning world respect. Kind of trying to blend the best of 19th & 20th centuries. ---

Our present financial structure and debt leverage was built on a platform that said " " "the dollar would always be credible as a "contract money" far into the future. Lost in this credibility is the risk that any move from world dollar use would force this contract into a bookkeeping change that revalued the dollar in present tense. In other words, a huge price inflation that matched the dollar to
current goods and production. Such a change has happened to other currencies and peoples all through history as money power moves from nation to nation. Only never before was it done when gold had not "marked to the market" the currency value loss on a regular, ongoing basis before the fact. Today, this transition of real wealth buying power from a single reserve system to another will force the dollar price of gold to soar to levels, we cannot understand. From this stance we can understandy why many have viewed gold as a riskless holding that will be revalued. If it was part of
your mix, the transition would always make up for any return lost from not holding other assets. Indeed, it is the very untimate in a super leveraged investment. No other currency today could expect a 1,000% to 10,000% rise in value against the dollar, none.

Now, if one can look closely we understand the need for gold in the background of a new reserve currency. Only gold has the ability to carry the load of this perceived wealth transfer without a catastrophic loss of world economic process. And do so in a format as common as any stock of treasury bill asset. Gold at $10,000+ will be as common as Yahoo at $400+. Just like a US treasury bill at $10,000 face, one ounce will be just another "money in the bank"!

-------Your words again: -----Most of us would settle for protection against inflation of things in general, in a time of crisis. And that is something we assume gold would give us, whether the inflation increment turns out to be 2x or 10x. FOA says the dollar supply is out there for the 10x
inflation of things in general (?), but is the same pool of dollars being "counted twice", once to go into things in general and the other into gold as a default crisis insurance?--------------

My friend, count it at least once+ for the present and ten times+ for the future. This will match the lost future buying power of dollars held in savings today. Then you will know where the real dollar value of gold in transition lies.

Thanks FOA

FOA (1/2/00; 11:39:33MDT - Msg ID:22050)
Welcome back Stranger. There are two sides on every trail.


FOA (1/2/00; 18:34:26MDT - Msg ID:22078)
TheStranger ( Msg ID:22056)

Thanks Stranger, that's all in the past now.
The future is before us.

Mr Gresham (1/2/00; 14:17:31MDT - Msg ID:22060)

Thanks Mr. G..
My #22048 was a hard complicated piece to produce. After reading it again I saw many spelling and english usage mistakes. But I hope it offered a springboard for concept. I'll write it again more clearly if you want.

This perception is the basic foundation that has fuelled the drive for a new reserve currency. Even if this only amounted to an establishment of another like the dollar (without the lineage of debt for baggage). Understand the reasoning in this and we can clearly see where the dollar was going without any political leverage to change the US course. A world wide hyperinflation that would impact every economic aspect of world trade. Today, that same inflation results will be contained by devaluing the dollar in gold with another reserve currency available for use in international settlement and reserve holdings. Instead of a world-wide event, the effects will be mostly felt only in
countries that have little gold and no Euroland trade reserves. Yes, the US has some gold, but this limited amount is frozen from effective use by the "duality" of the dollar. Today, the dollar is a citizen of two worlds even as the gold that must back it belongs "politically" to the a single
American people. There can be no clean resolution of this as we can't print a new money and we can't back the one we have.

Granted, this transition will amount to a financial paper deflation and goods price hyperinflation in some of the largest economies (US, Japan, Canada, Australia, etc.), but the majority of the worlds population will be somewhat shielded.
I am jumping way ahead of the fact here and should wait for political motives to set gold on this new trend line. But, I feel many here will understand this now. We shall see.

Thanks FOA

Note: This week is going to be big. I bet gold ends the week with a gain and the dollar is hit.

FOA (01/03/00; 06:13:31MDT - Msg ID:22110)
PERMAFROST (1/3/00; 3:35:05MDT - Msg ID:22106)
Dear FOA
I thought you may mistake the tone to be on the inflammatory side.

Hello again PERMAFROST,
Did you ever go to a family gathering where everyone is in the living room after dinner. They are all talking over each others conversation,, get the picture. Then someone asks uncle Bill a question about his favourite political / religious subject. He goes on and on and soon is on the edge of his chair talking ever louder. Next he is up, walking around waving his arms in the air and seemingly telling everyone about his views. Finally, someone says, "Bill why are you shouting?" Bill says, "I'm not shouting"?

PERMAFROST asks, FOA, why are you answering in a defensive way? FOA says, "I'm not defensive!" (big smile) Sorry PFrost, I'll try to sit down when I talk.

Be back later (answer the rest)

FOA (01/03/00; 18:06:02MDT - Msg ID:22156)
Long over due reply to ORO!
ORO (12/29/99; 12:15:39MDT - Msg ID:21792)
FOA - Pump

Hello ORO,
Your follow up post about the IMF money pump was very interesting. You state: ----- You are indicating (FOA), it seems, that the current consensus in the G20 is that the dollar reserve system should be allowed to slowly dissolve into cash full oblivion. --------

Yes, offering this analysis from the view that the dollar is being driven into a "cash position" is right on the mark. In hind sight, this would be the only way to prevent the reserve currency from deflating through the obliteration of world dollar debt. Further, as the Euro takes a larger and larger portion of debt financing, the left over dollars holders are forced into an ever more short term maturity. If you were a dollar holder and could see the transition ahead, you would not want to lend long either. This effect is well understood looking backwards, as it was usually caused from the Fed tightening credit. Today, the squeeze (on longer term dollar credit) comes from a perception that this market may be falling away. Making room for the Euro. Eventually culminating in an "almost cash" position for the dollar, the fastest moving currency derivative of them all.
I think this has to be the first stage of "flight" before a true gold run begins. This is the period where no past guidelines direct the trading. Everyone is looking around and saying, what are you going to do? Most will shorten maturities offered and feed slowly into the Euro and gold as a hedge. As you know my thoughts about the paper gold market; the enormous sums of floating dollars will easily crush this illusion. Long before any significant paper is exercised into physical gold that market will discount cash price in a big way and close.
Back to your thinking; notice how the Fed is still pumping money even after the year turn over! The liquidity squeeze is arriving and it has nothing to do with price inflation, Y2K or the stock markets. Another force is at work in the world today and it is attacking the dollar behind the bushes. You mentioned the Japanese and Eu banks in the carry trade. The Japanese are and always have been up to their eyeballs in US paper. They have to stay this way because of their dollar trade deficit. As they continue to decend into deflation, the strong Yen still locks their hands from selling our debt and the BOJ has always known this. So, they continue to add dollar reserves on balance with this deficit in an effort to keep the Yen from rising even higher and killing their US market share. These people are done in and will eventually print Yen (hyperinflate) in and effort to match any US dollar price inflation. Locked step to the end! The EU can play the carry game as long as they hedge in Euros (or gold) because it will balance the dollar fall. They will some day be seen borrowing Euros at 4% (??) and buying Eurodollars at 30% (??) or something like that. What else can be done with the eventual pool of Eurodollars floating offshore the US? It will already have
been devalued against gold and they will still want to trade with the US. After working through Exchange Rate controls that is.

ORO, more clearly, the period directly before us will be like a fiction book. Good reading, but I don't believe this is happening! Once the Euro gets it's legs, there will be no use for a Eurodollar holding as long as the US keeps it's trade deficit wide open. As the dollars flood in, we cannot
spend them in Europe because we will have to buy Euros first. As the existing Eurodollar holdings go further into cash mode their value must fall. And fall big!
These paper bullion boys at the front desk talk about all the excess ECB gold that must be sold. They are going to sound like the Y2K bugs after the fact. When the ECB and the BIS start moving unneeded reserve dollars for official bullion (this has started already) off market, we will see it in the US % rates (like today) and the Exchange rates (like today). The real bugs in 2000 are going to be in the paper gold market. Just watch it all unfold!

Thanks FOA

FOA (01/03/00; 18:46:32MDT - Msg ID:22158)
This tells it all! I'll be back much later.
Read it on this site!

On borrowed time?... Last but not least, I want to share something that Dennis Gartman wrote late last week when I was out. It is the perfect period piece to capture the mood of what is really going on. To any sane person, it should be frightening; but then again, anyone who's frightened isn't having any fun. And those who are not frightened are making gobs of money speculating their heads off. Here's what Dennis said:

"As a final aside for the year, we went to our local branch bank yesterday to transact some business [Ed. Note: we actually got some cash for the Y2K `turn'...just in case!], and spent some time chatting with the branch manager. She does not know what business we are in, so when we asked her if she'd seen any increase in personal loans she replied out of hand that indeed she had. Indeed, the personal loan demand at her branch had escalated rather substantively.

"She then proffered that the sole reason for the sharp rise in personal loans was the investment in the stock market. She said that local doctors, lawyers, farmers, auto dealers... all of the leading figures of the local economy (and their wives) had been in recently to borrow money to `put into the market.' We asked her how long this had been going on, and she said that the branch had been making personal, signature loans like that for some while, but that the demand had really escalated in the past several months and has really become `hot' in the past several weeks. She
wondered if it was too late for her to join in the market's enthusiasm!

We said, `We don't know,' and left bemused and afraid.

"It is perhaps not new news, but we find it odd that the public is borrowing money on signatures without collateral (other than CDs and/or sizeable demand deposit accounts) that is then used to buy stocks, very probably upon margin. The leverage is immeasurable, for the public is apparently `Reg-T'ing' money that it has already borrowed with nothing down. She said that those who've been borrowing the most indicated that they `could get more out of the market than the interest charge,' and considered it unwise not to take advantage of the circumstance.

"Friends and clients, if this is not rampant, tulip - bulb' - like speculation of the worst sort, we've no idea what is. Of all of the things that we've read about, heard about and discussed at length concerning the mania that is the U.S. stock market, this is the most manic of all. When speculation comes to small-town southern Virginia, it is rampant and it is dangerous. We have at this point said enough."

FOA (1/4/00; 19:24:50MDT - Msg ID:22282)
I guess everyone knows by now that I am somewhat "irregular" in my replies here. Still, I read
most everything when time comes my way. My linkup saves all the forum (even when I'm not around).
A few quick notes:

Aristotle (01/03/00; 17:39:33MDT - Msg ID:22153)
Aristotle, you prove the point that one person cannot understand everyone, nor can everyone understand the thoughts of one. You have a wonderful way of presenting things. Thanks, so much!

PH in LA (01/03/00; 20:59:55MDT - Msg ID:22175)
Another's e-mail address
" Geneva Steel Company, located in Provo, Utah;" ????

I'm thinking real hard as to why someone would set up in Provo to do that,,,,,,,,,'still thinking.
No, can't make any connection in my mind. (smile)

There is an old saying; "children of the sand curse the sun, yet run from the night". Adults often act the same way when they lack understanding of the world around them.

I'll be back when I can, PH. And be certain, so will Another.


FOA (1/5/00; 21:29:01MDT - Msg ID:22374)
Wednesday January 5, 5:24 pm Eastern Time

Silver Falls on Dumping Fears

By The Associated Press

Fears that China will dump silver on the market sent silver
futures prices sharply lower in trading Wednesday on the New
York Mercantile Exchange.------------------

------------Silver prices plunged on a report in the semi-official Peoples Morning News that the Chinese
government will sell some of its silver reserves. The amount of silver to be sold was not mentioned. However, China is believed to have 93 million ounces of silver in reserve, according to analyst James Steel of Refco. Inc.

China is currently producing about 1,300 tons of silver annually, while consumption in that country is about 800 tons, making it plausible that a sale would take place, Steel said.--------------------------

FOA (01/08/00; 17:34:05MDT - Msg ID:22538)
To ALL: I'm trying to catch up now. More to follow.


Sorry to see you go (if you still are gone?). I'll reply to your comments, somewhat in order.

You write in :------------

PERMAFROST (1/3/00; 2:31:57MDT - Msg ID:22103)
FOA Msg ID: 21859 Part 1
Dear Sir, Thanks for your response.
--------You are advocating a global financial system predicated on the peaceful and mutually-beneficial "concubinage" of gold and the "new girl in town" fiat money the Euro which you unwarrantedly presume to be relatively more "chaste" than the Old Whore, the US dollar, ONLY
because it is not "backed" by as much debt as the dollar, and its "lovers" (the EU Central Bankers, the Rothschilds?; an assorted variety of Illuminati and various other power brokers playing both sides [the sheeple?] against the middle [more sheeple]) tip their hat at gold without solemnly
declaring their allegiance at sovereign money, PM etc. ------------------

No Mr. Frost;
I don't advocate that. I think this is your perception of future events. This transition will not be "peaceful" in any way. Any time one large official faction (Dollar/IMF group) has it's money power replaced by a new official faction (Euro / BIS), it's never peaceful and not without significant loss of wealth by some of the players. I add that both little and big players get hurt when these events happen. Usually, it's the little "uninformed" players that lose the most. Your observation that people are "sheeple" comes as they step in front of a train with no breaks. Then
you tell the world that "someone" is out to get them. My experience is that the average investor is much more intelligent than that and they can do a good job of "moving" off the tracks if it's pointed out to them that a train is coming.
The dollar is giving up it's reign as a reserve currency, not "only" because it has so much debt. It's being replaced because it's inflation (total money supply, dollar derivatives supply, dollar debt supply and the official liabilities foreign nations hold as reserves supply) has discounted so much future real US production, at a constant exchange rate, that it is losing the ability to function as a reserve currency. Every currency on earth has one day come to this end. We call it a "fiat money's timeline". At this point the users of this money begin to either "deflate it's supply" through debt and payment default, or the they devalue it by bidding up the value of real goods (price inflation). Once either of these begin, the money function of that reserve currency declines. Further, one will find
that deflation is only a choice is no other official world currency is available to run to. World citizens vote with their feet at this point and greatly discount unpayable debt thus causing said deflation. Inflation is the choice when people can "refinance" into another currency media. Leaving the old to contend with an ever increasing velocity of the useless money supply. This is the fate that waits the
Is this some structure brought about by a New World Order? If you want to see it this way, then remember the world has been doing this from creation. I only add, why bother to put the "New" on it? Let's just call it "Next World Order"! Besides, it's only one peoples as a nation group (EURO / BIS) trying to protect their wealth because another nation group of peoples (Dollar / IMF) borrowed more that they could ever pay back! Still, I read this New World Order faction (NWOF) as loudly declaring the Euro as a fraud, yet they (NWOF) are hip deep the dollar assets of a country that "defaulted on it's gold delivery. Twice! Then they (NWOF) yell because no one is creating a new gold or gold backed currency. Why do that? So we can be defaulted again by the "NEXT World Order"?

You write:

This fiat money is necessary, you say, because it will allow management [manipuation] of the economy without suffering the deleterious side effects that a rigid gold standard has saddled us with in the past. Would you care to draw for the benefit of the forum the the philosophical line that
separates you from, say, an Alan Greenspan, as per the gold/fiat money relationship? do we not have TODAY a fully-floating POG alongside the dollar? What shall we gain in re-baptizing fiat money with a different name, i.e., the Euro? except the prolongation of the Game? IF gold IS
money than nothing else is. Disagree?

No PM;
We don't have a fully floating price of gold today. This is the illusion (paper gold) that has many people (such as yourself) locked into a narrow view. Mr. Greenspan has always seen the gold money relationship from a US dollar perspective and holding the US as the only dominating
financial power. He knows that the dollar could never retain it's position if gold became a "separate settlement currency" through a true world free physical market. All of the dollar price inflation that is currently locked into the present dollar supply inflation would present itself. Dollar reserves held world wide would become useless unless they could be used to buy real US goods (at a non inflated price).
Truly, Mr. G. only sees gold from a Washington view and even that must be locked in the cellar. He manages a system built by others and must use the tools this system allows. The present paper gold market is as much a function of the dollar value as interest rates and it is controlled as such.
Today, gold is money, I agree! But, it is not and never can be a fluctuating (in supply) digital money of high speed settlement. For it to work it's past magic in this modern world, it must trade in physical form without derivative use. It will.

You write:

PERMAFROST (1/3/00; 3:02:19MDT - Msg ID:22104)
Reply to FOA Msg. ID: 21859 Part 2
Capitalism, this familiar but insidious term really stands for the willful confusion of a descripitive proposition [that private property exists] with a PRESCRIPTIVE one [that private property and the wealth that can be generated from it is GO(O)D]. -------------------

No PM, not at all.
This is the standard (higher level) teachings in modern Western education. History proves that "real private property" has and always has been both wealth and a purchasing power medium (money). Through the best of times and the worst of times, in war and peace, people have always had private property. Even in Russia of old, they had to allow people their things. Even if these positions weren't recorded "officially". A universal truth is that no form of
official ruler-ship can function unless people have some private wealth. Never has worked for even a short time and never will. Further, generating more wealth from private property (owned wealth) is only good if one can overcome the "RISK" that comes with it. This is nothing new to most of the world. It's just a different concept for modern Western man.

You write:
It's a logical fallacy that doesn't survive the glare of critical analysis. Omit the adjective "private" from the premise and what you end up with is the other side of the coin, or communism. Both systems are basically worship of materialism and humanistic (man is the measure of the universe) propaganda. Now, whereas communism theoretically aims at generating its "GOD", or 'goods and services' in economic parlance, via the sweat and toil of its fellow gods (the proletariat), capitalism is predicated on CONSTANT INSTABILITY [the insidious rhetoric of the bankers
notwithstanding] of the prices of these very goods and services, the [managed] fluctuations of which allow the people Greenspan works for to earn wealth they did not work for. -----------------

I'm glade you understand this ages old function of humanity. Through out time and space our life quest is influenced by others that try to control our desires. The successful time traveller lives his days in harmony by adapting to the "lay of the land". Today, it's time for gold and Euro assets. Indeed, what you have just written is the very action that has brought the dollar to the end of it's

Again, your words,

PERMAFROST (1/3/00; 3:09:12MDT - Msg ID:22105)
Reply to FOA Msg. ID: 21859 Lastly,
As to even the 'emperor running to higher ground when he sees the flood coming'--if he were to do so, he'd be emperor no more for what makes an emperor an emperor is the "land" he rules. Without it he's nothing.That's why captains do not abandon their sinking ships; and why sometimes even emperors get their heads chopped off. To die an emperor is perhaps preferable than to live as a normal human being for some...You?--------------------------------

In addition PF, the history of gold shows how one may remain in their chosen land and retain their wealth. For gold needs not return to a native place to receive it's value. We do indeed chose the high ground, with or without our heads. (smile)

Further you add from :Msg ID:22104
Therefore; I find myself obliged to conclude that, due to your avowed devotion to the Euro and the "The King is dead; long live the King" tradition it propounds, the only difference between you and an "Alan Greenspan" lies in your respective handles. If you already are not one of them, you wanna join 'em. Incorrect?

Very incorrect my friend. The difference lies not between myself and others, rather between the life experience of "you" and "I".
Somewhat like the movie "The wind and the Lion":
You like the wind hold the power of force in your words. I as the lion roar in defiance as the sand stings my eyes in a
land I cannot leave. Yet, as a lion, I know my place on earth while as the wind, you will never know yours!

Thanks much,,,,,,,,,,,,,,,FOA

FOA (01/08/00; 18:04:52MDT - Msg ID:22540)
USAGOLD (1/2/00; 14:16:18MDT - Msg ID:22059)
Once in Golconda.....More Parallels: Soaring Averages a Rousing Spectacle/Decay Underneath
-----The persistence of the idea that all stocks were going through the roof in the autumn of 1929 is a monument to the power of popular myth." --------------

Your Once in Golconda was wonderful. It speaks volumes of our present situation; the inflation of the dollar as it is presented in equity valuations. Mountains of currency supply with nowhere to go! The difference between now and then? Today, we have an alternative currency that unlike the
past gold standards will not force a "deflation effect". We will have our dollars and we will have them in good supply. To the end.
I (We) expect this to continue until the dollar is devalued thru a defaulted gold market (and soaring physical gold price) and further devalued from "settlement function" by the Euro. This is going to be an exciting time to witness. FOA

FOA (01/08/00; 18:06:38MDT - Msg ID:22541)
mhchuck (1/2/00; 20:29:16MDT - Msg ID:22082)
-------------There's an old saying that "A man with one watch, always knows what time it is, but a man with two, is never really sure."... I have discarded all other time're it. It is not such a dangerous maneuver for me personally as some might think. You see, I "know" where the trail is going, but with your higher perch, I will improve my visibility. But whether or not any of your
"pre-vision" comes to fruition, matters not, (although it might matter to you for having put it forth)
....the fact is, I like the way you tick. ----------

Thanks mhchuck!

Watching the world turn with a physical gold watch will be an easy experience. And an educational one for us "regular people". The human interaction between "high standing" paper financial players will teach us all where the truth is. Indeed, they are not losing something they have. Rather something they perceive they have. A big difference. FOA

FOA (01/08/00; 19:55:11MDT - Msg ID:22544)
Hello canamami,

You write:
canamami (1/2/00; 22:43:33MDT - Msg ID:22091)
Reply to FOA - Possible Demands re Gold Breach of Contract
I believe the recent demands made against Germany/Switzerland flowing from World War Two, and the end of gold convertability under Bretton Woods, are almost completely disanalogous;I don't see any demands ever arising against the US flowing from August 1971. The demands against Germany/Switzerland are heavily tied in with moral questions relating to Holocaust-type issues, and all that that entails. Whether rightly or wrongly, portions of world
opinion (particularly important groups in the US, and the broader world community) continue to view a continuing moral culpability on the part of Germany and Switzerland. On the other hand, the end of gold convertability was a pure commercial matter, somewhat akin to a bankruptcy, not
giving rise to important moral issues. -------------

No Mr. C;
A great many people were impacted along with their lifestyles. The dollar was devalued through price inflation during all of the remaining 70s and this directly lead to much of the stress in world affairs. Many smaller countries saw their citizens almost starve because of the changing cost of goods.
Further, important people only recognize a wrong as a "moral issue" when a public door is opened for "resolution" of that issue. Regular people must wait for justice untill the force of reality comes into play. Just as the demands made against Germany/Switzerland were buried for decades,
that didn't mean they were concluded, nor would this repudiate other precedent setting actions that occurred later in time.

