Reply
Leigh (12/28/99; 20:15:43MDT - Msg ID:21752)
Hello Leigh,
My reply to your comments / questions:
-----I have a few questions to ask, and I hope you don't mind if they seem to cover old ground. I'm trying to clear up some fogginess in my understanding. First, regarding the proposed three world currencies -- will they be gold backed (like the Euro), based on a true gold standard, or backed by nothing at all? Will the three currencies compete against one another? Do you think that eventually the three currencies will merge into one world currency?-------
-----------Also, you've mentioned about digital money, and I assume you mean that a gold owner's gold is placed in the bank and he can draw upon its value. What if the gold owner (or cash owner) doesn't trust the bank or the government to take good care of his money? Could he refuse to use the smart card and function on a cash basis?----------------
Leigh,
Let's take a short walk.
I don't propose three world currencies and neither do our Euroland friends. There is only room for one world reserve "digital" currency that would take on the trade settlement functions of our present dollar system. We understand that the Euro alone will become that "digital settlement reserve currency".
The Euro is not and never will be gold backed like the various gold standards of the past. The ECB / BIS have no intentions of making that mistake again. The whole reason for allowing gold to return to it's free market "physical" price value is to use it as a background official / private currency. A real money (gold) that will trade at whatever level it seeks because "this new" Euro currency will not be defined in a set amount of bullion. It's price (gold) will rise as a function of world supply and demand based on gold held and used as a "wealth asset", not it's commodity use.
"Wealth asset" money is an old line function gold has always had throughout history. This use exists today, even as it's value is hidden in the fiction of a "paper gold" marketplace. This "Wealth money" is the very attribute the Western financial system has so much tried to destroy as it competes against the retention of our debt structure. A structure ingrained in the dollar world and requires that no one discount dollar debt.
The old gold standards needed gold to completely back their moneys because without gold, they (cash) had no purpose of exchange. Except to denominate a fixed gold transfer during trade. Today, modern commerce has evolved to the point that paper "digital" settlement is the cornerstone of an efficient trading system. Indeed, without international computer settlement, using fiat currencies, our system would not function. Too this end, our modern commerce and lifestyles require "digital" currencies and that need imparts a new value to their use and existence. One that did not exist during the relative "slow society" of the gold standard days.
Therefore, this modern reserve "digital paper currency" will not be backed using a fixed amount or price of gold, rather it will "use gold" as a real money reserve. A reserve that can be traded, lent or retained as national savings. As such, any world "free market" value rise of gold will only be seen as an "good" increase in savings and therefore better "reserves" for a national society. Not to mention any "physical gold savings" held by the private citizen. Contrast this with the today's Western view that any rise in the gold price means a loss of wealth and a economic disaster. Truly, this will not be a disaster for the majority of world citizens. Just those that tie their saving assets into the illusion a dollar presents.
The modern reserve currency will be in demand for trade settlement in conjunction with gold, but will not be in competition with it. Their values will move up and down against each other using their true attributes. Gold as a "real wealth settlement money of slower speed" and Euros as a "modern digital money of high speed".
Our modern currency history (the last 20 years) has shown that the world needs both of these moneys, but needs them in a different format from the past. Our present dollar could do the same but it carries the baggage of huge unpayable international and local debts. Debt made non payable by the dollar reserve system that forces the social needs of just one people upon upon the world using unbalanced, rigged exchange rates. It eliminates the escape route of a "free market" gold price and therefore locks down the ability of other nations to trade outside this system. Free the world of this system and a great deal of American wealth will be seen for what it really is, an illusion of bookkeeping. Indeed, create a workable reserve medium, based on world needs and wants in a settlement format and the race will be on to use your product. I submit that that product is in the process of being built today. A return to a new one world currency is the best thing for all of us.
Especially if it "includes" the money the world has wanted for all it's history. Gold!
Onward:
Mr. Holtzman, does not understand how the diversity and different social nature of Euroland will become it's most profound currency strength. It they were a more homogenizing people like the US, the Euro would become just another dollar! Their "Old World", "Hard Money" conflicting nature will be reflected in a "New Gold Market" and a responsible world currency. Their practical "Real World" focus will not allow them to reject this "digital currency" as we move forward in world trade. The very best balance for the next 1,000 years.
National states and broad based cultures, such as China and India will wholeheartedly embrace such a system. The prospects of using the Yen in such a world demonstrates the lack of understanding about how that currency and it's society functions. More later.
thanks FOA
USAGOLD (1/1/00; 10:35:52MDT - Msg ID:21977)
To mhChuck and all....The "One Thousand Ton Gap"
I remember Farfel lamenting the fact that the gold producers did not have the moxy to pull together as a cartel to keep gold off the market and thus buoy the price. Then when the cartellization (different source; same effect) occurred via the Washington Agreement, I was surprised that no one, not even Farfel, recognized it for what it was -- a signed agreement to keep gold off the market every bit as important as the OPEC Agreement -- in fact, a cartel. The price move from $255 to $330 which apparently many of our speculators missed was fueled by rampant fear among gold's detractors and unmitigated enthusiasm among gold's advocates responding to the appearance of that cartel.
When the gas came out of our mini-balloon, gold still garnered a roughly 15% return over the three month period from September to present -- that's 60% on an annualized basis. The commentators at CNBC cannot stop bubbling and gurgling over the 20% return on the DJIA through 1999, but noticeably failed to give gold credit for a substantially better performance. This despite the fact that major gold firms also spend millions advertising on their network.
Who caught that gold spike? Many. Including a large number of mega-Centennial clients who followed our simple formulation of buying on the dips -- no matter how catastrophic the opposing mainstream press and Wall Street's gold haters makes them appear. If you didn't catch the spike, or as a speculator you took losses in gold over the course of 1999, it was because your strategy (as a speculator) is flawed, not because of any inherent problem with gold itself. By the way, of the "many" who caught the spike, not one has called to sell!
The way to capitalize on gold, from my point of view, has always been to purchase the physical in a steady program and hold it as a long term hedge against various economic/political events that might injure the overall portfolio. (I have always thought that options, futures, loan agreements and the like played into the hands of the oppposition and anyone who has discussed the subject with me knows how I feel about it.)
For the life of me, I cannot understand these tirades against gold that it somehow kept one speculator or another from making a profit on internet stocks (for example). I have never suggested or have even come close to suggesting that 100% of one's portfolio should be in gold. In fact, I think the 10% to 30% formulation I've recommended based on your assessment (not mine) of the world economic/political situation is prudent beyond challenge. What an individual does with the other 70% is their business, not gold's (or mine for that matter). If you neglected to ride the internet crazy horse, that's your problem not gold's. I never been able to understand these strange connections, then again I've never been a gold speculator.
Instead, I remain steadfast in my opinion of gold as the ultimate arbiter in the currency wars foisted upon us by our various national governments. In keeping with that, I continue to recommend long term gold accumulation as a form of sound and reliable money which serves as the ultimate savings vehicle and, unlike the dollar, has none of the attendant liablilities and reciprocal obligations. I believe that anyone who owns it under this rubric need not wait for price performance to gain some satisfaction, that satisfaction comes now in form of peace of mind and the sure knowledge you have done everything you can to protect your family (and yourself) from potential systemic failure. (I will return to this subject further down.)
Now...onto something of a forecast for Gold2000..........
Back to the Washington Agreement:
In 2000, I think the fundamentals have changed in gold's favor. There is an inherent gap between gold supply and demand of over 1000 tons. That gap in years past has been filled by Forward Selling/Gold Carry Trade programs and Official Sector dishoarding. Both depend upon central bank co-operation for their sustenance. That rug has been pulled out from under the bullion banks in a very public show of disfavor by the central banks via the Washington Agreement. Keep in mind that when the Euro central banks came together on this agreement, they knew that it would jeopardize those gold loan positions at some of their own member banks, so they had to have done it with some larger end in mind.
The drop in gold from $330 back to the $275 level had to do with the bullion banks scrambling and doing everything in their power to keep gold down while they unravelled the mess at Ashanti, Cambior and others that did not become public. Many mining companies are still in a cold sweat over this and can only hope that the bullion banks are successful in buying enough time to unravel the mess. They may not have the time. That is the message of gold's return to the $290 level. I see it as the secong leg in a long term breakout (perhaps the Elliott Wave Three) that won't materialize overnight but occur over an extended period of time (assuming there is no stock market crash.)
I think the fundamentals are going to play a much more important role in gold's pricing next year than they have in the past decade with the central banks out of the supply picture. That one thousand ton gap will become an issue. Any of the anti-gold crowd that wants to stop a price rise runs the risk of pushing the price to a level that would generate huge physical purchases that probably cannot be fulfilled. At the mining companies, I would advise playing along with your bullion bank counterparties but buy the physical whenever you can (as Goldfields has done) because you might not be able to rely on your favorite bullion bank when the chips are down. (Just ask the people over at Ashanti) As a matter of fact, they tend to dig into your asset structure when things go bad and then offer you "more time" as a salve to arrest the bleeding. Of course, the next step, should the price continue higher, will be more bleeding, but let's not talk about that.
At the end of the year, we were in the market for a substantial number of gold coins at the behest of a client and not one supplier could make immediate delivery. (The transaction was not completed for reasons I can't go into here.) And when you consider the amount of gold that is supposedly transacted daily, our needs would have to be considered small. We have heard repeated stories of the lack of large amounts of bullion available for purchase among the big players and this despite the appearance of significant bullion from Kuwait, Holland, Jordan, Britain and others. When these various hoards come on the market, forget the source, they disappear into the black hole of physical short covering. These hoards have not sent the price reeling downwards. They've only acted as a temporary suppressant psychologically, then disappeared.
In essence, I see this up move at the end of the year, not as Y2K related upon reflection, but the fundamentals coming into play. Many are asking the same question I am: How is this 1000 ton gap going to be filled and at what price? We know about 300 will come from Euro banks according to the agreement. Where will the other 700 come from with the official sector and the carry trade essentially shut down, or at least substantially subdued? I believe it will have to come out of the ground and I think that will occur at prices that ratchet every higher as the year progresses, though we could have something of a down draft at the beginning of the year.
Once in Goldconda:
mhChuck makes the point that Mr. Greenspan and Wall Street have essentially pulled off the New Paradigm and there is nothing to stop the current Era of Good Feelings from extending to infinity. He goes on to list to list a series of governmental policies that flaunt the power government seems to exert over the economy these days without even the hint of a consequence. But, mh, history is replete with examples of even the mightiest empires turning to salt in what seems to be the blink of an eye. One day things are fine; the next not so fine. How does this happen? It would not be trite to say that in each instance destruction of the currency was involved, however, I would say it goes much deeper than that.
