Trail Guide (2/9/2000; 7:30:40MDT - Msg ID:24775)
test
this works? be back when I have more time.
Trail Guide (02/11/00; 09:49:21MDT - Msg ID:24996)
The Gold Trails
Thank you Aristotle!
A fine work that's worth a long study, my friend.
ALL:
Many writers today offer nothing less than a philippic discourse about the flaws in today's fiat systems. Always looking backwards, they are lost to grasp how what was considered "hard money policies then",,, "eventually failed then",,, as these same interacted within the economy. Truly, a hard financial structure trying to blend with a soft, flexible "human nature". In a larger degree, how much more could it not work in today's modern world. Once implemented today, these same policies would again "crash and burn" in response to the demands from "real people" living a "real life ".
Aristotle, your five part series is trechantly written and offers readers a glimpse into a future that must be. Will be!
My thoughts on a deep subject:
If the modern banking system has mislead us at all, it mislead by supporting a view that our wealth, our things, were not money. They implied that "paper settlement money" was our real wealth and only it could be as such. Truly, as we walk and breathe, human's things have always existed as both money and wealth. Side by side by side they walked with us in our financial life, in both modern and past context. Yet, in our modern "Western World" of thought, the largest portion of one's personal asset holdings now reside in the form of "paper money". Worse, the majority in it's "contract derivatives" forms. Gold included.
No longer do we hold our greatest portions in real forms that transcends the peaks and valleys of fiat money value ,,,, a variable fiat money system that our "changeable nature" demands. No, we option to ignore the true purpose of this paper money system and cast the entirety of our resources into it. Never stopping to understand that this money is but an "economic need" "to process a trade". Not an "economic product" and therefore wealth itself.
Through out recent time, fiat money has responded well to human nature, flowing like a river as it expands and contracts to our wants and desires to buy and sell things. From drought to flood it is the channel of our trading system, as it moved the "end product water" that flows within it's wide banks.
Today we use the remains of this dying "dollar settlement system". It continues a natural death, as society struggles to use a currency that can no longer represent our financial structure. A changing structure in a world that marches on. The dollar's debt load has aged it and brought it to the end of it's time line.
Only today, the end of this "time line" will find many holding their wealth in this same system, for a purpose it should never have been intended to perform. That being, to represent one's life long accumulation of real wealth as their money wealth things. Most will understand the impact of this well after the fact as we are indeed in transition to yet another paper system. One we must have, requested and will use. Just as everyone used the old one to their own private advantage, we will indeed grasp the next one. Just as you point out Aristotle, fiat exists more so because it does "what societies economic function wants", not because it's a function of "what society is forced to do"! Still, some will bark against this in a effort to stop people from following human destiny. Fortunately, relative to our lifetimes the world evolves quickly, with or without our agreement.
In this period however, we will return back in time much further than many can see. This time gold will be pulled away from it's strained attachment with "fiat contracts of currency" and again take it's place as the ages old "wealth money holding" it always was. It will occupy it's rightful place on the shelf with all our other "wealth things". And here it will, "for the first time in modern context" show it's true value in relation to modern paper settlement money. A value no one today will believe!
Should one risk financial assets based on this series (Aristotle's) alone? Never! On the contrary, no one should believe what he has written. Rather, we as a society should "study" his fine work and seek to understand it's meaning. Once fully understood, I think most would then agree with it's inevitable outcome. Indeed, a "free gold market", based only on physical holdings would impact the world economic system unlike anything seen before it. And Yes, it's impact on the relative value of gold will make that metal the monetary wealth investment for the next thousand years!
This my friends is why so many today, "Walk In The Footsteps Of Giants". They walk a trail that takes them further and further from derivatives of gold and the present currency it's (gold) priced in.
From Yesterday, through Today and onward into Tomorrow" ,,,,, we say buy Physical Gold for your future ,,,,,,, doing so will write your personal history in the palm of your hand!
"Soon, we will all hike the "Gold Trails" and see all there is to see ,,,,,,, over the mountains and through the valleys ,,,,,,, across rivers and plains ,,,, looking near and far as we stop along the way ,,,,,,, Truly, we will view the value of gold as modern mankind has never seen it before ,,,,, join in, it will be a journey in life, that's well worth taking.
thank you again Aristotle ,,, Trail Guide
Note to all: please study these fine works
Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589)
Aristotle (2/7/2000; 8:10:15MDT - Msg ID:24593)
Aristotle (02/07/00; 10:52:39MDT - Msg ID:24602)
Aristotle (02/07/00; 13:14:18MDT - Msg ID:24610)
Aristotle (2/10/2000; 3:37:44MDT - Msg ID:24877)
Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589)
It begins! -----* Executive Summary--an Outline of Observations *-----
The harsh slap of reality and the soothing touch of Gold:
*** Any monetary system that attempts to coin gold, or otherwise use gold as currency will naturally give rise to banks--for security and quality assurance, if for no other reason.
*** History reveals time and time again that this seemingly "perfect" gold-only system naturally evolves into fractional-reserve lending because it is what the people want.
((People want to consume or to own now that which they have not yet saved enough to purchase outright. They are willing to mortgage their future productivity in order to have their house today--they seek sources of loans. Meanwhile, those that already have a quantity of money are seen to seek a source of income from their wealth...and banks come to be actively sought and employed by both sides to act as the middleman.))
*** While lending depositors' money, the efficiency of banking to reallocate fungible funds allows many people to behave as though they all are owners of (have access to) the same original money on deposit.
((The bank uses its available, unlent funds to satisfy any depositors' requests for withdrawals rather than reminding them that the funds are temporarily unavailable--because in order to earn interest, the bank lent the money out, as per their agreement.))
*** The artificial increase in the money supply erodes its per-unit purchasing power.
*** A growing economy (complete with rising prices from a "softer" currency) raises the customers' demands upon the banker's art of money creation, widening the gulf between here and reality...between the vast amount of banking credit and the small original amount of real wealth-money upon which it was all built.
*** Because coin and bank-credit circulate as equivalent, interchangeable currency, the value the currency-unit regardless of form (Gold coin or paper) falls in accord with the growing supply of bank-credit.
((The many accounts filled with bank-credit "money" gives rise to the wealth-effect built upon the perception of abundant funds. This pressures prices and puts the effective purchasing power of the currency-unit severely out of balance with the proper and natural purchasing power that should otherwise be enjoyed separately by the small quantity of real Gold on hand. In practice, this renders the metal used in the under-valued coins into little more than an artifact of "the good ol' days when things were cheaper."))
*** When the value of the coin comes to be viewed as a simple representation of the abundant currency and fails to reflect the value of its metal, it might as well be made out of anything at that point.
((If a paper dollar can circulate at par with a gold dollar, and the purchasing power of both is dictated by the supply of paper dollars, then why incur the expense of minting coins out of Gold? If simple durability is desired, then copper or nickel would certainly be capable to represent the currency's value every bit as well as the paper does. Therefore, avoiding the expense of Gold in the production of currency for circulation would easily be seen to be an act of prudence, whether the value involved is 1¢ or 100 dollars.))
*** The concept of money gradually loses its original meaning and its ties to real wealth; it comes to be built upon the thin ice of confidence and good loan performance of the banking system.
*** Fixed gold convertibility of the currency on account looms large as a threat to the banking system.
((Keep in mind that it is through natural human activity that banking evolves into an important system for much of society, built by a population that has come to depend heavily upon it. Therefore, a stage will always arrive in which the fixed Gold convertibility of the circulating currency will be purposefully abandoned. It is done to preserve "lifestyle as we know it" in the eyes of those people living at such a stage in a currency time line.))
*** What then is the role for Gold? Gold qualifies as the only TRUE money. Among the many national currencies, only Gold fills the three important monetary criteria: store of value; medium of exchange; and unit of account. Gold, therefore, remains the ultimate king of them all and subject to none...as long as it isn't attached in any official capacity to the fate or fortune of any one of them. Therefore, the monetary system architecture must be such that Governments find no temptation; they are unable to derive any benefit to their own situation through any efforts to "keep a lid" on Gold.
*** Gold must be set free to float, seeking its proper value among the world of circulating currencies; preserved as a unique currency that may NOT be lent (because lending effectively causes a perceived increase in its supply and decrease in its purchasing power, as outlined above.) Gold must only be bought and sold outright, and must remain free of the attachments of any and all financial derivatives.
*** All people, regardless of nationality, must be free to exchange their national currency for Gold at prices established by an open physical Gold market.
((As I've said before, any system in which a person is denied the liberty to own Gold as a form of savings is both financially and morally bankrupt.))
How will this work, you ask?
*** Gresham's law predicts that the world's supreme currency, Gold, will not actually circulate in the conventional sense. Gold will be saved (and will appreciate in value without lending/leasing it out for interest,) while national fiat currencies will circulate under the needs of the economy. It is these national fiat currencies that will continue to satisfy the demand of borrowers for loans. National fiat currencies will also serve as the means to satisfy the various governments' unrestrainable inclinations to "manage" their economies to the extent that they are able. They, too, will hold Gold in savings (reserves) for the same reason we do.
The supporting chapters are to follow in this commentary--"Building the Perfect System by Capitalizing on Gresham's Law"
Aristotle (2/7/2000; 8:10:15MDT - Msg ID:24593)
Building the Perfect System by Capitalizing on Gresham's Law
At first cut, people fall into one of two categories: 1) those who recognize the value of an honest monetary system built upon Gold, and 2) those who have not yet given any serious thought to the matter. Proceeding with the small but special population that belong to the first category, my own experience has revealed them to be inclined toward idealism. Good people, to be sure--I wish we were all that way! But while their general awareness of what makes for a more perfect world should be providing them with fuel for an enjoyable life, instead, this level of idealism often blinds many of them to any shades of gray--and there is little comfort living in a strictly black-or-white world. I write this with hope in the off-chance that it may help provide a source of comfort to this small group of idealists, offering them some subtle shades of gray that won't completely undermine their idealistic integrity.
While reaching out to my idealistic friends, I also hope to present a "roadmap of thought" for that larger, all-important population which falls into the second category mentioned above --those that have not tapped into a more thoughtful, enjoyable life which I have seen to be the general hallmark of my few Gold-minded friends (the ones who have themselves avoided the extremist idealistic trappings.) Why do I call this second category the "all-important" population? Because the Many do indeed dictate the terms under which the Few must also live. I must, therefore, grudgingly devote sufficient attention in this commentary to ensure some of the idealistic readers can see this important "shade of gray" regarding majority rule. It is my hope that they will then be prepared to pragmatically accept the terms/constraints under which this *perfect monetary system* must be designed.
In this commentary I shall attempt to clearly lay out what I feel this "perfect" monetary system to be--the perfect system for a consistently imperfect world, that is. I am not so bold as to think that the world of human ambition and disposition is something that can be altered to suit the perfection of our preferred (Gold coin) currency's characteristics--especially the limitations (fiscal austerity) it imposes on its users, the population at large. I therefore resolve myself (and hope you do, also) to the humble thought that our currency system as a whole might be artfully developed into a state of harmony with the world in which we do live. The present system, and all failures before it, have been as square pegs in round holes. With the system to be described, I hope to avoid any system that lends itself to the repetition of past abuses and failures.
The Stage Has Been Set; Let the Play Begin...
Those familiar with the popular discussions of monetary thought will recognize the common plea of the idealistic Gold advocate: calling for a return to a 100% fully "backed" and convertible Gold standard currency system. (As if that were somehow the magic pill to cure all that ails us.) The solution is not so simple, and to believe so is tragically naive black-and-white thought. For confirmation of this, look to our past where you will surely see a familiar world, populated with people that were motivated by the same thoughts that motivate us today. In "their" world (fundamentally the same as ours) we have already had a convertible Gold Standard, but, in fact, history reveals that it did not work. Or maybe more correctly stated, modern times reveal that it did not SURVIVE. To be sure, any conceivable system might be seen to work well for a limited span of time--and indeed, history paints a vivid landscape populated by many currency creatures of various lifespans--but true success is determined by who remains to answer the daily roll call. HOWEVER, from where we sit we can gain important wisdom in the observation that, despite the overthrow of the Gold Standard regime, Gold remains an unparalleled reserve asset; carefully weighed, numbered, cataloged, and stacked, resting well-guarded within central bank vaults throughout the world--unmatched in financial staying power even as all else fails.
Having acknowledged this history, there is no point in rashly calling for us to repeat the mistakes of our past. The problems that killed a fully-convertible Gold Standard back then are still with us today. But take heart. The problem was not with the Gold itself. The problem was with the Gold Standard's fit with the prevailing banking/financial "System." If we objectively face the cold hard reality, we realize that we can't very well live with the lack of either one. But paradoxically, history shows us that the two cannot sustainably coexist--at least not under the various system-designs tried in the past. In my usage here, the "System" refers simply to the dynamic interaction between a currency and its users within the context of evolving economic demands for development, commerce, and banking. (Even to the extent of self-destruction, the System is notoriously good at giving the people what they want.) It is the subtle changes to that system that I hope to spell out, revealing not only how Gold can survive society's preference for the current self-serving System, but also how the System can tolerate/survive the discipline of Gold. In fact, the diametrically-opposed System will not only survive in the face of Gold, but will actually be made more functionally viable by Gold.
Now that you see what we are in for, it seems appropriate to launch my endeavor with this quote from John Kenneth Galbraith: "Most things in life--automobiles, mistresses, cancer--are important only to those who have them. Money, in contrast, is equally important to those who have it and those who don't. Both, accordingly, have a concern for understanding it. Both should proceed in the full confidence that they can." It is in the spirit of that assurance that the playing field has been made level for a such a Little Leaguer like myself that I shall embark on this attempt at passing along my own view of the monetary system. We are told above that everyone should share a common concern for understanding it. Actual experience reveals that few people can muster a basic tolerance for any meaningful dialog on the subject (money.) To be sure, they can be seen to talk at great length on the various schemes for making more of it, but not a word is to be had on the design of it. For that reason, I am thankful that USAGOLD provides this dedicated roundtable of guests to serve where the general population fails to pursue this line of monetary discussion.
Before I go further, I must confess that the map I see before me for the proper delivery of this presentation reveals a path I nearly fear to tread. (Although this view may not match theirs precisely, I have been encouraged to see that some of these same thoughts have also been touched on by PH in LA, FOA, Solomon Weaver, Journeyman, and ORO, to name a few that come to mind. They are seeing the shades of gray.) As I've already hinted, it will likely go against the grain of thought among the staunchest of Gold advocates. But hopefully my long pro-Gold track record will buy me their indulgence as required to read and absorb the thoughts contained in this post with some remnants of objectivity rather than outright dismissal. Herein lies the thorn: for the reader to have any hope of finding merit in this commentary, he must admit--even if only temporarily--that fiat ("paper") currency (i.e. dollar, euro, peso, yen, etc.) is not "completely worthless"...regardless of the enduring popularity of that notion among Goldhearts. Please bear with me; I'm sure you'll like the ending--even if you've already decided that you don't like this ominous beginning.
It doesn't matter who I am, but...
A brief introduction may be called-for to help you to better understand my position, and thereby evaluate whether or not my own thinking behind this commentary is clouded beyond the best attempt on my part at objectivity. So, who is Aristotle? You will know me better for my actions than from any other detail. I seek to recognize both the benefits and the failings of our existing monetary system, and strive to live life for full enjoyment in accordance with each. As such, you should be made aware that I already live "in tune" with what I am about to describe as the perfect financial system within an imperfect world.
I fully realize that I live in a world of fiat currency. Specifically, mine is a fiat dollar world, though not by my individual choice. It's what the majority wanted and dictated, and it's beyond any of us to deny its existence and credibility. Recognize that, and recognize also its failings, and you are poised to enjoy the best life you can possibly muster. Fail to recognize either side in this day and age, and you are either shorting yourself now (by somehow feeling miserable that paper dollars actually work,) or you will be shorted later (by the inevitable rude discovery that paper dollars weren't quite as good as Gold after all.) I comfortably walk the line of this understanding that dollars work for a purpose, but are not as good as Gold.
I live and work in the real world of fiat currency--there is no point in trying to be circumventive about it. As I work I am paid by others with fiat currency, and I quite happily pay my own bills with fiat currency. I manage my expenses responsibly, and so there is always some fiat currency left over at the end of each month. This I exchange for Gold without fail--to serve as my savings for a later time. No doubt this arrangement will appeal to you in equal measure with your understanding that Gold is the ultimate money; with your sense that it won't/can't be manipulated into extinction; and with your appreciation for the notion that a person, on average, can produce over a lifetime more than he consumes. That final element should also hold true for a group of people (such as a nation,) and no magic of accounting can alter that long-term necessity. Establishing a reliable "accountant" for your life's period of productivity should be enough for any honest person, and Gold serves that role better than any other. I believe those who share this view are among the fortunate few that are ahead of their time--even as the world is rushing to catch up. This will be clearer in time as I explain.
Greed is the one trait that would preclude the successful enjoyment of this present position--a position one step ahead of the following financial evolution. It is a trait that I thankfully find myself lacking--perhaps due to deficiency of imagination. Greed (and arrogance too, I suppose) would entice one to attempt to capitalize on investment leverage and timing of the markets to maximize their gains for the precise day that the world awakens to a new reality. I am far too dull-witted to know the unknowable, so such a strategy of leverage and market timing is prone to unfold as a spectacular failure. Also, I find life to be full enough without the added burden of losing sleep at night worried about such risky investments. Only through the virtue of patience in the understanding that we are for this historically brief time one step ahead of the world will we find in the end that we are among the few who participate in the rewards of a world that suddenly wants to be where we already are. Hopefully this doesn't strike you as the rantings of an irrational star gazer, so with that view of the author let's now move on to the heart of the matter.
Up next: A Test of Your Monetary Maturity...
Aristotle (02/07/00; 10:52:39MDT - Msg ID:24602)
Part Three -- A Test of Your Monetary Maturity
The vagaries of the economic process in the real world make it infeasible to give this matter a comprehensive treatment in this format (nor would I be mentally capable!) so of necessity I will only build upon the most fundamental core principles throughout this commentary. With that caveat out of the way, let's tackle this fiat currency issue right now so that we may sooner breathe a sigh of relief that the bitter pill has been swallowed and that recovery is at hand. How often have we all rallied at one time or another around the Goldhearts' battle cries: "The Fed (or banks in general, or government) simply makes this fiat currency from thin air!" "Fiat money is worthless!" "Fiat currency is the Fed's (or banks', or government's) tool to keep the poor man down." Well, a cold hard reality is that contrary to this line of thinking, while I do indeed fit the description, I certainly have not been kept "down." Have you? Further, and directly to the point, fiat currency isn't "worthless." Have you ever tried to buy anything with it? Did you succeed? I'm sure that you did, so what does that lesson tell you? As a general rule, a person rarely gets "something for nothing." Therefore, the fiat currency must certainly BE "something," and that "something" can't BE worthless.
There is a subtle but important distinction here between being "nothing of value" versus being no *thing* of value. A dollar (or any other fiat currency) is certainly no longer a *thing* although it once was (back in those days of yore when it was defined as a certain weight of Gold.) But it does in fact have value--a value it finds in measure of the success with which it retains the original Concept of value it represented at the time of its origination...at loan creation. This "Concept" is built on a unit foundation of arbitrary size, to be sure; and there can be no doubt that this remains a fundamental weakness for it to serve properly as money (medium of exchange, store of value, and unit of account.)
Nonetheless, the value in any given currency-unit originates in the terms of the loan contract in which the borrower has promised to repay these units of currency to the lender. And while it seems that these currency units are indiscriminately created out of thin air, each of the many trillions in existence today were created through the joint cooperation of a lender AND a borrower. It takes two to tango. Want to find value in a dollar? Simply track down a new homeowner who toils each workday to pay off his mortgage. (Is he *evil* for borrowing money from "thin air"? More on this later.) It's easy to convince yourself that people will provide goods or services in return for dollars--either because they themselves are in debt and in need of the currency to repay their outstanding debts, or else because they believe with near certainty that these same dollars will be useful to them as a medium of exchange when they encounter somebody else who is burdened with outstanding debts.
A Commonly-stated Problem With Fiat Currency
All in all, the system works about as well as any other manmade thing. Unfortunately, taken as a whole, dollars retain their original value only as reliably as wage-earners and price-setters remain content with past pricing levels. And that is influenced in large part by the perceived ease with which additional dollars may be obtained or loans defaulted on. If a significant number of borrowers will not validate the dollars they borrowed through some manner of equivalent production, then the foundation of its value is eroded. Our own Federal government for example, in its consistent failure to balance its operating budget, has effectively become a significant collective of borrowers that refuse to service their debt--they don't pay back their loans. The government is thereby failing to validate its many trillions of borrowed dollars; and the currency system suffers. The dollar value falls and prices generally rise.
The flip side of the coin regarding money supply is where loans are being paid back more rapidly than new loans are written to keep the outstanding money supply expanding with the prevailing growth rate of the real economy. In this circumstance, increased competition for dollars during this relative contraction in the money supply generally results in an increase to the dollar's value; prices would generally fall. The problem with these expansions and contractions, these inflations and deflations of the currency supply, is that in business and in private life both, people tend to enter into long-term contracts. Because earning power, prices, and wages are subject to this variability over time due to changes based on business cycles and money supply, the act of entering into long-term contracts becomes a mixture of faith and gambling.
As I've stated in an earlier post, people have generally been more comfortable to see monetary supply inflation erode the purchasing power over time. The coping mechanism is to renegotiate for pay-raises--and to face paying higher prices. They are less willing and less happy to renegotiate lower rents and wages and lower prices received for goods resulting from a currency that gains value over time. Due to the prevailing inability of people and businesses to accommodate a currency that gains purchasing power over time, the fallout is harsh. Instead of adjusting the price of contracts downward, the reaction is typically to reduce production and cut back on labor when business profits yield fewer currency units. Economic recessions/depressions are frequently the undesired effect of currency supply that either fails to grow as fast as the economy demands; or worse, a currency supply that actually contracts. This has traditionally been the impetus for a well-intentioned government to attempt various degrees of monetary interventions to bring about more desired economic conditions.
A Solution?
No doubt you are familiar with these problems, and tend to agree with our intrepid forefathers whose anti-banking, anti-fiat currency pronouncements are legendary. In all frankness, these were a handful of exceptional men living at an exceptional time and who accomplished an exceptional feat...the birth of a new Republic. It should not, therefore, come as a surprise to anyone that the opinions and desires so expressed by the likes of Thomas Jefferson and John Adams raised the bar for performance so high that practical performance by their multitudes of mortal descendants could not do but fall woefully short of their lofty vision. (In light of their exceptional life and times they desired perfection---and why not?--they thought they had set the world itself into a state of perfection!) I am not saying that perfection is not a worthwhile goal, but I am saying we must at least be rational about what can and can't be done in a real world populated by...well, just look around you.
Please for give my haste when I don't look up the exact quote here, but I seem to recall the great Thomas Jefferson once voiced his conviction which after all these years still has appeal and finds ample support among Gold advocates: "If banks are allowed to control the money supply first through inflation, then deflation, our children will wake up homeless on the continent their fathers conquered." The implication is that banks will issue their credit from "thin air" in return for a pledge of collateral against the return of that credit, drawing in everybody such that currency values fall, prices rise, and people seek ever more loans in their desire to buy before prices rise further, with the added benefit of paying off the loan with devalued currency. But then, in their nefarious desire to rule the world, the bankers would cause the money supply to deflate, making it difficult for everyone to successfully obtain the cash needed to repay their loans. The bankers then walk away with the collateral, leaving the borrower with nothing but a bad credit rating to show for the experience. On the face of it, this seems to be a noble enough assessment, and gives rise to the equally noble suggestion that our problems would be solved if banks could simply be done away with...these institutions that were once said to be "more dangerous than standing armies." So there you have the perfect inspiration for the monetary system of your dreams, worthy of any true patriot....you suggest we eliminate banks--and with them goes the inflation-threat from the paper money they create--leaving us with only Gold coins as currency.
Not So Fast, Sport Shoes...(you'd better rethink your advice)
Ok, for the sake of indulging this off-the-cuff "perfect" solution, let's be optimistic and assume that we could indeed suddenly find ourselves in a system in which banks are non-existent, and only physical Gold coin is currency. In our euphoric pursuit of perfection, we need only to roll the clock forward from this "perfect" starting point to see that we've rashly and incorrectly assumed that our modern problems could be avoided. First come the banks out of necessity, and then the fractional-reserve lending phenomenon naturally evolves into being whether or not it was deliberately intended from the outset. Are you skeptical? Consider this: it would be a mistake to give thought to monetary matters without due consideration of the weave of our social fabric--examined through the magnifying lens of history.
In the real world, banks are necessary. We need only to look at the circumstances surrounding the appearance of the first significant public bank as documented nearly two centuries after the fact by Adam Smith in his "Wealth of Nations," written as America was just a newborn pup. The setting was Amsterdam, a bustling international trading center as the 1500's gave way to the next century. As Adam Smith describes it, the bank was formed and thrived by filling a specific market niche: addressing the corruption of the currency. In settlement of trade, Gold and silver coins from many countries and many mints (public, private, and some disreputable) were in circulation, and as is ever the case, the coins of inferior alloy or those clipped of proper weight were always the first to be offered to the merchants. In addition to the money-changing manuals that served to document the metal (money) content of the coins from the various known mints, the merchants had scales to verify the sum of coins offered as payment. However, the good quality and reputation of these scales was seen as suspect in the eyes of the shopper even as the coins were seen in the eyes of the merchants. Smith wrote: "In order to remedy inconveniences, a bank was established in 1609 under the guarantee of the City. This bank received both foreign coin, and the light worn [and other debased] coin of the country at its real intrinsic value in the good standard money of the country, deducting only so much as was necessary for defraying the expense of coinage, and other necessary expense of management. For the value which remained, after this small deduction was made, it gave a credit on its books." Here you see the coins naturally coming out of circulation in favor of "mathematically certain" bank accounting.
In this way, much of the effort and cunning that went into adulterating the coinage by men of low integrity was thereby rendered unprofitable. This system worked well for all parties involved in trade, and the popularity gave rise to similar banks in the nearby trading centers of Delft, Middlebourg, and Rotterdam, and then to other countries. (I've got to work Rotterdam into every long post...have you noticed?) History also records that "banks" have also come into being for the purpose of the security against theft. Early metal smiths also became early bankers by virtue of the security offered by their strongboxes. What practical-minded person would deny the modern need for a similar service in the event of a return to a strictly Gold-based currency system...for safekeeping and for quality assurance?
Yesterday's Performance is no Guarantee on Tomorrow in the 'Business World'
The Bank of Amsterdam was said to work well for a full century, with a man's deposits remaining his on actual deposit until such time as he transferred the money in payment to another man's account. The money (Gold) was not lent out, and so when Louis XIV's French army approached Amsterdam in 1672, causing the depositors to rush to the Bank in fear for the safety of their money, those panicky depositors all discovered that their money was indeed on hand for immediate withdrawal. The fear-induced bank run gave evidence of yet another universal truth about the nature of mankind--that when satisfied as to the apparent safety and availability of their deposits, they no longer desire to follow-through with the actual withdrawal of their funds, remaining content to let the bank serve as the guardian. And so we have the seeds of the eventual fall of the Bank of Amsterdam, and many thousands of its successors. The Bank's ownership by the City of Amsterdam gave rise to close associations with the Dutch East India Company by virtue of the same men often involved in the governing or management of both operations. Due to the nature of their business, when literally waiting for their ship to come in, even while still a solid company with solid profits, the East India Company would from time to time need a short term provision of credit. In a precursor of what modern banks would come to call their bread and butter business, the Bank began to provide these loans to the Company out of depositors accounts. When business profits turned south for the East India Company in the late 1700's as many ships and cargo were lost in the war, the loans increased, and the City government itself also came to rely on the bank for loans.
During the first century of operation, merchants preferred to receive payment in bank deposits instead of the uncertain quality of the coin of the day. But as the loans of the Bank increased, and as the Bank began to put limits on withdrawals or transfers to accounts at other banks, merchants began to cast a wary eye upon payment made in bank deposits, and they raised their prices to reflect this growing uncertainty, discounting the value of the bank money. As you might expect, when a bank can't be counted on to reliable provide your money on demand, its days are numbered. And so it was for the Bank of Amsterdam--the doors were closed in 1819. It should also come as no surprise that similar scenes were played out many times on a smaller scale by the metal smiths mentioned earlier. After being sought out for the security of their strongboxes, and after a period of reliable service, many smiths would observe the willingness of their depositors and citizens in general to leave the Gold under lock and key, opting to circulate the receipts of ownership instead. The more unscrupulous among them would come to grant loans to others for profit, or else grant loans to themselves through the issue of receipts for more Gold than they held. When rumor brought about sufficient alarm to bring in an abundance of receipts for redemption all at once, the game was up and justice was swift--though to be sure, this righting of the wrong on the inevitable day of reckoning was COMPLETELY unsatisfactory to the good citizens left holding worthless Gold-receipts from the bank after the Gold ran out.
Outright Bank Fraud IS Black and White, but this gets Very Gray, Very Quickly...
Aristotle (02/07/00; 13:14:18MDT - Msg ID:24610)
Part Four -- Outright Bank Fraud IS Black and White, but this gets Very Gray Very Quickly...
You have likely identified the problem in both of these examples: the entity providing the banking service began issuing loans using their customers' deposits without the consent and cooperation of the depositor. Let's consider an example in which the bank is of the most noble character and management, simply offering safe storage and quality assurance of the Gold currency. It is human nature that those with wealth--such as we might find among those having deposits in our hypothetical Noble Bank--might seek to generate some income with their wealth. They might play an active role in this attempt as a venture capitalist, offering their money directly to entrepreneurs in return for some profits after personal negotiations convince them of the viability of the prospect.
But not all would-be lenders and borrowers are well suited to negotiate and organize such arrangements themselves, particularly the smaller would-be lenders seeking an income, and the smaller would-be borrowers seeking funds for such things as small business expenses. The Noble Bank easily develops the in-house expertise in evaluating those borrowers that represent a good credit risk, and can organize the formal loan arrangements on behalf of their depositors. And rather than matching up a depositor/lender with a borrower on a personal, individual basis, the Noble Bank would come to pool the depositors' funds into an anonymous operation in which the profits from the lending of capital are then provided to the depositors (minus the Bank's own profit for providing this service) according to the amount of funds the depositor put into account with the bank. This provides the flexibility demanded by the banking depositor to generally be able to access his funds as needed.
It's like this. Assume that you, me, and someone else have all put $10 in Gold coin on deposit with the Noble Bank for safe keeping, with the added hope to earn a return on the Bank's ability to lend it at a profit in the meanwhile. Let's say a shoe cobbler needs to buy leather and a new sewing machine in order to make new shoes, so the bank lends him $18 of the $30 available. The cobbler takes his borrowed Gold, makes his purchases, and sets to work in order to repay the bank $19 from his anticipated profits within the coming months. In the meantime, you incur unanticipated expenses, and need to obtain your $10 deposit from the Bank. Because this Bank wants to keep you happy, and to retain your future business, it doesn't tell you that $6 of your account is currently unavailable (out on loan) as per your wishes for the bank to earn you an income, and that the cobbler will be returning it (along with the profit you sought) in regular installments over a period of time. Instead, the Noble Bank gives you $10 of its remaining $12, and hopes that neither me or that third depositor will want to reclaim our deposits anytime soon.
Here you can see that no money was created out of thin air. But the size of the Noble Bank grows as a good track-record of management attracts ever more deposits in which withdrawals don't threaten the remaining funds on reserve, and the depositors all come to perceive through their good experience that the entirety of their account is available to them should they need it. The bank would accommodate this concept of reality by shuffling the credit distribution among accounts to provide the depositor's money on demand. This creates the illusion of money being in more than one pocket at the same time through no *fault* or evil intent of the Noble Bank. This is what the users of the System want, and this is what we got. And as the cobbler's leather supplier deposits the cobbler's Gold payment into the neighboring Honest Bank in order to earn a return, the process may continue yet further. The economy seems to experience an abundant money supply, and the purchasing power of all funds are thereby diminished by rising prices as the actual goods offered for sale are then held more dearly than the money which has suddenly become so easy to come by.
Please note that in this example, I didn't once use the term interest in connection with the lending of money. A great many of the over-zealous Gold advocates try to equate the lending of money at interest with the evils of usury, so I purposely avoided that trap which has become a mental stumbling block in their thinking. While they might be inclined to say rightly or wrongly that lending at interest should be banned in order to eliminate the "sin" of usury, they certainly can't make that claim against the form of venture capitalism that I laid out above. And if the banks come to define the terms of providing venture capital from their available pool of deposits as a standard low interest rate rather than higher claims on profits that vary from borrower to borrower, what's the harm?
Too Much of a Good Thing
A quick historical note is in order here on the position of famed economist David Ricardo, who was a strong supporter of the Bullion Committee and its position in favor of the Gold Standard in monetary discussions hosted by the Bank of England in the early 1800's. The purpose of the discussions was to get to the root of the problem regarding rising prices, including uncoined Gold bullion. The center of the debate was whether bank notes--which by that time had formed the bulk of circulating money supply--were losing value, or was Gold simply rising in price? Given the observation that other prices (such as bread) were rising, the verdict was against the bank notes, just as it was in the latter years of the Bank of Amsterdam when the merchants had diminished faith that the bank could successfully redeem its credits for Gold coins. In the course of the debates, Ricardo described in his works "it was most justly contended that a currency, to be perfect, should be absolutely invariable in value." While conceding that precious metals couldn't be held to the desired level of perfect invariability, they remain the best-suited item we have discovered. And yet while holding this position, Ricardo was not completely opposed to bank notes, finding them to be economical and convenient, so long as they were always fully exchangeable for metal upon demand.
I'll say again, if the Noble Bank could legitimately tell a rational depositor that a portion of his deposit wasn't immediately available for withdrawal, then things would likely be closer to OK, with the bank notes in circulation representing the Gold allocated to the borrower and properly held aside for redemption of the note as Ricardo would have it. While this sounds good initially, there would still be some perception of an abundant Gold supply due to the borrowed funds hitting the marketplace, and there would still tend to be the resulting diminution of the currency's purchasing power. And further, the banks would always try to accommodate the depositor's desire to withdraw funds by reallocating their available resources, leading to a false (and eventually fatal) sense of security in the general nature and supply of money.
As you can see from everything above, it begins innocently enough. The depositors' money is physically distributed (unlike the ledger creation of credit-money used today,) but it would not be long before the depositors who had thus risked their deposits for a return came to have faith that their full deposit would be returned with interest, and acted on faith as though the Gold was actually still at their immediate disposal. But inevitably, the day always comes when confidence is in short supply, and depositors rush en masse to reclaim their deposits, feeling that money in-hand is more desired than the prospects of any returns that the bank may have to offer, or perhaps fearing for the viability of the bank itself and its ability to provide Gold for the quantity of funds in account.
And as it begins innocently enough, it ends innocently enough, too. The availability for the common man to get a loan serves as an undeniably equalizing force in society. It allows a poor person with time and energy to participate in the economy on par with a man who has his own capital. Through the credit obtained from the banks' pool of deposits, a borrower is able to gain possession of land, buildings, tools, raw materials, or other goods and facilities with which to become a farmer, manufacturer, or merchant--using the profits from his time, energy and know-how to earn a living for himself and to compensate his lenders for their extension of credit. The poorer and more wretched a man might be, the more he might wish for the presence of a bank of low standards willing to extend credit to the likes of him.
The Same Old Arguments have Always Been With Us...
But despite this common desire for banks, even from the very beginning there has always been an element of society that for one reason or another saw banks as fraudulent means of transferring the wealth of honest workers to an elite group (the lenders) with agendas to rule the world. In a letter to John Adams about his own fear and loathing over the proliferation of banks and their issuance of paper credit, Thomas Jefferson wrote in 1814: "I have ever been the enemy of banks; not of those discounting for cash; but of those foisting their own paper into circulation, and thus banishing our cash. ...these are to ruin both republic and individuals. This cannot be done. The Mania [of borrowing and lending] is too strong. It has seized by its delusions and corruptions all the members of our governments, general, special, and individual." But in contrast to Jefferson, in a little-publicized footnote of history, Benjamin Franklin was a strong supporter of paper money. He saw that a national paper money provided a "general benefit" of facilitating alternatives for a government against the dual "horrors" to its citizenry of taxation and deflation. And as mentioned in the preceding paragraph, very "specific benefits" were seen on an individual basis by those who sought loans of any form of bank money (Gold, paper, credit, whatever) in order to improve their position in life.
Because the "little guy" clamors for loans just as the "big guy" who pursues bigger projects, and because the banks (which were naturally established to help the marketplace maintain the safety and quality of its original Gold currency) come to naturally play the middleman between the population with money to lend to the population seeking to borrow, the blame for all that follows is hard to pin on anyone specifically. Almost everyone in modern society comes to rely on the continuing and smooth operation of the banking system. As outlined throughout this commentary, you can see that as civilization advances and as the economy expands and the population grows, the general trend is for the apparent money supply to expand, even if the banks themselves do nothing more than efficiently reallocate deposits as needed to keep everybody happy. The threat of a bank run grows with the growing disconnect between what is perceived as the fair value contained in the underlying Gold contained in the coin that originally defined the currency unit, versus the witnessed purchasing power of the same currency units as dictated by the apparently swollen supply as borrowed and efficiently allocated by banks. Due to the unacceptably disruptive nature of bank runs on society, and the hurt inflicted on those who were late to the doors and therefore left holding worthless receipts of a newly failed bank, the inevitable outcome (generally tolerated by most) is two-fold. First, for the officially-sanctioned (government) regulation or development of a national central bank to bring more order to the hodgepodge of wayward private banks, and second, for the eventual officially-sanctioned termination of Gold convertibility for the abundance of circulating bank notes and bank deposits on account.
Stay tuned for the final(?) part(s) to be offered later (I've already burned up enough of your patience and space for one day):
Who is to Blame When the System Fails? And How can Sir Gresham's Simple Law Save Us?
Aristotle (2/10/2000; 3:37:44MDT - Msg ID:24877)
Part Five "Building the Perfect System by Capitalizing on Gresham's Law" --starting at (2/7/2000; 7:15MDT - Msg ID:24589) from link below
http://www.usagold.com/cpmforum/archives/720002/default.html
Who's to Blame When the System Fails?
Perhaps it would be clearer if I rephrased that question. "The System" as I've defined it is the ever-changing monetary principles, policies, and practices seen in the course of satisfying the real demands of conducting business and commerce among real people. At any given moment, the System is undergoing change from one form to another, generally smooth and gradual, but occasionally abrupt and painful. But never in the largest sense can the System itself be said to "fail," although parts of it certainly prove troublesome and are altered from time to time as economic efficiency dictates. Did the old Gold Standard era System "fail" when there was a bank run at one institution or another? Well, if you were a depositor who didn't get your deposits out before that particular bank closed its doors, you might indeed be inclined to say that the System failed. But more specifically, it failed YOU. Meanwhile, your contemporaries who lived half a continent away might say that the bank closure was a healthy adjustment to the system, weeding out a weak bank. As such, System "failure" might be viewed as any time YOU were legitimately dissatisfied with its performance. Therefore, it would probably be more appropriate to ask this question instead: "Who is to blame when the System disappoints you?" An important thought to consider in this regard is whether any conceivable System could please all of the people all of the time.
Let's briefly examine the dissatisfaction of the typical Goldheart. In his mind the System has failed because he is dissatisfied all the time--so long as Gold is not the circulating currency, apparently. How irrational is that? Romantic, to be sure, but completely irrational. This superficial desire will never be the impetus for a change to the System as we know it. Even in the "good ol' days" the coins quickly gave way to bank notes as the circulating equivalent. There simply must be more at stake than the whimsical preferences of an individual in order to inspire change.
Something to rally around...
Here's the key factor as detailed earlier in this commentary which ultimately argues forcefully for the proper role of Gold in the monetary system's architecture. In what has been revealed as a misplaced goal, with Gold as the circulating currency, artificial inflation of the Gold supply is the unavoidable consequence because money will always be lent by somebody to somebody else who wants to borrow. As a result, under any past System architecture, there has never been a truly satisfactory means to safely and reliably escape the ravages of inflation and deflation. Having Gold attached either directly or indirectly to the circulating currency (or Gold itself subject to being lent independently as we see today), the proper valuation of Gold is always understated by the market due to the perception of of an increased (artificial) supply. Truth be told, it is this element that gives rise to my own dissatisfaction--that Gold is not at all points in time held near to its honest physical-based monetary valuation as it should be. This is true at nearly all points in time except for those brief and historic moments when the adjustment inevitably comes and Gold reaches an entirely new price plateau. This proves unacceptable for those who live in the interim periods as they strive to protect their personal wealth...those holding Gold during these past 20 years, for example. (Although make no mistake, the extent of currency depreciation in various non-OECD nations would paint a more normal looking picture for citizens holding Gold within those countries.)
As the number of people increases who are dissatisfied with the System's performance at any given moment in time, the greater the pressure mounts to effect some degree of change. Similarly, the greater the level of dissatisfaction, the greater the impetus to effect some rectifying change. For those who are yet clinging to the notion that we need a Gold Standard with fixed convertibility of the currency, please forgive me as I verbally try once again to shake you out of your mental stupor. Under a Gold Currency-based system, any time someone borrowed money they would in essence be participating in a Gold loan (much as we see happening today--an act that is ill-tolerated by those who can rightly recognize its depressing effect on the value of that same Gold/Money.) For the hundredth time, because people will always have a desire to borrow money to meet their business or personal needs at one point or another, you would always be dissatisfied by any Gold Standard that allowed these (Gold-) loans to occur. Meanwhile, everyone else would be dissatisfied by such a Gold Standard System that specifically pleased you in which money (which would be Gold) could not be borrowed as needed.
Accepting the constraints of the real world...
Any properly functioning monetary system in the real world must accommodate those seeking to borrow funds. And if I've made no other point but one, we should all see from the extensive commentary (bludgeoning) presented earlier that such a system cannot sustainably coexist with a Gold Standard which has a fixed convertibility. Inflation is always a consequence, and then so are bank runs, a phenomenon unique to any such Standard of fixed convertibility. There can be little denying that those bank runs are the ultimate monetary catastrophe experienced on an individual basis. Think about it. If you were among the depositors left with unhonored deposits of metal on account at a failed bank, you might just as well be located in a modern-day Third World nation when its currency loses value...your life's savings have been wiped out through no fault of your own.
Examining this case of a bank run, everything was working fine for you and your currency-units yesterday, but then suddenly your world fell apart today. In truth, to witness that a bank run was "justified" by the bank's obvious (after the fact) shortfall of Gold necessary to honor all of the deposits reveals with abundant clarity that a goodly portion of the system's funds were actually "unbacked" currency. And since these same unbacked currencies were seen to be functioning well prior to the pain of the bank run, it makes little sense to those left holding the bag in a bank run. And as hard as it is for these unfortunate citizens to fathom fundamentally why these currencies could work yesterday but not today, it is even harder for them to grasp why the same currency could function properly at the front of the bank line, but not for those in the back end of the line. It is this kind of pain, especially when bank runs become an epidemic, that compel significant changes to be made to the System architecture. History reveals that a natural starting point to ease this pain is national regulation of the scattered and various independent private banks.
This leads to a united-we-stand, divided-we-fall solution in which resources are managed among the banks so that individual hemorrhages can be addressed without leading to domino-style bank failures. But ultimately, the whole system is put at unacceptable risk from bank runs inspired by the realization that the bank-money inflation has rendered a currency value that is less than the metal value in the system's few coins. Again, the institutional thinking goes, "Since all this unbacked paper worked yesterday, let's just get rid of the inspiration for bank runs--the Gold coins." Those finding themselves in the back of the lines certainly would welcome this. Their currency would not only remain just as good as the currency held by those in the front of the line, but it would also be not significantly different than it was yesterday.
OK, so who IS to be blamed for our disappointment with the System as it is?
The lesson to be learned is not to blame the push for fiat currency upon "the few and powerful" men of wealth of the world. While inflation can be bad even under a Gold Standard (along with the pain of bank runs for those who fail to rescue their deposits), inflation has the distinct opportunity and track-record to be much worse within a system built upon a fiat currency. The truth is, inflation hurts those with money (it erodes their purchasing power), and helps those with debts (it makes loan repayment easier.) David Ricardo said it eloquently: "The depreciation of the circulating medium has been more injurious to monied men...It may be laid down as a principle of universal application that every man is injured or benefited by the variation of the value of the circulating medium in proportion as his property consists of money, or as the fixed demands on him in money exceed those fixed demands which he may have on others." He said further that the farmer "more than any other class of the community is benefited by the depreciation of money, and injured by the increase of its value." This is likely for the dual reason that farmers as a general rule were often in debt to begin with, and because their annual creation of crops (from thin air!) could then be sold for more currency units in each subsequent year, even if the net real-world value of the product being offered remained entirely unchanged.
Don't waste energy on laying blame...
And so we can see, with more people in society having common wealth than uncommon fortune, it is distinctly the case that democracy proves to be the greater threat to a convertible Gold Standard than does even the unmanageable expense of war. I faintly recalled some historical figure who made the astute observation that in a democratic society, when the people come to realize that they can vote "largess" for themselves from the public treasury, they will do so, and hence bring about their system's collapse. And in researching this matter further (thanks Journeyman, ji, and RossL for your help) it seems that there actually have been a number of figures echoing this same sentiment through time. But regardless of the precise citation of this quotation, one look at the growing national debt in America (serving as the substitute for the taxes that would otherwise be necessary to fund our chosen social programs) gives credence to this assertion. Simply put: the people (the masses) get what the people want--and the people want easy money. Even outside of a democracy, over time, the forces of the population always win out over the forces of the few men of power. And in the end it matters not which group is on the side of good, and which is destructive--the many prevail over the few.
So, what is the proper role of Gold in the monetary system architecture?
At this point, the staunchest Gold supporters are likely gnashing their teeth and forming a posse to hunt me down for a proper lynching, I'm sure. After all, I have made no bones about the need to cut Gold out of any ties whatsoever with the various national currencies. Due to inflation and deflation that naturally arise through variations in the rates of borrowing, payback, and growth of the economy, currency fluctuations lead to bank runs which are frankly too disruptive and are not to be tolerated. Fortunately, they are rendered completely meaningless under a fiat currency regime. National fiat currencies allow governments to manage their own national economies to the extent that that are able, and to take whatever efforts needed to avoid falling into those most destructive currency deflations that wreak havoc on economies.
Gold must be removed from these currencies so that governments are not tempted to manipulate its perceived value in order to give a boost to their own currency. The goal would be that sudden value shocks will be avoided because at all points in time the currencies will be fairly valued against Gold--there won't be an inevitable and recurring "day of reckoning" in which the pent-up false perceptions are unwound amid calamity and crisis of confidence. Gold must also be removed from any element of the monetary system that would seek to make loans using Gold because, as we've seen, these confound Gold's ability to reach its true physical-based fair market value. Gold derivatives must also be done away with for the same reason. Gold must remain a pure monetary asset, bought and sold and owned outright--nothing else would be allowable. National fiat currencies will ably serve the market's various needs to borrow funds...after all, that's how fiat currency is born in the first place.
Although I've seemingly cut Gold out of the monetary system, that is not the case at all. Gold qualifies as the only true money; being able to function as a unit of account, as a medium of exchange, and as a store of value. A fiat currency only meets the first two elements, but they fail as a store of value. Therefore, Gold will be be the money of savings, while national currencies will be the currency of commerce. They will all float relative to each other, and constantly seek out their proper value. Kept with special status as an independent and unlendable currency, Gold will be the ever-rising North Star of the monetary system. Central banks would be inclined to hold only Gold in reserves of any significant size--because Gold is not the liability of any other nation, and its real-world value would continue to grow over time. As said before, quantities held in other national currencies would be done only to the extent that they facilitate trade between active partners. Individuals across the Earth would also choose to hold Gold as their savings; their life's productivity forever protected from inflation and deflation, and from reliance upon another person's (or nation's) liability.
The beauty of reserving Gold as an unmanipulated monetary asset is that individual local currencies can still be "managed" by the government in whatever manner is seen befitting that specific country, without having an adverse effect on the meaningful wealth held in reserves (in the form of Gold savings) among other nations and local citizens alike. No single national currency need ever be held by another nation as a reserve currency (which "unfairly" allows the nation that issues the reserve currency to export its inflation.) However, a nation might choose to hold another's currency in a quantity simply because it makes for expedient trade.
The reassurance of Gresham's Law...
Perhaps a short lesson is in order for those new to this realm of thought. In 1558, Sir Thomas Gresham made his observation that whenever there was latitude in tendering payment (as could be seen in the major medieval cities where coins from many lands came together in the course of trade--as we covered in the case of Amsterdam,) inevitably the money of poorest quality was offered while the better money was retained. In describing the circulation of currency, Gresham's law says that bad money drives out good. (The inferior money circulates, while money of superior quality is held.) In our new system herein described, paper currency will circulate while Gold money will be saved.
Pause for a moment to fully consider this practical notion of saving Gold on one hand, while on the other, borrowing and spending paper just as we always have in our lifetimes (and know of no other reality from personal experience.) This is in perfect tune with Gresham's law. Given our own limited history, this accord with Gresham's law provides a very comforting reassurance for predicting the success of this system. Why? Because Gresham's law is arguably the only economic law that survives beyond challenge--an echo of the universal and enduring truth that given a choice, people will choose the option that serves their own needs best. Gresham's law predicts that the world's supreme currency, Gold, would not actually circulate in a conventional sense, though it would move from the hand of one saver to another as individual circumstances might require. Sure, you could use it outright as money if you insisted, but nodding to Gresham's law, wouldn't you rather keep your Gold for the rainy day and spend your paper instead? This system will enhance the transparency of national economics and financial positions, rewarding those with good fiscal policy and balanced budgets, and giving none an exorbitant privilege over another through reserve currency status. It will allow the citizens a natural avenue to protect themselves against depreciation of the national currencies (which will inevitably inflate until the end of time,) and to actually gain a no-risk real "return" by simply holding the metal without the self-defeating aspect of lending it out for interest.
Gold. Get you some. ---Aristotle
Trail Guide (02/11/00; 16:01:51MDT - Msg ID:25047)
Changing times!
Thanks ALL! I'll leave these two posts to tell the truth for me. When (?) the new Trail page is up FOA will set a tough pace to keep up with, believe it! He has too, the preasure of oil is building fast.
ORO, I'll be arriving here soon, in debate mode no less. Your (and others) good post are noted.
ORO (02/11/00; 12:31:46MDT - Msg ID:25015)
Trail Guide - welcome
Welcome Trail Guide to your home.
We have kept it warm for you, awaiting your reincarnation.
Missed you badly.
Thank you for your return.
SteveH (02/11/00; 11:05:20MDT - Msg ID:25006)
Yep...has to be
One and the same?
SteveH (02/11/00; 11:02:35MDT - Msg ID:25005)
Trail Guide and FOA
One and the same?
Trail Guide (02/11/00; 17:21:28MDT - Msg ID:25055)
A different view?
ORO (02/11/00; 13:59:00MDT - Msg ID:25019)
Aristotle and Trail Guide
------
What is to stop the gold markets to regroup and form a new gold banking system?
------
Q:
Please define "gold markets" in the context you use? We need to know exactly what this market is before one can "bank on it"!
----
I would think that - if there is gold there is also someoned to lend it and someone to borrow it.
---------
Q: Why use gold to create a lending contract? Would society use gold as a "lend able" account unit if it freezes any further function of their money asset? To date, the history of the past gold systems points that such a function creates gridlock in the banking system. Doesn't this contradict the first purpose of gold: to act as a pay as we go medium, under no contract risk?
---------
If there is new gold mined, it will be contracted for future delivery.
----------
Q: Again, Why must gold be used? And why the illusion of future delivery in contract form? If society places a high enough value (currency price) on it, a" no collateral financing" would easily create a pay as you go operation, NO?
-------------
If there is gold of many players in a number of vaults, the gold will stay in the vaults and the title to the gold will trade electronically.
-----------------------------------
Q: Tell me, do we pay for our gasoline with "stock certificates" of IBM? Or any other ware - housed asset. Would not real estate titles also trade electronically? In this period of high speed trade, digits of anything could do the trick, no?
-----------------
I still say that there is no economic reason, no justification for central banks at all. There is no
economically useful purpose for national currencies.
-------------------
Observation: Years of history and the nature of modern society say you are wrong, no? Our use of digital currencies for trade always flows like a river that's strong and wide,,,,, and it always flows to it's end in the sea. The water takes it into the air and rains it again upon the headwaters for another trip,,,,,a new currency starts again. All the while gold is held from it's value as officials grapple with it's position on the currency river,,,,,,,,,, stopping it's use as a wealth asset held by all.
--------------------
I will go further and state that the purpose of central banks holding gold is so their people remain beholden to the state and the bank cartels it has chartered. The best thing for the CBs and treasuries to do is to unload their gold and cease participation in the financial markets. Individuals
and private organizations should hold their gold and trade its receipts, to lend and to borrow it.
-----------------
Observation: Again, society has proven that any and all currencies and moneys that are lent and borrowed,,,,,'soon become corrupted. Even gold itself,,,,,many times! Let gold become an asset of real wealth,,,,,and it will shine as the best background money this modern world has ever seen,,NO?
-----------
The amount of gold and other PMs can not be insufficient in quantity to for the basis for the volume of trade settlement. It is precisely the point that the quantity of gold matters not. What matters is that it grows with the economy that trades it as money.
----------------
Q: What will you do today that is different from yesterday? Can we pass laws that remove human nature?
----------
The myth of a living and breathing fiat system. Many have proposed that there is some need in trade and business for the flexible money that fiat allows. I contend that there is no such flexible money, as its cost in trade and to business far outweighs the benefits of flexion.
------------------------------
Observation: We want and use this "flexion" today. Is not the only thing missing,,,,,,,,,,a way to shield
our wealth from the effects of this "flexion"'s inflation ,,,,
--------------------------------
Fiat currencies do not expand and contract as the markets need. Their mere existence forbids healthy interaction in the markets. The seekers of the conversion of income into wealth and those who must convert wealth into income are forbidden from setting the rates of conversion by the
existence of fiat currencies. The necessary precondition of a fiat currency is the existence of a monetary authority that controls the quantity and the rate of conversion - the interest rate - at which both monetary and "real" wealth
coverts into income.
------------------------------
Perhaps: But no one ever said that wealth was digits? no? A Western view of a world that's always going mad?
-----------------
(smile)
thanks Trail Guide
Trail Guide (2/12/2000; 9:52:36MDT - Msg ID:25137)
Reality
Hello ORO,
Well, I knew that if I only asked, we would all receive! Boy did you deliver in ORO (Msg ID:25113).
Good stuff for everyone to read, my friend. You mentioned; """ The comments below - particularly those to Aristotle, are somewhat harsh. I hope this is taken in the spirit of friendly criticism."""
Sir, you can serve me (and probably everyone here) your "harsh" anytime. Waiter ,,,,,,,, I'll have a double order of that please! (smile)
OK, brace yourself ORO ,,,,,, a big plate of my "Trail" harsh coming up!
=============================
You write:
-------There are consequences to the existence of a fiat currency and for the use of debt money for trade settlement. FIAT HAS NEVER BEEN THE CHOICE OF THE PEOPLE ACTING IN
COMMERCE OF THEIR OWN ACCORD. Even when wildly popular, fiat money has not had a single instance when it had not been established by force - by laws imposing its use.-----------
ORO,
On a larger scale there was always more to it than this. Human society has from the very beginnings formed tribes and picked sides against each other. When we are not battling nation against nation, we jockey for position within our own groups. Right down to "me and my neighbour against the three houses down the street. As a tribe ,,, as a nation ,,,,,, as a group ,,,,,, our war is really a human problem with each other and always has been. In better context; the problems are in the way we use our laws and governments to gain advantage over the next in line.
Whether through force (war) or democratic means, we subject ourselves to the order of governments. We rightly perceive that,,,,,, the order gained from this action ,,,,,,, the security of a group, overcomes the rights and property lost on a individual level that living in a tribe requires. It's been this way through the ages. It's a political process that has always had it's in house battles ,,,,, namely portions of society try to circumvent their percentage of lost rights and property by maneuvering the rules (laws) in their favor. Yes,,,,,if I can gain the advantages of tribe life and still keep my "portions lost",,,,,I'm gaining wealth to the disadvantage of the group. Truly, the most obvious action of not paying your taxes,,,,,and that's only a small item when viewing the world battle as a whole.
So, how does this apply to money?
When you and others say """ FIAT HAS NEVER BEEN THE CHOICE OF THE PEOPLE ACTING IN COMMERCE OF THEIR OWN ACCORD """ ,,,,,this is true.
This is true, but this was never the thrust of the argument. The use of money in any context, fiat, gold or seashells, has always entailed the use of borrowing and lending... And as long as economies function at a profit, debts are made and paid back without argument. However, when the eventual downturn arrives, some portions (perhaps a large portion) of the owed wealth (debt) cannot be
returned.
It's here,,,,at this point in tribal life,,,,,,,that all of the context from above comes into play. The "reality" of life on this earth is this: ,,,,,,Some portion of society will use their influence or control of the leaders to make their debts easier to pay. In fact,,,,,it's times 2 for that number of government influencers ,,,, because even the ones that have debt owed to them will try to alleviate an impossible pay back situation the ones that owe them face.
You see,,,,,tribal life and the human nature that comes with it,,,,,,,,will not allow any money system to "completely" destroy the wealth of a good portion of society. Even if everyone is plainly shown that they are going to lose something ,,,,,,they would still option for the good of the overall tribe. This is why we return,,,,time and again to fiat monetary systems. In the few examples where a gold system brings the harsh reality of loses to bear on a nation,,,,,,usually war is the result. Not a
good outcome.
Yes, we can break gold into many small parts,,,,,'stamp it into coins and circulate gold certificates as money. We can borrow it, lend it and also circulate gold bonds as the economy grows. It is the perfect "weights and measures" monetary system. Exactly representing our productive efforts in every faucet of human endeavour. But, when the loses mount, our tribal human tendencies will not allow us to support a government or banking system that forces these real loses on only a portion of the group. Never has,,,,and never will! Without this escape valve, we go to war ,,,,,, internaly or on a world scale,,, so we all can share the loss,,,one way or another. As a human society of thousands of years,,,outside of war,,,,,we have learned to inflate our loses upon everyone as a whole,,,,,for the good of the keeping the whole from each others throats. Even to the
point of a total loss of the current system,,,,,and all the destruction that entail's for everyone.
Yes, indeed,,,,,,,we will transition to the next fiat system from the dollar, when the time comes. Believe it!
Further:
For myself and other observers ,,,,, we know about "peace on earth" and live our life in this context but,,,,as a member of the world tribe,,,,,,and following our best interest,,,,,, one must still arrange his affairs to shield their family from the "I'm going to get yours" times we live in. Should we get our leaders to help us? Well, the leaders of this world can only be but a reflection of us as a
whole. Yes, many things are not right, but they can only strive to do what can be done, not what must be done.
Consider the dilemma:
If a small portion of society telegraphs thoughts that "if we cannot have our oil we will go to war",,,,,,,,how would you force them to not elect officials that ease their pain in a gold money system? What's right and what's wrong is not the issue,,,,,,it's what this present generation will live with that rules. If they will break the gold yoke, no matter,,,,then why place gold on them? Is it not better to at least free the "knight" (gold) for the good of those that would stand with him?
During the period we are now entering,,,,,we can see all the ugly aspects of a fiat system that is failing it's tribe. Look far and wide and witness the various groups ,,,, all jockeying for position as they use whatever influence they have to lessen their own private loses. If this had been a gold system, the outcome would be the same,,,,,as players force their leaders to lessen the gold debts that could not be paid. They would raise the price of gold and inflate their way out of it,,,,,,for better or worse ,,,, come hell or high water.
So, my friend (smile),,,,,,,as you can see,,,,,I completely agree with all of your post. Only, my trail is hiked with a different mind. "Another" mind set, if you will. We use the life experiences of man to dictate the best path to follow. As such,,,,,,Gold must not be part of any money system,,,,,,it must reside as a freely traded asset without debt or paper to resemble it. In this position ,,,,, it's value can fully represent the ebb and flow of the affairs of man. And in doing so retain the wealth of man
as a holding of things. Truly, the "Wealth of Nations" in the peoples hands. We move forward by starting at the beginning of time.
We'll talk much about this and all the affairs of the world,,,including gold,,,, on the gold trail.
"We walk this new gold trail together, yes?" I hope to see everyone there when I return.
Trail Guide
Trail Guide (2/14/2000; 6:45:20MDT - Msg ID:25296)
OIL
http://biz.yahoo.com/rf/000214/b6.html
Elwood (2/13/2000; 23:41:04MDT - Msg ID:25270)
Request for Comments on OPEC Oil Cutbacks
Hello Elwood,
We are seeing the media blow everything out of proportion these days. The oil cut-backs were in no way what was reported! It was more of an adjustment. see the above article (there is a follow up also). Actually, oil management is working very well now.
Today, with oil more likely rising into the $45 range, we are getting a small view of where gold, in oil dollars should be. The mechanics (gears) of all of this are turning now. Prior to this we had the political software installed that literally placed gold "on the road" to much higher prices. The US / IMF have been managing this turn-a-round,,, trying to keep it from exploding too quickly (they did
a good job too!).
I'll be talking much more (and very clearly) about this later "on the trail".
thanks
----------------------------
Saudi denies reports of March oil export cuts
DUBAI, Feb 14 (Reuters) - Saudi Arabia, the world's largest oil producer and exporter, on Monday denied reports that it had cut its March crude exports to the West by 25 to 35 percent.
``The Saudi Arabian Oil Company (Saudi Aramco) has refuted recent news reports that it has cut its March deliveries of crude oil between 25-35 percent to some regions of the world as 'misleading and incorrect','' the state oil giant said in a statement faxed to Reuters.
Trail Guide (2/14/2000; 8:08:19MDT - Msg ID:25302)
Gold
http://www.fame.org/HTM/Mundell%20and%20Parks.htm
NOTE: These are (see the bottom) segments of questions and answers copied from this interview. I PLACE THEM OUT OF CONTEXT TO UNDERSCORE THE THOUGHT! Please see the link above for the full discussion. It's very good and so is Mr. Park's and his site.
ALSO: The point I was trying to make in #25137 (and the question I was asking) was this;
A full gold money system works during level and rising economic dynamics. It also works "VERY" well during a downturn. In fact it works "Perfectly" all the time! It's the lending of money that creates debt, be it gold debt or fiat debt ,,,, and the failure of that debt during a downturn is what causes the pain.
I ,,,,, we as gold bugs ,,,,,, most financial thinkers ,,,,, do not debate this point. The argument is that:
If the pain dynamic (loses) of a financial downturn is not "Somewhat" shared by society as a whole ,,,,, the economic dislocation always intensifies until we go to conflict. (see my earlier post)
It's during the downturns that society in general will not tolerate a full gold system because it concentrates the loses upon their rightful owners. As such "these same" are usually "wiped completely out" and their fallout effects on the social and economic structure can be widespread and very destructive to tribal life.
Again, history has proven, time and time again that humans will not allow the full (natural) effects of gold money ,,,,, if it threatens to create factions. They accept gold during long periods until conflict (internally political or externally war) forces a break in the gold bond.
We as nations will break the "gold bond" by calling for the shared pain of inflation. Whether we (as countrymen) understand the reasoning behind it or not; currency inflation (not price inflation) in the modern world is carried out until it's debt destroys the current system ,,, there by, sharing all the pain of the loses before it. We then move into the next fiat system.
The question:
Is it not better for all ,,,, if we remove gold from the official currency structure by forcing derivitives failure and creating a free physical only marketplace,,,,, so as to keep "US" ,,,,,, ourselves ,,,,,, from controlling it through our politicians?
Through "legal tender laws" currently in place ,,, let's force us (ourselves) to continue to create debts only in paper.
As such, "they" ,, "we" can manipulate the fiat as needed for society.
Does this not place gold in it's rightful position of being a "real currency asset" as it was chosen to be used from the beginning of time?
A private money for trade and savings that's outside the "contract / debt' system. Your thoughts?
Trail Guide
Robert Mundell:
--------I think that legal tender is a very old institution. It certainly goes back thousands of years and legal tender is an institution, whether we like it or not is going to stay. ----------
Robert Mundell :
------There's no institutional mechanism by which we could ever duplicate the kind of financial system we have under a system that relied almost entirely upon gold. Of course you could always have a system that used a lot of paper that was in some sense convertible into gold. You could always find a price of gold that you could convert that paper theoretically into gold. But I don't think anyone has thought in terms of the enormous price of gold that would be required in order to achieve that.-----------
Larry Parks:
---------George Soros says in his book Soros on Soros that the gold standard had to be given up because it did not make possible a lender of last resort. And says Soros, because financial markets are in his words "inherently unstable" you have to have a lender of last resort.-------
Trail Guide (2/14/2000; 18:20:51MDT - Msg ID:25335)
Freegold
Thanks for your reply, ORO.
My comments presume that readers have read our full posts.
Your major point, logic and comments that I got from your post (25310) , followed by my comments:
POINT:
I pointed out that it is the existence of a "lender of last resort" that causes the debt boom
Logic:
It is obvious then, that had there not been a lender of last resort there would not have been a substantial credit crunch, because the lenders would not have taken the same risks they allowed themselves once a promise of bailout was given, and thus would have avoided the credit boom.
Your Comments:
The argument is false in that it is circular. (Trail Guide note: I think he is referring to my logic?) The lender of last resort was there in the first place, the inevitable credit boom followed, the credit crunch followed - just as inevitable - and a further lender of last resort was needed. History shows that the credit policies of the BOE led to its bankruptcy before WWI and before the Fed was created. This was among the reasons for the argument for the Fed being pressed. All the previous lenders of last resort were tapped out and a new one was necessary. In 1929-1930 the Fed was
tapped out and the gold standard obligation was abolished shortly after.
My Comments:
ORO, I cannot accept that a "lender of last resort" causes a debt boom. It presumes that a great portion of lending is done for reckless, uneconomic reasons. Yet, at the end of great expansions many projects that were considered "blue chip" in the beginning still go bad. Sometimes, the most necessary economic activity is curtailed because peoples needs change during the course of life ,,,
not to mention a recession. Thus changing business dynamics.
How many instances can we document where banks lent into real demand ,,,,,,, backed with the very best demographic patterns ,,,,, only to find the loan blow up from changing demand. Oil in the late seventies would be a convenient example for us (smile). People were breaking down the doors
of the old "Texas Commerce Bank" in Houston ,,,,,,, all in an effort to finance hugely profitable petroleum projects. This was no flash in the pan, as the oil industry had a progressive expansion history of 15++ years before this. Truly, a lender of last resort was the very last thing on their minds. Later, even paper based on $10 producing reserves was trashed! Certainly there are many, many other examples,,,,,,,, most are of a more mundane, unglamorous nature, but fine examples.
Further:
Was this really circular thinking on our part? Did the Lender of last resort exist during the 'South Sea Bubble" or the "Tulip mania",,,,,, and did the "Black Plague" of Europe shut down a few sound financial systems then? I think gold was the norm in that period?
ORO, this portion of your thinking needs to include the other side of the lending aspect,,,,,, people want and demand loans for sound, economically justifiable, profitable projects,,,, and they get them on sound lending principles. Still, some 90% of them can become only "at the margin"
when demand changes. And typical of our human society, we all shift at once.
Truly, my friend, bank loans often fail because human events change the course of money dynamics,,,,,, and it does so in a way that is beyond the vision of any lender. Be the lenders you, me or a group of people as a bank, large portions of deals go bad just as much from human affairs
as from "over lending".
After all, the entire economic structure of the world is nothing more than people dynamic ,,,,,,,,, in the long run it's just too risky to bet ones physical gold on (huge smile)!
Yes, our present financial system gives the impression of total insanity,,,, but we are looking at the very "end of the timeline",,,, not how it began. It all starts with the very first loan and progresses until everyone has borrowed "too much", but no one wants the music to stop. Last resort lenders then become the norm because society will lose "across the board" if everything is "marked to the market". It is not a circle (smile) as it starts and ends with the currency system (gold or fiat) everyone demands to borrow into. It all ends in the shared pain of debt collapse as the debt is discounted to zero from price inflation ,,,, even if it's based on gold ,,,,,, gold that cannot be returned. Not much different from our present gold loan structure.
We will move on to the next money system when this one ends.
If it were gold we started with? The banker would lend his gold only to find the same metal returned to his bank as a new deposit. The "society at large" would remove his franchise if he did not re-lend that same gold during "good times", "booming times" no less! Round and round the gold
goes. Reserve lending hits it's limit and society demands the limits be raised again ,,, and again ,,, and again! Lender of last ,,,,,, or not.
In our modern world we must remove gold from the official money system, place it in a free market and people will use it as wealth money, not borrowing money. Then the fiat can come and go as the wind! Yes?
You agree now!
I'm so very glad!
Trail Guide
Trail Guide (2/14/2000; 21:11:17MDT - Msg ID:25350)
Freegold
Elwood,
I have read much of Mises and even a few others. Actually, I completely agree with them that the Gold money systems of the nineteenth century worked very well. As such we do not fall into any groups that argue against that concept. Our problem is with people (smile).
In a Money and Freedom speech at a Mises meeting Mr. Joseph T. Salerno made this point:
-------Unfortunately, the monetary freedom represented by the gold standard, along with many other freedoms of the classical liberal era, was brought to a calamitous end by World War One.----------
Further, he stated:
------Within weeks of the outbreak of World War One, all belligerent nations departed from the gold standard. Needless to say by the wars end the paper fiat currencies of all these nations were in the throes of inflation of varying degrees of severity, with the German hyperinflation that culminated in 1923 being the worst.---------------
My point (as an extension of earlier posts):
No country, however rich in gold or resources, can continue to fight a war once their money runs out! Consider ,,,,,,, You and your family as a country, a nation ,,,,,, you are under attack and have spent the last of your gold ,,,,,You will print money and continue the effort, no matter the inflationary costs,,,, come what may!
Many nations utterly failed to return to the original gold standard simply because they were mostly tapped out from the war. At the best, the richer, surviving countries would have taken a major economic hit by going back into a full gold system. All the eventual gold deals and non- deals
were little more than a part of the progression of events that lead us here today. All in an effort to keep from fully marking to the market the cost of a shared loss in war, defence and other financial failures.
There is not one person among us that ,,,,,,,,, if their family was completely broken from the war experience ,,,,,,,,,, would have asked for a return to gold. In full a honest context, millions would have starved in the process. The world optioned to share the loss and spread it out as far and as long as possible.
The war experience is but one example of why society has such a hard time with an official gold system during times of stress. Over and over again we have seen where gold is the very best holding and defence against private and public financial loss. Yet, when large scale national loss
threatens society as a whole ,,,,,, it's always the money system that receives the brunt of the demands for change. Society demands that whatever money system is in place at the time of stress, be shifted so as to spread the burden amongst all. Is it right,,,,,, is it just,,,, I do not think so. But it is what we do and have done for a long time!