You write:
Remember, every other country ended gold convertability, and some of these countries did not disestablish the previously gold-backed currency - for example, Canada kept its dollar and Britain kept its pound, though gold-backing ended for these currencies. ------------

Indeed, these countries held dollars "as their gold" by international treaty. Just as a person has no more money after being robbed, dollar reserve countries after 71 were forced to use whatever money existed (they had no gold because the law said the dollar was a contract for it). People are not so shallow as to accept your "disestablish" reasoning. Watch someone in a store, given a choice of two, they will purchase what offers the best value. Only when one item is offered does the obvious become a naive selection.
Canada and Britain did not later back their currencies with gold, did they. Nor will the US!

Your words:
Also, neither Germany nor Switzerland expressly stated - "no more claims will be recognized flowing from World War II". However, the US has expressly extinguished any demands
for gold against the Treasury, except for some very old issues of certificates and dollars. Thus, the US has made an express policy decision that no demands are to be made against its gold. This has not stopped the rest of the world from continuing to view the dollar as the pre-eminent currency.

Mr. C,
If the US expressly stated as policy that the sun will not rise are we to accept it? Again, a world pre-eminent currency is one accepted from a background of "choice". No other currency was presented for use in a major settlement function capacity. Today the Euro has.

I offer Journeyman's post (thanks Journeyman)as a further argument:

Journeyman (1/2/00; 23:41:12MDT - Msg ID:22095)
Stealing is not immoral? @canimami
The stealing of the gold from "foreigners" in 1971 by the US Gvt. in cahoots with the Federal Reserve by refusing to redeem redeemable notes, specifically redeemable in gold and as specified in the US Constitution was the SECOND biggest robbery in the history of the world. The FIRST biggest heist was pulled off by the FED & USA Corp. in 1933 when the same perps, this time headed by Franklin Delano Rosevelt, similarly stole the gold from its own citizens.
The question is, I guess, since these two events are the two biggest thefts in history, is "Is stealing immoral?" Well is it? Or do you excuse those organizations calling themselves "government," no matter what they do? Or is only when YOU are the beneficiary that anything goes? Regards,

Further from your post:
The bottom line: the US will not entertain any claims against its gold on either a moral or legal basis, and I don't believe any claims will be made against it either. This matter has been resolved, and the US would disregard any attempts to make this an issue, though I doubt such attempts would even be made.------------------

Sir, you have spoken a very clear "Western viewpoint". Truly, it does look different from other directions.

Thanks FOA

FOA (01/08/00; 20:52:00MDT - Msg ID:22547)
Only part of this post:
USAGOLD (01/03/00; 21:47:51MDT - Msg ID:22184)
Deja Vu...
I thought it a deja vu. This afternoon I read the following in Adrian van Eck's "Money Forecast Letter" for January which I received about two weeks ago and just got around to:
----"We are of the opinion that the Money he and the Fed have been creating in the past two months (going on $200 awesome amount ) reflects his efforts to avert a crisis situation that is being kept hush-hush."--------

They may take some of this back, but only a small bit of it. All one has to do is follow ORO's posts to get a feel for what is happening. (ORO, I'm getting to your good stuff!) The dollar is being challenged by the Euro in a very big way. And it's happening even faster than expected. I think several other measures were available to the BIS if the transition had not already begun. It's possible that the dollar will come under massive pressure this year if we continue this way. The Fed has no choice but to cover the liquidity drain. Eventually, this will break the paper gold pricing grip on the physical metal. Truly, the ECB is letting the dollar system rip wide open from it's own hand.


FOA (01/08/00; 20:54:42MDT - Msg ID:22548)
Hello Beesting,

beesting (1/4/00; 10:00:31MDT - Msg ID:22242)
Steve H- "Good one #22209!"
ORO- Great posts today--Thank You!!
FOA, I have researched the above URL "BIS" site, and my conclusion is, the BIS only conducts business with Central Banks. So, in the recent Dutch sale of Gold, and future Gold buying by the BIS, ALL that Gold would stay withen the Central Banking System, and have NO effect on world
"normal consumption" of Gold.----------------------

Actually Beesting, you hit the nail right on the head. The BIS is the only entity in the world that the dollar/IMF (and LBMA) worry about. That is because they can move gold between CBs at any value they want and do so without any supply passing through the paper markets first.
As this sinks into the minds of paper players, they will realize just how inflated the contract market is in relation to what physical gold is available to it. Remember, Euroland backed away from the dollar gold price illusion early last year. They would have stepped in and brought physical
to support the price. Instead they stood back and let it drop down to the $250 range, as they must have had the "Washington Agreement" in the works.
It no longer became a question of price, rather a question of when? I think it was because the Euro started out "too strong" in the beginning. They needed market acceptance and usage first, then begin the process of marking dollars to the gold price. I am expecting this year to produce some concrete moves in this direction.

You write:
FOA, do you agree with that analysis? Or, do you think the BIS could enter the world Gold market, replace the LBMA, and buy and sell non-paper Gold only? In My Opinion it would be a large European Bank that would first compete with the LBMA, and then after a collapse of paper Gold, join forces with The LBMA, sometime in the future. Your thoughts and opinions are always greatly appriciated ....beesting.-------------------

I think the ECB will eventually sanction a physical gold market in Europe that trades and settles only in Euros. The LBMA will eventually fall completely out of the picture as their product comes into question.

We shall see FOA

FOA (01/08/00; 21:08:07MDT - Msg ID:22551)
Peter Asher (01/08/00; 18:00:01MDT - Msg ID:22539)
FOA, fan-tastic

Thanks, I thought it made a point. (smile)


Cavan Man (01/08/00; 18:22:11MDT - Msg ID:22542)
Don't sugar coat it my friend!!!! What do you really mean?
Have you forgotten Cavan Man? Questions like; " Dr. Mundell's work just a coincidence from your perspective?" and, what is emperor AG up to? Will he take the high ground?
Kind regards this evening.....

Cavan Man,
No didn't forget, just trying to cover as much as I can. Dr. Mundell's work?? Well, I'm only one slice of a big information pie. As events progress, the opinions and thoughts of many will become reality.
No, AG cannot take the high ground. You read my other comments about him earlier? He is doing damage control, that's all.

Thanks, more later FOA

FOA (01/08/00; 22:15:47MDT - Msg ID:22557)
More discussion, my friend:

canamami (01/08/00; 20:43:12MDT - Msg ID:22546)
Reply to FOA - #22544
FOA, for ease of reference, I will repost a reply I made to Journeyman, then I will add a few brief comments. First, here is the repost:

Of course stealing is immoral, and it would have been preferable for the US to comply with Bretton Woods, or to withdraw while it was still able to meet extant obligations, so there would not figuratively have been a "breach of contract".

That being said, we are dealing with the actions of sovereign states, which are indeed immune from the ordinary principles of contract law, including the principles of private international law as they relate to contracts. My post related to the assertions of FOA, that the US would face demands for the honouring of gold backing just as the Swiss and Germans faced demands relating to Holocaust-related matters, years after the fact. I countered that the two matters are too dissimilar for there to be a valid analogy - i.e., like comparing apples and oranges.

Mr. C.,
I ask, were not the Swiss and Germans also sovereign states? Were their actions allowed as related to international law? In addition, I'm not trying to draw an analogy as you perceive it. The precedent was that the dollar was a certificate for gold in storage, not a debt owed to someone else. The closing of the gold window in 71 was a "taking of physical property" in much the same
light as "taking someone's private property". I make this point not because the BIS "is" about to ask for gold, rather that the US will never again back the current US dollar with it's gold. They must create another currency medium first.

You state:
However, if obligations relating to 1971 are to be dug up, then the US is free to dig up the defaults of countries after WW1. Back then, basically all currencies were completely gold-backed. In the course of WW1, the major countries became indebted to the US. Except for Finland, all the Europeans defaulted on their official debt to the US. So, if some countries can dig up ancient breaches of contract like 1971 (at law, an ancient issue, and I would also say a breach that has already been waived even on a moral level), then the US can dig up the WW1 breaches of contract by European countries - with accumulated interest. Also, such demands for compensation are made against Ger/Swit because Germany/Switzerland are willing to listen to such demands. On the other hand, the Japanese have ignored demands to compensate Hong Kong veterans and others
who were tortured, and to compensate the victims of the Rape of Nanking. Thus, few demands are even directed at Japan. This is how sovereign states generally operate. Given that most of the putative complainers concerning 1971 have "shafted" the US in the past, I doubt any demands for the honouring of the Bretton Woods gold backing will be made.

Again, the closing of the gold window was not a debt issue. None of your above items are relevant. The US seized gold belonging to others by not shipping what was in vault storage.

You say:

Thus, FOA, I disagree with your assertion that the US will ever face demands relating to the 1971 closing of the gold window. Subsequent to closing the gold window, the world agreed for a time to currencies directly pegged to the US dollar, and then that arrangement ended. ----------------

My friend, the dollar reserves held in foreign banks were not these "pegged" holdings you speak of. Foreign moneys pegged through exchange rates to dollars is one thing. However, there were real dollars held as gold certificate reserves by these Central Banks. There was no arrangement on this issue. The US took their gold plain and simple.

Your words:
However, the fact that the rest of the world adopted the US dollar as the baseline currency after the closing of the gold window suggests that most of humanity did not view that a great injustice had taken place by the closing of that window; in fact, that closing was seen coming for years prior to 1971.

In the same light, was the inaction on Swiss and German issue a sign of acceptance? Apparently not!

Remember, the US did not seek out the role as reserve currency to the world after WWII, it agreed to accept that role only after pleadings from other countries. Moreover, any country that distrusted US dollars could have demanded gold instead. ---------------

My point exactly. The very fact that the US shipped so much gold prior to closing sets the precedent that the dollar was a gold certificate, not a debt or IOU. It was payable on demand for many years.

Further in your thoughts:
It is fanciful to believe that demands concerning 1971 will be made now against the US, and even more fanciful to believe that anyone would take such demands seriously. To use legal language, the limitations period has passed, and in any event the breach was waived. Further, a history's worth of demands could then be reopened. The US could demand repayment of WWI-era debts, with interest. It could demand reparations from Germany and Japan for WWII, against the Arabs for oil supply contracts broken during the Oil Embargo - it would never end. This is a can of worms the world will leave closed.

I submit that it is "fanciful indeed" for one to think that the pre 71 dollar was a debt of gold. Clearly, all the evidence says it was not. The dollar represented gold held on deposit for any Central bank that requested it. Because most foreign citizens could own gold in their countries (US
citizens could not), they were free to ask for gold from their local banks in return for dollars. Thus, the US having taken the gold would become a private action if they ever backed the same dollar again Will this is a can of worms stay closed? Absolutely! The dollar will never be backed with deliverable gold again! Believe it!

Thanks FOA

ON to ORO!

FOA (01/08/00; 23:38:28MDT - Msg ID:22560)
Last post for a while
Hello ORO,


ORO (1/4/00; 8:09:17MDT - Msg ID:22235)
Talking Physically.
FOA (01/01/00; 14:42:33MDT - Msg ID:21993)
--->All the while, the bullion buyer slowly amasses a large "highly leveraged" position, just by channelling his would be trading loses into paid up physical and rare gold coins.

FOA has clarified the issue further, but I will post this anyway.

In the way of clarification for others, I think FOA is trying to tell us that the leverage is indeed there, just that when one buys bullion without leverage, the leverage you have is that put against you by the couner pairs to your "cash" position. Most notably, the counterparties in a typical gold transaction have claims traded among themselves and physical gold sold into the market. The trades involve a lender, a borrower, a bullion bank, and a physical buyer.
--The bank is both long and short gold denominated or gold indexed obligations. This is a complex multiple contract position. More on this later.
--The borrower is short "physical" which is due for delivery. This is a contract obligation. Gold miners and bank trading desks, as well as speculators hold these positions.
--The lender is long gold denominated obligations. This is a contract position. The contract is as good as the counterparty. If you own a gold account, or are long a derivative contract, this is what you have.
--The cash buyer holds gold bullion and is obligated to nobody. His holdings do not rely on anyone fulfilling an obligation.

The leverage built into the market, which we goldbugs will benefit from in the long run, is that of the many obligations denominated in gold. We need not buy leveraged instruments, because the leverage comes from the extreme volume of gold obligations issued within the "paper gold" trading arena described above. The same elements that make gold an attractive investment at this time and a long term store of value (over a lifetime), particularly during banking crises, make the various forms of leveraged gold unattractive. One should note the point of gold being protection from an environment of default on obligations. The same obligations that gold derivatives are.

Your presentation has described the leverage issue very well. This is the very essence of a gold run that manifests itself in the overflow "spilling out" from the paper arena into the much, much smaller physical arena. I doubt that very much paper gold will be forced into delivery before the
entire market stops contract trading. Still, some have said that official guarantees, insurance companies and the large financial reserves of players will be brought to play in making this market whole. In reality this is true. But further into reality, the more the resources become available to "cash out this arena" with gold delivery, the further away the physical gold price will run. The point
always was that no amount of contract supporting dollars could ever balance the gold owed. The more they try, the higher the price gets.
They could let it run, but at what price does it fully settle? $1000, 5000, 10000 ???? I have no doubts that it will be closed long before important people are killed (financially) in this. Further, before this comes to a head the total outstanding gold derivatives could double or triple in supply (building from the US side alone). All completely unbacked and issued in a effort to drive the paper price lower. We only know that in the maelstrom, just before the close, the paper leverage against each ounce could be unthinkable. This could impact your thinking in ORO #22236. We can discuss tomorrow.
I have but to add that there is another leverage issue that will take over once this one is resolved in a physical market trading at a much higher price. This later item is the leverage of a "true world-wide gold demand" in the format of gold being a settlement asset. It's effects on a limited supply, both mine and open market, would be incredible. Again, few of us understand how money gold would interact with the modern wealth of today. In no way has the world gold stocks increased in any form of proportion to the productive capacity we now know. Again, this view is taken across the valley where the dollar was butchered.

Further you write:

The most important aspect of gold as financial disaster insurance is that it is immune from default. The second point, particularly important for the gold mining investor, is that in financial crissis, desperate governments are prone to disregard the property rights of large holders of industrial assets. The most captive form of industrial asset are the mine and the oil well. The most attractive asset for taxation and expropriation in time of crissis is a gold mine. Very large hoards of precious metals may prove attractive to a government seeking survival. The small hoards remaining in the West are not attractive targets.

Yes, sir. This seems as impossible as the question of the BIS going after gold rebacking the dollar. But, this is the way the world works and the dollar timeline is running out of it's future. The trick now is in getting some of your assets out of harms way, well before the fact. The problem is in the dreams of every gold mine owner; the spiking of gold! The next gold run will be caused from pressures far different in dynamics from price inflation. Indeed, it may rum so fast. so quick that every country closes it's borders to gold flow. Usually this is accompanied with foreign exchange controls. (Ever notice how gold is always included in these currency flows controls? Not silver, platinum, copper or oil. Just gold.). The next event would be an emergency 60% (or something to this effect) exchange rate tax on bullion that comes out of ore sellers pockets. Then, it's later made permanent in some form of "windfall profits tax" against the companies. Oh yes, the mines stay in
operation and the ore is milled, it's just that the costs (price inflation) and taxes do a number on the stockholders equety. This may not happen in every country. But that's another story.

Your words:
The use of gold futures and options in the battle for financial self preservation during a financial crissis is equivalent to a knight charging at his enemy with a shaking kielbasa. Gold mining shares are similar to waving one's title to the land in face of the Mongol horde's charge. Wouldn't it be rather smart to hold a sword on top of the ramparts of a castle? Taking our little Midieval setting further, one does not complain of the building of the castle, though long after its construction came no attack. The expense of time and effort, of missed opportunities
and reduced performance will come to be appreciated when disaster strikes.

Ha, Ha! ORO, I sent your "waving one's title to the land in face of the Mongol horde's charge" to someone and they loved it! What better way to put it. Just great.

More much later, FOA

FOA (1/9/00; 11:22:41MDT - Msg ID:22579)
Saturday, January 08, 2000
BOSTON (Reuters) - The United States has not sold any of its gold reserves and has no plans to do so, U.S. Treasury Secretary Lawrence Summers said on Saturday. "I categorically deny assertions that U.S. gold reserves were being sold off or that there is any plan to sell them off," Summers told reporters on the sidelines of an economics conference.
His denial came amid talk in the gold markets that some of the weakness in the gold price over recent years may have been caused by direct U.S. sales of gold. ---------------

I posted once before that the US was not selling it's gold. Again, I completely agree with Mr. Summers statement and submit that it is a spoken truth in full context to the question.
Many reach for this easy reason (official gold sales) for our current low gold price. The reason this comes about is that without using this line of reasoning, one has to accept that: 1. the current gold price is mostly a paper contract fabrication 2. it's easily controlled as long as the "current price setting system" is functioning 3. this gold price everyone uses, could fall through the floor if the contract system comes into question 4. physical gold (dealers) prices could skyrocket in the future as no one accepts the credibility of any contract for derivative gold. Effectively destroying the paper equity of gold banking.
Most of the people in the gold industry do not want to hear this. For them, a break-up of the London gold market would destroy their financial partners and spike the physical gold price into uncontrolled levels. Most of the industry designed their business plan to embrace a "common
viewpoint" on gold. They expect, want and look for a return of a gold price that is in the range of $300 to $600. Something the paper marketplace can live with and their financing structure can survive "profitably". Above $600 and even ABX must post margin!
For one to embrace the knowledge that the "Washington Agreement" is real and that the other major nations are not selling into the market; we also must accept how the reverse leverage on physical gold will someday wipe out the entire dollar / gold marketplace. Clearly, this would imply the obvious, physical gold has more leverage than any of it's paper derivatives (gold stocks included). Truly, if you are selling a paper product, your income (and most likely your private investment position) depends on your finding another answer to the low gold price problem!
The sales of official CB gold must be the answer for many. We have for several years (longer than that privately) been discussing this gold market resolution and it's meaning to private physical gold advocates. Our position is that this is a long term evolution of the dollar reserve system. A system that was extended in life for a politically "fixed"
term by changing the very nature of the gold market. Further; Only recently (the last few years) has the timeline of the dollar begun it's final turndown from international "settlement use". Today, the signs are becoming increasingly clear that the Euro (for better or worse) is indeed breaking the grip of dollar financing and use. We expect this to continue and intensify it's effects on the very existence
of a dollar gold arena. As such, we now live in a period we call "the time for super gold". Perhaps our year 2000 marke the beginning od that change.
Prior to this, the accumulation of physical gold could only be viewed as a "long term , extremely secure saving account". One that would contain all the past investment gains an improving economy could produce. And represent those value gains in a future "money settlement roll" that only a free gold trading market would produce. Many have forgone the current financial craze with the complete security that the historical record of gold will not be broken. Truly, gold will later represent a buying power that makes current paper gains seem small!
We do not present this as an investment in the usual sense. Rather one should buy gold as the real wealth it has always been. No different that your car, house, etc. are real money wealth also. Only today, gold wealth does not reflect it's true dollar price value because the paper marketplace does not reflect the trading of real physical gold. Indeed, a clear advantage for persons that can step out from their "Western world" reasoning.


Hello ORO,
Yesterday in my (FOA (01/08/00; 23:38:28MDT - Msg ID:22560), I mentioned how ""before this comes to a head the total outstanding gold derivatives could double or triple in supply"".
This is an extremely possible event that is in no way different from our current mania in US stocks. The final act out of a money supply inflation is always reflected in the trading of the "popular wealth" of that era. Weather it is "real things wealth" as seen in the past (price inflation) or our current "Western" fascination with "contract paper wealth", fiat money leverage always explodes right at the end. With the paper gold markets holding a base trading level around 1,000 tonnes a day, any rush of events could easily gun the creation of gold contracts into a much higher
level. And therefore increase the leverage for physical gold "after the fact".

You write:
ORO (1/4/00; 8:16:45MDT - Msg ID:22236)
A (bullion) BANK NOTE
A note about the implication of the banker's situation: through the banker's borrowing and lending, all modern bullion owned outright has an equivalent part, nearly three times larger, of paper gold. The bankers have formed a 60,000-80,000 ton gold banking system using 20,000 tons of gold, most of which is now held by "cash" holders.

Common estimates of private gold bullion holdings available to the financial markets, most notably the one produced for the Fed in 1997 (estimated for 1995), put the gold at 20,000 tons. I have reason to believe that there are 10,000 tons more, bringing the total to some 30,000. I will not go
into the iffy details of the estimate, but note that one of the major components is "Yamashita's treasure", which has been in the gold markets since 1984, some of it even before that date. Whenever stories come up about the reappearance of that hoard to act as an overhang on the markets, you can rest assured that it has already been introduced to them in its entirety. These 10,000 tons are in "semi-official" hands of Royals of the Oil countries, the Vatican. Much of the
rest of the remainder (once the gold jewelry deficit is accounted for) sits in Rothchild vaults, and a few other large holders, "giants" much as described by FOA and ANOTHER.

I have no doubt that these figures are in line with reality. In fact, they are losing their relevance as the insanity continues. Most people only look at the "writers" (short) obligation to make good on the deal. Yet, few consider the implication that a market "shut down" would create. Literally, both sides of the deal would be looking for "GOLD". The short, of course! But, in addition, he may be drawn to buy his own position in physical and walk from further adding any "deal equity". In addition, the "long" would observe the obvious inability of the market to deliver and undertake a physical purchase outside his deal.
The point is that during a melt down, the entire human infrastructure of a paper market would be looking to buy. In other words, the gross total of world open interest times two (X2) running for gold. It does rather overload the little CB holdings, doesn't it?