The ancient Greeks dealt with this phenomena often in their tragic literature -- the counterpoint of power and failure. Human arrogance was always rewarded with a reminder from the gods as to who was really in control. Even the mightiest king or emperor, kingdom or empire could fall as easily, quickly and completely as the lowliest citizen -- a victim of "The Fates". It is not you or me who will bring down the New Paradigm, or even the acts of the greatest economic and political thinkers of our era. It will fall by its own arrogance.... on Hubris, as the Greeks called it -- the vain act of contemptuously assuming the mantle of the gods.
And I say this not because I "want" it to happen. I say it because I believe it "will" happen -- no matter how much I do to prevent it, to speak out against it, or to warn against its eventuality. All I can do is prepare for it by adding to my gold holdings and then going about living my own life in the best manner possible. In this way, I act on my beliefs and I am happier for it. (And I still have plenty left to invest in internet stocks if I want to.)
"Golconda, now a ruin, was a city in southeastern India where, according to legend, eveyone who passed through got rich. A similar legend attached to Wall Street between the wars." From "Once in Golconda" by John Brooks 1969
I might add that a similar legend attached to Wall Street after the end of the Cold War....
More some other time.....MK
FOA (12/30/99; 6:30:21MDT - Msg ID:21836)
Reply
Cavan Man (12/29/99; 8:55:03MDT - Msg ID:21777)
FOA 21774
"The whole reason for allowing gold to return to its free market physical price value is to use it as a background official/private currency". Hello FOA. Isn't gold an official/private currency for central banks, ME oil, large blocks of wealth etc today? What I mean to say is; gold for those "in the know" and fiat for the masses? Thanks.
-----------------------------------------------
Happy Y2K C Man (and to everyone (smile),
Consider Historic Reality:
Yes, gold has for some time been accumulated as a savings / reserve currency by people "in the know". What do they know as opposed to the masses? They understand how gold gains in value directly in proportion to the amounts a currency is inflated. Even though the long term inflation of our paper money has yet to be reflected in real goods prices, gold holds these gains "before the fact" of this price inflation. Hidden from view to the masses, these (gold) gains date back decades and form a kind of savings account that always balances once the currency begins its final timeline.
A Dangerous Trail; walked by many people nations in the past:
The quest to "get something for nothing" is what the modern "Western View" is built upon. Sold by a political machine, this concept nourishes this grand illusion. An illusion that requires leveraged paper wealth administered by a super leveraged paper currency. This quest for wealth from leverage is what drives the "Fiat for the masses" mentality.
We Walk This Trail Today:
The balancing of this "Western" bubble by a revaluing of the currency will not break the dollar system as most think. The US and its dollar will continue, yet it's only the illusion of this bubble wealth that will meet world reality. That reality will be in the form of a super price inflation that demonstrates the real buying power of "something for nothing" saving / investing! Denominating your wealth in today's dollars is like numbering your savings with commodity futures contracts. Truly Dollar credibility is completely dependent on others delivering physical goods against our dollar contract when we demand real delivery! Many will find their dollar assets in "Force Majeur" from this new and changing world.
The Leverage Of Physical Gold Against Dollars; it dwarfs the grasp of a Western Mind:
Today, the (gold) price making function of the dollar based gold market is affording the opportunity to trade an "illusion of nothing" for "something". A process of lowering the paper price of gold until physical delivery is no longer an option. All in an effort to buy time for the dollar. We may have already reached that point (dollar price) where physical gold will be purchased no lower.
Or more Western gold hoards may yet come to market in exchange for the fraud of paper gold. In time, the holders of leveraged gold paper will find themselves caught in a maelstrom of events that crush the entire concept of our modern gold market. This firestorm will burn through any entity that makes this marketplace its financial lifeline. We have seen only a tiny beginning of this today.
When the gold market breaks, it (the rushing price of dealer physical gold) will lead the downturn of the dollar and mark the great price inflation that follows. Gold will run in dollars as never before seen in history. It will become the investment few "Americans can understand". A savings account already full with the years of interest and gain. All equal to the past printing and leveraging of dollars world-wide. As a people, citizens of Western Thought and investing concepts are free to choose their future wealth. Some will buy a value that is not expressed today, yet as real tomorrow as rain from clouds in the spring.
"Gold, The Wealth Of ations, Gold One's Future In Our Hands"
As Another would say;
"We watch this new gold market together, Yes?"
Thank you all for reading and thinking,,,,,,,,, FOA
More later.
FOA (12/30/99; 16:38:17MDT - Msg ID:21859)
Reply
Hello and welcome Permafrost,
I'll comment on your items in order:
------------------------------------------------------------
PERMAFROST (12/29/99; 3:21:27MDT - Msg ID:21765)
FOA Msg ID: 21734
Dear Sir, Based on your logic, two outcomes are possible.
1) If you're right and we are witnessing the re-monetization of gold than all those that benefited from the fiat money scheme will lose their power. ------------------
Mr. Frost,
Not all of them! Only the ones that did not hedge their power effectively. Surely the Euro will carry some of the same political agendas the dollar currently does. Only, it will be controlled more so by the cross currents evident in the various old world countries. Let's face it, we all need a dollar like currency if our modern economy is going to function. What we don't need is a single reserve currency that precludes any avenue of escape if it hurts other countries.
If gold is trading in a free physical market, no one is going to run to gold as a single currency and leave the Euro entirely. Indeed, a free world economy needs and demands a currency that can expand and contract with changing conditions. The curse of the old gold standard was that it didn't allow this latitude and always created a crisis when needs required this flexible money supply. Only a separate gold market can offer a means to truly measure the success of the money creating treasuries. This is the direction we are heading, for better or worse.
-----------A gold backed and restrained financial system (An oxymoron, in my belief) will simply preclude them from accumulating goods and services against monopoly money -- the source of their power.--------------
Well, the power you speak of can also be held through the use of gold itself. Many a king and monarch ruled the land with the effective use of bullion. Your oxymoron is not in the restraint of the monopoly money, rather in the present lack of a free choice between "gold wealth" and "dollar wealth". The blending of these concepts will create a new power block that must conform to the needs of all.
----------2) If you're not and gold is merely being used as a relatively-untapped "new" source of non-debt-backed dollar creation, than it's a very old game we're playing, indeed. Was not gold itself responsible for one of the greatest INFLATIONARY explosions in History when the Conquistadors "expropriated" Aztec gold and brought it all to Europe to consume (chaseafter) a "limited amount of goods and services"? Colombus turning over in his grave? -------------
During the time of the Conquistadors, we must consider that goods were not being inflated in price, rather gold was being devalued! At the very least gold did not disappear as bank notes do. No, the coming run in gold will be a reflection of the tremendous dollar inflation already in the system. It's only in the eyes of the Western dollar saver that this price inflation is unwarranted. Again, they are only loseing something they never had. An illusion of wealth on a grand scale.
------QUESTION: Do you know of any emperor (I think you called them 'Grandees' here on this forum) who's willingly abdicated power--Besides God himself?------------
My friend, power belongs to the swift of heart and mind. This world waits for no one as power flows from peoples to peoples. Even the strongest emperor knows to occupy the high ground before the flood. The powerful in tomorrow's future will own gold today.
Thank you, FOA
FOA (01/01/00; 14:40:22MDT - Msg ID:21992)
Comment
Cavan Man (12/30/99; 6:43:30MDT - Msg ID:21838)
Hello FOA and, Many Thanks
Please consider this:
I am 42. Will I live to see it and perhaps enjoy the knowledge that I made the right decision???????????
Cavan Man,
42? Oh boy, I didn't know you were so old! Well, at that age one should be careful with your body. Get plenty of rest, eat well and take your vitamins. If lucky, one could live another 40 or 50 years! (big smile)
Seriously, it was so long ago that I passed that age I lost the records. And for the record, I know I'll see this gold change. So, all in all, you don't have to live long enough to see the next gold bull, "you just have to outlive me"!! Ha Ha (huge great big smile!)
Happy new year CMan.
FOA (01/01/00; 14:42:33MDT - Msg ID:21993)
Comment
Golden Truth (12/31/99; 15:09:49MDT - Msg ID:21912)
Paranoid Thinking Runs Amuck Here!
Now a year later i still have an enormous amount of respect for your knowledge about Gold. Yet, I still respectfully say, the World markets are just to big and to unpredictable for one person to know with any certainty.------------------
Hello Golden Truth,
Reading all of your post tells me the (non physical) gold markets have been rough on you. I can understand your feelings if you can grasp what groups we are talking to.
All of Another's Thoughts and my comments are directed toward "physical gold owners and by extension "physical gold advocates". These people have read all of these ongoing posts (some have been involved privately long before the current "gold forums stage") and know the thinking is strategic as it applies to a moving, evolving political target! Each group of posts are but a snapshot in time as it applies to this changing chess game. Yet, the end results remains the same, the destruction of our present pricing system for gold, a huge increase in the dollar price of physical gold, the eventual use of gold a Euro reserve settlement currency along with the new free market that must evolve with it.
"Physical Gold Advocates", such as I (and readers) have brought gold from the high $360s into the low $280s because of this ongoing timeline of events. A timeline that is now quickly being depleted as the Euro builds it's position in the world. I submit, we are not hurting in any comparable way as our gold holdings are in a good large proportion to our total assets. And certainly our asset values have not been impacted as the gold derivatives players have (gold stocks included). When behind the stage power plays are in progress, the possible short term outcome is presented. Yet, it is presented with the knowledge that readers will think bullion, not derivatives. As such, if the chess game moves into another stage, no hard loses are taken by anyone.
ALL:
The historical record of physical gold alone is enough to justify a real gold holding. I add that the record for mining shares and the other leveraged derivatives are lacking in their long term comparison. These items are as new and peculiar to the modern investment scene as is the current dollar "off the gold standard"! Players often tout these paper investments to be as good as gold, yet they are truly only as good as the dollar marketplace for gold! Still, I own some gold shares (gold), but only in a small proportion.
We conclude that the coming bull market in gold will be unlike anything before it. Today, the leverage is in physical gold, not paper gold. This latter day track record of derivatives, gold stock options, gold options, gold stocks, etc. all clearly demonstrate this changing function. The horrendous ongoing, long term loses, built up by these paper bull traders is evident. With each downturn, they search for greater and greater leverage, in a attempt to return to "even". All the while, the bullion buyer slowly amasses a large "highly leveraged" position, just by channelling his would be trading loses into paid up physical and rare gold coins.
One day, the dollar paper gold markets will be driven into "Force Majeure", during a transition from the current dollar reserve system. With each political announcement, the stress on the London market will grow. We know this position and understand it well. Yet, no one can guess when the last bullion delivery will spell the end for paper credibility. I only offer the month by month level of stress and how it may impact bullion.
As for this Y2K item. I fully acknowledged it potential for impact on the dollar. Yet, in my posts, I offered my feelings that it would not be severe. Clearly, we have larger items to address that this.
More later. FOA
FOA (01/01/00; 20:34:38MDT - Msg ID:22008)
Comment
mhchuck (12/31/99; 19:13:55MDT - Msg ID:21928)
Just Another Squashed Bug.----------------
----and----------
mhchuck (12/31/99; 19:22:25MDT - Msg ID:21931)
Do We Have Free markets?