Today, if gold can be forced out of the official money system, it will be to the benefit of everyone during times of stress in the future. In times of war people spend the legal tender in commerce. Yet they save the food, liquor and necessities. A common currency of the world would be just such a necessity to hold as part of your wealth.
Trail Guide
Cavan Man, see you later or on the trail!
Trail Guide (02/15/00; 05:57:35MDT - Msg ID:25376)
Freegold
Cavan Man (2/14/2000; 20:00:09MDT - Msg ID:25341)
To Trail Guide
I think I am beginning to understand.
First of all, if the gold price is freed from the $USD, monetary discipline will re-assert itself relative to all fiat currencies.
Hello Cavan Man,
You write my words:
-------This one sentence of yours tells me quite a lot; "In our modern world, we must remove gold from the official money system, place it in a free market, and people will use it as wealth money, not borrowing money. Then fiat can come and go as the wind."------
TG:
The above is my point in it's most simple form. I word it this way in an effort to engage ORO in one of the many aspects of our modern gold world.
------------
Second, fiat currency is for convenience only and is now truly represented in proper context for all the world to see; all of its weaknesses and limitations are manifested in the relationship between a particular genus of fiat and the POG. If it can come and go as the wind then truly, one should hold equity and wealth in gold and not fiat; exposure to the medium should be minimalized as is prudent.
------------
TG:
In it's most basic form, the beginning concept of gold money saw it as only one of many wealth items people held on their shelf. We traded anything and everything back then,,,, as all wealth was tradable money. Gold became the dominant circulating wealth money because of it's many unique qualities.
----------
Third and perhaps most importantly, the personal gold standard that Aristotle speaks so eloquently of from time to time still continues to assure an individual's right to and desire for honest money. A personal gold standard in the context you espouse will and should encourage and promote the realization that gold is indeed the money and wealth of the ages. Gresham's law will keep fiat relegated to a small percentage of one's net worth as it is mine now. --------------------------
TG:
Somewhat yes, CM! We can trace gold's first troubles,,,,,, back to when it was made an official currency that one could borrow and lend. This entangled it into the human emotions of fraud and cheating. I don't dispute (and completely encourage) the fact that real gold,,,,,, stamped into coins and circulated as such,,,,,,, is the correct form of world money. The problem comes in that "modern society" (as opposed to perhaps 19th century society) will never let an official money just circulate without manipulating it.
If gold is the only currency in circulation (in paper or coin form) our modern world demands that we borrow and lend it to service human functions. In this realm, we have and do change it's true format as our stress requires. However, if gold can circulate in coin form ,,,,, and traded on a world
physical freemarket,,,,,, without legal tender status,,,,,, it will become a perfect background currency for all mankind. Let the various governments stamp it as they now do in Maple Leafs, K-Rands, Eagles,,,,,, (especially relevant are the old world gold coin long in circulation prior to these modern ones) even call it "non binding Legal Tender" or place a ficticious low LT price on it. But, most importantly destroy the banking aspects of gold and let it all trade for physical settlement only.
In this ages old format, it evolves backwards into a wealth asset that once again projects all the fine qualities of circulating real wealth,,,,, and does so without the entangling alliances of contract legalities inherent in a gold standard. Truly in this old format, Central Banks, governments, citizens will all be able to use gold,,, side by side with fiat currencies. In this position, any official will quickly see how "more gold" held in reserve becomes a defacto backing for national moneys,,,,,, instead of
competing with them. Of course, the relative rarity of gold will force it's currency price sky high. But, in this position, it will quickly become "the dominate currency asset" that values all other circulating fiats. This position negates the desires of society to manipulate it while utilizing it's ages old purpose of holding wealth in a way that transcends time.
We are today, heading towards the trading of freegold,,,,, and the ECB is laying the political software for it. For better or worse we will ride this river of change to the sea.
Also: Elwood, is this more clear? Read it quickly as ORO is putting on his largest boots to grind it down (smile).
Trail Guide
Trail Guide (02/15/00; 07:07:49MDT - Msg ID:25381)
Freegold
Good day ORO,
Because your ORO (02/15/00; 05:14:21MDT - Msg ID:25372) is on this page and easily found, I will not completely re post it.
I believe that you have still not challenged the thrust of my argument. That being:
------Today, in our modern society,,,,,, no form of any national currency system will be left unmanaged. Be it a full gold system or a fiat system, society will expand it (inflate the currency through the loan process) or shrink it (deflation through uncontrollable stress default). As soon as the system in place bumps against it's natural or manmade limits, society will option to change those limits. Without
fail.---------
You write:
----------------------------------
ORO
Under a gold standard and the debt dollar standard as well, the existence of a lender of last resort in one substantial country will cause all international banks to lower their rates or minimum credit rating to make use of the guarantees of that lender of last resort - If they had not, the banks of the country with a lender of last resort would have forced them out of the markets during the boom. This is as much the case today as it was during the turn of the previous century.
For reference in reading the comments below, this note:
Booms and busts do occur. Debt bubbles occur without government sponsored cartels. What is different is the following:
1. Early failure. The non-central bank gold standard produces a small crash after 4-5 years of overextension. This is long before a gold debt boom made possible by a central bank and government sponsored bank cartel would have fully developed.
----------------
Trail Guide (TG):
How true! But this does not address the aspects of society control in our modern world. We will not allow any system to contract after a 4-5 year overextention. Any "small crash" today,,,,,, if using a gold standard,,,,,,would be countered with an immediate devaluation of the currency (raise
the nation's, official price of gold) so as to allow the boom to continue. Outside of that remedy ,,, and the loss of currency prestige it would entail,,,,,,, we would just dump the gold system entirely.
Not my idea of sound operation, but it's what society does today.
--------------------
2. The scale of debt. The natural dynamics of the free banking business is towards caution. By disabling the market's tempering mechanism (it functions through the specie money supply), the cartel can push debt to 15-20 years. The resulting scale of debt would be some 8 fold larger, because the rollover game made possible by the government cartel and the presence of a lender of last resort.
--------------
TG:
In a natural dynamic what is the greater fear,,,,,losing your banking capital or losing your banking franchise? There is no method of disabling a markets tempering ambitions. We have not outlawed fear, greed, fraud or war and conflict with each other. Today, if it's official, it's open for negotiations and rule changes.
--------------------
3. The weeding out of weak business. Weak businesses are weeded out much earlier than under a central bank regime.
-----------------------
TG:
As above, society today has a way of tolerating it's weeds and always says "oh, let's help them out for a while ,,, it' only just these few weeds". Soon, the boom is on!
----------------
4. Who benefits. The key motive of a cartel is the elimination of competition by means other than fair competition on the merits of the corporation. The best cartel to have is that of banking. The bank cartel allows endless losses during the establishment of the cartel, until the competition is destroyed. One familiar example to the goldbugs is Barrick. Their growth through the use of
hedging was very rapid, much more so than any other gold company starting out at their size in the mid 80s.
----------------
TG:
I agree! But when you have a nation that loves "Las Vegas" and all that represents,,,,,,, buys dot.com stocks and trades stock options,,,,,,they also enjoy the soap operas of these cartels. Hell, they buy into them, no less! ORO, with this mindset, no nation will tolerate the discipline of having gold as their official money. Yes, it's my loss,, your loss,,,,,,all of our loss!
But,,,there is another way! And it will politically work because it builds on the desires of this mind set, while offering an escape route. You are reading my posts, yes?
-----------
5. Who Pays. The failures of the centrally controlled bank system are swept under the rug and reappear in the form of fresh loans coupled with monetization. In the case of monetization, the "good" securities are purchased by the central bank, adding to the monetary base. The additions to
the monetary base are leveraged through the bond markets and the banks into a price rise that swindles the saver of the purchasing power of his funds.
------------------
TG:
Absolutely! But, remember, this is the same format we have been using for 20 years now. Everyone shares the loss through currency inflation (not price inflation yet) as they try to jockey for position. Yes, in the end (one that is coming soon) the entire system fails and most everyone loses
totally (at least in dollar based assets). But return to gold? No they won't!
However, place gold in a format where everyone can watch it run,,,,,then they will reach for it,,,, outside their fiat world. In doing so an ages old process begins that will clean the dirty currency pipes without making laws to enforce it.
You are the best ORO! We will all hike this gold trail to the sea and see all we can see.
Cavan Man and others, later!
Thanks,,,,, gone now Trail Guide
Trail Guide (02/15/00; 20:36:44MDT - Msg ID:25428)
Freegold
ORO, Journeyman, All,
I enjoy this conversation, and will continue right along your debate line. But, your question,,,which way do you think they are going as far as mechanism (ref the options
above)?,,,,,,,, it will be outlined on the Trails page. I will again be writing there as FOA and this time things will be more in order. It needs to be because events do seem to be proceeding faster now.
Note:
I think ABX brought their calls as a "position strategy" put in front of their "intended" buying in of real gold to close some forward sales. They were going to make some hay on any gold spike from their actions,,,,,,but later were shocked to find that no official gold was forth coming! It seems that the Washington Agreement had larger teeth than anyone expected. Even their "well connected" board could not open these doors. So, they put a New York spin on the story! Is this a fact? We will know before long!
Readers should follow the reality here, all forms of paper gold derivatives (gold stocks included) are in good supply ,,,,,, bullion is not! The discount on coins does in no way
present the true picture of the physical market.
It seems that Goldfields SA understood this well in front of everyone. They were the first to buy gold at the BOE auction, close out their shorts (most of them) and even held long paper gold. Progressive thinking one would expect from the best. (Yes, for anyone here that remembers, I took a position in them in support of their actions and burned the shares. Never to be sold. My wife may sell after I'm gone, no doubt (smile))
Many other mines and Bullion Banks are now visibly caught in this transition and will have to quickly
struggle for position before the next "rule changes" are implemented. No, I don't know the what or when yet, but something is clearly in the works and the major players are creating uneasy feelings that are spooking some people (including some lesser mine leaders). The paper prices could easily swing wildly either way here.
Obviously, I expect some further curtailment of bullion supplies. However this could be in the context of "buy side curtailment". We shall see.
My feelings are,,,, as always, the best way for one to participate in this is with physical gold first in line, as the majority metal holding. If one is concerned about privacy then stock registration is out and indeed, bar registration violates the same ,,,,, then the old country coins are the best.
Later (on Trails) I'll go back and discuss things like Why $280 was important,,, and Why the intentions of oil including gold in their settle mix,,,,, and in general clear up many lose ends.
So, now back to working on the debate!
Trail Guide
Trail Guide (02/16/00; 06:30:21MDT - Msg ID:25452)
Freegold (debate)
OH,,,Ho,,Ho! A big welcome to Traveler!
What a great post. Picture me jumping into Traveler's corner,,,, standing behind and pushing him forward. All the while saying "you tell em". Ha Ha. (no doubt he will have me in a head-lock later)
Thanks for a good effort Traveler, I'll post later.
Trail Guide
The Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
The Perfect Monetary System - Installment One
Trail Guide (2/16/2000; 16:14:06MDT - Msg ID:25476)
Freegold (debate)
Hello Journeyman:
Just read again your post of: Journeyman (02/15/00; 11:10:43MDT - Msg ID:25391)
Good post!
You write:
-----But a bank, especially a central bank, is part of the extended order, and as Hayek suggests,
(TG note: I'm adjusting Hayek's quote to simplify)
" " " If we were to apply the unmodified, uncurbed, rules of the small band or troop, or of, say, our families to our wider civilization,,,,,, as our instincts and sentimental yearnings often make us wish to do, _we would destroy it_."
AND
" " " Yet if we were always to apply the rules of the extended order [Note: as Journeyman would put it,,,,trade with those we don't know face-to-face ] to our more intimate groupings, _we would crush them_." " "
AND
" " " So we must learn to live in two sorts of world at once. To apply the name 'society' to both, or even to either, is hardly of any use, and can be most misleading" "
F. A. Hayek, _THE FATAL CONCEIT The Errors of Socialism_
Now Journeyman writes:
----------The bank treats us, not as part of their "small band or troop," but rather as part of their "extended order" (and rightly so) when times are good ---- we'd better pay up or there goes the ranch. But when they're in trouble, they want to be bailed out, treated by us now as if they were
part of our small band or troop, or now that they're really big and might cause the whole neighbourhood to burn, treated as "too big to fail."-----------------
Trail Guide:
Good point Journeyman! BUT (smile)?? It's always easy to place the failings of a nation,,,,,, a company,,,,, a small group or even a families finances upon some "other extended order". We read a lot about this in the general media (and on the web), but I question just how much of this is in
moral reality.
When referring to how some large entity (big banks?) did them in,, people often camouflage their own emotions by presenting only their side. What if the tables were turned,,,,, and these "small band" victims were in this "extended order" driver's seat themselves. We already know the answer as to how the majority would act. They would fight for their "most profitable" best interest,,,,,,, right
or wrong! Sad, but true.
----It's a great life in this here great lands we call these United States" -- Mr. W. Rogers---
This is the "dirty little secret" that many of the most outspoken hide. And,,,, they play out this hidden fact at the voting booth in a democracy. Yes, they "privately" vote for anyone that will protect their "financial position" whether it's moral or not. Then we "publicly" shout about how this "extended order" is doing us in ,,,, but, it's exactly what "we" as a "small band" would do to them.
This is the reason I don't buy the "two worlds occupying one" in a democratic society. The people in power are a reflection of us. Go to small-town anywhere in the US and put "us" up there,,,, and "them" down here,,,,,, and nothing would change. Yes, I know that's not true 100% of the time as there are some fine solid people out there. But,, I bet at least 90% of the time. Yes?
This is why,,,,,, in my Freegold posts to ORO I use Society as a term to express the financial drives of the whole. "We is them", my friends,,, my neighbours!
Further:
(note: to gain context of this please read his post)
You write:
-----The writing of IOUs, that is, lending, is unavoidable, and when done "correctly," is good. (There is "consumer debt," which except for rare instances is in the long run inherently "bad," and "commercial debt" which is good or bad based, ultimately, on whether or not it increases
productivity.) But how are you going to stop Uncle Joe from writing an IOU and using his gold sovereign as collateral?--
TG:
When gold is trading in a free physical market,, outside the currency perception,, Uncle Joe can use his "Swiss 20 Franc Helvetia's" all he wants for collateral in a currency loan. In this context gold is no different from any other item of wealth we own. Be it a car, house, furniture or a
petroleum cracking unit in a "Texas City Texas refinery ,,,,,, we are borrowing the fiat currency not the item of wealth.
As long as gold is "ideally" implicated as some form of "official money", modern society will try to lend "it" (the gold) and borrow "it" (the gold). Then it becomes part of the debt itself and is entangled in all kinds of ,,, "oh where am I going to get the gold to pay off this loan",,,,, issues! This throws it right back into the arena of "currency manipulations" by officials,,,,, all in an effort to maintain the economic momentum. The very same thing we are into today.
Again, today gold still carries the baggage of past associations with "official currency / money schemes of yesterday year. As time has progressed, and our economy has developed, each passing stage of using gold in the official money / currency mix has become more convoluted. As I noted to ORO, it's a shame we cannot just use gold,, outright,, but modern society has proven that it will never leave it alone.
We have evolved to a point where no one,,,, gold bankers, gold miners, politicians or private savers even knows what the term "today's gold market" really means! We have distorted the physical gold market to the point that the trading of "paper contracts",,, that have virtually no call on real gold (ABX cash settle calls as example??) price the supply and demand of real gold. All in an effort to keep the dollar looking good. And do we blame them for doing it?
Think about it,,,, prior to the birth of another possible currency system (Euro),,,,,, looking from 1990 backwards,,,, the amount of economic loss that would have been associated with a dollar failure made the minor loss of killing the gold industry look,,,,, well,,,, like nothing! Kind of like sending in your best troops to be mowed down,,,,all to build time to assemble a full army.
Thanks for discussing Jman,,,,,,, I have more for Cman and ORO later.
Trail Guide
Trail Guide (02/16/00; 19:22:58MDT - Msg ID:25485)
FREEGOLD
Hello again ORO,
ORO (02/15/00; 16:45:38MDT - Msg ID:25407)
You write:
------The electronic systems will carry the day.-----------
Your Point-------
Eventually they will switch to a free gold banking system
Your Why------
because the fraud of the bank-government-Cabal's fiat money system leaches too much from commerce, and now that electronic free markets have no barriers to entry left, it is on the verge of total collapse. ------Whether the Cabal survives or not turns on Cabal member's acceptance of the
reduced position left to them. ------So far, they have attempted to stretch their current position as far as possible - and then some. They are taking what they can out of the current structure and massively moving their holdings of old and new economy corporations onto an unsuspecting public full of enthusiasm. A last effort at one more fleecing of the flock.----------
TG:
ORO, I have a hard time accepting the present currency system as a independent Cabal. Even in the context of viewing it as some small part of US government structure. Yes, they are a political block and their policies can be applied to them as an acting whole (FOA's "Dollar / IMF
faction"??). But as a "extended order" type cabal, operating on their own? Consider that every US citizen has a personal share in this structure that many of them have voted for themselves. Just as in my post to Journeyman, we must accept that the entire dollar reserve system has tied all of us to it's fate as much as we tied it to ours. None of us had to go into debt, overspend or use a non- energy efficient product structure. We as a people optioned for the most financial rewarding lifestyles,,,,, not the most moral ones!
Trying to go back and pick the points of where the "Cabal" crossed a line of no return ,,,, that made us all "go with the flow" begs the question: "When did everyone stop voting?" (smile)
You write:
------Trail Guide - you obviously understand the issues as they are, yet you claim that there is a "society" willing to take upon themselves their own fleecing.--------------
TG:
No, we turned the cheek as we agreed to fleece each other for the good of the system. All the while holding private emotions that somehow each of us could jockey for financial position while the others were not looking! What else could explain the insane rush into all forms of financial derivatives. No one is chasing this leverage for nothing. The "Western Mission Statement" says that our dollar, free enterprise system is the greatest,,,, let's keep it going,,,, but please let me make my million before anyone "responsible" exposes it for what it is,,,,, and shuts it down!
---------Obviously, you include government and banking as part of this "society", ---------- and point out that they had in the past, and still have the upper hand and will be able to impose their fiat money on us for the foreseeable future.-----------
TG:
Too a degree, yes! I covered this in a post today to Journeyman. We are to a point now where the governing powers cannot turn back. You, I and many here understand the dangers,,,,and openly discuss it, but most do not and will not. If we (from my end) have any purpose at all it's
not to stop this "irresistible force",,,, rather, to better light the trail before us. My contention, as an American, it that our dollar fiat currency will continue through out out lifetimes. In an substantially lower value and international use mode,,,,,,, but be in existence never the less.
ORO, our entire society structure was built on this dollar and we will slowly slide with it's inflationary fall. We will not just shift out of it,,, especially on a downhill run. Look at many of the third world countries that still locally use their almost worthless moneys, but use dollars in a parallel economic world. We will eventually do the same. Read Travlers 2nd post here The Traveler
(1/28/2000; 1:30:27MDT - Msg ID:23712),,,,,'see the part under "Now for new business -----" beautiful! It gives a good perspective.
You write:
------ You are arguing that the fiat system is unresponsive to the fact of its own inefficiency reducing long term growth by an enormous margin - by half as far as I can calculate the effect. Alternately, you are making the argument that the system does not reduce efficiency but is
necessary for growth. ---------------- I know that the fiat system is not capable of increasing the growth of output. It imposes a transfer of resources from producers to government, banking, and related interests and reduces the resources available for producers to further produce and for the global community to raise standards of living. The fiat system is a negative sum game and the free economy is a positive sum game. Their connection together produces less wealth than is possible without fiat.---------------------
TG:
We shift gears here and talk about the Euro system. We have to differentiate between a brand new reserve fiat currency and an outgoing one that has been aged from debt and it's constant attempted alignment with gold. Of course the Euro has all the bad qualities you mention,,,,,, but so did the dollar at the beginning! Are we comparing apples and oranges?///// No. Just as you posted earlier, the dollar was never on a traditional gold system. And even during most of the time it was,,,,,,, the world financial structure would not hold still.
Yet, the US economy did incredible things and did it using a constantly evolving ,,,,,,"in reality mostly fiat",,,, financial system. Yes, we robbed our citizens of productive efforts (including gold) to do it,,, but "in much of our beginnings" ,,, as a whole it worked well enough to give us a major world standard of living. The same thing is going to somewhat happen in Europe. And their gold system may end up as the best yet!
ALL:
My FREEGOLD discussion with ORO and others is not a change of venue for me. Actually, I am laying the foundation for much of the discussion I will undertake on the "Gold Trail". Here, as Trail Guide I am debating the issues as myself. As FOA I will be offering the Thoughts and Reasoning of others.
Also SteveH,
I never did thank you for that wonderful work in your "Open Letter". All of us gained insight from it.
Thanks for reading.
Trail Guide
The Traveler (1/28/2000; 1:30:27MDT - Msg ID:23712)
…
Now for new business -----
Steve Hickel's macro viewpoint by and large mirrors our profile (Yes, we predict that the Euro, warts and all, will become in time the primary reserve currency. The permutations of this eventual reality offer prepared capitalists many prosperous opportunities). Naturally, most innocents will dismiss Mr. Hickel's viewpoint on a day that the Euro fell 1% verses the US$ and by almost 20% YOY.
Less understood by many gleeful goldmeisters of the Americas and Japan is the calamitous fallout from this eventual reality. Simply put, dollarized economies will go the way of Mexico, Brazil, Argentina, Indonesia and Russia to name but a recent few as the world goes to the Euro and a free market in physical gold. Consider this basic equation:
Now: US$ 300 = E$ 300 = 1 ounce AU = 15 barrels of crude = 1 man's new suit
Eventually, after the US$ devalues internationally and hyperinflates domestically in order to find its intrinsic equilibrium (Read: true value), the equation will look much like this:
Later: US$ 3,000 = E$ 300 = 1 ounce AU = 15 barrels of crude = 1 man's new suit
The US$ variable is largely controlled by foreigners who each will decide their affection for the many US$ that they have endlessly accumulated for the goods and services that their sweat has produced.
The equations state that holders of dollar paper claims (particularly creditors and common shareholders) will become poorer as the US$ devalues internationally and hyperinflates domestically while holders of E$, gold, crude or other hard assets will experience no increase or decrease in their current purchasing power. In certain circumstances, however, those prepared for this calamity will reap a significant increase in their net worth. Read this again and give it more thought. Its a key to understanding your financial future if you hold significant dollar denominated paper claims.
More specifically, suppose I owe the holder of my residential mortgage US$300,000 (or the equivalent Now of 1,000 ounces of AU or 15,000 BO). If I bought 100 ounces of physical AU Now, I could Later sell my AU at $3,000 per ounce and payoff my mortgage. I am ahead (for I received a $300,000 house for $30,000 in gold) while my creditor is behind for it received in full satisfaction of my mortgage 10% of the purchasing power that it originally lent to me. Thanks to the US Supreme Court for supporting FDR's fraud by striking the "gold clause" from debt instruments in its decision dated 2-18-35 (294 U.S. 240, 55 S.Ct.407). This only works if you have a fixed rate mortgage or a floating interest rate with a contractual or statutory ceiling.
Similarly, my oil well will payoff my mortgage Later with only 1,500 BO. The next 15 BO will still buy just one man's suit.
Aggregate this to the many mortgages and other loans held by banks, insurance companies, GE Credit, Ford Credit, your money market fund and the like. As a result of outright defaults (I need my all of my salary to buy food - a sirloin steak Later will cost $100 per pound) and payoffs by the prepared, their capital ratios will evaporate and many will go insolvent. This means that the common shares held in your IRA, 401(k), pension plan and so forth are now nearly worthless.
As a holder of paper claims (CDs, bonds, annuities) against these financial intermediaries, you will receive 100% of your principal back (in the best case) but it will have 10% of its former purchasing power. Yet a suit now costs $3,000 not $300. Thus begins the death spiral of the dollarized economies.
My last comment for this post considers the impact on gold mining shares as the Euro gains acceptance and physical gold trades as settlement alternative in a free market. FOA has essentially stated that these unique organizations will experience a unique set of adjustment problems (nationalization, confiscation of their production two name but two). Thus they will not be fruitful investments. While I agree with their share value at the end, I differ somewhat in their value while in the process of getting to the end.
We believe that as gold triples from US$300 to US$ 900 on its way to (pick your number), unhedged gold producers - not exploration companies - which have fixed rates or capped rates of interest on their mine loans will experience a 10 fold or better increase in their share prices. However, Later the share prices will sink below their price Now due to government theft. Holders of such shares could also payoff their mortgage or other secured debt for a fraction of the purchasing power originally received if they sold soon enough.
I am exhausted as I am certain you are if you made it this far. Thanks for your indulgence. Perhaps I will post again soon.
Best regards to all.
Trail Guide (02/17/00; 05:20:33MDT - Msg ID:25500)
(No Subject)
Hello Henri,
I printed that one ! So should everyone else(hopefully there will be more of those to come?). Henri (02/16/00; 20:55:20MDT - Msg ID:25487)
Now if we can just get Traveler to continue.
Thank You, sir Trail Guide
Trail Guide (02/17/00; 06:45:40MDT - Msg ID:25508)
Freegold
-----Elwood (02/16/00; 21:44:19MDT-MsgID:25492) Feegold---
and
--Elwood (02/16/00; 22:52:18MDT - Msg ID:25495)--------
Hello Elwood,
You write:
----- During the few times in history in which man has chosen this path, great leaders have arose to lead them there and thence out again once the danger has passed. Wherefore are such leaders today? Are the spirits of Jefferson and Jackson truly dead?---------------(and)--Was
Freeman Tilden truly correct when he wrote the following in his book, "A World in Debt"? "Nothing, has been more amply demonstrated during the past three thousand years than this: that the great majority of men do not esteem, or understand, or even desire personal liberty. What they value is the semblance of liberty accompanied by indulgence."-----
TG:
Oh boy, Tilden said it right,,,,, "semblance of liberty accompanied by indulgence"! This very aspect of modern life is clearly visible in our money systems today,,, and will most likely be the norm for some time.
It's one of the reasons I brought up Freegold,,,,,, so we can all air our feelings and perceptions about money and life,,,,,, past and present. I submit that most goldbugs are not preparing themselves for the trail ahead. "Reality",,,, in today's context is that the world is going to use a fiat
system for the foreseeable future,,,,, come what may.
If we can understand the impact a currencies "timeline" has on it's value, we can position ourselves to dodge "at least" the "worst effects" of that speeding truck you speak of.
You write:
------Haven't you, yourself, argued that our entire standard of living is but an illusion based on that robbery of others?---
Yes,,,, AND eventually??,,,,, or perhaps most likely??,,,, the fiat Euro will also create the same illusion of wealth that the dollar has given today. But, the size,,,,,, scope,,,, perception of that wealth illusion is most evident at the end time of a currencies life,,,,,, not the beginning.
This is one of the reasons my friends question the over dependence,,,,,, the over positioning of ones wealth in dollar based wealth and gold derivatives for this transition. For myself, it amasses me what a difference there is from Western perceptions and much of the rest of the world. In America, for instance,,,, investors know little about the true need for "real gold" and put perhaps
10% into it at best. And even little of that position is real metal. Major private players elsewhere consider 30% a good mark for our present time. It used to be 90% (talking about the hard money portion of ones overall wealth) of our (American view) metal holdings was in derivatives with 10% in metal. In the 70s that meant gold futures and mining stocks as the paper portion and 7% silver, 2% gold and 1% other as hard metal. Today, many do the same thing and also "trade" extensively, thinking it's the way to catch up. What they do not realize is that the mechanics of the entire "gold market" as we know, it has changed dramatically. The risk today is that the whole gold market place,,, and all the equity structure that depends on it,,,,,, will fail and shut down as the dollar reserve currency system suffers the first (and largest portion) phases of it's long term
downward drift.
In ground reserves (ore),,,,, future delivery against contract gold,,,,, cash delivery against contract gold and it's implied later purchase of gold on the open market,,,,,, will all be discounted heavily in a mad scramble to exit dollar assets.
This recent paper evolution of our gold market is the natural, end result of an old dollar / gold relationship being mutated in an effort to prop up and extend our dollar system. Once this strategy was / is abandoned, it will collapse with and before the dollar,,,,,, and in doing so "take out" the perceived "equity in almost every gold derivative asset.
This is the reason why many major private gold investors today believe physical gold will far outrun all of it's modern contemporaries,,,,,, and do so by a huge amount. As such we (that's me too) now place 95% (again this is the hard asset portion of their overall wealth) of their hard
money in physical "gold" only! I not only expect gold to keep up with any hyperinflation of the dollar,,,,, but out- pace even that ,,,,,, by a large amount!
This position was promoted and considered very radical only a few years ago. Today, many are reconsidering it. Again, on the Trail I'll build quite a foundation to support this view.
Thanks Trail Guide
Trail Guide (2/17/2000; 17:46:18MDT - Msg ID:25551)
Just nuts!
http://www.siliconinvestor.com/insight/contrarian/
Hello Farfel,
I bet this tops your story:
From Bill Fleckenstein's site ----------
In the mania chronicles... A reader who is a rep for a discount broker in Toronto sent in the following:
"A couple of crazy calls today reminded me of how ridiculous everyone has become.
"One client asked me for a quote, giving me the symbol of the stock. He then asked me to check his account to remind him how many shares he owned. I didn't recognize the symbol and asked him the name of the stock (I can get it from the quote screen but it takes a couple of extra steps). He
replied that he didn't know the name of the stock, only the symbol.
Remember, he already owned the stock. Next we went on to another quote. This time he asked me if I could tell him what that company did. I checked a couple of news releases and told him it sounded like they were involved in faxes over the Internet. That was all he needed to hear, and he bought 100 shares at market.
"Another call today was from a client who wanted to buy some "aec.wt". I set up the buy and started to repeat it back to him before releasing it. I read the full name - including the word `warrants' - and then asked him if he was sure it was the warrants he wanted and not the actual trust units. I could tell he didn't know what I was talking about, so I explained to him what the warrants were. They were basically worthless and due to expire in March. At least he caught on quick and decided he didn't want them after all. I was
almost encouraged, but then he just went and bought some other penny crap. Oh well."
Trail Guide (02/18/00; 13:18:44MDT - Msg ID:25607)
On The Gold Trail! Go get em John!
http://www.tocqueville.com/brainstorms/brainstorm0057.shtml
----------------The LBMA(London Bullion Market Association) recently reported a 22% decline in physical trading activity for the first month of this year. The average value of gold transfers fell to $6.3 billion from $8.1 billion in december. If this acute decline in physical trading volume continues, it is not hard to imagine the wheels coming off of the bullion dealer's machine.-----------------
Also:
--------A short squeeze caused by a contraction of credit among and for the gold intermediaries, the bullion dealers, is on the horizon. ------------
Also:
---------Still, each new rise in the price of gold is being
greeted with cries from the bearish camp that physical
demand is falling away. But the bullish case for gold calls
for the crowding out of physical buyers by short covering
and investment buyers.---------------
Also:
-----Gold is a currency, a monetary reserve asset and a credit instrument in the way it has been utilized by bullion dealers.------------------
Also
-------Apocalyptic expectations are unnecessary to project a dollar gold price that includes four digits. It will only require the inevitable unwinding of bearish producer and dealer hedge structures amidst a change of market perceptions on the desirability of financial assets.
John Hathaway
Trail Guide (02/19/00; 08:26:47MDT - Msg ID:25658)
(No Subject)
http://www.usagold.com/halldiscussion.html
TownCrier,
Thanks for the "Hall Discussion" page. I can now see where lot's of clarification and more discussion is in order.
http://www.usagold.com/halldiscussion.html
Aristotle,
Bet you knew what I meant in:
Trail Guide(02/11/00) - Msg ID:24996)--- The Gold Trails
-----Thank you Aristotle! A fine work that's worth a long study, my friend. Aristotle, your five part series is ????trechantly???? ritten and offers readers a glimpse into a future that must be. Will be!---------
Hope you did understand it,,, because I didn't! (smile)
Should be -- trenchantly --- vigorously effective and articulate,,,,, sharply perceptive!
In the future ,,,, as I have always done in the past ,,,,, will try harder to use as few "extra descriptive" words as possible. It's bad enough for us to read between the lines of thought,,, and fill in (in our minds) the simple bad word use and misspelling (we all offer),,,,,,, but fast typing descriptive terms wrong ,,,,,, just kills the whole presentation completely. No?
Formal papers are given a good going over,,,,, several times before print. Here, in this convention hall,,,, we not only say what we think,,, we are also saying what we are feeling about the subject as well. Same as if we were in person.
(ha! Ha!) Reading and listening here is no different from my talking to a large group. Going back,,,,, hearing some of my tape recordings of the past ,,,,,, often think "I can't believe anyone actually understood what I said" (smile). But, all in all,,,,, most do,,, I do also ,,,,,, human dynamics in action.
I have stopped all new projects and will be writing a lot,,, fairly soon. Next post coming up.
Trail Guide (02/19/00; 10:03:17MDT - Msg ID:25661)
Freegold
http://www.the-privateer.com/gold6.html#latest
Boy,,,,, the privateer is now hitting right on some of the discussion we have been having here. See his whole post,,, good site.
His words:
----------And Gold's history as a tradable financial asset only really goes back to the "floating" of world currencies in early 1973. --------------
TG:
As the whole gold / currency entanglement threatened our economy and began to come unglued,,,,, they just did what we have been talking about. Instead of setting gold free to trade as a physical asset alone, it was turned into a "financial asset". This exposed it to all the lending,
borrowing and derivative entanglements.
Most every thinker from that time to present uses that period to mark the beginning of Freegold trading,,,, what really happened was far from this. Gold never did become freely traded in the perceived context of just buying and selling gold alone. In parallel to the physical market a
paper market grew that eventually set the price for buying and selling Freegold,,, physical gold. In this respect, gold never did detach from the currency markets. Official policy could still be used to control it's price, therefore making the dollar look good,,, and extend it's life. Yes, one could buy gold, but it's price was marked to the fiat currencies no different than when it was part of the money system. The only difference was that the private market makers provided the hardware (various paper gold derivatives) while the Official markets provided the software (keeping gold lending rates well below currency market rates with the use of small actual sales and "grey" guarantees to supply if needed). In addition this played on the publics ("society") perversion to sell their "hard" , fully paid for" gold holdings and hold the newly offered "soft" (leveraged with less cash on deposit) paper gold. As such the "gap" (physical deficit) has been filled from old private holdings. Holdings that are / were much larger than the CB stash. This supply fact is largely backed up by looking at the gold holdings of "ALL" Central Banks over the last ten+ years. The actual average amount of CB gold hitting the market was never enough to cover the deficit. Not even close. Mostly, other CBs (and large entities) brought the offered gold.
This is the period that low gold prices were,,,, allowing some entities a recycle their dollars back into gold without impacting the price. Some used the paper gold function while others used actual hard gold buys. Oil is good example. In return for the worlds "official policy" oil production was kept high and prices low. Even in the face of a demographic growth in oil use that should have driven prices much higher. In reality, these low prices were backing the dollar reserve system with cheap oil,,,, settled in dollars only.
Cheap gold,,,, cheap oil and World CB support has been used to maintain and extend the dollar reserve system until another currency was available. Today, one is. It's no accident that one year after the Euro was born:
,,,,,,,We find oil prices steadily rising to match it's true economic relationship to world economic growth and use.
,,,,,,,We find the Euro becomming more and more of a financing preference.
,,,,,, We find oil production unresponsive to US demands. Even hinting to cut supplies further!
,,,,,,,We find this modern two tier gold marketplace,,,,,,, built from the mid seventies,,,,,, being abandoned ,,,as it's useful purpose to support the dollar is no longer needed. The Washington Agreement will be seen as only the first of many changes.
,,,,,,,We find the dollar driven into a more overvalued position as world dollar use and therefore liquidity begins to dry up. Prompting the US Fed to pump the money supply in an effort to replace international dollar reserves. We have but to look at Japan and it's Yen to see a similar situation. Here a nations currency is constantly driven upwards,,,,, not from the value of economic function
,,,, rather from financial destruction. Even now the BOE takes steps that may lead to major (hyper?) inflation. Our fate acted out on a much smaller scale? Is this the reason Another said that the dollar would rise first,,,, before it's end, and gold's beginning?
,,,,,,,,We hear talk in Euroland (German citizens) that it's not that their Euro and gold have fallen,,,, rather it's that the dollar has created a US financial bubble similar to Japan in the late 80s,,,, and this crisis is driving the dollar and it's financial sector into a mania. Perhaps an hyper mania?
Also from the Privateer:
-----------Gold has always been a great boon to the world's economic prosperity. And for that precise reason, it has always been a great threat to government created and administered financial systems. ---------------
TG:
To date, if physical gold supply is further curtailed,,,,,,if physical gold demand rises,,,,,, it's price will do so independant of the paper marketplace. This will destroy the modern dollar supporting two tier gold market. A market created to extend the system, not maintain it indefinitely.
In addition I add that governments can,,, have,,, and do use gold to their best interest if the strategy is to unseat an established but failing money system. We shall see.
Also:
-----It is an "asset class" (like stocks, bonds, and "cash") but it cannot be controlled. ------------
TG:
The "true value" of physical gold alone could never be controlled. If,,,,physical gold, trading as Freegold can again act as it did in the very beginning. It will perform it's wondrefull function outside the official money arena,,,, it becomes what it really is,,,,,, an "asset class" as wealth money. A wealth asset,,,,, not an unworkable financial asset.
Also:
-----What has and is being controlled are Gold DERIVATIVES. And as long as the demand for physical Gold can be met, the price can be controlled by the use of these derivatives. -------
Also:
----Since 1980, the demand for PHYSICAL Gold has never got out of hand, and the use ofderivatives to control the price has been developed to its present level. -------------
TG:
Something the world is "on the road" to changing today.
Also:
------The problem now is that unlike most other financial derivatives, which can be "settled" merely by the issuance of more debt paper or, in a final extremity, by the printing of actual currency, Gold derivatives rest on PHYSICAL Gold, which is in finite supply.---------------
TG:
Truly the weak link in dollar support that Euroland will break.
Walking the gold Trail!
Trail Guide
Trail Guide (02/19/00; 10:58:10MDT - Msg ID:25663)
(No Subject)
Cavan Man,
Not too many logs my friend(smile), I have to leave. Last post for today.
Hello Aristotle,
You are right about Ted Butler. I truly thing he and many other traders are a generation that grew up thinking that paper trading of all kinds is equal to the real thing. Yet, look around us,,,,, in reality our whole economic structure is always in the courts fighting over contract clauses someone could not make good on. Rents, leases, buy outs! Even on time delivery of new aircraft often defaults! Just because it's in writing,,,, guaranteed,,,,,, and has good counter party support doesn't mean a contract is the same as "in my hand"! Contracts are just agreements between two parties and mean nothing until concluded.
Far too many players take paper gold as a sure thing. They lost the perception that these items are just a bet on the price change performance, not delivery performance. It was barely real in the beginning and has lost even that early perception now,,,, by a factor of 1,000%. Still, we read of how it's all illegal and "they" are doing us in! Yet, I can place $2,000 down and create a contract for delivery ,,,,,, and that could be all the wealth I have ,,,, period. What's illegal about that?
We usually hear these arguments in court when somebody is losing big. They try their best to match a moral concept against a legal concept and hope the jury is out to lunch (smile). It's the same in Las Vegas,,,,,,, a guy loses big,,,,,, then tries to tell the jury that the house should have stopped him,,,,,, because he didn't know the house rules were established against him winning!
The real answer to all of this is,,,,, "boy don't play these games in their house, if you don't want to lose". Yet, people still gamble the futures and options in gold and get mad when they find out that the rules were always against them. Ha! Ha!,,,, they never cry a moral story when they are
winning???
Same thing today for the gold mine stock holders. How many would have said a word if the paper gold markets were manipulated in their favour??????? Not a word I bet! Yet, still illegal, no?
ALL: They tell this tail for their own advantage. Gold can't rise that much so use leverage ,,,,,, Gold can't rise that much so buy silver ,,,,, Gold can't rise that much so buy gold stocks. Then gold falls,,, they lose over and over from trading in and out and cry it's all illegal ,,,,,, we pack physical in and wait for the world to swing our way and pray for more of this illegal stuff to keep the price down!
Next play ,,,,, gold spikes way up ,,,, crashes the entire paper marketplace ,,,,,, destroying the finances of most mines and players in the process ,,,,,, same cries again ,,,,,,, it's all illegal ,,,,, they forced it too high!!!!! It will never end!
As Another said "Out bet? They can never cover. Because we play "our" game in "their" house"
Also: Aristotle ,,,,, you write, 'I hope I didn't undermine any natural progression of ideas you had planned by tossing this out on the Table too early"
I saw some while back that you had caught on to what was happening. Funny, there is but a very small group, world-wide, that are working on this. I guess thoughts travel through space and time?
Go for it my friend.
Thanks Trail Guide
Trail Guide (2/20/2000; 7:11:59MDT - Msg ID:25690)
Welcome
ThePrivateer (02/19/00; 22:42:09MDT - Msg ID:25681)
Checking In
Hello Privateer and Welcome!
It seems that a good number of people use your work to argue the "gold game" (often against me). They often send me parts of your thoughts as evidence. After visiting your site (for some time) I can see why,,,,, you have also been following the politics of gold from way, way back, no? You are not alone, I think Michael Kosares was following it from the 2nd day of his birth (big smile)
I present your position, mostly in agreement,,, but add that it is one of many parts of the gold trail we all now walk. If I may, I will post some of your work (with link) in the future?
I did check my recent item and it did include your link. (I got a little nervous and had to check. Thought I put it in, and did.) (smile)
thanks for posting
Trail Guide
Trail Guide (02/20/00; 12:44:17MDT - Msg ID:25701)
(No Subject)
Hello canamami,
You write in your: canamami (02/19/00; 11:37:37MDT - Msg ID:25664)------------
-------The debate concerning the morality of CB gold sales and leasing turns on whether the CB's should convert what I'll call "currency gold" (accumulated when currencies and gold were more intertwined than they currently are, and often the product of expropriation or other governmental
coercion) into what I'll call "multi-use gold" - i.e., commodity and jewelry use, and private savings not denominated in currency terms.----------------
------I believe it is improper for CB's to convert "currency gold" into "multi-use gold". First, this gold represents in a concrete form the accumulated savings of those who created wealth at a time when gold and currencies were intertwined, and thus dumping it on the market for "multi-use" purposes is a method of frittering away past savings. Second, an industry has arisen (i.e., gold mining) based on the premise that the CB's won't place this gold on the "multi-use" market. Therefore, CB gold sales serve to wrongfully destroy the gold mining industry.-------------
TG,
It seems to me that much of the whole argument on gold swings on whether the CBs are indeed dumping gold in the traditional sense,,,, that is, actually selling it into the industrial marketplace. This is much of the real thrust of everyone's discussion. I think it leaves out most of the picture and shrinks our ability to understand what is happening.
If one looks at the world through a long pipe we only see a small amount. It's called a narrow view. Gold thinking has today forever changed as Western people now think they are more educated,,, sophisticated and only need to see what is right in front of them. Put the pipe down and it's amazing what's out there.
Well, it all started many years ago when most investors had never even heard of "forward sales". We all received a good education given by the mining and brokerage industry as to how one should invest in gold,,,, and from this position it's no wonder the price of physical gold is now so easy to control.
The modern gold industry could be compared to a hypothetical "shoe" industry,,,,,
like this:
------Every family was taught that there was much more leverage (and profit) from putting the families finances into buying the shares of companies that make shoes. It seemed that almost everyone would have to buy shoes at one time or another and this demand would certainly drive
shoe prices sky high. In time, thought has indeed evolved. Today our logic dictated as a must that it was even far better for one to buy shoe mining companies than owning the shoes themselves. Slowly, over many years,,,, families held less and less pairs of shoes and more and more company
stocks. Logic moved further until,,,,, they lowered their shoe buying until each family shared only one pair, but owned a bunch of shoe co. stocks. In addition,,,, "indirectly, through third parties" ,,, they owned contracts for the delivery of real shoes. Indeed, this was smarter because their money was invested for a higher return in other areas,,,, and they could always exercise their contracts for more shoes if needed. Especially if "changing times" required the ownership of more than one pair per family.
The future as my evidence for today:
(A). As time and events later proved,,,, things were not as everyone thought. Later in this cycle, it turned out that many of the shoes everyone had contracts for,,,,,, were mostly the product of other families selling their excess shoe holdings. Not the governments selling so much themselves. Worse yet, those shoes had multiple contracts written on them so as to make the delivery impossible. To
cover all those contracts, shoe brokers and companies had gone into OTC and futures exchanges to buy "financial" hedges for shoe delivery. In a twist of logic, even though those hedges could only be settled in cash, these contract buyers figured that at least their "financial book" would be
covered if a shoe default occurred. But this did nothing for all the families that didn't read the small print that said shoe delivery contracts would "through national emergency" or perhaps "security exchange rules",,,,,, also be settled in cash under adverse conditions. Well,,,, most of these very sharp investors accepted even these conditions. They figured that with even a cash settlement, and well before national rule changes,,,, they could pay their taxes on the profits and still buy the shoes in an open market. And using the same logic that placed them in this position,,,,, figured they would buy even more shoes because their cashed in paper leverage gave them more money! Now, after the fact it didn't work out that way. Shoe prices ran ten times faster in the middle of the default settlements,,, so even with some players making 1,000% in cash,,,, shoes were nowhere to be found. If they were found, these cash profits brought even less pairs than if they had put the origional money in them in the first place
(B). Further,,,,, time later revealed that in the late 90s demand for shoes had indeed "skyrocketed", world-wide. Fortunately, many of the people in the Western nations of the world had "brought into" this logic of having only a few pairs of shoes per family and holding their other "shoe wealth" in other paper forms. Some in Dow stocks,,,, some in shoe stocks,,,,, some in shoe contracts,,,, some in shoe derivatives and other options. This effect diverted much of the real shoe demand by spreading out the buying into paper form. It allowed many existing shoes to be diverted overseas where people wanted to get rid of extra dollars and indeed, hold real shoes as their families wealth. Now, after the fact,, we know that the real demand figures from Shoefield
services were completely skewered because they only counted real shoes shipped,,,, not the paper shoes purchased!
(C). Further,,,,,, events later proved that the Central Banks really knew the value of shoes to the world after all. Even during this period, records later proved that the CB mostly sold shoes to each other,,,, with only a small amount (relative to demand) flowing into the real markets. It seemed that they really only rented a very small amount of shoes (relative to demand) to keep the rates down. Perhaps it was the power of suggestion?
All this was in an effort to keep world demand from destroying the "Whole Marketplace" for shoes. This policy was helped enormously as most of the Dollar / IMF banks were more than willing to supply "this paper shoe marketplace they had created earlier",,,,,,,, with paper shoe
commitments because of the profits this created. The CBs saw that "Western investors" would satisfy most of the real demand through their willingness to hold paper shoes,,,,,, and indeed, if shoe prices stayed low,,,, these same investors did indeed,,,, gladly sell their "old shoe bar
holdings" into the huge world demand. Further helping to keep the shoe prices low. All in a effort to give some foreign dollars an illusion of shoe buying power. The rest of the other dollar world,,,, that understood the message being sent by the CBs,,,,, traded their fiat for shoes,,,, over time,,, as able. Now, after the fact,,, they were right. The gold ,,, err err shoes, that is,,,,, they purchased and held in physical shoe friendly government hands more than offset the value lost as the world gold
market fell apart,,,,, taking the dollar with it.
Indeed, it's strange to see that today (year 200?) after the fact,,,,,,, the dollar is still trading,,,,, and still the main currency of the US and a losing holding for many other dollar tied countries. Now, with oil, shoes, goods and services still being sold to them in dollars we now know that talk of dollars being phased out was all wrong! The only thing that changed was dollar asset values and an realignment of world trading structure as it applied to using currency reserves.
Today, most all products brought and sold in dollars are either done in Euros first then changed to dollars,,,, or indexed to the new world Freegold market price. Of course price inflation has virtually destroyed a major portion of the US economic structure,,,,,, rendering it unable to
compete very well world-wide. Indeed, whatever price advantage dollar depreciation gives them, it's completely lost because inflation continues to make production profits non-existent. Slowly, they are using up all their gold reserves in an effort to prop up local industry with profit supports. Still, in time US manufacturing infrastructure will become only a shadow of past glory days.
(D). But time stops for no one,,,, and the shoe market had indeed evolved further. ------ As in all things, greed got the better of the "World gold marketplace" as the ones (banks) that made the market went hog wild creating paper gold for their clients. It seems they entangled every financial facet of the industry into this operation. It eventually became impossible to function outside this new
creation. When the end came, most everyone had had some exposure to the vitality of this paper gold market. When the two tiered marketplace finally failed, it took almost,,,,, "ALMOST" everyone in the industry with it.
What started as an official "grey" policy to keep gold prices low,,,,, had mushroomed into a "we cannot turn back situation"! When it's existence became in the "national interest" of the US (dollar / IMF) we now understand,,,,, because it's failure did indeed rock the dollar world,,,,, not to mention it's old illusion of value. Up until then, dollar assets outside the US had a choice of staying put or
moving into gold as a reserve. But prior to that time society forced the old gold system to fail,,,, so no one could make a good point for returning to a system the world was not willing to live with!
Further, if they did move into gold then, the shock would not only kill the marketplace from where they got cheap gold, it would destroy the function of the world economy because it had no other dollar system to use. So, they supported the dollar and it's gold market even though they didn't like doing it.
(E). Closer to home now,,,,,,, and back from the future::::: This is the broad view.
World political warfare being what it is,,,,, and lasting through out the ages,,,,,, an event has occurred that changed everything in strategic thinking. The Euro was born and became a success!
Now,,,,, this Euro is no dollar, I know,,, and it has many, many problems,,,,, true. But the one thing most people don't understand is just how much political "will" there is out there to escape from the dollar held world. And do it before dollar debt makes it self implode in an inflationary
blaze. Every major world player today, knows that for the last 25+ years we all have lived in a dollar house with a ticking inflation bomb about to go off and burn it down. Every bid of new debt piled ever higher on this system ages it's timeline and takes it one step closer to going off. Yet, it also is trip wired so that if we all exit at once it goes off while we are at the door, leaving many inside. Only recently has an unwired window been found for all of the world (that wants to and can) to escape
On this measurement everyone has completely missed out thoughts. If the Euro proves equal or better than the dollar ,,,,,, good! But, it doesn't have to be even close for most of the world to eventually run to it. They want out from under the dollar system ,,, so bad,, they will eventually
throw caution to the wind to escape it. Understanding this dynamic is key to seeing how the shoe market (gold market ,,, (smile)) is going to evolve. Supply and demand,,,,, legalities and moral truth,,,, fiat moneys verses hard moneys,,,,,, are all nothing in political warfare and national financial self preservation. If gold happens be used as one of many items to help unseat the dollar,,,,,, to
quote from the bible,,,,,, "it shall be done!"
Once the gold market implodes, it will set off a chain of events that will propel investors into using the Euro as a world reserve, come what may. From that time forward any mention of paper gold will be looked at with total disbelief. Anything outside of up front, cash on the head physical trading will be only be found in the back alleys. Euroland will embrace gold with a new physical marketplace that will endorse a bull run in prices like nothing ever seen in modern times. It will not be inflationary anymore than YAHOO stock prices are, precisely because gold will trade as an asset, not a currency. Official BIS / ECB policy will hold that gold is this asset wealth we have been
talking so long about. This is exactly why they now hold it as a asset reserve outside their Euro and mark it to the market. In the future it will be used to settle payments no different than if one gave another Yahoo shares or the deed to their house as debt payment. But, it will no longer contain an official currency function. The political will to control it's price for the sake of world currencies will
be gone.
---------------
So, canamami,,,,,, are the CBs selling gold that -------" " represents in a concrete form the accumulated savings of those who created wealth at a time when gold and currencies were intertwined, and thus dumping it on the market for "multi-use" purposes is a method of frittering away past savings." " ?????? ----
Could be my friend, but there is a lot more to it than that!
I think that by putting down the pipe of narrow vision investors can see that they can participate profitably in a future financial structure,,,,,, but only if they can see the future in a broad sense. Most, " "I say MOST" " of the gold industry will suffer massive dislocation and investor loses. But not all of it. Still the risks are so great (as many such as yourself have found out),,,,,, that the correct
position is having the majority of my hard assets in physical gold and the rest in a very small position of paid up gold shares. Even today we read account after account of sleepless nights and worry over whether ones 100% holdings in mining shares will work out. Desperately hopping that
the stock markets will not crash,,,, and inflation will return before the paper gold market forces prices down one more time,,,,,, and did I make the right move,,,,,and is this the right stock,,,,,, are they really hedged,,,,,,, and will my penny stock last long enough. And all for what?? The hope that the world has not changed and ,,,,, mining stocks will run before gold prices like they did before and ,,,,,, and they won't let me down by only going up at the same rate (or a little bit faster) than much safer bullion?
If ,,,,, " " IF " " what we offer is just a theory as yourself and many other proclaim,,,,,, do you think I am going to be hurt holding a chest of MK's old world coins and just a few mining shares? Truly in this world today,,,,, "a man's just got to know his limitations!" Yes? And you ladies also!
Indeed, had the world been different,,,,,, I think there is not a mining co. leader out there that would not have wished for another outcome. Nobody in their right mind encourages consumers to buy their company stock first, instead of their main product. Had all investors brought physical gold (shoes) first and held a small position of shares for a lifetime (instead of trading), the entire market would have been forced from real physical demand to re-adjust. The lending industry would self destruct long before this. And perversely, too the dollar would have been devalued in gold,,, perhaps changing the future?? We will never know the end of that story.
Having said all of this,,,,,, I am very positive about GATA,,,,, a few mining shares and the prospects of gold coins (and bars) in general. We'll have lots of time on the Gold Trail to see the good side of all of this.
Thanks ALL: for your time Hiking with me!
Trail Guide
Trail Guide (02/20/00; 18:09:59MDT - Msg ID:25717)
(No Subject)
ALL: Thanks for your thoughts. Cmax,,,,, (smile)
Cavan Man (02/20/00; 13:17:45MDT - Msg ID:25704)
Trail Guide
What do you mean by "paid up gold shares"? Thanks!
TG:
The very best brains for management,,, mines in operation for decades,,, unhedged,,, profitable now and at much lower prices,,, massive reserves going out decades,,, paying a dividend,,, outside the sphere of US / IMF influence,,, likely to have a good relationship with Euroland investors in the future,,, large payroll that supports a big segment of host countries citizens making further nationalization and taxation contradictory to national interest,,, takes world class steps in support of
a physical marketplace!!!!!!
All in all, a company that wouldn't mind if investors brought it without any leverage,,, and did so as an after thought behind ones buying the same bullion product they sell,,,, especially if they (company investors) would only hold for a good long time. -------- Not many around like this,,,, uh? (smile) Yes, they do exist.
Cavan Man,
"Paid up gold shares" belong to investors that have purchased their "very private bullion coins first" as the largest part of their position and still have resources to buy more coins later. Shares amount to a small, but "concrete" portion of our long term hard wealth,,,,,, held with no leverage,,,,,, no sleepless nights! In other words, putting you in control of a successful hard wealth investment plan. One you can live a lifetime with! The secret of the worlds truly wealthy is in their being in control, not how much they have. Each of us has the power to place ourselves,,,,, one on one,,,, eye to eye,,, with the the most powerful. Because it was never how much you have,,, rather how much control you have over your wealth that makes or breakes you.
Most all of us are blessed with the time to build a powerful position, no matter how short our life or how little we make. Unreasonable use of leverage is the "hangman of fools" and "the destroyer of our free spirit".
I'll talk more on this,,,,,, along the trail,,,,, be sure of this!
Thanks Trail Guide
Trail Guide (02/20/00; 18:19:48MDT - Msg ID:25718)
(No Subject)
CoBra(too) (02/20/00; 14:43:12MDT - Msg ID:25706)
------A nugget uncovered with your own labor on a promising site, just off the main trail, but nobody else's "claim", may even be more rewarding than loping all the physical along the way.----
TG:
You are a free spirit indeed, CoBra(too)! May the wind always be at your back!
Thanks for discussing,,,,,,,,, Be back in a day or so.
Trail Guide
Gold Trail Update (2/23/2000; 19:49:23MDT - Msg ID:25900)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (2/23/2000; 19:49:22MT - usagold.com msg#6)
Introduction
Hello everyone, I'm glad you could come along. My name is FOA. I see a lot of old faces here,,,, and some new. If you are wondering where we are,,,,,, your participating in one of our walks and talks on "The Gold Trail". You're one of many people who take the long drive out of the city to come here. Some say it clears their mind from things that are not real. Whatever the reason, it seems everyone arrives here sooner or later. For myself, I have been hiking this path for a good part of my life. I prefer it here, because from this vantage point we can better grasp how the world works.
None of us are the first, nor will we be the last to take this hike. Over time, various people and nations have been on this path, perhaps going back a thousand years or so. During some periods this same trail was followed right through the main stream of society. While during other times, like today it has tracked far away from the economic illusions in our modern world.
I see most of you have brought your laptops (computers) and cell phones for internet access. Good. We will be looking at charts and things as we go along. Also, one of our rules here is that no one can offer their credentials of track records to each other. Out here we all are the same with no exception. Just real people taking in the world events as they happen around us. Besides, one's past accomplishments and financial success are about what happened yesterday, not tomorrow. And understanding the future is what time on this trail all about. We will only look back at past events and commentary to gain perspective, understand ourselves and find reasoning. A process that helps all of us think more clearly in this world gone mad.
And one more thing before we get started: some of you were asking who I am. And I also heard those city slickers in the back joking about how this was all "so lame". Well, to address the second item first,,,,, more than a few of you slick dudes have left this trail complaining that the hike made their brain hurt worse than the old leg muscles. We'll see if you new ones are still joking after walking a few miles! Oh yes, I see you're wearing hard sole dress shoes. Now that "is" lame! (smile)
Back to the first question: all of you already know me. Just look in a mirror and see for yourself. I'm the butcher, baker and bricklayer,,,,,, doctor, lawyer and the banker. From the Texas oil man to the yardman in Hollywood, I represent the thoughts, feelings and perceptions that many people have, but never express. After we share some time on the trail, many of you may find that most of this understanding and knowledge of FOA was already with to you to begin with. Truly, it was the years of exposure to "Western life" that has obscured our good reasoning.
Mine is also a world perspective that offers thoughts and views as seen though the eyes of others from many lands. Sometimes it's through the eyes of Another. Oh yes, one more thing,,,,, I'm American to the core! "Born in the USA" and still living a "very" private life in my home there.
Onward
We must view the world in a broad context, just as much as in a detail perspective. The larger perception can be just like looking at a river the valley from the ridge above. From far away it's easy to see what direction national trends are flowing. The whole body moves as one, always towards the sea. The problem comes when we get too close and interpret things using only a small river section in front of us. More often than not, the white water we see only hides a deeper flowing truth.
In like sense, national governments and society in general, are the same as those boulders and eddies in the river. Seen up close, they sometimes give the impression that the river is flowing up stream or sideways, when it's only one small section of a larger political will. The same is true in the modern gold markets. The largest part of the river could be flowing in one direction with an unstoppable purpose, but the various swirls and eddies make it look like it's going in circles.
Further
Within every social order, people have conflicting factions that try to dominate the whole. But if one can understand and pinpoint the logic and reasoning of several dominate groups, we can get a grasp for the overall eventual flow. We have seen through out history and in our modern life that the human spirit, most always reaches for and leans towards natural conclusions to ages old problems. There is something in us that makes mankind flow this way. Time and again we build up our emotional will. Then in a great flood we literally overwhelm the branches and rocks that distort our progress through this stream of life.
Today, it seems that the need for this natural flow has been perceived by several of the worlds large groups. We see this in the progress of the gold market to date and is something we have been discussing publicly for several years now. We have given many different perceptions of this changing modern gold market. Each appropriate to it's own period of time. Indeed, they were snapshots of political will,,,, each taken in the context of the moment,,,,, all documenting the evolution of gold as a new force,,, a new player in the world today.
Truly, the stream is being prepared for the great flood that must come, will come!
We rest now
Our most broad view, expressing our strongest position is this: From ten or perhaps twenty years ago a political will, a concept was being formed that would today change the economic architecture and power structure of the world. Within this change, gold would undergo one of the most visible transformations since it was first used as money. We expect that starting three or four years ago, the actual gold market itself, started responding to this sea change. As such, in our time, physical gold will enter the greatest bull phase in it's human use history.
This my friends is the very trail we walk today. During our hikes and fireside chats, we will point out this political will, consider the logic and express our reasoning for this position. All the while, observing the "river current" in the form of events that will soon confirm our view. Indeed, as Another always said, "time will prove all things".
At times we will walk looking backwards, as we pull up many of our old posts and discussions, detailing the whys and what-fors. Why we said what we said, then. I hope these walks will be as interesting for all of you as it will be for me. When not writing here, I can be sometimes seen discussing gold on the USAGOLD forum as "Trail Guide".
And lastly, I wish to thank Mr. Michael Kosares for creating this fine venue. Displaying all of the creative, professional talents of the Centennial group of people, this entire site is a testimony to their forward thinking ability which is so lacking in most precious metals companies. With this in mind and considering our changing world, a relationship with them today will most certainly benefit the investor in the long run. Possibly in a way one may more fully appreciate later. I encourage you to support your future as well as this USAGOLD free site.
"the human river flows for the will of no man,,,, it takes our precious time as it's own
our lives are spent learning how it does pass,,,,, yet it will never know how we have grown"
We walk this new Gold Trail together, Yes? Thank you for reading,,,,,,
FOA / your Trail Guide
Gold Trail Update (2/26/2000; 11:13:57MDT - Msg ID:26028)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (2/26/2000; 11:13:56MT - usagold.com msg#7)
Foundation
http://www.usagold.com/halldiscussion.html
A Day Walk
If I had a nickel for every time we thought the dollar was finished, I would have a bunch of nickels! Remember back in the early 80s or even further back into the 70s. All we heard was how the dollar was finished and going to crash and burn. Books about hyper inflation and the need for gold / swiss francs were all over the place.
I read all of them to gain perspective and also acted on some of their advice. Made some money on it too. But even then, something just didn't completely ring true about the whole scenario. Indeed, in hind sight, gold never did return above $800, the dollar didn't hyper inflate and most of the world kept using the dollar as a reserve.
Today, we can more fully understand why so much of that early insight failed to deliver.
True, the dollar was seen as a basket case back then. It had just been pulled from it's gold bond and prices were going up all around us. However, because the world had been on a simi dollar / gold standard, all nations that had previously signed onto using the US buck as their currency reserve now did so with even more resolve. More important, it seamed than using gold itself was out of the question as every country's Central Bank brought dollars as fast as we printed them. The dollar still settled most all trade accounts while dollar reserve buying made an obvious show of support for this world system. No matter how much bad press was offered, they were staying on track and they have continued to do so right up into the 90s!
But all of this flew into the face of what every economist was saying, back then. The common understanding of the era was: if the US didn't stop over printing it's money, we would all experience a major price inflation,,,,,, and no one could stop it! Again, "major" inflation didn't happen and to ask a further question: if the dollar system was so bad, why didn't the world just dump the reserve system and refrain from using it further? In other words, let the dollar be "the US dollar" but don't use it as a backing for your own money system.
Thick Brush Now
Going against the logic of "sound money": through out all the currency turbulence of the 70s and 80s era (including today), the US never did reign in the over printing of it's currency. It continued almost non stop money supply expansion for it's local economy and in addition sent a good portion of it's cash all over the world. On and on the US trade deficit continued to do it's work of feeding ever more US cash into foreign economic systems. We printed paper currency by borrowing it into existence,,,,,, used it to purchase real goods overseas ,,,,,, while foreign governments actively soaked up this dollar flood by expanding their own money supply.
Like this: When you buy an item externally, a dollar is sent overseas to pay for it. Usually, through the world currency trading arena, that dollar is converted into the local currency of the nation which the goods came from. But more often than not,,,,,,, as we print that dollar out of thin air, the foreign government takes the dollar into it's reserve account and prints one of their units for deposit in the local economic system. They do this because: if the foreign CB didn't save the dollar as a currency reserve ,,,,,, and sent it back into the world currency markets to "buy" an existing unit of their money supply,,,,, this action would drive up their currency value vs the dollar and make the price their goods non-competitive in world markets. In other words, a US citizen couldn't use a printed (borrowed) dollar to buy an item for $10.00 that outside the "dirty float" of exchange intervention would cost $15.00.
This is how the "dollar reserve process" inflates the money supply world wide as we (USA) run a trade deficit for our benifit. It keeps the dollar exchange rate higher than it would naturally be thus allowing a US citizen to buy goods at a cheaper price than our expanding money supply and implied currency value would normally dictate. A process in and of itself that invites still more dollars to flow out and purchase still more external goods. Had foreign CBs not taken so many dollars, the ever expanding US money supply would have long ago impacted currency exchange rates and forced a major price inflation internally (in the US). Yes, the major inflation so many saw coming,,, back then,,,,, would have arrived,,,,, then.
So why did these other CBs do it? The standard explanation was that this created a market for their goods here in the US. Yes that's true, but it begs the question; did no one in their land want to buy goods manufactured locally,,,,,, and pay for them with the same printed money supply? Why is it the US could inflate it's money supply to buy cheaper goods externally for no more than the price of printed paper? But, in the same country our paper was sent to, they couldn't print their own currency to buy their own goods? Why couldn't they raise their real standard of living somewhat using the same process like the US,,,,,, and doing so without the burden of inflation or importing foreign currencies?
Again, why would our printed, inflated money movements not create price inflation for us (USA) in goods purchased externally? What if they (foreign goods producing countries) printed an amount of their money equal to the inflow of dollars,,,, but, without holding paper dollars as reserves to back it,,,,, brought the exact same goods from themselves. Common prevalent economic theory says price inflation would result? Or would it? Or better said: why them and not us?
Into the deep woods again
Again, and as above,,,,, In the 70s, it was widely held that the dollar reserve system forced other countries to inflate their local currencies, thereby importing dollar price inflation. But, as time went by,,,,, indeed a decade or two now,,,,,, the same process continued non stop, with no change. It seemed that some "other" countries had found a "new way" to somewhat circumvent the dilemma. Or was this "new way" something sold to them in order to extend the dollar system's timeline?
Many of the lesser third world countries experienced a combination of sporadic hyper inflation and deflation as we forced the dollar reserve system down the throats of their citizens. Their people's living standard constantly fell as they worked ever harder to produce more goods in return for more of our printed dollars. But, instead of using the extra inflow of dollars (positive trade balance) to buy their own currencies in the local system,,,,, thereby keeping their currency strong,,,,, they used that dollar flow as collateral to borrow (from IMF and international banks) more dollars from the world dollar float (mostly called Eurodollars). The lure (or the hard sell) was that they could build up their infrastructure,,, increasing their production efficiencies (human productivity's),,,, thereby raising the national standard of living. Further, they were sold the unneeded idea that even if they didn't completely use the dollar surplus to borrow more, they should hold those dollars in reserve (buy and hold US treasuries) and print more of their own money!
Again, it seemed they had no advocate to push for their own best interest. No one told them that their people already worked cheaply enough to more than offset the competitive loss of a stronger local currency. No one told them that with a strong local currency structure,,,,( that using the dollar surplus to buy their own currency would create),,,,,,,, would allow them to borrow in their own capital markets. A more go slow approach that builds long term benefits. This process would free them from the entanglements of making international debt payments in another money. Indeed, the costs of those involvement's later proved overwhelming!
Now the trail becomes more open
For third world countries their international dollar debt exposure eventually locked them into a servitude to the dollar reserve system. Despite all their natural and human resources, currency involvement had taken a lion share of any productivity increases and increased lifestyle this modern world offered.
However, it did help the cause for the dollar reserve system. By creating an ever growing international debt in dollars, eventual dollar demand to service this debt would only increase. Thereby keeping it's value artificially high. In addition, any left over floating dollars quickly took the form of US treasury debt held in these small countries treasuries. There they were used to further hyper inflate their own currency supply.
For the more developed gold owning countries of the G-7, they had a different question in mind. Again, if taking in inflated dollar reserves was the act of importing US dollar inflation into ones local economy,,,,, and in the process creating a market for your goods overseas,,,, why not just print your own currency without taking in dollars,,,,,, and in doing so give the same buying power the US citizens have in your market,,,,,, to your own people?
If it's not price inflationary to take in part of a world "inflated dollar supply" and create jobs for your people locally,,,,,, why would it be any more inflationary to print your own currency outright? Indeed, why does one need a dollar inflow to legitimize the same money inflation process? That being currency inflation to create jobs?
Why should we (as dollar asset holders) think about this question? Because someone else is and doing something about it today!
Back to a marked trail
Today,,,,,, and after all of this,,,, the dollar never did crash from price inflation. At least nothing like what was expected earlier in the last two decades.
The dollar reserve system was never going to fail then because the major world economic powers were willing to use (waste) all the productive efforts of the worlds people to keep it running. Looking back we now understand the thinking behind this. Without the dollar acting as a reserve, we would have had to go back to a gold system. There was no other currency structure strong enough or deep enough to carry the load.
But, gold had been proven to be much to easy to circumvent as a national or world currency. It seemed human dynamics would never allow an economic system that operated on a pay as you go process without gold debt. If history had proven anything it was that if we have a money,,,, fiat or gold,,,,,, we are going to lend it, borrow it and in the process create debt. Yes, even using gold!
Even if we have a pure gold system, human nature will find a way to turn it into securities. In doing so we will,,,,, come hell or high water,,,,,, lend more gold than we have and borrow more than we can pay back. One has but to return to the history books to see it all in plain print. Over and over again, we start with a solid gold foundation and soon degrade it into trash. It's not just the American way,,,,, it's the world's way.
Because the modern world had progressed into the efficiencies of using high speed digital fiat currencies, no one at that time or today, was willing to crash the whole system by returning to gold. I suspect that the worlds richest would have lost a lot, but so to would "us regular" people. Even with our savings in the form of a "digital illusion", at least we had a job to go to and a dream in our bank account. Removing the dollar and returning to gold would have erased the illusion and temporarily shut down the jobs.
So, dollar hyper inflation never arrived and gold did not make it's run because world CBs bet your productive efforts on supporting the dollar reserve. In the process, the US standard of living was raised tremendously on the backs of most of the worlds working poor. But this is not about to last!
A broad view from the ridge
Not long after the US defaulted on it's gold loans,,,, dollars held as gold certificates,,,,,, major thinkers began the long process of forming another world currency. One that would not maintain the fiction of a gold standard with the somewhat fixed gold prices inherent in such a system. The creation was distorted, to say the least. Just as the River in my first post was often seen in distortion, so too was this currency issue. It began with the European Currency Unit (ECU) and has later progressed to it's present state of the Euro.
After operating on a fiat system for 20+ years people are starting to realize that the only thing that backs a currency is the real productive efforts of their people. Yes, over time we always borrow more than out productive efforts can pay back and proceed to crash the money system.
But what else is new? (smile)
We call this a money's "timeline" and it's as new an idea a life, death and taxes! Time and debt age any money system until it dies. The world moves on. Only this time gold is going to play a different part in the drama. We will all watch it unfold.