You write:
The volumes of gold paper traded by the LBMA become much clearer when taken in context of the gold banking system rather than in context of annual gold production. The 1000 tons traded daily are well proportioned to the normal trading patterns in currencies. Eurodollar interest
derivatives constitute about 5.5 $T traded on New York exchanges, and another 55 $t or so are traded OTC with 62% netting (figures are from memory so don't shoot me if I'm off a little) bringing it to 19 $t. This is equivalent to the estimated 21 $t in Eurodollar debt outstanding (my estimate). This comes to 7%to 7.5% of outstanding positions traded daily. Applying this proportion to the gold market's 1000 tons, one comes to 14,000 tons of net debt - the same kind of debt as Eurodollar debt. This is debt generated by the sale of physical gold in the four part transactions.

Sir ORO,
Prior to LBMA giving open figures, the trading was quite high. Even if one had no inside view of their arena, the fact that our 1,000 tonne figure didn't just arrive "overnight" should point to a long term trading build-up. We can be sure that from at least 1990 onward, the paper gold system was backing the dollar on a planned schedule of events.

You offer more:
While the physical supply actually went into hoards of all sorts, the paper remained circulating in the markets. The gold accounts now stand at an incredible level of over 40,000 tons by my reckoning. Nearly 30,000 tons are owed by bullion bankers directly - without counter obligations
denominated in kind. They have only 4,800 tons in credible gold mining company obligations, and another 9,000 tons were borrowed by speculative funds playing the carry trade. The remaining reserves, some 10,000 tons, can not be used to pay off the gold denominated debt because the reserves are mostly borrowed and must be kept on hand to cover obligations to Oil Royals (the major lenders of these reserves). Of the other 20,000 tons in private gold hoards, only 6,000 remain in private hands outside of the Bullion banking system. 14,000 were supplied to the market over the years, and hang around the necks and in the noses and from ears of a billion people. The total commitments of bullion banks (including derivatives) are most probably around 60,000 tons, with an imbalance of some 35,000 tons, where gold was "borrowed" by the bankers (in reality only
dollars arrived at the bank for most of this, and the bank issued a gold denominated obligation),and the lending by the bankers was in dollars.
Their remaining gold denominated assets:
- Gold reserves are 10,000 tons, (I hope)
- mining company obligations are at 5,000 tons,
- Speculative fund obligations are 10,000 tons.
The remaining counters to the bullion banker's gold obligations are denominated in currency.
Physical gold lent TO bullion banks, about 25,000 tons.
Physical gold lent BY bullion banks, about 15,000 tons.

Again, I agree, but ask the question "are these commitments becoming irrelevant in gold terms"? This is "gold banking" on a pure fractional reserve basis and very much reflects the dollar prior to 71. Years ago, we hit a point where the market place is just trading the price of gold, not gold itself. They have created a form of "gold currency" that is more a "gold price obligation" rather than
"gold supply situation". It simply could not function once real delivery was asked for. This is the corner the ECB / BIS have pushed the dollar into. Force a change in the need for "contract gold banking" and you break the credibility of the market. Break that credibility and the dollar is
exposed in a gold price move.
Here, we can get a sense of the massive effects a change in the use of the dollar would have on these liabilities. Once the dollar begins it's slide from trade settlement (happening now), a dollar gold currency is not needed. Any break in the gold banking market would render a "new price" for physical gold. That price would begin to reflect the past dollar money supply inflation.

Thanks ORO for your clear understanding. On to your #22237 later FOA

FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview
ORO (01/06/00; 15:05:40MDT - Msg ID:22411)
Your words:
For years, I could not understand how the dollar could stabilize in 1980. It was a complete mystery to me. Austrian monetary theory, which I studied with the intense interest of youth, alongside Monetarist theory, was giving no clue as to how the dollar could be stable at all once the arbitrage
to gold through redeemability was closed to everyone - CBs included. ---------------------

It was amazing wasn't it? During that time, anyone that had any grasp of money theory just knew that eventual world wide dollar inflation was coming. Yet, right after the Mexico default crisis, the whole system came back to life. Never before in history had a country dropped it's gold backing, watched it's currency be devalued against gold ($800+) and then returned it to normal use as if nothing had happened.
But something did happen and it sent the world onto a different trail. Thinkers, world leaders, common workers, and investors had just spent the previous ten years learning the true worth of oil! And they learned how it had two values.


Duality of value is a funny thing.
If you have a gun in hand pointed at me and I have an identical gun pointed at you, their (the guns) worth is the same. Yet, if I am wearing a bullet-proof vest, my identical gun has more worth. Not much, just a little more. Strategic location?
You pointed out how in 1933 dollars outside the US were worth their weight in gold. Yet, inside the US they were not. The same dollar had a dual value dependent on location.
Oil, gold, minerals and ones bank account can all have dual values based on the strategic location of these items.
Another form of duality exists for most things. Gold has a jewellery value and a monetary value. It's price is reflected in the degree of total demand generated from each value. In fact everything we own has our personal wealth value and a "monetary" worth.
After 1980, oil also reflected this different duality.

Back to the main trail:

In the late 60s and early 70s some US strategic leaders were beginning to understand the "monetary value" of oil. It was becoming clear that local oil reserves, not gold was the real backing behind the robust US economic engine. Like gold today, oil back then was worth a whole lot more than the amount we were paying for it.
The simple fact was that as long as your economic system got more from (out of) the local oil it brought than printing ones currency took away, local oil was worth more as a "monetary backing" than gold. This was the changing currency climate some could see long ago. Modern society, as it functioned using digital settlement was restructuring monetary theory. The only problem was that it wasn't changing the importance of "human nature" or "strategic location".

By the early 70s the old gold exchange standard was breaking down, even as the worlds goods production system was just embarking on a new era of efficiency. Using the benefits of hindsight, we can today see that each year into the 70s, 80s and 90s all brought technological gains that were overshadowed by our currency system's flaws. The world was using technology to get more out of the life's blood in a modern economy, oil.
It was recognized that even though the old (gold) money system of the 60s had priced oil favourably for the US, it's (US) oil reserves were running out at that price. We needed a higher price for oil in order to build local reserves. At the very least, we needed higher prices to discover higher cost reserves located in the "Strategic Americas" (both north and south).
The potential (indeed, it was reality at that time) for the Middle East to continue producing reasonably priced oil for gold (dollars) stood in the way these needed higher prices. In order to resolve this, we moved off the gold standard (1971) and onto the oil standard. Again, in hindsight it was a masterful play. You see, in duality, oil in the Middle east was worth more than other oil if it
could back the dollar in world settlement.

Make no mistake, gold was and still is the center of the money universe. Only the way we utilized it was changed (indeed, it's about to be changed again). ORO, the US had already placed it's currency on an oil standard years before (in practical theory anyway). They were expanding the
money supply directly in relation with the increased production of goods that modern oil use was providing. Of course they ran away with the process as is always the case. Gunning the debt money supply and justifying it by extrapolating growth at ever increasing rates. Dollar creation overran the ability of the gold exchange standard to balance it. Still, in all fairness, the old system was built on a much slower creation of production efficiencies and couldn't accommodate this modern surge of wealth (and debt). Let's face it, the world has no precedent for the last 30 years of growth. By adhering to the fixed money supply, currencies would have risen in value creating a deflationary effect on the debt created from this growth. Our first experiment with this came as the US decided
to keep gold in the money universe but back the currency with oil. Better said: "continue to settle oil in dollars as long as the rate (oil price) creates more value from production than the inflation of the currency takes away".
This is the reason the BIS did not lobby the US to officially devalue the dollar in gold (raise the dollar gold rate from $42 to say $200) and continue the system. Even though many people were hurt from this, the system was failing and had to change. The tactic was not to stop using dollars if the gold was not delivered, but rather for the US to just stop shipping the gold. In reality the dollar is still a receipt for $42 in gold, but the it will never be connected to gold again. Ever!
In the background, the value of the gold backing lost was found in oil. In reality, the value of oil to the world economy was increasing much faster than value of gold lost from dollar default. Even at the higher prices per barrel the need and demand for oil proved to be a far superior "monetary backing" for the dollar than gold. As long as the majority of oil producers agreed to receive dollars
for oil, the stage was set for a renewed surge in growth the world over.
Yet, gold was still in the monetary game. Only this time the game was proving to be short lived and unstable. This new "free market" for gold was soon being leveraged in a way the old dollar was. Once again, the supply of gold contracts was exploding as they were responding to the new demands of an expanding world economic system. Only this time it wasn't the dollar that was about to default, it was the "new gold market".
Today, we find ourselves on the edge of yet another change in the world financial structure.

More later FOA

FOA (1/11/00; 6:23:10MDT - Msg ID:22690)
More Overview
Working from my FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview:

" " Our first experiment with this came as the US decided to keep gold in the money universe but back the currency with oil. Better said: "continue to settle oil in dollars as long as the rate (oil price) creates more value from production than the inflation of the currency takes away".--------

Initially this created instability in the financial system. Through out the 70s players ran into gold, trying to regain the monetary security the dollar had lost without it. Soon, everyone realized that no amount of conversion would ever replace all the foreign dollars outstanding. The dollars stayed in circulation even as they were traded for gold. Further, the dollars were still being received by ME
oil producers in return for oil. Dollar price inflation was bad, but in no means did we see the "runaway price inflation" that should have come from a reserve currency without gold backing.

In practical theory, oil now backed the dollar as world oil payments were settled in dollars. In return, gold now backed oil from a US guarantee of an open market for the metal. Over time, a portion of oil dollars could be replaced with real gold through actual physical purchases or in
participation with evolving world gold banking (paper gold). Even though the dollar gold price had surged, the higher oil prices were allowing a percentage of those dollars to be converted back into gold at the old gold/oil rate. Slowly, the old dollar holdings (prior to 71) were effectively being used to reclaim gold. The expansion of the world dollar money supply was seen as reflecting the more modern importance (value) of oil in the economy. As long as growth in the production of economic goods outstripped dollar price inflation, the dollar could be expanded to match the unrealized value held in oil.

Again, "strategic location" of the worlds major oil reserves was the backbone behind this "duality" in oils value. Gold in fort knox could not back the dollar anymore, because the US had shown that they could just withdraw it from backing. In fact, the entire validity of backing any
currency with a fixed gold amount was in question with this new age of "super nation blocks". For it to work again, gold and the reserve currency backed by it would have to reside in different "power blocks" to guarantee delivery. That wasn't going to happen. Indeed, with supply of the worlds
major oil reserves being controlled outside the US, the dollar was now backed more effectively by a commodity that could be used to devalue it (through the oil price) should the money supply run wild.

This system balanced, as the value received from oil by the goods producing world outran the loss from price inflation initially created from rising oil prices. ORO, this does not explain everything , by any means. But, it does at least give us a handle on the dollar transition through out the 70s and 80s. Looking back one can see that "money theory" wasn't thrown out the window, only reworked
a great deal. It offers a reasonable understanding as to why the dollar continued, even as the US treasury took control of the world financial system.

Today, the situation is changing in a much more dramatic way. I'll later offer a view as to where we are and where we are going.

Thanks FOA

FOA (1/11/00; 19:10:15MDT - Msg ID:22711)
Current events
Cavan Man (1/11/00; 13:08:03MDT - Msg ID:22702)
Dear FOA
---------I am not certain how many visitors here carefully read and digest what you write.
Furthermore, I am even less sure how many of us really believe what you write----------

Cavan Man,
Yes, I think you are right. There really is no point in going back so far. Nor is there any gain in diving so deep to explain political strategy just ahead. Mostly we want to understand the short term. Another warned me about this once before. Saying I should stay on the surface and discuss
events as they apply. Looking back I see why he doesn't send me anything now. The point has been made and the correct people have seen it. Now wait for events and discuss the market response.
So be it. I'll ride the soft river and stay off the hard trail.

Thanks Cavan Man, your words have helped, I presume too much, FOA

FOA (1/12/00; 8:21:11MDT - Msg ID:22768)
Thinking and talking out loud?
What a mess! Cavan Man, (I know you are still reading) I used your Thoughts as a measurement of what I was doing. This is a "very" large group to walk with, as such we often only hear the nearby discussion, yet many are along for this walk and choose not to talk. So, I find myself walking in the middle, the front and the rear, in a effort to not only be close and hear the talk but to "see" the map they read. In life, I have seen how often "the more verbal ones" project the direction of the quiet groups and I take this in. Cavan Man, you did not change my will to hike, rather your post made me "think out loud".
There is no leading or following here, as we are all on this journey whether one acknowledges it or not. I am only a small part of the group. It's just much more interesting is we can see the real "natural wonders" on the right, left, behind and in front, instead of just the next step before our aching feet. Yet, I understand how some would rather see the trail as only a series of completed single steps. Each with definable distance, impression and easy to collaborate. Ha! Ha! Indeed, it may be more of an American Journey if one can "float on the surface of a river" within easy view
and "earshot" of those walking the hard trail! (smile)
Mr. Lawrence, I'm sorry I spoke so loud what I should have thought so quietly. You will return, yes?

I do thank everyone for their kind words and honest directions. I'll continue to talk and "listen" as we walk this golden trail.


FOA (1/13/00; 6:16:24MDT - Msg ID:22819)
one quick post
Thanks for your "some comments" posts 1, 2, 3,. I have only read them quickly and am pressed for time. Will reply (rebuttal / agreement (smile)) to these excellent thoughts before I post my next "overview". In the mean time something to consider; by the late 60s, dollars were not "arbitraged"
into gold with the effect that "hard monetary theory" had envisioned . It was becoming more of a "concept" as the money supply continued to grow much faster than gold was shipped out of the country. This "soft" link to gold was growing as dollar production was being fuelled by the oil
perception. Officials brought into the concept that for much of our natural future, oil would always make "things" cheaper, faster and in greater supply. As such no amount of future debt and the money supply growth that followed it, was too much! This process of making the evolution of "oil
productivity backing" a more real backing than gold.

Sorry I cannot write now,,,,,,,,,,,,,,,,,,,,,FOA

Welcome Traveller and all the new posters here!

USAGOLD (1/12/00; 9:31:05MDT - Msg ID:22771)
Today's Gold Report: Swiss Lean Toward Liquidation through BIS

Hello Michael,
The background of this Swiss statement is more exciting than the announcement! We have offered for some time that future "official" Euroland sales would evolve into ECMBs (European Member Central Bank) buying gold "off market" and out of the reach of the LBMA . First the Dutch and now the Swiss have begun to open the door to this. The full 2,000 tonnes of gold covered in the Washington Agreement may not come to be used as collateral behind current gold paper. Truly, they (ECB/BIS) are cutting them off and starving the market. The next step will be the revelation that the "transfers" are occurring at higher dollar prices (and probably lower Euro prices, if they are done in that currency) than the spot market. Behind the stage, we have been "on the road" to higher physical prices ever sense the "agreement" was announced. The BIS has always had the power to break the Bullion Bank's from market controll by changing it from contract form into physical. Our current price doldrums do not indicate the frantic nature of life in this new "fast lane". Most traders are watching the paper markets and feel they are "dead in the water". This perception will change in the next act of paper destruction. We have had act #1 and each ensuing one should be more severe. Lease rates rise, paper prices gun up, major loses then a load of more
gold contracts dumped to force the price down. I bet they have run out of small lenders after the last run around. If so, (maybe the next go around) the contract discounting begins?

Note: Michael, I received your News And Views and read it for the first time. What a wonderful commentary it is! Everyone should get it!

Thanks FOA

FOA (1/13/00; 6:29:59MDT - Msg ID:22820)
(No Subject)
Aristotle (1/13/00; 1:17:56MDT - Msg ID:22810)

Aristotle, I could have just posted your item and not said anything! Just read it and had to note it. Good stuff.

Quickly Gone for good now,,,,,,,,,,FOA

Aristotle (1/13/00; 1:17:56MDT - Msg ID:22810)
How much wisdom in our anals of history; how much deliberate choice?
On the whole, this output is your best yet in both clarity of thought and presentation. Kudos. A distinct pleasure to read.

But, (there's always a "but" isn't there?) the sheer size and comprehensive scope of the material, defies any reasonable means for me (if I were to be so bold) to provide some of the feedback you are seeking. The ability to apply digital "post-it" notes to your on-line text would be required--to rave at the many flashes of brilliance, and to suggest possible course-corrections or avenues for further thought and discussion.

Taken as a whole then, you are possibly making one mistake in your inferences/conclusions regarding the official decision-making process that rests behind the scenes now in monetary history. You are possibly giving the officials of the day too much credit. With your 20/20 hindsight you are able to see the events of the day with the benefit of a perspective they did not share. You do a marvelous job of making the several important arguments from the several sides of the issues, but in truth, these guys were often flying by the seat of their pants, reacting as necessary to bail enough water to keep the boat afloat. It would seem that even when considering the conference of Bretton Woods in 1944, (and the IMF revamping summit in Jamaica in 1976,) the world has not seen such a concerted, thorough, and intelligent thought given to monetary matters as your suggestions would imply until the era of Maastricht arrived.

To wit, the dollar wasn't backed with oil because it was carefully calculated to be the most superior form of monetary arrangement. You have had little trouble poking at the flaws of such a scheme. In the eyes of the officials involved at the time, what was done was perhaps the most expedient course of "policy," for the day, and the concept of oil "backing" the dollar by any fair assessment is most probably a de facto result of the path of least political resistance coupled with our perceptive advantage of hindsight. Meaning, at the time, it was not expressly determined that oil would replace Gold in a new form of "commodity standard," but effectively, hindsight reveals that's effectively what we got -- the approximate result of evolving policy and trade agreements that maintained dollars as the currency of oil settlement (even after the Bretton Woods notion of Gold for $35 went beyond a blushing fiction to unabashed fantasy--followed by the reality of nothing when the window closed in 1971.) Even in those following days, many significant players expected this condition to be temporary--with Gold to be refitted to the monetary framework under some new form of workable terms. (Or should I say, they expected the monetary framework to be refitted to accomodate meaningful Gold settlement--we all know that only Gold is "money" in this modern world.)

To reiterate, I'm not calling into question the quality of your analysis and arguments, but rather, that you have given credit (of dubious quality, to be sure) to the policy makers where none was due. You've assumed a "Method" where, in fact, there was only "Madness."

Final food for thought: policy is set by politicians (not by intellectuals), and the quality of those so employed has not changed much between then and now. (At least by giving them too much credit you've avoided the other popular fallacy of assuming them to be hopeless and complete idiots. *grin*) But had the likes of an ORO or Antal Fekete been given full latitude in shaping the policy of that day, there is little doubt in my mind that we would all be better off today. But as it is, we are only now after 30 years repairing the financial architecture with the euro, bringing Gold back out of the shadows.

And as always, being a mere child in the world, I reserve the right to be spectacularly wrong in my perception of these issues. After you consider how much rationalization is appropriate for painting our history as a deliberate and calculated act, you are free to carry on.

Gold. Get you some. ---Aristotle

FOA (1/15/00; 11:00:06MDT - Msg ID:22951)
A few quick words then I'll post a reply to ORO with my next overview (perhaps an hour?).

Ha! Ha!, light sweet crude over $28! Now there is a fact one can chew on, right Permafrost! Tell me , everyone, what good were the "facts" from the beginning of 98 -1999, when they were used to point people to COMING $5.00 OIL! Not much, right?
Speaking of facts; In Barrons today they did an article on the Euro. I think they said "the Euro is the next biggest thing to impact us on a level equal to the internet" (or something like that). The major thrust of the write-up was to point out how the Euro had overtaken the dollar in international bond issuance. What a "blow out" in the first year of existence!
Can anyone remember all the negative "facts" being promoted regarding the Euro in 1998 and the beginning of 1999. All kinds of official statistics were used to indicate how it would never be born, never be used at any level equal to the dollar. In "FACT" every possible shred of evidence
was paraded about to show how the Euro would die, soon after it's beginning.
People, the point I'm making here (and to Permafrost) is that facts don't tell us what's going to happen, they tell you "What Happened"! Further, it's the motivations and political intentions of international leaders that shape the real world we live in. When these "minds with power" decide on a direction, the reactions in the marketplace then create the facts we all need to see. After the policy changes were made!
On this forum, you often read what is being promoted, what is being thought and what direction this may take in the real world. We look for "Events" to produce the "Facts" that pertain to these posts. Many of our loudest critic proclaim that our Thoughts are "dishonest" because no "facts" are available to collaborate out projections. Well, if their understandings, perceptions and connections to and about how leaders make "private policy" limits their (the critics) ability to look forward??? Truly, this is a curable disease, that's best defeated by reading USAGOLD FORUM 2nd and asking for Michael's News and Views 1st. (smile)
Finally, I add, we walk this trail looking forward "first". Before the left, right and back is observed.

Thanks all,,,,,,,,,,more in a little bit FOA

FOA (1/15/00; 11:08:21MDT - Msg ID:22952)
(No Subject)
007: All right Cavan Man, what is your price? Everyone has one.

How much do I have to "pay up" before you post here again?

I have this sack full of gold coins, is that enough? Or is it something that will break my Swiss bank, like an official apology? (smile)

Have payment, waiting contact. 007

FOA (1/15/00; 14:58:12MDT - Msg ID:22961)
Some discussion for ORO beginning with:

ORO (1/12/00; 10:01:35MDT - Msg ID:22773)
FOA - some comments - Part I

You write:------------------------I am trying to put the two issues in perspective, (1) the break in the gold backing and (2) the need to price oil at a higher dollar price for the dual purposes of (2a)"strategic", locally controlled oil, and for the simple (2b) prosperity of the American oil patch and its highly connected people.

foa: ORO, the oil patch was hated in New York and Washington. Two different cultures, you know. The Government just wanted them to produce oil and shut up. If they needed to make money in the process, so be it. The "oil windfall profits tax" later proved the point that oil was more seen as a "public utility" for "monetary policy". Not something that was privately owned.