Yuk, Yuk, what an industry, if the price of the item they are producing rises...they all go bankrupt. Please come and get me, I'm ready for the nuthouse.---------------------
Hello and welcome mhchuck,
Well, if you have come this far down the gold trail, we might as well finish the hike.
The end of this is closer than many think. My dad always said don't worry about the big bully in town. There is always someone bigger and tougher than him wait for the chance to ?????
The same is true in the money power game. I never said that the Euro was not going to be a tough "dude". He is and he will work the dollar over with the help of gold. We are only pointing out (to the average person) that the timeline of the dollar is ending and the transition will be sudden and harsh on dollar asset holders. Truly, gold will not be an "innocent" bystander in this fight. It's historic power to break empires will certainly come into full use.
Again, bullion will be the survivor with the most leverage in this battle. Yes, the gold mines will still have valuable reserves and be in full operation as this all unfolds. It's only the equity holdings of these "businesses" (not all, just most of them) that will be ransacked as the gold marketplace is up-ended.
FOA
FOA (01/01/00; 20:36:19MDT - Msg ID:22009)
Comment
Golden Truth (01/01/00; 18:17:00MDT - Msg ID:21998)
TO F.O.A---------------
Golden Truth,
No, G.T. I am the one who thanks you for telling us what you think and how you feel. And doing so without using a sword to try and cut my head off (as some have done)! Truly, all the success, wealth and social standings are lost if we as people cannot clearly air our thoughts without physical and verbal violence.
No one can walk this gold trail without a modern, updated map. And no one can read this map without a good understanding of the road signs that daily events create. Further, human understanding is developed by allowing ourselves to weigh "reason", by viewing these new events as others see them. Not just accepting them in the light of past performance.
Things change, life evolves and so too do the reasons and motives for gold. In this respect, oil influence has played a major roll in the evolution of our gold markets. Not to mention the birth and success of the Euro. There will be much more on this later.
Thanks FOA
FOA (01/01/00; 21:19:45MDT - Msg ID:22014)
Comment
USAGOLD (01/01/00; 20:07:21MDT - Msg ID:22002)
Series of posts....
Hello USAGOLD,
I have really enjoyed your recount of the Golconda writings. How true to modern life it is.
Philosophically thinking about our present situation; the current run up in the stock market is a perfect end to a long play. This mad rush to buy anything at any price is indicative if a financial order run amuck. I am struck at how the same process is repeated again and again by our Fed, each time with greater intensity. Starting with the 1982 Mexican default and the Dow at 700+/-, the federal reserve pushes money into the system. Right into this present day, each and every possible threat to the dollar system is addressed with a more intense cash flood. Now the flood becomes outright and open with little consideration of the eventual repercussions.
Yet, the entire population accepts this illusion as real wealth for the long term. Truly, a mass of deluded opinions ripe for reality.
Further,
I could not agree more with your #21977! In present time, the Washington Agreement has turned the "Thousand ton Gap" into a ticking time bomb. Even before the agreement, stocks of gold were being drawn down. I have often stated that this gap was being filled by private gold holders exchanging old line physical for derivatives. Because this process was backed by the CBs, there partial withdrawal from the business has set off a mad scramble in the BB camp. Far from the past official leasing announcements and sales, guarantees were hidden from view. This loss is the real story behind the market facade. The recent small official announcements to lend by other countries indicates that we are at the end of private stock supplies. I expect that the "gap" will now work its magic in short order.
How this will end in a pricing format is completely uncertain to many. The world has never had to wait out a transition from paper into physical. Usually, it's been the other way around (the dollar in 71). We watch for physical to move as paper becomes frozen. We shall see.
Thanks FOA
FOA (01/01/00; 22:49:45MDT - Msg ID:22020)
Reply
canamami (01/01/00; 21:08:25MDT - Msg ID:22013)
Question re Remedies for US Breach of Contract
This is open to the entire Forum, though it may be of particular interest to FOA.
Hello Canamami,
Your thoughts:
--------Is it possible to distinguish between pre-August 1971 Bretton Woods/gold-backed dollars and post-1971 dollars? It would seem that only those dollars which existed prior to August 1971 represent a breach of contract by the US. ---------
I have to put your items in context. Why would it be important to separate the pre and post gold backed dollars? That was not the thrust of the logic presented. The point was that foreign entities would take the US to task in trying to reclaim their gold at $42 per dollar. Simple international contract law does not allow the same contract to be honoured today and not yesterday?? Our present dollars have not changed in legal interpretation from their beginning. Only the Treasury committed an outright default by not supplying gold back then. Truly, the government should have reissued a new currency at the time of default.
Today, any return to backing the dollar with gold would open up a can of worms for the US. Especially in light of the success of the German and Swiss WW2 payments. Again, the whole reason for pointing this out is to highlight the political repercussions from backing the dollar with gold. Many suggest such an avenue and we point out that a new currency would have to be printed to avoid this. It's just another reason why an argument for backing the dollar with gold is impossible and dollar assets are at risk. The US gold stocks valued at any price will not save the dollar.
------Further, even on a purely moral basis, given that the rest of the world accepted US dollars after the 1971 breach of contract, would such acceptance constitute a waiver of the breach, thereby nullifying even a moral claim to US gold? ------------
Would the US risk such a move using this light argument as a loophole? I doubt it and so do a lot of others.
--------Moreover, it appears that by the early 1960's the world knew that the dollars outstanding exceeded the gold backing, yet the world continued to use the dollars? Again, the world accepted the US dollars knowing there was realistically no gold backing, thereby nullifying the moral claim.---------
So, in the same light, if the world stopped paying off dollar debts they could not pay, does this action nullify the moral claim that everyone should pay dollar debts? Further, if you buy a junk bond that is trading without payments, does your purchase relinquish the issuers obligation to pay you any interest? This logic does not work in your presentation or mine as offered.
-------Does not the continued prominence of the US dollar reflect value to US currency which stems from more than mere "gold backing" or "acceptance for oil settlement"?---------
I ask you, does not the high level of the US stock market reflect it's prominence rather than mere earnings or rational P/E ratios? Truly, the mind in a crowd thinks the common thought, no? Again, Western views are skewered by group acceptance of the contract that "bookkeeping entries" are representing real wealth. It's a fragile view that can be fractured from the competition of a less leveraged alternative. The Euro!
------(Kindly note I am not diminishing the possible importance of the Euro as a competitor to the dollar, or that at some point the huge overhang of foreign held US dollars and the trade deficit will have an impact. ---------
It is impossible for the production of any country to support it's currency if it's currency always flows "out" in a trade deficit. In this country, the negative effects of a reversal of this long term trend will bring on a dollar currency crisis that runs the price of gold well before local price inflation. This is the primary reason why recent investment profits will never transition into gold before it overtakes the illusion of these realized gains. This is the focus of our "reasoning" and push for the purchase of gold "before the fact". Gold will run well before price inflation is evident (in a large degree). And before resource stocks create an up-trend based on this performance. All in conjunction with a severe downturn in local equity markets that will overwhelm all forms of paper investments (gold stocks included).
Yes, we may see minor runs in these areas prior to the crisis, but these moves will not be connected with the major bull market in gold that is coming.
Thanks FOA
FOA (01/01/00; 22:50:45MDT - Msg ID:22022)
Reply
JCTex (01/01/00; 20:59:08MDT - Msg ID:22012)
FOA: end is closer than many think
Any truth to the rumor that the Saudis gave the CBs an ultimatum concerning gold sales?
Hello JCTex,
You must not have read the Hall Of Fame posts by Aristotle and others?
FOA
FOA (01/01/00; 23:16:07MDT - Msg ID:22023)
Comment
canamami (01/01/00; 22:36:25MDT - Msg ID:22017)
The gold "subculture" - Reply to Number Six, koan
-------------------
In the future we will read of the paper gold "subculture" that invested mostly in gold derivatives instead of gold. Even with the leverage of mining shares clearly working against them, this group will be questioned as to why they stayed the course. I suspect that they will eventually be buying gold at ever increasing prices, kicking and screaming all the while. Eventually enjoying the benefit of the only way to beat this dollar manipulated marketplace. Physical gold.
I never thought that I would see the day when investors brought into a business that tried to sell it's product (gold) down?? And defended their action with more suggestions to buy! Then when someone suggested to change their investment mix to buy mostly the product (gold) and less the business (mining),,,,,a move I add that would drive the product (gold) price up,,,,,,,,,,,,,that logic is attacked with pitchfork and fire?????????? Indeed, this logic does belong in a "subculture".
Be back later FOA
Note: ORO, I'm still working on a reply to you.
FOA (1/2/00; 11:36:40MDT - Msg ID:22048)
Reply
Mr Gresham (01/02/00; 02:30:24MDT - Msg ID:22030)
FOA -- 30k?
++++++++++++++++++
Good stuff Gresham! Re-read your post for a refresh then come here. This is something we can air out. I'll just rummage around some and see if any of this hits home. Will place some of your post comments inline where usable.
Two additional observations came into play years ago when this whole timeline was being worked out. One of them:
---A major flaw in the fiat system was in selling people the idea that money need not be wealth.--
This is something Martin Armstrong pushed a great deal in his pronouncements. I made an open post to him on this forum because his position was in direct conflict to human nature. Lo and behold his personal clandestine actions later proved out my point. Truly, most modern thinkers don't trust contract fiat money and understand "things" much better. Only they try to hide their perceived weakness. Indeed, he quietly owned a bunch of gold!
Onward:
In real life, everything is our wealth and simultaneously our money. Houses, cars, furniture, pots pans, you name it, it's all tradable in a duel format as money. In fact real things were what people traded in the beginning. Modern economist love to regress this function and use the term "barter" in a way that "dirties" it in the eyes of modern educated man. The use of things as money has always been the natural way people trade and the most understandable method to compare value by applying an "efforts to acquire" worth to unlike items.
Advancements in our infrastructure brought on the need to use contract wealth (receipts for delivery) as a means to trade efficiently. (You know, the old receipts for gold in the vault story bankers started.) Over time we lost the grasp that by using money to buy and sell real wealth we were still just trading real wealth as in the beginnings. Only now we are using money to denominate the trade. Again, modern economists contradict the facts by trying to convince us we are really trading dollars, not the wealth they represent. As if I buy a house from you, I get the house and you get the dollars as the end trade. In reality you have only taken what the dollars can buy, "real wealth", not the subjective paper value. I could have just as easily given you ten cars for the house and we both would know exactly where we stood.
So, in a larger sense the entire world economy is in effect trading "things wealth" for "things wealth". The nation state's moneys have nothing to do with how rich we are. Today, the grand illusion of paper money has evolved into -------we equate our life savings with how much we can buy, not how much we have------. The concept holds little reason for most people to worry as long as the world works. But, if the world changes, our savings are suddenly not what our wealth really is!