It seems people saw something else that would make the Euro unique. Paid up assets also stand behind circulating money. Indeed, if someone owes a $100,000 dollar piece of land , has a good producing job and borrowed $50,000 against his land,,,,,, the world is likely to circulate that debt note as a fiat land backed currency. But, if his gold (the land) is worth $1 million in a free physical market,,, AND RISES FURTHER IF CURRENCY SUPPLY OUTPACES REAL PRODUCTION,,,,,,, and his other debts are relatively low ,,,,,, the same note would circulate just as effectively if the $50,000 was borrowed against his name alone.
In essence, the jump into the Euro is more based on a new currency that is more honest in dealing with our historic human dynamics. Let's try not lying to ourselves and admitting that gold alone in a currency will not remove our will to borrow and lend and therefore eventually defraud each other! Would it not be better to at least not shackle the money to gold. Indeed, a real physical freegold market will constantly be devaluating any fiat currency over a long term. While removing the need for CBs to maintain fixed exchange structure through a dirty float against gold.
But, the most important aspect is in the escape valve gold would provide to developing countries with positive trade flows. Those that wish to settle their debts outside the currency arena using gold as a settlement. Or, if they wish, to buy gold in the open market with their trade reserves.
The secret to all of this is in the "Legal Tender laws". Allowing gold to be used as a Legal Tender,,,, "for the settlement of all debts public and private",, but changing international law such that no form of debt can force it's payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force it's return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them in addition to general use demand.
The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way. Not to mention that it's sale as a commodity (outside it's money use) on the private level will be well taxed.
We rest now
True there is a lot more to this story. Some posters have been discussing it publicly for some time on the USAGOLD forum. If you want a wonderful background reading on what "Freegold" would mean,,, get your laptops out tonight and read the link above. There is also considerable agitation voiced against this view.
First read all of:
Aristotle (2/7/2000; 7:15:24MDT - Msg ID:24589) It begins! -----* Executive Summary --an Outline of Observations *-----
My position: The world is going to change it's currency system before long and this will greatly impact the wealth of dollar asset holders. Not to mention physical gold holders. As a note for further consideration and talks,,,,, we have talked before about the "Texas Railroad Commission" and how it once declared oil a public utility and later controlled it's production. In the future, international law must declare all large gold reserves to be "public utilities" in the countries they reside. Mines will be very profitable and good investments after they recover from the destruction of our existing paper gold market. Still, their total production will be controlled and somewhat taxed. Small private operations will more likely be heavily taxed.
We will pick up the pace later (smile). Eventually getting to oil and the markets today.
Fires out.
Thanks for reading,,,,,, FOA/ your Trail Guide
Trail Guide (2/26/2000; 17:20:26MDT - Msg ID:26046)
(No Subject)
dragonfly, Cavan Man, CoBra(too), Leigh, Solomon Weaver ,,,,,, everyone!
Thanks for hiking the trail with me. I'm sorry I am not replying / talking here very much right now. My intent is to discuss mostly here as soon as we started. However, have had to wrap up several projects. With those behind me, I'll be writing quite a bit on both venues in a day or so. I already see something that needs further clarification and will correct soon. Also, I see a lot of openings for Trail Guide to jump in here and debate the issues! Hopefully, we will throw snow balls at each other,,,, I'm all out of rocks! (grin)
TownCrier,,,, that is some art job with the trees and all! (smile)
Thanks all,,,,,, Trail Guide
Gold Trail Update (2/28/2000; 10:18:14MDT - Msg ID:26126)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (2/28/2000; 10:18:13MT - usagold.com msg#8)
First walk
The real hike begins
In my last post "Foundation", we raised several questions as we walked. Some were implied and others were direct. But all were mentioned to give pause to think. Today I'll offer my thoughts from an old study.
By 1971 the remnants of our gold exchange system had two major forces working against it.
First:
The US had printed way more dollars than it had gold to redeem them. This didn't even take into account the fact that Americans couldn't exchange the native part of the money supply for gold. The whole concept of physical bullion keeping officials from printing too much money became shot full of holes. The reality of our modern day dictated that any major world power, not just the USA could eventually override the precedent of a money supply tied to a fixed price of gold.
It seemed that as powers became super powers and nations represented larger people blocks, their ability to just walk away from a stated monetary policy increased. Thereby negating the good effects of gold on a system.
The US had changed it's gold backing policy once before as hard times attacked the local economy. After the 1929 downturn began to gut the wealth of almost everyone, we just took gold out of the INTERNAL money system and added that supply for backing the EXTERNAL money system (foreign dollars). Indeed, all American gold was called in from US citizens. So, for anyone that owned real gold (in their hands), the historic dynamics of retaining ones wealth in gold during a "debt destroying black hole experience" was removed. Further, the "gold force" was not allowed to do it's job of cleaning out all the "dead wealth" created through the prior process of inflating the money supply.
Of the many excellent writers on the USAGOLD forum. I think some would see that the "hard times" of economic contraction are created in the first place by not adhering to a golden monetary system. I agree. But looking at it today, whether it's before the fact or after the fact, society just will not work within a system that fully kills off bad debt. Even if one separates society into two groups,, "controllers" and "the rest of us", it's still the way the world has functioned from the beginning. So, the perception I have received as to how policy will evolve in the future presumes human dynamics will continue as they always have.
Also:
Having changed the rules once (1933) already. We (USA) later proceeded on the same road again. By 1971, we were making dollars at a rate that virtually assured another change in the gold backing game. Indeed, it was becoming obvious that gold could not control the will of a large nation.
Second:
In addition, the very system itself offered no discipline. Think about it. Accepted policy dictated that a nation's gold was held in the same geographic economic block that utilized the money said gold was to represent and control. If that block held the gold and the "real money substitutes" under the same society roof, there was no impartial authority to control how the rate of gold could be exchanged for dollars! A natural, fair $X dollars for X amount of gold exchange rate could be changed at will and for the economic will! For a true gold system to really work, gold would have to be stored and it's conversion rate controlled in a separate nation from the country that printed the money. Without that separation, a large modern power could "using local law, take it out of the system" or "not ship it's gold" if the money supply increased too much. Indeed, this first item was followed by the second and is exactly what happened after 1971.
So, our modern society was quickly proving that it was incapable of maintaining a monetary function of gold if it was intertwined in any official fiat currency mix. Even if the currency represented an outright gold receipt in storage and supposedly redeemable through force of international law!
The trail is heading uphill now
Few people can fully accept or consider that oil became the backing for world dollars after gold was removed in 71. But that is exactly what happened in theory and practice. Using some earlier writing, I'll tie them into what we are saying today. I'm going to repost some of my comments
(between ---- marks) from the USAGOLD forum archives. Starting with FOA (1/15/00; 14:58:12MDT - Msg ID:22961).
---- 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, not gold reserves. Still, with London gold and oil mostly settled in dollars, the foreign dollar oil pricing 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.--------
Having read that (and keeping it in mind), I return to the implied questions of my "Foundation" post below. "Why in the world did foreign governments, especially Europeans, eventually go along with supporting a now fiat dollar reserve system after 71?"
Well, the whole notion of using any paper money is in the confidence that we can eventually trade it for something,,,,, Beer, food, clothes, cars, etc.. Gold was always in the money mix to insure that we could get these items at a somewhat standard price. Still, most of society thinks along the immediate line that: "I don't care where the fiat money comes from or what it's backed by,,,, especially if I can get something well below today's value cost,,,, and it benefits me, now!"
This is where oil made the jump from being "just a commodity" to "the major world necessity that can and did back the dollar". Prior to the US going off gold in 71, our whole economic structure was expanding because we were gaining massive leverage through cheap oil. Back then, oil was literally changing our lifestyle for the better, and doing so because it's dollar price was so incredibly low relative to what science was doing with it. Modern science had made oil worth so much more than we paid for it, we could extrapolate our debt and money supply growth far into the future and still figure that productive increases would cover it. In effect, the US was targeting it's economy and money value to future oil flow value, not gold. Here is the same thought in my post:
------ 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"!--------
The only problem was that if we continued this route, two things had to give: we would have to leave the gold standard because our money supply was exploding (relative to gold supply) and find a new source of oil because ours was running out. Again, here's more from my old post
-------At that time (prior to 71) we were buying local (internal) oil with "fiat dollars" (made so by the 1933 internal gold confiscation) and foreign oil with "gold dollars".-----
------ , 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.--------
In the eyes of our official thinkers then,,,, For the local US economy to mature we needed to get off the gold standard,,,,,,,, get the world to accept fiat dollars backed by oil,,,, and find more oil that could deliver triple dollar value for every dollar we paid! It was a tall order and one that would require a major adjustment. The transition through out the 70s was rough to say the least.
More from my post:
-----------they (usa) 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 (internal dollars were not backed with gold after 1933) , 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 (oil) prices were higher. --------
------- 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. (They were) Caught between what appeared as a good system based on cheap oil and the loss of gold delivery ------
------ Even as we left gold behind (1971) and oil went up (1978), the system still worked (at higher prices) because oil was perhaps delivering $100.00 worth of value and being brought for $30.----------------
In a somewhat convoluted way, by leaving the gold bond, it forced all world oil prices higher. Advancing the search for new (still cheap by value return standards) oil and paying for it using dollars backed by not only oil payment settlement in dollars but the continued purchase of supply "well under world use value".
G-7 countries knew that initially they would have to sell some gold in a controlled burn that would allow gold to seek a higher level after the dollar / gold break. However, once oil producers understood that gold was going to be "managed" at reasonable levels, the continued pricing of oil in dollars and it's flow was assured for some time. Allowing the exchange of dollars for gold on the world markets,,,, as needed and wanted.
This also appealed to major countries outside the US because it addressed the "second" problem I listed in the beginning. That being the geographic location of a currency's real backing asset. With most of the world oil reserves located outside the US,,,,,, and the US slowly running out of it's domestic reserves,,,,,,, using oil as a backing dynamic somewhat controlled the "free will" of the US. If indeed, the US backed away from managing a cheap gold market or ran it's printing press too fast,,,,,, oil prices could be managed upward in a devaluation of the dollar. No, not the best of policy concepts for the world, but better than perceiving that the US "Fort Knox" gold was a control on money printing!
Going back to the initial logic of my "Foundation" post, this was the context that G-7 countries "brought into" as they accepted and supported the new fiat dollars without gold. Like I said, the alternative would be a real mess to behold and this position brought time. Time to conceive and introduce a new world reserve structure.
It worked in a broken pattern for a number of years. Oil and gold defied all predictions of higher prices as they retreated from every advance. Central banks gorged themselves with worthless dollar reserves and prevented a hyperinflation of the dollar in the process. They did this, because they knew that gold had the ability to completely replace any and all loss of dollar reserve value once a new system was in operation.
Cutting across the field and returning to today's trail
Nations today, with little gold holdings seemed to have no clue to where this was all going. To a degree, the US used them as they took in dollars and never brought gold at all. They must be thinking that the dollar can be expanded forever and never lose value! To this end, they have based their entire social and economic order on selling goods to the US for a dream in return. Yet, after all these years they are only now seeing that foreign dollars are worthless when the US only runs a trade deficit that will not reverse. The real risk today is now being understood. The American economy will only slow down from a hyperinflation,,,,, and that will be caused from a shift from the dollar reserve function! Trapped holding dollars and no gold to compensate, these other nations are headed for real trouble.
Again, thoughts from my Foundation post
Euroland thinkers (today) are beginning to see where they really don't need dollars in reserve to retain market share in the US. Just as I asked: "if the US is just pumping it's money supply to build a bubble,,,, flooding the world with inflated dollars that we must buy to engage exchange rates..... With the Euro in play,, why do I need to hold their dollars to legitimize the further creation of my own currency? I can buy gold as a "wealth asset" to hold as a physical reserve and print my own money supply....... It's the same difference and at least I have a reserve that
" " IS NOT FLOWING FROM AN IRREVERSIBLE TRADE DEFICIT " " !
In better words:
The Euro float is still too small to receive a massive dumping of unneeded dollars. Indeed, the more the US tries to discredit the Euro,,,, the greater the risk of a "Washington Agreement #2" where the BIS / ECB uses unneeded reserve dollars to BYPASS the paper markets and massively buy "real PHYSICAL gold". In fact, all they have to do is enter the market in a minor way and the entire paper gold arena will go up in flames.
So, Is the Euro falling? Or is the dollar running away as a liquidity crisis threatens it's use?
Are we at the very doorstep of a crash in the US markets and it's dollar?
All caused by an evolving transition from the dollar reserve system?
We have some old writings on this subject and will examine them later.
We make camp here
FOA/ your Trail Guide
Trail Guide (2/28/2000; 20:03:54MDT - Msg ID:26170)
Reply
Julia (2/27/2000; 12:02:03MDT - Msg ID:26095)
Questions for Trail Guide and Oro:
Under your particular system that you advocate:
Hello Julia,
You are right in that this could unfold several ways. Your question is unique in that it's in a real world perspective. This is somewhat how I see it working out:
---1. In what form will I be paid for my job? ----
If your American, in dollars. No matter what the value or inflation rate, the dollar will not die as the US currency. Just like in Mexico today, one would also carry a hard currency in his pocket (dollars there, today are hard). Depending on how this unfolds, you may carry Euros here later??
----2. Could my gold be used as collateral for a loan to purchase my house?
My view is,,,,I doubt it very seriously. The push, world-wide will be to keep gold from being entangled in the loan system. You could sell it and pay a large tax. But, that will only be for people that have to have currency (to satisfy a debt). Or, you could do like most, use the gold directly as a lawful legal tender. I know this sounds strange now, but in a later context it may not. I'll be talking about this later.
-----3. What are my investment options for my gold? Is there an avenue for me to loan my physical gold for interest or will it be strictly hold for growth return. ------
------ 4. Will I even be allowed to keep my gold and have the freedom to buy more?----------
For myself, I expect to be holding gold as a "real wealth" asset that will rise in currency terms. It will rise from any further fiat inflation and,,,,, it will rise from "it's" world currency demand. I expect to use bullion coins "lawfully" as a currency that cannot be lent or borrowed. However, the premium on old pre 33 coins will soar because they will be the only form of gold that can be lent and borrowed against. As hinted on the Trails page, the laws could be changed making it impossible to force any loan payment in bullion gold. Voluntary payment accepted by both parties is ok. But one may not,,,, in court,,,,, force gold payment to cover any debt. This would not stop gold use, but would stop all bullion gold lending as no one could be sure of the return of physical gold.
As always, I own gold as a percentage of my total wealth,,,, not all my wealth. I suppose the more one understands, the higher the percentage may be.
Julia, I'm going way out ahead of myself here. This is what I see for now! (smile)
Trail Guide (2/28/2000; 20:05:48MDT - Msg ID:26171)
Reply
Al Fulchino (2/27/2000; 20:52:22MDT - Msg ID:26107)
------Foa/Another, I am following the price of oil. But, if I understand the two of you correctly, we haven't accounted for the price of what oil should be from the inflation registered since the lateeighties in dollar terms. So I would have to see still higher oil prices and at some point a coinciding rise in gold or a higher price that trails oils dollar rise per barrel.----------
Hello Al,
You are right, oil has along way to go before it returns to an overpriced range. By my numbers it should be around $45 and that is the lowest. Even there it represents a positive economic function for the economy because of what we can do with it.
It can rise to this level because we no longer have the whole world supporting the dollar. The pressure to make the dollar look and feel good at all costs is waning. Not even $50 in paper gold will be an incentive to gun production. The dollar backers may try it, but with oil eventually rising, no one will come to their paper gold party.
Like I said before, the political software is in place, the mechanics of this process are moving and we are "on the road" to high priced physical gold. Actually, in dollar terms, high priced everything!
In fits and starts, oil will ratchet higher. Just like the river we looked at "on the trail", the whole thing is moving in one direction. We may hit some rough water, but we are going to the sea come what may!
thanks TG
Trail Guide (2/28/2000; 20:07:24MDT - Msg ID:26172)
Reply
Henri (2/28/2000; 11:13:27MDT - Msg ID:26130)
Trail Guide
-------Question I have...is not the process of the ECB/BIS gold buying already begun with the latest sales (Dutch) being managed by BIS to undisclosed buyers? Also the Swiss have indicated that if their sales are initiated they will be handled in the same manner?------
Hello Henri,
Yes, the BIS is indeed moving the gold now! Probably completely outside the LBMA. We don't know exactly where it's going yet as it's not showing up in the EMCBs,,,,,,,, yet!
We have talked before about the ECB/BIS sooner or later buying gold. I'll be writing about this later on the Trails page. Prior to the Euro they (BIS) had marked $280 as the bottom. I think they were shocked that the dolar/IMF bunch were stupid enough to sanction it's trading below that
figure. I was too as I made a major effort to buy more physical in the spring of 99,,, around 285 or so. Then the BBs just dumped paper on the markets as if no one would care! Well, it stayed down there for what 3 months? Then here comes the Washington announcement. Still, that agreement only isolates the continent from being caught in a paper storm. If this currency war gets out of hand, our boys could drive the London price as low as they want it to go! The paper won't be worth much in real gold, but every trader, market maker and mine owner/ investor is contractually locked to that price making medium. It could all go down in a huge ball of fire and only the physical holders will be whole. (notice I said holders not just owners (smile))
thanks TG
Trail Guide (2/28/2000; 20:09:57MDT - Msg ID:26173)
Reply
Cavan Man (2/28/2000; 15:14:27MDT - Msg ID:26144)
Trail Guide
------- Could you please explain " the dollar running away as a liquidity crisis threatens its use"?---
Hello Cavan Man,
I can't find the series of post where we discussed this! Buried somewhere in the archives are several references from me, ORO and others addressing this.
The short and sweet of it:
This is one of the things old Martin Armstrong, Another and others referred to a long time ago when asked when the dollar would fall and gold rise. It seems that in the later stages of an extremely expanded economy, any contraction of financial assets forces the currency to rise, not fall. We can look to Japan as somewhat of an example. After all of their hyper inflated assets began rolling over years ago, they had (and are having) a difficult time keeping the currency down. The officials have to constantly pump the money reserves and supply in order to drive it down.
The dollar should behave no different when the time comes. This is where many investors read the signs wrong and assume the currency is strong from a dynamic economy. Most people understand price inflation, and how excess money creation is the process that makes it. But few can grasp how hyperinflation is started as a different dynamic. It is a "driven recourse" where the Central bank is fighting a super financial contraction before the fact. Usually it's created by some unexpected event, either natural or man made.
I think the Euro is consuming some of the financial roll the dollar once had. In the process dollar assets are disappearing while people fund the shortfall in the short term arena. This can be the only explanation for the constant daily reserve adds by the fed (that TownCrier is reporting). We may truly be entering a crisis phase now? We shall see.
Again, I stress that in this situation paper gold can work for or against you! People keep working gold as a trading play using "house rules" that favour the casino. In this ongoing drama using any leverage at all is going to carry some tough odds to beat!
Also: ---Has your view on confiscation (USA) changed--------
No. But there is a risk of them changing the legal tender laws...... and that could make owning the old coins or newer non LT coins more attractive. This was a new item for me. I never saw it in this context. Ever notice how all the new bullion coins are marked as legal tender? I'll get around to this in time.
Later Cavan Man
Trail Guide (2/28/2000; 20:11:48MDT - Msg ID:26174)
Reply
Leigh (2/26/2000; 19:13:43MDT - Msg ID:26052)
FOA
Dear FOA: If the long-expected market crash occurs soon, how long do you think it will take for hyper-inflation to set in? Should we be stocking up on things now and preparing for panic in the stores, or will the inflation happen gradually? Thanks!
Leigh,
I have lived in the South Pacific right in Typhoon country. Part of regular life was to be stocked up on everything, all the time. Even generators. It's the same in the waters where CMax sails his boat, stocking up is normal (if one has reserve cash to do so). Indeed, for many people of the world Y2Ks and major inflation's are,,,,,, well,,,,, just the way it works.
It isn't so important to know when as it is to know "it will". Besides, stocking up on things one always uses actually is an easier way of life,, perhaps even a luxury (smile).
Good Luck TG
Also Elwood (02/25/00; 19:56:55MDT - Msg ID:26013)
----The dollar now is no different than a dot com. No real earnings, no prospect for real earnings in the future, yet sky-high values are the rule of the day. FOA likes to quote Dirty Harry. Here's one for him: "Well, it's a high price to pay for being stylish."-----------
Elwood,,,,, you're killing me (smile)! Old Dirty Harry movies along with Charles Bronson were the rage all over Europe for a time. So, if you have any more of those, I'll have to say "Go ahead, Make my day"!
Ha! Ha!, enough,,,,,I'm gone now TG
Trail Guide (3/1/2000; 16:05:00MDT - Msg ID:26254)
justifiable use of federal power at a time of national emergency
Interesting stuff!! no?
Legal Tender Cases
(1870, 1871), two cases decided by the U.S. Supreme Court regarding the power of Congress to authorize government notes not backed by specie as money that creditors had to accept in payment of debts.
To finance the Civil War, the federal government in 1862 passed the Legal Tender Act, authorizing the creation of paper money not redeemable in gold or silver. About $430 million worth of "greenbacks" were put in circulation, and this money by law had to be accepted for all taxes, debts, and other obligations--even those contracted prior to the passage of the act.
In Hepburn v. Griswold (Feb. 7, 1870), the Court ruled by a four-to-three majority that Congress lacked the power to make the notes legal tender. Chief Justice Salmon P. Chase, who as secretary of the Treasury during the Civil War had been involved in enacting the Legal Tender Act, wrote the majority opinion, declaring that the congressional authorization of greenbacks as legal tender violated Fifth Amendment guarantees against deprivation of property without due process of law.
On the day the decision was announced, a disapproving President Grant sent the nominations of two new justices to the Senate for confirmation. Justices Bradley and Strong were confirmed, and at the next session the court agreed to reconsider the greenback issue. In Knox v. Lee and Parker v. Davis (May 1, 1871), the Court reversed its Hepburn v. Griswold decision by a five-to-four majority, asserting that the Legal Tender Act of 1862 represented a justifiable use of federal power at a time of national emergency.
Trail Guide (3/1/2000; 16:17:02MDT - Msg ID:26255)
government's power to enact legal-tender legislation and defending such power under the "necessary and proper" clause of the Constitution
Strong, William
U.S. Supreme Court justice (1870-80), one of the most respected justices of the 19th-century
court.
Admitted to the bar in 1832, Strong practiced law in Reading, Pa., and served in the U.S. House of Representatives (1847-51). While sitting on the Pennsylvania Supreme Court (1857-68), Strong, a Democrat but a firm supporter of the Union, changed his political affiliation
and became a Republican.
-------- in Knox v. Lee and Parker v. Davis (1871), the newly formed court overturned the Hepburn decision by a vote of 5-4. Strong spoke for the majority, upholding the
government's power to enact legal-tender legislation and defending such power under the "necessary and proper" clause of the Constitution. The abrupt reversal of a major decision so soon after the enlargement of the bench renewed the charges against Grant. Despite this controversy, which overshadowed Strong's appointment to the high court and his first major decision, he served with distinction for 10 years, winning the respect of the legal community for
his ability and integrity.-------------------
Trail Guide (3/1/2000; 16:30:16MDT - Msg ID:26258)
And how many "shinplasters" are in your bank account?
Here is some more very good food for thought. Please note the word use and how it could be so very "in context today". Especially these items:
--suspensions had occurred during periods of war or economic crisis-------------
----- "Hard money" advocates wanted to resume paying specie for this paper money, while "soft money" supporters feared the deflationary impact resumption would produce. -------
-----public favourably inclined to keep using the much more convenient paper money--------
============================================================
the redemption of U.S. paper money by banks or the Treasury in metallic (usually gold) coin.
Except for a few periods of suspension (1814-15, 1836-42, and 1857), Americans were able to redeem paper money for specie from the time of the ratification of the Constitution (1789) to the onset of the Civil War (1861). The suspensions had occurred during periods of war or economic crisis. With the outbreak of hostilities between the North and the South, the federal government again suspended specie payments late in 1861.
In 1862 the government began issuing paper money, called "greenbacks" and "shinplasters," and in 1863 it authorized federally chartered banks to issue national bank notes. By the end of the war in 1865, more than $430,000,000 worth of paper money (declared legal tender by Congress) was in circulation.
"Hard money" advocates wanted to resume paying specie for this paper money, while "soft money" supporters feared the deflationary impact resumption would produce. After the Supreme Court sanctioned the legitimacy of the paper money in the Legal Tender Cases (1870-71), congressional backers of a return to specie payments passed the Resumption Act of 1875.
In accord with the Resumption Act, specie payments were resumed on Jan. 1, 1879. But the knowledge that the government could indeed redeem each greenback or bank note at par in gold made the public favourably inclined to keep using the much more convenient paper money.
Trail Guide (3/1/2000; 16:39:34MDT - Msg ID:26260)
greenbacks continued as the accepted currency!
You may have to put these posts in order, but it's worth a thought.
I know most all of you already know this stuff,,,,, but thought a short review would be good.
(smile)
Resumption Act of 1875
in U.S. history, culmination of the struggle between "soft money" forces, who advocated continued use of Civil War greenbacks, and their "hard money" opponents, who wished to
redeem the paper money and resume a specie currency.
By the end of the Civil War, more than $430 million in greenbacks were in circulation, made legal tender by congressional mandate. After the Supreme Court sanctioned the constitutionality of the greenbacks as legal tender, hard money advocates in Congress pushed for early resumption of specie payments and retirement of the paper money.
On Jan. 14, 1875, Congress passed the Resumption Act, which called for the secretary of the Treasury to redeem legal-tender notes in specie beginning Jan. 1, 1879. The bill also called for reducing the greenbacks in circulation to $300 million and for replacing the fractional paper
currency ("shinplasters") with silver coins as rapidly as possible.
Members of the new Greenback Party were bitterly opposed to the Resumption Act, and in 1878 they succeeded in raising the amount of paper money allowed in circulation. Specie
resumption proceeded on schedule, however, and Treasury Secretary John Sherman accumulated enough gold to meet the expected demand. When the public realized that the paper money was "good as gold," there was no rush to redeem, and greenbacks continued as the accepted currency.
Trail Guide (3/1/2000; 16:45:50MDT - Msg ID:26261)
(No Subject)
Cavan Man,
Don't ever think that your old college teachers weren't learning too as they went along! We always learn from each other. All our lives!
In these articles, it's interesting just how easy people groups can change the rules. For better and worse. I'll send some more in a minute. Also am working on the next Trail walk. )smile)
Trail Guide (3/1/2000; 16:57:05MDT - Msg ID:26262)
farmers and others who wished to maintain high prices!
Aristotle,
Isn't it interesting (and supporting our freegold cause) that the government can "legitimize" an "unbacked" "greenback" currency ,,,,,,, by just accepting debt satisfaction (payment) in said paper!
See: last sentence
It seems that during both yesterday and today, the publics perception of money in circulation is more identified by it's ability to "square the books". Whether it's gold or fiat!?!?
=================================================
Greenback movement
(c. 1868-88), in U.S. history, the campaign, largely by persons with agrarian interests, to maintain or increase the amount of paper money in circulation. Between 1862 and 1865, the U.S. government issued more than $450,000,000 in paper money not backed by gold (greenbacks) to help finance the Union cause in the American Civil War. After the war, fiscal
conservatives demanded that the government retire the greenbacks, but farmers and others who wished to maintain high prices opposed that move. In 1868 the Democrats gave partial support to the Greenback movement by endorsing a plan that called for the redemption of certain war bonds by the issuance of new greenbacks.
Trail Guide (3/1/2000; 17:10:58MDT - Msg ID:26264)
Legal Tender,,,,,,, a long subject
After reading below, one can see that silver came into the picture more so because it would allow "greenback" expansion. The whole context of involving silver into the money system came about from the changing of the "Legal Tender" laws earlier. The thrust of the argument was that
people wanted the ability to expand their fiat monetary base........ and the Legal Tender laws were the first way such a change came about.
be back later TG
============================================================
More on the "Greenback movement"
The Panic of 1873 and the subsequent depression polarized the nation on the issue of money, with farmers and others demanding the issuance of additional greenbacks or the unlimited coinage of silver. In 1874 champions of an expanded currency formed the Greenback-Labor Party, which drew most of its support from the Midwest; and after Congress, in 1875, passed the Resumption Act, which provided that greenbacks could be redeemed in gold beginning Jan.
1, 1879, the new party made repeal of that act its first objective. The 45th Congress (1877-79), which was almost evenly divided between friends and opponents of an expanded currency, agreed in 1878 to a compromise that included retention of the Resumption Act, the expansion of paper money redeemable in gold, and enactment of the Bland-Allison Act, which provided for a limited resumption of the coinage of silver dollars. In the midterm elections of 1878, the
Greenback-Labor Party elected 14 members of Congress and in 1880 its candidate for president polled more than 300,000 votes, but after 1878 most champions of an expanded currency judged that their best chance of success was the movement for the unlimited coinage of silver.
Gold Trail Update (03/02/00; 20:15:21MDT - Msg ID:26315)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (03/02/00; 20:15:21MT - usagold.com msg#9)
A Clear Path
It's a nice day to get outside! Let's walk a while.
Think back at our recent history of gold and one can build a better perspective of this "new gold market".
Onward:
After the 1971 gold window was closed, the gold market didn't immediately feel the effects of major physical buying. At least until 1976. Most of the world remained shocked that the dollar was no longer backed, but perception remained that eventually gold would be brought back into the official money system. Yes, the dollar did drop in value but not so much that it would destroy the reserve system.
The world remained tied to using dollar reserves even though gold no longer backed them. Oil prices began their long march upward, but most of these early advances were more so political statements, rather than related to the dollar problem. Oil states, flush with cash, were able to convert dollars into bullion at still reasonable prices (as could everyone else). In addition, rising oil revenues were running well ahead of bullion prices and goods inflation. Producers saw little reason to overly rush into gold because some thinkers still held the prospect of a later dollar / gold relink. Especially so as gold began to sink in price after the US made it legal to own again (for US citizens).
By early 1976, gold was heading for $100 an ounce and making dollar holders less nervous. At that price gold was only a little more than double it's last official price of $42 per oz.. It seemed that the US had achieved what was largely unspoken at the time:
---------- By taking the dollar off the gold exchange system, it provoked a large increase in the dollar price of oil. As I just pointed out, most of those early price rises were political. But not all of it. There was some marking of oil to the free price of gold in a attempt to replicate any lost bullion value. Still, initially, oil prices more than made up for their (producers) now accepting fiat "greenbacks".
Oil was then and is now the life blood of our "new oil economy". For the US, this rising price set in motion a massive effort to find new untapped reserves that were unusable with the low prices an earlier gold dollar generated. Prior, without a rising oil price, the US faced the real prospect of running out of local oil and having to accept the reality of eventually importing Middle East crude for close to 100% of it's needs. What many only speculated about in the late 60s, later became reality as the Middle Eastern reserves did indeed prove large enough to supply and cheap enough to pump for everyone's needs. Their reserves would outlast and underprice our reserves, as long as we paid them in gold dollars. -----------------------
I pointed out in my "First Walk" post how oil was indeed taking over the job as an asset backing the dollar. Even with the first increases in dollar oil prices, the world and the producers were very willing to accept a dollar value based on an expanding "new oil economy". At least until mid 1976!
Look over here:
Of course, during this time there was plenty of "background noise" on the world stage. There always is and it usually distorts the picture just enough to keep us from seeing what was really happening. Like looking at a river up close, in the rapids, instead of far away. But, in 1976 :
------The IMF convened a monetary summit in Jamaica and ratified "The Jamaica Accords" in April. For some major people, this paper was the reality that drove home the golden point. The Accords formally recognized the managed floating currency system for the duration. Marking a turning point in how national super powers effect fiat currency use in our new modern economy. But more importantly, gold was "demonetized" as a reserve asset! -------------
Most everyone immediately grasped what this meant; "that gold would no longer back the currencies as it did in the old gold exchange system". However, for some 15 years to come, no one fully understood what was really said! In the Accords, the wording stated that gold would remain a " " Reserve Asset" "! Indeed, as a non currency, real wealth "reserve asset", this world class money was set free to become a backing for any economy. Even one based on a new reserve system. This my friends, was the key to perceiving what would later happen in the world gold markets. We'll get back to it later.
It's no secret why gold went wild from it's lows that year. For the first time since the 71 break, really big demand was driving the market. No it wasn't just the public's buying of coins and small bars. Nor was it the futures traders with their paper orders that caused gold to rise so much. It was the wholesale scramble by huge dollar holders trying to buy some of those "reserve assets" before it's price went sky high. This buying was in the form of 400 oz bars,,,,,,, lot's of them at a time! Some Central Banks slowly sold into the storm in a effort to manage the demand. Politics and the media did a good job of telling the story as they saw it. But the real reason for the managed rise was to demonstrate to oil producers and other dollar holders that everyone couldn't convert if they brought physical all at once. Had some banks not sold, gold would have gone into the thousands, and in the process destroyed the dollar long before it's date was due. Without a reserve system to replace it, our world economy would have crashed and burned.
Further along the path:
Without the prospects of gold ever backing the fiat money system again, a good portion of the next oil price hikes (late 70s) were dollar related. It wasn't until the mid 80s that two things occurred to lower oil prices for an extended period of time.
First-----
The incredible rise in oil prices once again took away some of the pressing need for producers to buy gold. Oil itself was compensating for price inflation. Not to mention that gold was seen as still relatively high. Further, the gold marketplace itself was evolving into more of a contract market than a physical one. Offering hope that financial demand could be channelled away from becoming physical demand.
Europe, London and the US had all joined together in a quiet effort to better manage the price of gold. All in an effort to once again buy time for the dollar. From a US perspective, this time was needed to "work out" the dollars problems. From a Europe / BIS perspective, it was time used to build a dollar replacement.
Did both of these power blocks know what the other was doing? I think they fully well did. But as is usually the case in warfare, the generals on each side think the other doesn't have a chance. Truly, the net effect of this joint effort resulted in a stalled gold market, even though the reasons for it differed.
Second------
Once the evolution of this supposedly free gold market was seen by oil as backing the value of the dollar (with a stalled gold price), production was increased in the mid 80s. The combination of OPEC's added supply and the new supply created by the price induced US drilling, all forced oil prices down. The whole process was seen in the media as the world's dealing with OPEC and forcing the dollar down their throats in the process. But no one ever made the connection that they didn't have to take dollars for settlement and the world would still buy oil. But support the dollar for a purpose they continued to do!
Oil still had it's political ups and downs over the years and the same reflected in it's prices. But supply was mostly assured from a level to falling gold price. During the next ten years form 85 through 95, few really noticed that although gold and oil charted in the same direction, they never flowed in the same direction. Nor did they grasp how the gold market was engineered to supply gold for this very reason.
With most of the dollar oil problem licked, the G-7 began an effort to keep the dollar in play. Even though it's debt had aged it and it's timeline was running out. In 1985 they started a series of currency moves that would last until the early 90s. From the "Plaza Accords" (85) to the "Louvre Accords" (87), it was all an effort to stall and stretch out any crisis of the dollar. It seemed that no matter how much the dollar was inflated or how much debt was built upon it, it would be supported for all the world to see. Not even the gold market would be allowed to reflect any portion of this ongoing currency crisis. Showing their full colours in managing this "new gold market", the $500 price in late 87 was quickly brought down. Indeed, the evolution from a bullion marketplace into a mostly "new paper marketplace" was well underway. The later fall in price after reaching a Gulf War peak, was even more stunning.
It was right about here, in the early 90s that some major players began to stop trading gold. Instead they started slowly buying physical. It seems they finally understood what the "Jamaica Accords" of so long ago really meant. Indeed, it was worth leaving all the "winnings to come" on the table! Because, no matter how high dollar assets would go, physical gold was destine to go much, much higher.
In December of 1991, twelve members of the original "European Economic Community", now called the EU (European Union) signed the "Maastricht Treaty". It spelled out the process where they would establish a full currency union, called the EMU (European Monetary Union).
Once the EMU process was signed into law, we could see that there was indeed a purpose behind the formation of the "European Economic Community" in the early 70s. Because it closely followed the 1972 "Smithsonian Agreements", signed in Washington, declaring the dollar / gold break an official act by the US. Nor was it a coincidence that the very first discussion of a Pan Euro currency block in the form of a "European Economic Unit" was first heard of in 1976. The date of the "Jamaica Accords". The EEU, a precursor to the Euro, soon became official in the early 80s.
On January 1 1999, the Euro was born. On the headlines of almost every paper, the new Euro currency immediately became the topic of speculation. How high or low would it go,,,,,,, will it last,,,,,, what good is it,,,, and on and on. Yet, completely hidden from view and outside most speculator interest, one important item was overlooked. Once this competing reserve currency was formed, the two major power blocks of the world no longer shared the purpose of maintaining a paper gold market! Established, maintained and supported for the purpose of absorbing the demand for gold, it's price damping effects were no longer needed.
What an overview:
From a Euroland viewpoint, the dollar no longer needed to be supported by a low gold price. With the Euro in place and holding a large portion of the worlds new, non currency "reserve asset" for support, they no longer had a reason to buy at $280 or sell at $480. Indeed, they told the world they were backing out of the paper gold game with the Washington Agreement. We fully expect that during the 5 year time frame of that agreement, physical gold will soar from lack of supply as they trade it outside the London dominated paper markets. We also expect a convoluted workout of the left over contract markets as they fluctuate between $0 and $infinity. Further, the greenback could now go as high or as low as world traders would like to take this now "on it's own" currency.
From an oil producer viewpoint, with the physical gold market now only a shadow of the total "paper gold market", they can now only float a few dollars in sufficient amounts back into physical gold. With half the gold market supporting players retreating into the Euro umbrella, the present market will revert to little more than a paper float. With this in mind, it should be no surprise to anyone that crude prices began rising almost immediately after the EMU. Eventually, even $30 oil will disrupt world dollar debt to a point where the dollar exchange rate collapses. Forcing a run from dollar settlement and into Euro or a Euro + gold pricing basket for crude.
Prior to this they watch the same drama today you and I see. An ongoing dollar liquidity crisis that had long ago reached the end of it's timeline. Now it grows worse, brought about by not only the loss of most of it's Euroland financing function,,, but also it's Pan European support. Truly, this crisis demand will drive the dollar ever higher. A hyperinflationary trigger, not completely unlike the one facing Japan today. Day after day one has but to watch the US Fed ever pumping reserves in a effort to reflate a world dollar tire that's full of Euro holes!
From a gold bullion viewpoint: the Jamaica Accords signalled a permanent shift from holding gold and fiat currencies in competition with each other. Yet, the eventual good effects of such a shift would only happen once the sick dollar system was killed by it's debt load. Untill 1999, one of the two world's power blocks had a purpose in keeping it alive. Until a fall back replacement could be formed, a dead dollar would leave gold alone in the currency roll and sent the world into a depression. Truly, with talk of the EMU falling apartin 1997, oil wasn't the only entity that would have bid on gold if the Euro had failed.
But it didn't. Soon, bullion will return to doing what it did centuries ago. Representing the value of the worlds assets and productive wealth. Only, with the world having far more in the way of modern things than ever before in it's history, "Freegold" trading as a "reserve asset" will be valued as never before.
You ask, what are the dynamics of such a position?
How are world investors prepared for this event?
I'll tell you my view,,,,,,, next time on the trail!
Thank you for walking with me,,,,,,, FOA/ your Trail Guide
Trail Guide (03/04/00; 07:04:54MDT - Msg ID:26357)
gold talk
http://www.the-privateer.com/gold6.html#latest
ALL: Some good items on the web now. Especially MK's post of USAGOLD (3/3/2000;8:36:06MDT - Msg ID:26331)!
ALSO:
From the Privateer web site: see above
----Gold stocks are STOCKS, they are NOT Gold. This leads to a some further observations. -----
ALSO: some good reading at GATA!
====================================
http://www.egroups.com/group/gata/399.html?
---------------Apparently the foaming-at-mouth
media feel it's ok to have religious fervor if
discussing political freedom, religious freedom, and
press freedom, but not OK about monetary freedom. If
you ant a real 'free market in gold,' free of
government and central bank interference, you are a
fanatic. Yet the paper money in your pocket shrinks in
value every day and always does in a fiat (non-
convertible, dictated) money system, as the supply is
endless.------------------------
ALSO:
-------------"I submit to you that the gold market story that has
evolved a great deal over the past 12 months is going
to change radically in the next 12 months.---------------
I'll be back later for some discussion ,,,,,,,, TG
Trail Guide (03/04/00; 15:47:23MDT - Msg ID:26368)
Comment
USAGOLD (3/3/2000; 8:36:06MDT - Msg ID:26331)
----Those of you who read this report regularly know that we don't buy the government statistics on inflation. -------
Michael,
Isn't that so very true! I completely agree. But in a more broad sense, doesn't that just delineate this era into something completely different from other recent (relatively mild) US inflations?
Here we are with a currency that's been in it's most recent extended inflation for 15+ years and almost no statistics show "major" price rises yet. Considering the overall world-wide expansion of dollar assets during this period, we would think 15% price increases would have already been the norm for several years. Along with seeing 15% interest rates. Clearly this is not the case as
somewhere, someone has been buying up our expanded dollar assets and holding them in support of the dollar system. This portion simply cannot be held as an investment, because one must eventually buy something here to gain from it.
I really love how everyone likes to say that all the foreign money is coming here to invest in this system,,,,, and that is why our markets and dollars were so strong most of this decade. Truly, if this was the case, our gross investment outflows minus the foreign investment inflows would have to have covered the huge trade deficit for the past 20 years! It never happened! Take out the expanded dollar reserve holdings of foreign CBs and their matching local currency creations from this and it would show a different picture. A colossal trade flow of dollar assets back into the US for conversion. Truly CB support was the dynamic that saved us from a crippling price inflation.
So, we have enjoyed a position of issuing a reserve currency and having mostly foreign governments support our asset values and lifestyles by absorbing all. This dollars support ,,,,,,, if they stop it's all over, yes? All the past dollar inflation will show up here in the only way that can balance ,,,, in the form of a major hyper price inflation. But not to worry, they have helped us for some time and will continue because the dollar is still the only reserve currency to support,,,, right?
But suddenly our USA official policy has changed from the recent past responses to up-ticks in price inflation. Our officials are doing their best to set the stage of not reporting any price effects at all. Covering the recent past, present and future reports by changing the rules. What gives? Why not do as in the past,,,,,, report rising prices,,,,, and raise rates to control it? We have the tools and support to do this, or do we?
In the past, "real figures" were reported because we "could" do something about them. Raise rates and tighten money! But we always thought (or were told) that these "tools" could be used by themselves. In reality, they never could. The dollar was "the" reserve currency and had to have the full support of other nations in order for this host country to reign in money growth and control prices. Doing so alone would leave us open to the risk of a complete economic crash in our economy. Of course the worlds system would also die because no other currency reserve existed then. So, the risk of "no support" was never there. Today, it is. I think my friends call this a strategic political risk unique for this era.
Yes, we could raise rates in a magnitude needed to control the situation, if the real price inflation figures were reported. But, if at the same time foreign nations decided not to support us and begin slowly converting dollar assets into another denomination??? We would have the very visual effect of a falling dollar with rate rises also appearing as an attempt to stop the currency from failing. Instead of just raising rates for the simple reason of slowing the economy. On top of this, if our present paper system that controls the gold market pricing action was to suddenly fracture,,,,,, the outflow of money into real gold would really make dollar inflation look ??????? Interesting situation, no?
I think today, the Euro has changed things and we are now entering a "final US inflation" because of it! It's not just the last few years we are talking about, rather the complete era. Our past ability to control rising prices without creating a major economic contraction is gone.
Gone,,,, not because the Euro is so great a competition for us,,,,,,, rather gone because "that" block of support has it's own major currency system to support. As a result, our US money printing through reserve expansion is now on a permanent one-way road. It will continue until it converts everyone into a hard money saver and paper sellers. Rate rises will be small and always be well behind the fact. One way or another, our currency value is going to adjust and it will impact every paper asset denominated in dollars.
No, our governments hiding of facts is indeed something more different than in the past. Currency war strategy has a way of doing this. We can expect more in the future. We know that more such under reporting is coming, because these are current signs of a monetary system living it's last days. Once the tools to correct a "regular inflation" were impaired, the final inflation process begins without end. If one is correctly prepared, it's going to be a real show to watch!
thanks TG
Trail Guide (03/04/00; 17:50:29MDT - Msg ID:26375)
Comment
Hello Solomon,
You write:
Solomon Weaver (2/23/2000; 22:12:25MDT - Msg ID:25912)
Is it Kuhn who gave us paradigms?
-----Something on the back of my brain tells me that the phrase "paradigm shift" was coined by Thomas Kuhn in a book called "the Structure of Scientific Revolution". It keeps reoccurring to me that FOA is telling us about a "new" gold market, which will behave much differently than the "old".
And many of us analyse the current market using today's perspective...----------
-----------------------------------------
TG:
Yes, I think this is a major problem and one that will backfire on many investors. Let's face it, no matter where the average investor resides in this world most all of them operate with a perception that the dollar will remain the worlds "supported" reserve currency. Few of them fully appreciate the impact a deviation from that norm would create.
They buy into gold derivatives with a dogged determination that the dollar price of these securities will always reflect the physical trading price on an equal or greater basis. It won't. It can't!
We can trace almost all of this perception from the views of the "gold trader". A perception that the entire "Western gold market" is built upon. He's primarily a paper trader of gold stocks, gold stock options, gold futures, etc.. Their whole strategy rests on the argument that the "price of physical traded gold" will wait for them to convert their paper profits into gold if the run really gets started.
The very leverage they play for is the same leverage that will gun the physical price faster than they can ever move.
As I just noted to MK, the publics real price inflation grasp is going to be from real events. Not from the past official policy of telling us how it really is. In this atmosphere the sponsors of our paper gold market are going to have a free hand to sell (create) contract gold without end. The more the Fed guns the reserves, the more the cash liquidity will be available to sell gold. Because so few of the paper traders wish to exercise these contracts, price discovery is totally in the hands of the market sponsors.
Because of this, at first dollar hyper inflation will not be reflected in a rising price of gold on the current dollar paper gold market. It will be reflected in a corresponding lack of real gold relative to outstanding contracts! A physical gold shortage will happen "first", as the contract price system slowly defaults in an ever lower price. Next the paper markets will totally fail from non availability. That means a super low (discounted) bid price for contract gold. That's the same price the stock market players currently value your gold shares with.
Once the dollar gold contract system fails (and this will be happening during a full blown "hidden" price inflation), a physical gold market will develop,,,, weather officially (Euroland) or black market style.
The point is that during this dollar inflation, physical gold will be in almost no supply and it's price will be 10X the paper price. No body, and I mean NO BODY is going to be cashing out of gold shares or any form of paper gold and doing an even swap! Every gold mine that operates using the
dollar gold market to sell into,,,, does it's financing with and is hedged leveraged with dollar based Bullion Banks ,,,,,, is going to see their stock ride the paper gold market to it's end.
A few of them will be allowed to tie themselves into ECB/BIS physical sales, very few! Many will try, but only if they can escape their financing ties with banks, that themselves are locked into the current paper bullion market. It's that simple.
I've mention this dynamic before. It's the main reason why I own only a very small slect few gold shares. If they fall,,,,, it will not impact me at all. Of my hard money "metal" investment portion of wealth,,,, 99% of it is in "non-USA Legal Tender Bullion". But not completely for the reasons our site provider does it (a good portion is in K-rands and bars, the rest in early and rare bullion). I'll
discuss this a later time.
We are always watching for the political dynamics to change, but I think only two things could make this happen.
First,,,, The US Fed would have to suddenly decide to break the current inflation on it's own and shut down all liquidity operations. Strangely enough, this would have the absolutely opposite effect many think. In today's changing times, such a deflationary move would completely fracture the contract creating ability of the Bullion Banks. The paper gold market would soar first, then lock from failure. Obviously, mines and their shares would do very well in such a situation. "If" investors could understand the positive effects such a dollar deflation would have on gold.
Second,,,,, our current process will change if Euroland decides to bid and trade openly with physical gold outside the LBMA marketplace,,,, and do so at ever higher dollar prices as they dispose of their mountain of dollar reserves. This is a very real possibility during this developing
currency war.
Otherwise, they have decided to let the "Western gold traders" live in their "paper market" and die in their own stew as the contract prices fall to ??. All the while letting the paper market have it's way with us,,,,, as they withdraw from supporting the dollar while the Fed tries pump liquidity as a real price inflation breaks out.
Solomon,
It's some interesting drama unfolding, no? Your advise in this next post is "right on"!
Solomon Weaver (2/23/2000; 21:22:54MDT - Msg ID:25906)
-----So, given that this is not the current structure of the gold market, and that it is only likely to change when there is a massive problem in the status quo, it is actually very safe to say that the real bull cannot come until the paper market of today collapses. Until then, it is really only that bear in disguise that I mentioned a little earlier ------
------I think what Trail Guide is trying to tell us is that now is the time to get some gold for yourself, because when the destructive bear/bull enters to make way for the real bull, it will be much too late to get real gold at prices of today.------------
Thanks,,,,,,,,,,,, TG
I have to read / study some contracts for a while. USAGOLD back and respond a little later (smile).
Trail Guide (03/04/00; 22:57:31MDT - Msg ID:26385)
Reply
USAGOLD (03/04/00; 16:51:08MDT - Msg ID:26370)
---------Why not?-------
Michael,
This whole inflation picture fits so perfectly together now, that none of us want to believe or fully accept it. Even I reserve a small corner of my brain for doubt. Honestly, none of this thinking came my way on it's own conception. It was drilled into me by others over many years. Long before most of what the last few years made apparent.
Today, I have the luxury of accepting this broad hyper-inflation view with confidence. After watching it progress for so many years and using this different perspective, all the current contradictions make sense to me. It does all fit so well:
Allowing the stock market to run away with no hint of trying to stop it.
Letting the money supply and bank reserves grow uncontrolled.
Forcing down interest rates after the LTCM problem.
Watching the trade deficit explode with no thought of intervening to lower the dollar exchange rate.
Changing the rules for calculating the PPI and CPI.
Buying in 30yr. treasury bonds so the markets would not expose the cost of a runaway money supply.
Promoting to the world that we are paying off the national debt when we clearly are not.
Even going against their own system and accepting a new definition of gold in the IMF. Just so they can keep some foreign dollar assets alive a little longer.
Paper gold traders talking about slicing out their piece of the pie using the same leverage that got us here in the first place.
Oil prices that can only indicate a withdrawal of support. Indeed, the very kingpin of support that has made the dollar last so long.
On and on and on!
These are all the things of a dyeing money system. One running on it's last breath as those that control it can only maneuver to prolong it. Not save it!
Yes, the trail up close is so very clear while the fog of human emotions clouds the far view.
Thanks TG
----------------------------
Golden Truth
Hello,
I see that you need concrete advice.
First, you can only own your wealth in a way that your heart and understanding tells you. Perhaps you placed far more of your assets in metal than you could hold "through thick and thin"? I have been buying bullion for a long, long time, but it's not so much of my wealth that I have to sell it. I admit, it is probably much more than most anything read here. But then, I don't know who is here, do I? How about you? Do you have to sell because you own "too much"??
Owning physical gold as I and others do is like having a bank account. I don't check my bank every day or month to see if the dollars and Euros have gone up or down against other currencies. If the dollar fell against the Yen by 30% (as it has in the past) I can tell you I won't draw it all out and dump it (the dollars or Euros). The simple truth is I don't own gold for trading as so many "Westerners" do. I own it because some very sharp people have educated me about how the real world works. I fully well expect that world financial dynamics and human nature will drive gold sky
high and keep it there for the rest of my life time. For myself and my friends, we don't need to know exactly when. Whether it's next month or five years from now is good enough. The fact that around 1997, political conditions existed that could have prompted a bid for gold didn't change my plans or lifestyle. Placing a good portion of ones wealth in gold at $380, $370 or $360 didn't destroy their future or mine. I still own that very same gold today and have never sold. I have only brought more. Truly, it didn't disappear as some stocks or leveraged options did. It didn't plunge like the major mining shares did. We didn't buy gold stocks or leveraged derivatives based on any possible outcome. Nor should have anyone else in in this "new era",,,,, in my opinion.
Second, knowing what you know now, should you sell it all and buy back later. Or never buy back? Or invest in the stock markets. Perhaps the Dow will double several times over again. Is that the answer? It could be for you?
If you do decide to hold only paper wealth, you will certainly not be alone. Many people are going to sit in paper and watch and see how this all plays out. Some in the "right" investments and some in the "wrong". Where will you be?
Third, I give this insight from myself and others. It gives you a view through other eyes. All through history people have won and lost. Others have watched the ones that win and lose. I can only say that wherever you stand when the music stops, it will be a place you remember all your days. For
myself, if the Dow goes to 1,000,000, the Euro goes to 30 US cents and gold hits 5 cents,,,, at least I will know where I stood,,,,,, when the music stopped! But even then, I will not be broke.
Truly, some people cannot by nature gain by following the path of others. I can and I do.
If you don't understand my position now my friend,,,, you never will.
Thanks TG
Trail Guide (03/05/00; 00:50:28MDT - Msg ID:26386)
Reply
Cavan Man (03/04/00; 20:42:02MDT - Msg ID:26382)
Sir Cavan Man,
The real unknown here is the total amount of physical gold we all hold in out portfolio. I remain vague about it because one can only buy wealth with their own understanding. None of us know how long we will live, and I can tell you it takes most of a lifetime to understand gold. So it's best to buy a percentage equal to what you can grasp. With the rest do as you say, buy land and other
forms of wealth.
Just as I mentioned to Golden Truth in what I believe is the proper perspective, gold is not an investment. It's buying another form of long term wealth. Yes, I'm certain that all the items I point out will eventually impact gold for the better. But I don't buy it with the perception of making those forces work for me through trading. Once one does that, you lose the ability to see it as a wealth
holding. It becomes an investment you can win or lose with. Or worse, we leverage it. Then it loses all the fine attributes a hard wealth holding was intended to have in your portfolio.
Many, many people have learned that bitter lesson. We only read and hear about the wise people that "just brought that mine share" around it's lows. Not too long ago! And if they had it earlier, they were smart enough to "trade it" using moving averages and "Comex traders commitments numbers". It seems everyone will admit to the "little loses" but will never tell you the whole story. That is that their current "gold investment" would really have to go up 1,000% for them to just get even from all the "little loses" (and in truth big loses) they took over these last many years. Still the song is sung about their recent 50% gain they just made. I just (smile)!
We only point out the Euro because it's dynamics are what will impact gold the most. A Euro account will only benefit you if you can live abroad. I can and sometimes do. I don't present it as a "trade", it's a possible bank account or demographic unit one may want to hold some of their wealth in. As an American, I have always presented physical gold as the very best way to protect our other wealth. For myself it is a great portion of my wealth.
I also present from the position that our present paper gold market has in itself leveraged the actual physical market. If the dollar paper market fails, it will make physical gold rise in the greatest percentage. Further, the inflation of all dollar assets are what creates an even greater leverage against physical gold.
In this position I am not a "gold bug" in the modern "western sense". They are almost 95% in paper derivatives of gold. Gold stocks included. Here, I am truly in the minority. Actually, if one looks around world wide, official physical gold trading is less than 10% of paper gold trading. Off the records it's huge.
Again, most of the paper is put in play by dollar based traders.
I hope this further expands my views (smile), TG
---------------------
Solomon Weaver (03/04/00; 21:15:43MDT - Msg ID:26384)
Hello again Sir Weaver,
You write:-----I will agree that if distortions in the paper pricing gold market drive the price down dramatically, the classic result will be for the price of gold mining cos to fall too...but in the end, these companies are not producing paper gold ... they are producing real gold. We should also
remember that when the paper POG falls below the cost of production, unless miners have an outlet to get a "real price" they will simply stop producing.--------------
TG:
In the end, could be yes and could be no! You know how a true forward sale works. So, if contract gold falls far enough and interest rates spike high enough,,,,,,,,,,,, their banks will force them to forward sell below production and let the rates on the "portfolio pool" bring their cost back to break even. This selling further puts pressure on the contract prices.
Then there is the political agenda. If the mine means enough to the local economy, the government could carry the shortfall by carrying the "pool note" at an even higher rate.
--------It is also not really in the interest of the short sellers to drive the price way down...just keeping it tame where it is is enough to keep their books in line..as a matter of fact, as the paper and physical markets begin to separate, the shorts will look even better, since the paper POG will fall dramatically. Until counterparties tell the shorts that they have to "go into the new physical
markets to buy back"!!!!-------------
TG:
Solomon, these modern market sponsors mostly do not actually sell gold short in the old sense. They write contracts against their cash equity. They don't even think physical gold, they think in cash settlement terms. If someone shoves cash at them and says write contracts, it's done! Gold isn't part of it. Indeed, the lower the contract price sinks the less likely any counterparties are to call for gold. Because, if,, and that's a big if,,, any physical callers are still in paper by then, they know a big call is an invitation for arbitration, plain and simple. Today, starting Sept. last year,,,,,, this market became a huge cash settlement arena and all the big players know it. The few physical sales (BOE and Dutch) are but little band aids that are used to manage it to some degree.
-------I look to the BIS to be the "new market" in a crisis. When they see that the Yankee market is locking up, they will be the default for large parties who want to sell or buy real gold. They will do this because they will want to stabilize the bipolar currency market (dollar/Euro) to allow an"organized slide" of the dollar. At the BIS (or the market backed by their name), mining companies (who have material free from hedged contracts) will be free to deal with gold buyers. Euroforces will have a vested interest in showing a publically traded real price for gold both in Euros and in
Dollars. ------------------
TG:
I mostly agree. But, mining companies free from hedged contracts are not out of the woods by a long shot. The present group of Bullion Banks finance virtually all new mined gold from beginning to end. Don't think for a minute that a BB in deep water because it's paper market is sinking will let it's mine clients just sell their gold wherever they want.
If the world contract prices are in the dumps, and a physical market is not considered "legitimate" yet (as in not the true price or black market), all mine valuations will be in the toilet. Pardon my french! In this brief atmosphere, banks will have a free hand to seize assets and force financing at will. Plus all the government intervention that may happen.
My point is that the risk of investing in most gold mines is far greater than the perceived reward. That's because most investors rule out a great rise in physical gold while seeing only the positive side of the stocks. At best, mines have ten times the risk of gold with only a small possible gain premium. Yes, under some possible workouts they could soar. But tell that to the people that own mines today that are on the edge of shutting down.
As Mr. Eastwood would ask "You just got to ask yourself,,,, do you feel lucky?" (big smile)
---------I don't really want to be walking down to the bank with my gold coins to cut a deal...-------------
TG:
I agree, it would be far more profitable in selling only a little of your much more appreciated gold to MK and using that proceeds to pay off the mortgage. Thus having extra gold already and not having to buy bullion later with cash (another smile)
Solomon, I hope my views offer a different perspective for yours and others thoughts.
I must go now,,,,,,,, see you on the Trail,,,,,,,,,,, Trail Guide
Trail Guide (3/6/2000; 15:34:02MDT - Msg ID:26448)
(No Subject)
elevator guy.
Indeed, the paper game could be just about to unwind now! You are so very right to say-------------------
" " Dont buy paper on the dips, cause its a shell game " "!
Gold has been in an unfolding story line for several years now. We have tried to isolate political and private movements that would impact the price of gold even sooner, as it travelled along it's destine path. But with each twist and turn the coming gold crisis was controlled with no perceivable change. At least not on the surface.
Oil always was the catalysis that would eventually begin the impact phase on gold's future. Whether it cam from outright intervention in the physical marketplace or by destroying the house of dollar credit with a large price rise,,,,, the dynamics of oil would eventually launch the Euro into reserve position. During that currency transition, physical gold would literally soar in price! Taking with it the entire financial structure of most of the dollar based banking system. Including most of the gold Bullion banking process.
With oil now above $32, it looks increasingly likely that we are about to start this process. With this in mind I repost an old piece. Perhaps I will also place it on the Trails page to remind everyone exactly how myself and others will be positioned for this turn of events.
Thanks Trail Guide
FOA (3/14/99; 17:33:37MDT - Msg ID:3369)
It should be obvious to all that I am not a trader. I do not think Another is either. Most of the observations given are offered to instil a path to follow for research, not to direct. Most gamblers (traders) try to find private information and act on it before it is common knowledge. Greed is the main motivation, certainly not the expansion of ones knowledge or protection of wealth. We often see people blindly follow the words of others without creating their own logical conclusions. No one will ever successfully manage their family wealth in this manner. Indeed, many have used the leverage of paper precious metals (including the white metals) to create great losses of wealth. Yet, Another has always striven to put the average citizen into physical gold as a percentage of their net worth. If you follow in the footsteps of giants, you gain proportionately as do these conservative people. My agenda is found in offering others an agenda that will hold true in a changing world.
Follow the news, think for yourself, observe the outcome of events in a different light. I think you will find this an interesting story as it unfolds. Yes, it is slow, but it holds true! The game of chess has many outcomes, but the objective is always to complete the journey with all of your
pieces (wealth) intact! FOA
Trail Guide (3/6/2000; 19:59:41MDT - Msg ID:26454)
(No Subject)
http://www.goldminingoutlook.com/
All:
It's not easy to trade an impending currency crisis. Especially one in the making for so many years.
I submit that all the contract forms that this gentleman tracks will soon become a whirlwind. We shall see!
From Mr. KAPLAN'S web site--------------
QUESTION:
Why are there so many recent changes to your outlook for gold?
ANSWER:
Rarely are there so many conflicting signals.
Sentiment is somewhat bearish, but not markedly so;
fundamentals are improving steadily, with unexpected setbacks;
commodities as a group remain strong, but a few key ones are still in danger of a pullback;
the U.S. equity market and the U.S. dollar are acting oddly;
the Australian dollar looks as though it is recovering and then moves to new lows;
technical indicators indicate an important pivot point but are less clear on direction.
Trail Guide (3/6/2000; 20:13:31MDT - Msg ID:26457)
Reply
Hello Cavan Man,
If the hard portion of your investments were like their 50% (or larger or smaller) in bullion (or even gold stocks and options). Now say they went to zero for a while, would it change your lifestyle much? Could you sleep at night?
Or if it went sky high,,,,, could you stand not to sell for a while?
It would not change anything for me. So my position and perception of this market is right,,,,, for me.
How about you?
Be back tomorrow TG
Gold Trail Update (03/10/00; 10:51:53MDT - Msg ID:26641)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (03/10/00; 10:51:52MT - usagold.com msg#10)
A Fireside Talk
We have walked a ways since our last chat, 03/02/00. Let's expand on what was said in each of these rambling talks.
"Introduction Post"
To understand gold we have to look at it through worldly eyes, in a very "broad context". This is important because gold has a better history of storing true net worth over people's lifetimes. More so in a generational sense, not just in the decades span most of us choose to see it in.
Even though fiat currencies often record it as a poorly performing asset in the relative short run, it has far outperformed every paper money system. That's because every paper money system has eventually died from old age while gold lives on.
During both the short and long haul, physical gold is wealth insurance for our extended families. This holds true because even holding gold in the early successful stages of a currency's life, war, politics and natural disasters can work to destroy any nation's assets. This includs ones personal wealth that's denominated in the business structure of said destroyed society. Gold mines included!
Over time, one could never compare the returns of investing in stocks and bonds to owning gold. This is simply because when gold is entangled in currency schemes, it's fiat value is falsely presented while the currency system ages. Only the commodity use of gold is reflected, not it's much higher wealth "reserve asset" function.
However, this present era has become one of those unique periods in paper money history when gold will take a great leap in value during the relative short term. Perhaps we can define it as being between 1990 and 2010. Having covered the accumulation phase of the first ten years already, the next five should be one for investors to just sit back and watch. The last five will be a time where we spend some of our physical gold wealth.
This will occur in a transition from an ageing currency that's still entangled in gold valuation schemes and politics, into a new currency reserve system that's positioning itself to let gold run. In this new venue, we are going to see gold become a world class "reserve asset" that's not tied directly to any official money system.
Again, once physical gold is swept clear from paper moneys, it's value in real life terms will soar.
The modern gold era never changed. Banks lend the currency that is invested in South Sea - like companies. Then the companies and governments create ever more currency debt at the request of the populous. At first the currency is a receipt for gold, then it becomes a receipt for more receipts. Then more currency is created to save these same failing debts receipts, but no gold is there to back it! The endless cycle goes on, all the while hiding our modern value of gold in the process. As the game reaches the end, we even begin to think that the "natural things" and "real things" of life are not the only wealth. Rather, a contract can also be held as one's life savings. It will end!
As paper debt increases, it ages the currency by always generating more "fiat receipts" than human production can ever service. Then, at the end of the "currency timeline", in a great flood of human emotions, we reach for "natural conclusions" to a non retractable financial problem!
One of the conclusions we reach are that physical gold can replace the lost values we once placed in fiat debt and equity, even the loses in paper gold and gold equity! In this drama these same fiat values that we once traded as wealth receipts can no longer be valued at par with real earth things. Once at this point we reach for natural real wealth on a epic scale.
In the process the entire society, including the government structure and it's outgoing money system are all carried with us in an emotional flood to the sea. Sweeping away the whole format of our worlds currencies and real wealth. We will watch this new format unfold.
This is why so many fail to see why one should hold physical gold at this time, in this closing era. They ask, why now? What is different from 20 or 60 years ago? Seeing only the jewellery value of gold in contrast to past official fiat currency rates (dollar at $42 in gold) as enough appreciation to be fair. We think a move to $600 is enough and invest for that outcome. Locking ourselves out of the real surge.
These questions and perceptions arise because we can only review the recent history of gold. As such it was unnaturally priced in the fiat currencies of pounds and dollars, not traded "next to the currencies" and valued as a "real wealth" "reserve asset". In a price discovery process such as is coming, gold in the past would have reflected all the great wealth advances that have happened sence the early ages of European gold coinage.
Again, for most of us this recent period offers only a fiat value comparison and leads us to accept it's present low fiat valuation. Yet, gold's fiat values over this era were only relative to it's manipulated price during an extended Anglo-Saxon currency timeline. A period that saw the dollar take over the pound's role of representing and dominating all world wealth. Including gold wealth!
During this whole period, gold's value did have small shifts up and down. Even our recent 20+ years are representative of these small shifts. Yet, because of our fiat perceptions we see these moves as large bull and bear runs for the metal. While all the time a truly great value leap in gold was building, waiting for the present dollar lifetime to end. Once the dollar gold entanglements are ended, gold's relative worth in modern world wealth and production abilities will return. In our modern day, the old adage that "gold is worth a mans suit" will prove far, far too low a value.
While we think about this, I'm going to eat some fresh trout. Then, tonight, under the stars we can come closer and extend the next "Foundation post" and others.
FOA/ your Trail Guide
Gold Trail Update (03/10/00; 17:00:47MDT - Msg ID:26651)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (03/10/00; 17:00:46MT - usagold.com msg#11)
A Fireside Talk (continued)
Hiking a gold trail usually requires us to ramble on as we walk mentioning any points, commenting on good views and taking notes as we proceed. But, after the end of several days on a trail, around a quiet fire, we put it all together. This is the format we take. Our first fireside talk was just posted. It and these (continued) posts will expand on our walking "Thoughts" before we continue the hike.
"Foundation Post"
From several viewpoints we proposed the same question: Why did so many of the world's nations continue to support a dollar reserve system after it went off the gold exchange standard?
They definitely had a choice; continue to use the dollar or go back to using gold. They choose to use the dollar! I pointed out how this policy flew in the face of common sense, and especially did so as the US only embarked on a policy of continued monetary expansion. In effect, inflating the whole world's currency systems right up into the end of 1997.
My point was that their actions can only be justified from a position of "buying time". Most of the major World and European countries had economies and currencies that could stand on their own in a competitive world. Yes, their transition from a dollar reserve would have been painful. But, compare that loss to the percentage of lifestyle gain they paid as a tax to the US by artificially maintaining the dollar exchange rate. Their Central Banks support polices were a decision to waste their citizens productive efforts in a process that held together a failing currency system.
They could not be this dumb! As I pointed out in the Foundation post:
-----For the more developed gold owning countries of the G-7, they had a different question in mind. Again, if taking in inflated dollar reserves was the act of importing US dollar inflation into ones local economy,,,,, and in the process creating a market for your goods overseas,,,, why not just print your own currency without taking in dollars - - In doing so give the same buying power the US citizens have in your market,,,,,, to your own people?------------
The other side; why not create a market for your own goods by selling them to your own citizens, using your own currency as a reserve?
Clearly, after 1971 the result of a failed dollar reserve system would have delivered a healthy dose of "real" price inflation to the US. Not just the 10% or 13% we experienced! But at least for the major European countries, with their money systems expanding on their own over the next 20+ years, their citizens would have brought their own lifestyles somewhat relative to their efforts. At least this was more reasonable than paying slave taxes in the form of dollar support. Or maybe it wasn't ?
Indeed, the whole world would have slipped further down the inflationary scale had the dollar failed. Everyone's lifestyle would have slipped a lot more than it did. More in the US, less in Europe. But more importantly, the whole international house of trade would have slowed tremendously without some form of world currency reserve. It's possible, that once we left the reserve system, the return to an increasing momentum of world trade flows would not have been seen again for several generations. Such is the case a world financial fracture on this scale could have created.
Yet they didn't return to gold! In the eyes of many, gold had been discredited as a controlling force that could regulate world finances and trade flows. Yes, gold was an option then, but we had just seen how modern superpowers can just walk away from the discipline of gold. In my post:
----Even if we have a pure gold system, human nature will find a way to turn it into securities. In doing so we will - - come hell or high water - - lend more gold than we have and borrow more than we can pay back. One has but to return to the history books to see it all in plain print. Over and over again, we start with a solid gold foundation and soon degrade it into trash. It's not just the American way,,,,, it's the world's way. ------------------
It seems the only explanation for the continued support of the dollar came in the form of "buying time": time to recreate a world reserve currency. But this time, make it subject to a whole group of diverse nations of conflicting political wills. In this format no one country can call the shots for the world. In addition, take away the need to compete with gold. Let gold be a supporting "reserve asset" that trades in a free market, unlent and non monetary so as to circumvent it's manipulation.
In this position a modern digital fiat currency can only represent the productive efforts of the nation blocks it represents. No different from the fiat schemes we have endured for 60+ years. Only this time without an illusion of gold backing and it's discipline. As such, a free market for gold will, on a ongoing basis, constantly devalue any and all currencies of the world. Just as in a somewhat similar concept where the stock markets of the world today currently discount the inflation of their local currencies.
Perhaps the payoff will be worth the past sacrifice of so many productive assets and savings. Perhaps we will never know just how far the world would have sunk had they written off the dollar back then. Without that knowledge as a measuring stick, we cannot compare if the recent loss was worth it.
Today, dollar support is winding down in the growing shadow of a Euro currency. This will eventually have a tremendous negative impact on all paper assets denominated in dollars. Whether they are viewed as hard paper assets or soft, the coming price inflation will wreck the use of dollar trading vehicles. Hard gold, owned as physical gold will make all the difference in the world.
Next, how oil was used to mask the motives of building the Euro, even as it supported it's creation. We will next extend the "First Walk" post. But first, more logs on the fire.