Your words:-----------------------
Which do you see as having been more significant? Or was it a monetary decision based on a new concept in commodity money? Or, what I consider more probable, that it killed so many birds in one stone that it was just too attractive to let go without one good try? The additional seignorage
from this concept would also have made it attractive.

Besides, considering that the US was then so far outsude of any possible internal remedy to its gold receipt (dollar) printing problem, it was just a matter of a few months till it would all have broken apart in 1968 - the Fed and the government then facing the hard choice between having a banking system or a currency. I can see that the system was saved in 69, when the London gold market moved to gold pricing in dollars and the OPEC countries stopped taking currencies other than dollars. The US managed to even stretch that arrangement past the breaking point. ----------------

foa: ORO, my friend, they were not using this concept as a real "commodity money play" in the "gold standard perception". At that time we were buying local oil with "fiat dollars" (made so by the 1933 internal gold confiscation) and foreign oil with "gold dollars". But, as you pointed out, dollar production was so far past it's "gold backing" that it was obvious they (USA) were pegging dollar printing to oil prosperity. Still, with London gold and oil mostly settled in dollars, the foreign dollar
oil deals fully well expected to cash in unneeded dollars for gold. As we can see, reality and present day events of that time were as "mismatched" as today!
All of the dollars success was ultimately made possible because oil could (and was) priced so far below it's "economic worth" to the world. At that time, even our Middle East friends had no idea just how useful oil would (and had) become to maintaining the world economic base. As we will
see in a minute.

Your Thoughts: as I break them apart and comment

Yes, among the true drivers of the US economic boom was the cheap domestic oil it enjoyed till the mid 60s. Economic freedom in the US was limited since Roosevelt took away our few remaining economic freedoms and the cash. The timing of the break in US oil production belies the truth of your analysis of the thinking behind this ingenious way of solving a stupid and costly problem. The steep drop of US oil production, as if off a cliff was impressive. But there were many alternatives to the solution chosen; oil could be imported and stored, and that would have set the price for internal production.-----------------------

foa: No, they were already shipping so many dollars out and any more would further aggravate the "possible gold drain perception". This was everyone's problem then as the industrialized world wanted to still get gold if needed, but they also liked the "non inflationary" (relative to that time) expansion of the dollar base as it expressed the new oil economy and it's real goods produced wealth. The US wanted new oil reserves to be "Local" (the Americas), because it could be paid in "fiat 33" cash, not the more golden "foreign cash". Both our neighbours to the north and south ever asked for much gold. In this light they acted like the local oil companies that received post 1933
dollars for oil (as mentioned above). Yet, to get these new reserves for fiat 33, they had to prevent the very cheap Middle East oil from supplying it all (if dollar prices were higher).

Oil imports could have been taxed to provide local and "most favoured" neighbours with better prices. ------------------------------

foa, they could have, but they didn't?? A lot of conflicting international political agendas with that one.

The reason the US went off of gold did have to do with oil offering backing for the dollar, on an "as needed" basis, but there was a reason that was necessary. The reason was the meteoric rise of government expenditure in that era. The US was throwing fiscal and balance of payments caution to
the winds till the last day before going off the gold standard. That day marked the end of the government expansion relative to the economy.
The 14% of GDP level seen in 1969-1971 was never seen again. In reality, we are back below 1959 levels at 11%, while the Federal government has shrunk to some 3.5% of GDP from the former peak of near 7% in 1970. ------------------------

foa, Again, I pointed out above, the new found prosperity from cheap dollar oil was being used to justify mountains of dollar debt. As long as a barrel of oil could be used to produce more relative real wealth than the dollars used to buy it represented, dollar inflation worked in the only political measurement that counted. "An increase in the standard of living"! Don't get me wrong, I didn't say,
"an increase in the value of savings", that's something else in the minds of "Western Thinkers". Further: GDP measurements and SOL (standard of living) are clearly not relevant to each other then or today. All through the 70s the American worker groaned under a financial / currency
system gone bad. Yet, compared to the SOL of even Japan, we were always way ahead!

------------------------The question that comes at this point, is why were the Arab oil suppliers willing to do this? Was it because their oil would continue to be priced in gold, and this whole thing with the dollar just did not matter? Why did Europe go along with this scheme?

I think it was the "strategic" element of the time, a malevolent and reluctant Soviet system and China in complete chaos in the "cultural revolution", led by psycopathic crackpots, that played a part in convincing Europe and Oil to back the scheme. There was a need to continue support for the US so that it could retain/gain superiority over the Soviets. The "exorbitant privelege" had to be maintained for both the sake of the US and of Europe. For Arab oil, pricing was fine so long as they got their "fair" amount of gold per barrel. The Europeans would pay for the US military sevice by taking US dollars. Do you see this as the "whole" of the strategic significance of the deal?

foa: ORO, First and foremost, everyone was caught flatfooted as the dollar broke from gold. Like I said above, the industrial world loved the dollar expansion in the oil context presented. Caught between what appeared as a good system based on cheap oil and the loss of gold delivery, they let it drift too far. Even as we left gold behind (71) and oil went up (78), the system still worked because oil was perhaps delivering $100.00 worth of value and being brought for $30. Yes, this new price did create a financial panic, but more so because everyone was leveraged for the status quo, not a rising price. Like a company business slowing down because they expected 100% profits and invested in equipment for it, yet only got 50%.
The producers never expected the cartel to get such a high price from their political embargo. They also wanted more dollars to compensate for the gold loss, yes. But the runup they got demonstrated to them just how good their product was. They thought a barrel was worth so much
gold (pre 69-71), yet after the fact (71-79), it was worth much more gold than they were ever getting. It was a real education.
As far as going along with the deal, they didn't! Hence the gold runup. But, I tell you that little gold run was nothing compared to what could have happened if they pressed for it. Later they experimented with circulating dollars as a stop gap measure until another system could come along.


ORO (1/12/00; 10:03:24MDT - Msg ID:22774)
FOA - some comments - Part II

Your words: ---------------------The problem of oil as money is in two ways, it is wealth when it is in the ground, but it is a medium of exchange when it is taken out, shipped and used. It must retain a wealth money to back it up. The wealth money was to be found in the gold exchange of oil
to gold, as I take your view. Or, as ANOTHER put it, gold and oil must travel in opposite directions. ---------------------

foa: ORO, once oil is "used" it reverts back into it's wealth (and real money) in the form of the real goods produced. This "spent" oil wealth / money can be retrieved by buying some of these real things with dollars. Still, the portion of real value regained is very small compared to the oil wealth / money spent. This loss of value is partially viewed as payment for your " "strategic" element" "
mentioned further above. But, this is a gross amount to pay for this protection. Much more than regular financial thinkers understand. As such, this loss is made up by receiving a "kicker" in the form of cheap gold provided from a "paper contract marketplace". A market that reduces the
amount of real gold world investors hold by replacing it with "dollar derivative gold contracts" based on the price movements of gold. This concept has lured "hard money" players into an illusion and allowed the flow of real gold to move opposite of oil. It is this simple. (smile)

Your thoughts---------------------
The next issue, that of the US government floating currency in proportion to oil production through the 60s, in effect assuming that the oil, rather than gold is what actually backs the dollar, I can see that thinking in much of the theory written in the decade before, namely by Friedman and the Chicago School, but the problem I had then, and have now, is that the currency itself does not in reality allow for any value whatsoever so long as there is no direct arbitrage between the currency and its backing. In the US there was no arbitrage into oil. It was only by the tight control of oil supplies in one tiny block, and the happinstance of gold just being controlled on the other side of the trade that made this work, and as badly as it had.--------------------

foa: ORO, fiat currency today is little more than a future contract (I posted on this before) of human production. Yet, our SOL (standard of living) could not exist without it. Presently we are in a transition between "wealth money concept" and "digital money concept". History has proven over and over that fiat money can never be a valuable as "real wealth". Through out time, everything real we own has represented both out wealth and a spend able (tradable) money, gold included. Early on, paper money had no other purpose than to represent real things in contract form. Today, even with all it's government manipulations, that paper settles high speed trade better than real wealth
contracts (dollars backed by gold?) because it can match the efficiency advancements with a growing money supply. And do so without revalueing the currency upward (deflation) in the way hard money requires. It's a hard perception to stay with, I know, but people have proven that they want their currency to stay even with economic function, not move up in value against it. Modern humans (not necessarily western) would rather hold their wealth in part in real things (gold) and settle trade in digital currency.
There is a precedent to this even in the history of our world gold supply. As a pure hard wealth money, it does increase in amounts (ounces mined) over time. During the old world growth rates this could have worked, but gold supply cannot match modern advancements without rising in value
far higher than even I project. Truly, digital currencies can work for a modern world, if only they are not backed to gold in contract (fixed gold standard) form. Most of this latter days currency problems have been in trying to keep a "hard digital money concept". It has not worked.
Yes, the percent system has blown itself completely away from official inflation. Inflation far beyond any future human production. Still, had we witnessed a true "free trading" "physical bullion only" market place for gold and allowed it to function in a goods buying settlement,,,,,,,it would have marked to the market the over production of currencies. OK, now that we understand this:

You now state many of our modern money problems in
Your thoughts:--------------
The economic expansion of the 50s and 60s in Europe and Japan was no less than that of Asia in the 80s and 90s, astounding. Similar to that growth that the US had under a tight gold standard from the end of the Civil War to the first World War.

The reality of deflation in a commodity money economy is fine if the banking system is either a "free banking" system (government is not involved but for prosecution of fraud), or the banks are regulated to disallow them the fractional reserve system completely, so that the fiction of having
bank debt balances being presented as money is removed. Thus the bank issues bonds or depository receipts (only for vault reserves) but can not stretch the meaning of customer balances to mean "cash". Thus banks are forced to either live up to their fiction in free banking, or prohibited
from the fiction altogether. The interest rates of the period before the Fed then were tremendously low. There was such a thing as a perpetual bond. Innovation was tremendous. Though this period was punctuated by bank runs galore, the system - as a whole - worked. This despite banks being
allowed their fiction and their being supported by many legal priveleges. There is no economic reason for fiat currencies at all.

The only reason is political. To allow government seigniorage and to allow its sometime friends in banking the assymetry of risk that raises their profitability and assures the great banking famillies of retaining control of their franchise at public expense. It also ended up costing them "ultimate" control in that their banks are now edifices of contracts that are all backed by the government
printing press and thus in constant danger of political expediency changing against them.

The expansion of currency in relation to the growth of the economy is simply another way for government to tax its people. In the case of the US, it was a way for the US government, in its true Roman idiom, to tax the world as a whole. That it was necessary is arguable. I would venture to
say that by 1959 it was not necessary at all. Europe had grown to the point of being able to support itself militarilly. The US was fearful of an armed Europe going communist, not needing the US and its military. Not paying tribute/protection money.

No, FOA, there was never a danger of deflationary spirals forming if the US had not insisted on socializing banking costs as the cost of the political bargain for subjugating the whole of the country's wealth to direct Federal government control. Did the war/wars both cold and hot make
this the only politically acceptable way? I think that was not the only way, even when going into a prolonged "cold" war. What it was for is obviously to "disappear" the cost to both Americans and Europeans. The decision to back the dollar with oil was based on any new concept, it was simply a new way for the US government to retain control of its economy through currency control. I could venture a guess as to Hayek being an intellectual backer of the compromise plan (compromise between reality and the wish of the Johnson and Nixon era bureaucracy to retain hegemony), since he understood well how oil is important economically, and how a currency works. .---------------
foa: above you say:
"The decision to back the dollar with oil was based on any new concept, it was simply a new way for the US government to retain control of its economy through currency control."

ORO, I could not agree more. This was not a new concept, rather "A" concept that became "the official unwritten policy" that few understood outside Washington. It also evolved into a way for "others" to keep the dollar game going until a replacement was found. Indeed, our Officials now see the threat clearly.

More of you:---------------
Second point on deflation is that it is healthy for the debt system. It removes assets from the weak and moves them to the strong. Businesses often fail, but rarely do the assets of the business disappear.It is only those businesses built on complete folly or on speculation that routinely fail
leaving behind no assets. It is this environment that spawns 1% short/2% long interest rates, at which the rate for gold remains to this day.--------------------

foa: Deflation under the old system deflation (rising value of cash gold) worked because it brought the dept in line with the rate of growth. A rate (growth) that was much lower then. Let's face it, during the last 30 years economic production and it's real debt rates of growth (not the
gross manipulated debt rates of present) were off the scale of anything ever seen from the beginning of time! Given the choice of borrowing "PHYSICAL" gold from a true physical market at 2% for trade settlement against borrowing "physical dollars" at %10, the dollar would have been
pushed from "actual market forces" to slow it's inflation to match real modern world growth. Match this against trying to keep a government treasury from issuing "too many" fake dollar gold contracts and it's no contest. It never worked.

ORO again:-------------------------
Regarding oil as money, my second point is that oil has a couple of problems as money backing -one is its low value density, it is too expensive to move around for trade. The second is its susceptibility to political disruption. Both as wealth when it is in the ground and as delivery contract
relying on retention of smooth transport conditions (as exchange money), the black gold is not as safe as the actual stuff, and hoarding it is very costly. The only ways to trade it are in the form of obligations ("oil debt") or as title to oil reserves.--------------------

foa: I covered this far above. No one was ever trying to actually use physical oil as money. Rather they (USA) were using the disparity of real oil worth to cover the inflation of the dollar.

While dwelling on this, there is still another set of details to this issue. The electronic settlement demands on currency make no difference as to its backing. It can be gold certificates, it does not have to be fiat paper (a promise as empty as the vault). Even as broadly usable a commodity as oil, its marginal utility is lower when available at greater quantity - its price relative to other goods falls. A money must have a steady marginal utility. As the world grew to make better use of oil out of necessity, due to an artificially inflated cost and an artificial scarcity, the world lost much to the new oil backed dollar. It had to deal with an oil cost based on the cost of producing oil in the "strategically" preffered but economically absurd location. The capital cost, the wasted engineering talent, and the years of discomfort in cramped cars and public transport (particularly in Europe) are
but the tip of the enormous ice-berg this piece of idiocy cost.

There is no benefit whatsoever derived from the oil being local but for its strategic significance for military and political reasons. No amount of theory can find a benefit from the waste of resources on a problem we did not face (at least not for another 30-50 years at the time) and from the
uneconomic consumption of the intermediate range reserves. Now we have broken the natural cost structure of the oil industry and put in a big hole between the low cost oil and the high cost oil. In the meantime, we have destroyed the coal mining industry with a boom and bust cycle, we drove
natural gas exploration too early and wasted it, We broke down the economies of many nations. This folly did not allow the growth of the world economy to proceed unempeded by the restraints of gold, it slowed down the world's growth and diverted its energies.------------
foa: Yes, to all except one." " " There is no benefit whatsoever derived from the oil being local but for its strategic significance for military and political reasons. " " "

As time went by (80s on), Europe encouraged this arrangement because backing dollar creation with foreign oil allowed a self destruct function.
Under the old gold standards, it was up the individual nation to pay out gold against it's money. A process especially usefull to others if said money was inflated. Still, modern power structures proved that this did not work. A large nation would just not pay out gold if it didn't want too. The US did this locally (1933) and internationally (1971). So what good does it do to back a currency with gold it that gold reserve is in the same nation? Obviously, none!
By allowing the US to back it's economic viability (and therefore it's currency over time) with further oil settlement, it allowed the removal of said settlement (backing) at a later date. Especially if another, closer to home and more appealing reserve currency came about. Unlike gold reserves, that resided in the US, playing the present oil deficit against the US economic need of this oil is
proving much better. Oil is a real commodity need, that must be paid for. A local (USA) oil reserve deficit can bust the dollar value if foreign oil rises in price. Much more so if oil is pegged in Euros while "parity" is in range!

More ORO--------------
I suggest two things regarding the ill-conceived ideas of the decision makers of the time. (1) Their motive was not to secure "strategic" oil supplies alone, but to make sure the whole world pays the price of this strategic decision, whether they want to or not. (2) In the way a large debtor can destroy his creditors, the US and the global banking system built around its rag of a currency did not want to lose control of their banking and commercial empires through the process of bankruptcy, and resorted to threatening their creditors with it. The resulting rollover of US debt resulted in perpetuation of the problem for the next generation, and allowed the continuation of American debt accumulation.

The US, in banging o
[post cut off]

FOA (1/16/00; 10:23:29MDT - Msg ID:22997)
It looks like we lost a big piece of my FOA (1/15/00; 14:58:12MDT - Msg ID:22961). It was all on this side as my whole system locked down. I lost quite a bit also.
Most of the remainder of that post was agreeing with ORO's views as he perceived them. What happened back then could be accepted from several angles, as real events offered the same outcome. My purpose for presenting them in our perspective was to generate a beginning sequence
of influence for our present situation. In other words, this is where the official thinking started from on this matter. Did this influence monetary events to proceed as they did? I would say at least 70% so. Still that was the past and we have evolved substantially today.
If my computers (and their links) don't fail again, I'll post "Overview" and some comments / replies.

thanks all FOA

FOA (1/16/00; 12:52:52MDT - Msg ID:23002)
More Overview
Moving on from my earlier posts, today we see where we are and where the trail may lead::

FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview

FOA (1/11/00; 6:23:10MDT - Msg ID:22690)
More Overview
We stop and share the view!

In the early 90s the world was not experiencing any visible results from our new Euroland currency creation (Euro). On the surface things continued much the same as before. The EMU (European Monetary Union) was somewhat in order, but most of the world financial analyst completely wrote off any of it's possible effects on the dollar. A view that was accepted because the US and the dollar were becoming ever more dominant in world affairs. Still, an increasing dollar reserve base impacted the economies of foreign nations as the US dollar trade deficit and the debt
that represented it expanded without relief.

I'm told that an excellent graph of this is still available on the net at the above link. It shows how
dollars have been building up overseas without fail from 1976. Yet, in this visual expression of dollar flows we can see the first fluctuation of a new currency order taking shape. Between 91 and 94 our dollar flows made an abrupt turn for the negative. Some would say that this was just a
function of the dollar becoming stronger. We say it represents a new "hands off" policy by foreign decision makers. This turn was in effect allowing the dollar to enter a multy year self destruct mode, during which deficit dollar flows would expand into oblivion. The US would be flooding the world with dollar reserves at the exact beginnings of Euro success.

After over two decades of non-stop foreign dollar inflation, the dollar float had become so large that any transition from dollar settlement into "Other" settlement would permanently remove it from reserve status. This forward looking thinking would eventually be spelled out in the events directly before us today. In these events we will witness and document the "Facts" of a dollar fall from

Unlike past bouts of local US price inflation affecting dollar value perceptions, this transition from dollar reserve use will be felt first in currency exchange rates as the Euro slowly replaces the dollar as the major trade holding. The later impact from this will be a massive "super hyper price inflation" in the local US marketplace. Much the same as seen in the third world country panics in Asia. But
prior to this, the largest of all currency exchange rate transitions will try to express itself. That will be the true dollar value exchange rate of gold. A transition so large and all consuming that it will completely wreck the present leverage in the paper contract gold market we today call "the gold market". Long before this new real physical price of gold is realized, the marketplace will stop all
function as physical deliveries, at any price come to an end for a time. Eventually, a world physical market will return.

Onward for another view:

The strong US economic success has been spelled out more in the our SOL (Standard Of Living) than if expressed in financial accounts. Dollar exchange rates, interest on dollars, stock market values, home values all represent what an American "can buy" if they decide to spend their wealth. Not what they presently have as owned wealth, paid up 100%. This leveraging of dollar affairs has created an "illusion of savings" that in effect allowed a high SOL. In other words, we live high on the hog today because our present equity values and savings don't really exist. Time has
transformed the entire dollar system into a giant "futures contract" that only represents the wealth we could obtain in partial "future purchases". Just like the gold market, we mostly trade paper wealth and call it real. Yet, if a large percentage demand for delivery ever happened, the contracts
would fail. Yes, our wealth and economy status is really based on us cashing in and buying just a little at a time. if we didn't, the illusion would be exposed. Only our present dollar economy is "super leveraged" not just into the future of US goods production, rather it also completely depends on future foreign fulfilment to produce those real goods. Truly, most of our present sizeable financial
wealth is little more than a function of the "acceptance of dollars overseas" by others.

Few locals today consider the view from the other side. They proclaim that the dollar is king because the "others" want to spend it here. It's the very same mentality of a gambler that's winning. He doesn't want to hear that the house is on fire and will accept any other "good news" that
prolongs his current "prosperity". In reality, if the above dollar deficit chart was ever forced (from outside pressures, Euro?) into reverse, no amount of real US goods production could be brought using present dollar price rates. In other words, foreigners could never spend their dollars at a rate that matches our SOL values. Indeed, some of the biggest players now know it! It's all an illusion
that has spanned 25+ years from the loss of the gold standard and it's about to be tested.

Onward as we look behind and before us:

In the 90s, big oil understood what was driving the acceptance of dollars. And from my earlier posts, we can grasp how their knowledge was gained through the oil embargo effect. Still, as long as international oil could be settled in dollars at prices well below it's economic value return, US debt, dollar reserves and dollar investments looked very good This train would run as long as another system was being built. Keep oil cheap and the dollar deficit flood would continue.