Further:
The second flaw arrives in the form of: --------"currency inflation slowly transforms fiat money into a futures contract"-------In a broad sense, IF the money supply is created in "lock step" with the ability of the economy to produce, everyone could take their money and buy a "newly made" item the first day,,,,,,, And the persons that received those paper dollars could turn around and buy another "newly made" item the next day and so on. In time, more and more items would come into ownership and there possible supply on the resale marketplace would increase. But, as the money supply was only fixed to the new production ability these increases in real goods, the increase supply of "owned" goods in the marketplace would drive up the value of paper money.
This would not be a problem except that our money makers decided to name this affect "deflation" as the paper value of goods in existence fell as the money value rose in direct converse fashion. This process would not effect anyone if it was a known effect that everyone planned for. But bankers and governments never plan for it nor do they want it.
So, along the way path to money inflation, someone decided that the money supply should increase in somewhat matched step, not only with the production of new goods, but rather with the total supply of owned goods. This was accepted as good economic practice and its application ordained an ever increasing world money supply to match the perceived world wealth in existence. Our constant building money supply is always viewed as a good thing. Indeed it is even a major component of all relative tools that measure our economy. An illusion that says "if our money is increasing, our economic system is growing". Again, at the very least, this guaranteed that the value of money would not "increase" on its own (hence the need for a "return" on cash in the form of interest) and the money denominated value of "goods" would not deflate. But, perceptions changed and the process evolved further.
In time, the perceived purchasing power (and worth) of dollars was extended to include what goods could be produced and therefore brought in the future. Not just today's production plus the existing supply of owned things, but also future delivery from a perceived infinite economic production base. This is where they justified the long term, massive debt build-up that has leveraged our economy far into the future. And done so on a scale unknown to mankind.
In effect, the world has accepted a money supply that created a money supply in gross excess of the world’s present things. Truly, this present reserve system does not price our real wealth of today, rather it prices our "perceived" wealth today as if it is produced or purchased today. Yet, this "real trade" for "real wealth" cannot happen until far in the future. This is the fundamental reason why dollar inflation on a massive scale has not produced a matched price for wealth owned today. People hold the ideal that any amount of US debt is as good as "real wealth in the bank", also known as "money in the bank". All the while lacking the grasp of any tools to measure just how far out of reality "existing debt money" is in relation to what it can buy, in mass.
-------------Your words:----They see it as wealth storage, FOA says. It also turns out to be a wise use of Gresham's Law, encouraging the use of a wisely-managed ("I only have to run faster than you," said the Euro to the Dollar) fiat currency in trade, and keeping the gold slightly off-stage (or well-displayed in the bank window as in the old wildcat banking days in US) for effect in earning world respect. Kind of trying to blend the best of 19th & 20th centuries. ---
Our present financial structure and debt leverage was built on a platform that said " " "the dollar would always be credible as a "contract money" far into the future. Lost in this credibility is the risk that any move from world dollar use would force this contract into a bookkeeping change that revalued the dollar in present tense. In other words, a huge price inflation that matched the dollar to current goods and production. Such a change has happened to other currencies and peoples all through history as money power moves from nation to nation. Only never before was it done when gold had not "marked to the market" the currency value loss on a regular, ongoing basis before the fact. Today, this transition of real wealth buying power from a single reserve system to another will force the dollar price of gold to soar to levels, we cannot understand. From this stance we can understand why many have viewed gold as a riskless holding that will be revalued. If it was part of your mix, the transition would always make up for any return lost from not holding other assets. Indeed, it is the very ultimate in a super leveraged investment. No other currency today could expect a 1,000% to 10,000% rise in value against the dollar, none.
Now, if one can look closely we understand the need for gold in the background of a new reserve currency. Only gold has the ability to carry the load of this perceived wealth transfer without a catastrophic loss of world economic process. And do so in a format as common as any stock of treasury bill asset. Gold at $10,000+ will be as common as Yahoo at $400+. Just like a US treasury bill at $10,000 face, one ounce will be just another "money in the bank"!
-------Your words again: -----Most of us would settle for protection against inflation of things in general, in a time of crisis. And that is something we assume gold would give us, whether the inflation increment turns out to be 2x or 10x. FOA says the dollar supply is out there for the 10x inflation of things in general (?), but is the same pool of dollars being "counted twice", once to go into things in general and the other into gold as a default crisis insurance?--------------
My friend, count it at least once+ for the present and ten times+ for the future. This will match the lost future buying power of dollars held in savings today. Then you will know where the real dollar value of gold in transition lies.
Thanks FOA
FOA (1/2/00; 18:34:26MDT - Msg ID:22078)
Comment
TheStranger ( Msg ID:22056)
Thanks Stranger, that's all in the past now.
The future is before us.
------------------------------------------------------------
Mr Gresham (1/2/00; 14:17:31MDT - Msg ID:22060)
Thanks Mr. G..
My #22048 was a hard complicated piece to produce. After reading it again I saw many spelling and english usage mistakes. But I hope it offered a springboard for concept. I'll write it again more clearly if you want.
This perception is the basic foundation that has fuelled the drive for a new reserve currency. Even if this only amounted to an establishment of another like the dollar (without the lineage of debt for baggage). Understand the reasoning in this and we can clearly see where the dollar was going without any political leverage to change the US course. A world wide hyperinflation that would impact every economic aspect of world trade. Today, that same inflation results will be contained by devaluing the dollar in gold with another reserve currency available for use in international settlement and reserve holdings. Instead of a world-wide event, the effects will be mostly felt only in
countries that have little gold and no Euroland trade reserves. Yes, the US has some gold, but this limited amount is frozen from effective use by the "duality" of the dollar. Today, the dollar is a citizen of two worlds even as the gold that must back it belongs "politically" to the a single American people. There can be no clean resolution of this as we can't print a new money and we can't back the one we have.
Granted, this transition will amount to a financial paper deflation and goods price hyperinflation in some of the largest economies (US, Japan, Canada, Australia, etc.), but the majority of the world’s population will be somewhat shielded.
I am jumping way ahead of the fact here and should wait for political motives to set gold on this new trend line. But, I feel many here will understand this now. We shall see.
Thanks FOA
Note: This week is going to be big. I bet gold ends the week with a gain and the dollar is hit.
FOA (01/03/00; 18:06:02MDT - Msg ID:22156)
Long over due reply to ORO!
ORO (12/29/99; 12:15:39MDT - Msg ID:21792)
FOA - Pump
Hello ORO,
Your follow up post about the IMF money pump was very interesting. You state: ----- You are indicating (FOA), it seems, that the current consensus in the G20 is that the dollar reserve system should be allowed to slowly dissolve into cash full oblivion. --------
Yes, offering this analysis from the view that the dollar is being driven into a "cash position" is right on the mark. In hind sight, this would be the only way to prevent the reserve currency from deflating through the obliteration of world dollar debt. Further, as the Euro takes a larger and larger portion of debt financing, the left over dollars holders are forced into an ever more short term maturity. If you were a dollar holder and could see the transition ahead, you would not want to lend long either. This effect is well understood looking backwards, as it was usually caused from the Fed tightening credit. Today, the squeeze (on longer term dollar credit) comes from a perception that this market may be falling away. Making room for the Euro. Eventually culminating in an "almost cash" position for the dollar, the fastest moving currency derivative of them all.
I think this has to be the first stage of "flight" before a true gold run begins. This is the period where no past guidelines direct the trading. Everyone is looking around and saying, what are you going to do? Most will shorten maturities offered and feed slowly into the Euro and gold as a hedge. As you know my thoughts about the paper gold market; the enormous sums of floating dollars will easily crush this illusion. Long before any significant paper is exercised into physical gold that market will discount cash price in a big way and close.
Back to your thinking; notice how the Fed is still pumping money even after the year turn over! The liquidity squeeze is arriving and it has nothing to do with price inflation, Y2K or the stock markets. Another force is at work in the world today and it is attacking the dollar behind the bushes. You mentioned the Japanese and Eu banks in the carry trade. The Japanese are and always have been up to their eyeballs in US paper. They have to stay this way because of their dollar trade deficit. As they continue to decend into deflation, the strong Yen still locks their hands from selling our debt and the BOJ has always known this. So, they continue to add dollar reserves on balance with this deficit in an effort to keep the Yen from rising even higher and killing their US market share. These people are done in and will eventually print Yen (hyperinflate) in and effort to match any US dollar price inflation. Locked step to the end! The EU can play the carry game as long as they hedge in Euros (or gold) because it will balance the dollar fall. They will some day be seen borrowing Euros at 4% (??) and buying Eurodollars at 30% (??) or something like that. What else can be done with the eventual pool of Eurodollars floating offshore the US? It will already have been devalued against gold and they will still want to trade with the US. After working through Exchange Rate controls that is.
ORO, more clearly, the period directly before us will be like a fiction book. Good reading, but I don't believe this is happening! Once the Euro gets its legs, there will be no use for a Eurodollar holding as long as the US keeps its trade deficit wide open. As the dollars flood in, we cannot spend them in Europe because we will have to buy Euros first. As the existing Eurodollar holdings go further into cash mode their value must fall. And fall big!
These paper bullion boys at the front desk talk about all the excess ECB gold that must be sold. They are going to sound like the Y2K bugs after the fact. When the ECB and the BIS start moving unneeded reserve dollars for official bullion (this has started already) off market, we will see it in the US % rates (like today) and the Exchange rates (like today). The real bugs in 2000 are going to be in the paper gold market. Just watch it all unfold!
Thanks FOA
FOA (01/03/00; 18:46:32MDT - Msg ID:22158)
This tells it all! I'll be back much later.
http://www.siliconinvestor.com/insight/contrarian/
Read it on this site!
http://www.siliconinvestor.com/insight/contrarian/
On borrowed time?... Last but not least, I want to share something that Dennis Gartman wrote late last week when I was out. It is the perfect period piece to capture the mood of what is really going on. To any sane person, it should be frightening; but then again, anyone who's frightened isn't having any fun. And those who are not frightened are making gobs of money speculating their heads off. Here's what Dennis said:
"As a final aside for the year, we went to our local branch bank yesterday to transact some business [Ed. Note: we actually got some cash for the Y2K `turn'...just in case!], and spent some time chatting with the branch manager. She does not know what business we are in, so when we asked her if she'd seen any increase in personal loans she replied out of hand that indeed she had. Indeed, the personal loan demand at her branch had escalated rather substantively.
"She then proffered that the sole reason for the sharp rise in personal loans was the investment in the stock market. She said that local doctors, lawyers, farmers, auto dealers... all of the leading figures of the local economy (and their wives) had been in recently to borrow money to `put into the market.' We asked her how long this had been going on, and she said that the branch had been making personal, signature loans like that for some while, but that the demand had really escalated in the past several months and has really become `hot' in the past several weeks. She wondered if it was too late for her to join in the market's enthusiasm!