FOA Gold Trail Update (03/11/00; 08:26:08MDT - Msg ID:26672)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates./ your Trail Guide
FOA (03/11/00; 08:26:08MT - usagold.com msg#12)
A Fireside Talk (further continued)
Expanding from the: "First Walk Post"
Many political problems confronted any drive towards an EMU. In order to build a consensus for a Pan European currency, the architects had to have time, years of it. The last thing they needed was a world-wide economic downturn brought on by a failing dollar system. Working between 1976 and 1982, the software for such a system was only just beginning to really take shape. It was a slow, hard process because during this period and many years prior, the dollar was already experiencing convulsions. They needed at least another ten years, but without something to make the dollar more acceptable even five years was too long.
Working within a large group of nations required painstaking discussion of all ideas out in the open, so their agenda had to offer something for everyone. In addition, this new currency could not be seen as a competition for dollar use, otherwise the US would most certainly try to split the group.
It's important to understand that most of the world wanted to at least see another currency that could share some of the dollar's function. It didn't have to replace it. To this end, most every country gave some philosophical and political support in it's creation. But, by supporting a dollar that was now completely removed from any commodity backing system, would require the help of some major players.
Another group was extremely interested to see how this new currency would turn out. The major world oil producers. Prior to 1971, they were secure in selling oil for US gold dollars, even if it's true worth in a modern oil economy wasn't completely understood. At least gold had a long history of eventually defining it's value as equal to modern advances. Better said, if oil did more for the economy, then that increased value would be reflected in a stable value of gold. But after 1976 they found themselves selling a resource for far more than they realized it would bring and doing so in dollars of unknown future value. In the unfolding economics of it all, these people saw the same thing we did.
From my "First Walk" post:
------Prior to the US going off gold in 71, our whole (USA) economic structure was expanding because we were gaining massive leverage through cheap oil. Back then, oil was literally changing our lifestyle for the better, and doing so because it's dollar price was so incredibly low relative to what science was doing with it. Modern science had made oil worth so much more than we paid for it, we could extrapolate our debt and money supply growth far into the future and still figure that productive increases would cover it (the lost value due to money inflation). In effect, the US was targeting it's economy and money value to future oil flow value, not gold.-------------
After 1976 they (oil producers) jumped into gold but soon found that their excess dollar flow could never even partially be shifted into gold as it was traded on this new commodity arena. For them, gold wasn't just a "trade", it was payment in the form of real "reserve assets". Oil assets for gold assets! If the CBs hadn't sold into the storm, gold would have went to the moon from oil flow alone. So they, and everyone else soon found out that there was a world of difference between trading "gold dollars for real gold" at your Central Bank and "buying commodity gold in a trading arena". In truth, the gold market was only a free market for commodity trading. It was never allowed to trade as a "wealth reserve asset".
The options were few. Buy gold outright and see it's price run past it's "money for oil" value, or include gold in a currency basket for payment of oil. In essence saying: "straighten this currency problem out or you will be the one buying high priced gold"! They optioned for a third way. Continue to sell oil for ever cheaper dollars, all the while waiting for something to replace the failed reserve system. So they watched as the US said they would fix the dollar and Europe said they would replace it.
It was clear that the US would continue printing money as long as it got oil flow at a price that created an increase in American lifestyles. To this end, the dollar economy would eventually crash if oil was not priced cheaply in dollars. In addition, pricing oil in a currency basket with gold would just as easily crash the system. It was here, between 1980 and 1985 that both the US and Euroland proved that they could keep gold on an even level if oil could play the game.
Higher oil prices had indeed brought forth more oil flow and crude reserves for the US. This alone did wonders to extend the US dollar economy and the extra load of debt it was building. From this position alone, producers could justify supporting dollar settlement for oil, but only for a decade or so. The US and Britain were busy building a contract gold marketplace that would channel money away from real gold, thereby freeing up more physical to partially exchange for excess world dollars their oil imports produced.
Still, this didn't explain all of the game. It brought time for the EMU to build, but who was going to carry all the eventual excess dollars that would flow from a booming US? By 1986 a booming US economy was the result of still cheap oil. It was being sold to them and everyone for expensive dollars that flooded the world in an ongoing trade deficit!
From my "First Walk" post:
------It worked in a broken pattern for a number of years. Oil and gold defied all predictions of higher prices as they retreated from every advance. Central banks gorged themselves with worthless dollar reserves and prevented a hyperinflation of the dollar in the process. They did this, because they knew that gold had the ability to completely replace any and all loss of dollar reserve value once a new system was in operation. -------------
In this new format (post 1982), the US and it's dollar system would only work if oil was sold to them cheaply and in dollars. It's no secret that cheap oil is created by opening the valves. But, dollar settlement without gold was a political agreement just waiting for a reason to change it's mind. Foreign Central Bank support for the dollar was the key that kept this temporary condition working. Still, without the added kicker of a world cheap gold price along with a significant revaluation of that gold in the future, oil would have went for settlement in a Euroland basket of currencies + gold, long ago.
The US had already proven that it could not be trusted with any form of gold currency. At least most of the major European countries still had a good record of trusting gold. This is where we saw the impact of oil in the building process of the EMU. If they were to be at least attracted to a new Euro system, it had to accommodate a new attitude in dealing with gold. They looked at the 1976 "Jamaica Accords" and said, "why not use it as it's written, keep gold as a "reserve asset" not a "money asset". Once outside the money system, at a high enough price, it could become a possible world oil currency without destroying anyone's economy."
These were the early thoughts that have continued to evolve through today. But the trick was in keeping the gold market functioning between now and then. It had to supply some gold to exchange excess dollars, keep the price within reason and maintain the major mining structure for supply. The last was most important because the BIS knew how the dollar faction was using gold to try to fix the dollar. Their agenda worked with the EMU process, but was outside the EMU agenda. Both factions wanted the dollar maintained, but the US was willing to sink gold if it brought ever cheaper oil. It was a short sided political process, but it brought votes.
The BIS was willing to maintain gold above $280 until the EMU. If they didn't, they would lose the support of oil for the Euro system. It wasn't just the fact that this price kept most of the major mine supply online, it was that crude at around $8.75 in gold was their bottom price.
When the Hunt brothers were going around talking about "an ounce of silver was worth a barrel of oil" they were closer to reality than even they thought. Prior to 1971, the lowest oil value was pegged by producers at around one gram of gold (at $42 that was around $1.30). At one gram per barrel today, $280 was still the bottom price. It's no strange thing that the real dollar price of oil never stayed around this level either. In any event, this was the reason for all the arm twisting in the summer of 1999. Even though the EMU was a done deal, the Euro was still too young to float partial oil settlement. With gold being driven home by the US faction, oil support for both the dollar and Euro was in limbo. The Washington Agreement not only took care of that, it officially announced to the world that the paper gold markets were ending. Indeed, it was paying the way for Euro Crude!
Today we are still on track for crude oil settlement to begin happening in Euros. Oil prices have continued the rise we predicted once the Euro was created. What is left of the gold market is but a huge paper float that's slowly losing it's credibility from the loss of over half of it's past major supporters, Euroland. To date, many of the major left over gold contracts are being shifted into Euro based settlement. It's only a matter of time until the illusion of a falling Euro is suddenly erased by a crashing US stock market along with it's dollar.
Next, we expand my "Clear Path" post. Then we will hike again, while talking about real events today.
Here are a few parts of Another's Thoughts as some time ago. They give us a different view. We are on his trail today:
6/4/98 ANOTHER (THOUGHTS!)
--------I think, over time, the gold derivatives market did "break" the control of the BIS. Gold is held by many world class entities, as a capital asset. These "Giants" did understand the purpose for $350 gold. In this range, the gold mining industry and many capital reserve gold assets would survive. Gold below $300 was not wanted, as even the BIS would be forced to move with the price much below $280. The last small gold war ended in the early 1980s, as the choice was to use the US$ or go to a gold based economy. No other reserve currency existed, and gold lost the war as all continued to buy dollar reserves.
Today, a new currency is formed. It offers a way to break the dollar valuation of gold without the total destruction of world-wide currency markets and economies. In time, oil producers can offer their low cost reserves at true valuations, that support industry and commerce in exchange for a revalue of real money, gold, in a real currency, Euros!----------------------------
5/26/98 ANOTHER (THOUGHTS!)
-----From the day of our birth we are taught to value all things using the one factor alone, currency! Can one contemplate the value of all possessions in other terms? Do you not have to think first as to "how many dollars is that worth" then "how many dollars is this worth" to compare two items? If it is deep within our mind, that we can know value only in terms of paper, to this I ask, can one know value at all!
The Western mind does focus on "what I buy today for the lowest price". Yet, in this modern world economy, the lowest price is always the function of "the currency exchange rate"? The Yen, it is compared to the dollar today, and used to purchase goods. One year later and the Japan offers these goods for much less, as the Yen has fallen to the US$. The currency value of this purchase, was it "true " today or a year ago? Understand, all value judgements today are as subject to "exchange rate competition"! It is in "this exchange rate valuations" that the private citizen does denominate all net worth! A safe way to hold the wealth for your future, yes? You should ask a Korean or the Indonesian?-------------------
-------One should grasp that "today, your wealth, is not what your currency say it is"! In this world, paper currency is for trade, only! It is for the buying, selling, earning and paying, not for knowing the value of your family holdings! Know this, "the printers of paper do never tell the owner that the money has less value, that judgement is reserved for the person you offer that currency to"! Again, I ask, how can we know a true value for our assets, when they are known only in currency that finds it's worth, as in the exchange rate for another currency?-----------
---------Many will "think long and hard on this", but will find little reason for this position. For it is in your history to know only "things valued in paper terms". Some say, "I hold investments of great increase these past years, and am much ahead of the inflation, if it should come". I say, "your investments, world-wide, have moved little, as it has been the currencies that denominate your assets, that fall a great deal". The price inflation that comes, it is larger than your vision can see! Your past, holds little of knowing value outside of currencies, this does block the good view!-----
-----There is more: Today, the world reserve currency holds the exchange rate of one dollar equals one three hundredth of an ounce of gold! It is this rate, that makes the dollar, not as the Indonesian currency. Perhaps a secure thought? However, even this 1/300 rate is also subject to "exchange rate competition"! This new rate was purchased by the acceptance of the "new paper gold" as equal value to "the physical gold"! This large, new paper gold market was created to increase the supply of "traded gold". The physical gold supply alone could not be increased to bring the dollar into the mid to lower 300s exchange rate area, there by making it "strong in gold". But, as in all new markets, for the "traded gold arena" to accept a "paper gold item" in great amounts, it required new collatteral / assets to give this paper item "integrity"! That "integrity" was found in oil-------
-----Some say, "gold fall because noone was buying it". I say, "gold fall because many were buying it"! They buy as the "trading market" was made "much fat" with added paper! Understand this: The US$ price of gold could only fall if a market existed for paper gold priced lower each time of offer! If the price did not fall, this paper market "could not function" as "it would not be profitable to the writer"! It was, for many years, in the good interest of all, for the dollar to find a gold price close to production cost. That time has now much passed!---------------
------One day soon, this "paper gold item" may lose it's "integrity from oil" by way of "competition" from a new reserve currency! In that day, "paper gold" will rush to become "physical gold" as "dollar gold contracts" rush to become "Euro gold contracts". You see, the value of the gold lost from the Euro CB sales will return in the form of a "Euro strong in gold". The "gold reserves" held for the EURO will offer strength, but it will be the total destruction of the dollar gold market that does make " this currency go home"!-----------
-----When the future comes, and one holds asset values in dollar terms, many may discover, there wealth was not as this currency said it was! In that day, you will know your assets, as expressed in the real money of our fathers! This new dollar/gold exchange rate will end your search for the
"the true value of gold"
Thank you
Another
--------------------------
Trail Guide (3/12/2000; 19:58:28MDT - Msg ID:26743)
Comment
HI - HAT (03/11/00; 03:50:00MDT - Msg ID:26667)
Gold only Gold
All. Forgive the darkness of my posts. I must call it as I see it in my bones. I see WAR on a world scale. Many fronts from which it will escalate from. Conclusion drawn from inate synthesys of mass psychology. Historical crowd behavior. Trail Guides dollar timeline has been means to paper over most of the worlds divisions. This has been the new world order all along. Bread and cicuses for the world. At the end of this dollar timeline when ORO's "there is no spoon",dawns, the fall will break Alice's back and Wonderland will burn.
-----------------------------------------------
Hello HI-Hat,,,, and welcome!
I can understand the darkness you feel. When you say "Gold only Gold" that's the right track. But I don't think things will be all that bad for everyone. Ask these questions and see how people respond.
I have never thought that the world would come to a stop. After all, we have been at this for,,,,,,, 2000+ years?? It's easy for me to say that anyone preparing for a change will come out better than the person that doesn't.
Because we have to consider this in an obvious context: ----- if the world has always been in a state of change, don't the people that prepare for change always win out over those that plan for a status quo?------
Further:
I have to ask all the people that use the "New World Order" context to explain the problems: -------when has the world not had a "World Order"? ------ When have we not been organized in tribes and nations trying to get the better of the next in line? -- When has any government not acted
for the wishes of only part of society? -- Isn't it impossible for any governing body to act in the wishes of everyone?
Let's see, people war against the "order" that's controlling them. In the process they form the "Next Order" and that "order" doesn't please everyone, and on and on! So, what is "new" about all of this? Our history books are packed with conflict. I guess seeing the world the way it really is comes under the heading of -- "our growing discovery of real life"!
Mr. Farfel does a good job of defining how deceiving we are in our dealing with each other. I agree that some of these belong in the HOF, for one good reason that they do reflect how so many people preceive the market! He point's out how many groups trade in unlawful, immoral ways to take the gold bugs money. But I point out that instead of getting out of the dark alley where these crooks operate, we stand there and dare them to do some more! And they do! Can you
believe that? (smile)
I almost get the feeling that paper gold bugs get mad because the "big they" won't let the bugs win using the paper game of the "big they". Again, so when has the world been different? Did we all grow up in a USA that was nothing but a society of saints? (Outside of us on this forum, of course! smile)
No one bothers to mention that the "big they" could not play their paper game in the dark alley if none of the "little us" were there for them to play with! To use the most American of phrases to reference one's misplaced mindset:
"Knock, Knock,,,, Hello,,,,,, is anybody home up there"???? (huge smile)
Trade with MK and you will certainly be guided into "the light" and away from most of that risk!
Trail Guide
Trail Guide (3/12/2000; 20:00:09MDT - Msg ID:26744)
comment
Leland (03/11/00; 11:44:19MDT - Msg ID:26681)
Al Fulchino, your 10:44:14 is echoed in the LA TIMES (Grin)
Is there a positive side to the gasoline price hikes? Phil Proctor, this column's man in Beverly Hills, heard an L.A. motorist tell "CBS Evening News": "I want to pay three or four dollars a gallon. I want to feel like I'm living in Paris." Ooh L.A. L.A.!
-------------------
Leland,
Ha, Ha! Oh yes! Most Americans don't have a clue as to how leveraged their lifestyle has become from cheap oil. The price is way up in Hong Kong too. These high values that most of the world is paying has served a purpose of rationing demand for them already. In reality their
economic structures are much more stable at even higher prices than ours.
TG
Trail Guide (3/12/2000; 20:02:05MDT - Msg ID:26745)
Reply
Cavan Man (03/11/00; 20:38:48MDT - Msg ID:26697)
Trail Guide/Aristotle
TG: I have read and re-read what you have written this past year many times. The serial along the "Trail" is teriffic. I believe I know now what you mean when you say, one should hold as much gold as, "one can grasp". The grasping is not only a tactile sensation. By grasp, you mean intellectually
"grasp".
-----------------
Hello Cavan Man,
You have that in context! Once people really "grasp" the whole concept, they will "grasp" onto a much larger proportion of gold coins. We are passing through a period of history unlike anything ever before. There is at least a 50 / 50 chance that once inflation becomes obvious in official
statistics, paper gold will be driven into the dirt! That's a 50 / 50 chance that gold paper, mine shares included will experience a drop that "no one" can stand, and I mean "no one"! Paper leverage works both ways my friend!
Paper gold can go to zero, but in the process physical gold will become unavailable to price. Everyone likes to say that if physical becomes scarce, paper won't trade either! Don't kid yourself. The less physical is in supply to deliver against contracts, the more the contracts will be discounted to reflect that fact. This market has never been in such a position before and there is no precedent for it. The major players in this game will not bid on or hold a gold contract that is heading for cash settlement. Whether it's traded privately, OTC, London or Comex.
When I read where investors bemoan how "the big boys" aren't buying gold, I just smile. They don't have a "grasp" as to why a billion dollar player would "NOT" want to buy into a market that's failing from a lack of "official" credibility. LBMA volume continues to fall away, slowly spelling the end of this era.
The good thing about all of this is that we will all get to see some real dynamics at work. Yes, it's a 50 / 50 shot! The paper markets are going to go "straight up" and die, or they will go "straight down" and die. No in between. Now those are some odds to "grasp", right Cavan Man? (big
smile)
TG
Trail Guide (3/12/2000; 20:04:24MDT - Msg ID:26746)
Reply
law (03/11/00; 20:53:31MDT - Msg ID:26700)
FOA "A Fireside Talk (further continued)"
(03/11/00); 08:26:08MDT - Msg ID:12
In your much appreciated "Fireside Talk (further continued)"
I'd like to point out what I believe was probably just an oversight in your proofreading? In your 4th paragraph you state..."But after 1976 they found themselves selling a resource for far MORE (I believe you meant LESS) than they realized it would bring and doing so in dollars of unknown
future value." I choose to point this out...not as a technicality because of my familiarity, but for someone reading this with less of an understanding of the context in which this occurred and which you have written, in order to avoid any semblance of confusion.
Hello law!
Thanks for reading so closely! I fully understand your point. Your perception is probably clear to everyone as it was / is the most accepted explanation. However, the truth was that most all of them "privately" didn't completely understand just how important oil was in it's backing of the dollar's first, early debt expansion.
Years prior (before 1970) to the first big price increases (between 70 and 76), the US was changing the whole world economy on advancements in oil energy use and new products from refinement. Our lifestyles were advancing in a way that reflected $10 (in gold dollars) crude, back then. Only we didn't tell anyone (smile)!
Hell, the way the market was first structured, we had to
have the Texas Railroad Commision to raise the local prices otherwise crude would almost be given away. Actually, OPEC used the TRC as a blueprint to raise world price structures because they and most everyone was blank in trying to value the stuff in real use terms. The fact that the first OPEC increases worked as well as they did was a wonder to the producers. In reality it worked more so because the US needed the price to rise to bring in more domestic reserves. (You have read how this was done through the 71 gold closure?)
Don't get me wrong, by 74 they (OPEC) were only just learning the "real" economic value of oil to the world economy. Back then, only a few understood how the US was extropalating it's debt to reflect oil use wealth. They (US) went further after 76 and were using cheap crude to inflate the whole financial structure. Yes, it was cheap in relation to the fiat dollars we were then paying for it. Some of the producers were smarter than others and really "grasped" how oil was just as valuable as a world reserve currency backing as it was was for actuall use.
I'll expand my statement:
" " they found themselves selling a resource (crude oil) for far MORE (in commodity value) than they (had earlier) (prior to 1970) realized it would bring ------ and doing so in dollars of (now) (1976) unknown future value (because their oil was the backing for the economy the dollar was based upon) (no longer gold after the 1976 Jamiaca Accords)."
Law and others, I'm sorry I can't make this more clear, but it's a very hard subject.
Thanks TG
Trail Guide (03/13/00; 07:01:29MDT - Msg ID:26777)
Comment
tg (03/13/00; 00:13:13MDT - Msg ID:26760)
Hedging your bets SLF
I am getting overly cynical, but when someone says to me that gold is a 50/50 chance of going up or down, it really means that they don't really know which way gold is headed.
------------------------
Hello tg,
In my view, a cynical "grasp" of this gold market is one where a person cannot separate between paper gold and physical gold. I agree, anyone that plays the gold derivatives game has no more than a 50 / 50 shot. I advocate the physical only game where one has a .9999 shot!
As such, a lot of old paper traders are now buying gold itself for what used to be a "paper trade"! Bars, old world coins, bullion coins and rare coins are being purchased with an eye on selling some of them at huge percentage gains later.
The big difference today is that physical gold advocates are the minority players in this game and have the largest leverage. Paper gold traders are no longer "the contrary" players as they are in a majority. We only have to look at the volume of paper trading going on around the world to see
that paper gold, in all forms out trades the physical ten to one (at least). In addition the very leverage they play for will work against them as it has already done. Truly, the paper player has just a 50 / 50 shot.
And that:
------ " " really means that they don't really know which way (paper) gold is headed " " ! (smile)
-----------------
From my post:
Trail Guide (3/12/2000; 20:02:05MDT - Msg ID:26745)
------There is at least a 50 / 50 chance that once inflation becomes obvious in official statistics, paper gold will be driven into the dirt!-----------------
---------Paper gold can go to zero, but in the process physical gold will become unavailable to price-------
----The major players in this game will not bid on or hold a gold contract that is heading for cash settlement. ----
------Yes, it's a 50 / 50 shot! The paper markets are going to go "straight up" and die, or they will go "straight down" and die. No in between.---------
Thanks TG
Trail Guide (03/13/00; 08:13:30MDT - Msg ID:26778)
Comment
HI - HAT (03/13/00; 05:03:02MDT - Msg ID:26770)
TRAIL GUIDE HOPE
-------------------------------------------
Hello Hi - Hat,
I do hope the gold market is resolved in a major "UP" spike that kills the shorts and the paper they road in on! At least that outcome will give the mine stocks a temporary spike. Remember, I own a small percentage of a gold mine also.
This would be the absolute, best way for this to resolve itself. But even in this, our present era is unlike anything before it. If we do have a paper destroying spike, physical gold will "immediately or eventually",,, at least match the mine stock run (or even pass it by -- by a hugh margin )! Making all the risk one assumes in holding paper a needless one to take. Even if the stocks outrun physical by 20% or 30% for a while, that return will not make it a "break even" for most long term holders.
I never entertained the idea that the paper markets could diverge from the physical in a down spike. It was Another that made that point about a year ago. It completely caught me off guard. But still, I made physical my #1 percentage holding because it will outperform in the long run.
Looks like the currency war is starting to impact the markets now! I'll be updating the Trails Page later.
Michael and TownCrier: Nice job with the new web home page! Now I know what MK looks like,,,,,, yup,,, he's a goldbug,,,,, can see it in his eyes! (smile)
TG
Trail Guide (03/13/00; 08:42:55MDT - Msg ID:26782)
Comment
ORO,
The interventions now should be to just slow the fall, not reverse it as in the past! The same thing
is happening in the gold market. The paper players no longer have the official support behind them.
To drive the contracts to new lows today, will require the markets to separate in values. So, just
like the PPT, the US gold faction may be just managing the movement, not controlling it.
Also,
The ME is doing a very good job of managing the crude flows. This is something completely different from anything seen in the past. I believe their security in this policy is found in the Euro, trading in the background. Eventually, the oil card is going to trump our dollar economy into a slow growth mode. Yet, this will crater the equity markets because they have priced wide open growth to continue. I suspect the only growth we are in for will be major inflationary. we shall see.
TG
Trail Guide (03/13/00; 19:06:30MDT - Msg ID:26801)
(No Subject)
Hello ORO,
You lost me my friend? I'm not sure what your "No!" is referring to in my post?
I understand that the official word is for them to only slow (manage?) a downward drift in the equity markets. Not save and reverse it any longer. I heard this several weeks ago. Yes? or do you still mean No?
Our posts are below.
thanks TG
---------------
Trail Guide (03/13/00; 08:42:55MDT - Msg ID:26782)
Comment
ORO,
The interventions now should be to just slow the fall, not reverse it as in the past!
-----------
ORO (03/13/00; 18:41:32MDT - Msg ID:26797)
TG - No. The public is not a participant in these decisions and the public's favor is not sought. Even if it were, the public is well outside its rights and is evidently engaged in self defeating behavior that reduces their own welfare. Even if we did have control of the gun, we are obviously shooting it at our own foot. As things stand, the gun is only partly in our hands but the aim and the trigger are in
the hands of the oligarchy that Rhodes set up.
Trail Guide (3/16/2000; 9:22:06MDT - Msg ID:26913)
"a 50 / 50 chance that once inflation becomes obvious in official statistics, paper gold will be driven into the dirt!"
ALL: Am working on the next "Trails Post". Will be back here later. But just to make my position again here is an old post:
Trail Guide (03/13/00; 07:01:29MDT - Msg ID:26777)
Comment to:
tg (03/13/00; 00:13:13MDT - Msg ID:26760)
I am getting overly cynical, but when someone says to me that gold is a 50/50 chance of going up or down, it really means that they don't really know which way gold is headed.
------------------------
Hello tg,
In my view, a cynical "grasp" of this gold market is one where a person cannot separate between paper gold and physical gold. I agree, anyone that plays the gold derivatives game has no more than a 50 / 50 shot. I advocate the physical only game where one has a .9999 shot!
As such, a lot of old paper traders are now buying gold itself for what used to be a "paper trade"! Bars, old world coins, bullion coins and rare coins are being purchased with an eye on selling some of them at huge percentage gains later.
The big difference today is that physical gold advocates are the minority players in this game and have the largest leverage. Paper gold traders are no longer "the contrary" players as they are in a majority. We only have to look at the volume of paper trading going on around the world to see
that paper gold, in all forms out trades the physical ten to one (at least). In addition the very leverage they play for will work against them as it has already done. Truly, the paper player has just a 50 / 50 shot.
And that:
-- " " really means that they don't really know which way (paper) gold is headed " " !---- (smile)
-----------------
From my post:
Trail Guide (3/12/2000; 20:02:05MDT - Msg ID:26745)
------There is at least a 50 / 50 chance that once inflation becomes obvious in official statistics, paper gold will be driven into the dirt!-----------------
---------Paper gold can go to zero, but in the process physical gold will become unavailable to price-------
----The major players in this game will not bid on or hold a gold contract that is heading for cash settlement. ----
------Yes, it's a 50 / 50 shot! The paper markets are going to go "straight up" and die, or they will go "straight down" and die. No in between.---------
Thanks TG
Trail Guide (3/16/2000; 9:32:38MDT - Msg ID:26914)
----LBMA volume continues to fall away, slowly spelling the---
I must be getting old, because I'm going to repeat myself by re-posting another one:
--------------------------
Trail Guide (3/12/2000; 20:02:05MDT - Msg ID:26745)
------You have that in context! Once people really "grasp" the whole concept, they will "grasp" onto a much larger proportion of gold coins. We are passing through a period of history unlike anything ever before. There is at least a 50 / 50 chance that once inflation becomes obvious in official
statistics, paper gold will be driven into the dirt! That's a 50 / 50 chance that gold paper, mine shares included will experience a drop that "no one" can stand, and I mean "no one"! Paper leverage works both ways my friend!-----
----Paper gold can go to zero, but in the process physical gold will become unavailable to price. Everyone likes to say that if physical becomes scarce, paper won't trade either! Don't kid yourself. The less physical is in supply to deliver against contracts, the more the contracts will be discounted to reflect that fact. This market has never been in such a position before and there is no precedent for it. The major players in this game will not bid on or hold a gold contract that is heading for cash settlement. Whether it's traded privately, OTC, London or Comex.------
------When I read where investors bemoan how "the big boys" aren't buying gold, I just smile. They don't have a "grasp" as to why a billion dollar player would "NOT" want to buy into a market that's failing from a lack of "official" credibility. LBMA volume continues to fall away, slowly spelling the end of this era.-------
-----The good thing about all of this is that we will all get to see some real dynamics at work. Yes, it's a 50 / 50 shot! The paper markets are going to go "straight up" and die, or they will go "straight down" and die. No in between. Now those are some odds to "grasp", right Cavan Man? (big
smile)-------------
TG
Gold Trail Update (3/17/2000; 9:16:57MDT - Msg ID:26977)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (3/17/2000; 9:16:57MT - usagold.com msg#13)
A Fireside Talk (last one before we hike the trail in "real - time" context)
Expanding some of my "Clear Path" post #9.
We are only just now arriving at a time period that will bring about "The Currency Wars". Everything prior to this was only a preparation period to build an alternative currency. The years spent traveling this road were done to prepare the world for an escape medium when the dollar finally began it's "price" hyper-inflation stage.
Few investors can "grasp" that in reality, our dollar has already been hyper inflated , but without the higher price effects. Years of deficit spending, over borrowing, debt expansion have created an illusion that the dollar was immune to price inflation. This illusion is evident in our massive trade deficit as it carries on with no negative effects on dollar exchange rates. Clearly other investors, outside the Central Banks were helping in the dollar support process without knowing they were buying into a dying currency system.
The only thing that kept this process from showing up in the prices of everyday goods was the support other Central Banks showed for our currency through exchange intervention. As I pointed out in my other writings, this support was convoluted at best and done over 15 to 20 years. Still, it's been done with a purpose all this time. That purpose was to maintain the dollar for world economic trade, without which we would all sink into depression. Indeed, the mainstay of this support required an ever expanding world dollar base. There is simply no way the old dollar debts along with the new ones could have been serviced without this money expansion.
The entire long term process is / was very clear to a few major financial players as they prepared for the dollar's retirement as a reserve. Their main strategy for dealing with this was found in several positions. One was a long term buying of real physical gold. The other was the acceptance that all trade and investments would eventually transition away from dollar use. To combat this they began to denominate their paper assets and business transactions in other currencies (now the Euro holds the main transition flow). This was done because, as the dollar prices of real things first show real signs of rising, all forms of dollar derivative contracts would begin to unravel. Better said, the process of dollar contract failure would show up in the form of discounts on these derivatives from par value. Because most of our "end time" dollar world has built itself into a huge derivative game, this discounting will occur across the board in almost everything we deal in. Not just gold.
The first signs that official dollar support is winding down is seen in real world pricing and official policy. The most obvious "first" price sensitive arena to reflect a "real coming inflation" is not gold as so many think, it's the stock markets. Their long term bull run, mostly starting around the early 80s completely reflected this official sanction of world dollar expansion without price inflation. It's only in the last year that we can see where equity markets are telegraphing a transition into dollar expansion "without world support". Better said, major price inflation is coming on a level equal to hyper status. Many stock markets have headed straight up in reflection of this.
Another area where we see this change is in crude oil. For years, every rise in crude prices was quickly shut down from added supply. Done to add the producers portion of help to the dollar support effort. Even war in the oil fields was not allowed to create a dollar destroying price rise. Once the Euro was born and seen in operation as a possible "backup" currency, added crude supply to keep prices low was no longer available. Prices have risen and fallen in a broken fashion that will continue it's upward bias. This policy change is not only a vote of confidence in Euroland, it's also a Euro reserve support function that will lead to much higher physical gold prices later. Oil around $30 (and $45+ later) now values gold upwards to $930 using the old one gram = one barrel from a pre 1971 gold dollar price ratio. This has fueled ongoing trade in gold by the BIS as it seeks more physical gold supply outside the LBMA paper contract world. A process that can only further destroy the present contract gold illusion as expressed in a paper dollar gold marketplace. Eventually, $930 gold crude will become the absolute bottom pricing range as real dollar price inflation begins.
The most recent example of official policy change toward the dollar was found in the Washington Agreement. It marks the end of Euroland support for the paper gold markets that helped maintain a dollar / oil settlement bond. In the beginning (1980s) it was a joint effort by at least two factions that has today become only a single effort by one faction. The US / Britain.
Even with this, the US accepted a reworked IMF gold structure. Because of this, they (US) are today operating two policy positions that contradict each other. One tries to use an escalation of the gold price to maintain IMF support for foreign US debt, while the other tries to keep the "gold trading desk" of several market makers solvent through an even lower price.
This places Euroland, the BIS and major world physical gold players on a direct collision course with the US backed contract gold marketplace. The effects of this will "most likely" be seen in a literal flood of new paper gold entering this arena in an effort to maintain "bookkeeping" credibility for the market makers. Today we see the beginnings of this change impacting the market as it is evolving into little more than a large paper float that exists mostly for this "bookkeeping" purpose. It will stay viable until dollar price inflation dries up to physical supply that to date still sells into this market. No doubt, the mine companies will become the very last sellers to support this arena. Possibly, selling into it's paper pricing all the way down.
For years, gold bugs have figured that gold would be the next dollar escape mechanism. Not another currency. They gave little thought to the reality that our modern world could not, would not price gold as a "reserve free trading asset" without a digital paper money reserve to do it in. Once the dollar begins it's decline through price inflation, it's use as a reserve and more importantly it's use to establish a gold market will stop. This will cause an unexpected delayed positive impact on gold values as gold's paper marketplace goes through tremendous convulsions. We may see dollar price inflation in all things, yet gold values fall as contracts fail from constricted supply. Eventually, even the mining sector will be forced from shareholder loses and poor contract price economics to abandon the dollar pricing contract system. I expect that during this time the physical price of gold will be soaring as it's lack of trade constricts supply. Most paper gold traders today, don't understand how a real dollar price inflation shrinks physical gold trade, no matter how high or low the price goes. Further, they continue to use the various dollar gold derivatives even as their paper supply mushrooms. A process that forces the contract gold price down. Yet, all the while they are proclaiming that they are "in the gold market" and bemoaning how the manipulation of the metal is giving them loses.
It's important for new players to understand that no government or private banker in the world today can manipulate the dollar price of traded physical gold once real price inflation begins in the reserve currency. A failing currency system would find governments and bankers selling into a virtual "black hole" of demand.
Prior to dollar price inflation effects, the impact of official policy can only manipulate paper contract prices. Just because traders are willing to sell physical gold for a paper settled contract price doesn't mean that's the real gold value in the world today. More to the point, this is simply a temporary condition that could exhaust itself before price inflation, once physical delivered against paper prices dries up. Thereby forcing contract prices into discount and destruction.
This modern paper market is relatively a new concept in world gold trade. It was created by banks, western traders and mine operators themselves over the last 15+ years. They supported this market by buying into it instead of buying and trading only real gold. True, the paper promoters may have been dishonest in presenting the effects of this process, but no one was forced to use it! Without user cash flow giving credibility to these paper derivatives, the market would not exist in it's present form. Yes, it's true that the Euroland and dollar faction agenda, along with oil interest and indeed physical gold traders all benefited from this investors market making cash flow! But this is reality for any investment where a buyer of a contract abrogates the security of present real ownership into a paper position with counterparties risk. Even today, call option buyers give their money away in support of this illusion, instead of buying coins outright. Truly, western gold paper traders and gold stock investors today a have evolved and in no way represent what the term "gold bug" used to mean. Today, physical gold advocates are the real gold bugs as they now posses the real leverage paper players only think they have!
To close, I offer two post from the USAGOLD forum.
The first is from Mr. Kosares and presents a true picture of how real gold flows have moved over the recent years. It collaborates my point made long ago that CB gold was never flooding the market as traders and the media thought. In reality it's been the evolution of investor use of the paper markets that have set lose so much private gold. Thereby playing into the hands of official policy.
This second post is from Mr. Solomon, who offers up a wisdom that is so very relevant to this fireside talk.
---
USAGOLD (3/8/2000; 15:05:37MDT - Msg ID:26541)-------
Interesting Fact....
According to the World Gold Council's Demand Trends #30 released a few weeks ago, theofficial holdings of gold were 1106.0 million ozs in 1996, and 1080.6 ozs in October, 1999.
In other words, central banks over the past four years have lost in the aggregate a mere 25.4 tons-- or a little over six tons per year.
That after countless mainstream press articles bemoaning the surety of central bank sales, the Bank of England dishoarding, Dutch and Belgian central bank sales, Canadian, Russian, Malaysian ,Jordanian sales -- and others.
What the mainstream press fails to point out consistently is that while some central banks have been selling, others must have been buying. I want to thank my good friend, Voyager, for prompting me on this subject.
------------------------------------------------------------
Solomon Weaver (03/14/00; 21:11:52MDT - Msg ID:26846)--
I remember a comment by Another which stated that dollars (cash) was a "derivative"....at first I was confused.. but over time...I started to understand.
Money "derives" its value from what it can move.
Anyone, with half a sense for history and culture, who sits down and ponders the most recent few hundred years of mankind's developments, comes to the dizzying realization that we have developed a massively new epoch in the total history of our species...in the last 300 years we have truly tasted the fruits from the tree of knowledge..and on some levels have indigestion.
The primary common denominator to our survival is knowledge (and its partner, wisdom).
Until about 120 years ago, oil was not very valuable...but the more we discovered how to "burn" it and how to "form" it (chemicals, plastics), the more valuable it became.
Like others here at the forum, I think that gold and silver are due for a return to hard asset category, and given their lackluster performance in the last 15 years, in a time with immense economic progress, can only enjoy a solid recovery (both in price and popularity).
On the other hand, I think we all have to consider that (all paradigms aside) humanity has entered into a world where the physical survival of 50% of our population requires the continuing functioning of a very complex set of physical and economic flows. These folks live in a derivative world. Milk is in cartons. Heat comes in over wires. Wheat arrives baked.
We see the rumblings of reemergence hard-liners in China and Russia and the "idea" of future wars is discussed....The problem with this is that with so much of our ability to create wealth tied to knowledge (techknowledge), invasion of the rich no longer generate the spoils they did before. I think that if we are honest, we will recognize that the extended use of emergency executive orders by the President would accomplish the same thing as having America invaded.
Would any President really want to be the one to do this? When Roosevelt called the bank holiday in the 30's and confiscated gold, does anyone think he wanted this???? He was a decisive man, stepping into a new office where he realized we needed some real bitter medicine. Gold was targeted because it was the "accepted" place for people of all nations to "park their wealth" in pockets "outside of the formal banking system". Back then, there was no highspeed digital money,and a large portion of money was cash....today, when you move money it goes from "your bank" to "counterparties bank". It is almost a pure derivative money. Even if gold were to rise in value such that it could be valued close to the same as today's fiat pool, most of us would die quickly if the digital fiat system did not work.
We look at the divergent paths of gold metal vs. gold paper. When gold paper becomes worthless, gold metal will have value because it holds inherent credibility. But given its very scarcity, that gold metal will need "another currency" to move its value into in order to transact purchases. In a dollar crisis in a digital world, there is really nothing to gain by "confiscating gold"....the primary concern should be to keep the "remnant of the dollar economy" stabile enough that "gold will flow back into it". Perhaps I am naive to believe that our leaders will understand this...if they don't then they are not only fools they are derivatives of fools. I like to hope that this might be one of the reasons why the very intellectually astute monetary mind of Mr. Greenspan decided to stay in power...I think he may be one of the few who understand the problems of foolishness (particularly when viewed in the magic mirror made of gold).
Poor old Solomon
------------------------
Thank you for reading
FOA/,,,,,, your Trail Guide
Trail Guide (3/18/2000; 8:27:29MDT - Msg ID:27018)
Oh Yes!
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13231804
As Cavan Man said, " "your grasp" " of the market is what will make all the difference! Between now and that $x,000 per ounce price, we may see convulsions like never before in history.
"Another" said long ago that "noone" would stand in this wind without the heavy weight of real physical gold holding them down,,,,,,,,,, "NOONE"!
Here is some of mr. Frank V's thoughts from the link above:
----------------
Frank Veneroso has been invited to speak at the Australian Gold Conference in Perth, Australia the first week in April. Some of the most noted Australian hedgers of gold want to hear what he has to say. Frank is a great speaker and I believe he understands the gold market better than any one else out there.
Frank and I were chatting today about the gold market - what else - and he now believes the move up in the gold market will be much greater than he ever dreamed of. In a nutshell, he thinks this way because of the extent of the manipulation of the gold market. Too much gold has been devoured at too cheap a price. He now believes the gold loans could be as high as 13,000 to 14,000 tonnes. They just cannot be paid back.
Frank also believes that the eventual stock market collapse will be so overwhelming and confidence in the stock market so shattered, that gold will become the "go to" investment vehicle. That is why has come to feel that the gold price will rise to heights that, heretofore, he could not even imagine - like $2,000 per ounce, or higher!
I do not know what kind of speech he will deliver to the Aussies, but I cannot imagine a good number of them not rethinking their hedging strategies by the time the conference is over.
Trail Guide (3/18/2000; 15:04:13MDT - Msg ID:27037)
(No Subject)
Hello everyone, I'm working on a few replies and comments. Will be here off and on over the next four or five hours.
I'm sure everybody agrees that there is a lot going on right now!
TownCrier, that ECB is something else. Double their gold reserves???? Who would have thought that (smile).
be back,,,,,,TG
Trail Guide (3/18/2000; 17:06:40MDT - Msg ID:27044)
Reply
ORO (3/16/2000; 14:39:54MDT - Msg ID:26937)
Short replies
Trail Guide - Do you think this display of reckless money flows of the past two days is the result of the Bankers (that own the BBs) and their facillitators at the Fed and Treasury thumbing their noseat the EU? Or do you think they just lost control for a while? I tend to think the latter.
----------------
Hello ORO,
Yes, I think you are right. But, I don't think they lost control for a while,,,,, we may be seeing the first signs of a runaway system making it's own rules! It's right around here,,,, at this point in the process,,,, is where the shift begins to give the Fed an "all or none" choice. Nothing in-between will do.
The whole world is calling them to show their cards,,,, right now! The real problem is that the Fed knows what is in the works as well as do I. Whether they lock down hard or "let it rip" with just a small rate rise,,,,, the dollar is going to lose it. Big! So they will try to go slow "manage it" the only way they can and that will lead to Hyper-Inflation. This time.
What an incredible dynamic to witness!
TG
Trail Guide (3/18/2000; 17:08:23MDT - Msg ID:27045)
comment
TheStranger (3/17/2000; 20:31:49MDT - Msg ID:27009)
Does The Government Lie About Inflation?
Hello Stranger,
Well we may as well get used to it, because it'll be this way for the duration!
I rode the big bubble in Japan with some of my assets. From the 70s right up into the topping process (late 80s). Even felt their money flows in Hawaii real estate (Maui and Big Island). It wasn't much different from our (US) position today. It's the reason I never played for this market
run in the US. It looked the same in the beginning but it's failure will be impossible to escape from once it gets going. And it will destroy a lot more "illusion" wealth. You know, the kind of wealth that a dollar can buy today, but will not buy later.
In Japan everything ran upwards; a well located house ran up hundreds of percent. Eventually the whole lifestyle was impacted,,,, and you know what? They never had any inflation to speak of either! (smile). I think almost everyone has heard the story, but I was in it up close and from a
distance. Their market went from around 3,000 to almost 39,000 while our downtown projects went up 1,000%++++++. But the Yen was strong and always had to be forced down because all the inflation was presented as "wealth building market dynamics" . Ha! Ha!, it was a joke and everyone knew it! Rates were always relatively low, not because everyone was saving but because the system was "managing the run"!
The only reason they did not go hyper is because they are locked to our economic system. We have been the ones holding them up all this time (90s), not them helping us as so many think. Hell, they are cleaned and gutted ( I think that's how it's said). Now they are going to bite the bullet when the real dollar price inflation shows up everywhere except in the official CPI. They cannot match the dollar on a downhill run without locking their economy into the same hyper inflation.
Eventually their stock market will break upward from it's 10,000 to 20,000 base, but it will be because a steak (already high priced) will cost a years salary. (Hmmmm, time for bean soup?)
TG
Trail Guide (3/18/2000; 18:33:10MDT - Msg ID:27052)
comment
SteveH (3/18/2000; 10:05:12MDT - Msg ID:27022)
Crazy Bill
Hello SteveH,
That Crazy guy is closer that he thinks! Everybody used to calculate it that way (70s 80s), trying to understand what was happening. The trouble was the markets (both oil and gold) were being moved by political forces even though they (producers) kept tabs using the real stuff.
If you read my Trails, then you know where we are heading once this dollar inflation breaks out in the open. $900++ gold and $45 oil will be the very bottom then. Of course I'm talking about the real stuff, not paper contracts.
TG
Trail Guide (3/18/2000; 18:36:43MDT - Msg ID:27053)
reply
Hello Christopher, and welcome!
First I would like to say that more than a few investors have spoiled a good dynamic from working in their favor,,,, by trying to leverage it to death! Just as I mentioned to Stranger about the Japan run,,,,, once these human trains get going, all one has to do is throw a little luggage on
whenever she slows down! (smile) Or in this case, take advantage of an asset that everyone is buying in contract form while driving the real item down. In the beginning, no one ever thinks the investment will run as high as it eventually does. The Nikkei and Dow markets are a good example.
Hell, just about any little bit invested in the beginning became a small fortune! Gold will not be any different as it will outperform all it's paper derivatives, even hyper inflation. The trouble is that it will be doing it as it's modern contract marketplace crashes. So, getting oneself all paper leveraged up will just ruin all the fun later (smile). I copied this guy (somewhere?) because he had most of what
you read "correctly pegged"! Western thought is fixed on paper gold and keep losing wealth into that black hole because they will not "get off the train track"! Read this:
---- Most discussion is too one sided,,,,,gold share people (the real modern goldgubs) dominate the web. Gicves impression that everyone buys shares and not bullion! Between them they battle on the web. It's the Western shares against the SA shares! There is a whole world of people out
there that don't buy them! They don't need to, made enough in the paper world already!-------
OK, now to your items:
Christopher (3/18/2000; 10:33:46MDT - Msg ID:27023)
1. HOw far out is the expected event? Do I have days, weeks, or a year or two(will it coincide with the Euro in 2002?) Of course I do realize that this is just your opinion.
TG: The expected event is "right now"! Like watching a plant grow,,,, no one can see it happening while watching it. Yet leave and come back in a few months and it's bigger.
Look at it as the guy (gal??) above sees it. The opinions most of us read come from people that need that plant to produce fruit "now"! Otherwise their leverage eats up their wealth. But, all the while,,,, over these last few years they have missed the opportunity to build a chest full of physical gold at low prices. They lose money trying to time a "historic event" of huge positive financial implications,,, and miss the whole thing. Hell, the small plant has grown into a medium tree already and they "poo-poo" it because it hasn't produced fruit on their paper schedule. Just like some idiots I knew that were repeatedly blown out of the Nikkei around 8,000 because of leverage and missed the run to 40,000. We are talking about missing turning $100,000 into 60 mill. Get my point.
You have to use a broker (yes I'm talking about our host) that can help you see a conservative big picture and stay with the "big move"! Making most of your wealth while trading metal with him for the game of it! Not jumping out.
2. HOw much gold should I try to accumulate between now and then? (again I realize that this would be just an opinion, but would it be too much to ask for a specific guestimation?)
Yes, that is too much to ask because it puts you on the wrong track. We are talking about owning real wealth, not stocks, bonds, futures or options. I look at it the same way some of my friends do, like real money. I own a lot of different currencies, but they are held as savings accounts in the bank! I treat gold coins and bars the same way. Once you see it as real wealth, then ask yourself just how many dollars, or yen, or Euros, or francs is too much? It's not an investment, it's saving money wealth,,,,, money wealth that is real cheap to accumulate between $400 and $200.
Get some of those old European coins and you could be holding what was once a "Kings wealth"! For myself, any gold that is not US legal tender.
3. If and when the expected event arrives, how are we to use our gold that we have accumulated over time? Will we spend it at the grocery store, or gas station? Will we trade it in for Euros or whatever new currency replaces the $US? Or will people be coming to us and begging to trade their diamonds or real estate for a few grams worth of our wealth?
My friend, if you had Yahoo stock from the beginning and someone asked you the same question,,,, your answer? Hell, I heard that south of San Francisco, people are signing over stock to buy houses. My point is one I made over several posts, the dollar will remain the US currency for everyone to use,,,,, only it will lose a lot of value to gold.
TG
Trail Guide (3/18/2000; 19:31:17MDT - Msg ID:27055)
Reply
TownCrier (3/18/2000; 16:28:20MDT - Msg ID:27039)
Sir R Powell's comment on ECB doubling reserves
Do you see the raised ceiling on ECB reserves as a move to accommodate the potential for increased valuations of the existing reserves, or might it be to facilitate their direct "processing" of larger pools of foreign exchange in whatever fashion they deem to be appropriate...exchanges of dollars for gold as a simple example?
Hello TownCrier,
That is a good question! It could be either or a combination of both. They have to begin dropping their dollar holdings soon because they don't need them much longer. But there is more to consider than that.
Yes, the US trade deficit is rendering their earnings on these assets useless. What good is it to earn someone else's liability when they keep sending you more. Still they must carefully consider their next move because it will shape the US future.
They will not use dollar reserves to buy very many Euros because they don't want to stop it's building positive float momentum. If they buy other currencies it would slam the dollar and force the Fed to lock down,, driving our economic expansion into a depression,,,, stopping the exit from
dollar reserves by others. In a way like the Japan outcome so far.
The present exchange rate is a creation of their (ECB) taking in more dollars and not spending them,,, nothing less,,,,, even though they no longer need them. This is the real joke about the Euro weakness, if they only "begin" unloading their dollars, the US trade deficit, not the dollar selling by Euroland,,,, would make mush out of this illusion of dollar strength.
This is what the Fed is going nuts over. The Euro weakness is what's turning us into an inflation machine and they (fed) can't politically stop it! In my view, the big play will come as they (ECB)ask for more gold reserves from their member banks instead of buying it from them with Euros or
dollars. Then, use their dollar reserves to buy gold outside the BIS, while buying the Swiss float within the BIS using Euros,,,,,driving gold up two or three hundred and letting the paper markets dissolve.
This way they replace lost dollar reserve value but still force the US to keep it present trade policy because the trade deficit will not go away in this format without a changing exchange rate.
This is where everyone is missing the strategy,,,,,, they want the US business, but also want us to slip into an inflation on our own,,,,, by expanding our money to fund our trade deficit. You see, it's a position we cannot retract from! IN the process, the ECB could use our unending flow of dollars to buy gold? As this matures, gold in Euros will not rise as fast as gold in dollars.
Also, this is what is driving England to drop gold to save what BBs they can before the fact. I wrote about this some time ago. They are indeed heading for EU and won't need that much gold anyway. The ECB will let them in without their gold because their joining is a victory for Euroland.
Without the LBMA paper market, oil and gold will completely move to full Euro settlement. Especially if the dollar price inflation picks up steam,,,,,, and oil is doing it's best to set that fire.
thanks TG
I'll be replying more next day
Trail Guide (3/18/2000; 19:38:09MDT - Msg ID:27056)
quick one
The Victorian
Hello, hold tight! I just would not "add" to a Legal Tender position. I'll explain later.
TG
Trail Guide (3/19/2000; 8:59:38MDT - Msg ID:27072)
reply
Cavan Man (3/18/2000; 16:35:54MDT - Msg ID:27040)
Hello Trail Guide
What of the rest of the world, especially Euroland? When the US equities markets and dollar crash, won't the impact be felt 'round the world?
Hello Cavan Man,
I'll get to this later on the Trails page. Thanks for sharing the fire (smile),,,,,TG
Also:
------------------------------------------------------------
Trail Guide (3/18/2000; 19:38:09MDT - Msg ID:27056)
-----------------------------------
Hello, The Victorian,
I have written often about my views and reasons on these subjects. But here is a quick run through:
The US will not call in it's citizens gold.
It will later encourage them to hold gold.
It will never be allowed to back this dollar with gold again.
It may create a new currency in the future.
In that process it may classify all "legal Tender" as old currency belonging to the US and call for it's return.
To Further expand on:
" " The US will not call in it's citizens gold." "
They will have no reason or precedent to do this. The dollar as well as all other world fiat digital currencies are no longer attached or legally considered gold receipts. Because the dollar was (in 1929+/-) a circulating gold loan in receipt form, and it and gold was our official "Legal Tender", they had the right to change it. Whether this was theft, right or wrong, I don't care, they did it and
got away with it. Once this precedent was established, our government gained the right to change their circulating "Legal Tender" as needed. Again,, whether right or wrong it's now outside our ability to change this.
But, I have to add that one never knows for sure what a government under preasure will do??? So just consider all of this for the record and as future context.
Today, they DO NOT have the right or NEED to call in or change any form of gold because none of it is established as "Legal Tender",,,,,,,, except new modern coins that are not collectable and are so marked (and officially classified) as Legal Money. The Eagle and possibly the Maple are.
Our position is: that the coming "Currency Wars" will pit the fiat dollar against the fiat Euro. Because of the "Jamaica Accords" any official gold held behind these currencies is only a "non - money,,,,,, non - currency "reserve asset"! In no different perspective than them holding title to large blocks of sellable land or even oil storage reserves. This gold is an asset that can be traded or sold for a fiat price if needed. Yes, we all know it will be the last thing traded in the immediate future, but later, at thousands per ounce it may become an oil currency or background official settlement reserve. If, and it's a big if,,,,, the US was to ersetablish a gold currency, this time they could only guy the gold to do it,,,,,,not confinscate it.
With that "grasp", we must consider that during these coming fiat currency wars, governments will be thinking the higher the gold price the better! Gold ownership in Euroland and the US will eventually be encouraged as a "private wealth asset" no different than stocks and houses. However, one risk could remain for US citizens!
If the US later decided to change it's fiat dollar into "fiat dollar #2", the powers that be may call in all "Legal Tender"! Again, they are not calling in gold, just any "legal currency". The future political strategy for doing this would be in a "future circumstance" context and require a small book to describe it. I will do it later on the Trails page, but it's going way out in future events.
IN any event, I buy the bars, K- rands (because they addressed this a long time ago) and low premium rare coins. To be honest and open, I buy a lot of the rare items mostly because I view them as an art form. But also: because just such a future (dollar changing) event could cause all
their premiums to sky-rocket!
So, yes I do own some Eagles and Maples and all the rest, but will not add to these positions. If I was a small holder (under say $250k), I would not change anything,,,,,, rather adjust future accumulations.
Remember, this is a forum and all of this is just thought discussion,,,,, so think about it (smile).
TG
Trail Guide (3/19/2000; 9:05:10MDT - Msg ID:27073)
(No Subject)
To Bill,,,, the friend of SteveH,
I posted a clip of your thoughts yesterday and am now sorry I did it. I thought it was in the open but later found out different. Not again (smile).
TG
Trail Guide (3/19/2000; 9:12:49MDT - Msg ID:27074)
(No Subject)
Ha! Ha! Correction:
-------If, and it's a big if,,,,, the US was to reestablish a gold currency, this time they could only guy the gold to do it,,,,,,not confiscate it.------
should be:
------If, and it's a big if,,,,, the US was to reestablish a gold currency, this time they could only buy the gold to do it,,,,,,not confiscate it.---------
OH boy,,,,, be back later
TG
Trail Guide (03/19/00; 18:34:10MDT - Msg ID:27100)
(No Subject)
ALL:
Well, I just returned and found so many things to reply about! I'll try to combine most of this into one post and clarify / extend my views. SteveH, wonderful context! Also, my message was to BillM, I copied and posted some of his items that were re-posted from another site. ORO, will
comment later.
Be back much later,,, thanks TG
Trail Guide (03/22/00; 07:53:28MDT - Msg ID:27266)
Comment
http://www.prudentbear.com/markcomm/markcomm.htm
I have some real time today! So I'll start here and comment backwards into the last few days.
ORO (03/21/00; 21:19:39MDT - Msg ID:27252)
---------Take 20-25% off the market and the banking system is just plain caput. No more banks at all.---------
Hello ORO,
You are exactly right! With the gross number of financial derivatives written worldwide today, any major, lasting drop in dollar financial assets will leave the entire system with zero equity. This is an absolutely non - reversible fact and everyone (Mr. Greenspan included) understands it.
Read this from the link above: http://www.prudentbear.com/markcomm/markcomm.htm
----Thus far, we have placed considerable focus on money in this forum, as it is our contention that our monetary system has spun out of control and is being poisoned by unsound practices. Money excess, however, is but one critical aspect of this massive credit bubble. In fact, excesses in money creation are easily matched by excesses throughout the entire credit creation process. In both cases, Wall Street is the leading instigator-------
---------The stock market is absolutely dysfunctional and an obvious speculative bubble, fostering a breakdown in the effective allocation of capital. There are also massive trade deficits destined to only grow more extreme as imports are left to satisfy the credit induced excessive demand. We see this week that February imports into the Port of Los Angeles were 25% above last year's level. -----
TG:
Once we worked ourselves into this position there was no "political" way for the US to work the dollar out of it. Better said, it's a done deal! Our entire dollar reserve system has become a function of contract derivatives that must expand in order to survive. It's an incredible dynamic that few get to witness up close as it unfolds. It's also a deadly game that will literally eat one's assets if it falters while they are trading in it.
This is why the Fed only raised 1/4 point. They must remain behind the expansion curve thus allowing the dollar inflation to continue. This is the whole thrust of my walking the gold trail today. Others have known about this ending "dollar timeline" long ago and began preparing for it. These people (entire country systems, actually) are not trading this dynamic with an eye to make more dollars from it, rather they are positioning themselves to be "out of the way" of this train. Truly, trying to make more dollars in this is like trying to accumulate more real estate in downtown Rome just before the "Roman Empire" falls.
This is why physical gold is seen as "so alien" to most "western traders". They fail to understand (or they don't accept) how a hyperinflation destroys all wealth denominated in said paper currency. You can trade yourself into a billionaire, but cannot spend it into something of real value faster than real things prices rise. Physical gold is one of those real things that neither the currency or gold
contracts written in that currency can match. Once this contract system begins to fail by reverting into "cash settlement", the paper gold trader immediately begins to fall behind a surging physical gold price. Most think they will be faster than the markets and will cash out, jumping into physical. Thinking that at worst they will sell for, say $1,000 then buy for $1,050. But, like a dog chasing his
tail, the entire marketplace will be doing this! Once the gap becomes real, traders that use paper contracts will discount their bids that you must sell into. These spreads against physical trading cannot be arbitraged because a real shortage of deliverable gold will break the arbitrage credibility. This is the actual failing dynamic we will witness and it will mostly happen as a sudden event. Not
drawn out over months.
Forget the official CPI reports, once real price inflation comes into real view the paper markets will disintegrate with untradeable speed! Unfortunately, some 99% of the most visible western gold bugs all accept that their present "gold market" will counter match this loss of wealth. It will, but only in dollar terms! Not in real gold terms because gold will be devaluing the dollar on a massive scale. Even if the officials temporally stop all US gold trading, Euroland will allow it. Thus continuing to mark the dollar to the gold market.
Again, this is just one segment of an overall disintegration of dollar wealth as we know it. Any and all companies in real goods production will face the same nightmare as their distribution network runs head long into this dollar derivative breakup. Hence, the comming run that will take place to settle in Euros.
Gold mines are in the same boat because they cannot just walk away from their trade banks by selling gold outright, on the street corner. What bank, under gold contract stress would settle their trade? They will sell into the paper gold market through out the discounting phase until their inflation induced operations costs decimate their margins. I am betting that the only ones that will at least keep up with the return on physical gold will be the mines that can most easily restructure to sell into Euroland, for Euros. We shall see.
Back to your bookkeeping trade flows:
Good luck keeping up with it all! (smile)) The whole system is spiraling out of control now. We just call it the end of a currencies "timeline" and leave it at that. Most everyone else will eventually call it the beginning of dollar hyperinflation.
There was a lot of commentary recently about how the Fed didn't really know what money was, or how to measure it's growth or velocity. I wasn't jolted by this because they cannot lock down a run away currency and let everyone see that their breaks have burned out (or don't work). Politically, they must doubletalk themselves into a policy of "ongoing management". The only way for them to stop this is to literally shut down and bankrupt the dollar system. But, that was a political option in the late 70s and early 80s as there was no other reserve to run to. So, as the fed locked down then, everyone stayed on the train, took their loses and helped slow the thing down.
Today, everyone on this run away train is yelling to hit the breaks. The fed driver just turns and says don't worry, I'll break it hard if we go much faster. Look around and you'll see all the train mechanics jumping out the windows (physical gold and Euros) because they know if the real
breaks are hit, the dollar will just jump the tacks at this speed and wreck apart.
ALL:
So get ready to lose a substantial amount of your net worth as this all unfolds. In fits and starts, everything is going to seem to go up much higher in prices before this is all over. Yet, the illusion will fail. Physical gold will have it's day in a way that few will ever understand.
Onward to other items (and more of your's ORO)
TG
Trail Guide (3/22/2000; 9:17:23MDT - Msg ID:27271)
Comment
HI - HAT (03/22/00; 03:46:57MDT - Msg ID:27260)
-----------To be so removed from entropic rhythems and have our whole advanced civilization on this high of a derivative tightrope can only lead to disaster or totalitarian structures. ----------
Hello Mr. Hat,
This is a great observation, but we must accept and adjust to the flow of human will. As a nation of people or even as a group of freedom fighters, society can and does often try to change the course of history. It's a good cause. But battling people and controlling one's own wealth in times of
trouble are two different things. As wealth owners" we must guard against an attitude of "the new totalitarian structure is going to control everything and take away my stuff (in gold or whatever form), so why bother to fight that cause". For gold advocates it's usually hear as " they will take
your physical gold, so we may as well play their paper game now, and win more, before they stop it all". Hence, the promotion to "trade it" because we cannot win!
I see this attitude all over and it's not something completely new for our time. Mostly it's new because western thought is fixated on a paper defense. The outrage is expressed because people can no longer play the financial paper games they played before, without losing to the "cabal" (or whatever). In the process, they come up with all sorts of strategies to combat the "big forces". Yet, none of these strategies perform well today. These "big forces" are driving the system into the ground as they try to keep their own financial selves ahead of the game (not to mention saving the viability of the dollar).
Again, I submit that one does not have to "fight it" by standing on the train tracks and yell "don't run over me again because it's illegal". To keep holding (or buying) gold derivatives because someday, the "big forces shorts" are going to eat it, invites your own assets being served up for dinner at the time.
Buying more options, more futures or adding to that gold stock that went from 10 to 1 because it's now a "long term option" against the eventual "paper surge", begs the question: "What if the shorts don't have to cover?" What if the paper markets add even more equity to their gold short position by falling even further? What if the US banking system creates so much "free inflation" "bookkeeping cash", that the shorts have an endless supply of contract producing ability. Let's face it, as long as the paper market sets the physical price, those that have sold real gold short may not
ever be called to refund it! At least until the marketplace completely fails!
We see it all over the "Western Web". Paper gold investors want this market to coexist with a "cleaning surge" that pays off their paper positions, yet completely destroys the positions of the very people that make the market??? As such, they forget (or never accepted) that the world gold
market today is an "official illusion" built for the benefit of the US dollar. For the game to pay off the way they want will require the fed to just lock it all down. That simply is not going to happen and even if it did, no one could honor the contracts written anyway. Under these conditions, does anyone think the governments will watch the free worlds banking system melt away as they wait for the gold mines to dole out a covering supply at $XX,000 per ounce?? If you do, please stay on the tracts while waiting for the next train!
No, we are going to progress exactly as we have to date. The dollar will continue to inflate itself into the hyperinflation of all goods prices. The paper gold supply will continue to expand along with the dollar until "discounting" begins to crush it's ability to function. Physical gold will be the very best thing to accumulate as it's leverage multiplies every day under these conditions. Truly, the key to coming out ahead in this is by playing a game no one can rig. Buying cheap gold from others who accept that officials set it's price through paper trading, is like selling real estate in Rome just before the fall. Selling paper deeds for Roman gold, that is!
TG
Trail Guide (3/22/2000; 9:36:38MDT - Msg ID:27272)
Comment
ss of neap (03/22/00; 08:05:21MDT - Msg ID:27267)
-------I believe that the problem is that most people do NOT know IT.------Hmmmmmmmm---
Hello ss of neap,
Well,,,,, sadly that's true. But, then this has been the case all thru history. Yet, today, nothing stops a person from buying real gold in coins. It's a clean judgment call for everyone to make. It's no different than buying a stock for $300 and watching it go to $3,000. What of the poor person that sold it to you? They didn't have to sell. Indeed, they sold because they thought it was going to $100.
My point about gold is that it's a wealth asset as old and as free as the world. You either accept humanity as being honest or you buy a little gold as wealth defense. If there has been any real deception today, it's been in the western perception that paper gold is real gold. This is where many of our modern gold bugs "do NOT know it". (frown)
TG
Trail Guide (3/22/2000; 18:28:43MDT - Msg ID:27306)
Late Reply
I fear I' m going to be banished to the Gold Trail if I don't stop saying "I'm ready to talk",,,, then run away! Sorry all, had some contracts (not gold) to look over.
USAGOLD (3/22/2000; 10:06:08MDT - Msg ID:27273)
Trail Guide...
Good to see you here today, my friend.
A question for you inspired by a conversation with a well-placed friend of USAGOLD yesterday. He reminds that the upcoming OPEC meeting on March 27th is exactly six months to the day after the Washington Accord announcement.
He wonders if there is any scuttlebut about an announcement being made in Vienna that the Gulf will start taking euros in payment for oil (corrected per MK, smile). The extravagant dollar printing goes on almost without interruption. The oil price rises and Europe must convert to dollars first, then buy oil at the jacked-up price -- three times what it was less than a year ago. This has to be a
tremendous burden on Europe both politically and financially, and I note the quietly proceeding talks between European financial officials and the MidEast.
What is your take on this? Do you think the March 27th OPEC meeting in Vienna will be the day the Euro speaks with new authority, or just another OPEC meeting?
-------------------------------------------
Hello Michael,
Thanks for all the effort by the Centennial people for making this such a visual pleasure. It's a class act by a truly professional team!
My thoughts:
Don't think for a minute that Euroland is suffering any worse than the US. In reality, their true inflation impact is about the same or less than it is on Americans. By true inflation I mean the real prices that regular people have to deal with. Some commentators state that we have it better, but that is looking at it using the US rigged CPI against the more honest Euro rates.
Sure, their oil costs have gone up more because the Euro is down against the dollar. But relative to what? It's a moving target that defies comparison. Oil was way down from today when the Euro came out at an artificially high rate. Did that exchange rate reflect the correct value of oil in Euros at that time? Could be yes or no because the entire Dollar / Euro / oil value comparison was / is being manipulated for an end goal.
In addition, on a fundamental basis one must consider that their barrel use per person unit is way less than ours. The result of cost containment efficiencies structured in a long time ago. Gasoline rates, commercial train use and public transport etc.., all allow them to function with higher crude while receiving less of a cost jolt. Further, these countries trade more with each other. This arrangement allows them to work with a lower Euro while enjoying it's positive effects on exports. Even with higher oil prices! The real question we must ask is why are they taking all these dollar assets and what will they eventually do with them.
Currently our trade deficit is flooding the world with dollars that have no practical purpose for use in buying anything but oil. Sure, they can and do invest in our stock and treasury markets, but that only produces more of the same currency. Further, if the fed was to do anything that would tame out deficit, that action would slam the dollar, stocks and even bond rates. In the process destroying
more value than could be gained. So gross foreign dollar holding is only a long term losing position. As such it (dollar support) must be seen as only a parking arrangement. There can be no explanation except that they have a trump card that will eventually replace any lost value these
dollars will throw off. They are drawing us into a self inflicted inflationary trap by helping the system build a dollar flood.
This is the card they are playing right now and it's the reason the US is trying to get crude down quickly. Lower crude is our main defensive policy because that's our real money killer if we don't. Long term, high dollar crude has a super inflationary impact on US money policy. Because our cost structure is hit the hardest from high oil "over time". The flaw is in our use per capita. The oil flows alone translate into huge outgoing dollar credits. When combined with an already hyper expanding trade flow, the dollars are piling up overseas like never before. We are digging our own grave, because for the first time the dollar is in competition with another reserve currency that can
withstand and prosper during a crude oil assault.
I doubt they (ME) will shift oil to partial Euro settlement yet. It would look too obvious and the Euro float is still to small. The impact would derail their (Euroland) current dollar strategy. My bet is that it will be done once real price inflation begins to impact our economy. Over and well beyond the reported CPI. Something not far away. Once the Fed is seen holding it's "behind the curve" interest rate course and pumping reserves when obvious inflation is gaining momentum, the justification will be there. I suspect they (producers) will "basket" the price first, them proceed by slowly changing the currency percentages.
If Euroland is talking with the ME about anything, gold is somewhere in that discussion. (smile) If the paper gold market gets clocked in the middle of all this, expect them to convert the gold trading center in Dubai into a physical arena settled in Euros. Hong Kong and Zurich will be hot on that trail.
So, having said all that, watch the Euro get included in settlement anyway! (smile) If this was ongoing, I know Another would not tell me. Boy, that would be something to know ahead of time, right (huge smile)!
thanks TG
Trail Guide (3/23/2000; 12:03:54MDT - Msg ID:27349)
reply
USAGOLD (3/22/2000; 10:16:11MDT - Msg ID:27276)
Trail Guide...Euros/Oil
One other nuance to that question:
Do you think that the doubling of euro reserves might be preparation for such a move (euros for oil)? More gold at ECB's disposal would raise the level of MidEast interest and confidence per the anlaysis of the Gulf mind-set as posted by Another some time ago -- at least as I interpreted it.
Hello Usagold,
Yes Michael. This is part of their plan. I think the original concept (or compromise) in building the Euro was altered somewhat around 96 or 97. Gold had to be placed in a more established framework that could easily reflect a higher gold (value) price in their reserves. Fiat currencies are held as part of many nations reserves, but they are more a function of supporting the inter currency exchange rate. After EU, ECB gold reserves became more of a backing asset, outside traditional fiat reserve use.There it could later be used to settle long range imbalances in the system. Not much
different from the old gold exchange standard yet today not entangled in actual currency comparison thru fixed rates. The ECB made this a obvious point by openly marking their gold reserves to the market on a quarterly basis. They didn't have to do this. The act must be seen as having a policy purpose. With this statement alone they promoted a Euroland policy that higher dollar gold prices were fine, even good for the Euro. Further, this said that our currency will stand buy itself as a representation of our productive efforts, for better or worse. If peopled later wanted
to own gold instead of Euros, the ECB is saying, good, buy all you want at whatever price physical gold will trade at. In the future, gold prices and gold flow will be free.
This is a cornerstone for countries who's export values are mostly measured in real resources instead of human resources. It almost sets up a currency that's more suitable in reflecting their kind of wealth to the world. People today, missed the whole advantage of this. In reality, the higher the gold price, the easier it will be to buy natural resources in Euros internationally. The tradeoff comes
to countries that had the leadership to buy gold early, instead of depending on dollars alone. Oil producers will be compensated for already owning gold in that it's (gold) appreciation will return all the value stolen from them as they depleted oil and sold in dollars.
I expect the ECB to eventually own a lot more gold than they do now. Whether they buy it with newly issued Euros (using the BIS perhaps), buy it with reserve dollars or have it "transferred" from their ECMBs (through policy changes) gold reserves will be a future key item in determining the
integrity of the ECB.
Again (from an earlier post), if Euro was declared the settlement currency for oil, it would triple against the dollar overnight. No one wants that at this time. They want the Euro to be seen as strong in usage, strong in gold, strong in a hands off policy but not yet strong against the dollar. Right now, the dollar is in the process of killing itself through massive currency expansion. And doing this for the first time with a competitor standing next to it. Once real price inflation takes hold, the dollar will fall on it's own against the Euro. Without intervention.