Why would they do this for free? They didn't and neither did Euroland! People "in the know" knew the effects a new reserve currency would have on dollar values. They also knew the future impact on physical gold. As long as the gold market kept gold priced at a discount to the real value
of oil, buying some gold with excess oil dollars more than made up for any loss of investment or loss of reserve values. Europe needed this concept to work and they helped maintain the present gold market trend for this purpose. A good way to wait for a dollar retirement, no? If the Euro was not born (a real possibility a few years ago) big oil was more than prepared to include physical gold settlement into it's payment package. Just a minor inclusion of gold would have gunned the market and replaced any lost investment gains from a botched Euro introduction. So, the participation in gold and gold banking made good sense.

Indeed, even now the paper gold market expressed a major "duality" in real value depending on the strategic location of it's contracts. Some leveraged gold banking backed with Euroland guarantees is today far superior after the Euro success. (I think this concept is hard on most people.
Still, it will look much different after the train wreck that coming.)

Going further into the duality values from my earlier "overviews"; Oil prices today are on the rise and doing so in total conflict to perceived marketplace function. It's no mistake as to why this dollar price rise is happening now after the Euro was born (we have been discussing this for some time). Just as a high gold price would expose the dollar by presenting it's true past inflation (world dollar
money supply growth), a rising oil price exposes the US economy to the super leverage it contains. Especially if one can grasp how that economy was built on oil backing through dollar settlement. Once the threat of a dollar slump is made possible by high oil, expect big oil to run to Euro
settlement for international trade. Perhaps run is not a good word? Let's just say a transition will begin that shows the world the trail ahead. This is the period when the Euro will rise very much against the dollar (2.00 or 3.00 Euros per dollar?). As oil becomes cheaper in Euros, their local
economy (Euroland) will experience a dramatic positive shift in activity relative to the US and other countries tied to US trade. Does Japan sound like one on the wrong side? (TownCrier, yes, no?)

Because the ECB has no pressing need to keep gold prices in place, gold could initially run in Euros also. Still, eventually Euro gold prices will not be anywhere close to dollar gold prices as international dollar reserves are liquidated. In effect, the disgorging of dollar reserves will show no negative accounting on ECB books as gold prices more than make up for dollar reserve destruction. In fact, once the Euro becomes the world reserve, there will be no reason to hold dollars at all.

Onward, looking only forward:

In fits and starts, oil prices will keep rising based on an expected reserve currency transition, not dollar oil use economics. Any substitution of alternate oil resources in the US will run head long into a local cost inflation roadblock. $200 dollar crude will not be seen as enough to drill for reserves nor switch to other fuels.

The Euro will keep taking market use share from the dollar, especially if major US players continue to trade the Euro down to parity. Eventually (and presently as this is happening now), dollar reserves held outside the US will be forced into shorter and shorter maturities as the "return
on" these holdings becomes more important than their "use as trading currency". This will drive dollar rates far above Euro rates, draining liquidity and forcing the Fed to continue "Most" of it's pumping action (what so many thought was Y2K related). Rising dollar rates will be in response to
this new currency problem, not the present non-existent local US inflation. Later, the fed will be seen as far behind the inflation combating yield curve. However, these rising rates will fully cap the local stock market. Weather it falls will depend entirely on how fast hyper inflation later accelerates. In this environment, foreign exchange controls will play a major negative roll in pricing stocks.

Gold will, at some time meet it's 2nd bout of paper destruction. The next will be far worse. If the currency crisis becomes in full view, there will be no small physical gold lenders to soften the blow. We shall see.

More and replies later. FOA

FOA (1/16/00; 14:16:45MDT - Msg ID:23005)
Solomon Weaver (1/15/00; 22:16:10MDT - Msg ID:22983)

Hello Solomon,
Good post!
Your point about how average citizen there has a " "dramatically lower material quality of life" " is something I completely agree with. I have known more than a few of them. This is the real difference between their "leveraged experiment" and ours (US). Theirs was based more on trading
with America and it's dollar to the effect that it built "paper asset wealth", not a better SOL (standard of living). Because we own and print the reserve currency, we gained the same "leveraged wealth" but also increased the SOL. When this system fails, they will never have had anything to show for it. This is the road they are on now as their currency function has run flat into a failing dollar world. Hyper inflation is in their future!
Their social fabric and organizational skills did create a producing machine, but at what cost in human means? You see, it's impossible to produce yourself rich if you trade the efforts for some "rights to future buying power" like the dollar.
I wish we could all operate a well as they do and also use their ethics (well some of them). Perhaps, in a later time, across this dollar valley we will unlock the creative spirit in all nations as have the Japans done for themselves.

Mr. Weaver, you write:

-----------------But will you not agree with me that the example of how the dollar could leave gold behind or how the Japanese could bootstrap themselves as an island nation with no resources to have more wealth than any Arab nation who has all the oil and gold...that these examples show that
"the creation" of wealth in the future is not connected to gold ownership.-----------------

Solomon, gold ownership does not create wealth, it retains wealth created. Just because gold today has a massive amount of past "wealth representation" hidden from view, does not mean that the new owner of gold will have had gold create this new wealth for him! It's no different than if you found a $100 bill on the street, "it's new "wealth representation" created by someone else and found by you". This is our main story. I think far too many confuse out thrust for gold today with "trading for profits" motives. This is not the case.

Further you say: ---------

But, humanity, and its technological economy is evolving into something which will always be filled with debts and promises...if it were to all collapse today..the gold owners would feel rich but there would be a lot less they could buy....----------------------

foa: Unlike most die-hard gold bugs, I view gold as another form of wealth currency in transition. Not a run for the hills the world is falling investment. Yes, the US will lose a lot of not real wealth. But, as I have said so often, this is a perceived wealth based on an illusion. We will not lose something we don't have. Still, I expect a great deal of prosperity as this progresses. Just as many other countries
have suffered tremendous loses as the US gained a greater SOL, the reverse can also happen. Many think that without a US powerhouse, the world will fail. It never has and never will. Just a Clark Gable (Mr. Butler in "Gone with the wind") travelled the world after the Civil war, I submit
that the same world will be waiting modern travellers that retain their real wealth.
As you say " " humanity, and its technological economy is evolving" " , I agree and it will not stop if the US pulls back.

Also you note: --------------
.I see the large owners of gold taking gold out of the vaults and consigning artists to fashion massive sculptures each weighing several tons (about $10 billion of today's dollars and maybe $100s of billions later on). In time, there might be about 10,000 of these statues fabricated. They would be displayed in public places like banks, corporate headquarters, governmental buildings, world fairs, etc. Each sculpture would............. (and the rest of your post)

Ha! Ha! That is a good way to see it. Let's watch for this to happen!
Thanks FOA

Aggie (1/15/00; 20:27:06MDT - Msg ID:22970)

Hello Aggie, yes there is a new Another and he is from Provo Utah, no less. Stay with him and do exactly what he say's. I promise you your life will be forever changed! (great big huge sarcastic smile) Oh, by the way, I'll stay with the original here.


Cavan Man (1/15/00; 17:24:07MDT - Msg ID:22966)

Cavan Man, thanks FOA

FOA (01/16/00; 20:56:17MDT - Msg ID:23018)
Hello Cavan Man,

You write:------------- Cavan Man (1/16/00; 15:23:37MDT - Msg ID:23006)
I can assure you that most of the people I know who are highly leveraged, own no gold (not even gold equities) and are mostly invested in US equities for the most part do BELIEVE their perceptions however misconceived are their individual (and collective) reality.------------

foa: It's only been in the most recent period that such great wealth is held as "documented contract bookkeeping entries". Weather these numbers are stock values or saving accounts, they are all derivatives that indicate what "someone could buy, not what they have brought. As a percentage of American holdings, the actual converted and paid up wealth in the form of real useful things (cars,
houses, furniture, etc.) is tiny compared to the overall leveraged paper wealth holdings.
Most people equate the system like this:

" " I can cash out my winnings anytime and buy a gold bar. In fact, I did sell a little today and brought a Maple leaf. This proves that we can time our exit for our benefit" "

Truly, what this person is missing is that his actions completely mimic the overall American system and are what preserves it. Just as I equated the dollar to a gold futures contract, so too is the total dollar economy. In this system, we are, every day, taking delivery of some goods (comex gold delivery), just not total delivery as stated in the "full money supply" context (comex open interest).
As long as all of us don't try to buy with more than 5% of our assets (calling for delivery for say 100 contracts), the system works. Yes, any economic system operates with some relative savings for future delivery (retirement, saving for school, etc.), it's just the gross extent of our leverage
today has no possible comparison. The present risk is outside any historical precedent.
Without any yardstick for measurement, most people are comfortable that their paper wealth is somewhat real and remain with it. Only now, the foreign holdings of dollar assets has grown so large that if it "comes home for delivery", it will break the system without our buying help!

Your words:-----------------
I submit to you there are very troubled (social unrest) waters ahead in this country if events progress as you forecast. What do you think?-------------------

foa: C Man, from the beginning of time people have been gathering and losing what they have. It seems that as a people, it's our lot in life to, periodically do battle over "who took what from who" and "who failed to honour their contracts to deliver". It's nothing new. However, there is a
recent precedent that says things will be bad locally but not internationally.
The recent downfall of a world "nuclear super power" happened without a world war or the use of weapons of mass destruction. Russia was bankrupted without a shot being fired at the west for doing it. Does this mean that the US will sit still as it's dollar is gutted on the international markets?

You say: ---------------I remember the animosity paid toward ME persons and nations during the 70's due to the oil crises. Americans can become inhospitable with great alacrity when it comes to their gasoline. How can all come to pass (as it evidently must) without major domestic and
(hopefully not) international upheaval? Add xenophobia to politics and the recipe for disaster becomes written upon all minds.------------------

foa: I think that locally, the US will experience some bitterness as people realize what they never had. We borrowed so much from our unborn children that it could never be paid back. So, the international community changes the rules in a way that forces us to pay our own way now and we don't like it. Interesting, our debt supports a life style higher than most of the world and anarchy is
expected if we must repay it.

We will all have to see how this plays out. thanks FOA

FOA (01/16/00; 20:58:26MDT - Msg ID:23019)
Journeyman (1/16/00; 15:55:09MDT - Msg ID:23007)
Oil shale: A spoiler, FOA?

But FOA, there is one factor, it could be minor, I don't have the context knowledge to judge, which may affect your thinking a bit. Oro, you especially may be able to put this into context in terms of "strategic" value.

Clearly the size of the reserves is significant. The question is, is it significant enough to affect your
scenario FOA?

Hello Journeyman,
If not another drop of foreign oil was imported into the US, world oil production could be cut in half and still receive the same dollar revenue as today. You see, oil prices are only one part of this drama. Dollar use and value outside it's reserve roll is the main problem.

In addition, as stated before, even $200 a barrel for west texas crude may not spur oil shale development if local dollar price inflation becomes too great.

See the picture? thanks FOA


Strad Master (1/16/00; 18:39:13MDT - Msg ID:23008)

Hello Strad Master,
The same answer above applies to your question of using the US oil reserve. Also, in the past it was a real political card to play, Today, it's just a card.

You ask:-------------
2.) Would it be prudent for those who speculate to buy Euros with dollars and just hold them against an inevitable price rise you see in the relative near future? -------------

I would say one should choose their savings accounts with all the considerations offered here. The world financial system is always slipping like an earth fault. The question is can your wealth survive a full quake? For myself, Euros look just like a regular way to save some of my money.


Do you remember my question of a few days ago about the circumstances in which you and Another might reveal your identities? Is that ever a forseeable possibility? ----------------

foa: the major push of these posts is that you look for economic events that explain where we have been walking. If they tell you your trail is correct, then we are thinking for ourselves and perhaps seeing the world as others do. Not knowing us forces you to look closely with your own eyes. The understanding gained in this way is wealth that lasts forever. Thank you for reading and thinking

FOA (01/16/00; 21:39:45MDT - Msg ID:23025)
Time to go!
SteveH (01/16/00; 20:28:31MDT - Msg ID:23013)

" " one can only surmise that it is the dollars exit strategy or that all of what you say is mere conjecture." "-------

foa: Steve, every thing we humans say and think is conjecture until "something real happens as a result" of that conjecture. Ha! Ha! The real trick is in understand what is "mere conjecture" and "conjecture with a severe purpose". (smile)

Also: The man is doing the best he can with the tools Washington gives him. No more, no less. Besides, Peter has it right: Peter Asher (01/16/00; 20:33:14MDT - Msg ID:23014)


Al Fulchino (01/16/00; 19:17:23MDT - Msg ID:23010)

-------------You are in effect stating that Alan Greenspan was not truthful when he said this money ( I believe around 150 billion) was strictly for y2k confidence among the citizenry.------

foa: Al, did he really say that? (smile)

--------Secondly, is there evidence that dollar flight to the euro is taking place now? -------

foa, I think it's more like the Euro is becoming more useful a tool than the dollar. Read the Barons article this week. If indeed, the assets are drifting towards the Euro as a rising US rate is indicating, then a flight could occur. However, I doubt they want a stampede now. A slow drift would be much better.

------Afterall, oil is in fact now making its run upwards, yes? ----------

foa: Looks like fits and starts to me. But the trend is there. Truly, someone is turning the valves to adjust the dollar oil price.

-------If, it is yes, gold should be being unleashed right now. ------------

foa: If the gap that Michael talks about is still working (I think it is), then the paper market is running out of physical supply. The fact that they had to call in markers from small official sources the last time (to get physical lent), indicates that we have reached the last of the private stocks. We shall see.

Thanks all,,,,,,,,,,,,,,,,,,,,FOA

FOA (1/18/00; 6:57:14MDT - Msg ID:23098)
Solomon Weaver (1/17/00; 21:56:15MDT - Msg ID:23084)
Solomon Weaver (1/17/00; 21:16:27MDT - Msg ID:23083)

Excellent posts, sir!

On another subject:

I view this forum as a large discussion group on the floor of a convention hall. Each of us roaming between different faction groups, listening first, then taking part in the debate. From group to group we walk taking in all the fine new points. We can best be viewed as a large body of
people all adding to the information pool in a mostly serious, thoughtful way.

Then some kid runs up and stands at the sidelines and shouts out a few good thoughts and immediately says "To the Forum: You're all stupid and being mind controlled!". Then he makes a face, sticks his tongue out and runs away. During this episode, most discussion stops, everyone looks, tries to respond, but eventually goes back to work.

So, should we have security lock these nuts out? Well, in my opinion, early on we don't have to as long as we understand them and they don't ruin the whole convention. By understanding them I mean; they are smart and have something to offer, but when they make a face at everyone, it's just
an expression of "emotion without real background" not serious thoughts or discussion. Just as we all have children or young relatives that visit, we usually tolerate their behaviour until the talk (and events) becomes more serious. Then they must leave.

As "PH in LA" once put it, "they come in with both guns blazing and never read the rules". Indeed, they don't care about any "groups" rules! They want to spit on you if they feel like it and proclaim that that's the only way for adults to communicate! They dirty the air with innuendoes that our very own conversation (yes, our private talk) is half truths and dishonest. And point out that no one here is smart enough decipher this. In the end, it's demonstrated that some children, even though they are now old and have been around are no more than just "old immature kids with an
attitude"! A mind set that abhors humility and is usually brought on from a lack of real success in life.


FOA (1/19/00; 8:53:32MDT - Msg ID:23197)
Last "overview" for a while
Hello TownCrier:
I read your "Golden View" about the Euroland Gold valuations in (TownCrier(01/18/00; 20:42:11MDT-MsgID:23158).
Do we see the beginnings of a new official gold market being traded through the BIS system. One could almost see where the gold is moving into the EMCBs and only being traded and valued in Euros. We have promoted this shift for some time and anticipate it to grow as Euro use in the
international community expands. Especially as the Swiss sales begin. This lack of CB bullion liquidity will eventually starve the London paper gold system, mostly a dollar settlement system for the maintenance of dollar gold prices. Again, it (Euroland agenda) was a process that was designed some time ago and implemented with the Washington Agreement. Indeed, the WA is not the end of this "changing of the rules".


True, they (BIS) move a lot of gold for CBs and always have. Only, this time (from 1990 to date) they have shifted their agenda in favour of the ECB system. A shift that will strengthen the Euro as it weakens the dollar. This entire evolution of BIS direction and support has taken Washington, Britain and most economic thinkers by surprise. Yet, over the last twenty years it was a very visible and logical move with the Continent coming closer and closer to a new common
currency. It's no secret that they (BIS) became ever more apart from political dollar support as this (Euro)new weapon was growing. We can trace this shift's beginnings from the Jamaica Accords (mid 70s)and the first creations of the EEU (European Economic Unit)(early 80s). Later (mid to late 80s) the BIS fully promoted the EMS (European Monetary system) and used it's stability as a selling point around the world. This new architecture is what drew in Arabia to become a member and now sees a new BIS office in Hong Kong (opened in 98??). China will be the next member and a big Euro / gold suporter.
The entire (current) process involves a gradual weakening of the gold market (the paper function of it, not the paper price) to match the Euro expansion (5 years per the WA timeline?). I expected the paper gold marketplace to fail sooner and fall into discount. But the market has yet to fully grasp the impact of these events and still bids contract gold at par. However, we look at the dramatic
speed of this change (Euro acceptance) and can see gold coming into severe stress much sooner now. At the rate that Euro financing (and use) is growing, they will be imploding the paper gold market much sooner as they must revalue gold faster.
We watch for the dollar to come into real stress when the LBMA has it's system tested. This is where the real currency transition begins to grow! Again, I do not offer our words as proof, watch for events to confirm. As Another said, "Time will prove all things"!


Our stance is and always has been that the world will be using paper digital currencies for the rest of our lifetime. I for one, have never heard any official voice his stance that we will move back into a gold standard. Their (Euroland) direction has always been to keep a reserve currency system and strengthen it with a free physical gold market trading in the background. In none of our meetings have we heard where a fear was expressed that the governments will lose control of digital currencies and give it (that control) back to gold. That is simply not going to happen, no matter how severe a down turn the loss of the American dollar system creates. Believe it.
This has been the fundamental thrust of this news. The dollar system is failing as we move into another stronger (relative to fiat currencies) money system. I support, use and promote the new Euro simply because it is and will create the next trend for the future. Not because it's a gold currency of extra hard value. This (Euro) future will see us all using digital currencies, for better or worse. Therefore, by logical extension if I must use a reserve currency of account, I move into one that has the best strategic ability to survive and denominate my assets. In addition, it's creators are restructuring the gold market to the physical bullion holders advantage. This is the only reason I "Walk In The Footsteps Of Giants". They created this bullion path and the world will follow in due time. Therefore, my position of Euro assets and physical gold. Mostly (because I am American), I lean to gold for this transition.


One can take the radical position that the world financial system is going to end without the dollar. You can also say that the Euro will fail as this process evolves. One can buy gold for these reasons only and still prosper, whether your grasp of politics leads you this conclusion or not. Our sole reason for writing is a private commission to share official directions and perceptions with the
average citizen of the world. Nothing else.
Still, stand alone logic and history promote that the world will lose the present system to paper inflation and move into another as it has done before. With this, gold will bankrupt (through extreme price devaluation, $10,000 - $30,000) the outgoing system as hyper inflation runs through it. In a broader view, all total dollar dependent economies (Canada, Mexico, Japan, etc.) will share this fate.
This view gives you no facts only our perceptions from the builders of the future. We offer only the events as they occur for our proof. Indeed, strong events are ahead on this gold trail we all walk.

Al Fulchino (01/18/00; 20:58:12MDT - Msg ID:23160)
------------And like you, I see what is coming. And I see where FOA's thoughts regarding the euro and oil lead us. --------------------------------

Hello AL, as you have read all of our posts, one can see how oil is the swing power in this currency war. Their commodity has been used to back the outgoing dollar system for some time and in the process keep it alive. Their price in return was a "cheap gold market" and their percent of return will be a new stronger reserve currency and acceptance of physical gold as a real settlement option in international finance. We will all get a feel for this as the oil prices lead the US dollar, and it's world dependent Economy into a slowdown. At the same time, the entire Euro / gold market
changes will impact world perceptions about their values.

Solomon Weaver (01/18/00; 21:46:49MDT - Msg ID:23168)
Compliments to FOA
FOA (1/18/00; 6:57:14MDT - Msg ID:23098)

--------More than ever before, collapse will be of our own doing. Perhaps what we need most is a very dramatic shift in our SHARED UNDERSTANDING of what global politics and economics really is. Perhaps, as the cat gets out of the bag, the politicians and power brokers will not get it
back least by the same hole it gets out of. -----------------------------

Hello Solomon, add the above to my "overview" posts and we can see how the shift will affect Western investors the most. This is the segment that is most (mentally) unprepared for a true "marking to the market" of their paper dollar wealth. Again, they will lose nothing but their perception that their buying power was so great. It never was.

lamprey_65 (01/18/00; 21:47:13MDT - Msg ID:23169)
It's getting very interesting
"The Japanese car manufacturer Toyota has threatened to pull its business out of Britain unless thegovernment signs up to the Euro."-----------------------

Lamprey, I can just feel that dollar in my pocket that Michael will owe me. If Britain backs out though, my bet with USAGOLD may break me. (smile)

canamami (01/18/00; 22:10:58MDT - Msg ID:23172)
Lease rates tumble again
--------------When will the Asian CB's (or the ECB as per FOA), or big Saudi money, or anyone, finally go long big time for gold?---------------------

Hello canamami, they already have, didn't you see it? No, you can't watch the paper contract markets, because they stopped buying those early last year. Also: Forget the current lease rate charts. It's so thin it doesn't reflect the real lending. Most of that has gone off-line. When they do come into the visible market again, it will be as before, in a big overflow that guns rates for the next crisis.