We said, `We don't know,' and left bemused and afraid.
"It is perhaps not new news, but we find it odd that the public is borrowing money on signatures without collateral (other than CDs and/or sizeable demand deposit accounts) that is then used to buy stocks, very probably upon margin. The leverage is immeasurable, for the public is apparently `Reg-T'ing' money that it has already borrowed with nothing down. She said that those who've been borrowing the most indicated that they `could get more out of the market than the interest charge,' and considered it unwise not to take advantage of the circumstance.
"Friends and clients, if this is not rampant, tulip - bulb' - like speculation of the worst sort, we've no idea what is. Of all of the things that we've read about, heard about and discussed at length concerning the mania that is the U.S. stock market, this is the most manic of all. When speculation comes to small-town southern Virginia, it is rampant and it is dangerous. We have at this point said enough."
FOA (01/08/00; 17:34:05MDT - Msg ID:22538)
Reply
To ALL: I'm trying to catch up now. More to follow.
Hello PERMAFROST,
Sorry to see you go (if you still are gone?). I'll reply to your comments, somewhat in order.
You write in :------------
PERMAFROST (1/3/00; 2:31:57MDT - Msg ID:22103)
FOA Msg ID: 21859 Part 1
Dear Sir, Thanks for your response.
--------You are advocating a global financial system predicated on the peaceful and mutually-beneficial "concubinage" of gold and the "new girl in town" fiat money the Euro which you unwarrantedly presume to be relatively more "chaste" than the Old Whore, the US dollar, ONLY because it is not "backed" by as much debt as the dollar, and its "lovers" (the EU Central Bankers, the Rothschilds?; an assorted variety of Illuminati and various other power brokers playing both sides [the sheeple?] against the middle [more sheeple]) tip their hat at gold without solemnly declaring their allegiance at sovereign money, PM etc. ------------------
No Mr. Frost;
I don't advocate that. I think this is your perception of future events. This transition will not be "peaceful" in any way. Any time one large official faction (Dollar/IMF group) has its money power replaced by a new official faction (Euro / BIS), it's never peaceful and not without significant loss of wealth by some of the players. I add that both little and big players get hurt when these events happen. Usually, it's the little "uninformed" players that lose the most. Your observation that people are "sheeple" comes as they step in front of a train with no breaks. Then you tell the world that "someone" is out to get them. My experience is that the average investor is much more intelligent than that and they can do a good job of "moving" off the tracks if it's pointed out to them that a train is coming.
The dollar is giving up its reign as a reserve currency, not "only" because it has so much debt. It's being replaced because its inflation (total money supply, dollar derivatives supply, dollar debt supply and the official liabilities foreign nations hold as reserves supply) has discounted so much future real US production, at a constant exchange rate, that it is losing the ability to function as a reserve currency. Every currency on earth has one day come to this end. We call it a "fiat money's timeline". At this point the users of this money begin to either "deflate its supply" through debt and payment default, or they devalue it by bidding up the value of real goods (price inflation). Once either of these begin, the money function of that reserve currency declines. Further, one will find
that deflation is only a choice if no other official world currency is available to run to. World citizens vote with their feet at this point and greatly discount unpayable debt thus causing said deflation. Inflation is the choice when people can "refinance" into another currency media. Leaving the old to contend with an ever increasing velocity of the useless money supply. This is the fate that waits the dollar.
Is this some structure brought about by a New World Order? If you want to see it this way, then remember the world has been doing this from creation. I only add, why bother to put the "New" on it? Let's just call it "Next World Order"! Besides, it's only one peoples as a nation group (EURO / BIS) trying to protect their wealth because another nation group of peoples (Dollar / IMF) borrowed more that they could ever pay back! Still, I read this New World Order faction (NWOF) as loudly declaring the Euro as a fraud, yet they (NWOF) are hip deep the dollar assets of a country that "defaulted on its gold delivery. Twice! Then they (NWOF) yell because no one is creating a new gold or gold backed currency. Why do that? So we can be defaulted again by the "NEXT World Order"?
You write:
-----------------
This fiat money is necessary, you say, because it will allow management [manipuation] of the economy without suffering the deleterious side effects that a rigid gold standard has saddled us with in the past. Would you care to draw for the benefit of the forum the the philosophical line that separates you from, say, an Alan Greenspan, as per the gold/fiat money relationship? do we not have TODAY a fully-floating POG alongside the dollar? What shall we gain in re-baptizing fiat money with a different name, i.e., the Euro? except the prolongation of the Game? IF gold IS money than nothing else is. Disagree?
--------------------------
No PM;
We don't have a fully floating price of gold today. This is the illusion (paper gold) that has many people (such as yourself) locked into a narrow view. Mr. Greenspan has always seen the gold money relationship from a US dollar perspective and holding the US as the only dominating financial power. He knows that the dollar could never retain its position if gold became a "separate settlement currency" through a true world free physical market. All of the dollar price inflation that is currently locked into the present dollar supply inflation would present itself. Dollar reserves held world wide would become useless unless they could be used to buy real US goods (at a non inflated price).
Truly, Mr. G. only sees gold from a Washington view and even that must be locked in the cellar. He manages a system built by others and must use the tools this system allows. The present paper gold market is as much a function of the dollar value as interest rates and it is controlled as such.
Today, gold is money, I agree! But, it is not and never can be a fluctuating (in supply) digital money of high speed settlement. For it to work its past magic in this modern world, it must trade in physical form without derivative use. It will.
----------------------------
You write:
PERMAFROST (1/3/00; 3:02:19MDT - Msg ID:22104)
Reply to FOA Msg. ID: 21859 Part 2
Capitalism, this familiar but insidious term really stands for the willful confusion of a descripitive proposition [that private property exists] with a PRESCRIPTIVE one [that private property and the wealth that can be generated from it is GO(O)D]. -------------------
No PM, not at all.
This is the standard (higher level) teachings in modern Western education. History proves that "real private property" has and always has been both wealth and a purchasing power medium (money). Through the best of times and the worst of times, in war and peace, people have always had private property. Even in Russia of old, they had to allow people their things. Even if these positions weren't recorded "officially". A universal truth is that no form of official ruler-ship can function unless people have some private wealth. Never has worked for even a short time and never will. Further, generating more wealth from private property (owned wealth) is only good if one can overcome the "RISK" that comes with it. This is nothing new to most of the world. It's just a different concept for modern Western man.
You write:
---------------
It's a logical fallacy that doesn't survive the glare of critical analysis. Omit the adjective "private" from the premise and what you end up with is the other side of the coin, or communism. Both systems are basically worship of materialism and humanistic (man is the measure of the universe) propaganda. Now, whereas communism theoretically aims at generating its "GOD", or 'goods and services' in economic parlance, via the sweat and toil of its fellow gods (the proletariat), capitalism is predicated on CONSTANT INSTABILITY [the insidious rhetoric of the bankers notwithstanding] of the prices of these very goods and services, the [managed] fluctuations of which allow the people Greenspan works for to earn wealth they did not work for. -----------------
PF:
I'm glade you understand this ages old function of humanity. Through out time and space our life quest is influenced by others that try to control our desires. The successful time traveller lives his days in harmony by adapting to the "lay of the land". Today, it's time for gold and Euro assets. Indeed, what you have just written is the very action that has brought the dollar to the end of its timeline.
------------------------------------------
Again, your words,
PERMAFROST (1/3/00; 3:09:12MDT - Msg ID:22105)
Reply to FOA Msg. ID: 21859 Lastly,
As to even the 'emperor running to higher ground when he sees the flood coming'--if he were to do so, he'd be emperor no more for what makes an emperor an emperor is the "land" he rules. Without it he's nothing.That's why captains do not abandon their sinking ships; and why sometimes even emperors get their heads chopped off. To die an emperor is perhaps preferable than to live as a normal human being for some...You?--------------------------------
In addition PF, the history of gold shows how one may remain in their chosen land and retain their wealth. For gold needs not return to a native place to receive its value. We do indeed chose the high ground, with or without our heads. (smile)
Further you add from :Msg ID:22104
-------------------------
Therefore; I find myself obliged to conclude that, due to your avowed devotion to the Euro and the "The King is dead; long live the King" tradition it propounds, the only difference between you and an "Alan Greenspan" lies in your respective handles. If you already are not one of them, you wanna join 'em. Incorrect?
------------------------------------
Very incorrect my friend. The difference lies not between myself and others, rather between the life experience of "you" and "I".
Somewhat like the movie "The wind and the Lion":
You like the wind hold the power of force in your words. I as the lion roar in defiance as the sand stings my eyes in a land I cannot leave. Yet, as a lion, I know my place on earth while as the wind, you will never know yours!
Thanks much,,,,,,,,,,,,,,,FOA
FOA (01/08/00; 18:04:52MDT - Msg ID:22540)
Comment
USAGOLD (1/2/00; 14:16:18MDT - Msg ID:22059)
Once in Golconda.....More Parallels: Soaring Averages a Rousing Spectacle/Decay Underneath
-----The persistence of the idea that all stocks were going through the roof in the autumn of 1929 is a monument to the power of popular myth." --------------
Michael,
Your Once in Golconda was wonderful. It speaks volumes of our present situation; the inflation of the dollar as it is presented in equity valuations. Mountains of currency supply with nowhere to go! The difference between now and then? Today, we have an alternative currency that unlike the past gold standards will not force a "deflation effect". We will have our dollars and we will have them in good supply. To the end.
I (We) expect this to continue until the dollar is devalued thru a defaulted gold market (and soaring physical gold price) and further devalued from "settlement function" by the Euro. This is going to be an exciting time to witness. FOA
FOA (01/08/00; 18:06:38MDT - Msg ID:22541)
Comment
mhchuck (1/2/00; 20:29:16MDT - Msg ID:22082)
FOA
-------------There's an old saying that "A man with one watch, always knows what time it is, but a man with two, is never really sure."... I have discarded all other time pieces...you're it. It is not such a dangerous maneuver for me personally as some might think. You see, I "know" where the trail is going, but with your higher perch, I will improve my visibility. But whether or not any of your "pre-vision" comes to fruition, matters not, (although it might matter to you for having put it forth)
....the fact is, I like the way you tick. ----------
Thanks mhchuck!
Watching the world turn with a physical gold watch will be an easy experience. And an educational one for us "regular people". The human interaction between "high standing" paper financial players will teach us all where the truth is. Indeed, they are not losing something they have. Rather something they perceive they have. A big difference. FOA
FOA (01/08/00; 19:55:11MDT - Msg ID:22544)
Reply
Hello canamami,
You write:
-----------------
canamami (1/2/00; 22:43:33MDT - Msg ID:22091)
Reply to FOA - Possible Demands re Gold Breach of Contract
FOA,
I believe the recent demands made against Germany/Switzerland flowing from World War Two, and the end of gold convertability under Bretton Woods, are almost completely disanalogous;I don't see any demands ever arising against the US flowing from August 1971. The demands against Germany/Switzerland are heavily tied in with moral questions relating to Holocaust-type issues, and all that that entails. Whether rightly or wrongly, portions of world opinion (particularly important groups in the US, and the broader world community) continue to view a continuing moral culpability on the part of Germany and Switzerland. On the other hand, the end of gold convertability was a pure commercial matter, somewhat akin to a bankruptcy, not
giving rise to important moral issues. -------------
No Mr. C;
A great many people were impacted along with their lifestyles. The dollar was devalued through price inflation during all of the remaining 70s and this directly lead to much of the stress in world affairs. Many smaller countries saw their citizens almost starve because of the changing cost of goods.