This is the period we are just entering. Today, the dollar gold markets are in the middle of a major transition started about this time last year. The Washington Agreement only made official in September what was being changed in March 99. The oil markets are also responding to a new dynamic in world oil valuations. The fact that oil need not be locked to dollar prices anymore than gold does. The physical supply of both these items is reduced to the world markets in the attempt to more reflect their true worth in dollars.
Already Euroland values oil much higher than America. One has only to look at the gas pump prices to see this. They also value gold much higher and ECB policy alone makes this evident. Such an open policy in support of both these items cannot go unnoticed.
Today, world production of everything no longer has the dollar as the only option. If prices are unacceptable, things can be sold in Euros. In the past the oil "valve" was the only way to achieve a more honest return for an irreplaceable resource. A usable resource that paid back three times the "lifestyle" from what one paid for it in dollars. Now the US must contend with not only the valve,
but a "currency alternative" in the ongoing process to revalue oil! The adding of gold to the Euro's reserve base can only build the credibility of that alternative over using the valve.
thanks TG
Trail Guide (3/23/2000; 13:33:40MDT - Msg ID:27355)
reply
Julia (3/23/2000; 11:23:36MDT - Msg ID:27344)
Trail Guide
Hi Trail Guide,
You mentioned the "US rigged CPI index" in your post to Michael I think it was yesterday. I'd like to know what "Index" would give the "REAL" picture of inflation in the U.S., especially as applies to , say, rental property over 20 years needing an inflation increase clause according to ?? Index?
Hello Julia,
Ha! Ha! My first thought would be to use any index that's always going up! Marking it to a ratio of US postage is a real winner. Let's see, an average of the spot wholesale prices of "Western Red Cedar", Kansas City delivered "Winter Wheat" and Hawaiian "Koa wood rocking chairs"!!!!!!(big smile)
Seriously,
The reality of it all is that almost every major index is somewhat "rigged". At least the ones you could get a counterpart to sign on to. Depending on the application a ratio of gross electric use and it's price can work fairly. It is a dilemma??
TG
Trail Guide (3/23/2000; 13:36:09MDT - Msg ID:27356)
comment
jinx44 (3/23/2000; 9:23:49MDT - Msg ID:27341)
Hello jinx44,
I don't know about this? Let's see:
-------The reason that politics will influence OPEC s decisions is that the current and future prices of oil are turning out to be a major economic issue and thus a major political issue. ------
TG: Yes, this is good! Oil's been political for 30 years or so. Nice recap.
--------The reallocation of wealth from oil consumers, mostly in western economies, to oil producers, mostly in developing economies, cannot proceed without affecting capital markets in western countries.------
TG: Yes, again! This must be at least the second or third time around.
-----------OPEC is a cartel and the sole purpose of a cartel is to allocate production quotas among its members as to maximize their revenues. Once a cartel starts to make decisions about production levels, which do not seek to maximize its members revenues, they lose the economic
incentive to be part of a cartel. When they have no economic incentive to be part of a cartel, they also have no incentive to abide by its decisions. Then the cartel dissolves and each producer determines production levels independently. -----------
TG: Well, the maximizing of revenues is "not" the sole purpose of closing the valve. If they wanted "maximum" money flow they would shut the valve completely off!! Then auction off the stuff one barrel at a time to the highest bidder. Boy we would see some serious "maximization" in that
process! (smile)
How about adding in: We want a fair price for the resource? Not the maximum price. Where was all the US deplomacy when oil was at $10?
Or: We want to conserve this limited resource so as to last everyone longer?
Or: Why don't the Americans charge the same price for gasoline as Euroland, in order to conserve "our" oil? These are all valid reasons to be part of a cartel also.
Further: Why is it that everyone thinks that just because you have two water wells in the ground you must pump from both of them,,,,,,, otherwise you are manipulating the supply. What if you never drilled the second well? By god, that must be some form of "cartel" also. In that context,
Arabia is manipulating the supply by not trippleing their holes in the ground. If they did, then we could triple our demand that they pump at capacity??
------------This brings us to the dilemma of the big producers in OPEC, chief among them are Saudi Arabia and Venezuela. The big producers in OPEC cannot fix the price of oil unless they are willing to become the swing producers adjusting their production as is needed to achieve a certain
price level of oil. -------------------
TG: Wait a minute, he says they "cannot fix the price of oil unless they are willing to become the swing producers". He must have missed the last year or so. OPEC controlled prices recently without using swing producers. Everyone either cut production or limited their increse in order to maintain better prices. First he points out the "economic incentives" of very high prices, then leaves out the part about "economic incentives" to keep the price from falling through the floor! (frown)
------Saudi Arabia and other Arab oil producers in the Gulf can now go it alone and raise oil production by 2 million barrels per day, as is asked for by Washington, thereby driving the price of oil in the near term to less than 25 dollars per barrel. ---------------
TG: Oh! OK! I get it now. Washington asked them to cut production earlier so as to raise prices. So, now Washington is ready for prices to fall so they will tell OPEC to raise production.
ALL: The only delima I see here is in what the US is going to do if OPEC only raises 1.25 to 1.5 million?
TG
Trail Guide (3/23/2000; 13:37:12MDT - Msg ID:27357)
reply
Cavan Man (3/23/2000; 11:40:05MDT - Msg ID:27346)
Hello Cavan Man,
Well I guess I should have watched "frontline". If I did I would have a much better grasp of what is going on. (sarcastic smile). Tell you what, I'll just hold what i've got and watch how this all develops. You know the earth takes a turn every 24 hours and we never occupy the same spot for long. So, even if I stand still, my holdings are in a "fluid" position, right? It's the good thing about gold, it works in every spot in the human universe!
Thanks TG
Trail Guide (3/23/2000; 15:35:35MDT - Msg ID:27363)
Reply
PH in LA (3/22/2000; 19:16:32MDT - Msg ID:27308)
Euro value as seen in Spanish Pesetas
Greetings! Trail Guide.
TG:
Hello my friend, your words:
---------You touch on a dynamic that brings no end of consternation to family discussions on the international situation between the US and Europe (Spain). ----------
TG:
Ha! Ha! You should be in my house? We need hired security at parties to keep our guest a safe distance apart! (smile)
------At the introduction of the Euro, it was not artificially high when viewed from perspective of the Spanish Peseta. At $1.18/Euro, (the Euro is pegged at 166 pesetas per Euro), the value of the dollar vs. the Peseta ($ = 140 ptas) was already slightly above its traditional level which has normally fluctuated between 98/$ and 130/$. Presently it seems determined to stay above 170 and has reached 174 more than once.---------------
TG:
Tell me, do your people feel petrol has gone up more in percentage than, say,, Los Angeles? In the same light has price inflation at the "real people" level gone up more than the US? Your guess, perhaps?
I'm makeing a point that at this time we cannot prove, but: had the Euro stayed stronger at it's birth stage, price inflation within the Euroland partners could have been worse. Because they trade so much with each other, a stronger Euro would have forced even lower % rates and gunned the economy. Prices would have went up based on regular supply and demand economics within their system. Imported items in dollars make up a much smaller percentage in Euroland than in the US. So, the foreign competition to control cost increases may not have worked as in the US. It's a strange thing, but it was possible that the ECB was somewhat worried about this. When considering a "brand new" currency, the lesser of two evils may have been a lower Euro vs Dollar initially. In this way inflation would only match the US rate,,,,, at worse???
-------Perhaps the Euro/peseta ratio was pegged at 166 to compensate for the robust level of economic activity in Spain. Nevertheless, a ratio of ±172 pesetas per dollar is really VERY high now. It reminds me of ANOTHER's comment that we would see gold and the dollar rising together
Perhaps the reality of the efforts to be expended to keep the POG down were not anticipated at that time, and for this reason, we are seeing only part of ANOTHER's prophecy being fulfilled. Your own writings point to an eventual "unglueing" of this effort. Do you and ANOTHER think that
the removal of the lynchpin presently holding all this together will be the result of a deliberate action on the part of Euroland? Or will it more likely be a gradual unfolding of events that brings about the "marking to market" of gold values that you are convinced will happen "in our lifetime"?-----------
TG:
I think somewhere in the archives I wrote about this before. Trying to reconcile it. The dollar is completely doing what no one thought it could, given the inflationary prospects of the continued US money policy. On this count Another was right in that Euro competition was driving a liquidity shortage demand for dollars even as the Fed guns the presses. This is a limited dynamic that will burn itself out fairly fast, I think. Who knows, looking at today's rates, we may have seen the dollar/Euro top?
If this is the dollar top, a gold crisis is next. I think Another gave a false perception to us about gold. He probably equated a gold crisis and a gold run in the same context?? If you remember, it was last spring (??) that he corrected me by pointing out how the markets could separate (paper vs physical). I never saw it that way untill then. How much they (US faction)can hide the crisis or hide
the true price of physical in this is up in the air now? In addition, this business of England jumping ship for the Euro and buying time for their BBs before the fact,,,,,, was a new move on the chess board.
All I can say now is that we definitely have a super inflation in the works! Hell, you can see it in the Dow alone. We might as well get used to it, because all the rules are going out the window.
I've got more "off the cuff" comments to make but have to go now. More replies to ALL tomorrow.
Thanks PH,,,,,,,,, TG
Trail Guide (3/25/2000; 14:16:55MDT - Msg ID:27464)
(No Subject)
Julia (03/25/00; 05:55:41MDT - Msg ID:27444)
Trail Guide - Inflation Indexes
Trail Guide,
Or..... we could base it on "Master's Golf Tournament tickets."(Smile!)
------------
Hello Julia,
I have an old badge to the masters. Dated 1986, April 10-13. Number X(?????). I can't print the numbers, you understand. It's price was $75.
Ha! Ha! You know and I know that's not what it really cost to be there, then or now!
Yes, this would be some inflation index!!!!! (big smile)
TG
Trail Guide (03/25/00; 15:46:22MDT - Msg ID:27467)
comment
Journeyman (03/21/00; 06:32:00MDT - Msg ID:27201)
Paper/gold composite spot
Remember, the "spot gold price" ISN'T the true price of physical gold - - - though you can still buy physical gold at this price. The spot gold price is a composite price including both physical gold and gold contracts, the paper component implying a much greater physical gold supply than actually exists. Buying physical gold (and taking possession) at this point in history is thus sort of like paying milk prices for a bottle of cream. Almost no one else has noticed yet.
I know we all pay lip service, but at times like this, it's good to remember. Also good to remember, if TC or MK was it? was correct, most of the gold "sold" actually travels around to other CBs, it doesn't really enter the market, doesn't affect the supply/demand equation except psychologically.
Finally, if we truly want a return to honest money, the more gold actually released from the CB vaults the better, no matter what the price temporarily falls to.
Regards,
Journeyman
----------------------------
Hello Journeyman,
Reading your post made me think of something I was wanting to say about the "Legal Tender" item. Many readers commented on it earlier when it was brought up.
My point about not using modern gold classified as LT comes from the 1% chance that the government may in the future proclaim all "old" LT "illegal" to possess! Recently and in the past,,,,, after an extended price inflation,,,,,,,, most countries just knock off a few zeros and print a new
currency. Declaring that they are phasing out the old one at some specified date.
But I sense that here in the US, they may want to "suddenly" declare all LT illegal to use and own. The reason for such a policy would be to trap the majority of "cash" users in a position where they cannot spend their holdings before the fact. Whether cash owners keep cash to hide money assets
or ill-gotten gains, these holdings would be flushed out with such an action. Of course this would be a "state of emergency" action. But they could come up with some scheme to temporally make us tender our cash for "bank credits" until a new money was made, after the announcement. This way
no one could prepare for the usual "turnover" process, by knowing in advance that a new currency was being printed.
I know,,,,,, I know,,,,, it's a strange way to see it, but I believe it's a real possibility. We have to understand that this would not be aimed at gold ownership, just hidden LT ownership. This is mostly because hidden cash is, as some commentators write, is more than anyone can count. In the
mean time, Eagles would be inadvertently sucked up in this maelstrom because they were classified as LT. I have even read that this was a preconceived trap, laid on the American people in an effort to placate their bullion desire. Yet, still allowing a backdoor way to grab their gold for other
reasons! Reasons outside the legality of a gold recall, that they clearly cannot do within he current dollar status.
More likely than not, we would be able to replace our called in gold, but with privacy lost!
I feel like a conspiracy nut for saying this, but it makes some sense.
Further:
Leigh made an excellent point (hello Leigh) in that one could just melt them down. Absolutely true, but what a needless mess, no? Anyway, I pass this on in it's abbreviated form for all to consider.
Someone else also asked how one could store a very large gold holding. Well, we have to accept that once one's wealth becomes large, it's impossible to hide. This has always been the case. We just place the bulk of it in accredited storage and keep what we will privately. I think we all have to
remember that the truly wealthy people in both the US and the world, all have gold! In addition they are not as stupid as the media print them as. CNBC could parade a countless number of billionaires on tv and never once would any of them say they own gold. In fact, they would go out of their way to say how dumb an idea it is!
My point is that most of the world leaders, your congressmen included, have gold that they would never admit to. Once we left the "dollar being gold" world, they all started down this trail. In addition, none of them own gold as a bet on it's price movement, they hold it as insurance. This said, we must understand that in the end, when push comes to shove, they will not pass laws that damage their own interest! Trust me, their own interest has always been above ours (smile), don't you agree!
Journeyman, I do have a reply on your post. Will have it in a minute.
Thanks TG
Trail Guide (03/25/00; 16:29:55MDT - Msg ID:27470)
comment
Journeyman (03/21/00; 06:32:00MDT - Msg ID:27201)
Paper/gold composite spot
I know we all pay lip service, but at times like this, it's good to remember. Also good to remember, if TC or MK was it? was correct, most of the gold "sold" actually travels around to other CBs, it doesn't really enter the market, doesn't affect the supply/demand equation except psychologically.
--------------------------------------------------
Journeyman,
What MK wrote about total gold in the CBs is absolutely true. I agree with him in that we read so very little about this statistic. I think it's because it obliterates most of the theories about how the CBs are killing the gold price by selling off this unneeded asset.
I and Another pointed our countless times that the CBs were mostly playing the BBs against the market by giving "gray guarantees" to protect their (the BBs) paper positions. In reality the whole thing is a political thriller every bit equal to any 007 film.
The truth of it all is that they could never control the value of physical gold and because of this kept most of their holdings in tact. I would even go so far as to say that much of their draw down is an illusion.
We must remember that selling a real asset to the public for cash does not control anything. You get the gold, they get the paper money. It's the same for crude. The price is what you get real oil for. The lower the better. Just like gold, a lower price imparts the benefit and use of the product to
the buyer. Indeed, a lower price is the loss is to the seller. Through out this 1990s gold downturn, what physical gold the new buyers obtained was to their gain. There was no control at all, the buyer gained the gold!
What this modern gold market can control is the value of contract gold. Here they (BBs) do an exceptionally fine job. They sold paper gold to everyone that wanted to only bet on it's price movement, not buy gold. To this end, they took everyone's money and the buyer got nothing in return. Yes, it did play an important role in supporting the dollar while the currency world was in transition. Just as our USAGOLD writer SteveH has said, this gold industry and the contract
market it services was sacrificed. But, look at what would have happened if they didn't. Indeed, the time brought was purchased on the backs of gold bugs, not physical gold advocates. One ended up with depreciating paper and the other with an ages old world class money. This isn't the first time citizens of the world such as Farfel learned that "betting" and "owning" are two different things. It won't be the last!
This country is diving head first into a grand hyper inflation and no amount of Fed maneuvers will stop it. People that learn this early on, before the physical comes into short supply, will be miles ahead. Buying gold between $400 and $200 will be like knowing a member with Masters Tickets. Cavan Man, do you know me better now?
I'll work on the next hike now. We are packing up for the real thing my friends! Get ready.
TG
Trail Guide (3/28/2000; 5:27:15MDT - Msg ID:27598)
USA------ Oil prices
http://biz.yahoo.com/apf/000328/gasoline_e_1.html
Galearis (3/27/2000; 22:10:14MDT - Msg ID:27588)
-------I drive a SUV. Please note the following: It is an old Ford Explorer, and it gets 30 miles per gallon. -----
=========================================
Farfel (3/27/2000; 23:01:10MDT - Msg ID:27590)
-------Meanwhile, the nation suffers for it as gasoline prices DO have something to do with DEMAND, not simply supply.-------------
=========================================
http://biz.yahoo.com/apf/000328/gasoline_e_1.html
--------OSLO, Norway (AP) -- If Europeans spotted gasoline for $1.50 a gallon -- a price that outrages Americans -- motorists would be lined up around the block to cash in on an incredible bargain.----------
--------Norwegians pay up to $5 per gallon for lead-free regular, even though their nation is the world's second-largest oil exporter.------
--------In Britain, also a major oil producer, drivers endure the world's most expensive gasoline, at $5.75 a gallon.-------
===========================
ALL: We have a long way to go before learning that oil is worth a lot more that our currency says it does!! (smile)
TG
Trail Guide (04/01/00; 07:58:23MDT - Msg ID:27896)
(No Subject)
Today is a good day for a hike on the gold trail. Be back a little later with a full pack!(smile)
TG
Gold Trail Update (04/01/00; 16:59:06MDT - Msg ID:27915)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (04/01/00; 16:59:05MT - usagold.com msg#14)
Walking The Trail
http://csf.colorado.edu/forums/longwaves/mar00/msg01356.html
Hello everyone!
It's been a few weeks and it's time to stretch the legs again.
During these last few days I have seen several renditions of my discussions from the USAGOLD Forum circulating around. Good! Glad to see it being thought about. I just wanted to let it be known that this was a collection of several of my rambling posts. They were strung together and included some commentary of ORO and a few other good posters there. I don't know who put this together but have seen THC, Singlion, Sharfin and a host of others posting it all over. With a title of "Selling Paper Deeds for Roman Gold" it does truly hit home for gold advocates today. Food for thought in a hungry world. Thanks people, for adding your own special flavor to the currency problems we consider today.
http://csf.colorado.edu/forums/longwaves/mar00/msg01356.html
Onward
Every time the dollar price of gold is driven down we hear cries of despair all over the web. Understand that these sounds you hear are not really the noises of physical pain, rather it's the ages old wale of one person giving his wealth to another and getting nothing in return. (frown) As "Gold Advocates" we hear these same as signals that indicate more free assets coming our way. As Real Gold buyers, the feast only becomes larger and our real wealth greater! (smile)
You see, a Gold Advocate looks at gold as a wealth currency and continues to accumulate it at any better price. Follow those that "mostly" invest in Paper Gold or even the "Gold Industry" and one can only see where more losses are coming at these lower prices. Some gold mines may be a good buy here, but not many of them.
Some moaners place gold as a downtrodden relic and swear never to invest in it again. Yet, from our view, they never purchased "gold the currency" in the first place. Their idea of "hedging their wealth with gold" included a wholesale buying into the concept that "paper gold" was "real gold". It never was and never will be. Paper trading only works while the paper world stays together. A dynamic that is unraveling now!
There is a big risk difference between betting on the price of gold for a short run profit and buying real wealth currency for a long term crisis event. For myself, the largest difference will be in the real wealth gained in the future, not today. Over the last 15 years political gold policy has caused paper players to walked the gold trail like drunken sailors. As a result their assets have done likewise. One step forward in the little gold paper runs and two steps backwards while waiting for the next move. All the while giving away their dollar wealth with nothing to show for it when the real run comes. In the end, they will sober up only to find that they made little progress as most of their "gold" investments brought them full circle. About even if they are lucky! Yet, bullion holders will experience gains that make almost any investment today look tame.
Look over here
The currency of gold hasn't done nearly as bad as paper traders would have us think. As a person of the world I own many currencies (dollars included) and all of them go up and down as much as gold. Some even more so. Because gold is but one very large currency holding for me, it takes on an exchange significance.
Using very approximate values:
In January 1985 one dollar would buy 1/300 ounce of gold. At the same time it would buy 3.25 German Marks and about 250 Yen.
Ten years later, by 1995 one dollar would buy 1/375 ounce of gold, 1.40 Marks and less than 100 Yen.
Here we have two world class currencies moving well over 100% against the dollar! Yet, gold was more stable as it moved only 25%. From Jan 1999 gold has been even more stable than the Euro, today resting within 5% of it's value from the Euro starting range.
My point is that today, all currencies will run up and down in their race to full fill a fiat's destiny. Yet, in the process their percentages moves could be temporally far greater than what gold moves. Making gold look like the most stable holding of all. Even as paper gold bugs cry about how it's crashing?
In this light we must all consider ourselves like insurance companies writing risk policies by holding paper currencies. The higher the movement risk, the more interest we must receive to hold our wealth in paper form. Indeed, just as an insurance company is lucky in good years to balance it's exchange rate loses against the same interest return, currencies are not that great a deal in today's world. Physical gold becomes a fine wealth holding that pays a much higher premium than any fiat currency. It's zero interest is "high" in relation to the default (inflation) rate inherent in paper money. In the future, some will even pay a "negative" rate in the paper markets to try and acquire gold through legal force. This is called buying a gold contract in default and trying to force the counter party to produce gold. Some will, most won't!
For all of you with a mind for intrigue, the game is now on to buy gold at negative rates. ORO, the SDR is telling your story. (follow his past discussion on the USAGOLD Forum) If the US would just stop pushing paper gold boulders down the hill,,,,, and stood and watched for a while,,,,, they would see that the avalanche now has a mind of it's own and needs no help. The whole paper gold mountain is on the move. (smile)
Further we walk
All of the massive tonnage of contract gold that is owed today was never as real as investors thought. It was an illusion of paper supply. Most of the gold sold by the European and other world CBs moved no further than the next CB vault. The gold trading world brought this "physical selling" story in it's entity and in the process supported the dollar's life.
Today, Europe is the greatest supporter of "Freegold" the world has seen for some time. As they act out their policy, the paper gold marketplace as we know it priced in dollars will fail. The completely unexplainable gold sales by the BOE are only a means to this end. They are much more concerned about joining the Euro and saving some BB face than any longer saving the dollar.
The US is now "in it" alone as they have lost the dollar war and the "oil war". Crude oil will not stay in this new dollar price range for long. This was politically arranged to somewhat save US face. We (US) are now calling in every favor, expending the last political capital and inflating the dollar in an end run that will soon lead to nowhere. A grand hyper inflation of prices is now directly ahead on the trail. It should be ushered in with a large "crackup" in the currency derivatives market. Once this event is "in process" the paper gold markets will quickly rush to discount against physical gold. A discount that will break our gold market pricing and physical allocation system.
Understand that the largest gold rush will be from the paper gold arena into real gold. Any form of asset allocation that took the form of:
" "hey buddy, this security belongs in your portfolio as the gold portion" "
will be dumped and the remaining value placed in hot pursuit of the real thing. Just watch how it all unfolds, you will fell the pressure.
I for one hope someone can force paper gold lower while physical supplies still sell into it. Because once paper credibility is broken, our physical markets will seem like a speck of sand washed on an ocean shore.
We were at this same crossroads almost one year ago. The same stress brought about the "Washington Agreement" as it was pieced together during the summer of 99. I expect that this time, stronger medicine will be applied and fully expect it is "in process" now with gold under $280! The only difference today is that the Euro grows more mature and oil ever more independent.
Onward to camp
Here is a post I offered on our Forum. It's a good reflection of what was just said. Read it around the fire.
---------------------------
Trail Guide (03/25/00; 16:29:55MDT - Msg ID:27470)
comment
Journeyman (03/21/00; 06:32:00MDT - Msg ID:27201)
Paper/gold composite spot
I know we all pay lip service, but at times like this, it's good to remember. Also good to remember, if TC or MK was it? was correct, most of the gold "sold" actually travels around to other CBs, it doesn't really enter the market, doesn't affect the supply/demand equation except psychologically.
--------------------------------------------------
Journeyman,
What MK wrote about total gold in the CBs is absolutely true. I agree with him in that we read so very little about this statistic. I think it's because it obliterates most of the theories about how the CBs are killing the gold price by selling off this unneeded asset.
I and Another pointed our countless times that the CBs were mostly playing the BBs against the market by giving "gray guarantees" to protect their (the BBs) paper positions. In reality the whole thing is a political thriller every bit equal to any 007 film.
The truth of it all is that they could never control the value of physical gold and because of this kept most of their holdings in tact. I would even go so far as to say that much of their draw down is an illusion.
We must remember that selling a real asset to the public for cash does not control anything. You get the gold, they get the paper money. It's the same for crude. The price is what you get real oil for. The lower the better. Just like gold, a lower price imparts the benefit and use of the product to the buyer. Indeed, a lower price is the loss is to the seller. Through out this 1990s gold downturn, what physical gold the new buyers obtained was to their gain. There was no control at all, the buyer gained the gold!
What this modern gold market can control is the value of contract gold. Here they (BBs) do an exceptionally fine job. They sold paper gold to everyone that wanted to only bet on it's price movement, not buy gold. To this end, they took everyone's money and the buyer got nothing in return. Yes, it did play an important role in supporting the dollar while the currency world was in transition. Just as our USAGOLD writer SteveH has said, this gold industry and the contract market it services was sacrificed. But, look at what would have happened if they didn't. Indeed, the time brought was purchased on the backs of gold bugs, not physical gold advocates. One ended up with depreciating paper and the other with an ages old world class money. This isn't the first time citizens of the world such as Farfel learned that "betting" and "owning" are two different things. It won't be the last!
This country is diving head first into a grand hyper inflation and no amount of Fed maneuvers will stop it. People that learn this early on, before the physical comes into short supply, will be miles ahead. Buying gold between $400 and $200 will be like knowing a member with Masters Tickets.
------------------------------------------------------------
Enough for now, unpack and lights out. We need our rest because the trail will get rough from here on out.
Thanks for walking,,,,,,,FOA/ your Trail Guide
Gold Trail Update (04/03/00; 20:58:37MDT - Msg ID:28004)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (04/03/00; 20:58:36MT - usagold.com msg#15)
Looking ahead, around the next curve?
Last year the Washington Agreement (WA) spelled the end of the modern paper gold markets as we know it. Yet, few people truly believe anything substantial has happened because gold failed to "follow through" on it's post WA price spike. Most hold this conclusion as a result of watching the ball instead of the game.
The WA was a direct response to the "dollar faction's" use of contract gold in driving the value of the "real asset" down. Prior to the Euro birth, such an extreme paper manipulation below $280 would have been meet with a different kind of WA. More likely an outright "physical purchase" of gold on the world spot markets by the BIS. They would have allocated this newly purchased gold into the same official accounts where current BIS gold flows are now placed.
But today we operate in an established, new Euro environment. The very fact that the US and England acknowledged the WA is alone evidence of this new Euro political power. In essence, an ECB / BIS alliance has placed the world "in process" to changing the way gold is traded and valued. A process that will drain "real gold" liquidity from the present london market and leave many players wondering what happened.
Part of understanding "what is happening" requires us to keep our eyes "on the game", not on the ball. Physical gold advocates have but to follow the posts of TownCrier on the USAGOLD Forum. He has consistently pointed out how "Post Euro" Euroland arena gold sales are being "allocated" into BIS sanctioned placements.
Even though the WA allowed for 2,000 tonnes to be sold over 5 years, no provisions were made to officially channel that new gold into the world contract market. The upcoming Swiss sales and the more recent Austria sales make the point. Especially when one understands that the BIS does not buy gold to sell outside the CB community or it's special accounts held for certain nations.
More importantly about the WA, the total existing contracts held at signing time were allowed to continue without any draw down criteria (gold to cover) over the 5 yr. term. Over time, this will squeeze the dollar physical market in an effort to fill existing paper commitments. In effect, the BIS now has it's hand on the gold valve and is controlling the contract filling flow at will.
But most analysis misinterpret the strategy of this. It is not an attempt to drive the contract gold prices upward. Quite the contrary, it's effects are just the opposite. In our current dollar gold market, the less gold is supplied, the more it pressures the price down! Players must create and sell not just more contracts to cover expiring ones, but also sell enough paper to force the price down further. In a market that's becoming shorter of physical gold, this is the only way they can add equity to cover rollover positions. In this political game, the dollar supporting paper gold arena is being forced to kill itself. It's also the reason I proclaim that we will see rare physical gold in the thousands once the deed is done.
Looking down the trail we can see the end of our paper gold markets. This same market place that evolved from 1971 into a "contract gold currency" is now being politically forced into hyperinflation in much the same way fiat currencies are. Just as the dollar has been inflated to unimaginable extremes to protect the US banking system, so to will this gold currency be inflated until suddenly it's credibility is shaken. I think a large gold default is directly ahead and it will be forced by the BIS / ECB. Right up until that default, contract gold currency will be printed as never before. Indeed, they are printing now for all they are worth! Literally!
If contract gold prices stop around here, be assured that the US dollar supporting faction has truly hit the end of that printing "worth"! If the prices start to rise now, a canceling of the BOE gold sales will confirm a large default in the pipeline. There would be no reason to sell into their LBMA if the marketplace is lost.
Further, watch for a sudden rush of OI on comex (double ot triple of total OI). This is the same item we watched for as confirmation around this time last year. The rush to buy contracts will be nothing more than an attempt at bookkeeping hedging by big traders. Truly no gold will come into play.
Excitement is building while the game is "in process"!
FOA/ your Trail Guide
Trail Guide (4/14/2000; 6:23:45MDT - Msg ID:28593)
(No Subject)
Hello again Cavan Man!
I haven't been too far away, just waiting for and digesting some further discussion with friends. Things are really looking up for the gold markets now. Truly a great day for physical advocates. I'll be here (this forum) and on the trail over the next few days. Will include your --- Cavan Man (4/14/2000; 6:05:29MDT - Msg ID:28592)-- observations also (along with others).
Nice to see so many good writers here!
Thanks Trail Guide
Trail Guide (4/14/2000; 6:33:52MDT - Msg ID:28594)
(No Subject)
Also,
Aristotle, nice points and items to bring up! We must talk about this (smile), it's good stuff!
ALL, we'll be covering a lot of ground soon.
TG
Gold Trail Update (4/15/2000; 14:31:22MDT - Msg ID:28713)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (4/15/2000; 14:31:21MT - usagold.com msg#16)
The trail is getting rough!
Here is a map to review as we walk.
I have read numerous times over the last year where analysts are finally subscribing to the fact that gold is a political tool. At first (1996 - 1997) only a handful even discussed this as a possibility, citing their perceptions that it couldn't be manipulated on such a grand scale. Now almost everyone knows it as a fact. Still, very, very few of them can today make the connection that the political tool of managing gold is not by selling on the physical side. In reality it's actually the "contract gold marketplace" itself where paper selling manages the gold marketplace.
We read media report after report where the CBs are dumping gold and forcing it's price down. But just as I pointed out on our last hike, in the BIS world of CB gold trading a very small percentage of gold has physically left their system during the 90s. The only thing falling has been both the "contract gold price" and that of investor perceptions of "total gold stocks" held officially. If investor thoughts have been manipulated at all they have been impacted most by "watching the ball and not following the game".
Onward
Clearly the world has broken itself into "only two" currency system support blocks. The US and the European! We have to observe these factions as a group if we are to understand their actions. Further, it's important to place nations that are outside these two groups. Are they "supporters" or destroyers of a faction. Which one is most strategic to their cause.
Japan and much of the Asian block are clearly "supporters" of the dollar faction because their entire trading structure was built on selling into a "US dollar trade deficit". Any buying of gold or Euros with dollar reserves would wreck their economy further by driving the Yen straight up. If they do elect to do this it will be in response to a much larger American economic crisis and occur further along in the dollar inflation timeline. Talk of the Yen being the third part of a "tripolar" currency world will be proven completely off the mark. Japan and any other of their close economic allies will sacrifice their money's viability for some time to stay with the dollar. In the process suffering the same full blown dollar hyperinflation effects that are coming to the US. Other Asian nations sold gold during their recent crisis not in support of the dollar so much as they were forced by the IMF to do so. In a story I have told before, their physical buying was hurting the manipulation game. Breaking them was all in an effort by the BIS to maintain a Pre Euro low gold agreement. Today, the lesser nations of the Asian block have returned to buying gold. Something that is in their culture, rather than a desire to destroy the dollar. Only this time we will not witness a political effort to stop this buying. To there credit and good fortune many (asians) will retain this wealth asset as our dollar is eaten from price inflation.
China is a wild card that uses the US for short term gain while not politically "supporting" the dollar system. Their historic trading ties face West to Europe, retracing the old Orient Express. Further, their attachment to gold is a natural draw that pulls them into the Euro faction. When the time is right and Euro trade deep enough, they like the oil producers will adopt the Euro as a reserve. That time may be very, very close!
Canada is seen selling it's gold stock in support of the US. This is an easy one to understand because everything they do is US related. Like Japan, if the US sinks Canada will ride the ship down. Their small gold holdings were nothing compared to standing in the American shadow. Selling it helped keep liquid our contract market. Still, I think most of their sales ended up in BIS and CB accounts anyway. Indeed, North American gold that will eventually support the Euro. The irony of it all!
South America has been in an extended financial crisis for what seems like forever. For the moment they also have tied their economic fortunes to the dollar and sold much of their gold in it's support. Yet, tragically this whole continent continues to operate as an economic "play thing" that is used by whatever world "currency block" that's in power. They will be dropped off by the dollar train and picked up by the Euro train at the next "crisis station". But because of the gold ties that Euroland will employ, South America as a whole will eventually prosper as they are forced to painfully break from the dollar induced inflation cycles of the past 20+ years. In time the Euro will be good for them.
England was not only part of the dollar faction, it was the dollar faction and is clearly becoming a "run a way" nation. They are moving towards the Euro and leaving our dollar world. But, unlike many other first tier Euroland nations that joined and quietly sold gold into private accounts, Britain is selling it's gold in an obvious "retreating action" from the dollar. Truly, their government has a long history with the "who's who" in LBMA and I suspect owes more than a few favors. Their little gold sales are specifically designed to allow some "backing out" room before the dollar based contract gold markets fail. Once in the Euro, England will enjoy the shelter of a free gold market that supports the Euro system. Still, after saying this, I would not be surprised to find that a good portion of those bullion bars ended up filling contracts owed to BIS accounts.
Editor's note: It's amazing to recall just how few knowledgeable people even had even heard of the LBMA prior to 1996, let alone know how it impacted the gold markets for years prior. I remember reading how many "big time" internet gold writers were asking "what's the LBMA" when it first made public it's trading volumes. These same "political gold analysis" today know "all about it". It's all part of the learning process we "physical gold advocates" are gaining by as their cheap physical gold is sold for the wrong reasons (smile).
A view of the Mountain
The game we should be watching (instead of the ball), has been changing from the spring of 1999. The early joint manipulations of contract gold has broken apart and left only the US standing alone in the wind. As I said further back on the trail, the US dollar faction is now hyper inflating contract gold in a last ditch effort to block a dollar destroying rise in "physical prices". Many people (Cavan Man, USAGOLD poster?) do not understand why the Euro/BIS group just stands there and allow this to happen. The fact is that they (Euroland) have the gold in the BIS system (never really sold it outside) and do not care what happens to the prices of contract gold expressed by the US or LBMA marketplace. Those contracts (as the gold currency they represent) (SDRs?) will eventually fail.
This is a simple concept that so confounds and hurts investors and traders in the "gold industry" today. They are mostly on the "failing" side of the war as their purpose remains to bet too large an amount of their hard portfolio on the price movement of contract gold, not own physical gold itself! I would say that the opinions expressed on most of the internet come from traders trying to time a paper trade in a failing marketplace. Even those buying gold mines can be compared to my "Paper deeds for Roman Gold" analogy. Betting on a rise in the price of real estate then selling it for Roman gold coins before the city (gold marketplace) falls.
"Truly, the ECB / BIS have made sure that there will not be enough Roman Gold to cover the property sales before the city falls"! Physical gold will not follow the same ratio to mine equity it did in the 70s. If a mine goes from $10 to $300, bullion will have gone from $300 to $15,000++.
The contract marketplace for gold has for years given the illusion to Western investors that enough gold exists to maintain the old ratios. So they continue to follow this mistaken precedent and follow their chart points. Points that can only represent the trading realities of paper. All the while planing their move that will make them some retirement money. Sadly however, once the paper gold system is broken, we will all experience an evolution in the true value of physical gold as it is expressed against mine equity, currencies, all real things and most certainly paper gold equity. Something this dollar world of investors have never seen before.
Just as Koan (a USAGOLD poster) long ago expressed bewilderment at how gold moved as fast or faster than silver and most gold stocks after the WA, the coming true break in the system will make that even percentage comparison to paper look like nothing at all. Investors that do not believe this should rejoice for the experience, it will be a chance to see something few ever get to see (smile).
Honestly, during most of our investing "timeline", we as Westerners have never understood that owning gold itself "IS" the profit one makes when a reserve currency system fails! The price of physical gold in said failing currency is "meaningless" because that price can no longer express any long term value!
Back to the main trail (extending from my first paragraph)
They (paper gold bugs) "now" rightly warn everyone that this "political control" of gold is coming to a dangerous end and council investors to "be in" the gold markets for this ride. But most "gold bug traders" stick to "the paper facts" and maintain strict "paper trading" discipline. I submit they will completely miss the "real profit" of owning gold at an advantageous currency price. Their trading with factual information about this "paper marketplace" will eventually net them only more paper gold or currency in a cash settlement. Both of which values will fall completely behind a soaring physical market.
By sticking to the "facts" dictated to them from trading in a hyper inflated paper contract market, they cannot see the "reality" of a coming "politically induced" shortage of deliverable gold. Just because a contract is governed by the Crown's laws, doesn't mean it will retain the value of physical settlement. As the dollar holders prior to 1971 thought they held a receipt for warehouse gold, the dollar's gold market today will leave traders completely out of the greatest gold bull ever to occur! This my friends is understanding the politics of gold in it's fullest context.
The great dollar hyper inflation is only just beginning. Convulsions in all paper markets will be the norm from here on out.
Next item today: a response to the points of Aristotle and TownCrier (USAGOLD posters)
Thank you for reading and hiking
FOA/ your Trail Guide
Gold Trail Update (4/15/2000; 18:07:00MDT - Msg ID:28722)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (4/15/2000; 18:06:59MT - usagold.com msg#17)
A Fireside Chat
Hello Aristotle,
Your message #ID:28580 was very interesting.
Aristotle (04/13/00; 21:31:56MDT - Msg ID:28580)
Question for Trail Guide
Do you what means of price discovery is employed for the Gold transactions conducted through the BIS? I know the BIS as part of their regular fuctions faciltates transfers of Gold on behalf of their account holders, and I would assume that the conditions of the various transfers might (might not?) make them different from what we saw with the latest mobilization by the Ductch CB through the BIS. If the Dutch, and now Austrian, (and likely Swiss) Gold mobilizations are a unique form of operation, is there an element of price discovery for each independent Gold mobilization? I'm also currious about the transparency of the "going price" for real metal through these official channels.
As I reflect on the Dutch operation, I recall that the ECB's weekly balance sheet simply revealed the value of the mobilized Gold as the product of the current official ECB Gold book value (marked to market each quarter, as we all know) and the tonnage placed through the BIS. In the event that this Dutch Gold was involved in what could be deemed a true "sale," the reason I question the validity of assuming the officail ECB price to be the sale price is related to what the IMF has done recently. For the benefit of those following along, but not familiar with the recent IMF Gold "sales," after selling IMF Gold at prevailing market value to member nations and then accepting it back in settlement of their debts, the IMF continues to carry the Gold on their own books at their official value of 35 Special Drawing Rights, while the "excess currency value" gets funnelled into an investment account--reportedly held by the BIS. I'm simply wondering if there is "excess value" generated in these Dutch/BIS style operations that aren't reflected in the existing level of transparency--that being the valuations only revealed through the fixed ECB statements.
Ultimately, I guess I'm not overly concerned with the mechanics themselves. What I find myself to be most intrigued by is the possibility/potential of additional transparency in these BIS-facilitated operations that might reveal a pricing disconnect with the London and New York markets. Or would that constitute an unacceptible rocking of the boat, in which case they (BIS faction) will bide their time behind the veil of the ECB official price until the LBMA and New York will have crashed themselves through the discredit of non-delivery?
Have really enjoyed your commentary. Sorry I haven't had more time to engage you in discussion.
Getting back to the IMF before I sign off for the moment, it looks like they are at least structurally postioned to function in accord with my proposed "perfect monetary system" regarding the role of Gold as a non-lendable/non-inflatable asset. From their recently updated website--though admittedly there is nothing NEW here:
"According to Article V, Section 12 (b) of the IMF's Articles of Agreement, any transactions in gold by the IMF require an 85 percent majority of the total voting power in the IMF. The IMF may sell gold outright on the basis of prevailing market prices; it may accept gold in the discharge of a member's obligations to the IMF at an agreed price on the basis of prices in the market at the time of acceptance. The IMF does not have the authority to engage in any other gold transactions, e.g., loans, leases, swaps, or use of gold as collateral, and the IMF does not have the authority to buy gold."
Gold. It's not just for barbarians anymore. ---Aristotle
It seems that some have walked this trail before me as my "Guiding" is following the echo of USAGOLD posters (smile). The fresh air must be doing everyone some good!
This day in time is a unique period in real money history. Seldom, if ever, has the world found itself in the grips of a possible, complete fiat reserve breakdown! Especially one that impacts the way 70% (???) of the worlds current assets are valued. What a wonderful mess for a well connected financial sleuth to be born into, right? (big smile)!
We will all look back on this and see that most of our trusted measuring sticks were useless to decipher the situation. If we truly do not know what a "dollar credit" (DC) is, how can we know what it is worth in purchasing power? We do not even know approximately how many DCs are out there, let alone their demand to satisfy debt service. What is really starting to spook the big world players is that no one now knows what kind of currency intervention is in the pipeline at any moment in time. This is having the effect of making one's real debt in international dollars an "unknown". The same thing goes for dollar assets?
You could owe one million in value today, then find that an evolving political agenda has changed that amount to 5 million in real value tomorrow. All of this was glossed over for many years by employing derivatives to hedge. Now that arena has grown so large that there is a real threat that the derivatives need hedging too! I laugh about it but it's a real event, happening in real time. It's scaring the hell out of a bunch of people and they are not taking if as being funny.
The camp fire is burning now and everyone is here:
Did you ever see the movie "Havana" with Robert Redford? It was a great tale about a card gambler that often went to the casinos in Cuba. It takes place just before the revolution when Havana was a real swinging place. I don't remember the exact lines in the show but he often made reference the the laws of probability. Saying "anything is possible, just not always probable". To that end he explained to his girlfriend why there was a lump in the skin in his forearm. It seems he had a diamond sewed under the skin, "just in case"!
It was an excellent example of human interaction with the laws of probability. It seems that inside all of us lies a fear that what the world is telling us (the marketplace) may not be real. Just like ORO said what if "there is no spoon" and our financial process is the trading of illusions! We all expect life itself to be chancy, and fully expect to lose some in the effort. But no one wants to be "busted out" because of a freak, once in a generation "revolution in the way wealth is counted".
In reality,,,, in the real world,,,, big players never tell their whole tale,,,, not like the persona of our little trader/gamblers talking their book on the Internet. In the big arena that really counts,,,,,, real players all keep most of the wealth "off the table" and "under the skin". So what does this have to do with the BIS?
Remembering back:
Something that Big Trader or Another said a long time ago about trading gold off market in the thousands. Trust me, it's there somewhere way back in the pre USAGOLD days. It seems that gold was then and is today traded between countries, CBs, special accounts,,,,,,, at not only contract prices but in the "perceived prices" that would exist in a non dollar world. Hard to believe? Don't be so quick to laugh. We are talking about gold traded in large amounts on the "possibility" of a no dollar reserve world,,,,,, gold moved from "under the skin" to "under the skin" so to speak.
In some cases more than a few people have "done the math" and come up with some startling probabilities and possibilities. In some perceptions, it's a political certainty!
Imagine, if you will that gold,,,,, tomorrow,,,,,, was "marked to the market" and slated for 30 day physical settlement. Most Western thinkers and investors would say that there is plenty of gold out there to cover all that paper. At worst it's price would go to,,,,, say,,,,, $700 in the squeeze. Well, that is assuming this event happens in a world like today where the dollar and our US economy is still running.
But these Western investors don't understand the real human world. Gold being marked to market would be the result of an economic revolution of sorts. A currency transition, if you will.
Most of the big talkers you here in the bar,,,,,, saying they would sell at $1,000 and buy some land,,,,,,, would be the very last scared kittens to cut that diamond from under their skin! Believe it!
Under the circumstances,,,,,,, miners would do their best to "stop mining",,,,,,, dealers would mostly be making a market on the buy side only,,,,,,, and our bar room paper gold trading friend,,, with all his bravado would be telling everyone,,,,,, "Gee, I sold too early and wish I hadn't"!! All the while wearing a long sleeve shirt on a 90 degree night in Phoenix,,,,, just to cover the lump that's under his skin!
The night is getting very still:
Today, gold is worth far more than it's traded contract price,,,, and has been for some years. That's the reason some players have owned it while giving up any interest and stock gains they could have enjoyed.
Listen to this and listen closely: "the real value of gold today is based squarely on the probability of weather the US dollar can survive as a reserve currency"! No problem, you say? Well, you may think a little different in a few weeks or years.
Considering the trade deficit of the US, CB dollar reserves and the interest they earn,,,, are worth between $.50 and $0 in real good buying power.
Now, would you sell your gold into the BIS system for dollars,,,,,, at the market price today to have it returned in Euro gold credits reserves at the real price much later?
Just as TownCrier says in his daily commentary:
the IMF gold leaves at one price and returns at "Another" ,,,,,,,, it travels far but never moves,,,,, while the BIS holds the value for a later use in time.
It seems a neet "gray concept" to have just popped out of nowhere, no? Was that plan already "in process" somewhere ,,,,,, someplace,,,,,,,, think about it?
Then think about the dollar price of gold today? In fact, "think long and hard about it"?
Fires out
Thanks for hiking. (be on the forum later or tomorrow)
FOA/ your Trail Guide
Trail Guide (4/16/2000; 20:59:31MDT - Msg ID:28787)
(No Subject)
Elwood,
Hello again. As you might guess there is a lot of private discussion in process now. I just stopped in to say I can't talk much right now. I think Alan just walked away from it all. In effect saying "let it go"! Ah Yes, anyone of size could own the paper gold world now and I think it will be too tempting for some operator not to try. Yet, he will only own a large paper bet for a few days.
I had offered a point earlier that our guys (US) were running out of "worth" to control gold. I think they are truly out of this "political worth" now. This could become a firestorm in a short time?
Elwood, I still have an old posted question from you about the Euro being not big enough yet to settle world oil (and other questions). It's just about there. I'll get back to that.
Also, Cavan Man offered the Goldensextant's latest views. It better puts into perspective how the BIS shuffles gold around. In a deeper thought, they actually control a lot more gold than we think.
Ok, I'm off to the bunker (smile). Watch your "top knot out there"!
Trail Guide
Trail Guide (4/17/2000; 20:28:52MDT - Msg ID:28891)
Reply
reply to da2g
After a long day and night of market thinking (for me anyway), just thought I would toss this quick one in here. Cavan Man's post gave me the thought (smile)
--------------------------------------------
If today I can purchase about $1.00 with my one CHEESEBURGER, and use this currency to purchase about 1/280 OUNCE OF GOLD, then after CHEESEBURGERS run (from price
inflation), and my CHEESEBURGER now purchases $75.00, how many OUNCES OF GOLD will I now be able to purchase?
ANSWER: About 75/15,000 of an ounce! ( big smile)
My real point:
From around 1929 to date, Americans have never known a real, full blown, all out "price hyper inflation". We have only history books and movies to give us the true mental and
physical picture of what it would be like. Yet, even these cannot begin to portray the real human interaction "up front and personal" the way it happens in real life.
To date most of us still think of things in dollar values. After a real inflation begins this all changes. But in the same way a traveler adjusts his currency values when shopping in a foreign land, so too will you quickly learn to think of things in real terms instead of dollar terms. A hundred dollar cheeseburger will be a normal as a 50,000 peso "whatever" in Inflation Land. The same attitude
will prevail in gold.
Thanks ALL for reading, but much more thanks for thinking for yourselves
Trail Guide
Trail Guide (4/18/2000; 7:00:01MDT - Msg ID:28918)
PGA
Trader Gold
We are seeing more and more disappointment from the "Trader Gold" crowd. Their motives and reasoning is commented on widely by the media and spread over the internet. Often studied as the way a "Gold Bug " thinks, recently the Western investor world sees these examples as a reason to
stay away from gold not buy into it. For years this group was mixed in with all the other "gold bugs" and was considered "one - in - the - same". They are not and only now is the difference becoming more clear.
The distinction between gold stocks, contract gold and physical gold investments is widening as the relative "soundness" of these asset classes is further exposed daily. In the past, as long as all gold vehicle valuations held within a tradable ratio of each other "Trader Gold Bugs" could hide within the "Gold Bug" community and proclaim all the fine attributes of a "physical gold advocate". But
this current protracted political involvement in the gold "paper marketplace" is dividing "Gold Bugs" into their two clear different groups and showing their two clearly different reasons to be in gold.
Over the last three years, Trader Gold Bugs (TGBs) have fallen further and further behind "Physical Gold Advocates" (PGAs) as their leveraged investments are more percentage impacted by a falling contract gold system. No longer able to keep quiet, the pain that their leverage brought them is
forcing an ever more vocal (and irrational) response to the movements in gold prices.
Every $2 drop is seen as a total failure of gold and every $2 rise as pathetic and proving how gold is done in for the count. Truly, these are the perceptions of investors trading either a "Paper Gold Market Place" or a leveraged "Gold Industry". Not the feelings of a Physical Gold Advocate holding a sound world class financial asset! One that's holding it's own strongly in the face of massive
official manipulation.
The TGB crowd is hopping that more of their same kind will soon exit the stock markets and put money in "their kind" of paper assets. All the while ignoring the logic this dictates as it invites the same "hot Money" trading using the same "leverage" that is now failing Trader Bugs. If indeed
contract gold rises $10, $30 or $80 and pulls in some of the stock crowd, that same "fast mentality" will surely run away at the first sign of more official paper gold creation. Further damaging the publics view of Real Gold".
Indeed, the TBG experience is today sinking from it's own exposure to public view. A strategy that takes a 1970s gold precedent and continues to extrapolate it into our future. Yet it is failing from an evolving gold arena. Our gold success for tomorrow will rest on a new and different dynamic not the aging leveraged games of years past.
The precedent for the future of gold is found much further in the past than the 70s. It is a return to natural human economic reasoning of what wealth always has been and is now. This thinking is being helped on by a changing official recognition of what gold should do and be as an asset class
in official and public hands. Taken from a time when Freegold ruled the wealth world, physical gold will tomorrow be the investment of our future from today.
The old TGB experience will go the way of past fads of the investing world as a modern, smart, new investor steps from the fog of all paper leverage failures. Not just leverage gold failures! To their credit new generations do understand when an old investment strategy is little more than the
"old baggage" of their fathers. The event that marks the end of carrying this dollar luggage is an ending currency timeline that is directly ahead. Clean, non leveraged new money is getting ready for it today with physical gold.
Looking ever forward we are today joining a new dynamic force in the world. Physical Gold Advocates are now using sound, responsible reasoning while building a rock solid alliance with the economic builders of tomorrow. The future holds that Physical Gold will not be savings. Nor will not be a hedge. It will not even be an investment.
For those with the courage to follow in the "Footsteps of Giants", gold will be the opportunity of a lifetime!
Thank you
Trail Guide
Trail Guide (4/18/2000; 7:09:39MDT - Msg ID:28919)
comment
ss of nep,
We (US) need the flow of oil more than anyone else out there! If someone drops the dollar or the IMF we will protect our oil flow even if it means supporting the Euro to do it.
Just a thought my friend. be back later
Trail Guide
Trail Guide (4/18/2000; 18:34:54MDT - Msg ID:28968)
Comment
ss of nep (4/18/2000; 7:26:20MDT - Msg ID:28921)
comment
I may have to learn to ride a camel
smile.
------------
Ha! Ha! Hello ss of nep,
I hope you have some success because those damn things are hard to ride. For this American anyway! (smile)
You are right, we do seem to be more free with our military these days. It just feels like we are slipping into the same old "pre inflation" society values that are responsible for "war attitudes" in the past. Our Economic engine pulls all of us into it's high speed printing press whirl and we end up demanding the head of any peoples (or nation) that slows it down. I see moral values at the very edge of the same old "I demand mine now" and "to hell with the outcome" thinking. It more profitable to trade it than own it! Didn't Robert Precter detail some of this in his last book?
Anyway, good luck when your first ride comes!(smile)
Trail Guide
Trail Guide (4/18/2000; 18:36:44MDT - Msg ID:28970)
Reply
Cavan Man (4/18/2000; 7:44:54MDT - Msg ID:28923)
Hello Trail Guide
Is Trail Guide/FOA more than one person?
Hello Cavan Man,
No, I'm the two of them. Because FOA interprets, transcribes and publicly represents the thoughts of another poster, I found myself unable to express (and defend) my own position when attacked or challenged. It's a cultural gulf that's different from what we know in a lot of Western social
interaction. Here I post as Trail Guide so as to still tie my personal feelings to those presented on the Gold Trail, but write as I see fit.
Another seldom writes "outright". Most of his Thoughts (I'd say more than 3/4) are transcribed. He's a long term thinker / planer / leader and has every intent on seeing this "new gold market" through to the end. Many people think his whole presentation is winding down because he has withdrawn for a while. I can assure you the last few years were only an "outcry" of what is to come. When events lead the way, FOA will fade to the background as Another's Thoughts again
take the stage. At least this time, I'll be able to continue posting here as Trail Guide (smile).
Thanks Trail Guide
Trail Guide (4/18/2000; 18:38:32MDT - Msg ID:28971)
Comment
da2g (4/18/2000; 9:13:22MDT - Msg ID:28928)
in the future (75/15,000), perhaps I am better off keeping some of my wealth in cheeseburgers
(very large smile).
da2g,
Ha! Ha! I wondered if anyone would catch that? At that evolving ratio burgers would be sold for oil, I'm sure! (smile)
thanks Trail Guide
Trail Guide (4/18/2000; 19:11:02MDT - Msg ID:28974)
Comment
PH in LA (4/18/2000; 10:58:39MDT - Msg ID:28932)
Evolution! Coming to a gold market near you!
Hello again PH!
Thank you for your clarity! But more so for showing that yourself and others are seeing through the fog. I can present only "so much" because my human inability to describe this evolution is so limited. Truly, the more that others can see these changes and write their perceptions the more we all can gain perspective.
Thanks again
Trail Guide
Trail Guide (4/18/2000; 21:11:19MDT - Msg ID:28990)
Comment
Mr Gresham (4/18/2000; 16:38:17MDT - Msg ID:28958)
TG/FOA message
The satisfaction of drawing together a school of independent THINKERS is also sublime beyond most human accomplishments.
-------------------------
Hello Mr. Gresham,
Thanks for your consideration and the same to everyone else who has voiced the same. It's taken a while for me to read all the posts. I know there are more than a few that hold OldGold's position. But, their position and strategy speaks for itself. It will succeed or fail them in the long run. I think if Another were here today he would say "time will prove all things" and leave with that simple, all
consuming thought.
Yet, I can't help but think that your comment about "drawing together thinkers" is indeed part of the plan we see in process here today. While GATA leads with a nuts and bolts attract, Another draws the human spirit and imparts his question in the hearts of real wealth patriots.
I have read that education through experience builds the mind. Once shown what to look for, events become the real experience that creates lasting knowledge and demands the search for more. More often than not wars are won by an army lead from the last in line. Yet only armed with a truth they have found on their own.
"we watch this new gold market together, yes"
Thanks Trail Guide
Trail Guide (4/18/2000; 21:13:25MDT - Msg ID:28991)
Comment
aunuggets (4/18/2000; 18:29:06MDT - Msg ID:28966)
Suppose for a moment you were a Central Bank......
....Would you "sell" your hard assets (gold) for another commodity that you could easily create out of thin air (U.S. Dollars) ? This has probably been mentioned by others, but where is all of this gold being "sold" by the Central Banks ? Is it entering the (private) markets as physical, or is it simply more of the illusion, actually consisting of nothing more than bookkeeping entries from one CB to another ? The "numbers" don't seem to add up for some strange reason.
Hello aunuggets,
That's a real good trail to follow! (smile) I'm with you on that one!
Trail Guide
Trail Guide (4/18/2000; 21:15:48MDT - Msg ID:28992)
(No Subject)
Econoclast (4/18/2000; 16:21:46MDT - Msg ID:28954)
Rise above the negativity
http://www.gold-eagle.com/editorials_98/osborne061898.html
Cavan Man (4/18/2000; 16:36:30MDT - Msg ID:28957)
Econoclast 28954
-------------
Ok, we will all have a look. I'll comment later (or tomorrow)
Trail Guide
Trail Guide (4/19/2000; 18:17:48MDT - Msg ID:29053)
Comment
Hello ORO,
My wife will not let me put your post on the main wall! Can You imagine that? I had an unused frame from the local custom picture shop,,,,, nice, big real wood frame. Was thinking of mounting your post in that frame. Then put it on the entry wall of our home where all our guest would have to read it and no doubt comment on it. Now I guess it will just have to stay in my office.
Besides that I didn't really see anything in it that qualified for the HOF? ( bet you think I made this up) (grin)
Thanks to you and to everyone for reaching beyond themselves in the search for and sharing of understanding.
Excelent! ----- ORO (4/19/2000; 0:05:39MDT - Msg ID:29003) ---------
Trail Guide
ORO (4/19/2000; 0:05:39MDT - Msg ID:29003)
Oldgold stirring the pot
Oldgold, thanks for stirring our little pot of soup. Some stuff has gottent stuck at the bottom.
Rather that try to put Trail Guide's point across for him, which he does very well himself, I will just point out this:
1. There has been a gold standard in effect through the 80s.
The US overdrew its gold and the system collapsed.
2. There has been a dual physical gold and paper gold standard since 1989 or so. The US and UK overdrew this by 1997.
3. The Asian collapse, though it would have happened eventually anyway, was a planned event that saved our sorry @$$es for three years.
4. The bulk of the dollar support mechanism (remember that we did not have a current account surplus in three decades) was a series of debt traps for various emerging nations that were indebted by tricks and by force. These debtors needed dollars to pay off interest on dollar loans so that they could buy life's basics on the global markets.
5. The idea of a debt derived money offering stability in economic function and in prices is an absurdity on the scale of defying gravity, absolving the world from Newton's law. Without an anchor in a commodity money, all debt money spirals out of control and into worthlessness. No conceivable system can make it otherwise. Gold is to finance and money as the speed of light is to Einstein's law of relativity. Gold answers the question "relative to what?".
In short: for a monetary system to work, someone, somewhere, must be able to exchange the currency for gold AT A FIXED RATE. We call this parity.
6. The global dollar debt system is collapsing. Soon, only the US and a few "friends" will be left owing dollars and owning the "bag" - our debt.
7. The system could not work if it was well known even among the top bankers, because their attempts to get into gold for defense against this would have killed the system. Even now, when it is apparent, bankers refuse to believe that their product is as toxic as RJR's and Columbia's main export combined (and they work in remarkably simillar ways).
Finally, say thanks for the low gold and silver prices you are getting and pray that it can continue. Next thanksgiving tell your familly to give thanks to the Germans, Japanese, Koreans, Chinese, Indians, Italians and others who feed and clothe us half the time (actually 56% in 1998, 60% in 1999).
---------------------------------------
Some details and discussion follow:
We have fought a war and have lost it. The war that was fought was for financial hegemony through the issue of the reserve currency for the world. In essence making the US serve the role of banker to the world. The war was lost in 1968 and defeat conceded in 1971 and again in 1973. With much support from a world scared of a complete freeze-up of commerce, the dollar was resuscitated just in the nick of time and a new gold convertibility standard was put together by the same bankers that pushed for and got the Fed and then Bretton Woods. JP Morgan said "gold is the only money". He said so well into the Fed's life when gold was no longer circulating in great volumes.
Fiat debt money is incapable of maintaining value without a fix to a real item - notably the precious metals, and the most prominent of them, gold. The dollar is two different things at the same time. Within the US is only a product of debt, the IOUs of all us credit card using and mortgage and car loan paying people that the bank sells to the producers of the houses, goods, autos we buy with "credit". Outside the US, the dollar is much the same, until it meets the BIS for transnational settlements of imbalances. There, the central banks trade gold for dollars at an unknown exchange rate much greater than that in the markets. (This is a premium that is payed for the right to buy gold rather than the gold itself - this way it is kept off the books). The private markets provide the non-US private bankers an opportunity to hedge their dollar assets and those of their clients. The US banks and their UK allies produce the paper gold needed for settlements of dollars into gold debt.
The fact that someone - somewhere - can settle over $100 billion dollars in unbalance "imbalance of payments" every year with gold, is what makes the dollar's value relatively stable.
The US and UK bankers had completely overstepped their bounds in the process and issued way more paper gold than there could ever be redeemed (the BIS and OCC statistics just deal with derivative contracts, these are just mirrors of a much larger gold banking system which underlies trade and at which gold settles the dollar through the SDR). So long as the gold credits were believed to be redeemable, the system was credible.
When it lost credibility, in 1996 - 1997, the imperative became the classic wildcat bank strategy of moving the gold in the back door when the inspector comes to look at your reserves, and transfering it to the next bank just as the inspector is on his way there. The whole dynamic is now the satisfaction of gold demand by whatever means necessary so as to maintain credibility of the paper and thus prevent a "bank run". The Washington Agreement was the statement by the EU that they will not put in jeopardy any more of their gold, that their part in the dollar support system is over. Since that date, the US has been exporting some 800 tons of gold (annual rate) officially, and an unknown ammount "below custom's radar".
In the meantime, the bankers in the EU and the UK have been redeeming their gold liabilities to their clients with American gold liabilities. When actual gold ran out and gold yet to be mined (or found or explored for) was used for settlement, some time in the late 80s, this part of the dollar support system was born. The part US banks played was (at first) small, US market share in gold banking was some 20% in 1995. By 1997, it passed 35%, by mid 99- over 42%, now it probably passed the 50% mark according to OCC numbers (BIS numbers for the end of 99 will only come out in June).
This process reflects the change of responsibility for managing the dollar from the losers of WWII to the "winner". The Fed is responsible for the viability of the liabilities of US banks. These liabilities are what we call dollars if banks can't supply dollars they owe, the Fed supplies them through the treasury and directly. The gold liabilities of US banks are quickly growing so that they will soon hold all of the dollar side of the global dollar-gold settlement system. When the transfer of gold liability from the UK to the US is complete, there will no longer be any reason for Europe and the Oil nations, nor China to assist in controling the gold ecxhange rate. At that point, the gold obligations will be terminated and gold contracts and accounts drawn on US banks will be settled in dollars only.
The time for that is not here yet. I would venture a guess at the time frame of the end of this year. At current rates, the transfer should be finished by then.
The terms for the end of the game were set, in part, in the early 80s. Since then, there had been a tremendous effort by the US government to stop use of American resources by American and foreign consumers. Major finds of gas, and particularly, oil were capped and not allowed to go into production. Forest lands were set aside from loggers. Gold mines were induced not to explore nor produce gold within the US. Why? So that when the end does come, the US will have cash traded commodities to sell - so that when the US can't buy on dollar credit anymore, it will have something to trade while the country is reindustrialized.
The US tried to play the technology card by assisting US tech companies in gaining investments, that was done by making them appear more attractive to investors through SEC and IRS accounting rules regarding ESOPs and merger accounting that lower the cash costs of top talent and make losses seem like earnings. But the "social adjustment" oriented school system produces mostly good salespeople and hamburger flippers. India has more programmers than Silicon Valley, and Taiwan and Singapore produce more chips. The best computer and software design is done in Ireland and the Norse countries, and wireless technology is mostly a Finnish, British and German industry. The only way to eliminate the disadvatage in education is to import as many tech pros as we can before they stop wanting to come here. If 10 million 30-35 year old techies can be imported over the next 5-10 years, the US may have a chance to survive as the major economy.
The bank debt reports published by the BIS and the IMF tell the story in all of its gorey statistical details. The dollar debt outside the US is collapsing as it is turned from emerging market and transnational corporate debt into American debt. The US imports produce a flood of dollars that pay off the liabilities of Emerging nation's corporations, governments and banks. It is the need by these to repay dollar loans that has produced demand for dollars abroad. Now that they no longer borrow in quantity and have been reducing their debt, these countries are slowly reducing the international value of the dollar and adding themselves to the long list of dollar creditors. The only dollar debtors left are the UK, some HIPCs, and the greatest debtor ever, the US.
The story is simple. The debt trap set for the emerging markets by 3% dollar interest rates in the early nineties, was sprung in 1997 by a joint effort of the Fed, the IMF and the BIS. The IMF demanded self destructive policies from the countries it was supposed to help, the BIS raised their bank's reserve requirements (actually it was their net asset ratios - a.k.a. ccapital adequacy - but few understand what that is and reserves are a close enough descriptor), and the Fed raised interest rates by all of 1/4% and the whole Asian economic system collapsed.
This generated the requisite dollar demand, stopped Asian gold demand, produced an Asian gold supply, and allowed EU and US banks to buy out many Asian corporation's assets that they were barred from owning before. Hyena and Vulture LP had their day. We were spared disaster for another three years.
Gold Trail Update (4/22/2000; 20:49:00MDT - Msg ID:29191)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (4/22/2000; 20:48:58MT - usagold.com msg#18)
Good Morning everyone!
Because the group has had a good night's sleep and a fresh cup of coffee, I wanted to say a few things to fresh minds before we get started.
People hike the gold trail for the understanding they gain along the way. For some it's to make a profit using the reasoning gained. Others find reinforcement about the historical asset insurance gold provides against other wealth. Still others do it to further an ideological standpoint that gold wealth is more a direct reflection of true reality in life. Whatever the reason, for many people gold holds and maintains a real image of stability even beyond it's currency price. A rare concept in this modern world full of financial fakery.
Whatever your purpose in joining us may be, understand that neither I or us make the trail. We simply follow it as it winds it's way through our evolving lives. Gold, an entity of mother earth's making has a fluid value that's an ever changing perception of what wealth represents in the minds of men and women. Over time the wants and dreams of humanity along with their need to retain them are the forces that shape this path. The actions of ourselves and the governments that represent us create this trail as we grasp just how much in life is real and how much is not.
To date, we see a large segment of Western society that has accepted most of our modern paper as their wealth and reasoned that the value of gold itself is little more than an illusion today. In time most of these "new reality" believers will join us here and contrast their life's experiences with other hikers. In these recounts, many will profess that they lost "what they never really owned"!
Observations
A few days ago I offered this post: Trail Guide (4/18/2000; 7:00:01MDT - Msg ID:28918). It can be found on your laptops in the USAGOLD archives.
I presented a perception of the changing image of Gold Bugs as they appear to other would be gold investors. Many of whom see the strategy of the old TGBs (trader gold bugs) as something to avoid as it produces nothing but loses. A wealth destruction that seems unending as the evolution of the gold market itself continues. This evolution of over twenty years has proven to many that our market place was never as free as many played it for. Indeed, the growing perception today is that the gold industry and this paper market place have become little more than a leveraged game inside a manipulated concept. Rather than a contract market that represents the sum total of knowledge and therefore value of our physical gold supply. In the beginning this concept once held gold trading to be the same as free physical trading. It never was then and is not today.
New, "would be" physical gold investors are not looking at the gains made from shorting or going long paper gold as profits made from operating in the same arena that dealers use to sell physical from. Rather profits and loses from trading all paper representations of gold are seen only as they apply to our current paper market. While profits and loses from owning physical gold are found only in the physical market. To date the profit and loss difference between these mediums is striking. In the face of massive distortion of facts, figures and contract supply, physical gold has suffered a very reasonable discount when compared to investments in it's leveraged paper side.
Seeing this, the question is presented: why trade a gold industry security or gold derivative paper when I can make and lose just as much playing the established fiat stock markets? Truly, if contract paper gold is being inflated with supply in order to mask bullish fundamentals on the physical side, why bet on a rise in physical gold using a leveraged derivative? If the world stock markets are in trouble and I need to hedge my wealth, why hedge using an arena that will tend to be manipulated down even more so as equity markets fail?
Further, if this official paper gold market is not the free place we thought it was why not buy the product that's in short supply and the subject of said paper manipulation? In this regard, Physical Gold Advocates are gaining the upper ground of "sound reasoning" as we speak! New investors see through the fog and don't want any part of an investment that's already killing many investor assets. From my post:
--------
"The distinction between gold stocks, contract gold and physical gold investments is widening as the relative "soundness" of these asset classes is further exposed daily. In the past, as long as all gold vehicle valuations held within a tradable ratio of each other "Trader Gold Bugs" could hide within the "Gold Bug" community and proclaim all the fine attributes of a "physical gold advocate". But this current protracted political involvement in the gold "paper marketplace" is dividing "Gold Bugs" into their two clear different groups and showing their two clearly different reasons to be in gold.
Over the last three years, Trader Gold Bugs (TGBs) have fallen further and further behind "Physical Gold Advocates" (PGAs) as their leveraged investments are more percentage impacted by a falling contract gold system. No longer able to keep quiet, the pain that their leverage brought them is forcing an ever more vocal (and irrational) response to the movements in gold prices.
Every $2 drop is seen as a total failure of gold and every $2 rise as pathetic and proving how gold is done in for the count. Truly, these are the perceptions of investors trading either a "Paper Gold Market Place" or a leveraged "Gold Industry". Not the feelings of a Physical Gold Advocate holding a sound world class financial asset! One that's holding it's own strongly in the face of massive official manipulation." " "
----------------------
This full post was aimed squarely at the failed paper gold investor of the past. Whether buying into the gold industry or the contract gold arena, the flaw in this strategy is that leverage gold today is and has been for some time opposed to official policy. An investor can "wait out" this policy time frame or buy directly into the part of the gold market that cannot be controlled. Physical gold!
The real leverage today is found in the understanding of just how this current "wind down" of official policy will impact the two markets for gold.
Whether doing the bidding of "official policy" or just trading paper gold short, the major makers of short contracts cannot and will not "just walk way". If they have created so much supply that it is "uncoverable", they have no option in stopping their writing. In a last ditch effort they may make every trader aware that they will create a bottomless pit of supply if necessary to stop any rise in contract prices. Regardless of the physical price! Especially if a rise in contract prices is the only accepted agent they must mark their margin to! In the end, no speculator, commercial trader or gambler in the world will buy into a contract that must end outside physical settlement. The end of out current gold markets may end this way:
"""""""""" If physical gold spikes and is trading in the dealer market for $3,000 an ounce,,,,,, and a major trader stands ready to sell contracts in any number,,,,, to all comers,,,,, for $200,,,,, no one will buy if the obvious settlement will be for the full equity of the paper gold marketplace!!!! Truly an amount that may only bring $400 or less (an ounce) in negotiated cash to cover the "end time" hyper inflated contracts issued. """"""
This my friends is the full picture seen by not just old money in gold but new gold money also! It's also the reason so much "Physical Gold" is leaving the US today. Please see Mr.TownCrier (4/19/2000; 17:59:41MDT - Msg ID:29050).