Thanks ALL Good Luck! I'll be after more info and will be gone for some time. FOA

FOA (1/29/2000; 8:01:51MDT - Msg ID:23806)
Nice Thoughts all!
Thanks to everyone for all the excellent imput and discussion here. I have read only a small bit of what was offered, but what I did see was great. Also thanks for supporting a "civil" discussion forum. This method does work the best as contrasting the WTO meeting in Seattle against our current Dravos forum demonstrates.
SteveH, nice work of presenting the "New gold market" in a clear context. It's a good example of presenting something in a professional manner while leaving the emotions at home.
PHinLA, thanks for your post of support. Truly, we must all present our views in a format that allows the audience to think constructively about world events. People always see things more clearly when allowed to compare thoughts, not people.

Besides, in the end, we all spend our short time on earth as faceless fools. Ourselves, we are nothing, but our good perceptions and thoughts travel an endless road as the history of man. Indeed, every crowded road begins life as a small trail insights that are walked by the few. We walk this gold trail of the future, here today on this forum.

I'll try to post one time later (if able). Will close with these two (out of context, but interesting)
thoughts from Mr. Paul Volcker, speaking Thursday night during a speech sponsored by the Bank of Thailand.

----Ultimately, a world currency would be implemented --

-----"National currencies are only illusory,"-----------

thanks FOA

FOA (1/29/2000; 19:12:43MDT - Msg ID:23839)
For anyone that would like to know


The World Economic Forum is the foremost global partnership of business, political, intellectual and other leaders of society committed to improving the state of the world.

Members, constituents and collaborators have a unique opportunity, through their association with the World
Economic Forum, to engage in processes of developing and sharing ideas, opinions and knowledge on the key issues of the global agenda.

The World Economic Forum is an independent, impartial, not-for-profit Foundation which acts in the spirit of
entrepreneurship in the global public interest to further economic growth and social progress.


In November 1998 the World Economic Forum moved into its new headquarters overlooking Lake Geneva.

The new building reflects the culture of the Forum in the following ways:

Our environmental responsibility by being completely integrated into the landscape. The rooftops are covered with grass and recycled glass, and energy consumption is kept at a minimum
The offices are completely open space, creating a true team culture without any hierarchical differences
The new working environment reflects today's network society, not only by being equipped with the latest communications technologies, but also by providing 27 different meeting points and lounges for personal interaction
The building also serves as a "clubhouse" for members and constituents of the World Economic Forum, allowing board and other meetings for up to 120 persons.

The World Economic Forum's headquarters have been established in close cooperation with the Government of
the Canton of Geneva and the Commune of Cologny and will integrate a communal shelter equipped for several hundred people.

Message from the President

There are three reasons our Foundation is so special:

First, we constitute a unique partnership of representatives from business and government. Our basic philosophy is that the great challenges facing humankind as we move into the next century can only be met through joint efforts on the part of government and business. But these efforts have to be stimulated by the best minds and have to be made transparent to the public. In short, what makes the Foundation unique is that we are a truly global community, a global partnership of business, government, academia and the media.

Second, we are not only a unique community; we have a very special role to play.

At the beginning of each year during our Annual Meeting in Davos, we brainstorm to help define the global agenda. At this meeting and, indeed, during our numerous other gatherings throughout the year, we discuss the key political, economic and social issues.

And this leads me to the third reason our Foundation is very special: we all have a responsibility to fulfill its
mission: "Committed to improving the state of the world". We are aware that entrepreneurship is the basis for all
economic and, ultimately, social progress, but entrepreneurship has to take place in the framework of social responsibility. Therefore I call on each of you to keep in mind our motto: "Entrepreneurship in the global public interest."

We are building the network society. This means that elites will more and more disappear. The new network society will be open and access should be guaranteed to everybody. For this reason, the World Economic Forum has increased its exposure by creating a web-site that allows all the members of the global civic society to be integrated into our activities.

Klaus Schwab

Timeline 1970-79

Klaus Schwab, Professor of Business Administration, takes the initiative and the personal risk to convene Europe's chief executives to an informal gathering in the Swiss mountain town of Davos in January 1971, to discuss a coherent strategy for European business to face challenge, in the international marketplace. He secures the patronage of the Commission of the European Communities, as well as the encouragement of Europe's industry associations.

Klaus Schwab founds the European Management Forum, a not-for-profit foundation, as a framework for further
initiatives and activities. The foundation's Annual Meeting in Davos is now considered the global summit which defines the political, economic and business agenda for the year.

Country Forums are created, to bring together the international business community with the political and
economic leaders of specific countries. By 1995, more than 500 such meetings have taken place - in some 30 capitals or at the foundation's headquarters in Geneva, making the foundation the leading interface for global
business/government interaction.

After concentrating at first on management issues, the foundation increasingly integrates into its activities
(after the oil shock) political, economic and social issues. It starts to play a major role in confronting
environmental challenges as expressed, for example, in its role as an official adviser to the Earth Summit in Rio in

With the creation of the first Arab-European Business Leaders Symposium in Montreux (2000 participants) and
the first Latin American-European Business Leaders Symposium in 1977, foundation activities take on an international dimension.

The foundation transforms itself into a membership organization, becoming the catalyst for the foremost global
business network.

The foundation starts to organize Country Forums in developing countries. In such a way it highlights the
potential of emerging markets and helps to integrate these countries into the world economy.

The publication of the first annual World Competitiveness Report marks the debut of the foundation's research

The foundation is the first non-governmental organization to initiate a partnership with China's economic commissions and starts activities in China. Since 1980, an annual Business Leaders Symposium is held in Beijing and a high-level Chinese delegation comes every year to Davos. No other organization has brought so many businesses to China; many flourishing joint ventures today originated within the activities of the Forum. The foundation has had a substantial impact on the economic reform policies of China.

Timeline 1980-89

The first Informal Gathering of World Economic Leaders takes place on the occasion of the Annual Meeting in Davos, bringing together cabinet members of major countries with heads of international organizations (such as the World Bank, IMF, GATT). This serves as a model for similar initiatives in the global public interest, including: the Club of Media Leaders (editors-in-chief) the annual informal gathering of heads of the world's foremost non-governmental economic research organizations the Informal Gathering of Regional Leaders the Informal Gathering of Global City Leaders the Roundtable of Industry and International Organization Leaders.
All take place on the occasion of the Annual Meeting in Davos.

A special Informal Gathering of Trade Ministers from 17 countries is organized in Lausanneby the foundation, which spurs the launch of the Uruguay Round.

Governors Meetings, integrating the chief executive officers of the world's most important corporations, are created in specific industry sectors. These "CEO clubs" add an industry orientation to the foundation's well established country-related activities. Today, ten such industry groups exist with more than 400 Governors.

Regular meetings begin in India, which have a substantial impact on the opening-up of the country. Concrete proposals made by business participants are taken into account by the government in shaping its policy.

In order to reflect its increasingly global outlook, the name of the foundation is changed to World Economic

Hans-Dietrich Genscher, Germany's Foreign Minister delivers his famous "Let's give Gorbachev a chance" speech at the Annual Meeting in Davos. This is considered by many historians to mark the beginning of the end of the Cold War.

World Link magazine is launched, covering global business and economic issues for 35,000 decision-makers worldwide, increasing the foundation's publishing activity.

The foundation has played a role in major reconciliation processes in the world, with the first of these initiatives
in 1988. Examples are: Greece and Turkey: after being at the brink of war, signing of the "Davos Declaration" between Prime Ministers Papandreou and Ozal, Davos 1988 Korea: both Koreas meet for the first time for discussions at ministerial level at the Annual Meeting, Davos 1989 German Chancellor Helmut Kohl and East German Prime Minister Hans Modrow meet, accelerating significantly the process of German reunification, Davos 1990 East Asia: bilateral contacts lead to the normalization of relations with Vietnam, Davos 1990 South Africa: the first private meeting of all political constituencies of South Africa is held in the Forum's headquarters in Geneva in 1990; the first joint appearance outside South Africa of F.W. de Klerk, Nelson Mandela and Chief Buthelezi brought new impetus to the political transition, Davos 1992 Middle East: Israeli Prime Minister Shimon Peres and PLO Chairman Yasser Arafat reach a viable draft agreement on Gaza and Jericho, moving forward on the road to peace in the Middle East, Davos 1994. Middle East: Israeli Prime Minister Shimon Peres and PLO
Chairman Yasser Arafat reach a viable draft agreement on Gaza and Jericho, moving forward on the road to peace in the Middle East, Davos 1994.

WELCOM is created, the first electronic networking system between the foundation's members and constituents. This pioneering effort, operated on a limited scale, has provided the foundation with experience to develop a strong digital information and communications dimension for its future activities.

Timeline 1990-2000

The foundation launches in Davos an unprecedented All-European Summit of heads of state and government,
followed by substantial activities to integrate Central and Eastern European countries and the former USSR into
the world economy.

The foundation initiates the annual Europe/East Asia Economic Summit with the objective to strengthen
economic and business links between the two regions. The first meeting in Hong Kong gathers 400 participants;
it is followed by a second in Hong Kong in 1993 and a third Summit in Singapore in 1994 attended by over 600
participants. Calls were made there for a meeting on the level of European/East Asian heads of government to
be held in 1995, creating between Asia and Europe an APEC-type organization.

The foundation creates a new network, Global Leaders for Tomorrow, composed of young leaders from business, politics, academia, the arts and the media, all of whom are under 43 when chosen and are already well established through their achievements and their positions of influence. The first 200 Global Leaders for Tomorrow are appointed, to be followed by another 100 each year. The network provides an additional source of forward-looking ideas and initiatives.

The foundation sponsors the creation of a sister foundation, the World Arts Forum, which convenes 200 artistic and cultural leaders from all over the world to a special meeting in Venice, Italy; based on this experience and
contacts, the foundation integrates a stronger cultural and artistic dimension into all its activities. From 1995
onwards, it awards a prize (the Crystal Award) to personalities who, in addition to having made a real difference in the world of arts, have also made an outstanding contribution to cross-cultural understanding.

The first Southern Africa Economic Summit takes place and is followed by a second in June 1994, coinciding with the emergence of the first democratic Government of National Unity in South Africa.

The foundation launches the Industry Summit outside the Annual Meeting in Davos, to serve particularly
entrepreneurial "Global Growth Companies". The first Industry Summit is organized in Cambridge Massachusetts in cooperation with MIT and Harvard University; the 1994 Summit takes place in Palo Alto, hosted by Stanford University, and with the collaboration of Caltech and the University of California, Berkeley. The cooperation of the world's leading universities ensures the latest technology-research and
knowledge-oriented input into the activities of the foundation.

In order to reinforce the club character of its networks, the foundation limits its activities to members and to
their special guests only.

The foundation starts the concept of Forum Fellows nominating some 300 top experts in the political, economic,
social, cultural and technological fields as pertinent advisers and contributors to its activities.

The Informal Gathering of Editorialists and Commentators is created to provide the media with its own networks and with the opportunity to interact intensively with the other constituents of the Forum.

The foundation welcomes its 1000th member and launches two new forms of membership in addition to the 1000
multinationals forming the core of the foundation membership: the Global Growth Companies, a second pillar of
particularly entrepreneurial fast-growing companies; and Regional Membership which allows the integration of
companies with a specific interest in a particular region, such as Asia and Southern Africa. Already more than
half of member companies are headquartered outside Europe.

The first Middle East/North Africa Economic Summit in Casablanca is convened by the World Economic Forum
in partnership with the Council on Foreign Relations, under the presidency of King Hassan II of Morocco. The
Casablanca Declaration produced at the Summit proposes numerous concrete mechanisms to support the peace
process in the Middle East and to launch the concept of a Middle East/North Africa economic community.

The foundation holds its 25th Annual Meeting in Davos.

The foundation takes members on a Special Trip to the Greater Mekong Subregion, creating a new identity and
new forms of cooperation in this rapidly developing growth area.

The Forum has actively promoted the integration of Latin America into the world economy for many years, and
in 1995 the first Mercosur Economic Summit is held in Sao Paulo. The Summit is instrumental in overcoming a
crisis situation (an automotive trade dispute between Argentina and Brazil) which threatens the existence of this
newly emerging economic region. On the occasion of the second Summit in Buenos Aires (1996), Chile formally
joins the regional trade group (Argentina, Brazil, Chile, Paraguay and Umguay) as an associate member.

The theme of the Annual Meeting of Foundation Members is "Sustaining Globalization," and worldwide attention focuses on Davos as the centre of a growing debate, initiated by an editorial, written by the foundation's president and managing director, published in the International Herald Tribune and widely cited in other media.

The first ASEM (Asia Europe Meeting) meeting takes place in Bangkok. This meeting of heads of state and government of European and Asian countries was initiated and prepared by our Europe/East Asia Economic Summit.

The first Central and Eastern European Economic Summit is held in Salzburg, under the patronage of Austrian
President Thomas Klestil. Attended by all the relevant heads of state and government, in addition to a significant group of business leaders, the meeting creates a new identity for this region inside the larger European framework.

The foundation publishes its Global Competitiveness Report . The report is highly valued by governments worldwide as a benchmark for their own performance. The foundation recognizes its responsibility in this area and brings back the report under its sole control. Jeffrey Sachs, Director of the Harvard Institute for international Development, is co-chairman of the Report's Advisory Board.

The Council of the World Economic Forum meets for the first time at the Annual Meeting in Davos. The World Economic Forum integrates its Foundation members in the decision-making process via the Council, which is made up of some 40 eminent representatives of member companies. They meet twice a year.

The Africa Competitiveness Report is published for the first time. This new study undertaken on a region's
competitiveness is based on the model of the successful Global Competitiveness Report. It is the first
comprehensive competitiveness study on the African continent.

Creation of the Business Consultative Council, a group of over 30 heads of business associations from around the world and heads of several United Nations bodies meet for the first time in Davos at the Annual Meeting. This innovative initiative of the World Economic Forum offers the UN the support of business and aims to install a permanent relationship between the business community and the UN system.

The Forum moves into its new headquarters at 91-93 route de la Capite, 1223 Cologny/Geneva, Switzerland.

The Forum holds its 30th Annual Meeting in Davos.

FOA (1/29/2000; 19:22:46MDT - Msg ID:23841)
Is this more clear?
World Economic Forum in Davos, Switzerland
"Informal talks" as reality overcomes illusion.

I was just thinking:
In the January issue of News and Views" from USAGOLD, Michael Kosares noted that; "In my view, we are witnessing the breakdown of the dollar based floating rate system erected in the 1970s to replace the ill-fated Bretton Woods arrangement." He then gave his many good reasons for that view.

I couldn't agree with this more, especially the above statement. The late 60s into the early 70s is where our current gold trail began and today we are seeing more twists in this winding path. From the beginning, our gold marketplace has been little more than a reflection of the same forces political powers exerted upon all world markets. Indeed, gold has never ended it's function of being a major currency component of international reserves. Because of this, it has received the same exchange rate pressures that governments have exerted upon their own paper moneys. Today, our private gold marketplace is maneuvered to act as a proxy for the governments political needs as it (the marketplace) prints gold as needed to impact it's price. No different from the treasuries printing money and intervening in currency exchange markets.

Can there be an end for this?

In these power games we know that nations states always have an agenda. This purpose is slowly revealed as the repeating force of policy direction eventually exposes their thoughts. In time, these political thoughts are shaped into real events for all to see. The recent Washington Agreement
and the BOE gold sale are a prime examples of this. Still, if one can feel the political purpose ahead of time, just the background events can mark a clear trail. From our (Another/FOA) table we offer the "Thoughts" that in time can give birth to official acts.

The Currency Trail and The Gold Trail, two moneys on the same path?

On this forum (USAGOLD) and many others, readers are sometimes exposed to opposite extremes of "money" thought. I submit that History and Logic say neither of these extremes will "Play" in this "Modern Drama".

On the radical side, ........."the serious gold bug" says all currencies will fail and only gold is the correct investment. All currencies are created by the same evil, misguided governments and should be avoided at all costs. Even degenerating into a lower scale of emotion, they point out that all forms of money politics are gross manipulations of the public. All with Secret Agents and a New World Order that controlling the worlds wealth......

The intrigue never ends! I submit that this is a "common view" that's been promoted for 200 years. Today, serious investors know that as a modern people, we can only hold real wealth for endurance, not daily use in commerce. Patiently, knowing that in time society always creates the
political motives that unlock gold's value hidden by the "illusion" of today's reserve currency system. In gold today we find this hidden wealth and observe the march of "Giant Footsteps" in a direction that's unlocking it's value. Still, in the end, society will use a currency system to denominate this wealth transition. A different system, yes, but a digital one never the less!

On the conservative side,...... "the dollar inflation experts" have witnessed the ebb and flow of minor price inflation events over 25+ years and base their preparations on the next event being the same. As such, this view expresses an expectation that this currency (the dollar) will continue on indefinitely in inflation and deflation cycles. It assumes the dollar system has retained the same
fundamental values it had in the past cycles and the world will continue to use it. Yet, hidden below the surface is the rot of massive dollar expansion and the debt that has produced it. Each cycle of economic expansion was built on a greater multiple expansion of dollars. All without an overall increase in productive abilities of the American machine. Indeed, some measures show that the ability of the US to produce goods locally has declined in real terms as they transferred a large portion of said production to other peoples overseas. A dynamic that actually further removes more economic function from backing the dollar money supply.

I submit that this modern "American Experience" of dollar production has completely overtaken the ability of this system to engineer "one more cycle" of regular dollar inflation!

For ourselves, we walk far away from these two concepts. In reality our position remains in the absolute center.

In our view, the buying of physical gold should mostly be form dollar asset holders because this is the currency system that is going to change. A strategy for both foreign and native dollar investors with foreign holders changing settlement to Euros.

Yes, history does show that no currency has ever lasted and all will fail. A point we completely agree with. However, recent history of our modern time clearly demonstrates that as every past national currency failed, the world economy moved on to the next functioning currency system. We have progressed too far in trade efficiencies for us to function without a digital fiat system. For our world, there will be no going back to "gold alone" Therefore, we fully expect, accept and plan for a reserve currency system to be in operation as the old one fails, and so should you. It's a prudent, conservative concept. In this transition, dollar gold prices will best reflect the hyper inflation that will wreck the outgoing system.

Further in our view, we feel that the dollar timeline has ended along with it's past "minor inflation" cycles (8% to 15%). This time a new price inflation will take hold and "run away" as the world evolves into the next system of settlement. Again, the dollar will remain the the US currency unit. America will continue to buy and sell using dollars, much the same as other countries with major inflation It's the reserve currency settlement system that will change and effect the dollar value.


Why so much gold now and not before?

It's always been a good individually policy to hold some gold. Especially after circulating gold lost it's ability to function in a modern evolving economic architecture (1933?). Yes, over all these years, one aspect for holding physical is that a natural disaster, a local banking panic or short term trade dispute could find one using gold coins. However, this has always had a short term impact with long-term effects on wealth. Look around at the other national economies that have been destroyed lately (and in the past)? Go there and we find that they are still using the broken, local fiat systems. Had they held some of their savings in gold or strong major currencies, most of their wealth would have remained intact. So, holding some gold (or gold stocks in a foreign account) worked fine.

But today, the world has evolved. In our modern perceptions we hold gold for two reasons. 10% (of the reason) is still for use in a temporary currency breakdown. 90% (of the reason) should be for gold to represent your real wealth in a form that negates the effects of a "failing WORLD DOLLAR reserve currency system", not a just another "local" cycle of inflation.

It's in this second 90% reason that we find the most misunderstanding of our times. Many gold investors of "Western Thought" own some gold for the above 10% reason. The rest of their wealth is denominated in the currency they expect to survive the best, the dollar. In addition, they retain gold derivatives that owe their existence to a world "dollar marketplace". For many years they have lowered their holdings of physical gold and replaced them with these leveraged dollar gold derivatives. All because they accepted the concept that the dollar and it's world markets will remain intact through the next cycle. This massive discarding of real gold has altered the physical marketplace by supplying gold for commodity use and creating a demand for paper gold products. In effect, Western Players shorted real gold, then brought into gold mines that also shorted real gold! To date, the massive volume on the LBMA is a testimony and confirmation of this new gold market based on contract gold.

Again, on one side we hear a conservative voice that says the dollar will complete another cycle of price inflation as past money supply expansion works it's magic. Just like the 70s we will see prices rising 6%, 8% or even 13%. Knowing how money principles work, the average investor has but to position himself in "derivative inflation hedges", gold stocks, oil stocks, REITs and commodity futures. Then wait the cycle out. Expecting some inflation or a partial dollar breakdown, they consider themselves prepared by holding paper wealth based on a continuation of
the dollar marketplace.

Something has changed!

They totally ignore the fact that past dollar inflation produced price inflation, early on. Yet today, world dollar liquidity has grown at huge rates for many years (perhaps a decade) without this price effect many had expected. Some have been positioned, on and off in resource investments that have yet to produce the gains "relative" to those experienced in the 70s inflation. Financial panics come and go, yet dollar use has only increased. The US trade deficit explodes for years with no ill effects. Local and world dollar interest rates remain somewhat tame in the face of what should have been a panic flight from US investments.

All of this clearly points to a currency system that "WAS" being held together and supported by world Central Banks. There is simply no other answer for this action. As this support unwinds, look for the old rules to be broken.

We walk this trail today!

A rising dollar today is an indication of "deflation stress" under the surface. Players scramble to unwind positions as dollar liquidity dries up. The withdrawal of dollar settlement in world financing, savings and CB reserve structure destroyed dollars like soup on a slow boil. In time (like today, like now!), dollar exchange rates are driven up in much the same way the Yen is. The process
represents weakness in the background financial function, not strength inherent in the integrity of the currency. The reverse leverage in the market destroys more assets as the currency rises.

The US Fed must flood the world with money in order to stop the stress. It is! Indeed, the BOJ has and will follow the same course. It's called the final inflation.