Further, important people only recognize a wrong as a "moral issue" when a public door is opened for "resolution" of that issue. Regular people must wait for justice untill the force of reality comes into play. Just as the demands made against Germany/Switzerland were buried for decades, that didn't mean they were concluded, nor would this repudiate other precedent setting actions that occurred later in time.
You write:
------------
Remember, every other country ended gold convertability, and some of these countries did not disestablish the previously gold-backed currency - for example, Canada kept its dollar and Britain kept its pound, though gold-backing ended for these currencies. ------------
Indeed, these countries held dollars "as their gold" by international treaty. Just as a person has no more money after being robbed, dollar reserve countries after 71 were forced to use whatever money existed (they had no gold because the law said the dollar was a contract for it). People are not so shallow as to accept your "disestablish" reasoning. Watch someone in a store, given a choice of two, they will purchase what offers the best value. Only when one item is offered does the obvious become a naive selection.
Canada and Britain did not later back their currencies with gold, did they. Nor will the US!
Your words:
---------------
Also, neither Germany nor Switzerland expressly stated - "no more claims will be recognized flowing from World War II". However, the US has expressly extinguished any demands for gold against the Treasury, except for some very old issues of certificates and dollars. Thus, the US has made an express policy decision that no demands are to be made against its gold. This has not stopped the rest of the world from continuing to view the dollar as the pre-eminent currency.
Mr. C,
If the US expressly stated as policy that the sun will not rise are we to accept it? Again, a world pre-eminent currency is one accepted from a background of "choice". No other currency was presented for use in a major settlement function capacity. Today the Euro has.
I offer Journeyman's post (thanks Journeyman)as a further argument:
Journeyman (1/2/00; 23:41:12MDT - Msg ID:22095)
Stealing is not immoral? @canimami
The stealing of the gold from "foreigners" in 1971 by the US Gvt. in cahoots with the Federal Reserve by refusing to redeem redeemable notes, specifically redeemable in gold and as specified in the US Constitution was the SECOND biggest robbery in the history of the world. The FIRST biggest heist was pulled off by the FED & USA Corp. in 1933 when the same perps, this time headed by Franklin Delano Rosevelt, similarly stole the gold from its own citizens.
The question is, I guess, since these two events are the two biggest thefts in history, is "Is stealing immoral?" Well is it? Or do you excuse those organizations calling themselves "government," no matter what they do? Or is only when YOU are the beneficiary that anything goes? Regards,
Journeyman
Further from your post:
---------------------
The bottom line: the US will not entertain any claims against its gold on either a moral or legal basis, and I don't believe any claims will be made against it either. This matter has been resolved, and the US would disregard any attempts to make this an issue, though I doubt such attempts would even be made.------------------
Sir, you have spoken a very clear "Western viewpoint". Truly, it does look different from other directions.
Thanks FOA
FOA (01/08/00; 20:52:00MDT - Msg ID:22547)
Comment
Only part of this post:
---------------
USAGOLD (01/03/00; 21:47:51MDT - Msg ID:22184)
Deja Vu...
I thought it a deja vu. This afternoon I read the following in Adrian van Eck's "Money Forecast Letter" for January which I received about two weeks ago and just got around to:
----"We are of the opinion that the Money he and the Fed have been creating in the past two months (going on $200 billion...an awesome amount ) reflects his efforts to avert a crisis situation that is being kept hush-hush."--------
Michael,
They may take some of this back, but only a small bit of it. All one has to do is follow ORO's posts to get a feel for what is happening. (ORO, I'm getting to your good stuff!) The dollar is being challenged by the Euro in a very big way. And it's happening even faster than expected. I think several other measures were available to the BIS if the transition had not already begun. It's possible that the dollar will come under massive pressure this year if we continue this way. The Fed has no choice but to cover the liquidity drain. Eventually, this will break the paper gold pricing grip on the physical metal. Truly, the ECB is letting the dollar system rip wide open from it's own hand.
FOA
FOA (01/08/00; 20:54:42MDT - Msg ID:22548)
Reply
Hello Beesting,
--------------
beesting (1/4/00; 10:00:31MDT - Msg ID:22242)
To FOA
http://www.bis.org/index.htm
Steve H- "Good one #22209!"
ORO- Great posts today--Thank You!!
FOA, I have researched the above URL "BIS" site, and my conclusion is, the BIS only conducts business with Central Banks. So, in the recent Dutch sale of Gold, and future Gold buying by the BIS, ALL that Gold would stay withen the Central Banking System, and have NO effect on world "normal consumption" of Gold.----------------------
Actually Beesting, you hit the nail right on the head. The BIS is the only entity in the world that the dollar/IMF (and LBMA) worry about. That is because they can move gold between CBs at any value they want and do so without any supply passing through the paper markets first.
As this sinks into the minds of paper players, they will realize just how inflated the contract market is in relation to what physical gold is available to it. Remember, Euroland backed away from the dollar gold price illusion early last year. They would have stepped in and brought physical to support the price. Instead they stood back and let it drop down to the $250 range, as they must have had the "Washington Agreement" in the works.
It no longer became a question of price, rather a question of when? I think it was because the Euro started out "too strong" in the beginning. They needed market acceptance and usage first, then begin the process of marking dollars to the gold price. I am expecting this year to produce some concrete moves in this direction.
You write:
-----------
FOA, do you agree with that analysis? Or, do you think the BIS could enter the world Gold market, replace the LBMA, and buy and sell non-paper Gold only? In My Opinion it would be a large European Bank that would first compete with the LBMA, and then after a collapse of paper Gold, join forces with The LBMA, sometime in the future. Your thoughts and opinions are always greatly appriciated ....beesting.-------------------
I think the ECB will eventually sanction a physical gold market in Europe that trades and settles only in Euros. The LBMA will eventually fall completely out of the picture as their product comes into question.
We shall see FOA
FOA (01/08/00; 22:15:47MDT - Msg ID:22557)
Reply
More discussion, my friend:
-------------------
canamami (01/08/00; 20:43:12MDT - Msg ID:22546)
Reply to FOA - #22544
FOA, for ease of reference, I will repost a reply I made to Journeyman, then I will add a few brief comments. First, here is the repost:
Of course stealing is immoral, and it would have been preferable for the US to comply with Bretton Woods, or to withdraw while it was still able to meet extant obligations, so there would not figuratively have been a "breach of contract".
That being said, we are dealing with the actions of sovereign states, which are indeed immune from the ordinary principles of contract law, including the principles of private international law as they relate to contracts. My post related to the assertions of FOA, that the US would face demands for the honouring of gold backing just as the Swiss and Germans faced demands relating to Holocaust-related matters, years after the fact. I countered that the two matters are too dissimilar for there to be a valid analogy - i.e., like comparing apples and oranges.
-----------------------------
Mr. C.,
I ask, were not the Swiss and Germans also sovereign states? Were their actions allowed as related to international law? In addition, I'm not trying to draw an analogy as you perceive it. The precedent was that the dollar was a certificate for gold in storage, not a debt owed to someone else. The closing of the gold window in 71 was a "taking of physical property" in much the same light as "taking someone's private property". I make this point not because the BIS "is" about to ask for gold, rather that the US will never again back the current US dollar with it's gold. They must create another currency medium first.
You state:
--------------
However, if obligations relating to 1971 are to be dug up, then the US is free to dig up the defaults of countries after WW1. Back then, basically all currencies were completely gold-backed. In the course of WW1, the major countries became indebted to the US. Except for Finland, all the Europeans defaulted on their official debt to the US. So, if some countries can dig up ancient breaches of contract like 1971 (at law, an ancient issue, and I would also say a breach that has already been waived even on a moral level), then the US can dig up the WW1 breaches of contract by European countries - with accumulated interest. Also, such demands for compensation are made against Ger/Swit because Germany/Switzerland are willing to listen to such demands. On the other hand, the Japanese have ignored demands to compensate Hong Kong veterans and others who were tortured, and to compensate the victims of the Rape of Nanking. Thus, few demands are even directed at Japan. This is how sovereign states generally operate. Given that most of the putative complainers concerning 1971 have "shafted" the US in the past, I doubt any demands for the honouring of the Bretton Woods gold backing will be made.
----------------
Again, the closing of the gold window was not a debt issue. None of your above items are relevant. The US seized gold belonging to others by not shipping what was in vault storage.
You say:
------------
Thus, FOA, I disagree with your assertion that the US will ever face demands relating to the 1971 closing of the gold window. Subsequent to closing the gold window, the world agreed for a time to currencies directly pegged to the US dollar, and then that arrangement ended. ----------------
----------------------------------
My friend, the dollar reserves held in foreign banks were not these "pegged" holdings you speak of. Foreign moneys pegged through exchange rates to dollars is one thing. However, there were real dollars held as gold certificate reserves by these Central Banks. There was no arrangement on this issue. The US took their gold plain and simple.
Your words:
------------------
However, the fact that the rest of the world adopted the US dollar as the baseline currency after the closing of the gold window suggests that most of humanity did not view that a great injustice had taken place by the closing of that window; in fact, that closing was seen coming for years prior to 1971.
---------------------
In the same light, was the inaction on Swiss and German issue a sign of acceptance? Apparently not!
Onward:
------------
Remember, the US did not seek out the role as reserve currency to the world after WWII, it agreed to accept that role only after pleadings from other countries. Moreover, any country that distrusted US dollars could have demanded gold instead. ---------------
My point exactly. The very fact that the US shipped so much gold prior to closing sets the precedent that the dollar was a gold certificate, not a debt or IOU. It was payable on demand for many years.
Further in your thoughts:
------------------------
It is fanciful to believe that demands concerning 1971 will be made now against the US, and even more fanciful to believe that anyone would take such demands seriously. To use legal language, the limitations period has passed, and in any event the breach was waived. Further, a history's worth of demands could then be reopened. The US could demand repayment of WWI-era debts, with interest. It could demand reparations from Germany and Japan for WWII, against the Arabs for oil supply contracts broken during the Oil Embargo - it would never end. This is a can of worms the world will leave closed.