Western gold investors have lost the real "Gold Spirit" rooted deeply in their past as they chase profits instead of reality. Mr. Farfel made this comment (Msg ID:28931) that so aptly describes this modern Western phenomenon:
" " You seem to have the mentality of a trader, with no rooted beliefs in anything other than that which makes you profit." "
Onward The Trail:
The gold industry today is in a position to take advantage of and profit from this changing view of gold. To do this they must sell their product to the public, not their shares. Microsoft did not get where it is today by selling it's stock as an alternative to owning Windows. It sold it's main product first to a public that wanted and needed it. It's stock value followed.
Two thirds of the modern gold market creators have walked away from further manipulating the current pricing system. The ECB / BIS position has evolved into letting the remaining market inflate itself into oblivion. If the gold industry is to survive this coming reckoning of a crashing system, they must move now to break their product away from filling paper commitments. Only a small handful will have this choice. The move by some players in creating "goldavenue.com" is a major first step. But it's not enough.
The companies that will survive must make their product into registered form. Then sell only to users that will certify and prove that gold's end use as jewelry, coin or private bar. Registered bar sales, must be stored in bonded warehouses that can identify a mine's product bar. If the paper industry or fabrication process is to use this gold they must remelt it, absorb the cost and pay a fee to the mine of that numbered the bar.
Very few mines will make this shift. But it's the only way they will profit enough to overcome the taxes and regulation that's coming.
The gold industry must make every effort to educate investors that their mine shares are not a substitute for owning gold. Demonstrate why persons should own and utilize their software (gold) for personal financial safety first. Only later (as profit potential prescribes) encourage persons to invest in microsoft stock (gold shares).
The few companies that can follow this lead today will be amazed at the outcome tomorrow!
Further:
The paper markets give the illusion of a fat gold supply that says, "there's plenty to go around". Yet, once our paper markets finally price in their own destructive tendency, the illusion of supply will vanish along with the available product. The price change in physical gold will be fast and brutal, to say the least. Leaving virtually no chance to convert any paper profits into real gold on a one to one basis.
To this end, "PGAs" (Physical Gold Advocates) today enjoy the very best of all worlds.
The "wind down" of our official paper marketplace has begun with the Washington Agreement. An accord that began with the first private acknowledgment that IMF gold would have to be revalued through either sale or official revaluation. We are on the road to very high priced gold, but will not arrive "publicly" at these values until the paper markets destroy themselves.
London is clearly in the wind down process as their volume slows. The dollar faction is alone in representing itself as the defender of low paper gold prices. I give the odds of contract gold spiking and holding it's gains at one in ten. If the paper gold market can end it's days in a rapid rise to bankruptcy, it will take a major portion of the banking system with it. The same banks that the mines must work through today.
In the eyes of new Gold Bugs, all risk today is in paper held in lieu of gold. The choice is clear. Buy into a bear market in paper or ride on a new concept for our changing modern world.
The future belongs to the PGA. Physical Gold Advocate!
Thanks for walking
FOA/ your Trail Guide
Trail Guide (4/23/2000; 19:08:21MT - usagold.com msg#: 29241)
Reply
HI - HAT (4/23/2000; 6:05:13MT - usagold.com msg#: 29203)
Trail Guide EURO
Hello. I am looking at analysus that focuses on possibility that Euro's downtrend portends value crises of this currency. It seems that all the prognostications of the dollars future are what is exactly happened to the Euro. Since its inception it has steadily lost value, and now appears at the crossroads to go down more.
This it semms is the only major currency arena where the price of gold is in a bullish uptrend. In a world already saturated with debt financed stuff, it seems any fundamental competative advantage of lower Euro, will still net out very negatively against increased costs for oil,electricity,etc., in Euroland.
-------------------------------
Hello Hi - Hat!
Good question. I'll offer in my words what was presented to me from some other people.
--------
Every time the Euro comes up in conversation someone points out the ever so obvious fact that it has fallen against the dollar. Ok, so what does this do to impact us as world players?
First: my new Euro accounts are static in Euroland and are spent there for investments if and when need be. As a international player I don't trade my dollar accounts (local US held) against these or other holding in foreign domains. To date, my real cost of acquisition in Euroland has little or no effect from the Euro / Dollar exchange rate. A myriad of other factors come into play when determining a particular investment's (Euroland) viability. Unless the industry is exposed as an importer from dollar nations the short term exchange rate means nothing. If our selected sector is export related and sells into a dollar sector, then all the better for them. Our long term success rests on the sector's ability to make an adequate return in Euros. The whole purpose is to build an asset infrastructure that will remain in the Euro realm. Not convert it back to dollars (or whatever currency) in a year or so.
Second: the costs in Europe have not gone up in any way comparable to the amount Euro / Dollar has fallen. Neither I nor anyone else (I know) are concerned with this short term condition. In fact, the lower rate is making my decision to cover dollar debt and refinance in Euro debt for me.
Especially so for anyone that is overweight in long dollar assets (working assets as opposed to investment assets) and wanting more Euroland exposure with less cost. Borrowing Euros to invest in high return financial assets (Euro carry trade) is only a trade against exchange rates and in every
way has the smaller impact on Euro value over a long run. The booming demand for Euros is swamping the ability of US to supply liquidity fast enough to cover the liquidation of dollar debt. In spite of this much examined and overweighted carry trade.
Third: ECB is right, US dollar is up because a funding crisis is drying up dollar assets faster than Fed can supply. From the looks of everyone financing here, Euro is right about where it should be in value. It's the dollar that is spiking from a crisis.
----------------
Editor note: In a broad view just look at Japan. The Yen is being driven up from a long term crisis in their economy. The same thing is only now happening in our US. The difference is that we have "the" reserve currency and our eventual response to a "Japan like" economic condition will be to super inflate the dollar. That is something our fed is doing right now to keep the dollar from going even higher.
In another view, the ECB has the Euro doing what Japan has been fighting like mad to do for many years now. That is get a major world currency down against the dollar by having the dollar driven up from "debt transition demand". No different than as my friend uses his dollar reserves to cancel out his local (US) debt to reestablish in Euros. This effect expands the Euro in a good way but eliminates dollar liquidity in a bad way. The dollar rises from a liquidity "dry up" and this forces the fed to pump. But this kind of pumping floods our shores with dollars that can only function as "hot money" (stock market trading). Not used to finance real industry infrastructure.
If the Euro is causing any pain it is doing so to traders that made long derivative bets on that currency (not invest in it). They bet on the Euro being strong and the dollar being weak. None of then grasped that the Euro would be strong as a crisis of transition made the dollar even more in demand for liquidation.
Confirmation of this is found in the US fed and Treasury using every trick in the book to pump liquidity into dollar based assets. Alan is no fool, he isn't killing the stock market because he can't right now! If the dollar was strong from all the demand media says is out there, why must we pump money during a time our trade deficit is flooding the world with dollars. If the Euro is so week, why is everyone financing in Euros at a rate that's still building?
Thanks
Trail Guide
Trail Guide (04/24/00; 20:36:19MT - usagold.com msg#: 29285)
(No Subject)
Hello aunuggets,
Why stop there? What would keep the Gov. from taking all your cash? Ha! Ha! That's right, they could just call in all your money!
How about them taking the diamonds, china, 1/2 your food and
spare tires? Hell, they could even demand we turn in 2/3 of our stock certificates (gold shares included)! If they are half as stupid as we think, they may even want all the derivative contracts also (smile).
It doesn't take too much brain space to understand how one tries to structure his wealth to dodge as much "incoming" as possible! Pre-33 may or may not work, but it's a good bet it will.
Also: in the thick of things art work still holds it's premium. So do coins. When France fell, art, coins, china and anything rare was taken before all the rest. Even in Nam rare things held a higher price on the last days. I know some boys who were there.
As for "profit"? I have lived a long time and can't remember not paying a profit premium for anything or any service. In fact, the better the advice the cheaper the profit became. Yet, I have seen many, many people spout off that they pay almost no profit for something. In the end they got what they paid for.
But you knew this already. Just thought I would put in words for everyone, what you knew but forgot to say.
Just something to think about...... (big smile)
Trail Guide
Trail Guide (04/25/00; 06:47:56MT - usagold.com msg#: 29301)
Euro
http://pacific.commerce.ubc.ca/xr/plot.html
ThaiGold (04/24/00; 21:07:43MT - usagold.com msg#: 29287)
EURO being Abandoned.? Attn: FOA/Trail Guide
http://www.telegraph.co.uk:80/et?ac=000124036011016&rtmo=V6gJg6VK&atmo=99999999&pg=/et/00/4/25/weur25.html
But if you go-there, and read-it, it appears to me (and the Telegraph Reporters) as if the Euro is being abandoned before they even print the first one.
What do you make of this twist of events.?.
Is their report incorrect.?. If not, why do you (FOA)
continue to tout the Euro so highly.?.
Cordially
ThaiGold
--------------------------------------------------
Hello ThaiGold,
Here is part of your article:
-----------------------------
City: Economic week: Interest rate fears dominate
TONY BLAIR was urged to rethink his commitment to the euro last night as the ailing currency suffered a fresh blow to its credibility.
Leading German financial experts issued a warning that it would fall further in value unless there was urgent economic reform. This was a clear sign that opinion formers at the heart of the eurozone are turning against the 16-month-old single currency. A week after it hit a record low against the dollar, there are now fears on the Continent that it is facing a full-scale crisis of confidence.
The most damaging attack was made by Prof Jürgen Donges, who heads a committee of five independent "wise men" which advises the German government on economic issues. He said that Germans had been told that the euro would be as strong as the mark, Europe's most successful post-war currency. But they had been bitterly disappointed.
-----------------------------------------
Thai,
Go to my above link and plug in German Marks to US Dollars.
You will notice that the Mark once brought .60 cents +/- in 1980 then plunged to buying .30 cents by 1985! What's that, a 50% loss against the dollar?
Then notice how it was at .72 cents in 1995, then plunged to .55 cents by 1997. What's that, another 30% loss?
The Mark was also spectacularly strong against the dollar at times. My point is that using the Euro as an excuse for European currencies to have fallen is all wet and these guys know it! The German people (and most of Europe) have known money fluctuations from their birth. The above "wise men" are not going to sell them on dumping the Euro on the grounds of it's recent exchange rate.
It's all politics, pure and simple. The anti Euro crowd in England is trying to sway Tony away from his well founded convictions. Still, Britain will join the EU as soon as possible because it represents a new future for them. I have well positioned advise that the dollar is going to begin it's decent this year. As soon as it does these political outcries by "fat cat special interest" will silence.
Believe it!
Read my last (recent?) post here about the Euro value. It's a convoluted story, but our modern 80 trillion derivative driven currency world make traditional money flows (and values) hard to fathom.
Besides, who's fooling who about the Euro? Quoting from today's WSJ currency page:
--------
"Even after the expected increase (talking about ECB Euro rates), the Central Bank's main refinancing rate would remain well below those in other western countries - at 3.5%, compared with 6% in the US and the United Kingdom".
--------
The Euro is weak? Give me a break? Some posters here only look at the exchange rate to see a currencies strength. That's good for the "trader crowd", but it doesn't begin to address the fundamental forces that truly impact a currencies real redeeming qualities. We are talking about real world "use" and the cost to implement that "use" in business. At these rates the Euro is smoking the dollar, hands down. Can you imagine what the exchange rate would be if Euro rates were raised somewhat close to Western rates?
The most exciting dynamic here is that these low Euro rates are building an economic infrastructure in a major world trading block. And doing it during an expansion in it's beginning timeline. And retaining a solid currency in the process.
I agree with the ECB: the Euro is fundamentally strong to the extreme, while the dollar is looking more like a Yen. So what if the dollar rises? It's strength is a sign of failure because our rates must be so high to maintain it. This same "high dollar rate" momentum, that traders love is just killing the international US debt quality from the trade deficit flood.
So do we want to have our assets in Japan instead of Euroland? Japan has a strong currency with 0% rates. Good, yes? Ha! That arena is in a crashing crisis and embarking on it's own hyper - inflation policy to try and control it. The Yen is strong because they are drying out! Our Dollar will
do the same, only we will gun rates higher in a "wind down" of reserve currency status. Just the opposite from Japan. Eventually, price inflation will eat the dollar on the exchange rate market, no matter what our interest rate is!
Further
Most TGBs attack the Euro story because it validates the current gold market dynamic "Another" laid out long ago. It ruins their passion for Gold stocks and gold derivatives as it proclaims that physical gold will at least match ( or far exceed) any possible run in these paper products. He
influenced this political process privately in the early 90s and publicly in the late 90s. To date the whole dynamic is proceeding and many other analysis are now moving in this direction. Truly, it's a transition on an epic scale.
thanks
Trail Guide
Trail Guide (04/25/00; 17:57:08MT - usagold.com msg#: 29340)
Comment
Hello Mr. Gresham!
Mr Gresham (04/25/00; 09:47:57MT - usagold.com msg#: 29313)
Trail Guide #29301
think we could re-finance the house in Euros? Before the rush begins?
------------------
TG:
Oh, lord no! Not if you live in the US (smile). I think one could just buy some well located (in a safe area) homes financed in dollars (or cash (smile)) and hold them for the great run. I have done just that and am adding.
If one can buy (a home) in Euroland, plan on using it, not selling for dollar profits. I fully well expect big time exchange controls as this blows up. This is the same reason many investors save in Euros (and other currencies) in addition to local dollars. They don't bet on it (Euros) because it's a long term hedge as is.
---------------
Of course we'd have to hedge the future Euro/dollar rise, since we earn in dollars. That would be a call on Euros, or maybe a put on Tbonds (call on TYX). Just throw us on that $80 trillion derivative heap. Of course, we'd be first in line for collecting. Not!
Then we could broker our neighbors getting in on Euro re-fi's. Get our own Euro carry trade going.(Just think of the fees!) Oh, but the unwinding (big grimace!) ahead!
-------------
TG:
Yes, I have the same expression thinking about it. Some real serious international money is going to be in court for years trying to unravel it all.
Thanks
Trail Guide
Trail Guide (04/25/00; 17:58:32MT - usagold.com msg#: 29341)
Comment
Cavan Man (04/25/00; 08:12:34MT - usagold.com msg#: 29302)
Trail Guide.......Still with you....CM
--------------
Thank you Cavan Man!
The game is getting real hot now. The dollar and Yen are being gunned up to the point that their economies must become printing presses and no longer sell anything outside their borders. Right now there is almost nothing the Japanese can sell into Euroland at a profit! Japan needs desperately to sell more now and do so at a profit. The US is almost becoming a dollar exporting machine as the exchange markets begin to kill even their high tech exports.
It's going to continue until the Fed is forced from a crisis to cut rates to the bone (just like Japan). Then,,,,,,, exchange rates and price inflation will do their dirty work. Once that break happens, prices will suddenly jump ahead of the yield curve and the race will be on for the fed to follow it. It will evolve into the greatest inflation ever to impact a world currency.
Physical gold will be the easiest holding to sit through all this with.
Thanks Trail Guide
Trail Guide (04/25/00; 17:59:35MT - usagold.com msg#: 29342)
Comment
USAGOLD (04/25/00; 10:06:34MT - usagold.com msg#: 29316)
Michael,
Thank you so much for having that item. More than a few of us need to refresh our minds about that. Good stuff my friend!
Trail Guide
Trail Guide (04/25/00; 18:01:14MT - usagold.com msg#: 29343)
Comment
WAC (Wide Awake Club) (04/25/00; 08:31:17MT - usagold.com msg#: 29304)
Sterling
WAC (Wide Awake Club) (04/25/00; 08:15:20MT - usagold.com msg#: 29303)
--------------------------
Hello WAC!
I read your Buiter article and it was good. Concerning the British "higher ups" thinking they have engineered the economy and this has put a premium on the Pound: he puts the MPC in their place by saying "It's just twaddle"
Ha! Ha! WAC, I'm glad you found that item!
And he is so right in his perception. Just as you quoted: "It is just some big and largely irrational confidence discount on the euro and the ECB. And that will pass."
It seems like the entire dollar thinking world is on some new level of perception. Yet, their treasuries (and CBs) are just bankrupting everything that's left of the system and doing it in double time now.
Thank you for your realistic views in (usagold.com msg#: 29304).
-------
I think the key word here is FUNDAMENTALS. The UK economy is been completed decimated. ---------
We will later see the effects of all this as it is played out in what MK calls "the currency wars". War is truly a much better name for it. While Western investors are preparing for a little $100 or $200 rise in paper gold (and worrying about how their paper gold substitutes will hold up until we get there), the whole damn dollar arena is on fire.
Everyone asks the same question you do about dollar arena currencies: "So, why does sterling continue to rise relentlessly?" Yet, in this day and time strength in these major currencies comes during a crisis. It's going to shock a lot of investors at how fast price inflation runs once the wars really get started. After the gold markets implode,
physical will rush as never before seen in history. Exciting times my friend!
Trail Guide
Gold Trail Update (4/26/2000; 7:45:42MDT - Msg ID:29364)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (4/26/2000; 7:45:41MT - usagold.com msg#19)
The Euro is part of this trail!
Hello ALL:
This is a pre - weekend office review before our hike.
Here is some context from today's WSJ that reinforces what we have been talking about. I'll put it in my words but read it yourself in their paper.
In the World Watch section, under ECB Rate Rise:
----Inflation in the Euro zone may have peaked in march and now declining. ------ The CPI in all 11 countries rose 2.1% in march, year over year. ------- But analysts expect euro zone CPI to fall back to 1.8% this month and to 1.3% by end of year. ------ Three German states reported that prices were unchanged or fell in April / March. ------ Two other states reported similar data last week. -------- Italian cities reported inflation in April had declined from month before. -------
OK,
Does this sound like the major price inflation that was suppose to impact Euroland as their currency has fell for over a year? That's right, it's not! This is because the Euro Zone economy is "benefiting" from a sound currency structure. It's the Dollar that's is being driven ever higher into over valuation as it's reserve status is transitioned. The ECB / BIS are doing the same thing to the dollar that they are doing in gold right now. Allowing the Western Dollar faction to inflate and export (if able) the paper version of both items until they burst from supply.
In this process US interest rates must retain a large premium over Euro rates to support and over value the dollar as it's supply is pumped. This in turn drives performing financial structures (real world goods creation) into Euro assets because a sounder currency allows lower operating costs with the same or lower current price inflation. By this measurment, short term exchange rates are not the "use" deciding factor. If this continues, Euroland has the potential to take the lion share of world finance, and goods settlement. We are on that road today as a forced high dollar exchange rate is fueling our trade deficit! Yet, all of this is hiding under cover as the media only reports on the loses that traders take in the Forex markets.
Further from what I read in the WSJ under Foreign Exchange:
------ From an economist in New York ------ The European economy is strengthening. ---- European rates are rising. ------ And Europe is at an earlier stage in the business and restructuring cycle than the US, which suggest greater potential for price gains in the intermediate term. ------
Again,,,,,
Breaking the dollar's hold on world reserve status means forcing it into a major price inflation at the end of it's timeline. This is done by tying the hands of policy makers so they can only create (pump) more dollar assets into the world system. That "tying of hands" is done by creating for the first time an alternative currency structure that does not fail from continued dollar "crisis strength" or "crisis weakness". The world economy will run to just such a system as their current system (the dollar) fails.
The US is now trapped because they cannot lower rates to bring down dollar exchange rates without gunning their stock market and economy into an obvious hyper inflation. Yet, they cannot raise rates any further without causing a complete landslide of investors into using the lower cost Euro system.
Hence the little 1/4 point rate rises Alan is doing. He and the dollar are now trapped from all the outstanding dollar debt in the world. The whole mountain is now slowly sliding down the slope as we watch. Is it no wonder that gold leaves our shores in record amounts.
In the past, no one would rock the boat in such an obvious way as the ECB / BIS is doing because everyone would lose as the dollar eventually was discarded. But today, the Euro Zone system has taken a second step to backup their Euro banking reserve structure when the fall comes.
In an ever so obvious event they told the world that the Dollar based world paper gold markets are "on the road" to being phased out. That event was the Washington Agreement. If you have read my earlier "trail walks", you know how this action is slowly drying up supportive gold supply that gives credibility to the paper gold markets. The eventual outcome of this is to allow the current contract markets to be supported by the US and it's backers alone. To date, without world support there is not enough gold supply to keep these contracts at par with spot bullion prices.
In a desperate attempt to keep dollar gold prices from spiking, the dollar faction must inflate it's contract market to the same extent that the dollar itself is being created. Without this paper supply, the paper gold markets would show a discount to physical just as world dollar debt would discount dollar price inflation without more created dollars to buy existing debt supply.
The stage is now set for a fall in the dollar and a corresponding leap in the "dollar reserve replacement value" of gold held in the BIS system. The point is clear for all to see,,,,,,,, when a crashing dollar exchange rate comes from dollar price hyper inflation,,,,,, and drains world liquidity and value from dollar holdings,,,,,,,,,,, gold and Euros will fill that void. The Euro system is completely braced to accept a US self induced transition of world reserve status from the dollar into Euros. It's no accident that the breaking of the world gold market structure and dollar price inflation will come about just as the Euro comes to center stage. Euro depth grows every day and brings in ever more players seeking opperations value.
Now you know what "Another" has know for some time. Now you know why gold is and must rise far, far higher than anyone expects or predicts. Now you know why our paper gold contract market is about to fail as a "freegold" physical market takes over. Gold in the many, many thousands is in our future as the transition to Euro reserve status is set to begin.
Another:
"We watch this new gold market together, yes?"
Thanks for hiking
FOA/ your Trail Guide
Trail Guide (05/03/00; 05:42:59MT - usagold.com msg#: 29826)
Comment
ALL:
I've been working up several new posts and have had no time to place them yet. I talk in depth to a number of people and it can be quite a task. So, am behind reading too. Also wanted to wait until I could post some long overdue replies and comments on the main forum. ORO, your good thoughts always require some commentary from me. Will do so this weekend.
Excellent writing by everyone! Elwood, great charts! Stranger, your'er NEM is going up too fast!
Only allowed 10% a week (smile).
Looks like our long term plan is still working in the right direction! Good news for gold advocates!
thanks
Trail Guide
Gold Trail Update (05/06/00; 16:45:22MDT - Msg ID:30056)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (05/06/00; 16:45:21MT - usagold.com msg#20)
For Your Eyes Only!
Hello Again!
Thanks for stopping by my home before our hike. I have a large outdoor fireplace in back and plenty of chairs. Here we can first eat, talk some and then get on the trail.
I want to start by making my personal opinion more clear. Some of you that know what talk is coming are smiling already. But, this is for some of the newer ones.
First point:
It's shocking to me when I hear that so many are still trying to figure out "gold's place in the world". Some people even question whether gold is any kind of wealth worth owning, let alone be a substantial portion of their savings! With this mindset is it no wonder that this current slice of "Western Investors" can be so easily bilked out of their "hard money" savings. Instead of saving gold for coming currency devaluation's, these same try to only profit from gold's current small price movements. It's an old strategy built to fight yesterday's gold wars and it's costing them plenty. Here- in, we see there is a huge difference from our position and what they are trying to accomplish. In the quest for profits they have taken the Fiat bait, "hook, line and sinker" and brought into fiat gold substitutes in every form.
But, I guess it must be this way. The financial convulsions that lie just ahead cannot possibly occur with everyone holding physical gold. At least not at any kind of currency prices we see today. Perhaps this is just one more signal of the end of this financial era as we know it. Somewhere in the "good book" I read where in the end many would throw their metal in the streets. By buying gold substitutes we may be seeing a whole segment of our world savers literally tossing the metal before the fact.
Let me expand:
We, physical gold advocates, have largely built our views from the actions of several smart players. Players we perceive are out there in significantly large numbers. Here we find a kind of thinking that's completely opposite from the dollar asset world most (Americans) live in.
When all of us hear of someone buying gold with no intention of ever selling it for dollars, we laugh! What good or profit could they ever derive from it? Well, a lot of paper gold bugs are going to understand this real soon. In a way that's kind of "up front and personal"! Our fellow "Trader Gold Bugs" all firmly agree that it's much better to hold a trading position on some form of gold derivatives. In their view, mining shares, stock and gold futures options offer a much better play and much better profit potential than physical gold. At least in dollar profits, that is.
All of this is fine and probably very true in their world of perception. But we have to remember that these TGBs all present their case for a higher value of gold as "the reason" to play the paper derivatives game. Whether gold's value rises from an industrial use physical shortage or induced from a currency devaluation (price inflation) physical shortage, they see the currencies as bad and gold as good. But the deep flaw in this thinking is found in this: "Playing paper gold substitutes is only a game that tries to make you more of the same currency that's failing from price inflation"! It's a currency game that's apart from owning physical gold. In other words their position is: "if fiat prices are rising 10% or 20% I want to make at least that much more of those currency units so as to keep me ahead". Even if they get delivery in gold against paper contracts or receive some gold as a dividend from a mine, they need and intend to sell it for cash to profit.
Whether their gold stocks are surging or their stock dividends are rising or the leverage of futures options are gunning ahead,,,,, the gain "in the mind" and "in the hand" still comes in the same fiat you are losing against. You play the game because the money is somewhat failing, but keep making more of the same failing money to stay ahead! Get my picture? That's ok when the currency was just inflating a little and world governments were trying to save said currency. But the currency war ahead will paint an entirely different picture in these markets. The next price inflation will build well past "plain inflation" and explode into Hyper-inflation.
It all comes down to you playing with a paper gold supply that's supposed to represent gold you could conceivably get, if needed. But the closer we get to the "real act" in this play, the more the paper game is inflated with supply that cannot be covered outside a cash settlement. That is a simple position to understand and work from but just look around? The "Western Mind" is stumbling all over itself in an attempt to explain it with a different outcome. In other words: There must be a way this can all work out so as to preserve our dollar and the leverage we own in these paper gold substitutes. You see, it's the perceived leverage in paper games that keep them coming back, but official policy has changed these markets in order to conduct a now ongoing currency war! Paper gold leverage is only an illusion built on the desires of dollar players trying to prosper in a dollar position. Well, I can tell you that the further we travel this trail, the higher the eventual cash settlement of all gold paper will be and the less that settlement will be allowed to match any "free physical" price.
This, my friends is the reason so many Physical Gold Advocates have no intention of selling their physical gold for dollars any time soon. "They don't expect the dollar to retain enough real value to warrant trading it for gold. At any price! When the "real act" begins to play out, international gold will be settled outside the dollar world and done so far above the coming forced contract cash settlement prices. Whether traded "outright" or for a "better" currency, gold and the current dollar derivative world will part ways.
By holding physical gold you are owning a super leveraged "derivative" that will be exchangeable against the value of real things at a par level lost to the minds of most investors. Today, physical gold purchased in dollar values is discounting it's worth by perhaps 100 times. For us PGAs, that is a leverage worth "playing the physical game for"! (smile)
Second Point
(that smoked salmon is good, no? go ahead, there's more here)
I have made it clear that I follow in the footsteps of giants and by extension remain in Another's shadow. We have been buying gold all through the 90s as a portion of out savings. It's held just like any other currency and represents a major portion of the (my) pie. I also own some gold stocks (smile). But own them in a portion and for a reason that any leading gold mine executive can only crave:
"they are held not for trading and in small enough portion that they will never be sold".
In effect, we own their product first and foremost for the real world, long term leverage it represents. We own a share in their business with a far away view across the "coming currency war valley". In the middle of that valley, amiss the war, we expect some of these businesses to survive by changing into the Euro world. But, most all of them will experience a crushing collapse in equity values during the war. My view to the other ridge sees a gold price, so high, that it will eventually overcome taxation, government production controls and even the failing dollar based contract gold market. Even though these shares will plunge "in the valley", my holdings are such a percentage that I will own them "through it all". This is why I own only a few of the very best and one in particular.
For all of you here today, contrast this position against the trader of the last few years? During the worst plunge in paper gold assets seen in a quarter century, these same have lost most of it through their leverage. In and out, in and out, and all the while saying they are only "a little down"! Then, at the slightest little rise in their paper positions, it's given that this proves they are right. Right in that paper leverage beats physical any day. I submit that the way traders work, they will be lucky to be even as gold runs past $1,000.
Again, Yen, Euros, dollars and Marks are in my savings position, but physical gold is held as the derivative that will best outvalue them all! I do not trade these positions, I build and save them. The coming political transition from dollar reserve use will break the paper gold markets into cash settlement pieces. In that process, induced by this Euro / Dollar war, physical gold will outperform any any all failing paper gold. The value is there to own today and anyone can have it! Events will prove that the footsteps we follow have placed on "the real gold trail".
Now, onward the hike.
See you there in an hour or so.
FOA/ your Trail Guide
Gold Trail Update (05/06/00; 21:50:38MDT - Msg ID:30072)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (05/06/00; 21:50:37MT - usagold.com msg#21)
I see Gold!
Onward
Anyone following these walks knows I am not the best at putting the trail into words. We must therefore rely on events (and other writers) to demonstrate the real world around us. Recently the completion of the Swiss gold sale is a case in point. Here you have a country known for it's pragmatic hard money trends, yet it's selling gold. Something they would never do unless the process could in some way return the lost value back to them.
Trading Swiss gold into the BIS system gives further support to the Euro "free gold" cause. Giving the ECB / BIS more control over how physical gold is allocated only further starves the dollar paper gold world. Having once backed a low dollar price of gold for oil, the Swiss helped build and sustain the same contract gold infrastructure that would eventually be the undoing of the dollar. Today, they further align themselves with the Euro world just as a "deflationary" phase is set to impact the dollar dominated gold banking world. In the end, gold values will be much better with the Euro pricing a Free Gold marketplace. This in turn will mark to market the remaining Swiss stocks of gold at a higher level than could be currently achieved. Add to this a strong Euro system and the benefits will be enormous.
Gold banking paper deflation will lead to Gold banking paper inflation
Just as deflation in a currency block is caused from the defaulting of currency loans, we are on the same road in the gold banking business. Such deflation is cured the same way in both instances, paper printing! Be it gold paper or currencies.
In the end, a currency deflation is halted by supplying the currency units until rising prices become an obvious default of the fiat money. For you and I the prices of everything race ahead. For business caught on the wrong side of this, it's hell! In other words, the dollar prices of real physical things rise higher than many business contracts can deliver against. Hyper - inflation bankrupts businesses that agreed to supply a physical item at a price they can no longer buy it for. Whether tires, tools, batteries or gold bullion, anyone writing supply contracts that last into a major price inflation will end up settling those contract in cash. That is up to the limits of their capital. Then, only if the treasury deems them important enough does the government prop them up with more public cash to bail them out. This endless circle goes on until all currency contracts fail from the loss of credibility.
Our current world dollar gold contract business is arriving at this same juncture with different results. Paper gold markets expanded to meet investor demands. The only difference between now and in the past is that "Western investors" today want to invest in the price movements of gold, not use gold as a money holding. The demand for gold today became the demand for leveraged gold paper. Instead of selling real gold to meet demand, governments, bankers and brokers created more contract gold. In the same way that people borrow cash created out of thin air, would be gold owners and traders brought a lot of gold credits based on nothing but thin air. The paper market expanded until a political change now threatens it with default deflation.
Just like a fiat currency, modern gold currency is only credible until prices start rising against it. It will start out with a settling of contracts with only a percentage of physical and the rest in cash. Then, in the same way as prices rise against a currency during an inflation, physical gold prices begin to rise against paper gold. Slowly but surely, less and less gold is supplied against contracts until we end up with total cash settlement. All along, the physical "free gold" market trades at a higher and higher currency price. This, my friends is what dollar hyper - inflation may look like in our modern paper gold markets. The selling of paper gold "into the dirt" even as all prices run away.It may last for an hour, a week, six months or several years, but it will unfold this way. As long as investors believe in paper gold, their wealth will be slowly absorbed by physical gold buyers until trading breaks down. Eventually we have the super failure that locks up the entire paper gold arena and ends it for good as everyon's holdings are marked to the real market.
Further
On another note, please read ORO #29003 and especially #29498 on the USAGOLD Forum. His Euro Crush and Dollar spike describe many of the items that impact our currency world. These same forces are also shaping the transition of the gold markets.
I noted this past week how the dollar rose against the Euro. Many rushed to proclaim the Euro weak and failing. I have to ask: "without a dollar to compare exchange rates to, how would anyone measure the Euro's weakness"?
If you lived in the Euro Zone countries, with a bank account full of Euro credits, what impact on your lifestyle would lead you to see how the Euro is weak? Against what? For myself, I can find none! In fact, most all prices of goods are rising slower than in the US. I can borrow money at lower rates than in the US. The Swiss unit is falling and costs there are out of site! The Pound carries interest so high I would certainly not give up my Euro system to operate there. Here in Euroland I sell more abroad than I bring in.
Perhaps the world is not what it seems!
The view:
The dollar faction is having a hard time keeping paper gold under $280. Now that the world has seen how the WA is placing Swiss Euro Gold, the paper markets should start to discount physical. I think weeks are all the time the dollar faction has left before things begin to change!
Thanks for hiking with me
See you at the USAGOLD Forum
FOA/ your trail guide
Trail Guide (05/06/00; 22:35:54MT - usagold.com msg#: 30079)
comment
THC (5/5/2000; 5:31:38MT - usagold.com msg#: 29970)
Hello THC,
I'll add my 2 cents to your discussion.
You say:
---- I believe that FOA has spoken from time to time of "paper being sold into the ground" while "physical gold sells at much higher prices away from the futures markets." I would content that as long as futures markets are connected to physical markets through the physical delivery rules, this would seem to be highly implausible. -----
The obvious weak part here is in your
" " through the physical delivery rules" " !
These rules are open to change. If enough traders or commercials default, no one is going to supply physical for them. The "rules" convert to "trade for liquidation only". That is usually a trade of "paper to paper". In other words "cash settlement". If you were short you lost a bunch. If you were long, you get cash and go try to buy your own metal.
The problem is that in this atmosphere any amount of metal trading will be spiking straight up with each bulk cash settlement.
The reason this perspective is important is that the "paper makers" know just how this will impact the paper markets. In reality, no one that has real capital will buy into a paper marketplace headed for any form of liquidation. So it becomes even easier for them to send prices lower. Even a hint of settlement is enough. If anything at all, during this process the arbitrage is just the opposite from
normal. Traders help the discounting process along by dumping contracts that are even in obvious discount to physical and running to buy "dealer physical" supply at higher prices.
Contracts are contracts my friend. Nothing more until settled. In a real crisis, cool arbitrage players get run down by the train as they find their own physical that was set to trade becomes "suddenly not there"! As the gold markets grind to default, the paper selling by people with nothing more than good credit will greatly intensify.
Trail Guide
Trail Guide (05/06/00; 22:58:26MT - usagold.com msg#: 30081)
Comment
Cavan Man (05/06/00; 20:07:56MT - usagold.com msg#: 30063)
Hello Trail Guide
Two questions please:
1.) Will you tell us of your favorite gold stocks?
--------------
I once said one and will hold back from mentioning it (or others) again. The Western view says that if I have $100,000 to put into hard assets, I'll buy ten ounces and place the rest in gold stocks. I doubt most people could hold that ratio through what is most likely coming.
It's the same as using the grocery money to buy Coca Cola stock as a substitute for a bottle of coke. All the same arguments apply: the company could pay me dividends in coke,,,,, there reserves of coke in storage are huge,,,,,,,, more leverage than the real thing,,,,,,etc.,,,,, etc.,,,,!
Then the stock goes down in a general crisis even as the price of a cold coke goes up from inflation and everyone can't figure it out?? In the end you open the frig door and don't see what you really need........ that cold bottle of coke (smile).
2.) Have you been in the very general vicinity of Aiken, SC recently. I'm trying to confirm a sighting:).
Have you been celebrating that mexican holiday??? (smile)
Trail Guide
Trail Guide (5/7/2000; 0:09:23MT - usagold.com msg#: 30082)
Note
TownCrier (5/5/2000; 21:00:38MT - usagold.com msg#: 30028)
-----------------------------
If they are giving up their own ability to print money, why all the trouble to form a new currency unit instead of just joining the dollar and the currency union of 50 states plus assorted banana republics that use the dollar? The reasonable answer is that the intended objective is a
fundamentally new monetary architecture not available through the current dollar system.------
Hello TownCrier,
You hit the nail right on the head! The whole purpose behind all of this was to get away from the dollar, not imitate it. All the hard money people that pounded the table about the dirty float (80s decade) in dollar exchange rates now want the ECB to intervene. No sooner do we have a currency system that let's the market rule it and everyone says "Oh no! We need to do something".
I can tell you why they want something done and it's not the saving of the Euro they are interested in. They (the dollar faction) want the Euro up because it is gutting the dollar infrastructure at these rates. Just let it set around .90 for the rest of the year and the dollar will be toast. The ECB won't spend it's dollar reserves buying Euros because the Euros they would take in won't be the international float like our dollars (eurodollars?? damn confusing to use that term now a days) overseas. It would be the domestic zone supply. We forget that they are running a trade surplus
that is building local assets denominated in Euros not dollars. Not adding to the mountain of dollar liabilities like the US trade deficit is. If the carry trade wants to create Euros against their own equity just to buy dollar assets, let them. It's not hurting the international Euro float because all of it is being sucked back into their (Euro) economy. The carry group thinks this is the same act as Japan, but it's not. The Yen is being destroyed as they compress and rates are held at 0%. Yen demand for business is dead. Contrast this against Euro demand and economic growth and we can see a massive trap for Euro shorts in the making.
I think this is all coming to a head now and gold is going to be in the middle of it. Before this is over, the ECB is going to begin unloading dollars for gold through the BIS offices. This may be happening now as gold moves from our shores. Then they use gold to buy excess Euros from the
ECMBs. That same gold could be used to lend Euros again because it's marked free value reserve asset. No different than the IMF play. Beautiful!
Trail Guide
Trail Guide (5/7/2000; 18:42:15MT - usagold.com msg#: 30096)
Good! our fourum is back up
ORO (5/7/2000; 3:25:29MT - usagold.com msg#: 30083)
Hello ORO,
A few comments about your work.
-------Particularly surprising was how right Davidson and Reese Mogg were about the dollar debt squeeze.----------
ORO, It has to unwind through a reserve transition. Default will only come through inflation after the fact. That is the only way a modern reserve currency can revert back to a regular currency without a complete washout of the global financial structure. Call it what we want, inflation, deflation, default or devaluation, the loss of the ability to expand a reserve fiat further becomes an end time banking crisis that requires the next system to take over. If no replacement is available we all go down.
The problem of when is a currency no longer "reserve quality" is based more on it's expansion qualities than it's comparable exchange strengths. The failing point is reached when the local economic system can no longer supply products or new productive capabilities in sufficient quantity to expand the internal debt base for real use reasons. The money then just expands because it's "Legal Tender" and anyone can get some. This shuts off the real money making engine and forces currency creation only for the sake of it's ability to buy and finance things. Not it's ability to hold a steady value. In other words, more dollars are loaned into existence just because they still have some value left in them to trade for things and that value is based on debt pay back strength. Not because their creation is matched by a productive increase somewhere in the society.
Obviously the US has been on this path for some time. Today, the only reason the dollar still has value is because of this pay back crisis. Dollar denominated debt is so far out of line with it's perceived real economic base, the rush is on to move real world infrastructure debt out of dollars
and leave the rest of these dollar claime sloshing around as trading vehicles. And boy that's a lot of slosh to move around.(smile)
They (ECB / BIS) planed for the day when this could begin and it's here, now! The Euro, warts and all is allowing this transition. In time everyone will realize that dollar demand and strength is gravitating towards nothing more than international currency contract settlement. It has no reflection of US economic conditions or the value of our real assets. For large cross country players and
governments there is no escape from this. They cannot just dump dollars to get their equity back out of it because there isn't enough free "REAL" equity in the whole world to run to at today's prices. The only way is to hold an offset position and let the dollar self destruct through inflation. Is it no wonder the foreign CBs have supported the dollar system by holding and taking in more dollars? How could everyone possibly run out of the dollar? They couldn't and won't for the most part, but will sell what they can.
Gold value today and tomorrow will have nothing to do with economic supply and demand or the cost to mine it. It will be forced to rise in value to help represent trading wealth currently held and trapped in dollars. The Euro could never do it alone. Of course, dollar hyper-inflation will gun the
process, but physical gold in real goods terms is heading way up! That's why I laugh when people talk about $700 or $800 gold being about right. That's not even close.
Again, dollar strength today is a sign of a bad situation and will only get worse. It will gut the productive infrastructure of this country even as the fed super inflates the system to fight that strength.
Your words:
----------The reason a bank debt currency carries a value at all, and does not go directly to 0 is that each unit was borrowed into existence and has a demand by the borrower to return the currency created by his loan. -----------
Yes! This hits right at the heart of why I call our dollars only an illusion of wealth. Truly it's just a contract
that can and is created between two entities with banks as the broker. The person that sees dollar value based on this demand and then holds those dollar assets as his wealth,,,,, is buying into an illusion based on that contract relationship. It's ok to own fiat money based on this concept because the human world has built a lot of value through the ongoing building of currency debt based on real productive efforts. But our money denominations and supply today are nowhere close to that comparison. Unless a free market value for gold can be established where one can
gauge the quality of all outstanding contract relationships (money supply), we cannot know where we stand. Allowing a real gold price to always rise (or contract) with no limits turns it into something better than circulating government money. It becomes a circulating asset that represents
real wealth values at all times to all people. We are on that road today.
Further you make the point that:
---------The BIG GAPING HOLE in this system is that there is no such thing as cash--------
I agree and doubt there will ever be again. This is where gold traded as an asset instead of competing with money would fill that hole.
Thanks Trail Guide
Trail Guide (05/08/00; 18:58:00MT - usagold.com msg#: 30138)
Reply
Hello Topaz,
Thanks for reading and considering my offerings. Actually I don't expect or ask anyone to act or believe any of this. It's placed here to offer a view from another place and a future time. A way to see how some others interact with the ongoing money changes in our world today.
In your post:
---------Topaz (5/8/2000; 4:48:11MT - usagold.com msg#: 30108) On this Trail: "I'll tak the High Road and Ye'll tak the low road" and we'll both get to "Scotland" (eventually). {;])----------
Topaz,
To comprehend Another's Thoughts is to understand that you and he are not on the same road! Indeed, most if not the majority of Western gold investors will find themselves in Scotland to only then know they lost a great deal by ending up there. Watching the current gold markets, accepting their pricing mechanisms and using today's paper vehicles to play this arena will land most traders in Scotland but unable to buy gold. The physical price will have ran far, far past
whatever leveraged gains they made.
It's easy to see the leveraged traders by reading their verbal trails. They are completely fixated on "wanting" our current arena to work for them. All of their understanding and drive is centered on using the various forms of paper gold. Yet, this entire infrastructure and most of the mine equity that's built upon it has from the beginning been just another currency the dollar governments uses to take "Western minds" away from buying real gold. You see my friend, physical gold is where the real leverage is and the dollar faction have know this all along.
The entire marketplace we call the gold market is all based on a working dollar world. Everything that's paper and called gold has it's roots deeply leveraged not in gold but the dollar return on gold. There is not a paper gold investment in the world today that has seen a gold spike like the one that is coming. Likewise no investor has ever held or seen how these paper markets can cope with just
such a move. None!
I submit to you and everyone that will consider that profits from paper in this move will pale in comparison to holding physical.
You write:
--------It is apparent you perceive the current pricing mechanism (spot- futures) will implode and the POG reduced accordingly until the "penny drops" ie: Paper and Physical will go their separate ways--- Ok so far?
------You came to this conclusion several months ago after "enlightenment" from ANOTHER source. (we all remember the fracas that erupted resulting in Sir Stranger's sin-binning) Since then, the possibility of an upside explosion in POG has been totally discounted.-----------
Topaz,
Nothing about this has been discounted in our paper or physical gold price. We stand where we did almost a year ago when we (both of us) delivered this message. I expected then and even more so now that a default is near. The WA was the concrete fact that placed us "on the road" to super gold! It is indeed coming and will arrive in our time.
The price move (spike) last Sept. was certainly not anything close to the lock up move ahead. When the season is right and motivations strong enough: oil will begin it's move for the Euro, the dollar will begin it's crisis and our paper gold markets will completely fail from lack of bullion.
Your words:
------For the benefit of those who still cling to the hope of a steady rise in the price, can you offer your thoughts on what is now a contrary alternative to your scenario? Just for the record I would like to cite the reason I consider the Status-quo will be maintained throughout this transition:- Accepting that Au is the centre of the Fiscal Universe and as such, (has/is/) will be manipulated by
opposing interests, is it not to the ultimate benefit of both sides to effect a controlled burn to the upside thus not jeopardizing the perception of Fiat currencies as a whole? (Similar to a nuclear standoff- where no-one wins if all the cards are played) I mean to say- If all holders of paper Au find themselves getting shafted, it may well have the effect that these large players/ countries etc will
even turn away from all forms of Fiat settlement and go straight to Metal which is in no-ones interests -No? Whereas, a steadily rising price (in fits and starts) can be (once again) perceived as the inflation indicator it is. The outcome would be the same in the end--Yes? I hope this sufficiently explains my thinking and look forward to your comments.-------------
Topaz,
There is no contrary alternative! The game at play has been "in play" for some time and processed through several age groups. The American dollar has reached the end of it's ability to function as a world reserve currency. It's debt load has aged it past it's useful timeline. From where I consider the world, this is obvious and has been for a number of years.
Because gold has been "the world tool" that all used to kept our dollar alive for these last days, it will be the first item to fall away from being a dollar support. This paper gold tool will fail as the dollar transition proceeds. It will fail because it's illusion will be seen through physical default. Today, it's only a matter of time. This default will break the paper gold support tool and shut down
virtually all dollar gold markets.
Once this breaks, there will be no "Western Investors" with a mindset to any longer buy paper gold. Having been badly burned and watching physical gold soar, it will be a long, long time before anyone is ever again "sold" on the idea of "gold substitute holdings". Not even gold in the ground
will bring them back. New taxes will make gold mining nothing more than what it always was, a business.
The Euro / BIS have positioned their official policy and reserve holdings to benefit strongly from a surge in value of "free gold". Contrary to your thoughts, they will welcome this change, promote it and utilize it's wealth building perception for public gain. Just as we have talked here so often: for better or worse, digital Euros and super "free gold" will set the pace in Euroland and the world.
The manipulations of gold you speak of are "old stuff" and are today a "dying process" at the hands of the BIS. I think many OLD GOLD bugs will find themselves "broken down" on the side of the road as events surge past their backward looking understanding. The road where they stall will be the one that leads to your Scotland.
The future my friend is before us and those that can see it will be on a different trail. They will be "on the road with Free Gold"! The Gold Trail we walk today starts far in our past and has become a direction to a new future. Walk it with me and see the world in a new light.
Thank you
Trail Guide
Trail Guide (5/9/2000; 5:40:58MT - usagold.com msg#: 30157)
Comment
Elwood (05/08/00; 20:22:08MT - usagold.com msg#: 30140)
Trail Guide (05/08/00; 18:58:00MT - usagold.com msg#: 30138)
Elwood (05/08/00; 21:58:37MT - usagold.com msg#: 30145)
SteveH (05/08/00; 21:02:33MT - usagold.com msg#: 30141)
SteveH (05/08/00; 21:02:33MT - usagold.com msg#: 30141)
Elwood, SteveH,
Hello, both of you.
This placement of Swiss gold was the first "real obvious" indication to the markets of what the WA is all about. Because these sales are the bulk of physical entering the markets during the next 5 years, something has to give as it is diverted into BIS accounts. Remember, I touched on this point on the Trail (when?): the WA did not address any means of covering existing contracts while still endorsing and maintaining their gross level outstanding! Most everyone completely missed the fact that this places "physical coverage" squarely on the back of the US if the paper markets are to be maintained. No one saw this as an issue because they assumed the Swiss gold was for coverage.
It's not!
I know The Golden Sextant is following that line of Swiss gold filling Euro loans. The problem is that it's not. They feel comfortable letting the dollar faction figure it out themselves. Euro Zone banks know that the entire Gold arena will shut down once this US supply line is cut off. They are
not so dumb as to fill their paper with physical when the rest of the world is force settling in cash. They will not " blanket" cover all loans. Just the important ones vital to oil supply. This is the real leverage that will bring on Oil for Euros! Get the picture!
Elwood, I agree that everyone is still trying to milk whatever gold out of the system they can get. This was a driving factor for allowing the US to "save some face" by forcing oil prices down some. Onec the gold flow stops (and it may be right now) oil ril rise fast and furious!
SteveH's repost of my "weeks" timeline is on track. Untapped official gold is running out and unless someone rolls over a huge paper commitment the game begins "real soon". We watch!
Trail Guide
Gold Trail Update (05/14/00; 20:39:27MDT - Msg ID:30528)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (05/14/00; 20:39:25MT - usagold.com msg#22)
Mothers: the only real gold of this earth!
Hello to everyone!
No hiking today. Let's just ramble on about some recent discussion and do it in a relaxed format. This is an especially good time to do this because most all investors are softened in spirit from mothers day. Yes, we all came from somewhere and even thought us guys try to take credit, it's the mothers that worked the magic! I am of an age where my mother is long sense pasted, but still celebrate the occasion with those of the new generation.
After a good dinner, a few glasses of fine wine and exceptionally good company, I'm now writing this piece. Thought you should know this (smile). Having read lightly through the USAGOLD forum I / we want to touch on a few things.
Yes Leigh,
"it's a beautiful day for a hike". Thank you for considering (smile)!
Peter Asher,
indeed the American public and private debt still grows. Yet, we as clear minded, broad thinking conservative citizens are expected to believe this debt has no end. This debt growth process alone is enough to make one seek financial cover. All of the economic facts , figures, projections and sentiment don't make a hill of beans compared to the corrosive powers of the total US dollar based debt. This alone completely overwhelms any near term bullish considerations. No economy in the history of mankind has survived long enough to make good on this magnitude of IOUs. None! This country will be forced, in our time, to hyper inflate us out from under a debt than cannot be covered. This is a proven fact from the beginning of all history, especially that of paper money.
From Another:
Mr.YGM,
you are a miner, I see. Good fortune for you any your family. I encourage your support for GATA and all who fight against the suppression of "FreeGold". Soon, a foreign political tide will turn strongly against the American dollar and drown it's policy of maintaining this paper gold
marketplace. When the great tide changes, the current will be like wind in a miner's sails. But my friend, it will be an exceptionally strong breeze. One seldom felt on desert nights. Only the strongest boats will race before our storm. My only fear on this day is that your people voice no clear
understanding of how this change will affect the trading of physical gold. They still long for the past and a return to an honest, supportive paper gold marketplace. They base their financial plans on $600+/- gold in context of a concurrent futures / paper market. I submit to you it will never happen. Paper gold will live with falling prices or die a horrible death. No middle path will modern miners walk. May your best dreams be as a fortune in hand's grasp.
Thank You, Another
FOA,
Hello TownCrier! My best to your Mother (smile).
Your item on the German 20 mark was an fabulous piece. It tells a true story that few can believe today. Those coins are both a part of history and the future. I read some of Holtsman's article and have to add something.
Many people today picture gold as an evolving asset that's only just now showing it's real potential. Perhaps this is seen in a context that gold value never did represent people, rather it represented our created wealth on this planet. Yes, actual physical gold, in ounces, has increased dramatically over the human time span. But, never before in history has human physical creation been as it is today. The real wealth assets of our modern world have increased thousands of times over the mined gold supply! Had mankind not intervened over these last 50+ years and created gold substitutes, there is no telling what gold would be worth.
As the only real wealth money this earth has ever had, it's unthinkable what value physical gold would have had to attain to denominate our created holdings. This is where so many "gold advocates" completely sell themselves short in projecting gold's future price. They try to somehow reconcile gold's value with it's cost of production. In fact, once man's drive to attach his official currency / fiat money to gold is broken (as it is about to be), all the gold "IN" the earth today could not represent human created things at 10 times it's current price! Throw in the fact that the earth will not give up all it's gold any time soon, present world gold holdings in reserve currency today must rise in value at least 100 times to match what assets now exist. On top of that add in the fact that dollar gold will go sky high just to equal past dollar creation (as the dollar fails) and one can see where physical gold is "the play" in modern times. Forget stocks, business valuations, land or currencies: physical gold is the wealth for the next generation. The generation that in "our time" came from today's "Mothers" (smile).
But TownCrier,,,, you already know this. Perhaps I am expanding on your thoughts? ,,,,, if so, then it's good for you, me and everyone here!
Hi - Hat,
The people at the Hi-Hat ranch have a pigeon shoot (target practice) using real birds, no? A friend of mine said it caused a controversy there recently. It's a practice commonly used in other parts of the world. It's the same with our gold perception, just depends on where one has been and who we have known.
Oil begun rising in dollar terms again, even though many thought some deal was cut! Well, cheap oil is hard to maintain now that the Euro is breaking our paper gold market. It seems that only real gold flow will slow the oil rise. Today, derivitive gold is on the way out! Let me tell you, this revelation is sinking in on American policy. Without cheap oil, this Western economic illusion is going to fade quickly. And with it will also go the Western illusion of value in paper gold.
Like those in the rest of the world, a Sovereign Individual will be the one with real gold.
Henri,
You say
-----I hereby nominate the overextended timelime of the US dollar on life support for one of the great wonders of the modern world. Certainly on a par with the Colossus of Rhodes.-----
Ha! Ha! Never in the history of human endeavor has such a debt been built! I dare say it is greater than the seven wonders. When I listen to how players plan their next investment based on TA, I fully understand their narrow view. Truly, they are trading paper deeds as Rome burns!
Rhody,
You say,
-----The only gold mining company that I know has the capacity to fabricate both gold jewelry products and bullion wafers is Harmony Gold Mines. It would appear to me, that this gold equity (paper gold investment vehicle) would have the potential to shift its product sales into EUROs should the buying power of USDs implode. Do you know of any other such companies?-------
Quite a few miners are talking (very privately) about how they could sell their product "outright". The problem is that they have built their whole financial plan on selling gold to the "middlemen" first. So, now that paper gold has priced their product to a bare bones margin level, they have no resources to just "cut and run". When the "real" "next" physical gold bull breaks open, it will be lightning fast and lock the very market mines must sell into. Truly, it will be pandemonium at it's best!
The calls for "derivative cancellation" and "physical delivery" will wreck every possible banking network in the food chain. Both good and bad, solvent and bankrupt. There will be no market for gold in the banking world and these same BBs will be demanding all mine loans be settled from any miner that starts selling his product publicly before it's all settled out. Technically, many mines will be placed in default and their shares sold because their product is frozen.
There will be some huge profits to be made by holding certain mine stocks. But, almost all of them will go close to zero first. I doubt many investors could hold their current percentage through this price action. Physical gold will find a new market and soar in that medium of trade. In the face of this, few if any stockholders will hold their falling mining shares while watching gold soar. Yes, some will (like me) hold through thick and thin because they have a right percentage of (the best) mine shares to bullion. But, many, many others will pressure the market as they attempt to adjust to (our)level of holdings.
Companies that are "unhedged" and somewhat profitable at around $280 may attempt to restructure their bullion sales "near term". The problem comes in where so many "western share holders" do not believe that our paper markets are "maintained" much less about to destruct. So they vote for a status quo while waiting for some "legal" or "political" action to return us to "normal" paper prices. For these companies and their share holders, this backward view is the wet concrete that will set up and freeze their wealth as gold later soars.
As an aside, I hope the US will enter the paper arena and allow a controlled burn as paper prices rise. This would be the most "saving grace" for all long derivative (and stock) players. But the leverage creation has been so immense these last few years that I am afraid Another is completely right. All paper will burn! Completely!
Thanks on this Mother's day
FOA/ your Trail Guide
Trail Guide (05/15/00; 18:41:08MT - usagold.com msg#: 30576)
Reply
Cavan Man (5/15/2000; 6:34:50MT - usagold.com msg#: 30547)
-------If the paper POG goes to $0 separating from the physical price, how will physical gold be valued? Is it conceivable that an individual's gold holdings might appear to be worth less for a period of time and if so, how long do you think? Also, could you comment on Euro denominated
equities? I've been looking at the EAFE index as well. ----------
-------I'm still not clear on what mechanism will provide price discovery for gold in this new market we watch together. -----
Cavan Man,
Gold will be valued at the currency price physical dealers trade it for. On the spot! Done deal on the barrel head! I use my right hand to grab the cash in your left hand while you grab the gold in my left hand,,,,, Viking style! (smile)
A real life, true supply and demand market! You and I will know it's price the same way you know the price (value) of a loaf of bread. It's the price where one can walk into a store, hand over your currency and walk out with the goods.
Let your mind drift over all the things you can buy today, on the spot. Truly, real life isn't about buying an option that settles in one futures contract for August delivery of "underware". Then taking delivery of that contract and later settling that for a warehouse receipt of Jockey Briefs (smile).
But that is exactly what the paper gold boys have sold the American public on doing. It's become so far removed from reality that many (perhaps yourself) have a seriously hard time grasping how anything can be priced without some huge contract market setting the value.
I expect a period of confusion to rein as this all blows up. This is "exactly" why having physical gold will so greatly benefit the average person. When all the markets are closed for a while, paper holders will have absolutely no value in their hands. Yet, somewhere in the world physical gold will
be trading and it's value will be known. I and many others are betting on 2,000+ years of human history that this will be fact.
I mentioned before that Euro accounts are more for someone that can live there (part time?) and spend and invest their currency there. Even though I can see one day when Euros are held and used here in the US (like dollars in Mexico), I cannot see the average US investor (working family person) having Euros now. Physical gold would do just as well on a functioning basis and outstanding on a return basis. Please understand, our Euro discussion is more to explain the "why"
of the evolution of paper gold and gold's eventual real price. The Euro is not the focus for investment even though myself and others see it as the next major currency.
Hope this helps?
Trail Guide
Trail Guide (5/22/2000; 6:25:29MT - usagold.com msg#: 31000)
Comment
Elwood (5/21/2000; 22:49:13MT - usagold.com msg#: 30990)
Rugen (5/21/2000; 7:46:00MT - usagold.com msg#: 30940)
Gold Leasing Jigsaw Puzzle Part 2.
Hello Elwood and ALL!
Elwood, your post was on target. I'll be giving a full comment on it in a day or two. Also will discuss the paper derivatives buildup at banks. How they are preparing to profit from a shutdown and crash in the whole dollar / gold / trading system. Indeed, here the largest financial players in the world are selling paper gold into the dirt while "paper gold bugs" are counseling investors to buy more gold substitutes! Guess which side understands Another's Thoughts the best (smile). Guess what form Another has his wealth in as all this plays out?
Also:
MK, there are few places on the internet (if any) that advocate physical metal investment as your company does. The investing universe is choked with brokers and such pushing 95% paper gold and 5% (or less) physical. By not offering any insight as to how that position could backfire on the
vast majority of people, they create a one sided illusion of the future. Your site and company does a tremendous service for the public. People are not just buying gold from your operation, they are buying a "physical understanding" about metal doing it from a team of professionals that won't run
away when the going gets tough! With that comes the strength for one to hold strong.
Anyone dealing with CPM will profit far more in the future from their purchase, than you will profit from the sale today. If your promotion places more gold in the hands of people, then miners, savers and the entire gold industry benefit from it.
Don't mind us, there is plenty to follow and talk about and lots of room here to do it in. We will fit our discussion above, below and on both sides of your offerings.
Thank you for all your efforts
Trail Guide
Trail Guide (5/24/2000; 7:33:47MT - usagold.com msg#: 31148)
Comment
Hello ALL:
I'll have some replies / comments soom. Just not yet.
I've been closely following (involved) the progress of the new iX pan European market. What a convoluted thing this is turning into. It still looks good and will ultimately transform the world stock trading arenas. Especially in that it will further along London's move into the Euro Zone sphere. We follow this very closely because once this Britain Euro link passes the (mental / political) half way
mark of no return, it will also start a frenzied rush away from dollar based gold trading. Actually it will only make clear to many what has been in progress for some time. Stranding anyone, including governments, power brokers and the like into holding depreciating gold paper. This is all part of an extremely broad based transition from a dollar world. So, this is where my energy has been focused these many weeks.
BTD, I was wanting someone to present a position such as yours so everyone could follow it. In fact, I'll place your position way up on a "pedestal" "for all to see" (SMILE).
Here's what I did:
I'm not too different from that fella Armstrong. You know, the one in trouble for being a big gold bear while he in fact had a lot of bullion himself! I think he kept in a hall way closet. Well, I'm not a bear on Physical gold, but am very bearish on paper gold. Who knows, maybe he was just acting out the very same premise myself and a few fellow banks are also doing? In fact now, today, is going to prove a very good time frame for this little exercise.
So, after reading BTD's post I decided "not" to think for myself, but just follow his lead (smile)! I got up, went down my hall way and opened up the closet. Oh lord, I forgot how many Krugerrands were piled up behind that door! After opening it, they all slid out and just covered me up so as to almost crush me (huge smile). Three hours later, after digging out from under it all, I counted out 300 K rands, just as BTD did.
Then I went down and sold them for $270 each (a rough fair, average price in today's market). Then I placed $81,000 in T-bills and placed these in a margin account. Then brought 3 - 100 ounce comex futures contracts. Boy this is fun after all! I purchased the Dec 2000s at $383.30. So, come Dec. I can pay #383.30 in full and have 300 ounces of gold. All the while earning some interest.
Now, I don't know how long some of you have been around this market, but it seems we all learn a little something every now and again. But, any of you trading futures know just how hard it is to beat the "priced in interest" of a forward paper position. Much less beat out a full paid up physical
holding ounce for ounce. Ha! Ha! I remember when there was no gold futures and how exciting the prospect was to have one. Some old dude, huh?
Anyway, my brand new BTD trade is up and running and I'm counting on him to update and guide me (us) on his success. Oh, rest assured, I'll keep my trade "on the table" until this all play's out! In fact, it's going to be posted on a "trail marker" on the gold trail. Just in case some lose their way.
Also:
BTDs post #31098 said:
------ I enjoy this forum and all the theories posited here, but I thought a variant opinion might be useful.-------
BTD, your position (opinion) is not in any way "variant" from typical Western thought. I bet 99% of the gold bugs employ your strategy, mostly in a much more leveraged form. What is "variant" here is our "new" future view of gold in the political world.
You say:
---------and many will probably assure me that the world is coming to an end (per FOA/Trail Guide) and that paper gold will be driven into the ground while physical gold skyrockets. -----
My friend, it would only be the end of the world for paper gold traders. Indeed, if comex stays intact, I bet my physical will match your contracts ounce for ounce (smile). Something that cannot be said for a reverse situation I see coming. You see, our position is leveraged for a worse case,
while yours can only keep up with mine in your good case!
Of course, you could employ major leverage in the futures and gold shares and take the same major percentage paper hit such a position has had over the last few years. But then, we would never hear of it, would we. It seems the whole internet is full of gold stock owners (and future traders) that never lost money over the last 10 years, but suddenly brought their position "at the stock lows" recently (frown). My record is very clear and "unchanging" I might add. I have been buying physical gold all the way down from $360 through $280 and continue to do so. Indeed, a very large bulk of that was taken last year (around the spring) at $283+/-. I made several posts then as to why a combination of good supply (for large traders) and the $280 price for delivered
physical made it an opportune time. Nothing has changed that position. Also, please check the rest of my posts to see that gold is not my only holding.
You say:
------Trail Guide is a very articulate and thoughtful commentator, but his ideas are just theories like everyone else's.---------------------------
Well, my friend, I know you trade on facts alone. Your riches prove that, right (smile). For myself, I agree, theories are like "mouths", everyone's got one! Problem is, I never got anywhere investing in what others said. My position comes from following what a few people are "doing". The question is "do they know what they are doing?" Oh, they better! Because your wealth and lifestyle depend on it! Whether you know what you're doing or not!
"In the Footsteps Of Giants"
Trail Guide
Gold Trail Update (5/25/2000; 2:54:41MDT - Msg ID:31222)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (5/25/2000; 2:54:39MT - usagold.com msg#23)
Trail Marker #1
Hello everyone.
I'm placing a marker on the trail today so everyone can see our path more clearly. Please read my post on USAGOLD: Trail Guide (5/24/2000; 7:33:47MT - usagold.com msg#: 31148). I'm calling it the BTD Marker.
No, I'm not becoming a futures trader. Rather it's done as a real life response to a post (#31098) made by BTD where he presented his case that holding 300 ounces as futures was just as good as holding 300 physical ounces. Far to many newcomers arrive at the decision to own physical gold only to be taken in with the paper song of futures brokers. Usually it is given in the context that:
"Your physical is just laying there doing nothing, so why not trade it. Better yet you can even earn interest to boot!"
More often than not, fresh gold investors end up losing a ton of their wealth before getting an "education" that leveraged paper gold is not real gold. Therefore, I will hold and even roll over several times my 3 - 100 ounce futures in an effort to compare it's return to holding physical gold. Anyone that is tempted to "unload" their real gold to follow the leveraged game can watch my money first. I sold 300 K-rands at $270, netted out $81,000 and brought (6 month) T-bills. Placed them in a margin account and brought 3 Dec futures at $283.30 (I mis typed this as 383 in my post, but most of you would have known this).
After a period of time (even a few rollovers) we will see if we can buy back those same 300 K-rands for even money. I'm now betting that the season is close enough that the two positions will part ways. For all of you that have been walking this gold trail, you already understand how paper gold is the tool being employed today to destroy the dollar gold market. It is very possible we will see the effects of this during our exercise as the value of futures is discounted well below the physical gold price. I'll be sure to update my new holdings for anyone that does not chart this trade themselves.
In all fairness I wanted (asked) BTD to track his "Publicly stated position" so as to articulate his gains or losses for new followers. He declined for personal reasons in #31154.
Onward
The perception gained by following a losing position in paper gold comes in seeing the different mentality inherent in the gold market today. As I presented many times before, their game is to play the "price" of gold in a paper leveraged way. It's an old failing tool that is compounding loses as the years go by. In no way can they understand the massive leverage in holding gold itself against the coming discounting of the paper industry. From my post:
------"My friend, it would only be the end of the world for paper gold traders. Indeed, if comex stays intact, I bet my physical will match your contracts ounce for ounce (smile). Something that cannot be said for a reverse situation I see coming. You see, our position is leveraged for a worse case, while yours can only keep up with mine in your good case!"------
Immediately after I presented my "trade", futures brokers jumped in to council and precondition my comparison. As if to outline how it had to be done. Well, I have brought and sold paper from every position you can guess. Up, down, sideways and in reverse! Most of you have also. Having to listen to them backtrack and explain to me how futures are meant to be traded and are a short term investment and how it should be done,,,,,,,, it's like having our just grown up children return for a visit and listen as they "educate us" on politics, human interaction and sex! I can only quietly think "you're kidding", "I didn't know that" "wow, didn't know things worked that way" (smile).
My friends, they are a fine example of this new generation of "Western Thinking" when it comes to gold. Read all of the 05/24/00 USAGOLD for some background. No matter how many thousands of words are written to identify the different impact that Physical gold and paper gold have on the market place they promote a paper investment as the saving factor that will drive the price higher.
The very forces that Chris Powell and Bill Murphy of GATA are fighting against are using these "mindsets" as the tool to control gold. The vast majority of traders "buy into" the concept that paper gold is real gold, all the while placing real investment money against the opposite side of a cash trade. In the process freeing rare physical to satisfy the established contracts of a loan / leasing game.
Further we walk
The Washington agreement formed the ground work that will eventually destroy all of our dollar based paper gold contracts. Yes, PH in LA we are still "on the road" to high priced gold. Today, selling paper gold is almost free money to the banking industry! No one opposes the complete unbridled selling of gold contracts because so few want delivery. More and more, real gold is being channeled outside the contract arena. It has become so obviously clear it should appear as a blinding light to anyone that looks. Trading on established paper exchanges will dry until they fail.
On the US side, we continue to write gold derivatives to keep the "followed" price down for the dollar's sake.
On the Euro side, they write gold derivatives because it further dilutes, discredits and eventually destroys the dollar's gold market.
From the BIS perspective, "noone" cares what the paper price of gold goes to now because the acceptance of paper gold has been replaced with "real gold flow" as the regulator of dollar oil prices. With a "full on" cash settlement of outstanding paper contracts on the horizon, Euro paper will best out dollar paper, but no one is stupid enough to be covering paper with real gold. Well, perhaps a few are.
The view
This is the landscape from where GATA is trying to pressure a return to "fair trading" of paper gold. My friends, it's not going to change back for the better and the industry doesn't expect it to. In the words of Goldfinger in a 007 film: "I expect you to die Mr. Bond!"
This failing system is also one of the same investing vehicle so many futures brokers push! Brokers present all these leveraged items as a good way to "play" the price of gold. At the same time my friends are selling, creating, writing and unloading all the paper derivatives the world can handle. Indeed, they will keep doing it as long as the market has money to give away by not discounting these derivatives against physical gold. It's free money from paper gold investors!
We rest
No, we gold bugs are not all on the same side! Many think I don't like paper gold just because it's not physical. They say there is no precedent for a large scale devaluation of all paper gold. One has only to see the perception just prior to 1971 when the dollar was discounted against gold. That discount, unlawful as it was will in every way compare to the coming discredit of all paper gold. One day you will have a gold contract, the next it will be a currency contract. Marked to the market, the currency price to settle this crisis will not even compare to the coming "free gold"
trading price.
Perhaps we will see the beginnings of this while I hold my 3 futures. I expect our resident paper pushers to jockey and squabble all the while this unfolds.
Back to the city.
Thank you for Hiking
FOA/ Your Trail Guide
Trail Guide (5/25/2000; 12:51:58MT - usagold.com msg#: 31250)
Comment
goldhunter (5/25/2000; 5:05:29MT - usagold.com msg#: 31225)
Trail Guide Mkr #1
Sir Guide...Apples to apples I do repeat...
You can say you sold your Krands for $270.00 (a fair value?)
for the day...Is that ALL you could get?...I read your post yest. in response to BTD, but to be
FAIR, the "local price" from the vault was "$282.00 per coin" as I checked with CPM Inc. right
after the store started for the day...
Here in lies the Small problem...You could only "get" $270 but a comparison "purchase" costs $282...
Is it not more truthful to have "bought both" yesterday AM.and see how the dust settles in the
future on a total equity worth basis? I offered Dec1 as a practical window of time...
Once again, The "buy" price of our physical contrasted with the "buy" price of our futures will give a fair and honest comparison of the two (in my opinion, related)"investments.
You try and stack the deck in your favor by using the "sell price" of $270...and then using this as your "basis"...That isn't right for this comparison...
Hello Goldhunter
I read you the first time. Understand, I'm not doing this for your benefit nor do I follow your rules. This is a real life demonstration done in a simple "rounded out fashion" "by me" and for the benefit of the average investor watching. Most of these people (thousands I believe) read my talks while they are using a good helping of their common sense. They know how to read between the lines and figure things for themselves. As an example I believe all of them knew that Dec futures didn't close at $383 as I mis typed yesterday. They can also read my extremely poor English usage (smile).
BTD didn't offer any physical sell price or future buy price in his post. That's why I wanted to mark my trade close to the market for all to see. Your quibbling about my price to sell these K-rands is small change to me and even smaller to these readers who are looking for a big picture. I know
they will not accept if someone nickel and dimes a trade to prove a point. Truly, if my exercise doesn't completely overwhelm your difference, I'll present it as a paper win.