The world dollar gold market we all thought we knew will respond in a way not expected. It will fail! Contract gold prices will be stressed from two forces........... From one side, major users of this paper market will flood the market to the full extent of their equity. Creating gold contracts out of nothing but the dollar bank accounts that stand behind them. Just as the Fed is pumping money to try and protect the banking system, so too will gold contracts be created to try and protect the gold banking system ................From the other side; As this unfolds, major demand for physical gold will erupt from official sources world-wide. Not the kind of coin buyer demand we know of
from the past. No, this is the kind of serious buying none of us have ever seen! As the "dollar boil" becomes more obvious it (physical demand) will completely avoid the contract market and go straight into the much smaller dealer market. In effect, allowing contract gold to experience a void on the "buy side" as physical gold completely disappears on the "offer side". Some "traders contend
that they will sell their gold if it goes into the thousands and buy a car, new house, etc.! This from "behind the desk" players that think they will lean back and observe the largest shift in real wealth ever to occur. And do so at a computer screen, no less. No, no they will not! We hear these words in the context of today's soft reality. Later, it's the extra houses and cars that people will be selling
to buy more gold. Believe It!

None of this has happened yet, or has it? From the Washington Agreement to date, all aspects of the contract market have become "strained". Major players have withdrawn from the physical lending markets and left behind a small facade of unbacked "paper lending". Hence the low lease
rates. Some mines are in default on major gold loans and Comex Open Interest falls away. I expect the comex to receive some major use when the next (real!) spike arrives. Perhaps from paper hedging paper? We shall see.

A Story: There are facts, reality and only one's perception separates them.

------A New York plumber walks into a hardware store for supplies. After paying and receiving his change, he accidentally drops a penny on the floor while walking away. The checker points out his lost penny. The plumber says he can't afford to pick it up. The checker asks why? My friend, he says I makes 60.00 an hour. That works out to .0166 cents a second. If I pick up that penny, I'll lose money. In fact, just talking to you cost me .20 cents. Let me out of here or I'll go broke!-------- (smile)

ALL: The world does not think this way, but to hear some people talk you would think it does.

---------When a stock goes from $10.00 to $100.00 the same day, it's reported it went up 1,000%. If it goes down to $50.00 the next day, it's said it dropped only 50%. Yet the investor that brought it for $10, just lost half his 1,000% gain, or -500% down! --------------

--------If we are told that a stock that's been falling for years and is down 95%,,,,,,,,,,often the same bullish trader has been in and out of that issue "all the way down". Most of us would agree that human nature being what it is,,,,,,,,,,, he lost far more than 95% on this long journey! In addition, the "mind set" created from this trip must affect ones judgement of wealth? Often making it
impossible to walk a different trail. ----------------------

I'm back into the sea of thoughts, now. Be back when I can,,,,,,,,,,thanks FOA

FOA (1/30/2000; 11:37:56MDT - Msg ID:23870)
ORO, Cavan Man:
I put the Dravos web site up so everyone could see what they were about (at least some of it). I'm not in their mind set nor do I agree with some of their ideals. It's just a view into their forum agenda.
Also, they are in no way the powerful minds behind the worlds political thrusts. They mostly represent the viewpoints of the major players behind them. It seems that the real movers in this world don't look good on TV, can't talk to audiences and in general do not present their thoughts well. They usually present an agreed architecture concept and leave it to the professionals to implement. At least this is my view and experience of this?

Cavan Man,
What is the USD camp response? Well, the fire has been burning from march of last year. It started small (in the basement) and is spreading now. I think Mr. Greenspan has been trying to put it out with a money spray, but he and everyone else knew that would only work for so long.

We said once before that the game was over and the US would "manage" this crisis to the end. Even to the point of forcing the IMF gold sales into open view and creating a contentious outcry. If you remember, I said last year that the US was coming around to letting gold rise because it's
revaluation could help control the dollar fire. Just like turning around a tanker, the political dollar machine had to slowly reverse to encourage this. Did they know congress would jump on the IMF gold sales and force a revision? It's your guess. Never the less, the IMF is now well on the road to reworking (even more now) it's gold stocks for the purpose of supporting the dollar with higher gold prices.

What a reverse, huh? For years they want gold down, now they want it up. Well, it had to happen once the dollar fire began to burn out of control. Besides, with oil prices spiking, there is an obvious (now) disconnect between low gold prices and cheap oil. Want to bet that the creation of
the Euro had anything to do with this? (smile) Notice that they (USA) signed onto the Washington Agreement. They didn't have to, you know. Are we reading the trail clearly, now?

The only players left in the paper gold market are the final fall guys. All the LBMA people. They now hold the full deck of cards in this modern gold market and the CBs and governments have walked away from them! Yes, their (CBs) support is still there, but only in the form of crisis
management if gold runs completely away. Witness the small CB lending at the height of the last crisis. Truly, the entire world currency architecture is shifting away from supporting the past paper gold market and allowing it to slowly die. At some point (Another says $360) it will begin a real breakdown and close it's doors to trading.

Just as the Fed is now "managing" an all consuming dollar fire, so will the last of the gold bankers "Manage" their now ongoing fire. Eventual, it will take them completely out of the gold banking business and leave a wake of scorched earth. Everyone (and I mean everyone) that must utilize gold derivatives to work this modern market will be hurt by this. Even some major players are showing the road ahead as they must unload big positions in gold derivatives (last Friday) because of (you guessed it) this dollar burning crisis. And we are only just getting started! Who is going to bid for future gold (paper gold) when it's delivery party is being cleaned out on the cash side from an unrelated play? Indeed, will anyone bid for paper gold when they themselves are being skinned in this? You see, there will be no security in dollar gold derivatives when the whole dollar house is on fire. They will bid for metal that is available "right now" or not bid at all! Only the "straight up" "cash bullion only" dealers will come out clean and strong in this. Is this a correct read of the cards all the players are holding? Let's hold some physical, lean back and watch the events unfold. We are "on the road", but the paper prices we watch may spike either way. It's now a political match that's between who can manage the fire best as it finishes it's work.

Back to the dollar: The Europeans are going to eat everyone's economic lunch with this low Euro! Just think, the markets have done for the ECB what the BOJ has been fighting like hell to achieve. Now, they (Japan) must gut their financial system with a "real live inflation" just to get back to a competitive zone (currency wise). Read this analysis someone sent me and then consider that some investors thought Japan was a good play:

Japan to Turn to Direct Loans From Its Banks

Jan 30, 01:46

TOKYO, Jan. 28 -- In a striking demonstration of how precarious Japan's financial situation has become, the government plans to borrow money directly from banks to fulfil its obligations to local governments.

Governments normally borrow money by issuing bonds,which is cheaper than taking out bank loans. Japan's unorthodox approach to borrowing now and the size of the shortfall -- 8 trillion yen, or roughly $76 billion -- have stunned economists and other market watchers. With one small exception, this is the first time since the days after World War II that Japan has taken such a step.

The amount is equivalent to roughly 2 percent of Japan's gross domestic product, and exceeds the 7.7 trillion yen the government has injected into troubled banks.

"The funding mechanism is breaking down," said David
Asher, a research fellow in the Japan Program at the
Massachusetts Institute of Technology. "The dam is showing more and more stress fractures, and they're trying to put plaster on them."

Concern is rising that Japan is overextending itself. The government's debts now match the country's G.D.P., and Merrill Lynch is predicting a rise to 150 percent of G.D.P. in two years.

The skyrocketing debt, justified by politicians as a way
to keep a faltering economic recovery on track, is
increasingly a point of contention within the ruling Liberal Democratic Party.

But by side-stepping the traditional reliance on the bond
market, the new borrowing has placed a stark new emphasis on this crushing problem.

"By not issuing bonds, by taking on an intermediary like
a bank," said Jesper Koll, who is chief economist at
Merrill Lynch Japan and is typically upbeat about
Japan's prospects, "you are basically saying one of two
things: either you don't believe in the efficiency of
the financial markets or you're admitting you have a
credit problem."

Now, Mr. Koll said, the government runs the risk of
replicating, on a smaller scale, the trap that brought many Asian economies to their knees recently. "There's a mismatch because they're planning to borrow one year loans, but the municipal deficits are not going away in a year," he said.

There are signs, too, that the government may expand its
borrowing from banks, which are healthier than they were
two years ago. A Finance Ministry spokesman said there
were plans to cover shortfalls in another, unnamed "special account" this way, though the amount in question is far smaller.

The banks, for their part, are likely to welcome the plan. Although the Finance Ministry spokesman stressed that terms had not been set, the Nihon Keizai Shimbun, Japan's leading financial daily, said the government planned to pay 2.1 percent interest -- a handsome premium to the 1.6 percent the banks could earn buying government bonds.

Andrew Smithers, a prominent fund manager, is one of the
few experts who put a positive spin on the plan, saying
it will get more money into circulation, which many
economists have advocated as a way of curing the economy's ills.

Because loan demand is low, banks have too much money
sitting idle. "It's a good measure," he said, "because it further eases monetary policy and relieves pressure on the bond market, which will help lower real long-term interest rates."

Japan has been suffering from a classic "liquidity
trap": while an exorbitant amount of money is available
for lending, companies and individuals are not borrowing
as they try to reorganize their activities. Thus, the
money is bottled up in the banks, idle.

While most people see the move as a sign of government
desperation, it may also help some banks facing shrinking loan demand.

Masaaki Kanno, senior economist at J. P. Morgan in Tokyo, is also unconcerned. "Japanese commercial banks are the largest buyers of government bonds," he said, "so there's really no change."

The government is battling to keep its ballooning deficit in check in the face of continuing signs that the economy is addicted to stimulus measures that require more debt.

In a speech to Parliament today, Prime Minister Keizo
Obuchi said getting the economy on its feet would take
precedence over paring the national debt. "Fiscal reform
is important," he said, "but we cannot commit the
mistake of undertaking it while the economy is not firm
and before it is on the path of full-fledged recovery."

Yet highlighting the discord within the government,
Finance Minister Kiichi Miyazawa bemoaned the fact that
the proposed budget would push government debts to 645
trillion yen, or $6.15 trillion.

Economic prospects are not bright. The Japan Center for
Research estimates that G.D.P. fell by 1.6 percent in
the latest quarter, suggesting that the government will
have trouble meeting its target for 0.6 percent growth
this year.

Hiroyuki Inoue, the center's senior economist, said the
figures demonstrated that when government public-works
outlays end, the economy falls right back into the
doldrums. "After the effects of government spending
programs faded last summer," he said, "the economy
slipped back to the level it hit in 1998."

He expects the situation to change as the latest stimulus package starts kicking in. But the center's figures still suggest that the economy is far from able to sustain itself, even though Mr. Obuchi promised today that there would be no new spending beyond the record $810.8 billion budget he has proposed.

The Finance Ministry spokesman said the decision to borrow from banks rather than float bonds was merely an effort to segregate the funds, which will go into a special account for local governments.

He said it had nothing to do with the government's ability to raise money, an assertion confirmed by two recent bond auctions.

But that makes the plan even more puzzling. Economists
speculate that the government is wary of issuing more
bonds than it has to, fearful of jeopardizing any
recovery by pushing long-term rates higher. "They're
afraid of upsetting the bond market," said Ronald Bevacqua, senior economist at Commerz Securities in Tokyo.

The government also wants to avoid drawing additional
scrutiny from credit ratings agencies. Many economists
say Moody's Investors Service, which withdrew its triple-A rating of Japan's sovereign debt last year, is poised to downgrade its assessment even more later this
year. Standard & Poor's, though, recently reaffirmed its
triple-A rating.

The ministry spokesman said the new plan was nothing
more than a response to the fact that traditional sources of financing have fallen short. The government has traditionally been able to tap the 253 trillion yen postal savings system, but many 10-year deposits will mature soon, leading many economists to predict that money will flow out of the system in search of higher returns. The post office in Japan is the de facto largest bank in the country.

The spokesman stressed, however, that the outflow should
dwindle after two years, at which point the government
might be able to dip into it again.

Similarly, Mr. Koll noted that the post office took in
1.1 trillion yen in new deposits last month, suggesting
that Japan's ever-so-cautious investors may prefer earning 0.28 percent over 10 years to risking their life savings in the market.

The decline in tax revenues coupled with a decreasing
ability to tap the postal savings system left the
government with a gaping $76 billion hole when it came time to give local governments their share. "Can they keep spending money to cover the deficits of the local
governments and in the pension system?" Mr. Asher asked.
"If the answer is no, there's going to be a crisis."

The government has resorted to direct borrowing at least
once before, to cover shortfalls in a special account for national forestry projects. But the account for local government is different, said Kunji Okue, an
economist at Dresdner Kleinwort Benson in Tokyo.

"Borrowings for national forestry projects are used to
manage and cultivate national forests and parks and can
thus be viewed as an investment expense," Mr. Okue wrote
in a recent report.

Also, he noted, the amount borrowed for the forestry
account was far smaller. "This is the first time since the end of World War II that Japan has undertaken large-scale direct borrowing to cover recurring expenses," he said.

The last time the United States resorted to a similar
move was in 1893, when J. P. Morgan provided gold to help the Treasury.
C Man,
Now that the Euro has become even more competitive with the dollar, the US trade deficit is going to literally explode! And this is on top of a cascading dollar system that is forcing the Fed to pump money! And now Britain is running straight for EU membership with all that implies for the US dollar system. You tell me if this doesn't mean they are managing a gold banking crisis with their sales. If they join before a gold market failure, then "England in Euroland" will be the end of dollar gold banking as we know it! Believe it! Here is a real shocker:

Blair Accused Of Planning Euro-Superstate

Conservative leader William Hague says Tony Blair and Brussels bureaucrats are pushing ahead with plans to create a European super state. Mr Hague argued that European Commission proposals published this week could lead to further EU integration, and a limiting of member states' right to use their national veto.

But Mr Hague rejected Mr Blair's accusation that the Tories wanted to quit Europe. Mr Hague told the Council of Europe's European Democrat Group that the EC's proposals for the Intergovernmental Conference later this year let slip its integrationist ambitions.
He said :"They are pushing for a European Union with its own government, its own army, its own taxes, its own foreign policy, its own criminal justice system, its own constitution, as well as its own currency - in other words, a single European state.
"The submission is an integrationist wish-list - the blueprint for a single European state." Mr Hague said the EC wanted to expand the use of majority voting to push through policies which a minority of countries did not back. He said: "The national veto would be abolished in areas such as aspects of social security, social policy, industrial and transport policy, financial regulation and the spending of the multi-million pound structural and cohesion funds." The blueprint was not an "isolated document," the conservative leader warned.
He added: "It comes alongside moves to build a European defence capability independent of Nato, and a common foreign and security policy which the EU's High Representative concerned calls the 'integration project for the next decade'."

Also read the Dear "investor letter" at

And read the Golden Sextant for a different view

I'll get back when able
Thanks for reading and thinking,,,,,,,,,,,,,,,,,,,,,FOA

FOA (01/31/00; 20:29:25MDT - Msg ID:23964)
Part 1
Part 1

Hello everyone,
Finally I have some time. Permafrost has come into this forum and made a few posts that need review by us all. I'll present my case against his position as in a court with all of our forum members as the jury.

Hello Permafrost,
Nice to see you today as we stand before the court of public opinion. Now we can feel the pressure many of my friends feel before voters (smile).

ALL: What we have here is a person walking into our convention where FOA has been offering his reasons for gold for a year,,,,,,,,,then Mr. Frost stands up and says ""he's (FOA) telling you to buy Euros"!

He comes in on (12/24/99; 2:31:01MDT - Msg ID:21594),,,,,,,,'saying
--------Hailing from a "Third World Country"! Mes Compliments to you all! Dear Forum particants, I have stumbled upon this Shoe Box while shuffling my cyber feet to locate the LBME site. After a few weeks of perusing the postings, especially those by the Elders----------------

,,,,,,,,,,,,,,and suddenly he is an expert on my position?? From a person that has read for a "few weeks" and is so new he just found the LBMA web site!!

(Your Honour: this line of reasoning goes to "experience credibility" in the affairs of the modern information markets.)

My Position:

I state this from the beginning: no one can claim an understanding of a book if they read and use only the last chapter for reference. This is essentially what Mr. Frost has done. By design of purpose or by mental accident he has stated my position out of context and continues to do so.
Before me, Another proclaimed that gold was the only wealth investment Westerners could count on in the long term. Not stocks, not bonds, not currencies or paper gold derivatives. Using hundreds of posts he offered bits and pieces of the puzzle he referred to as the "New Gold
Market". Time and time again, he pointed out the relationship between oil, gold and currencies as they were maneuvered by the political wills of the world. Of course, just like you, me and everyone that reads this forum, he holds other investments. Yes, all the usual paper items traded in this modern world along with the other hard things. Like property, businesses and personal belongings.
Still, the thrust of his logic was "always" that the dollar would fall and gold would rise! His reason dictated that one could extend their wealth, safely through this coming transition by holding a large position of physical gold.
Myself, I have also produced hundreds of posts on this forum,,,,,and they all presented the "logic" and "reasons" for holding gold. Yes, some of them said that the Euro will eventually be strong. But, always the "Euro Event" in our time was viewed as the main catalyst that would propel the dollar down and gold up.

Mr. Frost; you must present a series of my thoughts that in a chain of reason conclude what you present as true. Otherwise your posts are false and without credibility. Show us where my "chain of thought" or "logic in progression" has directed one to invest in Euros without gold or in Euros and
not gold. If you cannot demonstrate this reasoning, your contentions are worthless for consideration and must be discarded.

My thrust and feelings for gold as stated in from hundreds of posts, are most clearly stated in the end of FOA (12/28/99; 8:34:38MDT - Msg ID:21734):

Gold, the only investment needed for the next thousand years


In Mr. Frost's post of (12/29/99; 7:40:27MDT - Msg ID:21773),,,,,,he replies to Cavan Man
---------I find your train of thought quite pragmatic for the most part. But I personally don't think we'll have a "fix" to our dollar-based monetary systemic problem. That would be like trying to cure the disease...I think it'll be a wake up in the morning into a new world sort of cathartic affair. For gold and finance are mutually exclusive. ------------------

ALL: This is in part something I completely agree with. Our views part ways in that I see the Euro eventually taking over the dollar's reserve function. Reducing the dollar to a much lower standard in world affairs. For this transition I proclaim that "Western Investors" buy mostly gold. But, knowing that everyone holds other assets, we should try to denominate those (other) holdings in Euros if possible. So, just like he says (Mr. Frost) ------I don't think we'll have a "fix" to our dollar based monetary systemic problem ---.

Part 2 is next.

FOA (01/31/00; 20:34:19MDT - Msg ID:23965)
Part 2

ALL: Early on Mr. Frost addressed me in (12/29/99; 3:21:27MDT - Msg ID:21765)------Dear Sir, Based on your logic, two outcomes are possible.----------

How nice, he even said Dear Sir. Proving the point that he is capable of civil conduct in the affairs of professional people. (Your Honour, this line of reasoning goes to purpose of action,,,,,,his later caustic conduct is wilful and meant to discredit)

As evidence: My reply to him is reproduced below. I submit that it clearly lays out my reasoning, logic and produces an expected course of events. Please read for the peoples court.-------------

FOA (12/30/99; 16:38:17MDT - Msg ID:21859)
Hello and welcome Permafrost,
I'll comment on your items in order:
PERMAFROST (12/29/99; 3:21:27MDT - Msg ID:21765)
FOA Msg ID: 21734
Dear Sir, Based on your logic, two outcomes are possible.
1) If you're right and we are witnessing the re-monetization of gold than all those that benefited from the fiat money scheme will lose their power. ------------------

Mr. Frost,
Not all of them! Only the ones that did not hedge their power effectively. Surely the Euro will carry some of the same political agendas the dollar currently does. Only, it will be controlled more so by the cross currents evident in the various old world countries. Let's face it, we all need a dollar like currency if our modern economy is going to function. What we don't need is a single reserve currency that precludes any avenue of escape if it hurts other countries. If gold is trading in a free physical market, no one is going to run to gold as a single currency and leave the Euro entirely. Indeed, a free world economy needs and demands a currency that can expand and contract with changing conditions. The curse of the old gold standard was that it didn't allow this latitude and always created a crisis when needs required this flexible money supply. Only
a separate gold market can offer a means to truly measure the success of the money creating treasuries. This is the direction we are heading, for better or worse.

-----------A gold backed and restrained financial system (An oxymoron, in my belief) will simply preclude them from accumulating goods and services against monopoly money -- the source of their power.--------------

Well PF, the power you speak of can also be held through the use of gold itself. Many a king and monarch ruled the land with the effective use of bullion. Your oxymoron is not in the restraint of the monopoly money, rather in the present lack of a free choice between "gold wealth" and "dollar
wealth". The blending of these concepts will create a new power block that must conform to the needs of all.

----------2) If you're not and gold is merely being used as a relatively-untapped "new" source of non-debt-backed dollar creation, than it's a very old game we're playing, indeed. Was not gold itself responsible for one of the greatest INFLATIONARY explosions in History when the Conquistadors "expropriated" Aztec gold and brought it all to Europe to consume (chaseafter) a "limited amount of goods and services"? Colombus turning over in his grave? -------------

PF, During the time of the Conquistadors, we must consider that goods were not being inflated in price, rather gold was being devalued! At the very least gold did not disappear as bank notes do. No, the coming run in gold will be a reflection of the tremendous dollar inflation already in the
system. It's only in the eyes of the Western dollar saver that this price inflation is unwarranted. Again, they are only loosing something they never had. An illusion of wealth on a grand scale.