-----------------
I submit that it is "fanciful indeed" for one to think that the pre 71 dollar was a debt of gold. Clearly, all the evidence says it was not. The dollar represented gold held on deposit for any Central bank that requested it. Because most foreign citizens could own gold in their countries (US citizens could not), they were free to ask for gold from their local banks in return for dollars. Thus, the US having taken the gold would become a private action if they ever backed the same dollar again Will this is a can of worms stay closed? Absolutely! The dollar will never be backed with deliverable gold again! Believe it!
Thanks FOA
ON to ORO!
FOA (01/08/00; 23:38:28MDT - Msg ID:22560)
Last post for a while
Hello ORO,
---------------------------------------------------------
ORO (1/4/00; 8:09:17MDT - Msg ID:22235)
Talking Physically.
FOA (01/01/00; 14:42:33MDT - Msg ID:21993)
--->All the while, the bullion buyer slowly amasses a large "highly leveraged" position, just by channelling his would be trading loses into paid up physical and rare gold coins.
FOA has clarified the issue further, but I will post this anyway.
In the way of clarification for others, I think FOA is trying to tell us that the leverage is indeed there, just that when one buys bullion without leverage, the leverage you have is that put against you by the couner pairs to your "cash" position. Most notably, the counterparties in a typical gold transaction have claims traded among themselves and physical gold sold into the market. The trades involve a lender, a borrower, a bullion bank, and a physical buyer.
--The bank is both long and short gold denominated or gold indexed obligations. This is a complex multiple contract position. More on this later.
--The borrower is short "physical" which is due for delivery. This is a contract obligation. Gold miners and bank trading desks, as well as speculators hold these positions.
--The lender is long gold denominated obligations. This is a contract position. The contract is as good as the counterparty. If you own a gold account, or are long a derivative contract, this is what you have.
--The cash buyer holds gold bullion and is obligated to nobody. His holdings do not rely on anyone fulfilling an obligation.
The leverage built into the market, which we goldbugs will benefit from in the long run, is that of the many obligations denominated in gold. We need not buy leveraged instruments, because the leverage comes from the extreme volume of gold obligations issued within the "paper gold" trading arena described above. The same elements that make gold an attractive investment at this time and a long term store of value (over a lifetime), particularly during banking crises, make the various forms of leveraged gold unattractive. One should note the point of gold being protection from an environment of default on obligations. The same obligations that gold derivatives are.
-------------------------------------------------------
ORO,
Your presentation has described the leverage issue very well. This is the very essence of a gold run that manifests itself in the overflow "spilling out" from the paper arena into the much, much smaller physical arena. I doubt that very much paper gold will be forced into delivery before the entire market stops contract trading. Still, some have said that official guarantees, insurance companies and the large financial reserves of players will be brought to play in making this market whole. In reality this is true. But further into reality, the more the resources become available to "cash out this arena" with gold delivery, the further away the physical gold price will run. The point always was that no amount of contract supporting dollars could ever balance the gold owed. The more they try, the higher the price gets.
They could let it run, but at what price does it fully settle? $1000, 5000, 10000 ???? I have no doubts that it will be closed long before important people are killed (financially) in this. Further, before this comes to a head the total outstanding gold derivatives could double or triple in supply (building from the US side alone). All completely unbacked and issued in a effort to drive the paper price lower. We only know that in the maelstrom, just before the close, the paper leverage against each ounce could be unthinkable. This could impact your thinking in ORO #22236. We can discuss tomorrow.
I have but to add that there is another leverage issue that will take over once this one is resolved in a physical market trading at a much higher price. This later item is the leverage of a "true world-wide gold demand" in the format of gold being a settlement asset. It's effects on a limited supply, both mine and open market, would be incredible. Again, few of us understand how money gold would interact with the modern wealth of today. In no way has the world gold stocks increased in any form of proportion to the productive capacity we now know. Again, this view is taken across the valley where the dollar was butchered.
Further you write:
-------------
The most important aspect of gold as financial disaster insurance is that it is immune from default. The second point, particularly important for the gold mining investor, is that in financial crissis, desperate governments are prone to disregard the property rights of large holders of industrial assets. The most captive form of industrial asset are the mine and the oil well. The most attractive asset for taxation and expropriation in time of crissis is a gold mine. Very large hoards of precious metals may prove attractive to a government seeking survival. The small hoards remaining in the West are not attractive targets.
-------------------------------
Yes, sir. This seems as impossible as the question of the BIS going after gold rebacking the dollar. But, this is the way the world works and the dollar timeline is running out of it's future. The trick now is in getting some of your assets out of harms way, well before the fact. The problem is in the dreams of every gold mine owner; the spiking of gold! The next gold run will be caused from pressures far different in dynamics from price inflation. Indeed, it may rum so fast. so quick that every country closes its borders to gold flow. Usually this is accompanied with foreign exchange controls. (Ever notice how gold is always included in these currency flows controls? Not silver, platinum, copper or oil. Just gold.). The next event would be an emergency 60% (or something to this effect) exchange rate tax on bullion that comes out of ore sellers pockets. Then, it's later made permanent in some form of "windfall profits tax" against the companies. Oh yes, the mines stay in operation and the ore is milled, it's just that the costs (price inflation) and taxes do a number on the stockholders equety. This may not happen in every country. But that's another story.
Your words:
----------------------
The use of gold futures and options in the battle for financial self preservation during a financial crissis is equivalent to a knight charging at his enemy with a shaking kielbasa. Gold mining shares are similar to waving one's title to the land in face of the Mongol horde's charge. Wouldn't it be rather smart to hold a sword on top of the ramparts of a castle? Taking our little Midieval setting further, one does not complain of the building of the castle, though long after its construction came no attack. The expense of time and effort, of missed opportunities and reduced performance will come to be appreciated when disaster strikes.
Ha, Ha! ORO, I sent your "waving one's title to the land in face of the Mongol horde's charge" to someone and they loved it! What better way to put it. Just great.
More much later, FOA
FOA (1/9/00; 11:22:41MDT - Msg ID:22579)
Comment
Saturday, January 08, 2000
BOSTON (Reuters) - The United States has not sold any of its gold reserves and has no plans to do so, U.S. Treasury Secretary Lawrence Summers said on Saturday. "I categorically deny assertions that U.S. gold reserves were being sold off or that there is any plan to sell them off," Summers told reporters on the sidelines of an economics conference.
His denial came amid talk in the gold markets that some of the weakness in the gold price over recent years may have been caused by direct U.S. sales of gold. ---------------
ALL:
I posted once before that the US was not selling it's gold. Again, I completely agree with Mr. Summers statement and submit that it is a spoken truth in full context to the question.
Many reach for this easy reason (official gold sales) for our current low gold price. The reason this comes about is that without using this line of reasoning, one has to accept that: 1. the current gold price is mostly a paper contract fabrication 2. it's easily controlled as long as the "current price setting system" is functioning 3. this gold price everyone uses, could fall through the floor if the contract system comes into question 4. physical gold (dealers) prices could skyrocket in the future as no one accepts the credibility of any contract for derivative gold. Effectively destroying the paper equity of gold banking.
Most of the people in the gold industry do not want to hear this. For them, a break-up of the London gold market would destroy their financial partners and spike the physical gold price into uncontrolled levels. Most of the industry designed their business plan to embrace a "common viewpoint" on gold. They expect, want and look for a return of a gold price that is in the range of $300 to $600. Something the paper marketplace can live with and their financing structure can survive "profitably". Above $600 and even ABX must post margin!
For one to embrace the knowledge that the "Washington Agreement" is real and that the other major nations are not selling into the market; we also must accept how the reverse leverage on physical gold will someday wipe out the entire dollar / gold marketplace. Clearly, this would imply the obvious, physical gold has more leverage than any of it's paper derivatives (gold stocks included). Truly, if you are selling a paper product, your income (and most likely your private investment position) depends on your finding another answer to the low gold price problem!
The sales of official CB gold must be the answer for many. We have for several years (longer than that privately) been discussing this gold market resolution and it's meaning to private physical gold advocates. Our position is that this is a long term evolution of the dollar reserve system. A system that was extended in life for a politically "fixed"
term by changing the very nature of the gold market. Further; Only recently (the last few years) has the timeline of the dollar begun it's final turndown from international "settlement use". Today, the signs are becoming increasingly clear that the Euro (for better or worse) is indeed breaking the grip of dollar financing and use. We expect this to continue and intensify it's effects on the very existence of a dollar gold arena. As such, we now live in a period we call "the time for super gold". Perhaps our year 2000 marke the beginning od that change.
Prior to this, the accumulation of physical gold could only be viewed as a "long term , extremely secure saving account". One that would contain all the past investment gains an improving economy could produce. And represent those value gains in a future "money settlement roll" that only a free gold trading market would produce. Many have forgone the current financial craze with the complete security that the historical record of gold will not be broken. Truly, gold will later represent a buying power that makes current paper gains seem small!
We do not present this as an investment in the usual sense. Rather one should buy gold as the real wealth it has always been. No different that your car, house, etc. are real money wealth also. Only today, gold wealth does not reflect it's true dollar price value because the paper marketplace does not reflect the trading of real physical gold. Indeed, a clear advantage for persons that can step out from their "Western world" reasoning.
Onward:
Hello ORO,
Yesterday in my (FOA (01/08/00; 23:38:28MDT - Msg ID:22560), I mentioned how ""before this comes to a head the total outstanding gold derivatives could double or triple in supply"".
This is an extremely possible event that is in no way different from our current mania in US stocks. The final act out of a money supply inflation is always reflected in the trading of the "popular wealth" of that era. Weather it is "real things wealth" as seen in the past (price inflation) or our current "Western" fascination with "contract paper wealth", fiat money leverage always explodes right at the end. With the paper gold markets holding a base trading level around 1,000 tonnes a day, any rush of events could easily gun the creation of gold contracts into a much higher level. And therefore increase the leverage for physical gold "after the fact".
You write:
---------------------
ORO (1/4/00; 8:16:45MDT - Msg ID:22236)
A (bullion) BANK NOTE
A note about the implication of the banker's situation: through the banker's borrowing and lending, all modern bullion owned outright has an equivalent part, nearly three times larger, of paper gold. The bankers have formed a 60,000-80,000 ton gold banking system using 20,000 tons of gold, most of which is now held by "cash" holders.
Common estimates of private gold bullion holdings available to the financial markets, most notably the one produced for the Fed in 1997 (estimated for 1995), put the gold at 20,000 tons. I have reason to believe that there are 10,000 tons more, bringing the total to some 30,000. I will not go into the iffy details of the estimate, but note that one of the major components is "Yamashita's treasure", which has been in the gold markets since 1984, some of it even before that date. Whenever stories come up about the reappearance of that hoard to act as an overhang on the markets, you can rest assured that it has already been introduced to them in its entirety. These 10,000 tons are in "semi-official" hands of Royals of the Oil countries, the Vatican. Much of the
rest of the remainder (once the gold jewelry deficit is accounted for) sits in Rothchild vaults, and a few other large holders, "giants" much as described by FOA and ANOTHER.