Also:
This whole exchange was never an effort to pick on BTD or fault his physical position change into futures. As I said, using leverage is how most Westerners play the game. The problem is the concept always falls out of context because everyone touts a trade but never fully follows up with a
general outline of their position. Or when they leave it. Everyone here has some perception of my capacity to own gold and general entry points. By simple extension the average thinker knows I'm huge, big time, "world class down" in dollar terms. Yet, I am comfortable because I understand it's future and proclaim where we are all going with it. Gold is a "percentage of my wealth" savings to me, not a trade. I will see out distance every other investment in time.
Yourself Goldhunter is a good example. You declare to hold Eagles and trade futures. You also commented in your above post to me about being truthful, fair and honest. How about giving these people a position that lasts longer than a few months? If you make a living as a futures broker and trading is where it's at, take us on a hike (smile)?
thanks
Trail Guide
Trail Guide (5/25/2000; 13:08:59MT - usagold.com msg#: 31252)
Comment
Leigh (5/25/2000; 12:49:39MT - usagold.com msg#: 31249)
aircrew
Hello Leigh and welcome also "aircrew"!
Thanks Leigh, for pointing out those past discussions. Yes, a rounded coin holding is very good for most people, myself included. The old world coins may do very well if they are frozen out of the trading marketplace because of their art appeal and non- Legal Tender status. I even thought of
comparing Stranger's NEM against the performance of the 20 Marks, MK offered. But I am unsure of my personal outcome. You see, if the 20 Marks beat out NEM, Stranger will come after me with an "AX". But, if NEM wins, he will try to hug me! I'll be in a bad position either way (big smile)!
PH and ORO, just a minute.
thanks
Trail Guide
Trail Guide (5/25/2000; 14:21:55MT - usagold.com msg#: 31262)
Comment
Hello again ORO
Great post! A few comments:
-----------
ORO (5/25/2000; 6:21:15MT - usagold.com msg#: 31228)
BTD, TC, TG, Solomon - gold and paper The paper markets provide an investor with a means to play the price of gold. They do not reflect directly the availability of gold, just the availability of paper obligations denominated in gold.
---------------------
Your part above brought me back to a subject I only touched on before. When all the gold loans were a big rage a year ot two ago, no one really bothered to confirm if the loan money the mines got really came from "sold gold". The media and Bullion houses said it was, but was it? The price said it was, but did the price fall from physical selling or was it just some physical and mostly paper derivatives?
You know, the original typical unconvoluted mine loan. The BB borrows gold, sells it and they and the mine control the account where the money from the sale is placed. Some people think the BB just gives the mine the money for it's own use, but then the mine would owe the BB both cash and gold bars. No, the mine owes the BB only gold bars. They usually jointly invest the cash from the gold loan sale until it's used to buy the newly mined gold that's returned to the lender.
Correct me if I'm wrong, but the mines don't hold any confirming documents that absolutely state that a real physical gold sale produced the cash collateral. Could you imagine a miner demanding such a document as a condition for a gold loan (smile). I think someone should check into this!
No?
You see, this cash could come from someone's account, a loan, official entity or official government source? I bet some of this money wanted to actually receive gold for the cash (oil?). But most of it just wanted to stimulate (expand) the paper gold supply. From this view the gold
loan isn't the rainman, is it? The profit for the banks comes from selling the derivatives to create a channel for new mined gold. As the price falls, the derivatives grow fat.
The gold loan cash doesn't have to be generated by real gold moved from a vault and sold. Even though a CB is involved as backup. Once this cash is introduced into the deal as collateral, the BB is obligated to cover his position if the mined gold is not wanted. Not by going long gold derivatives, rather by selling gold short. All in an effort to create an avenue to send the gold down if the gold loan ever starts paying down instead of rolling over.
During this time, the more funds available from investors or fractional reserve banking, the more gold paper is sold, the lower the lease rate, the more paper gold is expanded. Why, almost anyone could borrow gold cash in this fashion. For someone wanting paper gold to fall, it was like "money
in the bank". I don't think there is much lending against the lease rate now as rates reflect a diminished market. But who needs it? Everyone has learned to just sell the derivatives outright. This won't last much longer.
I bet if someone went to a willing mine, they could find gold. Not in the shaft, on the books!
Just thinking out loud.
more on your full post
Trail Guide
Trail Guide (5/25/2000; 16:15:16MT - usagold.com msg#: 31272)
Comment
Again, back to: ORO (5/25/2000; 6:21:15MT - usagold.com msg#: 31228)
ORO,
You could have not presented this any better than your full post has done. I wanted to note your item:
-----The price of gold in these markets is the value of a fiduciary gold. The only mechanism for the connection of the gold price to its supply and demand fundamentals is arbitrage. ---------
Yes, and if that process is blocked by an ever falling price? Or better asked, who delivers bullion against a short contract if the contract can be sold at a profit? Arbitrage doesn't happen in these one way paper markets. The contract is covered in a cash close and the bullion is sold on the open spot. Further driving the price. As a percentage of the whole traded paper gold market place, very little is delivered against contracts. If you sell a tonn to a dealer, sure he hedges, but he mostly covers those contracts in cash. Right?
My point, that coattails your post, is that the existing gold market as we know it is already mostly in "cash settlement". In a gold crisis, physical could easily be withdrawn from what little arbitrage exists. The lost profit potential from suspect payment in a delivery against contracts becomes the "premium" on "barrel head gold". Or reversed, the contracts trade at a discount.
We are so close to lighting the fuse on this, I can almost feel it.
World gold derivatives positions are exploding as authorities turn away. There is truly nothing left to
protect. Without arbitrage it's a full on cash game.
The Euro is incredibly strong considering the interest rate difference with little or no price inflation comparison. The ECB has just held tough. I've said it before and will say again; can you imagine what the Euro would do if they raised rates close to ours? Just look at the ongoing London / Euro
iX plans. How long do you think Europe would take to reestablish a gold market in Euros once England makes the dive? Certainly, LBMA is going to lose a few big members as this winds down.
Your "fiduciary gold" risk is building daily as the "risk" to paper is truly in cash settlement and currency transition. Not to mention the "walking dead" from the WA bomb.
Then there is oil! OH boy! Everyone talks like this political price range will save us. But, the jockeying for position in an alternative Euro must surely be complete. Once the gold flow slows, the oil price will surge. That will break the dollar and the ECB will be cutting rates to stop the Euro from also surging. Next step, a jump to basket or full Euro oil pricing!
Yes, the leverage against the explosion and demise of derivatives is only in physical gold. What an incredible event this is going to be!
Thanks
Trail Guide
Trail Guide (5/26/2000; 13:21:36MT - usagold.com msg#: 31367)
comment
Hello Goldhunter
In your corrected post #: 31355 you say:
------------ 18,500 100oz lots...1,850,518 total ozs.. of the REAL STUFF too...--------
I ask, so what? You see, we all have been talking about comex gold for a year or so. The present fact that 1,850,518 ounces is laying in their vault, but owned by others doesn't do comex any good if someone wants to call for delivery. Right? You know, I know , we all know that this "Real Stuff"
has no play to make credible my (3) or others outstanding "longs" unless the owners of that "real stuff", who are not "the comex operation", wish to sell it. TownCrier has written on and followed this for several months. This is old refuted news, my friend.
You say:
-------The largest commercial producers and consumers of commodities use these exchanges for price discovery, price protection (hedging long & short), and speculation for profits...------------
Yes, this is good, but just because one of these "players" have placed some cash down and taken the other side of my (3) or others contracts in no way secures any gold to honor delivery. Right?
In fact the entire total comex outstanding contracts mostly represents "margin" money on both sides of the contracts. Look at me? I'm new long and have only T-bills as 100% margin. 99% of the short players do not trade like me. They place appx. $2,000 +/- a thousand and go short! Do they have
"uncommitted gold" to deliver? Usually not! The bulk of commercials only hold the paper version as a hedge against wholesale and retail operations. If they suddenly were called to deliver, they would have to buy outright most of the gold. That's because their customers would demand them to cover their deals too. Tell me have you done much international / commercial gold trading? I mostly
just watch (smile).
Is this what you call "gold on the ready" to be delivered from comex? NO? I'm glad you agree, because no one here accepts that perception anyway.
Also: Comex is but a tiny fraction of paper gold traded around the world. But you knew that too. (smile)
"paper gold, it's just for fun"
"physical gold, it ain't for trading any more"
When are you going to take us for a futures hike?
thanks
Trail Guide
Trail Guide (5/26/2000; 13:27:42MT - usagold.com msg#: 31368)
Comment
PH in LA (5/26/2000; 11:15:27MT - usagold.com msg#: 31353)
New essay at Golden Sextant
Hello PH!
Boy, Howe is talking to real people now! I think he is getting into the thick of it.
(big smile) Trail Giude
Trail Guide (5/28/2000; 9:32:47MT - usagold.com msg#: 31442)
Comment
USAGOLD (5/28/2000; 8:54:26MT - usagold.com msg#: 31438)
--------Would such a mining company restrict the amount of gold it placed on the market as mine.com seems to infer? ----------------
A Great Hello to you USAGOLD!
You have to admit it would be an interesting development for the bullion markets if a large sector even "Thought" about redirecting supply. Almost like channeling gold away from the contract markets? (smile)
You know, that Golffields might be a good one to hold through "thick and thin" no matter what it's share price goes to? Oh, but if only investors would learn to reverse the "accepted" rules and place 90% of their hard money wealth in real gold and 10% in "the best gold companies". Then one could lean back and watch it all "play out" these next few months. No matter what happens.
I'll be back later. Hope you (and every American) is having a fine Memorial day.
Trail Guide
Trail Guide (05/28/00; 19:20:44MT - usagold.com msg#: 31469)
Reply
Hello again Michael,
--------USAGOLD (5/28/2000; 10:50:58MT - usagold.com msg#: 31446)
Greetings, Trail Guide. . .Let me Ramble a bit....as we slowly hike the crosscut--------
Yes,
I enjoy it when you "ramble on a bit" as in #31446 today. That post covered a lot of ground! While we are on that crosscut:
I think that between Reg Howe and ORO, the ghostly fog is being removed from our gold markets. If they keep going this way, eventually, the whole world will see what kind black hole it is. These are the same asset-less securities they are buying into by trading (investing) in paper gold. This entire gold derivatives book has been one of the most "unseen", "least understood" paradigm to come along in some time. Most people little more grasp what our current gold arena is than they grasp what that dollar is in their pocket!
I sit down the other day and spent a lot of time writing a very long post to take the next step. But, it became too blunt and outright. After some thought and discussion I withdrew with a firm conviction that this venue is still the right track. No matter how slow, events are unwinding as
others are understanding the gold evolution. Yes, and doing it on their own. Here is the first beginnings of that hike, presented as a backdrop to your post today:
--------
At camp:
Our gold market is in "evolution" not just suffering from the same bear effects old gold bugs promote and have documented from the past? If you agree that it's only a bear market and that it will reverse soon, you're in for a big surprise. The paper gold market you know, trade and love is
about to end.
Onward
Central Banks have leased / lent some gold for a number of years and for no more than a tiny return. Even Alan Greenspan pointed out their willingness to do so. But the majority of that "real" gold never made it onto the "melt down" market as the media portrays. Early on (years ago) most of it was transferred to other Euro friendly CBs while setting a lending precedent for the Bullion Banks. We have made this point over and over and the ongoing CB figures prove it out. Further, what portion of this additional gold supply that went outside the BIS system of CBs, mostly ended
up in real accounts under other names. Yes, these bullion bars are still alive and well. Representing the real wealth of someone, somewhere!
Many try to build a position that this CB gold is gone, melted and will never return to their vaults. Well, it wasn't lend it out for next to nothing so they could count on it's return at today's values! Again, most of it is still in the BIS system waiting for revaluation once our current dollar market fails. The fact that virtually no one can name the physical buyers of all these deals calls into question the often stated premise that CB gold has been melted down for industry use. It wasn't!
----------------
Michael,
Truly, the whole purpose for starting the Western paper gold markets with initial lent gold was so they (BIS / ECB) could eventually destroy our dollar gold market. But the dollar faction (USA) played this game because they never believed the Euro Bomb could be set off. It's that simple. This
joint play was made on the "Western" weakness to own paper gold substitutes. American dollar backers thought this was just fine. Yes, the more these paper markets could be diluted with supply the lower the paper price would go as the dollar looked ever better. That in turn convinced ever more "old" "long term" bullion holders to give up their metal and hold leveraged positions that required less cash. Using gold stock options, gold stocks, futures options and futures themselves, investors began a long term trend of off loading bullion onto the market. Even sophisticated
investors used "unallocated" bullion accounts that contained only a delivery commitment and no gold itself.
This new "mind set" was, years ago, read perfectly by the political system! Nothing else could identify this trend better than right after the WA announcement. You noted how:
----" " This is when management clamped down in some of the bullion banks, people fired, changes made. Of course that's when the word went out that an investor could sell calls but they would have to be taken in "at market" -- which of course left holders at the mercy of the players. --------
But what happened next? The whole market returned to trading the questioned paper! In the old days it would have been over with. No, they set the hook deeply and have the modern day gold bugs doing their political bidding for them. With every drop in the paper game, players double up to catch up. All the while leaving the real leveraged instrument, physical gold to be ever more acquired by those who understand the dollars current position. Truly, I am not expanding the perception too far when I say, "they don't plan on ever selling again for dollars".
Our recent "TOCOM style default" is absolutely nothing to what is before us!
-------------------------------------
Nuts! MK, I have to quickly go. Will pick this up in early AM and finish.
Thanks
Trail Guide
Trail Guide (5/29/2000; 8:28:27MT - usagold.com msg#: 31482)
To continue on from my #31469
Our recent "TOCOM style default" is absolutely nothing to what is before us! One has but to read through the internet and see what is only a small fraction of dedicated Western gold bugs playing this paper game. To the last man (and woman), they all perceive the paper tools they work with
has gold on the other side of it. If not that, they firmly believe the human and his wealth on the other side of that trade can be forced to eventually settle in gold. Further, if not gold, then settle in a fashion that deliveries the same "close out" value as the then "currently trading dealer physical".
In reality, all these players (uptick included) are only working within a limited pool of cash margin account wealth. Deposited worldwide, this small pool is the limited wealth that creates the gold perception behind paper contracts. As long as the ebb and flow of gold trading does not leave the
limits of this pool's wealth boundaries, a small fraction of physical can be delivered against it. Giving the entire paper arena credibility. Under these conditions, traders can settle 90%+ in cash, confident that the 10% (or less) of visible physical delivery is available to them if desired.
Once gold values move quickly beyond this margin zone, all is lost. The comming gold moves, we know are coming will dwarf anything seen in the past. Indeed, most think it's impossible for gold to move this much in a genneration.
Without knowing it, the banks and gold brokering industry have built a paper system that has grown in line with American political motivations. Using only a fraction of the money necessary to margin paper gold 100% (mark to the market), our current arena grew into a huge derivative gold
game that dwarfs the real physical gold world. No matter how it's compared; be it to total gold held in the world or the possible real gold supply offered at any particular dollar price, physical gold would need be priced in the many thousands to equal even a portion of our current paper
market holdings. Truly, we could lose two thirds the paper contracts and $5,000 gold would not cover the rest. It's that far out of line!
Obviously, once this system passed certain limits, years ago there was no turning back. Today, world gold could never honor the paper that's out there. At any dollar price! Not even close! Once understood, as it is being understood now, a person blind in one eye could see that this required political backing to build it. There was simply no way anything on an international scale this big could have developed without behind the curtains political support.
This decades long trend was developed as a way to placate "non Western" dollar system supporters. True to life, oil producers and Europeans wanted the dollar to work just as much as anyone. Michael, you have followed this evolution for a long time and know that none of us wanted the American reserve system to fail. I think the big philosophical difference between most of the world and Europe / Oil was that non Americans only wanted cheap gold to legitimize continued dollar use. Americans didn't because the dollar was our internal currency. Our gold value was in the exporting of dollars for real goods, plain and simple. Few US citizens grasp that this business of getting real goods internationally, on this scale, for only an IOU is a new "untested" concept. It's only been around from the late 60s. It's scale only came close to these levels in the 90s.
Today, this dollar IOU system has grown to a size that is completely not measurable. It is to this end that one has to credit these physical gold advocate countries for seeing the future. Right on schedule, the Western dollar supporters built a debt load that could never be covered in real
production. In balance with this debt, they also built a gold debt that is uncoverable. It is at this point that the dollar begins the death march so many expected years ago. The end of our ability to create dollar debt was / is not the end sign. The true end sign is found today. It will be in the failure of our ability to sell paper gold debt on par with physical. This will kill it.
Truly, the Washington Agreement was not about the end of making of all paper gold. I mentioned earlier how it made no provisions to cover or reduce Western held dollar derivatives, but did controll physical flows by using the BIS. The WA is about decoupling the joint political drive to
support low dollar gold prices with Euro Zone CB gold trades. With dollar based derivatives all being seen as eventually thrown in the same default pot, no one is worried about supplying gold to cover them. If the dollar is going to hyper inflate, and it's gold paper is going to default worldwide then writing (shorting) dollar gold paper is free money to anyone that want's it! Euro Zone based
derivatives will be supported through limited gold delivery or with Euro cash. Both will be seen as a mountain of credibility in the storm that is coming. Let's face it, if you held a Euro gold contract for 100 ounces and only ten ounces plus Euro cash are delivered, that settlement will be worth a fortune in today's terms compared to a hyper dollar world.
What is amazing is how so much of this gold debt is held in lieu of bullion by Western investors, both large and small. These last few years, Americans have downloaded their bullion holdings worldwide. This trend is encouraged by industry players. Every paper gold broker that walks and
talks has to believe in the credibility of his domain. His income depends on it! This same confidence travels through the community of brokers / investors until they all support the arena. In the end, once paper gold begins it's discount against physical open interest and trading will fall away. Then every dedicated gold analysts will claim to have understood it all and pointed to this long ago. Leaving the poor gold investor wondering what happened. Oh, there will be a huge spike right at the crisis time as OI surges from panic, but the shut down will happen equally fast and deny exit to almost everyone.
Michael, you commented:
--------Isn't it interesting, TG, that all these mega stock mutual funds (Janus, comes to mind), hedge funds (Quantum, Tiger, come to mind) and trading firms (John Henry) are having to close down or trim operations for essentially the same reason -- because they can no longer find anyone
to peddle their positions to? Big enough to buy everything in site; but too big to find a buyer. These markets do eventually take care of themselves don't they? This is by far the most important development in the investment markets with huge social, economic and political repercussions and
nobody is talking about it.
Now we will have a splintering over the coming months into smaller entities, competitions should be renewed. I think this is healthy for the investment business, but the current "paradigm" will likely suffer. The warning is very clear to those who read the signs. In fact, the process has begun. As I say, the markets do eventually take care of themselves.--------------------
Boy, they sure do MK! All of this is a function of the larger picture, not just the gold markets. Our dollar world and it's markets are changing and we as "locked in citizens" of that world must adjust to what is coming. It's not the end of the world, as so many say our position represents. We only hear that from those that will lose a lifestyle built on everything remaining "as is". A large sector of
American life will adjust to a more realistic level of existence. As in all things past and present, some will do better than others. The "better doers" will see and plan for this change.
More from you"
------A thought that occurred to me recently is that these gold derivative position might have been funneled to Morgan and Deutsch to make it politically possible for a bailout to occur (via the "Too Big To Fail" Docrine) -- that bailout would be on paper products of course, but that could gun the
price as they buy back their positions. In the end though, they will be left as we all know with some huge gold loans to pay at inflated prices -- their worst nightmare will have come to life.----------
I agree MK and that would be the best outcome for paper gold traders. But it would "only gun" the paper price while the physical price would literally skyrocket! The outcome would still be a huge discount of contract value against physical (1% of physical price). Much more than in a total paper
default where what could trade would be perhaps 20% of physical value. We shall soon see (smile).
Also, you say:
--------As for the GoldFields and FrancoNevada, I would like to know what they are thinking. (??) (One thing that comes to mind is that I have had some clever mining people tell me that the best gold is not what you are bringing up now, but what you will bring up in the future. Consider that one!) I do not think the two have enough metal to affect the price by keeping production out of the market. So I think that minesite.com might be overly optimistic there. Besides these are companies not countries. It would be a different story if South Africa were to cartellize and restrict production with Australia, or some such thing, but two companies representing less than 200 tons of production annually won't have anything but a short term effect. How much of that 200 would they be willing to take off the market? They do have bills to pay.
I think they have something else in mind -- like a company with enough capitalization to attract big time mutual fund money. I don't know. Just guessing. I'll be watching with interest along with everyone else.--------------
MK, I think they are trying to position themselves to start a trend others will follow. After reading all of the above we can understand that in the coming situation, it won't take much supply removal to control the physical markets. In the context of our reasoning, certifying that gold is not used to cover contracts would break the bank, literally! Forcing industrial buyers to use gold and not trade it does more than we think in today's super leveraged arena. Only a few will be able to do this (smile).
Finally, about your last words:
-------Gold itself is less ambiguous. Any gold investor entering the gold stock arena should understand that stocks are not really a proxy for gold itself, and resist the temptation to load up because you think gold is going to explode and these stocks are going to rise ten times faster than gold, etc --especially the so-called juniors. We have seen where that type of thinking can land you. Thereseems to be always something unforeseen. My advice would be to take a measured approach'stick with the blue chips, and don't take a position that's going to keep you up at night worrying. -----
Absolutely! When looking back several years at Another's Thoughts and his council to own physical, I see where so much paper value was destroyed right in the hands of modern gold bugs. Most paper gold vehicles are a small amount, if not a fraction of their value then. Even though the
political game evolved differently from his perception then and the great paper burn hasn't happened yet, placing 90% of one's hard assets in paper gold and 10% in physical yielded a disaster. All of the great gold bugs touted their followers right into a failure, then retreated to a stance that said "oh, but you were to have traded it, not hold it"! Their direction was flawed then and will be again for anyone that listens now. For this evolving market, and to counter the dollar failure to come, a position of 90% physical and 10% paper is for both Giants and Dwarfs. I'll hold that for the duration and come out well ahead following their footsteps.
And you close:
--------Enough of my rambling, trusted Guide. Speaking of unforeseen, have you seen any bears on this mountainside lately? What are your thoughts this fine Sunday morning?-----
Michael, this whole unfolding event is going to be an experience to behold and discuss. In convoluted form, our gold markets will begin to lose credibility and disintegrate. All the while as our American economic engine breaks down. Truly, the end of an era as the "American Experience wanes".
As for bears, it time we pause so I may put on my running shoes. You didn't bring yours? Them, my good man, I hope you can out run that bear behind us, because I am certainly going to outrun you (huge smile)!
Thank you for doing your clients and the public a service by allowing our discussion on this privately funded site. A free gift of knowledge from the CPM Group.
Trail Guide.
Trail Guide (05/29/00; 18:38:21MT - usagold.com msg#: 31510)
Aragorn III, it's my turn now! (smile)
Hello Goldhunter,
I'm glad you read and commented on my post to you. It opened more ground for discussion.
You say:
--------goldhunter (05/29/00; 13:07:27MT - usagold.com msg#: 31494) For FOA's Friday post #31367, He can get physical gold from his contracts (our example we're visiting about) he simply needs to remain "long" into delivery period (the short determines the exact date) and FOA's broker will notify him when his account has "stopped" 3 100 oz. contracts of gold...he'll pay a couple very minor charges and instruct BRINKS where to deliver his physical gold to him...It happens just like this all the time for those that want delivery.-------
This is very good Mr. Hunter and sounds just like their printed literature. It describes the mechanics of a small trade such as in our BTD example, but by extension your reply about the delivery process is out of context. It does nothing to address how this market could fulfill a delivery demand "in mass" and the risk that entails.
In my post to you #3167 I pointed out:
-------we all know that this "Real Stuff" (gold in approved warehouses) has no play to make credible my (3) or others outstanding "longs" unless the owners of that "real stuff", who are not "the comex operation", wish to sell it.--------
-------just because one of these "players" (The largest commercial producers and consumers of commodities) have placed some cash down and taken the other side of my (3) or others contracts in no way secures any gold to honor delivery. Right?-----------
--------In fact the entire total comex outstanding contracts mostly represents "margin" money on both sides of the contracts. ------
-------Do they have "uncommitted gold" to deliver? Usually not! The bulk of commercials only hold the paper version as a hedge against wholesale and retail operations. If they suddenly were called to deliver, they would have to buy outright most of the gold. That's because their customers
would demand them to cover their deals too-----------
In effect, a large demand delivery would be meat with the same official reaction that recently happened with "TOCOM" or further back with the Bunker Hunt scandal. There is no possible way paper futures today could retain credibility in the face of serious delivery demands. For a demand of three contracts such as mine or in amounts less than 10% of outstanding Open interest, the markets work. In a serious crisis, it does not.
Further you say:
----The reason there is not "more delivery" is that the leveraged traders (not FOA or BTD: They paid up in full) so out perform physical buyers (IN A RISING MARKET) that fewer traders pay in full and simply post $1000 or $2000 margin for a futures contract. -----------
Mr. Hunter, the reverse of this statement is more in line with today's realities. Let's try it my way:
" " the reason there is not "more delivery" is that the leveraged traders so "UNDER" perform physical buyers (IN A " " FALLING " " MARKET) that fewer traders pay in full and simply post $1000 or $2000 margin for a futures contract." "
That truly does a much better job of presenting the feelings of modern paper gold traders, no? In fact, many on the net can relate to having started with enough cash to buy 100 ounces of physical at say $400/oz. But after dropping margin after margin over several years they lost the entire
$40,000! Compare that to the awful realities of someone that still has $27,000 in 100 coins today and retains the physical option of still being "IN THE GAME"! Even here I do not nickel and dime the thoughts of readers by using $360 as the entry point. (smile)
Further, your words:
----A futures trader may be content to "control" the gold and profit from a price rise, However, A "long futures" holder can receive physical if they choose...The gold is there (in Comex approved storage) exactly for this purpose.------
Tell me sir, if I placed $20,000 down and shorted (sold) ten 100 ounce contracts,,,,,, and had no gold of my own to back up my bet,,,,,, and I failed,,,,, Exactly how does Comex go about extracting 1,000 ounces from others accounts to make good on my bet? Do they buy it? Or do they just take it? Or do they keep a buffer of several thousand ounces to cover failed traders? It seems to me that in the event of a crisis, "noone" that owns all that gold in approved storage might want to sell it? I guess this begs the question, if all that gold is owned, what good does it do in making credible excess, outstanding contracts? Those above and beyond "eligible" holdings sold outright. You know, the ones that far and beyond represent gold, as you say! But only have margin cash behind them. (smile)
Also:
I really did sell those coins for $270 and it was not through CMP. Can't help if the price wasn't higher. In addition I brought the (3) contracts for $283.30.
Again my example is not designed to represent what a "broker" or I consider fair. It represents what happens in a "real life" context. The kind of experience an average person would encounter. I'm showing (among other things to be presented as this unfolds) why it will be a very bad trade to sell paid up coins to pursue a paper trail. Again, as I said before, ten or twenty bucks per ounce will not mean a thing, later.
Thank you for continuing this eye-opening discussion. It is my sincere hope that everyone will follow along.
Trail Guide
Trail Guide (05/29/00; 19:35:39MT - usagold.com msg#: 31517)
comment
Cavan Man, thanks for your comments and for all the others that note my posts.. Indeed, thanks to everyone else that gains and offers something to these pages. Truly, some fine minds gather here. No matter how we agree or disagree, all of us are on the "The Gold Trail"!
will return later
Trail Guide
Trail Guide (05/30/00; 05:37:20MT - usagold.com msg#: 31538)
Comment
Hello again Goldhunter!
If we are to discuss this issue, each of us must attempt to address all (or most) of our replies in a somewhat point / counter point fashion. I am trying to do this with your posts. Otherwise readers never can grasp our position in it's presented context.
You say in #31520:
---------FOA, In your example: 10 contracts on $20,000 margin (short)... If you are on the wrong side, price rising against you, you have two choices, post additional margin funds, or, your brokerage firm will liquidate (buy) your short position in a timely manner...you will be out of the
trade, lighter in cash, but no liability to deliver gold.-------------
Mr. Hunter,
My example was not in the trading context. The thrust of the argument was that of a short investor being called at this point. If the price had been static (not moved enough to warrant much more margin money), as recently has been the case and my short position ran to the end. Assume I did
not make any motion until someone "stopped" my position with a delivery intent. I then stand firm with no more money or gold to apply.
My point and example goes to the inability of Comex to supply gold to cover my short position and attacks your use of their warehouse stocks as a "symbol of security" for investors.. They (Comex) must "buy new gold" to cover me in order to make the "stopping" long position whole (Note to all: that's the guy on the other side of my trade). Whether they buy gold from existing approved warehouse stocks or go into the open market, they do not have "standing supplied" to draw from without expending "their (comex) capital" to do so. In the event of a "fast market", many such short
failures leverage any gold price increases against comex capital.
My friend, please address this in your discussion. My argument has challenged you to defend your position. I present that approved comex warehouse gold is nothing more than "investor owned" metal and would require the expending of comex cash to deploy that stored metal, or any metal to
cover my default.
Further and extending this:
In a crisis, with enough demands on their resources, many positions such as my 1,000 ounce example would completely overwhelm and shut down their operation. Because they could not secure enough physical gold to buy and / or they do not have the resources to do so. (please address this by point so we may proceed). (smile)
Trail Guide
Trail Guide (5/30/2000; 13:16:32MT - usagold.com msg#: 31562)
Comment
Mr. Goldhunter.
Thanks for your many replies. No, you are certainly not the / a bad guy here. We are discussing and dissecting the concept, not each other (smile). I do feel sorry for the points of contention as they are being slowly dissected while still alive. Awful site to behold, rated X.
You say in #31542:
---You are right...Comex gold is "investor owned gold"--
Ok! For what it's worth, I agree. This is the heart of a paper perception that's always presented to modern gold bugs. Usually, the existence of gold in storage at some bank , warehouse or dealers vault is suppose to give the investor a feeling of security. As if to imply that that gold could be used to make their "unallocated" or "futures" paper account good if needed. Many average people walk away with the impression that that gold is in storage just for such crisis use. With this grasp of the mechanics, it's no wonder that quite a few investors think holding futures is of the same security as owning physical gold.
To all:
Yes, that vault gold can serve a security purpose but someone or some entity must still use "their" cash to pry (bid) said gold from it's current owner before it's used to cover your long contract. In the case where a "short" has no gold to cover and will not (or cannot) close his position the market place (comex acting through his broker) will attack his margin wealth and even his other wealth. But that can take some time and legal efforts. All of this works fine during normal trading like we have seen over the last decade.
Reading my last two (or more) posts one gets the flow of the real context of what future gold really represents. Almost entirely, it consists of the cash margin placed as security against existing contracts. Today, of the appx. 150,000+/- contracts open, 150,000 of those are shorts. Yes, some of those shorts may be using their owned, existing gold residing in Comex vaults. But, by far most are not. Again, yes, these other shorts may also have real gold to deliver. It may be newly mined, refined or held in a dealers vault. Very often this very gold is "in trade" and may have been
committed. In fast markets major commercials can be caught selling their hedged gold and not being fast enough to cover their paper futures hedges also. So, unless it is "delivered" against a contract, it isn't there! My position all along has been that in a crunch most of the real gold that could be delivered, will not be. The prime precedent for this position comes from the Bunker Hunt silver fiasco. Many of you have read the account so I will not repeat it.
Further:
Mr. Hunter, your post:
-----The short issues notice or intent to deliver... If you are short 10 or 1, you through your brokerage acknowledge your intent to deliver physical against your short contracts and advise of the intended delivery date (within delivery period)--------
-------Your question to me ...what if you have no intention to deliver gold against your short contracts? Your broker will insure that your position is liquidated by last trading day, or consequences for your broker and brokerage...brokers do not like consequences...----------
Yes, I know the short stops the waiting long. But, I always felt this nomenclature was used wrong. In real life who stops who? Who is demanding the asset? Not the gold short!
In usual trading, it's the unfortunate long that waited too long with a long position that gets delivered into (stopped). I say unfortunate because the vase majority of Western future traders don't want gold. Indeed, I suspect most of them do not have the assets to pay for the contracts they hold. You see the entire future system is based on trading the price of gold not gold itself. In this respect, the price of physical,,,,, derived from paper future trading,,,, is discovered from the trades of players that cannot fully buy! Therefore in my opinion, price discovery through this venue (and others like it) is fraudulent. Fraudulent from the standpoint that deposit money, placed as margin security does not constitute real demand dynamics. Further, it tends to discount whatever "asset usage" price is prevalent at that time because futures traders must sell to distance themselves from real supply. In other words, paper trading lowers discovery prices.
My point to your secure contention is that once real demand enters a futures system, this real, 100% money is the side doing the stopping (demanding delivery by holding fully and holding strong)! In this situation where crisis reigns supreme,,,,,,, where a known large long makes a stance
to take delivery,,,,,, here, it's the hapless shorts that are frozen and stop nothing. They cannot, in mass cover by buying an offsetting position as it guns the contract prices further against their already failing margin. Yet they cannot supply physical because they didn't have it anyway. It becomes the classic Bunker Hunt market where the exchange must protect "it's" capital by locking down trade. It's trading for liquidation only! Happened before, I was there. Been there and done that (smile).
So, will my BTD trade prove that selling out paid up coins and positioning myself futures make me more money. We shall see!
More on Goldhunter's post's later.
Trail Guide
Trail Guide (05/30/00; 18:48:46MT - usagold.com msg#: 31570)
Comment
Journeyman (05/30/00; 09:48:40MT - usagold.com msg#: 31549)
Skirts & bank runs @goldhunter
Perhaps I mis-understand this whole gold paper thing, but isn't the real issue here at some point _how fast_ physical gold can be delivered? If those seeking delivery can't get it on contract settlement date and word gets around, doesn't the confidence which must be there to make the paper-gold market work evaporate? The players don't care that they can get the gold they were expecting today a week from now. When that happens, won't that cause the equivalent of a bank
run?---------------
Hello Journeyman,
In real life, this run or lock up we have been discussing will never happen! The exchanges have the right to make rule changes to protect the marketplace. Read that as "protect their best interests".
Goldhunter mentioned in #31554 that ------Since there has been not one cheated, confidence remains.------.
Well that is actually a play on words and how we as investors receive these words. During the Hunt silver bust, the major longs stood strong to receive silver. They had the cash to do it, too! But in order for the shorts to "stop" longs positions and deliver into them, these shorts had to go into the world markets and buy real silver. The actual exchanges did not have the "owned" material to do it. Same situation that exists today in gold (and silver?)
You see, this was the process that I extended my last post from. As long as the futures markets are traded using margin funds, most of the short players are not prepared to actually deliver real metal against "REAL" standing longs. Sure, some metal is traded and delivered every settlement period, but it's only a small percentage. Once a real bull market takes hold, the futures cannot and will not transition into a major physical trading arena. Mostly because there isn't enough extra metal around to fulfill the contracts in a real physical run. In a real physical run, all contracts are discounted against physical. Only, to date, the marketplace has been able to change the rules before that discounting begins in force! We watched this happen while involved in both silver and gold in the
late 70s.
When push came to shove, the rules were changed to demand "liquidation" trading only in silver (it never got to gold because so many silver longs got their cash wiped out before the gold fact). You could not stand long for metal delivery and you could not deliver against your short position. In other words you could only paper trade the positions to cancel them out. In addition position limits were imposed. If my memory is correct we went from total position limit of 10,000 contracts to 1,000 or something like that (anyone that remembers help me out here). We had to close out! In profits, yes, but no metal!
So," sure" no one was cheated because you had to play by the rules, and that is not cheating. Right! Only later, after all the rule changes, did the banks close down the Hunts by restricting their credit. Funny how everyone still thinks that the public's selling of silver at retail dealers did it in. Ha! The Hunts and quite a few other boys were still ready to buy a load of gold and a half billion ounces of silver. It was political. New supply had almost no impact until after the political deed was done.
This bit of hindsight provides a foundation of why the big boys will not be had again. They will let the paper exchanges hang themselves this time by not being involved.
Further, what do you think of a marketplace that sets the price for gold but the traders run from delivery? Look at Towncriers #31555 and see how the "rotation" is in effect a run from buying gold. This ritual is the same "bailout process" that allows traders with only "margin security
deposits" to help set the gold prices. They never take real gold off the market in any proportion that's equal to the "price discovery" function their trading imparts. This same process is acted out on a worldwide basis on other paper exchanges. As I said in my #31562,
-----You see the entire future system is based on trading the price of gold not gold itself. In this respect, the price of physical,,,,, derived from paper future trading,,,, is discovered from the trades of players that cannot fully buy! Therefore in my opinion, price discovery through this venue (and others like it) is fraudulent. Fraudulent from the standpoint that deposit money, placed as margin security does not constitute real demand dynamics. Further, it tends to discount whatever "asset usage" price is prevalent at that time because futures traders must sell to distance themselves from real supply. In other words, paper trading lowers discovery prices.---------------
The political machine has used this process to their advantage over the last decade or so. Now it's about to use that same power to kill the currency that's so dependent on the gold price value perception.
OK, enough of my going on. I'll read more of others good words along with waiting to read ORO when he posts again. (good stuff ORO)!
THanks
Trail Guide
Trail Guide (5/31/2000; 6:48:50MT - usagold.com msg#: 31587)
Comment
ORO (05/30/00; 22:58:11MT - usagold.com msg#: 31580)
Solomon - 100 fold
----A 10 fold drop in the value of the dollar has occurred in your lifetime.-----
----I grew up (in part) in a country that saw 1000 fold depreciation in the currency within the space of a few years in the 70s and the 80s, and finally reached a better than 10000 fold depreciation. -----
---The currency had some 0s knocked off and was renamed. Then the currency inflated again and again a couple of 0s were knocked off - and the currency renamed.-----------
Hello ORO,
Your background life has helped build a real working perspective about currency inflation dynamics! I wish more Western Gold Bugs could have spent some time in these "real life" countries. Or at least study their currency history. Far too many of them dismiss these awesome figures as a function of said money being in the "third world".
Most people understandably draw a complete blank in trying to see the dollar doing the same. Truly, as the dollar "reserve" function is politically removed, this real inflation will begin. Just as you witnessed, we US citizens will continue to use our dollars no matter how many 0s are added. I use Mexico as a close relation to this event because so many Americans travel there or have close business ties to that country. It's very common to use pesos but dollars are the mainstay. In the next event in our currency experience we will eventually use Euros as the Mexicans use dollars. Hard to accept but easy to prepare for.
This brings me to Journeyman:
Journeyman (05/30/00; 22:04:20MT - usagold.com msg#: 31579)
Re: Skirts & bank runs @ Trail Guide
Hello again Journeyman and thanks for considering.
I used the Comex as an example because, like my Mexican peso example above, it's a market most Americans look at. The key to understanding our gold markets is in placing paper gold
trading in a correct perspective. It's not gold trading, it's leveraged currency trading with a little physical delivery thrown in. What hurts the public most is when Gold Mine investors and supporters bash the manipulated paper dynamic but fight to keep it in place for the gold mining industry sake. Most of the front lines battles are aimed at retaining the same paper trading concept, but "cleaning it up". Then, in their mind gold can return to it's proper "futures determined price range" of around $400 - $600.
This amounts to returning to a gold standard after a financial crisis wipes everyone out. Then the governments can start the same decay all over again.
We want to avoid this in the gold trading arena of the future by forcing the concept of "free gold". This has been approached by the next reserve currency backers. By trading physical only as the price making medium, gold will act as a real currency outside the established fiats. It's value surge will make it deep enough to actually carry a good proportion of world financial trade. But do it as a "wealth money", not a borrowed, lend able, bankable, government fiat system. A true natural vehicle for holding ones wealth. Most likely the way gold was meant to be used in the beginning.
I fully accept the political motives for getting us to this point. They are using gold to destroy an aging, failing, over debted dollar reserve system and doing it to promote their next fiat arena. The only difference is that they are structuring their system to take advantage of a surging gold price, not be destroyed by it!
All of this points to a breakup of the old paper gold trading business as a physical crisis eventually crushes their derivatives based equity. This is why we point everyone to look in that direction. All paper trading contracts along with their "price discovery" function are going to fail as the dollar begins it's "great price inflation" destruction. The vast majority of Western gold bugs are all watching and waiting for this event but reject the political certainty it will bring about. That being the
failure of most all paper gold substitutes to shelter an investors dollar depreciation. As such, the leverage in using these vehicles is lost while said leverage moves to physically held gold!
I'm going to place this post on the Gold Trail with reference to my discussion posts about futures trading. I hope it continues to give readers a new perspective as we hike this path.
Thanks
Trail Guide
Gold Trail Update (5/31/2000; 6:54:54MDT - Msg ID:31588)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (5/31/2000; 6:54:53MT - usagold.com msg#24)
Background!
For anyone that wishes to follow along, we have been having a long running discussion about gold futures on our USAGOLD forum.[Archives here] Right after I placed the BDT Marker #1 I was somewhat challenged on it's validity by the good words of Mr. Goldhunter and others. Here are some of my recent posts. Please review all the good writers that posted both before and after me. We will be hitting the trail for a good outing this weekend! (smile)
TrailGuide (5/25/2000; 12:51:58MT - usagold.com msg#: 31250)
TrailGuide (5/26/2000; 13:21:36MT - usagold.com msg#: 31367)
TrailGuide (05/29/00; 18:38:21MT - usagold.com msg#: 31510)
TrailGuide (05/30/00; 05:37:20MT - usagold.com msg#: 31538)
TrailGuide (5/30/2000; 13:16:32MT - usagold.com msg#: 31562)
TrailGuide (05/30/00; 18:48:46MT - usagold.com msg#: 31570)
Also: my discussion with Mr. Michael Kosares (USAGOLD)
USAGOLD (5/28/2000; 10:50:58MT - usagold.com msg#: 31446)
TrailGuide (05/28/00; 19:20:44MT - usagold.com msg#: 31469)
TrailGuide (5/29/2000; 8:28:27MT - usagold.com msg#: 31482)
All of the above created the train of thought that brought us here to today's post on the forum. I will spring from this trail head for our hike later.
THanks for reading
FOA / your Trail Giude
------------
My post of today.
Trail Guide (5/31/2000; 6:48:50MT - usagold.com msg#: 31587)
Comment on:
ORO (05/30/00; 22:58:11MT - usagold.com msg#: 31580)
Solomon - 100 fold
----A 10 fold drop in the value of the dollar has occurred in your lifetime.-----
----I grew up (in part) in a country that saw 1000 fold depreciation in the currency within the space of a few years in the 70s and the 80s, and finally reached a better than 10000 fold depreciation. -----
---The currency had some 0s knocked off and was renamed. Then the currency inflated again and again a couple of 0s were knocked off - and the currency renamed.-----------
Hello ORO,
Your background life has helped build a real working perspective about currency inflation dynamics! I wish more Western Gold Bugs could have spent some time in these "real life" countries. Or at least study their currency history. Far too many of them dismiss these awesome figures as a function of said money being in the "third world".
Most people understandably draw a complete blank in trying to see the dollar doing the same. Truly, as the dollar "reserve" function is politically removed, this real inflation will begin. Just as you witnessed, we US citizens will continue to use our dollars no matter how many 0s are added. I use Mexico as a close relation to this event because so many Americans travel there or have close business ties to that country. It's very common to use pesos but dollars are the mainstay. In the next event in our currency experience we will eventually use Euros as the Mexicans use dollars. Hard to accept but easy to prepare for.
This brings me to Journeyman:
Journeyman (05/30/00; 22:04:20MT - usagold.com msg#: 31579)
Re: Skirts & bank runs @ Trail Guide
Hello again Journeyman and thanks for considering.
I used the Comex as an example because, like my Mexican peso example above, it's a market most Americans look at. The key to understanding our gold markets is in placing paper gold trading in a correct perspective. It's not gold trading, it's leveraged currency trading with a little physical delivery thrown in. What hurts the public most is when Gold Mine investors and supporters bash the manipulated paper dynamic but fight to keep it in place for the gold mining industry sake. Most of the front lines battles are aimed at retaining the same paper trading concept, but "cleaning it up". Then, in their mind gold can return to it's proper "futures determined price range" of around $400 - $600.
This amounts to returning to a gold standard after a financial crisis wipes everyone out. Then the governments can start the same decay all over again.
We want to avoid this in the gold trading arena of the future by forcing the concept of "free gold". This has been approached by the next reserve currency backers. By trading physical only as the price making medium, gold will act as a real currency outside the established fiats. It's value surge will make it deep enough to actually carry a good proportion of world financial trade. But do it as a "wealth money", not a borrowed, lend able, bankable, government fiat system. A true natural vehicle for holding ones wealth. Most likely the way gold was meant to be used in the beginning.
I fully accept the political motives for getting us to this point. They are using gold to destroy an aging, failing, over debted dollar reserve system and doing it to promote their next fiat arena. The only difference is that they are structuring their system to take advantage of a surging gold price, not be destroyed by it!
All of this points to a breakup of the old paper gold trading business as a physical crisis eventually crushes their derivatives based equity. This is why we point everyone to look in that direction. All paper trading contracts along with their "price discovery" function are going to fail as the dollar begins it's "great price inflation" destruction. The vast majority of Western gold bugs are all watching and waiting for this event but reject the political certainty it will bring about. That being the failure of most all paper gold substitutes to shelter an investors dollar depreciation. As such, the leverage in using these vehicles is lost while said leverage moves to physically held gold!
I'm going to place this post on the Gold Trail with reference to my discussion posts about futures trading. I hope it continues to give readers a new perspective as we hike this path.
Thanks
Trail Guide
---------------------------------------------
Trail Guide (6/2/2000; 9:31:57MT - usagold.com msg#: 31682)
Gold,,,, OIL,,,,, and EUROs,,,, All up!
(Big Smile!)
Trail Guide (06/03/00; 07:32:26MT - usagold.com msg#: 31736)
Comment
Chris Powell (6/2/2000; 22:33:26MT - usagold.com msg#: 31728)
GATA busts the shorts and gold rallies
http://www.egroups.com/message/gata/476?
-------What did YOU do for the gold cause today?---------
Hello Chris Powell,
To simply answer your question: Myself and others brought more Physical Gold"! If one can only understand the implications of the paper derivatives tonnage your figures present, then real gold is the "Cause" to reach for. It carries the same 100 to one leverage any form of paper play can produce. This is true because it must eventually represent the entire gold ownership position our present world paper gold market entails, once said paper defaults! Physical gold cannot default or be entangled in the coming "workout" of this mess.
Support yourself and the Gold cause, become a Physical Gold Advocate in action first. Then send some money to GATA! (smile)
Trail Guide
Be back later
Gold Trail Update (6/4/2000; 21:26:35MDT - Msg ID:31819)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (6/4/2000; 21:26:34MT - usagold.com msg#25)
The Trail is getting Hot!
Hello all,
That was some weekend hike, yes? Let's talk while we rest a while.
Is BILL Murphy not heard? No not really, not yet. While it's true that his ongoing presentation is still not on the center of "anyone important's" desk, one has but to spin 180' in their chair to find a neat stack of it on the "boss's" credenza. Very close by, so to speak. (smile)
I know, they get a lot of flack from the trader crowd and spend a lot of time defending the gold cause. It's important time and well spent because a broad base of people must understand GATA's position if they are to help with the PR. But that bunch will never be the ones that actually transition the market. What I'm saying is that whether "The" report drives their personal trading is meaningless. It's the broad political position that counts. Harsh statement? No real life and real politics.
The same holds true for the media. That venue is never telling anything the real players didn't know two years ago! So, if the media appears to be downplaying the GATA news, it's OK. Because the story has been out for a time now and it's truly moving in a wider circle! Remember, the most damaging knowledge is the stuff that moves quietly, behind the markets. Seemingly before the fact in the eyes of regular citizens.
We said a long time ago that Bill didn't need to really do legal action to blow this wide open. We also felt they were doing something for the marketplace that was above and beyond their "stated aim". Truly, they only had to keep talking until the game is almost over to have a devastating impact. What's so important about that?
Well, most of the "big gold" world knew about the derivatives and all, for some time. But no one really knew when it would reach it's political limit. In the very same view that no one knew where the end of the dollar's rein would be, either. In a very simple way of saying it: both of these paper currencies would expand until there was no one else left to fool!
Just as soon as paper dollars and paper gold become political liabilities, the perception of the game changes. Today we see that perception changing. For the first time ever, the US dollar faction is in a trap brought on by the Euro and it's backers. With the European world operating in a more closed circuit fashion than the US, their financial and economic engine can continue to run without the supporting American drive intact. This makes their Exchange rate values less important in maintaining real local economic growth. Even today, after a huge, economic supporting decline in their currency, price inflation is still less that in the US! Confounding the currency trader bugs that present themselves as knowing just how a currency should act. Further to their discredit, a new Euro carry trade is creating massive new Euro liabilities that are based on the successful record of the Yen carry trade. A serious mistake, because that yen trade was done using a single nation currency that greatly depended on the US. A big difference!
The political agenda in both Japan and the US generally supported the outcome of borrowing Yen to invest in dollars. Mostly because the Yen must eventually be inflated in supply to keep the Yen in a competitively down stance to save market share. In a long view, both currencies will inflate together and balance that carry trade. Even if they both hyper inflate.
In contrast, the Euro does not need to inflate to remain competitive. We have said all along that the ECB is allowing the markets to do what the Japanese have struggled a decade to accomplish. That being having a weak (in exchange rate only) global currency with low inflation relative to the reserve dollar. This supports the internal economy of Europe without having to drive interest rates to zero (like Japan) to do it. Every day that this Euro / dollar currency mismatch continues, it expands the coming Euro Zone financial dynamics. The longer that dynamic is in place and growing, the less impact an eventual failing dollar will have on them. This is the fatal flaw for the dollar in this ongoing "currency war". When the dollar death signs are signaled by our Fed raising rates further, it also outlines the significant difference the Yen carry has with the Euro carry. Truly, the ECB will not have to inflate the Euro currency supply in an exchange lowering rate battle with the dollar in order to maintain "market share"! This will trap the Euro carry in a diminished currency supply situation that will literally decimate their (the carry trade) program. It will also gun the Euro!
The Fed cannot raise rates high enough or restrict reserve creation enough to slow the US economy without cascading our financial markets. This is a seldom seen typical function of a failing currency system off the gold system. Such a Fed action that would drive business into the Euro Zone sector at the exact same time that currency and it's economy is rising. And rising as local Euro rates stay the same. Today, the political perception of this risk is raising the dollar's political liability.
If the Fed does nothing, they remain on a full blown inflation track. Right where Europe want's them. A track that every important player in the world has "slightly" hedged by taking the long side of those billions in paper gold derivatives GATA has shown is out there! Yes, this is the very same super demand for gold that has been with us for most of the 90s. It's just that the physical demand is a little above supply while the rest of the demand has been channeled into a paper leveraged position. Even as many of these bullion holders elected to trade old physical holdings for leveraged paper accounts, they helped transfer the price making dynamics towards these dollar faction paper creators. With new (old) gold supply on the market joined with the unlimited supply of paper contracts, price discovery started on it's now well known down trend. A trend originally started in a joint effort between Europe and America. Our past discussions outlined their current split.
But something is very wrong with this picture today? If the political risk is now on the dollar side,,,, and your gold inflation hedge is discovery priced with contracts created with unlimited dollar supply,,,,, how will paper gold rise in a dollar hyper inflation? In addition, how will any gold supplier that must sell into these markets, profit during an inflation? We have hiked this path before, no?
As I said, GATA keeps putting two and two together in this derivitive game as players keep re-thinking their position. Eventually, everyone will begin to reach the same conclusion:
" " I have to dump the contract derivatives game and buy real gold,,,,,,,,, AGAIN!" "
In that process, the world gold markets, as they are 95% dollar paper today,,,,, will crash in the face of unbelievable physical gold demand. Derivative and contract values in all positions will be crushed in the race to transition out of them. Not exactly the end most investors had in mind!
We watch these developments.
So we see,,,,, it was never a war between the dollar and gold. The US won that game long ago by playing to Western gold bugs taste for paper! No, now you understand with all we have discussed why gold will run because of a fiat currency war. Not a gold currency war. Indeed, this war is waged between different views of what money should be. A currency war that will transition gold into a different world from our perceptions today.
Keep talking BILL, I said they started sweating over a year ago. Now even the shoe laces are wet! (smile)
Thanks
FOA/ your Trail Guide
Gold Trail Update (06/12/00; 19:48:26MDT - Msg ID:32231)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (06/12/00; 19:48:25MT - usagold.com msg#26)
Put your cards on the table!
The gold poker game as seen at Camp:
My bet for you card players: "Did any in our camp ever express that the Euro would be backed with gold using the current paper system?"
No.
The whole concept behind the Euro thrust was politically driven to specifically include only physical gold in a future "non currency" function. Not intertwining the present dollar paper gold system in some form of currency backing. This position was driven home by the lessons oil learned in the 70s and 80s. It was included in the Euro because a real threat to use gold as a currency for crude would have resulted if it wasn't. This explained the early warnings (years ago) from Another that "All Paper Would Burn" as gold soared in value.
With a future Euro backed by a "free trading" physical market in gold, gold's real value would be later seen! Upon hearing this, almost every analyst took the ball from us and immediately ran with it in the wrong direction.
The usual explanation built on the fact that the world paper gold markets would burn up in a paper short squeeze. There by delivering our projected "soaring gold value". Well, there is something to be said for that, but such a process would be short lived and certainly not be the real play that's coming.
The current paper gold world will die (burn) as it's value to users erodes, not increases! We have to remember that some 85% (or more) of the long side of our world paper markets will not (perhaps cannot) take delivery of physical gold. If the paper trading price is driven ever lower from new derivative supply, these longs simply "trade out" and take their cash hit. The major banks and players in this arena know this and therefore are not at risk from expanding their positions. Truly, they are only playing behind the real political game today.
Indeed, if the Euro function will ultimately burn the dollar and it's paper gold markets and replace it with a physical "free gold" market, then selling paper gold is free money! Right? This is but one segment of the coming currency transition and to date it's progressing right along!
Again, most everyone in the Western Gold bug game is running with the ball in the wrong direction. They are trying to understand just how the Euro zone players are going to get out of our current gold market liabilities when the Euro makes use of the dollar gold market! These same thinkers are looking for some kind of "work out" of our system so it's price discovery function will value gold where it should be! My observation from the "Euro Makers "is that one should "forget this notion"! "Noone" gives a hoot about holding "price discovery" paper contracts as the real thing. Except for those with the real power to trade something for full payment! OIL!
Today, paper gold derivatives are for selling because they will eventually be politically defaulted once their discount to physical drives their value next to nothing.
So who is in danger of being hurt as this unfolds?
That's right, the Western paper gold long! I'm not talking about just the US market! This is about the entire world gold market as we know it today. The real play will be for the ones that get out in front of the move by owning physical.
This stampede out of "paper physical" by the "big boys" will first discount that medium as all the selling comes to play. Then the real buying of physical will ensue. It seems every Gold bug sees only half the trade and has great faith that contract law will favor a short squeeze. Yet, none of them see where it's the long that will be dumping and forcing the discount!
Yes, the Washington Agreement gunned the paper price and was the political signal that gold was "on the road" to super high prices. But, when we said gold we were talking about the same "physical gold" we always point to. The process that agreement started was really marking the death of our current paper gold market place, not it's new use beginnings!
Whether the paper market was about to default and burn then (as we thought it could / was)or next year, the point of all this is that it's destruction is politically written in stone!
Still, not one Western Gold bug in a thousand fully grasps the impact of this. Most of them frantically search for a ray of light that shows how our "price discovery" paper market will advance in value.
All the while major players unload on investors all the derivative gold we are willing to bid for. At the same time world traders are buying all the physical gold that comes their way.
Eventually, "Physical Gold Advocates" will own a real wealth asset that's fairly marked to market in a "free gold" Euro Zone marketplace. The same marketplace value that will back the new Euro economy by pricing "free gold" in the many thousands. A new world class currency backing a new
world class currency!
So how will these big derivative players make out on their paper gold loans and paper gold shorts?
I think they will make a fortune because they understood Another better than the Western Gold bugs could!
Thank you for camping.
FOA/ your Trail Guide
Trail Guide (06/13/00; 05:21:16MT - usagold.com msg#: 32258)
Gold Fields of SA.
Could be good news (big smile)!!!
A small percentage investment in paper is plenty of risk. 90% bullion and 10% paper works just fine.
------Gold Fields, the South African mining company, and Franco-Nevada of Canada will merge to create one of the world's biggest gold mining groups-------
---New name: Gold Fields International------
---structured as a $2bn takeover of Gold Fields by Franco-Nevada ------
---primary stock exchange listing in Toronto-----
Trail Guide (06/13/00; 15:14:10MT - usagold.com msg#: 32285)
Reply
Cavan Man (06/13/00; 06:30:12MT - usagold.com msg#: 32262)
Trail Guide; Your Latest
So the two large German banks are just fiddling and making money by selling (and buying?) gold derivatives eh? They're laughing all the way to the bank (no pun intended)?
Hello Cavan Man!
You know,,,,,, the entire world gold market is little more than a paper derivative today. It's nothing hidden from view and has been evolving in this direction for many years. So why do banks and politicians grasp it and Gold Bugs don't? We have all followed this unfolding drama from the
beginning. Only a few have known where it's going, but the signs are clear to all.
Building on the world's use of paper contracts instead of owning physical couldn't help but detract from gold demand. Channeling investment away from the real thing had to lower gold's value over time. In this light do we think the dollar faction was stupid in encouraging this? Especially if it kept oil priced cheaply in dollars. Any damn political fool could understand how this prolonged the dollar's timeline. Further: Any damn political fool outside the US could see how this would eventually end the dollars timeline!
Yes, we all played the same game. Europeans, Americans and Asians all brought into it and watched the system evolve. We played it because it allowed the dollar to give us it's last thrust for our benefit. Is it now so hard to see that this was all just a temporary thing until a better format was
designed?
Has the Western world become so completely caught up in the debt game that they have lost all concept of what is "lasting value"? Better asked: Can the dollar continue to denominate our wealth at a fair value, or is our current wealth not what the dollar says it is?
Truly, what is there left to gain by supporting the dollar system or it's paper gold network? Physical gold will be a strong man standing when all this passes. At least this is what the world's largest players are trying to tell you as they destroy it's paper substitute with endless supply. So why not sell the dollar gold markets for all they are worth? Especially if the paper and physical values are about to part ways. All the reasoning that I and Another have presented is being confirmed by the largest financial players selling paper gold into the dirt! Their very actions are telling of what is to come! Does anyone reading this actually think any government today is trying to "save" the dollar gold markets? After the Euro, there is no longer any reason for these paper markets to live. Truly, one has but only to look at the dollar oil prices to see that the producers no longer accept dollar gold contracts.
We never asked anyone in the Gold Bug community to accept our Thoughts as fact. We presented what we know is in progress and tried to explain evolving events in a light that helped others see it too. "Noone" knows who we are, so you can only evaluate out speech by educating yourself as
facts unfold. It is free thought for all that will consider it. We are not Gold Bugs nor are we in any investment business (certainly not gold traders / brokers). Oil is the asset, my friend!
Further:
Sure, some of these BBs and governments will get burned! Especially the US based ones. So what else is new in the "World Game"? Gold contracts? They are just a game, you know. Just about the time it all crashes watch everyone (brother, sister and friends included) try to rush the
paper markets to try and "hedge out" their paper exposure before it all shuts down. You'll see open interest and volume as never before! This almost happened a year ago, but it seems the US still had gold to ship. The next time, the whole game will fail and lock up trillions of trader's winnings.
If anything has changed (in the last year) in all of this it's been the proactive stance of the BIS. Where once they only stood by and waited for the system to slowly starve for physical, they now play the game to accelerate the grind. I think human nature got the better of some big players as
they couldn't stand not to make a few as the currency transition nears.
People ask where / who will begin the physical market? That's a no brainer. "Free Gold" will almost immediately begin changing hands in cash only dealings. The demand will quickly build a dealer exchange, worldwide. Yes, I bet USAGOLD will be right in the middle of it. This is where
the Euro Zone will move quickly to establish a "no contract" arena of it's own as gold's new found value explodes to the benefit of our ECB system. The world's ECB system, that is.
Will it last? Ha! Ha! I am always struck by that question being put to me from an stock / futures day trader type. People who plan their investments on a one to two day / year time frame but downplay the Euro because they don't see it's gold policy supporting it for more than ten years! (frown)
But then, we can't all hold physical at the turn, can we? (smile)
--------------------------
Well, I'll be going for a while. It'll be a week or so before I leave. I hear there are some big gold
talks about to happen somewhere in the world. I hope it's close to Paris (smile). I'll be traveling sometime. If my electronic connections survive, I hope to tune in from time to time. By the time I return, the Gold Trail should be "RED HOT" from use. We shall see.
thanks
Trail Guide
Trail Guide (06/13/00; 15:54:13MT - usagold.com msg#: 32288)
One last note!
Henri (06/13/00; 10:45:09MT - usagold.com msg#: 32277)
Trail Guide/ Latest trail update
------How is such a free gold market to be maintained once it is clear that gold IS something more than just a commodity?-----
Hello Henri,
As I look around the world, I marvel at how many concepts exist on little more than human desire. Add to that a good portion of "political need" and things just stay on track.
You and everyone have read all the fine arguments (for and against) presented here about "free gold". If I had to pick out one thing that will force this direction it would be the fact that "free gold" will not compete with fiat. That's right. For better or worse, right or wrong, in today's world: Free Gold would no more compete with currencies than soaring real estate or soaring Dow stocks or soaring oil reserves (smile).
Gold was never meant to be part of an official currency. It should have remained a wealth asset like everything else. Traded around at values that depict the amount of currency inflation in modern digital currencies. Volatile? Of course! But no more so than everything else we use and price with
paper money. At least in a "free gold" stance, more people would own it, use it and benefit from it's true value then based on "real" supply and demand!
I further reply to your thought by noting to ORO:
Hello ORO,
Everything you document about free gold not working in a free traded arena is note worthy. I / We understand it all as you so very well present it. But your and our feel for the subject is different in that you probably cannot sell your presentation to any government. Another did.
Thanks all
Be back soon and good luck!
Trail Guide / FOA
presenting for Another
Gold Trail Update (06/14/00; 05:19:31MDT - Msg ID:32307)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (06/14/00; 05:19:29MT - usagold.com msg#27)
Off the trail for a while!
Hello ALL,
I noted in my last two USAGOLD FORUM posts (5-13-00) that I will be traveling for a while. Some of the time will be for research, but most will be as "time away". Will bring a laptop to follow the flow of gold discussion while away. It will be quite a few weeks before I return to this trail so
please help yourself to our path.
If all goes as expected, we will have a lot of ground to cover when I return.
thanks
FOA/ your Trail Guide
FOA (08/10/00; 20:30:44MT - usagold.com msg#: 34765)
(No Subject)
TEST
FOA (08/10/00; 20:33:40MT - usagold.com msg#: 34766)
RETURN
A Big Hello to Michael Kosares and all the people at Centennial Precious Metals!
And Hello To Everyone That Reads And Writes On The USAGOLD FORUM!
I have been away for a while and consumed some good Thoughts from many people in many places. Having only been back a few days, I have a large personal agenda to take care of. Once
that is done, I'll offer up my views and Another's perception on this ongoing evolution of Gold. Some of this has again arrived in the familiar "Another (Thoughts)" context.
By now most of you may agree that our world economic function is fast changing in a dangerous way. This new function's direction has blocked the return to "normal" markets and the "normal" paper contract prices many of us experienced in our youth. In Dollar terms, we will never see these markets correctly value anything in our economic structure again. We are on a march into total dollar hyperinflation as our dollar evolves. Now, more than ever for the USA, "paper contracts of all forms must expand rapidly" or our dollar and our way of life will fail sooner rather than later! I think this slow process is well understood by many quiet thinkers, worldwide.
From Another before I departed:
========
"Look every direction to world's currencies as these do price gold for modern economy. I say now this not price of my gold. It be price of "your Western gold"! These Western gold values be true! It must it has no weight! My friend, man who does control not wealth, has no wealth, yes? Indeed,
any man that be "surprised" as value falls of paper gold wealth he owns and controls not "be a great asset to one that sells such wealth", yes?
We ask now what be "true value" of gold in world if all have contract metal but few do control value of contract? A world where economy stand on "strong legs" of government money and debt. Strong indeed with good flow of oil? Oil that once was pumped for "two golds" of equal worth.
Two golds there still be this new day, two golds. However one holds no value and held by many. Other holds value as never before, held by few. This oil, it slow now until there be one gold, one gold for all to see!" This day on, two gold bring "weak legs".
Another (Thoughts)
=========
Thanks everyone, I'll be back in a few days or so.
FOA/ your Trail Guide
FOA (08/19/00; 17:23:02MT - usagold.com msg#: 35191)
POSTING LATER
Hello Again Everyone!
Yes, I'm still here. Sorry I haven't been able to write anything, but am just now getting back to normal. Thanks to everyone that welcomed me back after my post of a week ago. Michael, thanks for your private note then.
Will be testing my code for Gold Trail in a minute and hope to send in something later (few hours?).
Oh "Yes", we have a lot to offer over the next weeks and months.
FOA/ Your Trail Guide
Gold Trail Update (08/19/00; 17:29:00MDT - Msg ID:35192)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (08/19/00; 17:28:58MT - usagold.com msg#28)
Test
Up and running.
Gold Trail Update (08/19/00; 20:40:50MDT - Msg ID:35204)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (08/19/00; 20:40:49MT - usagold.com msg#29)
Real Wealth?
I'm tired from traveling and having just placed my house in order am in need of quiet time. Instead of hiking lets sit out on the veranda for a while. It's was such a beautiful evening, even as night fast approaches.
At times like these I can almost feel the thoughts of hundreds of my friends, worldwide as they collectively think of how our future must be, will be. It's a common understanding, these thoughts, as they agree and extrapolate on several singular items. Such as: mankind's future is more often negatively impacted by "acting on knowledge we learned from each other". Especially if it is contrary to the natural world around us. Nowhere is this more evident than in the "Western Mind's" concept of wealth!
I, being of "Western Mind" am fully aware of how this thinking will shape our future that's directly before us. Indeed, from cradle to grave we learned from each other how to highly value things that have no real value. From stocks, bonds, CDs and currencies, we hold a good portion of all of these as our Estate. But this is expected to support our lifestyle in the future. Yet none of these count as wealth in our natural world. They have no value until exchanged for "Natural world" things.
These "paper world" values are little more than credits and IOUs that we "learned to value" "from association with our own friends" of "Western Thought"! Even as the end of this financial era fast approaches we continue to follow our learned "Western ways".
"Don't buy that which cannot burn, buy a paper share of ownership of something that cannot burn." "Then watch, with your estate protected, while all the rest goes up in flames!"
My friends, a stock trader is a stock trader no matter what company name appears on the shares. If they think the world needs more golf balls, golf stocks are the ticket. More computers or internet providers, then those shares are purchased. If gold is expected to rise, gold stocks are played.
If a paper game is in them, paper products are pursued because that is what these investors were taught to value. Is electricity is on the move, buy electric futures. Oil? Buy oil futures! Iron? Buy iron futures (smile)!
Yet, even taking all of this in view; none of these traders are acting out anything different than their learned "Western Concept" of wealth. When the future comes, and it will, they will own nothing of natural value that can represent lasting wealth for their needs.
As night has now arrived, and we must go in now; please consider this short talk on my veranda. Sometimes fresh air can free the spirit so it may prepare for the future. A financial future that will, like our current Western forest fires, consume all paper made from these same trees.
In a day or so we can carry this much further. Even into the direction of oil.
Thanks
FOA/ Your Trail Guide
Gold Trail Update (08/20/00; 23:23:04MDT - Msg ID:35239)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (08/20/00; 23:23:02MD - usagold.com msg#30)
Ready for the next hike?
Hello Everyone,
I have been wanting to talk about the palladium situation for some time. There is a lot more precedent here than most writers want to discuss. From my position, the discussion has so far been slanted towards the "long" paper traders view. Let me ramble on a bit as we drift towards palladium: (smile)
During our "Veranda" chat in my last short post, I made reference to how so many financial players work from a learned "Western View" of paper wealth. With this background perception always dictating that owing the price of something in contract form is the same as owning real wealth, their reasoning becomes distorted. Their use of a real item as currency in trade loses it's function and purpose and the mind begins to see "intent" (a contract) as a tradable or ownable wealth on equal footing with real wealth.
Narrowing down the scope of that view considerably, we come to the "paper futures" game most every trader is familiar with. Again, what strikes me as odd is the universally accepted position that holds these paper markets as equal to "the real thing". In both value and possession! Indeed, how many times have we seen council presented by seasoned professionals as to how the physical product can be delivered against paper if needed or wanted. Yet, in reality neither side of these future markets are prepared to "settle up" entirely, 100% in physical merchandise if push comes to shove. That's right, neither side!
These markets were never designed to represent the value of 100% physical settlement. That's why they haven't recently and don't today demonstrate the real price value of their contracted product! The closing price is but a settlement of opinion ABOUT "supply and demand". Not settlement of real supply and demand that has been sold to so many as "one-in-the-same". An opinion bet is never a "real value" that's equal to a 100% settlement in actual trade.
The only value represented in these markets is found in their ability to demonstrate the cash margin build up on each side of the total contracts outstanding. The closing prices of gold contracts have lately shown that there is a bottomless pit of margin cash available to create the short side contracts against any long position. This is the real reading an investor should take from closing paper prices. Not a real give and take of physical supply or demand.
But, these shorts are no more ready to supply real metal than are the longs ready to pay for real metal. Why? The "Western Concept" of wealth accepts that if the "cash margin opinion" of the value of gold is great enough to move the paper price upward or downward,,,,,, then that opinion is the true "supply and demand" value of physical gold.
Indeed, billions of dollars of physical gold is sold every day using this "cash opinion" to set the value of physical trades. With all world currencies in play by their governments, then gold's low pricing is truly a political gift for those not blinded by "Western values" and investing in gold paper wealth.
But before you cry foul, understand that it's been this way for many, many years now! The vast majority of "Western" paper trades are cash settled with no metal moved in a way that largely impacts the "supply and demand" context traders so often discuss and follow. Again, the "Western View" takes the position that these contracts and their closing values are a paper value that represents real supply and demand values. My friends, it doesn't and never again in our lifetimes will it! Today, these paper price values only represent "margin deposit opinion" about where the physical trading price "should be" not where a "Freegold 100% settled price "would be".
A fraud? To say that the shorts have sold a metal contract that they cannot deliver against,,,,,, holds no more meaning than the fact that the longs cannot pay for metal they have contracted to take! As proof, watch as both sides always scramble to close out the majority of contracts for cash before they must settle. Betting on the price movements of something is not buying real wealth and running from a contract should prove it in the open to changing "Western Thinkers". Waiting for the shorts to be had, in order for your paper investments to gain value may be a long wait indeed. If this continues further, and now with the blessing of Europe, it's the paper longs that may be had as the shorts are let off the hook as the market is destroyed!