------QUESTION: Do you know of any emperor (I think you called them 'Grandees' here on this forum) who's willingly abdicated power--Besides God himself?------------

My friend (PF), power belongs to the swift of heart and mind. This world waits for no one as power flows from peoples to peoples. Even the strongest emperor knows to occupy the high ground before the flood. The powerful in tomorrow's future will own gold today. Thank you, FOA

At the beginning of this post (above) I made the statement: " " Surely the Euro will carry some of the same political agendas the dollar currently does. " " .
This item alone is proof of my opinion of this new digital currency. It will be little more than a digital contract item of settlement,,,,,,a fiat currency in competition with the dollar for reserve use. It's advantage is obvious ,,,,,,,,, it's new! History has shown that every currency system "at least" has it's time on stage,,,,,,,and they always start out with low debt and a dearth of holders. For this reason alone it will function for at least a while. Do I say "hold only Euros and no gold"? Of course not! Who here could read such a position into this given viewpoint?


Again he addresses me in a civil manner as below:

-------PERMAFROST (1/3/00; 3:35:05MDT - Msg ID:22106)
Dear FOA Sir,Having noticed that the last of my three part posting is shown first, I thought you may mistake the tone to be on the inflammatory side. It's not the case. I consider it a privilege to have an intelligent conversation with people of knowledge. Please go to Msg. #1 then proceed
"upwards." Thank you!-----------

To the court: The gentleman posts in a civil tone only to give way to a caustic format later. For what purpose does one so obviously break the social rules of forum conduct?

Again, I reply to all of his items and clearly present my position. This is an important post as it dissects most of Mr. Frosts future comments about my position. It clearly shows that he did not comprehend it.

Part 3 is next

FOA (01/31/00; 20:41:03MDT - Msg ID:23967)
Part 3

ALL: Below, I clearly demonstrate my position on the current evolution of financial affairs. Please read for the peoples court:(I will comment on each part with ALL: preceding my analysis)

FOA (01/08/00; 17:34:05MDT - Msg ID:22538)
To ALL: I'm trying to catch up now. More to follow.
Sorry to see you go (if you still are gone?). I'll reply to your comments, somewhat in order.

You write in :------------
PERMAFROST (1/3/00; 2:31:57MDT - Msg ID:22103)
FOA Msg ID: 21859 Part 1
Dear Sir, Thanks for your response.
--------You are advocating a global financial system predicated on the peaceful and mutually-beneficial "concubinage" of gold and the "new girl in town" fiat money the Euro which you unwarrantedly presume to be relatively more "chaste" than the Old Whore, the US dollar, ONLY
because it is not "backed" by as much debt as the dollar, and its "lovers" (the EU Central Bankers,the Rothschilds?; an assorted variety of Illuminati and various other power brokers playing both sides [the sheeple?] against the middle [more sheeple]) tip their hat at gold without solemnly
declaring their allegiance at sovereign money, PM etc. ------------------

No Mr. Frost;
I don't advocate that. I think this is your perception of future events. This transition will not be "peaceful" in any way. Any time one large official faction (Dollar/IMF group) has it's money power replaced by a new official faction (Euro / BIS), it's never peaceful and not without significant loss of wealth by some of the players. I add that both little and big players get hurt when these events
happen. Usually, it's the little "uninformed" players that lose the most. Your observation that people are "sheeple" comes as they step in front of a train with no breaks. Then
you tell the world that "someone" is out to get them. My experience is that the average investor is much more intelligent than that and they can do a good job of "moving" off the tracks if it's pointed out to them that a train is coming. The dollar is giving up it's reign as a reserve currency, not "only" because it has so much debt. It's
being replaced because it's inflation (total money supply, dollar derivatives supply, dollar debt supply and the official liabilities foreign nations hold as reserves supply) has discounted so much future real US production, at a constant exchange rate, that it is losing the ability to function as a reserve currency. Every currency on earth has one day come to this end. We call it a "fiat money's
timeline". At this point the users of this money begin to either "deflate it's supply" through debt and payment default, or the they devalue it by bidding up the value of real goods (price inflation). Once either of these begin, the money function of that reserve currency declines. Further, one will find that deflation is only a choice if no other official world currency is available to run to. World citizens vote with their feet at this point and greatly discount unpayable debt thus causing said deflation.
Inflation is the choice when people can "refinance" into another currency media. Leaving the old to contend with an ever increasing velocity of the useless money supply. This is the fate that waits the dollar.
Is this some structure brought about by a New World Order? If you want to see it this way, then remember the world has been doing this from creation. I only add, why bother to put the "New" on it? Let's just call it "Next World Order"! Besides, it's only one peoples as a nation group (EURO/BIS) trying to protect their wealth because another nation group of peoples (Dollar/IMF) borrowed more that they could ever pay back! Still, I read this New World Order faction (NWOF) as loudly declaring the Euro as a fraud, yet they (NWOF) are hip deep the dollar assets
of a country that "defaulted on it's gold delivery. Twice! Then they (NWOF) yell because no one is creating a new gold or gold backed currency. Why do that? So we can be defaulted again by the "NEXT World Order"?

ALL: Later on Mr. Frost tries to paint a picture that I did not hold this logic. His future contention that all the "boys in control" are in the same club and the Euro is but another dollar. My chain of reasoning demonstrates how his logic is flawed. The very fact that we find "tribes" and
"sides" on this forum speaks volumes about human interaction. In like kind, world power brokers also form "tribes" as they jockey for position in world affairs. Is this not plainly obvious to all of us? They even fight among themselves as witnessed in the Euroland struggles. But this is no different than the US political fights. Still, we all band together in larger groups when it comes to world
affairs. Financial power is no different. Sure, they all hate gold, but they will embrace it if it gives them an advantage in currency warfare.

In my next reply to his several part post, I offer the logic and reasoning behind the dollars position. Why it is managed today in a defensive posture. It presents it's weak link from where the Euro/BIS faction can attack.
You write:
This fiat money is necessary, you say, because it will allow management [manipuation] of the economy without suffering the deleterious side effects that a rigid gold standard has saddled us with in the past. Would you care to draw for the benefit of the forum the the philosophical line that
separates you from, say, an Alan Greenspan, as per the gold/fiat money relationship? do we not have TODAY a fully-floating POG alongside the dollar? What shall we gain in re-baptizing fiat money with a different name, i.e., the Euro? except the prolongation of the Game? IF gold IS
money than nothing else is. Disagree?

No PM;
We don't have a fully floating price of gold today. This is the illusion (paper gold) that has many people (such as yourself) locked into a narrow view. Mr. Greenspan has always seen the gold money relationship from a US dollar perspective and holding the US as the only dominating
financial power. He knows that the dollar could never retain it's position if gold became a "separate settlement currency" through a true world free physical market. All of the dollar price inflation that is currently locked into the present dollar supply inflation would present itself. Dollar reserves held world wide would become useless unless they could be used to buy real US goods (at a non inflated price).
Truly, Mr. G. only sees gold from a Washington view and even that must be locked in the cellar. He manages a system built by others and must use the tools this system allows. The present paper gold market is as much a function of the dollar value as interest rates and it is controlled as such.
Today, gold is money, I agree! But, it is not and never can be a fluctuating (in supply) digital money of high speed settlement. For it to work it's past magic in this modern world, it must trade in physical form without derivative use. It will.

ALL: next I conclude the replies

You write:
PERMAFROST (1/3/00; 3:02:19MDT - Msg ID:22104)
Reply to FOA Msg. ID: 21859 Part 2
Capitalism, this familiar but insidious term really stands for the wilful confusion of a descripitive proposition [that private property exists] with a PRESCRIPTIVE one [that private property and the wealth that can be generated from it is GO(O)D]. -------------------

No PM,
not at all.
This is the standard (higher level) teachings in modern Western education. History proves that "real private property" has and always has been both wealth and a purchasing power medium (money). Through the best of times and the worst of times, in war and peace, people have always had private property. Even in Russia of old, they had to allow people their things. Even if these positions weren't recorded "officially". A universal truth is that no form of official ruler-ship can function unless people have some private wealth. Never has worked for even a short time and never will. Further, generating more wealth from private property (owned wealth)is only good if one can overcome the "RISK" that comes with it. This is nothing new to most of the world. It's just a different concept for modern Western man.

You write:
It's a logical fallacy that doesn't survive the glare of critical analysis. Omit the adjective "private" from the premise and what you end up with is the other side of the coin, or communism. Both systems are basically worship of materialism and humanistic (man is the measure of the universe) propaganda. Now, whereas communism theoretically aims at generating its "GOD", or 'goods and services' in economic parlance, via the sweat and toil of its fellow gods (the proletariat), capitalism is predicated on CONSTANT INSTABILITY [the insidious rhetoric of the bankers
notwithstanding] of the prices of these very goods and services, the [managed] fluctuations of which allow the people Greenspan works for to earn wealth they did not work for. -----------------

I'm glade you understand this ages old function of humanity. Through out time and space our life quest is influenced by others that try to control our desires. The successful time traveller lives his days in harmony by adapting to the "lay of the land". Today, it's time for gold and Euro assets.
Indeed, what you have just written is the very action that has brought the dollar to the end of it's timeline.

Again, your words,

PERMAFROST (1/3/00; 3:09:12MDT - Msg ID:22105)
Reply to FOA Msg. ID: 21859 Lastly,
As to even the 'emperor running to higher ground when he sees the flood coming'--if he were to do so, he'd be emperor no more for what makes an emperor an emperor is the "land" he rules. Without it he's nothing. That's why captains do not abandon their sinking ships; and why sometimes even emperors get their heads chopped off. To die an emperor is perhaps preferable than to live as a normal human being for some...You?

In addition PF,
the history of gold shows how one may remain in their chosen land and retain their wealth. For gold needs not return to a native place to receive it's value. We do indeed chose the
high ground, with or without our heads. (smile)

ALL: Here again, I promote gold as the high ground, not the Euro!

Further you add from :Msg ID:22104
Therefore; I find myself obliged to conclude that, due to your avowed devotion to the Euro and the "The King is dead; long live the King" tradition it propounds, the only difference between you and an "Alan Greenspan" lies in your respective handles. If you already are not one of them, you wanna join 'em. Incorrect?

Very incorrect my friend (Permafrost).
The difference lies not between myself and others, rather between the life experience of "you" and "I". Somewhat like the movie "The wind and the Lion": You like the wind hold the power of force in your words. I as the lion roar in defiance as the sand stings my eyes in a land I cannot leave. Yet, as a lion, I know my place on earth while as the wind, you will never know yours!Thanks Much ,,,,,,,, FOA

ALL: Here (above) is where Mr. Frost begins to promote my "devotion to the Euro". It is completely out of context and misguided. The complete evidence, inherent in all my posts point to using the Euro as the political tool for making gold rise in dollars.
Because all of the Another / FOA public viewpoints were presented on the Web,,,,,,,,,,I hold that Mr. Frost could be much too new to this venue to have read them all (smile?). I don't think so, but still as evidence of this I offer his ------------(1/5/00; 6:55:41MDT - Msg
ID:22322)---------Now, could you tell me what "IMHO" stands for? Thanks!---------------

Later, after Cavan Man told him what it was he posted --------(1/6/00; 4:42:35MDT - Msg ID:22396)--------Not good, IMHO (now that I know what the acronym stands for).


Part 4 is next

FOA (01/31/00; 20:49:50MDT - Msg ID:23974)
Part 4

ALL: Now we review a post that I submit is pure garbage! I'll break some of it up and commit.

PERMAFROST (1/13/00; 3:18:40MDT - Msg ID:22817)
To the Forum...So; are we to believe the pagan [Aristotle] when he says that the dollar is NOT backed by oil--please
arrest needless mincing of words--or the holy trinity [ORO, FOA, and the "holy spirit" ANOTHER?] when they make noises to the effect that it is? The fact is, it is NOT--de jure, de facto; in reality or in illusion. ATTN: ALL THOSE THAT EQUIVOCATE THEIR PERSONAL SPECULATIONS TO ACTUAL FACTS;

You are doing this willingly because the content of your postings display articulate intelligence and considerable knowledge. The only conclusion I can deduce from these FACTS are that you are either trying to surreptitiously mislead your following or simply making an [---] of yourself.
Unfortunate in both cases.

ALL: Some chain of logic? One would think he would respond to all the previous discussion ,,,,, and do so in a manner that spells out his position. Instead he uses the old ---I can't present my views in a way that proves me right so I'll tell everyone that you're an (---)!

Then he goes on:

Your fawning and obseqious behaviour towards the local gurus places you in the same ship [the Titanic?] as the sheeple you frown upon.I've been reading this forum for a month; thence follow my observations for those who care to read them:

ALL: Again I say, "What a bunch of garbage!!" He admits that he's been reading the group for a month,,,,,,no less,,,,,,,,and has us all pegged. And later on says that I am talking down to everyone!!

Then he goes on:

1) Only A=A. If gold=A then NOTHING ELSE equals A. Period. No Euros, dollars, dinars or
2) Positing premise #1 to be true, all those here claiming that the Euro constitutes the lifeboat off of
the Titanic [the dollar] are LYING, because YOU know that they know better!
3) Now I ask YOU who previously considered yourselves to be so well informed; WHY would they do such a thing? Do they have a hidden agenda or are they plain you-know- what?
When they disparage one fiat money [the dollar] and sing the praises of another [the Euro] they are talking from both sides of their respective mouths. Sheer dishonesty!

ALL: Again I say "What a bunch of garbage!!" You have all just read our (FOA/A) position as given. Did anyone feel "arm twisting" ,,,, or "mind control",,,,,or a "hidden agenda"? I ask, where is his logic chain,,,,,,,his political analysis ,,,, his reasoning. Does he just give "predictions" based on his perceptions without laying the ground work of how political logic would bring his events about?

Mr. Frost says (part of his post) in (1/13/00; 6:59:28MDT - Msg ID:22822)----------Even assuming Aristotle's words were written in stone, YOU are still confusing an alleged (by Ari) RESULT with an actual CAUSE of that result, or fact (irrationally assumed by the lot of them) that never was the case: THE DOLLAR WAS NEVER PEGGED TO OIL!--------------

ALL: But he never offers his reasoning as to why! Nothing! Deep stuff, huh! Big help to the forum as a team effort! Here is another of his team effort-----------(1/13/00; 7:15:04MDT - Msg ID:22824)---------You're right Steve; nothing wrong with being friends and sharing thoughts. But I
sensed a whiff of insipid and insidious tendencies and aired out the room. See? now we got fresh air, and that's good as well.----------------

ALL: finally we get some analysis in 22826 and 22875, but it's again mostly rebutting other posters.
He attacks me (and others) with innuendoes and then states the following---------(1/18/00; 2:39:41MDT - Msg ID:23093)-------RossL; and Forum also To condemn someone in public without elaborating evidence or at least an argument is not a sensible thing to do. IMHO, I am simply reacting to what I perceive as being the promulgation of half-truths and wilful creation of confusion and intellectual miasma on this forum.------------------------------------

ALL: "What a bunch of garbage!" ,,,,,,and "What an incredible contradiction!"
He is "simply reacting to what I (he) perceived"-----and after only reading the discussion for a month or so. Does
"his perception" give him the right to step all over other participants?

Mr. Frost says in --------(1/18/00; 8:28:03MDT - Msg ID:23104)------------------Mr. Peter Asher; With all due respect, sir, I never stoop to calling people names like your camp has done re Msg. ID 23098 by FOA.FOA; Strange...I have the nagging feeling that what you wrote there (Msg. 23098) hurt YOUR credibility more than it did anything else. For God's sake man, you actually called me a nut! Was
that really warranted? Does THAT fit the guidelines?

ALL: "What a bunch of garbage!" He just said that we offer ----half-truths and willful creation of confusion and intellectual miasma on this forum------,,,,,,,,and then says he never insults anyone!

Then admits that in my Msg. 23098 he was the nut referred to. Read my post,,,,,I never referred to him. "What a bunch of ?"

And Further:

He continues his posting with----(01/20/2000; 06:13:29MDT - Msg ID:23242)----As for your mentor, FOA, he states that #23197: "In none of our meetings have we heard where a fear was expressed that the governments will lose control of digital currencies and (give it) back to gold. That is simply not going to happen, no matter how severe a down turn the loss of the American dollar system creates. Believe it."
beesting, why should we believe your mentor? This guy is talking about NOT giving control back togold which YOU YOURSELF equate with SOVEREIGNTY. He wants gold bridled and the Eurobewinged to monetary heaven and you want to put him in the HOF?----------------

ALL: did anyone read my entire post and receive it in the full context of what I presented today? His perception of what I said is garbage,,,,pure and simple. Then he goes on in the same post
----------This, the banker community, of which I suspect FOA to be a member of as evinced in his own allusions to be speaking down to us from "official" spheres, are trying to hide from us by advertising the Euro as the one lifeboat off of the dollar-Titanic.-------------

Again, after all this guy says about our discussion, I am accused of this trash!

There is more------(01/21/2000; 02:39:57MDT - Msg ID:23334)----------BEESTING: FOA has discredited HIMSELF. Just as you yourself did by standing by a man who's betrayed you.----

ALL: What was that ????,,,, where did that come from? Why am I standing on the same stage and attempting to add to this convention while this "!!!" is saying anything that comes to mind?

Now I'm told (by a friend) who he is
--------(1/28/2000; 4:37:35MDT - Msg D:23715)--------Someone was asking Leigh if I was TZADEAK and had any good leads that would presumably help him/her make a buck or two. Well; here's my "predictions" for 'you'...-------------

Well I have to thank my good friends for tracking much of the gold talk on the web. They are the ones that saved all these posts and pointed out that this PERMAFROST is indeed of the same mold as TZADEAK that posts on Kitco. Today, he and Disney go round and round using several handles (go follow it past and present and you will understand). This is the same type of guy (or is he the same?) that came over here using the Mello88 handle and NewGold. He has always tried to claim that he is Another or had Another's ideas or some other ridiculous crap,,,,,,,,,,,,,,and does it
in a totally caustic fashion. His postings are well documented (PHinLA you witnessed his incredible conversations)and Another would never share a stage with ANY SUCH FOOL or the Lurking Gold Bug idiot (ON k),,,,,,,
once he realized their tactics.
My writing is a reflection of him (Another) when he's not posting and I must honour his directions. I said I would walk off this stage if there kind were allowed here. It
was bad enough to hear Stranger literally stomp me into the ground, then promote himself as a professional pillar of the community,,,,,apologize and return. But, no amount of camaraderie is worth being associated on stage with this other nut.

Sorry Michael. This decision was made for me. From time to time I'll send in something for you to post in another area (off the forum) if you will allow (OR WANT). But this is where I MUST draw the line. This is final, good luck all.


FOA (2/3/2000; 8:11:45MDT - Msg ID:24209)
Some changes I was asked to make.

Hello all,
The last post (s) by Rainman only underscored the point Another made to me earlier. His (Another's) message is so strong and political that it will always draw out "verbal assassins" in an effort to destroy the concepts (MK understands this and communicated it to me also). Especially as they (events) start to really confirm this new direction. Some of these (forum) disruptions are deliberate and some are due to mental dysfunction, but all of them divert most people from fully grasping the trail in the context given. I don't think everyone fully realizes just how much of an
impact these "Thoughts" (as political wills force the issue) will have on the international assets and business plans of major people. Some of them will argue against these viewpoints as if all their wealth depended upon it. Indeed, it just may!

Some time ago (many years), he privately planted these Thoughts very deep in the minds of a few. Only recently were these items produced on the Web for all to see. It was done in a way that did not betray things gained in confidence, but still made people see the world as others did. Another withdrew when the attacks (he knew would come), arrived. I wanted to continue on in a "narrative" fashion that would spell out these changes (events) more clearly as they occurred. As an American, I knew that most "Western Thinkers" would not ,did not and will not grasp these
political changes until they were well underway, or worse. Even then, every attempt will be made by special interest groups to show events in a different (more dollar friendly) light. Virtually assuring a stampede once the real bell is rung.

Truly, other major changes in world affairs are coming. Once they are visible, I believe Another will return and comment. Again, he does not write to engage people, he writes to place other minds "in the pipeline of political thoughts and directions". I truly think it has more to do with ethics and honour than the love of man. This may be a harsh observation on my part, but some cultures (as well as individual standards) require this.

My posting here as FOA has attracted to much of the same caustic attacks that he walks right through. In reality, he is thick skinned as one could imagine such a person to be. As one of you posted an "A" item earlier, "these attacks are as boys having words with the wind, yet a strong wind has no ears" (or something like that). But, as the "thin skinned Westerner" I am, I do a poor job of representing his thoughts the way it was done before. After Permafrost continued his mindless comments, I was "asked" to no longer post as FOA in a give and take forum setting. Even
though I offered extended reasoning, it was never addressed in a clean logical fashion. The Rainman item only underscored this. But (if MK will allow), I will continue (as FOA) the "Gold trail Hikes" in posted letter form somewhere else on the USAGOLD site. We can still address many of the forum discussion items as deemed necessary. Yet, it will be done more in a letter format. If I am to post again on the forum (sparingly), I must use a different handle and debate the issues as myself, rather than represent the Thoughts of Another. This removes me from a conflict most of you did not know existed.


To everyone that wrote here in support of these writings, I reply with a thanks from a true heart. I accept this knowing that your words are also for all the other fine persons that post here.
MK, you are the Hollywood producer and director of this drama. A film being shown around the world for all to see. It's your call my friend?

Thanks FOA

FOA (02/08/00; 11:55:06MDT - Msg ID:24704)
(No Subject)
PH in LA, Cavan Man, and ALL,
I'm waiting on some possible new structural changes to this website. If it works out it will be very interesting. Also, I will receive a new handle for this forum and for the first time post representing myself only (not anyone else). Give it some time, this will all work out very well.

Only market events can change the opinions of "hard" gold bugs that are looking too much into the past for guidance. No amount of human logic or our discussion will sway them to view the future in a different context. Many of them only see the here and now plus 3 steps in front of them.

Later, god willing, all of us will "walk the gold trail" as a group (FOA included) with an eye on the future, not the past.

Thanks all,,,for your many comments ,,,,,, I'm taking this time to complete several projects. Will
return later (a number of days).