Once again:
This very paper trading process was the birthplace of a larger world market that controls gold values for the benefit of those who will buy physical well under true currency market value. A wealth building benefit that is available to anyone. Below market physical gold, in dollars, is a deal available around the world to anyone outside the "Western Perception of Wealth".
In this perception mindset, most Western investors have purchased into the controlled paper side of the gold equation. They are lost in an outdated paper wealth dream that can never again be a value substitute for real gold. International politics and world currency realities are today pulling what little value is left from the paper gold wealth that so many thought they had.
In a way, one may say that the flow of oil was purchased over many years using this same cheap physical gold currency created by withdrawing wealth from these paper gold substitutes.
The fact that,,,,, for many years,,,,, around the world,,,,, so many investors adopted the "Western View" of paper wealth,,,, it changed the real supply and demand function of physical gold. Because the majority of "American Style" investors had decided they would do just as well by betting on the price of gold as by owning gold,,,,,,, physical gold was free up to flow where it was needed.
This paper market was born, not created and found that it could be "CONTROLLED" by the flow of official "margin cash". Truly, in a larger view it was our collective "Style" of investing that trapped many as "long paper gold bulls", not as much the flow of "opinion margin" that has been used against them.
So what about palladium:
The massive margin increase announced is demonstrating exactly what these paper markets always have been. They understate the real world value of the physical product by valuing it using margin opinion, not real physical supply and demand. If the markets get out of whack because too many players move away from holding "American Style" paper wealth and want the real thing,,,,,,, then the paper markets adjust by reverting to cash settlement using the "understated opinion price".
None of the recent commentary touches on the fact that the shorts also face the same huge margin increases. In reality, the move is a precursor to forcing cash settlement if needed. Once a crisis threatens to shut down paper trading, cash settlement liquidation is enforced. This is why the shorts need to carry 150%++ MARGIN to make sure of cash settlement (not physical settlement). The fact that the longs must also have the same margin does make the weaker players fold their hand. But still, many longs will stay for the end.
This is very much what is coming for our gold market, worldwide. Yes, just as in palladium (if it fails), long paper gold traders will smile at their big cash gains (if they can get them). But their smiles will fade as they notice how their $1,000 / ounce settlement only represented the "margin opinion" of real physical value. In the aftermath of a paper gold market shutdown they will buy a 1/10 ounce for that $1,000, if lucky!
In today's world, it's the physical traders that hold all the cards and will gain the most wealth for their future. The value is there today for anyone that want's it. The paper markets we know and love will die before they can ever equal the real value that's coming for gold.
To close:
The true physical gold demand in our world today is poorly understood and poorly calculated. While physical trades are documented as well as possible, little weight is given to the countless investors that own gold using the international margin/deposit paper markets. Yes, most of these players don't have the "here - with - all" to make good on their gold purchases by taking delivery 100%. Mostly they play the "gold price" in a paper game rigged against their ever seeing full value.
But if even 10% of this ---"I own real gold in paper form but haven't paid for it yet and have the cash to do it "--- demand was to surface outside the futures related arena? This demand would take all the supply available in an "adjusted" post paper gold world. Only then will the real demand equation be understood. Only then will physical gold trade for it's fair value as a world currency outside official paper gold control. That day is coming for the owners of real gold.
You see,,,,,, any excess supply would mostly flow to filling those that have contracted for it and have something the world cannot live without! OIL!
In time the real value of gold will be represented by real demand not subject to currency supply. Not the unlimited paper supply that values gold for political ends.
To reword Another's strange post: One gold is coming my friends, one gold!
Thank you all
FOA/Your Trail Guide
Trail Guide (08/21/00; 20:59:20MT - usagold.com msg#: 35282)
test
test
Trail Guide (08/21/00; 21:04:03MT - usagold.com msg#: 35283)
Reply
Hello SLF and Welcome!
I say welcome because I think you are new here. But then again, I haven't read back through all the discussion that happened while away. As you know many of the posters on this forum present exceptional perspective. The kind that demands a comment or answer before moving along. Often one must be careful not to read them or risk being trapped here. (smile) Yours is the first I saw today, no doubt there are many others in the archives for later. So let's stop a while.
Your post # 35259:
--- I have been following your post's for a couple a years. I am trying to get a grasp on your current thoughts. As time goes on I am trying to see how current events will effect Gold/Dollar. It is my impression that you believe the Euro will be the currency that dethrones the Dollar as the Dollar
hyper inflates. What are your latest thoughts about the weak Euro strong Dollar? -----
SLF, I see this whole progression of events as an international chess game. It's a game that has been going on and evolving for many years. It's hard to discuss it in an investment format because far too many "hard money" traders continue to grasp each move on the board as a short term
isolated happening. From this view, they play these events for quick profits. Mostly they lose big, because this particular game is unlike anything in the past and continues to evolve away from past historical precedent.
On the other hand, there is a whole world of people out there that are making a killing for reasons they profess to fully comprehend. Yet truly, their wealth making is little more than a mistake of historic human proportions and they will have it all taken away for reasons fully incomprehensible!
SO,,,, For us to see the whole board we must wade away from shore. Away from all the shallow water traders and into the deep blue. There we can feel the real current.
Our dollar has had a usage period that corresponds with the society that interacts with it. Yes, just like people, currencies travel through seasons of life. Even gold currencies, in both metal and paper form have their "time of use". Search the history books and we find that all "OFFICIAL" moneys have at one time come and gone with the human society that created them. Fortunately, raw gold has the ability to be melted so it may flow into the next nations accounts as "their new money".
This ebb and flow of all currencies can be described as their "timeline". We could argue and debate the finer points, but it seems that all currencies age mostly from their debt build up. In a very simple way of seeing it, once a currency must be forcefully manipulated to maintain it's value, it is entering the winter of it's years. At this stage the quality of manipulation and debt service become the foremost determinant of how markets value said money. Suddenly, the entire society values their currency wealth on the strength and power of the state's ability to control, not on the actual value of the money itself. Even today our dollar moves more on Mr. Greenspan's directions than from the horrendous value dilution it is receiving in the hands of the US treasury.
This is where the dollar has drifted into dangerous waters these last ten or twenty years. If you have read most of Another's and my posts, it comes apparent that preparation has been underway for some time to engineer a new currency system. A system that will evolve into the dollars slot once it dies.
Out here, in deep water, we can feel what the Euro makers are after. No one is looking for another gold standard, or even something that will match the long life and success of the dollar. We only know that the dollar's timeline is ending and a new young currency must replace it. No great ideals, nor can we save the world! But a reserve currency void is not acceptable.
Now look back to shore and watch the world traders kick ankle deep water in each other's faces over the daily movements of Euros. From here, up to our necks in blue water, you ask "What the hell are they doing?" I'll tell you. They are trying to make $.50 on a million dollar play! Mostly because they are seeing the chess game one move at a time. (smile) Truly, their real wealth is in long term jeopardy.
Our dollar has already entered a massive hyperinflation. It's timeline is ending and there will be no deflation to save it. The currency and all the multitude of derivative instruments that make up our money system have expanded rapidly over the last 20 years. Even at a super hyper rate for the last five years or so. We cannot read it because much of what we "Western" savers call paper wealth has really become money substitutes that's value is supported by the government. This paper wealth creation cannot reverse and is beginning to enter the "natural world" of real things. The best sign that the currency has entered it's last, final inflation is seen in the manipulated price gauges. Truly, this is only the beginning. Eventually we will see roaring price increases in everything, even as our
government indicates level prices or perhaps a deflation in our price structure. This has to happen, because there is no saving a society's currency that has debted itself beyond any known example in man's past.
In our time we will all see the Euro become very strong. You will read and hear this. But, Another and I have know for some time that it will be the dollar falling away that will make the illusion complete. I say this because all currencies are but an illusion of value.
Eventually, either before of after the dollars transition, the illusion that makes currencies real will also undergo a change. That illusion / vision is the current world paper gold market. Often known as the dollar gold market. This marketplace will fail with the dollar's timeline and so too will it's use to value gold. In this time gold will not soar in value, rather all currencies will seek their true
relationship to a "FreeGold" market. The US dollar will some day see $30,000+ for an ounce of gold. So too will the Euro price gold much higher ($$3,000 to 6,000???).
It is here that our Euro has planed to play the game to the end. (more later)
In your post:
---- When Another talks about " slow oil" what does he mean? Is the current short term oil price increase the beginning of something larger and more sustaining?---------
Yes, SLF! The transition from a world of dollars into something else is truly an evolution. There is no definite point where political wills draw the line. Once the Euro was born and "online" the dollar evolution began to speed up. Oil, out of a seemingly impossible position, suddenly began to rise in price. The paper gold markets were adjusted in what was the first step of their destruction, the Washington Agreement. Now, oil prices are set to evolve high enough to test not only the dollar's strength, but to force the physical gold market to separate from it's paper controlling world. Indeed, our paper gold markets will very much simulate the same manipulation of price gauges as the CPI.
All in an official attempt to say that our dollar is not dying. In many ways, it will be the paper longs that abandon the gold markets (forcing prices ever lower) even as the physical price soars. Yes, the shorts may make a killing but the money they make will be worthless!!!!!!
Your post:
--- In reading your last post on the trail, you say "one Gold is coming my friends, one Gold"-----
I think Another means that oil flow will slow until we have one physical gold price. Perhaps this is the end of Another's beginning odyssey of many years ago. It could be that the REAL GAME HAS BEGUN!
My friend, the future of physical gold is to become a wealth holding of a lifetime. However, the world will not take lightly to such a recognition of private wealth gain. I hold physical gold in good proportion but am prepared to see it's current paper fictional value plunge to Another's very low
dollar price. A paper price that will be a fictional as $1.00 gasoline during a dollar hyperinflation. This is the reason I hold a lifetime position in a few gold shares. Their value may plunge to zero before things change (an event the shallow water boys could not stand with). Even in the face of a soaring physical price, investors may chose to believe the paper markets over reality. Don't laugh, the believe the CPI today and continue to buy bonds????
Your post:
--- I know you don't have a crystal ball to see the future, but I am under the impression you are a person that has high level information about what is going on with Gold/oil/currencies.--------
AS Another often put it, "I am but a simple person". Events will make this knowledge real, not the words of myself or Another. Indeed, only "time will prove all things".
I hope to continue this, be back next day? , thanks
Trail Guide
Trail Guide (08/21/00; 21:17:27MT - usagold.com msg#: 35284)
Back later
Cavan Man, AL,,,, ALL
Just saw all the good discussion. I'll join in tomorrow (smile).
Trail Guide (08/22/00; 18:32:15MT - usagold.com msg#: 35332)
oil
http://cbs.marketwatch.com/news/current/crude.htx?source=htx/http2_mw
MarkeTalk (08/22/00; 16:34:15MT - usagold.com msg#: 35323)
Heating Oil and Natural Gas Prices to Skyrocket
Hello Market Talk:
I know you are part of USAGOLD but have misplaced your name from Michael's post.
Something has definitely changed in world oil supply!(smile) Can you remember back just a year or so ago, how everyone thought OPEC was finished? Even further back I remember people asking how in the world any of the OPEC group could ever find the money to buy gold. Much less eventually move the markets!
If I remember correctly, you are more of a fundamental thinker. Tell me, how could oil be worth $10 one day and now $30+? Was long term supply and demand so completely misunderstood? Perhaps our current world dollar dilution has become so powerful as to override our political ability
to manage it's oil purchasing ability. Truly there is a lot more at stake here than a coming bull market in gold!
Here is a clip from the above link:
NEW YORK (CBS.MW) -- October crude futures rallied to more than $32 a barrel in overnight Tuesday trading after a key report said crude inventories as of the week ended Aug. 18 plunged 7.8 million barrels -- a dramatic turnabout from the forecast rise of at least 300,000 barrels.
"Forget everything else -- we're back to record-low stocks again," Phil Flynn, a senior energy analyst at Chicago brokerage house Alaron.com, exclaimed just after the data was released. He also said the latest data was a "shocker" and will have "explosive" effects.
In after-hours Access trading, October crude oil added 84 cents, or 2.7 percent, to $32.06 a barrel. After the markets closed, the American Petroleum Institute said crude stocks, as of the week ended Aug. 18, dropped a whopping 7.8 million barrels to total 279.7 million barrels.
Thanks Trail Guide
Trail Guide (08/22/00; 20:01:05MT - usagold.com msg#: 35336)
Reply
Hello 714:
From your post:
714 (08/22/00; 12:17:49MT - usagold.com msg#: 35309)
Questions for FOA/Another
Under the concession agreement of 1933, Aramco was paying Ibn Saud in gold. But during WWII, the price of gold became distorted, with an official rate being posted in NY and another rate, double that of NY's, posted in Jidda. The Saudis apparently demanded payment at one point at the Jidda rate. Aramco felt it was not possible for them to meet Saudi conditions and even diplomatic intervention failed to resolve the dispute. Ultimately, it was settled by having Aramco build a $70 million railroad between Riyadh and Dammam.--------
HA, HA! Well 714, there were/are a lot of versions to that story. But it does point out how far we have traveled from grasping what money really is. Our official money teachers try to separate the currency / money concept in order to make an inferior money (currency) worth more against
competing wealth money. Usually one is taught to think of money as something you buy wealth with when in fact all the wealth you own is money. Not just your "bank account" against "everything else we own".
That nice new railroad was wealth money and used as such. Yet it's never worded that way in Western views. Like this: "Well Jim, I just used my house to buy $200,000 bucks. Boy, there must be some kind of real wealth DEFLATION going on because my house money sure is buying a lot more cash these days!"
That works for your mind, no?
Truly 714, no form of money (all wealth money) needs an established exchange to be used in daily life. Lock up a herd of 10,000 people in the state of Kansas for a year without currency,,,,,,,,, in no time at all every one of those 10,000 humans would know the value of every tradable item. Yes, there would be a few taken by the quick learner/ trader types. But, trading wealth money is a fast study for most. Believe it!
Think about it: None of us know what our pocket currency is worth except by association. Give a Canadian 100,000 Marks and send him to Germany for a month. Trust me he will know value association in no time. As for our group in Kansas, if there happens to be a little gold floating around in their wealth pool, that metal will quickly evolve to become the leading wealth item for trade. And all of this would happen without any formal exchange.
I think most hard money advocates have conditioned their thought process too much. A little time away from the trading screen and into the real world where fresh air clears the mind would do them good. There is a whole planet of people out there that can use currency right along side all their other wealth to trade anything. Old Ibn Saud was one of them.
Your post:
---This episode brings to mind Another's assertion that gold would be traded at an artificially low "official" price at the LBMA (and NY), while physical bullion would unofficially be traded off-market at a much higher price. My question is this: WHERE will physical gold trade at higher prices than those officially and imposed prices? In London? In Jidda? In NY? And my second question is: In a capped market, such as we've seen in Tokyo with palladium, where would a bullion holder go to get higher prices? All the way to Jidda?-------
Why hell, if one had a camera he could take a picture of it being traded on the sidewalk, just outside the COMEX! (smile) Wouldn't happen, you say?
Like this:
About ten years ago,,, in south Florida and on Kauai (Hawaii),,,,,, a hurricane blew the daylights out of everything,,,,,,,, especially electricity! A person could have gone into any nearby Home Depot, Wall Mart or Mom and Pop store and see signs for generators. Say, $800 each. The
trouble was none were available on these "Official Exchanges". Yes you could buy all the order papers (futures contracts) you wanted, but physical settlement was dearly in question,,,,,,,,, soooooo,,,,,,, the amount of deposit cash placed against these orders became less and less. Eventually, these contracts for future supply became less and less wanted and even there "tradable value" fell dramatically as players fled the market! But,,,,,, these "official exchanges" still kept the doors open and offered the generators for sale at even higher prices. But,,,,,, just around the corner (in Georgia) and across the water (on OAHU),,,,,, in back alleys,,,,, one could trade for these
generators on a "physical market" that was sucking all supply away from the exchange stores,,,, at perhaps ten times the official rate!
And the good part about it was:
"they didn't have to go to Jidda!"
(smile)
714, a market will open in Europe, in Euros.
Thanks
Trail Guide
Trail Guide (08/22/00; 20:36:52MT - usagold.com msg#: 35342)
Reply
------Leigh (08/22/00; 13:36:37MT - usagold.com msg#: 35315)
Trail Guide
Welcome home, Trail Guide! Would you mind putting some of us out of our misery and answering this question (which is debated often here): Will real estate values go up or down in the hyperinflation ahead? Is this a good time to buy a home or land, or should we wait? Thank you from those of us who are trying to get our portfolios now! ---------
Hi Leigh,
Thanks to you and everyone that have welcomed a return. Real Estate better keep going up, because I own a fair amount! (smile)
Leigh, Many years ago (20+) there was a lot to discussion that a strong inflation would drive rates high enough to kill real estate. Well, it did hurt somewhat, but it certainly didn't kill it.
I think,,,,,,
that most of that perspective, then was built on our government keeping the dollar strong. In other words, if inflation got out of control, they would do whatever it took to thin out the banking system and save the integrity of the dollar. But, that whole concept was flawed because it was based on the government reacting to a relatively weak price inflation, 10% to 14%,,,,,, but maintaining paper asset growth. In reality, money inflation has taken off even from that day, only it's been manifest in the government considering virtually all paper assets as protect able money. This process has built a huge new money base that is inflating as we speak. Once this money base breaks into a price spiral, our leaders will fall far behind the battle of holding real price inflation at bay. Mostly because it would underscore the use of an alternative, competing currency, the Euro. Any attempt today to stop asset growth, runs headlong into destroying the very new money base the system is built on. Destroy that base and the dollar itself will fall away. The next price inflation spiral will run far, far
above anything we have known.
Under these conditions, that are more typical of third world systems, real estate will run as a real wealth asset. I'm mostly talking about residential.
Thanks
Trail Guide
Trail Guide (08/22/00; 20:41:18MT - usagold.com msg#: 35344)
comment
Cavan Man (08/22/00; 20:18:02MT - usagold.com msg#: 35337)
The Euro
From the 8-21 FT:
Unilever 'encourages' Its UK Suppliers To Ivoice In Euros-----
Hello Cavan Man,
The evolution moves on! (smile)
Be back later
Trail Guide
Trail Guide (8/23/2000; 15:44:43MT - usagold.com msg#: 35423)
boy this hall is crowded
My Goodness!
After pushing and grabbing just to get up here on stage with the "mike",,,,,, I'm all worn out and forgot what I wanted to say! (smile)
Michael,,,, where did all these people come from? (big grin)
Can't believe how many new faces are here today and in the archives.
Anyway, just had to note something and I'll be back to add my say about these paper "futures" in a bit.
Trail Guide
Trail Guide (8/23/2000; 17:42:28MT - usagold.com msg#: 35427)
Comment
Hello Everyone,
OK, now that I have the mike and a clear mind, I'll say a few things. I see a full house and even spotted Goldhunter over there on the side. Yes, a little wave and smile back at you, sir.
People, I have to say that myself and most of you have probably heard official line spoken before. In all walks of life and professions, once heard the expression is easy to remember. I have forgotten the number of times guys have explained the workings of exchanges and markets to me. They spent hours lining me up so as to get a crack at my little account. (grin) It all comes out so neat and clean that the verbiage almost sounds like a preacher quoting line and verse right from the book.
Well, Mr. Goldhunter is absolutely right in presenting all the line items in sequence. (another little wave and grin to you 'sir) But, something happens between the time we read it all and hear it all while sitting at the kitchen table,,,,,,,,, and when our money is on the line "real time". I think the terms to describe it are "reality" and "real life"!
We can take in everything a "futures industry advocate" tells us as fact,,,,,, kind of like going to drivers school. You know, go the posted speed limit, signal before turns, maintain a safe distance, put your lights on at night,,,,,,, and don't worry there are plenty of officers out there to enforce the law if you get in trouble.
All these things are line & verse,,,,,, the rules,,,,,,the law,,,, the trading book. But boy once we get out on the Freeway (Highway for you east coasters),,,,, all bets are off! It's everyone for themselves! If the speed limit is 70 watch for that truck going 95! Good lord, I almost hit that
woman because she didn't signal! That big commercial trader just ran me down with a 6,000 lot sell order!
My friends, the difference between Goldhunter (another big smile) and myself, is that I speak in terms of what happens in "real life". Not what the book or officials say will happen. My discussion, projections and analogies are based on how real people deal with each other world wide in hard
terms.
Now for a little rebuttal:
You post:
goldhunter (08/23/00; 07:56:59MT - usagold.com msg#: 35388)
------The Comex price IS THE PRICE for gold to buy or sell at that instant in time...PERIOD. ---
Sir, there are many good schools in this world that could teach you the difference between a "contract agreement" and a "hard closing trade". Before making a statement like above you should consider enrolling. All COMEX dealings on their exchange are the trading of contract agreements. No matter if they extend out six months or last just 60 seconds, there is no "closing trade" for "PHYSICAL METAL" until that metal or it's warehouse receipt is in your account or your hot little hand.------ PERIOD!
Further:
Even when you have settled for physical delivery,,,, and paid out your cash,,,,,,,, you still only have a contract agreement OUTSTANDING,,,,,,, nothing is settled yet,,,, you have no "hard closing trade". That closing, sir, is when the days,,,, weeks,,,,,, or months pass and your physical is
delivered in your requested form. Let's add one more PERIOD to that!
Further:
Now, the above was the process of buying and closing a contract, not setting the price of physical yellow gold. In the above one has "bid for delivery" by entering into a contract. You have not traded any gold nor have you conducted a "closing trade" that IMPACTS THE SUPPLY OF
GOLD at the time said contract is traded.
As an example:
I have one good friend that is short some 50 contracts and does not have any gold of his own,,,,,,, does not have enough assets to buy that much gold if called to deliver. He would have to declare bankruptcy if the markets opened the first trading day tomorrow and the first contract traded
moved at +200 over the following day.
Now,,,,, the long holder opposite this poor fellow has a contract for 50 times that 100 ounces. But, he did not set the price of gold when he brought those contracts. He only set the price of those contract agreements. He did not close a trade for gold and did not impact the price of gold by
taking supply off the market as a "closing trade" would have done.
In fact,,,,, all he did was express his opinion,,,,, through open outcry,,,, of the value and integrity of those contracts should he decide to take delivery and "close the trade" from my friend
Of course,,,, in driving school we learn that everyone stops for red lights. It's the law,,,, right? It's also the official rules that comex will deliver is needed. But,,,,, in the real world we may experience later,,,,,, no one is going to cover the millions and millions of gold bets made world wide by people like my little 50 contract friend. Especially if the markets open +200 ten days in a row!
Your post:
-----Your OPINION that it is an opinion of price or other is wrong...You want gold, you get it...you want to sell gold you can sell it...100 oz lots, big or small...the exchange will accommodate your wish.---------
People,,,,,,,
We can't even get new firestone tires for our bad ones,,,,,, let alone find an extra 100 million ounces of gold laying around when the market goes up in smoke. The next time someone passes you going 80 in a 50 zone,,,, just remember,,,, in the real world accommodation is indeed
just a passing wish.
Smile!!!
Thanks all
Trail Guide
Trail Guide (8/25/2000; 6:04:33MT - usagold.com msg#: 35504)
Comment
Oh Aristotle,
Standing on the hillside of life and watching our "golden wars"
I can see your battle crest like a blazing sun!
Your thoughts are our true course
mighty words do shield these golden hearts
Advance mighty one and draw ever nearer truth
for the benifit of all
-----------------
My friend, Isn't it interesting how people revert to debating and berating "the presentation" of a position when they are lost to discuss or question "the content". Your beautiful post drives home "the content"!
One should read these passages first and settle into a thought frame.
Then reread the whole post:
Aristotle (8/25/2000; 4:02:42MT - usagold.com msg#: 35502)
The evolution and confessions of an unrepentant Gold advocate
-----for myself despite the heavy influences of the Goldbug dogma I had eagerly absorbed with gusto. As I came to realize how many pieces of their puzzle didn't fit, I came to see that the explanation was owing to the well-intentioned reason that much of the "standard Goldbug rhetoric" was based on idealism.----------
------Happily for the buggiest Goldbugs, this same pragmatism also renders equally null and void the successful implementations of any notions of an idealistic paper-only world as seen in the wildest dreams of Keynesians, governments, and many bankers. As things are, Gold has a very important role squarely in the middle of a pragmatic world, yet too few people give much "theoretical thought" to this middle ground.------------
------I arrived at a position with a realistic eye on the middle ground giving me clearer monetary understanding as it works in the real world, and also how it COULD in fact (and should) be made to work immeasurably better.-------
------Such has been my evolution toward monetary "enlightenment," and such is my position here--as a pilgrim, not a teacher--at the very bottom and on the fringe of the admirable and idealistic gentlemen who gather here to share their thoughts and visions of a better world and a better monetary system.------
-----I certainly didn't come here as perhaps some of the traders have--after having gotten themselves into an investment hole, hoping to argue, defend, and justify their way out of it.----
-----Keynes didn't call Gold itself a "barbarous relic," but he rightly called the Gold STANDARD a "barbarous relic," which is also precisely what the system of Gold derivatives and bullion banking of today has become---------
-------a relic of a clever scheme originally to offer life-support to a failing dollar-based international system at a time when the world had no other option. -------
This patchwork scheme is no longer needed. On the other hand, freemarket physical Gold, as the pure and essential reserve/savings asset (unlent with no derivatives) is desperately needed in the modern world to indiscriminately bolster each of us along side modern currencies which are now a permanent feature in the financial landscape. Simply put, Freemarket Gold is the only way for a man to safely coexist with his currency.--------
Gold. Get you some. ---Aristotle -----------
---------------------------
Thanks Aristotle--- The future is before us!
Trail Guide
Aristotle (8/25/2000; 4:02:42MT - usagold.com msg#: 35502)
The evolution and confessions of an unrepentant Gold advocate
Hello to you, Mr. JMB
I've had the pleasure of catching up on the postings for the past day and see from your recent message (08/24/00; 23:28:30MT - usagold.com msg#: 35490) and similar earlier expressions that you are apparently having a problem with AllanC, and with me also. It is my observation that AllanC has conducted his affairs at the forum this day in an exemplary manner (such as his 35479). He gave you a good reply, steered his remarks toward meaningful discussion of Gold, and yet you persist. What more would you have of him, appointing him as my spokesman seemingly, when you state, "My case, simply put, is that GOLDHUNTER presented an excellent post and ARISTOTLE was unnecessarily rude to him. You [AllanC] have stated that 'GOLDHUNTER posed a fair question' yet you said nothing about ARISTOTLE'S rudeness...well I will. ARISTOTLE is brilliant, no doubt about it. There are just three teenie little problems with him as a teacher...He thinks he has a monoply on all worldly economic wisdom, he is insecure (intellectually) and he is an anus. Other than that, he's great. I look forward to his next post...I just hope it's not to me."? To you, Mr. JMB, I have this to say. AllanC seems quite competent to discuss matters of Gold, so let's let him avoid any unnecessary participation in speculative defense of my recent behavior here.
Apparently I've been on a mean streak lately to which I've been blissfully oblivious. To tell the truth, I can't recall having an August that has been any MORE enjoyable than this one in my entire life. So, we can't chalk up my latest displays of "harsh" and "rude" behavior to stress, now, can we? Perhaps, deep down, I'm nothing but a bad, bad man. All in all, when I look around, my honest assessment is, "I can definitely live with it." Why is it wrecking YOUR day? Goldhunter and Adam Hamilton, if anyone, ought to be the ones calling for my hide or for my immediate banishment.
To your point, yes, you are correct--on Aug. 23rd, Goldhunter did raise a topic (to say nothing of HIS tone) that was worthy of a well-considered answer. I would like to think that he got this from both individuals who addressed his thoughts: me and Trail Guide. Again, I am surprised that you, a simple bystander to the exchange, felt compelled to raise such a ruckus over this. Which of my two posts, (8/23/2000; 12:40:51MT - usagold.com msg#: 35412) , or (8/23/2000; 13:46:33MT - usagold.com msg#: 35416) was the more offensive, and in what regard? While you suggest that I was "unnecessarily rude," my perception remains that I was "precisely and necessarily direct," and for that I offer no apology, as none is needed.
To end on an agreeable note, I certainly appreciate that you have shown me a measure of kindness in pointing out *only* three "teenie little problems" with me "as a teacher." I am certain that the reasons abound, and I shall be thankful if others refrain from adding to this otherwise important list, for I make no claim here as "teacher." I didn't come here to be a "teacher," nor did I come here to be liked, nor abused. As a matter of fact, my expectation was (and remains so) that I would fit in rather poorly and rub many people the wrong way because I have long since evolved from my earliest being as someone who listened fast, thought faster, and talked fastest. There was a time I gave very little thought to the nature of the money I earned and spent and saved. But as certain thoughts drew me years ago to investigate Gold, as a result of my reckless nature I listened too attentively to the standard Goldbug rhetoric of others and was not well-served regarding the influence it had on my pursuit of clearer monetary understanding or on my discussions with others on this subject. Fortunately I had no investment commitments during that period of tainted perspective, so only my perception of monetary affairs was temporarily damaged, not my meager savings at the time.
Fortunately, my mother raised me right, and I still possessed the capacity to think for myself despite the heavy influences of the Goldbug dogma I had eagerly absorbed with gusto. As I came to realize how many pieces of their puzzle didn't fit, I came to see that the explanation was owing to the well-intentioned reason that much of the "standard Goldbug rhetoric" was based on idealism. Well, that's fine and all, and something worthy to strive for, but in the end, we all must live in a pragmatic world. Happily for the buggiest Goldbugs, this same pragmatism also renders equally null and void the successful implementations of any notions of an idealistic paper-only world as seen in the wildest dreams of Keynesians, governments, and many bankers. As things are, Gold has a very important role squarely in the middle of a pragmatic world, yet too few people give much "theoretical thought" to this middle ground. Arguments are always made from the merits of the lofty points on opposite ends of a pendulum's arc. Pointless for making meaningful progress, to be sure, but God bless the idealists, anyway. (For the record, the Goldbug (Goldheart!) idealism--however unworkable it happens to be--is at least noble in the "eyes" of the individual human spirit, whereas the paper idealism is not.)
After a period of slower talking and deeper thinking, I arrived at a position with a realistic eye on the middle ground giving me clearer monetary understanding as it works in the real world, and also how it COULD in fact (and should) be made to work immeasurably better. Simply put, my thoughts had evolved from their starting point, and I became comfortable with my own concepts of a unique kind of monetary idealism that existed at the nadir--the bottom of the pendulum's arc. Despite reservations about beginning to share such radical monetary thoughts at this Goldbug-infested forum, in truth, it happens to be the finest economics discussion forum to be found anywhere on the web, and the credit goes to the good hosts (MK and TC) along with the high quality of those individuals who "infest" it. And to my delight, there are in fact some here, past and present, (I won't name them because it is obvious to them who they are) who also have grappled this monetary pendulum at the "perfect bottom" at the risk of receiving slings and arrows from those feeling ill-tempered on any given day who occupy the "perfect top" on either side--although given the Golden nature of this forum, our position at the bottom center surely looks like the opposite paper side due to the complete absence of those folks making their case here. In their presence, I have been further nurtured and heartened in my convictions that the international monetary system could and seemingly IS evolving toward this position.
Such has been my evolution toward monetary "enlightenment," and such is my position here--as a pilgrim, not a teacher--at the very bottom and on the fringe of the admirable and idealistic gentlemen who gather here to share their thoughts and visions of a better world and a better monetary system. I certainly didn't come here as perhaps some of the traders have--after having gotten themselves into an investment hole, hoping to argue, defend, and justify their way out of it. I don't feel stressed or defensive in any degree because my investment strategy has not put me on the ropes as others perhaps are. I have maintained a savings/investment position that is consistent with my understanding of how the world works, and to that end, I hold physical Gold at this time in such a large percentage of my net worth that most Gold bugs would tarnish green with envy, or else think ME to be the idealistic one.
Believe it or not, Gold within the system I endeavor to describe during my time here, though my views are unpopular, will be far more valuable (yes, and priced accordingly) than Gold ever could be in the more popular Gold-standard system. Such a radical vision? It promises vast wealth (for current Gold owners) AND international monetary stability (for everyone), whereas the Gold-standard vision won't propel your physical Gold near as high in value and has already shown itself in the past to fail under natural worldly pressures. Which system (and outcome) would YOU rather wish upon yourself and also leave to your children?
Keynes didn't call Gold itself a "barbarous relic," but he rightly called the Gold STANDARD a "barbarous relic," which is also precisely what the system of Gold derivatives and bullion banking of today has become--a relic of a clever scheme originally to offer life-support to a failing dollar-based international system at a time when the world had no other option. This patchwork scheme is no longer needed. On the other hand, freemarket physical Gold, as the pure and essential reserve/savings asset (unlent with no derivatives) is desperately needed in the modern world to indiscriminately bolster each of us along side modern currencies which are now a permanent feature in the financial landscape. Simply put, Freemarket Gold is the only way for a man to safely coexist with his currency.
Gold. Get you some. ---Aristotle
Trail Guide (8/25/2000; 8:55:32MT - usagold.com msg#: 35512)
Comment
oldgold (8/25/2000; 8:12:54MT - usagold.com msg#: 35510)
Energy and Gold
Hello Oldgold,
I know you have held a forceful opinion for sometime that the US can and is still controlling oil producers. Your thinking was no doubt rightfully influenced by our last ten to twenty years of experience with the political world of oil.
What has been changing for the last number of years was our realization that a new currency would available to the world. True, it's nothing to write home about now but we as as a Western thinking group tend to underweight it's strategic importance as an "available alternative" to the dollar if needed. This subtle fact has shifted the playing field considerably when viewing the US ability to control oil flow.
Today, oil flow has moved from playing a fundamental game of pricing "use value" with supply and demand to pricing it's "monetary value" in supporting any major currency block. Concessions are now there for the taking. Dollar prices for oil can rise considerably higher with the US's behind the
scene support for this action. In addition, the world paper gold markets can and are being dismantled as a further concession to retain dollar settlement of oil.
Strangely, the coming surge in physical prices are now a 180 degree shift from keeping them low in support of oil flow. In the future, rising physical bullion stores (and dollar prices) will play an important roll in playing a failing inflationary dollar against an ever likely increasing shift towards Euro oil settlement. No matter how this eventually plays, our dollar paper gold markets will dissolve as free priced bullion supports the EBS / Euro system.
Your article goes a long way to seeing the mental shift some Western thinkers are only just now grasping. It's seems even Goldman has printed a paper calling for 50 oil! It will be very interesting to see how their stock is valued the try to ride the middle ground between a short gold position vs
long oil. In the end their much vaulted paper gold game make them a tone of money but without a market available to realize those gains. The more GATA talks, the more the paper world sweats. Not from a short squeeze, but from their market being officially evaporated. I know you, oldgold
must also (smile) as I do at that thought!
thanks
Trail Guide
Trail Guide (8/25/2000; 8:57:25MT - usagold.com msg#: 35513)
Reply
Hello Knallgold,
Do you think LBMA and their entire operation are wondering what price that gold will eventually be offered at so as to flow back to them? You know, once the political flow is more recognized, then that off market pricing will eventually leak into the open. I wonder what someone with extra
assets would pay "over market" to put out their fire ahead of the rest?
The world sees supply as growing when it's shrinking to almost nothing. See my post to oldgold and you will feel "the deep current" in blue water.
thanks
Trail Guide
Note, Cavan Man, we talk tomorrow, yes?
Trail Guide (8/26/2000; 19:16:31MT - usagold.com msg#: 35569)
Couldn't post this on the Gold Trail? Something Wrong?
Hello Cavan Man!
In your post of ---- Cavan Man (08/21/00; 19:49:05MT - usagold.com msg#: 35278)---- you asked for more detail. Something like a grocery list to check off as events move along (smile). The exact question came as: ----"What are some of the impediments to moving ahead with your
"freegold" scenario?"----
Well, Cavan Man, one of the toughest problems investors have with following the Gold Trail stems from their perception of how our modern dollar money values things in the market place. I, we, all of us have discussed this extensively. Often from a somewhat different view than mine.
From my interaction with people of various far reaching world backgrounds, one thing is clear: Investors and regular workers with a Western slant do not grasp what wealth is. Overwhelmingly they see their currency and paper investment portfolios on an equal footing in value with the same
"real things" that raise our living standards. Yet, in real life, they cannot be equal because these paper assets are only an exercise able future claim on our "real things in life".
Take my debate "Against" Goldhunter as an explanation example. His perception is typical in that the ---"prices bid for futures contracts are the market value of gold"---- (see msg#: 35427). These future contracts serve no more purpose in setting pricing function than do all modern paper assets we today hold as wealth.
In this larger sense, after rereading my post to him,,,,, one can see where the entire dollar world itself has become a "futures pricing arena" that "undervalues" almost every real usable item we function with in daily life. The dollar asset system, as we know it today is used as a value setting
tool even though it,,,, like gold futures,,,, does not entail the removal of real goods from circulation.
But wait, you say,,, of course it does,,,, we buy and sell for our life's needs every day using dollars! Yes, this is true, Cavan Man but in that process we as an economic society only use a tiny fraction of this paper asset wealth to do that physical trading. As an example:
Look at the daily trading of gold futures and gold future "look alikes" in London as they trade in a huge volume multiple of the actual physical market. As this lopsided trading is a comparison valuation that understates the value of gold,,,,, so too does the collective acceptance that dollar assets are held as equal to life's physical needs,,,,,, also understates the real value of all things in our lives.
You see, a futures system that functions as our currency or currency contracts, values physical assets without taking these assets into our lives and by extension taking the assets out of the market. This is the current money world we live in. The dollar in your pocket is part of a much larger paper wealth system that has evolved into today's money system. A reserve system that is not tested against real "supply and demand" values. With these money futures we may leverage our perceived wealth by thinking we actually control "real assets" just by holding contracts or dollar denominated paper assets. In reality we only own claims on each other's ability to produce,,,,, just as a futures contract holder only holds a claim on another to produce physical. Expand this function to a level where today's dollar world is and we can grasp what others see in the real value of gold.
This is the reality of perception that Another speaks of when he said -----"your wealth, it not what your currency say it is"-----.
Truly, this statement was larger than life to anyone that could understand it's implications then and correctly act on it today! Unfortunately, most readers just went out and brought more paper denominated dollar gold assets. Many have lost a bundle thinking they were hedging when they were just playing the same dollar game.
This takes us back to your initial question:
Western society and Western influenced investors cannot grasp gold's value because they mentally must denominate it into currency first. To do this they turn to the "market place" as the undisputed tester of values. But, as shown above, our market place uses a currency system that is entering the end of it's timeline and therefore can no longer measure "things" on a simple supply and demand
value basis.
Some of the things on our "grocery list" are being checked off as we walk this Golden Trail.
==========
This currency systems and the evolving nature of our current society that created this system is in the process of radically changing it's paper wealth structure. The government, as an extension of that society begins to support and maintain the asset value of almost everything. This is the engine that drives an eventual hyperinflation. Not a typical business expansion inflation we are used to,
rather an all consuming, ending inflation that does not stop. At this point the concept of sound money takes a back seat to maintaining majority asset holdings on a permanent plateau. By extension, the official stance is moved to promote all paper assets as "national money". Stocks, bonds, business function and even general welfare is elevated to an equal footing with the need for a good sound money in your pocket. The mood becomes one of "what good is a sound dollar if we are deflating"? Check that one off your list because we are well on that road.
============
The international value of major currencies become more a function of "who can manipulate them the best" rather than their soundness. Forget the trade deficits, asset price bubbles, debt overflows or interest rates,,,,, it's who is best at controlling currency derivative function. Traders buy using "official control" as their determining value fundamentals. Truly, at this stage the prospects of a
price deflation and it's opposing currency hardness are a distant joke. The US has now moved to using measures once reserved for third world systems when it comes to playing the money game. Example: "our national debt is being paid off"! Or the CPI rising .01%! Check this one off your list,
it's happening now.
===============
Those with power outside this game are seen making long term preparations for the day when the US dollar inflates away. They see where the dollar value is only a function of trade flow manipulations. Not real economic progress. They see where throwing ones entire economic system wide open to "bubble expansion" policy in a "come and get it while you can" experience,,,,, can only end one way. So they play the game while there is time and they play to win with gold! As
USAGOLD poster Henri put it today in msg#: 35547:
---- " If one considers wealth to be the accumulation of unencumbered assets of enduring value, then the pursuit of fiat profit to be converted to real wealth makes sense.-----
(nice post Henri)
The unanswered question that "noone" could ever understand was "outside the other CBs, who has been buying all this gold over these years?" Check this one off your list my friend.
================
The Washington Agreement has placed us "on the road" to one of the most exciting changes for our current physical gold market in it's short 25 year history. This part of the world reserve currency system was about to radically evolve with respect to the world dollar gold values. To date, the
ongoing dramatic fall off of LBMA trading from it's (also) short public life is leading to an eventual official evaporation of dollar based paper gold banking.
Someone in Another's group pointed to that spike in paper trading long before most had ever heard of LBMA,,,, and did so by saying that a drop below $360 would cause it. That ensuing round of massive paper playing was but a backstop to maintain the dollar reputation with low paper prices
prior to Euro presentation.
I point this out because many new watchers of our gold wars have no knowledge of this important play on the political currency chess board.
This paper game got out of hand before the Euro was born and the BIS was ready to hold the gold line at $280 if needed. But, the Euro was born and is now a functioning currency. Today our paper gold game has come full circle and most of the players that know anything are shaking at the prospect of a pure physical market that will stand next to the Euro.
Forget the gross volumes of derivatives on the books of majors, they don't mean a thing. They can keep writing contracts all they want but with trading volume falling away, eventually there will be no market to value these
assets.
If this process is allowed to mature fully, major pain is coming to paper hard money investors worldwide. They have hitched their wagon to assets that require an operating paper system to sell into. Outside the private markets for existing and circulating bullion and coins, the entire industry will shutter to a halt as the mess is worked out. Investors will be kicking themselves as bullion soars
while an extended workout phase brings their asset values to almost zero. Sure, something will give,,,, maybe? Maybe we are at the paper price lows now?
But most "regular" hard money people that read these Thoughts are in the game for asset preservation during a world currency crisis and or inflation. Ten ounces of French gold coins and $60,000 in mining stocks and derivatives will make them sick during such a paper work out. Other proud hard paper asset holders proclaim they have millions in the industry and are not the least worried. They also said the Euro would never happen, oil will never see $30 without $600 gold and $280 gold would mean a major US depression! Well,,,, Don't check this one off yet. It's still playing out.
=======================
Then there is oil. I will repost my recent and now "edited" post to oldgold:
Trail Guide (8/25/2000; 8:55:32MT - usagold.com msg#: 35512) Comment
oldgold (8/25/2000; 8:12:54MT - usagold.com msg#: 35510)
Energy and Gold
Hello Oldgold,
I know you have held a forceful opinion for sometime that the US can and is still controlling oil producers. Your thinking was no doubt rightfully influenced by our last ten to twenty years of experience with the political world of oil.
What has been changing for the last number of years was our realization that a new currency would be available to the world. True, this Euro is nothing to write home about now but we as a Western thinking group tend to underweight it's strategic importance as an "available alternative" to the dollar if needed. This subtle fact has shifted the playing field considerably when viewing the US ability to control oil flow.
Edited note: this next item is where we should watch for the dollar to be impacted by an increase in oil prices. For oil prices to be this high after all the political favors we are owed,,,, something must be countering that leverage. The US must be endorsing the move?
---------- Today, oil flow has moved from playing a fundamental game of pricing "use value" with supply and demand to pricing it's "monetary value" in supporting any major currency block. Concessions are now there for the taking by oil producers. Dollar prices for oil can rise
considerably higher with the US giving behind the scene support for this action. In addition, the world paper gold markets can and are being dismantled as a further concession to retain dollar settlement of oil. -------------
Strangely, the coming surge in physical prices are now a 180 degree shift from keeping them low in support of oil flow.
Edited note: This next was the purpose for the short history of the LBMA high volume. It's use is now behind us.
In the future, rising physical bullion stores (and dollar prices) will play an important roll in playing a failing inflationary dollar against an ever likely increasing shift towards Euro oil settlement. No matter how this eventually plays, our dollar paper gold markets will dissolve as free priced bullion supports the EBS / Euro system.
Oldgold, Your posted article goes a long way to seeing the mental shift some Western thinkers are only just now grasping. It's seems even Goldman has printed a paper calling for 50 oil! It will be very interesting to see how their stock price is valued as they try to ride the middle ground between a short gold position vs long oil. In the end their much vaulted paper gold game should make them a ton of money, but without a market available to realize those gains? The more GATA talks, the more the paper world sweats. Not from a short squeeze, but from their market being officially evaporated. I know you, oldgold must also (smile) as I do at that thought!
=========================
Cavan Man, check off rising oil prices.
We are on the road to "Freegold"!
thanks
Trail Guide
Trail Guide (8/26/2000; 19:44:32MT - usagold.com msg#: 35573)
Gold Trail
TownCrier,
The ISP presented a message saying it was out of menory. I won't mention the ISP name as you know who it is. I'll try again,,,,,,thanks (smile)
Trail Guide (8/26/2000; 21:41:44MT - usagold.com msg#: 35583)
Reply
TownCrier (8/26/2000; 20:53:17MT - usagold.com msg#: 35578)
A question for Trail Guide
http://www.insidedenver.com/business/0826gree7.shtml
TownCrier,
Ha! Ha! I think we are going to see a lot of requests in the future for things to go slowly. You know how it is, once someone else gets behind the wheel of your car,,,,,,, you can only direct! (smile) Now with oil in a win - win position and Europe playing the good guys,,,,,,, there is no room left to maneuver. Alan no longer can adjust policy except to add more gas. His recent rate hikes seem to
be just a return to where we were before the LTCM disaster. All assets seem to know only one way to run and that is up. Just the direction a failing currency takes it's owners before it fails completely. When you think about it, Europe would like nothing better than for the dollar to get
stronger as it inflates! If the US can keep the game going just a little longer while everyone gets what they want,,,, good for everybody,,,, right?
TownC, I tried to load Gold Trails again. Didn't work. I think my post was too long, like you said. I'll watch and wait, see what Jeff does.
One more post to Henri and I have to go.
thanks
Trail Guide
Trail Guide (8/26/2000; 21:44:27MT - usagold.com msg#: 35584)
Reply
Hello Henri,
Your post (Henri (08/26/00; 07:59:19MT - usagold.com msg#: 35549)----
-----------1) If $12 oil is incompatible with $320 gold, then $10 oil must have been extremely incompatible with $250 gold. To what extent was the recent explosion upward in oil prices a retaliation for continued downward manipulation of gold prices?----------------
Henri, most of this maneuvering took place prior to the Euro being secure. There was a lot at stake if the Euro fell apart at that time. Politically it went something like this:
a.(late 80s early to early 90s)
US and Europe worked together to bring gold prices down:
to make the dollar good in gold for oil and others
to allow some cheap physical purchases
to allow some long term contracts to be established
to allow the continued flow of oil at reasonable, economy supporting rates
paper gold had not inflated to anywhere near these current levels
so contracts were seen as supportable
so contracts and physical were seen on almost equal footing
b. (early 90s to mid 90s)
the supply of freegold on the official level was beginning to run short
so CBs sold openly mostly to each other to create gold selling impression
so mine forward selling was encouraged originally engaging mostly CB gold
major gold buyers were ready buyers with cash or lend able natural resources
so naked paper selling began to imitate CB supplied gold
so same naked paper selling supplied some mines forward sales contracts
so falling paper gold prices drew out old line/ non oil physical bullion in exchange for paper
so falling paper prices brought in cheap financiers to sell into this paper demand
market is flooded with new paper and begins to override it's original purpose
by now US knows the Euro will succeed and benefit from a rising physical gold price
c. (mid 90s to date)
US and Europe split,,,, BIS takes Euro side
US encourages London to join it in dollar support,,,, print more paper
Europe and BIS stand to enter the world physical markets if gold falls below $280 before Euro is born
Euro comes online
Oil gold buyers don't like paper gold inflation
Oil stands to raise dollar oil prices if gold markets stay below $280
Europe stands aside and watches knowing what rising oil will eventually do to US dollar / economy
Europe adopts policy of "Freegold" by quarterly marking to the market bullion prices
Europe and BIS stand aside and endorse a flood of paper gold
Eventual demise of dollar contract gold markets draws oil to Euro support
Oil and Europe force Washington Agreement
Oil begins to raise dollar oil prices in effort to crush paper gold markets with inflation induced physical gold demand
----Your questions-----
-------2) How high is OPEC prepared to take oil, to force the gold price freeing agreement to a
level they are comfortable with ($30,000/oz)? I am assuming that OPEC is voice of this group. Am
I wrong?----------
$75 to $100
Europe / BIS are and always have been at least the political architects
------3) when gold is freed, will $10 oil reappear?------
10 dollars? Never.
10 Euros? Absolutely
----4) Can we look to the breakup of operations at the London Bullion exchange as the next
signpost along the trail? -------
Several outcomes:
Look for paper trading to slow further, physical becomes rare
or paper prices surge in a super run then quickly shut down as physical prices run away
or paper open interest surges as shorts try to cover before more players come to know about the condition of the markets.
or paper prices plunge to less than $100 as all physical trading stops. Then markets shut as physical prices leap
---5) Goldman Sachs is I believe as much involved in forward sales of oil and futures as they are in gold futures sales. I think this only because the oil index is also known as the Goldmans Sachs index. I may be wrong.----
These guys are smart! Who knows, this could all pass and nothing happens at all! (big smile)
-----How much of the "glut" of oil that drove prices down to $10/barrel existed only on paper? I am thinking that the same group that is driving gold down with paper supply learned this by doing the same with oil earlier. Will the breakup of the London operations signal it is past time to go long gold and short oil?-----
Henri, it's my bet that the oil markets learned from the gold market. For myself, in these uncertain days, I would never short oil or anything that a hyperinflation could drive thru the roof. If I must trade gold trading physical with a dealer is the ticket.
Sorry for the short format, I have to go.
Thanks
Trail Guide
Trail Guide (8/26/2000; 22:25:05MT - usagold.com msg#: 35589)
Comment and Reply
goldhunter (8/26/2000; 21:41:37MT - usagold.com msg#: 35582)
Mr. goldhunter and ALL:
NOTE: It is rare that I am ever upset when talking with everyone here and truly I am smiling as I write this. The contrast of thoughts here is worth all the time spent reading.
I'll answer that good question from you:
--"Do you believe that futures set the price of gold?---
Yes!!!!!!!!! If every trader that has taken the short side of a long gold contract,,,,,, has physical gold " " in his possession" " to deliver against his contract,,,,,,,,,,,, then that contract market has indeed set the true fundamental supply and demand price value of gold!
Further,,,,,,(smile),,,,,, It also goes without saying,,,,,, that every trader on the long side of a contract must also have the cash to take delivery of said "in possession physical gold". If not then his bid is only a short term opinion that cannot be converted into a fundamental supply and demand function that sets the price value of gold.
Further,,,,,,,,,(SMILE),,,,,, because we all know that neither of the above circumstances is true,,,,,,the line of logic pursued by goldhunter presents and confirms the point I keep making,,,,,,,,that the present contract price of gold that is used to trade all physical is,,,, indeed,,,,,,
an understatement of and not the the true physical price. It represents a Western Style Opinion of where price should be IF they had the assets to complete the trade. This Style of investing is currently the reason Governments are able to keep the dollar price of gold low. However, do not complain and please encourage traders to continue to bet this way,,,,,, as it fills the vault to out advantage! Become a Physical Gold Advocate and hold a wealth no paper can ever value!
Now I must depart,
Thank you TownCrier and everyone
FOA/ your trail guide
Trail Guide (8/28/2000; 6:32:03MT - usagold.com msg#: 35638)
Later Post
Hello Peter,
Thank you for using this portion of my logic to get your point across. In my travels I have found it surprising how many investors immediately grasp the enormity and impact of that statement. Yet, equally surprising it intrigues me just how many sophisticated, educated Americans see only a very
small piece of the paper contradiction that same statement entails.
Later today, I'm going to once again use Kansas as a testing ground like in an earlier post (smile). Asking 10,000 people to line up and do a futures trade for us. In this exercise we should be able to see how the futures understate price of gold by using our soft opinion instead of a hard trade.
Somewhere in that group, even Goldhunter will participate!
Also thanks to SteveH, HBM and others for "digging" deep in their mind. The truth is buried deep, here in America. With a good effort we will unearth it!
thanks
Trail Guide
================
Peter Asher (08/27/00; 23:31:54MT - usagold.com msg#: 35630)
Canucks Challenge was already met
Today's Forum opened up with my post of an EXACTLY twenty word excerpt from
FOA/TG's earlier msg.
Again: Trail Guide (8/26/2000; 22:25:05MT - usagold.com msg#: 35589)
*** It represents a Western Style Opinion of where price should be IF they had the assets to complete the trade.***
Trail Guide (08/28/00; 20:35:52MT - usagold.com msg#: 35674)
The big trade!
Hello Everyone!
I would like to start this as an offshoot from my post earlier today to Peter Aster (msg#: 35638). It seems we have run into a roadblock of thought. Perhaps a traffic jam would be a better analogy.
Let's talk:
In it's most basic form, this presentation has been that;
----in the worldwide modern paper markets, contract trading has taken over the roll of setting gold prices at a tremendously understated level.---- Years ago hard physical trading once did that job and did it at a correct level
relative the physical product that was changing hands.
For us to follow and grasp this concept change correctly, we must start at the very beginning of simple economic principal.
When someone buys a product and takes possession of that product he impacts the value of that item as it relates to the next person in line waiting to buy. Like this:
----------
When Joe buys one of five apple from the table of a vendor, he leaves only four apples left on the table to be bid on by the next buyer. This ages old act of "hard trading" demonstrates the whole human interaction with supply, demand, need and emotions. When the next buyer sees that only four apples are left, where there were once five, whether he likes it or not his mind will consider the above supply and demand possibilities. All the while personal need and emotions mix in his brain.
The result may or may not be a different bid from the first buyer of an apple. But it will be a true value assessment based on actual, hard, real time circumstances known at that moment.
When Joe brought that apple, he impacted real supply and forced the market,,,,,,, that's everyone trading behind him,,,,,, to form "hard opinions" about "real demand" and "real supply". In this dynamic, the next trade is not priced by "soft opinions" based on conjecture of "will Joe really take delivery".
You see,,,,,, in real life,,,,,,, in real trading,,,,, Joe taking delivery now, hard down, undisputed,,,, and this forms a different "mind set to bid" by the next in line. This mind set is what creates a "real value bid" instead of a "possible value bid". These "hard bids" based on "hard opinions" overshadow and usually bid higher for product than "soft opinions". In times of "Hard Trading",,,,"Soft opinion" bids even fail to materialize mostly because "Joe has shown that he does take delivery"! ========
Now,
I had today, asked 10,000 Kansas investors to line up along their border with Colorado. This nice straight border is very long and allows room for everyone to have some space. I asked half of then (that's 5,000 (smile)) to stand on the Western side of the border (Colorado for you non
Americans) and the other half of them to stand directly opposite on the Eastern side (Kansas). All of these people did this in a hurry and they remembered to bring the very last $50,000 in cash they had to their name along with a pen and paper.
This was quite a mess to organize, so I hope everyone will appreciate this effort! (smile)
So,
Today, while the Comex was still open and trading,,,, and the US dealer markets were open,,,,, I instructed all 10,000 of these people to enter into a REAL LEGAL PRIVATE OFF MARKET CONTRACT with each other for "1,000 ounces of gold". In effect, I asked that 5,000 of these investors contract to buy from the other 5,000 the equivalent of "ten 100 ounce gold contracts" that would expire in one hour. That's one hour before the gold markets closed today.
Yes, that's 50,000 contracts for five million ounces of gold that existed during trading today.
Further, not only did the sellers not have any physical gold, their last $50,000 in margin cash could not possibly buy the 1,000 ounces to deliver. Nor could the 5,000 long traders hope to use the last $50,000 the had to their name to buy that same 1,000 ounces. But their margin deposits did seem to make the deal real.
So,
While this trade took place and the contracts were in force (they were legal and binding),,,, I called several bullion dealers to ask if the gold market was being impacted. I also watched the computer screen intently to see if anything would happen.
Surely, with five million extra ounces of gold being traded, it would have changed the price of gold.
"Just think, five thousand rich Americans contracting for five million ounces of gold should have done something!"
Well, it didn't. So all 10,000 Kansas investors canceled their contracts by buying each others commitments and went home a little smarter.==========
OK,
The reason this little trade didn't impact the "real value" of physical gold was because they didn't trade any real gold. As big as the numbers seem, the real physical supply of gold was never touched. All they traded with each other was their "soft opinion" about the future price of gold.
Again, I say soft because they only traded bluffs that were for far more metal than their real financial assets could cover.
Their trading, like so much paper trading today creates and expands a soft paper market that not only overstates demand, but more importantly allows sellers to "vastly overstate supply without DRAWING FROM THE APPLE TRAY.
Further, the worldwide paper markets our margin money has helped sustain, continues to trade an outstanding interest that is far in excess of real available bullion. ------"""" Yet this outstanding interest is the supply gauge that so
understates what physical gold would trade at as it's used to price the much smaller dealer gold demand""" ----.
===========
Oh,,,, I'm sure 5% or 10% of my Kansas traders actually did make and receive delivery while I wasn't looking. They most likely had some gold and extra cash to make the deal. But with the size of the world gold market it didn't really notice.
By far, the majority of these investors were playing out my observed typical "Western Style". They trade the price of gold while waiting for someone else to buy enough physical gold to impact supply. All the while helping support a system that dealers use to price bullion at an understated
price. Again, a price that's not created by taking real bullion off the market in a volume equal to contracts traded.
=======
My reply to one investor heard saying, "why does anyone have to take delivery at all?".
My good man, then you would end up just like my Kansas traders as they wade in our modern mess. Always settling up and trading nothing, and doing it at a lower price. Because the paper price of bullion will continue to fall from a continued increase in paper supply. No different than the way our governments lower the value of money by supplying more of it. The correlation between the two concepts is indeed staggering.
This logic is almost like our early currency thinkers asking, "you know, we really don't need gold as a currency. Let's just trade dollars!"!===========
Thanks
Trail Guide
Trail Guide (8/29/2000; 6:16:10MT - usagold.com msg#: 35691)
Comment
Your Post:
-------Hill Billy Mitchell (08/28/00; 21:58:38MT - usagold.com msg#: 35678)
Anyway thanks for the insight. Better get out of here before I jam up the traffic any further. I think I may have ruffled FOA's feathers. It appears that maybe this is his forum.-------
Hello HBL,
I checked my feathers, all nice and flat. (smile) Traffic jams are good, they show that no one owns the thought freeway! Thanks for your posts and insights here.
Trail Guide
Trail Guide (8/30/2000; 6:04:09MT - usagold.com msg#: 35734)
Note
TownCrier,
Thank you very much for your time in fixing the Gold Trails page! I will be placing a few of my recent posts on it and then we can begin hiking "current events" as seen from the eyes of others.
Also, Cavan Man, I'll be discussing Mr. Howe's latest thrust then. This next leg of the trail should provide a nice parallel to actual events unfolding on our world gold markets.
Trail Guide
Trail Guide (9/3/2000; 8:03:23MT - usagold.com msg#: 35921)
Onward!
Hello Everyone,
Sorry I couldn't make it for our hike yesterday! I was waiting for some input before taking up the walking stick and heading out onto the path. Because this is a big American weekend, most readers will have more time than usual,,,,, and some major things are happening,,, a longer walk is warranted (smile).
Will be posting later and joining the main forum.
Trail Guise
Gold Trail Update (09/03/00; 16:27:21MDT - Msg ID:35938)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
FOA (09/03/00; 16:27:20MD - usagold.com msg#34)
Of Currency Wars
Hello ALL!
Let's hit the trail!
While we walk view to the southwest:
Is Gresham's law no longer a law? You know, the one that say's good money will drive out bad money. One may look at our modern gold markets and say "help, it's not working". Indeed, if gold is the good money and dollars are the bad money, how come gold has gone down for all these recent years? Worse yet,,,,,, aside from price considerations, gold does not seem to drive out the bad money as people accumulate more of the yellow stuff!
Well, in truth gold can't compete because our modern world of gold mostly consists of the same bad money paper that currencies are made of. That's right, this modern world of paper gold very much functions as the same IOUs that currency is based on,,,,,, not much different from fractional reserve dollars.
So this is the same failing gold markets and resulting prices we all hear and read about. The same markets gold bugs watch with increasing despair as Gresham's law works it's will. By saying "paper gold cannot drive out paper currency" this law is proving that hard money investors have hitched their wagon to the wrong horse. A paper horse! Today, more than ever, investing in an industry or paper vehicle that requires a functioning gold banking (paper) intermediary will be devastating as this modern gold market evaporates.
Make no mistake, physical gold already contains many times the value these paper markets have established for it. When the price of physical traded gold runs far away from this imploding paper gold arena, the value of real money will them truly reflect where our bad money exists today.
Obviously, we are talking about dollars.
True, gold will reset itself in value compared to all world fiat currencies. But, that percentage reset will be viewed in a different context than when gold money was ordained by governments. Gresham's understanding applied more to gold as a bankable currency, not an asset holding "in and of itself". This is the future of "freegold" in our time. It will be much like comparing an advancing stock to the currency it's denominated in, a rising asset,,,, not a competing money!
Now look northeast, into the valley:
What will make this "modern gold market evaporate"? Well, value in a paper contract is a funny thing,,,,,,, it can change radically when no market bids exists for it to trade in. Like paper dollars, contracts have no value without a trading market demand. Walk into any store,,,,, if everything is suddenly priced in a physical trade format, our dollars suddenly become worthless, no?
If the gold market was to shift to say, 5 day hard delivery, how could one trade their contracts for gold? Yes, you guessed it, paper would trade all right,,,,, at a huge discount. But in short order, as a spiking price lunges upward into the thousands,,,, and doesn't come back to earth,,,,,, what counter party on the other side of your contract could deliver? Further, how could the bullion banking system match liabilities and make good on a cascading default?
Stop here and see how it could happen two ways (or a combination of both):
You see, all it takes is for one or two government and/or private entities to pull the cord. Most all of you long ago came to the same conclusion; a Dollar / Euro currency dispute could set this off. Outside parties begin buying gold with dollar reserves,,,,, on the barrel head for 5 day placement. It begins with twenty or thirty 100 ton orders ,,,,,, a billion$$ or so each! Not derivative orders, mind you,,,, hard delivery orders that aggravate and outline the soft nature of modern gold banking. They keep coming,,, days on end! Then, suddenly the paper markets "are no more".
OR:
The price of oil rises until price inflation can no longer be contained. Unmined physical gold is withheld from the markets to such an extent that even limited demand runs the physical price to a large premium. More and more investors pay a larger escalating premium to get physical "now". Such a premium overwhelms and discredits the function of paper market pricing. Bullion Banking must revert to currency banking to cancel out it's contracts. The run begins.
Let's check our political map to see where we are on the trail:
The wonderful recent essays by Mr. Howe expose and document a system as it currently stands,,,,at the end of it's timeline of usefulness. The purpose, need and use of gold banking has run headlong into a world class political storm. This end time battle has been in the making from before Another ever started writing. Truly, this Gold War will be about a transition from world dollar dominance.
As I stated in an earlier USAGOLD post (listed as #35569):
----- Today, oil flow has moved from playing a fundamental game of pricing "use value" with supply and demand to pricing it's "monetary value" in supporting any major currency block. Concessions are now there for the taking by oil producers. Dollar prices for oil can rise considerably higher with the US giving behind the scene support for this action. In addition, the world paper gold markets can and are being dismantled as a further concession to retain dollar settlement of oil. -------------
It's easy to see today that most of the major world oil reserves have had their value politically converted by the Euro's successful birth. The current trading value of the Euro is a small factor compared to this "existence" worth in our political currency wars. This Euro has broken the "cheap dollar" value placed on oil by our one currency world and now allows dollar oil prices to soar without constraint. Oil has indeed been rising after the Euro's first few months of existance The prize of this master play on our Chess Board ,,,,? This new pricing thrust, unlike early OPEC drives of the 70s and 80s, will crush the modern paper gold banking game and place the dollar and Euro on a level playing field.
And so the contest begins for real,,,, no longer must we talk in a future mode,,,,,May the best man win!
Thank you
FOA/ Your Trail Guide
Trail Guide (09/03/00; 19:18:29MT - usagold.com msg#: 35950)
Reply
Mr Gresham,
Ha! Ha! I never thought it would be picked up the way you saw it. Yes, I meant to imply that "it was driving bad money into circulation"! You are right, I put it in a context that could be easily seen as reversed. Hope everyone can understand it?
When I say Gresham law is not working; I wanted to point out how the dollar price is not reflecting this "good money" (gold) accumulation as it drives our fiat dollars into circulation. It's doing this because what we as Western Style investors assume to be gold is really paper.
Oh well, it's my poor use of thought direction.
Also,
I think the waiting is finally over. Everyone is accepting that crude is going higher and not from any fundamental reasons. This surge in perceived value of oil has become so blatant that it's obviously not just from demand. This will play out as a fall in all currencies relative to oil, but once it breaks $35 to $45 (or sooner) the dollar will begin to roll over. That's because producers are prepared to
bid the excess profits for both gold and Euros! By the time crude gets that high the US trade deficit will be truly explosive,,,,, and no one is willing to guess the impact.
Further, without a corresponding plunge in perceived gold values, using paper gold as the measure, the dollar will be going into it's first real free fall. I think Europe will allow a swift default cascade in gold banking, but only because they now have major buying support shaping up and it's being voiced from dollar reserve holders. That support will be aimed squarely at spot physical. A prospect that was not legitimate with cheaper oil.
We shall see!
thanks for your comments on my post, I'll try to word things a little more clearly.
Trail Guide
Trail Guide (09/03/00; 19:38:31MT - usagold.com msg#: 35952)
Comment
Cavan Man (08/29/00; 18:36:09MT - usagold.com msg#: 35715)
Trail Guide/FOA...RE: ix What do you make of the OM bid for LSE as reported in the FT today?
Hello Cavan Man,
I think OM Gruppen would be a better platform for Euro Land trading. They are way ahead of the rest. It makes no difference who takes the lead politically, in developing future market infrastructure. What counts is the whole Euro thrust at the moment. Who buys or merges with LSE is not all that important, OM will be a European player whether alone or with another. So will London, they just have a hard time digesting that fact right now.
I bet shares will be quoted in Euros. What say you?
Trail Guide
Trail Guide (09/03/00; 20:39:50MT - usagold.com msg#: 35961)
Reply
Al Fulchino (09/03/00; 19:38:42MT - usagold.com msg#: 35953)
Trail Guide
I many have missed a response to the post below, I have searched a couple of times, but to no avail.. However....any comment would be appreciated.Al Fulchino (08/21/00; 19:16:50MT - usagold.com msg#: 35277)
--------------------------------------
Hello Al,
I often write or refer to the Comex and their future contracts. But in reality, I'm just as much pointing out the whole system. With that in mind:
Every month or so a very large collection of open interest builds up in a leading futures month. From almost as long as I can remember, the vast majority of these contracts are worked off thru either cash trading or cash settlement. This is what I refer to as "running from a contract" because
they don't want physical delivery. There is nothing wrong with some of this because a portion of these traders use the system as a hedge. But, Comex trading is nothing compared to the whole world of gold paper and all the physical traded doesn't require this much hedging. Obviously, by a wide margin most of these transactions do not involve the transfer of bullion. As I said before, by trading and settling in cash, this huge paper pool has created not only an illusion of physical demand but a much larger illusion of physical supply. It is never tested for price validity by settling in physical and does understate the true price of bullion. Therein is the system for controlling the perceived value of gold. In this format, supply can equal and overcome any demand built on currency inflation because the supply is a function of the same fiat liquidity.
But this is yesterday's news. That period is ending with this end run from oil! We should prepare for the destruction of our dollar gold markets now.
Further, I fully well expect the entire bullion banking sector to be frozen by official decree and settled in an understated cash price. Even as the physical trades onward and upward. This will devastate many mines, investors and hedgers but save the banks. We shall see!
thanks
Trail Guide
Trail Guide (09/03/00; 20:49:46MT - usagold.com msg#: 35962)
(No Subject)
Cavan Man (09/03/00; 20:30:12MT - usagold.com msg#: 35959)
Cavan Man, I do try to use a #2 iron but it's rough on my ego! (smile)
Trail Guide (09/03/00; 21:48:34MT - usagold.com msg#: 35966)
Comment
Hello Buena Fe,
I'm sure you will keep your soul, my friend. I think mine is still safe,,,, I think? (smile)!
But, truly,,,, our gold bankers were only following behind a political wave that's changing things. No different than the hard money crowd that has tried to follow behind a gold move. One group was on the correct side and the other was on the wrong side. Nothing more.
How many local and international traders you know that would not have shorted gold for all they were worth if they knew how the game was being played? Even with a pro hard money stance, I bet they would have borrowed all the gold a CB would lend,,,,, and sell it down with the best of them. Further, how many big bankers do you think are personally very long physical,,,, even as they voice their evil projections of gold being worthless?
It's no different on the mining front. Most (but not all) investors went long shares or pumped money into the business for the leverage it could produce,,,,,, not the wealth preserving qualities so many of them proclaimed of bullion. The same as if someone tells everyone that will listen how their life will not be the same without a new ford,,,,, then he goes without a vehicle himself to allow the purchase of ford stock for himself?????? The examples of these traits are all over if we look for them. Not just in the possession of bankers!
Every so often a change comes along that makes old fashioned ideals and concepts look like something only a genius could understand. Yet, it's just recognizing where we are on the trail and doing what has to work instead of what will work the most.
Physical gold, as simple and stupid that holding may be,,,,, will outwork all the brains on our planet. Like keeping cash in a shoe box,,,, under the bed during the great 1930 bank failures,,,,, the leverage in gold today is a thousand times greater.
I ramble on.
Trail Guide
A Tribute to the Thoughts of Another and his Friend
"Everyone knows where we have been. Let's see where we are going!" -Another
Subscribe to the Speakeasy
$150.00 USD for 6 months
Paypal Account Is NOT Required - Just email me at fofoamail [at] gmail [dot] com if you have any problems
BullionStar.com (Singapore)
BullionStar.co.nz (NZ) BullionStar.com/?r=1025 (Shareable link)
Donate
Email Contact Info:
If you'd like to read more…
- It all starts here!
- Then here
- Here's more
- And more
- Some highlights
- Linkable ANOTHER (THOUGHTS!)
- Linkable Gold Trail
- Linkable regular forum 1998-2007
- Alternate regular forum archive
- Linkable Kitco forum 1997-1999
- Red Baron's LBMA EXPOSÉ
- AFTER (THOUGHTS!) 1-2 PDF
- AFTER (THOUGHTS!) 3-5 PDF
- My blog in portable PDFs
- Glossary of some acronyms I use
- POG for buyers and pot watchers
Total Pageviews
Evil gold hoarders, jerks, time misallocators and brainwashed cult members:
Disclaimer
The above is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the author alone on the current and future status of the markets and various economies. It is subject to error and change without notice. The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.