------------------------------------------------
ORO,
I have no doubt that these figures are in line with reality. In fact, they are losing their relevance as the insanity continues. Most people only look at the "writers" (short) obligation to make good on the deal. Yet, few consider the implication that a market "shut down" would create. Literally, both sides of the deal would be looking for "GOLD". The short, of course! But, in addition, he may be drawn to buy his own position in physical and walk from further adding any "deal equity". In addition, the "long" would observe the obvious inability of the market to deliver and undertake a physical purchase outside his deal.
The point is that during a melt down, the entire human infrastructure of a paper market would be looking to buy. In other words, the gross total of world open interest times two (X2) running for gold. It does rather overload the little CB holdings, doesn't it?
You write:
--------------------
The volumes of gold paper traded by the LBMA become much clearer when taken in context of the gold banking system rather than in context of annual gold production. The 1000 tons traded daily are well proportioned to the normal trading patterns in currencies. Eurodollar interest derivatives constitute about 5.5 $T traded on New York exchanges, and another 55 $t or so are traded OTC with 62% netting (figures are from memory so don't shoot me if I'm off a little) bringing it to 19 $t. This is equivalent to the estimated 21 $t in Eurodollar debt outstanding (my estimate). This comes to 7%to 7.5% of outstanding positions traded daily. Applying this proportion to the gold market's 1000 tons, one comes to 14,000 tons of net debt - the same kind of debt as Eurodollar debt. This is debt generated by the sale of physical gold in the four part transactions.
------------------------------
Sir ORO,
Prior to LBMA giving open figures, the trading was quite high. Even if one had no inside view of their arena, the fact that our 1,000 tonne figure didn't just arrive "overnight" should point to a long term trading build-up. We can be sure that from at least 1990 onward, the paper gold system was backing the dollar on a planned schedule of events.
You offer more:
----------------------
While the physical supply actually went into hoards of all sorts, the paper remained circulating in the markets. The gold accounts now stand at an incredible level of over 40,000 tons by my reckoning. Nearly 30,000 tons are owed by bullion bankers directly - without counter obligations denominated in kind. They have only 4,800 tons in credible gold mining company obligations, and another 9,000 tons were borrowed by speculative funds playing the carry trade. The remaining reserves, some 10,000 tons, can not be used to pay off the gold denominated debt because the reserves are mostly borrowed and must be kept on hand to cover obligations to Oil Royals (the major lenders of these reserves). Of the other 20,000 tons in private gold hoards, only 6,000 remain in private hands outside of the Bullion banking system. 14,000 were supplied to the market over the years, and hang around the necks and in the noses and from ears of a billion people. The total commitments of bullion banks (including derivatives) are most probably around 60,000 tons, with an imbalance of some 35,000 tons, where gold was "borrowed" by the bankers (in reality only dollars arrived at the bank for most of this, and the bank issued a gold denominated obligation),and the lending by the bankers was in dollars.
Their remaining gold denominated assets:
- Gold reserves are 10,000 tons, (I hope)
- mining company obligations are at 5,000 tons,
- Speculative fund obligations are 10,000 tons.
The remaining counters to the bullion banker's gold obligations are denominated in currency.
Physical gold lent TO bullion banks, about 25,000 tons.
Physical gold lent BY bullion banks, about 15,000 tons.
-------------------------------
Again, I agree, but ask the question "are these commitments becoming irrelevant in gold terms"? This is "gold banking" on a pure fractional reserve basis and very much reflects the dollar prior to 71. Years ago, we hit a point where the market place is just trading the price of gold, not gold itself. They have created a form of "gold currency" that is more a "gold price obligation" rather than "gold supply situation". It simply could not function once real delivery was asked for. This is the corner the ECB / BIS have pushed the dollar into. Force a change in the need for "contract gold banking" and you break the credibility of the market. Break that credibility and the dollar is exposed in a gold price move.
Here, we can get a sense of the massive effects a change in the use of the dollar would have on these liabilities. Once the dollar begins it's slide from trade settlement (happening now), a dollar gold currency is not needed. Any break in the gold banking market would render a "new price" for physical gold. That price would begin to reflect the past dollar money supply inflation.
Thanks ORO for your clear understanding. On to your #22237 later FOA
FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview
ORO (01/06/00; 15:05:40MDT - Msg ID:22411)
Your words:
-----------------
For years, I could not understand how the dollar could stabilize in 1980. It was a complete mystery to me. Austrian monetary theory, which I studied with the intense interest of youth, alongside Monetarist theory, was giving no clue as to how the dollar could be stable at all once the arbitrage to gold through redeemability was closed to everyone - CBs included. ---------------------
ORO,
It was amazing wasn't it? During that time, anyone that had any grasp of money theory just knew that eventual world wide dollar inflation was coming. Yet, right after the Mexico default crisis, the whole system came back to life. Never before in history had a country dropped it's gold backing, watched it's currency be devalued against gold ($800+) and then returned it to normal use as if nothing had happened.
But something did happen and it sent the world onto a different trail. Thinkers, world leaders, common workers, and investors had just spent the previous ten years learning the true worth of oil! And they learned how it had two values.
Consider:
Duality of value is a funny thing.
If you have a gun in hand pointed at me and I have an identical gun pointed at you, their (the guns) worth is the same. Yet, if I am wearing a bullet-proof vest, my identical gun has more worth. Not much, just a little more. Strategic location?
You pointed out how in 1933 dollars outside the US were worth their weight in gold. Yet, inside the US they were not. The same dollar had a dual value dependent on location.
Oil, gold, minerals and ones bank account can all have dual values based on the strategic location of these items.
Another form of duality exists for most things. Gold has a jewellery value and a monetary value. It's price is reflected in the degree of total demand generated from each value. In fact everything we own has our personal wealth value and a "monetary" worth.
After 1980, oil also reflected this different duality.
Back to the main trail:
In the late 60s and early 70s some US strategic leaders were beginning to understand the "monetary value" of oil. It was becoming clear that local oil reserves, not gold was the real backing behind the robust US economic engine. Like gold today, oil back then was worth a whole lot more than the amount we were paying for it.
The simple fact was that as long as your economic system got more from (out of) the local oil it brought than printing ones currency took away, local oil was worth more as a "monetary backing" than gold. This was the changing currency climate some could see long ago. Modern society, as it functioned using digital settlement was restructuring monetary theory. The only problem was that it wasn't changing the importance of "human nature" or "strategic location".
By the early 70s the old gold exchange standard was breaking down, even as the worlds goods production system was just embarking on a new era of efficiency. Using the benefits of hindsight, we can today see that each year into the 70s, 80s and 90s all brought technological gains that were overshadowed by our currency system's flaws. The world was using technology to get more out of the life's blood in a modern economy, oil.
It was recognized that even though the old (gold) money system of the 60s had priced oil favourably for the US, it's (US) oil reserves were running out at that price. We needed a higher price for oil in order to build local reserves. At the very least, we needed higher prices to discover higher cost reserves located in the "Strategic Americas" (both north and south).
The potential (indeed, it was reality at that time) for the Middle East to continue producing reasonably priced oil for gold (dollars) stood in the way these needed higher prices. In order to resolve this, we moved off the gold standard (1971) and onto the oil standard. Again, in hindsight it was a masterful play. You see, in duality, oil in the Middle east was worth more than other oil if it could back the dollar in world settlement.
Make no mistake, gold was and still is the center of the money universe. Only the way we utilized it was changed (indeed, it's about to be changed again). ORO, the US had already placed its currency on an oil standard years before (in practical theory anyway). They were expanding the money supply directly in relation with the increased production of goods that modern oil use was providing. Of course they ran away with the process as is always the case. Gunning the debt money supply and justifying it by extrapolating growth at ever increasing rates. Dollar creation overran the ability of the gold exchange standard to balance it. Still, in all fairness, the old system was built on a much slower creation of production efficiencies and couldn't accommodate this modern surge of wealth (and debt). Let's face it, the world has no precedent for the last 30 years of growth. By adhering to the fixed money supply, currencies would have risen in value creating a deflationary effect on the debt created from this growth. Our first experiment with this came as the US decided to keep gold in the money universe but back the currency with oil. Better said: "continue to settle oil in dollars as long as the rate (oil price) creates more value from production than the inflation of the currency takes away".
This is the reason the BIS did not lobby the US to officially devalue the dollar in gold (raise the dollar gold rate from $42 to say $200) and continue the system. Even though many people were hurt from this, the system was failing and had to change. The tactic was not to stop using dollars if the gold was not delivered, but rather for the US to just stop shipping the gold. In reality the dollar is still a receipt for $42 in gold, but the it will never be connected to gold again. Ever!
In the background, the value of the gold backing lost was found in oil. In reality, the value of oil to the world economy was increasing much faster than value of gold lost from dollar default. Even at the higher prices per barrel the need and demand for oil proved to be a far superior "monetary backing" for the dollar than gold. As long as the majority of oil producers agreed to receive dollars for oil, the stage was set for a renewed surge in growth the world over.
Yet, gold was still in the monetary game. Only this time the game was proving to be short lived and unstable. This new "free market" for gold was soon being leveraged in a way the old dollar was. Once again, the supply of gold contracts was exploding as they were responding to the new demands of an expanding world economic system. Only this time it wasn't the dollar that was about to default, it was the "new gold market".
Today, we find ourselves on the edge of yet another change in the world financial structure.
More later FOA
FOA (1/11/00; 6:23:10MDT - Msg ID:22690)
More Overview
Working from my FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview:
" " Our first experiment with this came as the US decided to keep gold in the money universe but back the currency with oil. Better said: "continue to settle oil in dollars as long as the rate (oil price) creates more value from production than the inflation of the currency takes away".--------
Initially this created instability in the financial system. Through out the 70s players ran into gold, trying to regain the monetary security the dollar had lost without it. Soon, everyone realized that no amount of conversion would ever replace all the foreign dollars outstanding. The dollars stayed in circulation even as they were traded for gold. Further, the dollars were still being received by ME oil producers in return for oil. Dollar price inflation was bad, but in no means did we see the "runaway price inflation" that should have come from a reserve currency without gold backing.
In practical theory, oil now backed the dollar as world oil payments were settled in dollars. In return, gold now backed oil from a US guarantee of an open market for the metal. Over time, a portion of oil dollars could be replaced with real gold through actual physical purchases or in participation with evolving world gold banking (paper gold). Even though the dollar gold price had surged, the higher oil prices were allowing a percentage of those dollars to be converted back into gold at the old gold/oil rate. Slowly, the old dollar holdings (prior to 71) were effectively being used to reclaim gold. The expansion of the world dollar money supply was seen as reflecting the more modern importance (value) of oil in the economy. As long as growth in the production of economic goods outstripped dollar price inflation, the dollar could be expanded to match the unrealized value held in oil.
Again, "strategic location" of the worlds major oil reserves was the backbone behind this "duality" in oils value. Gold in fort knox could not back the dollar anymore, because the US had shown that they could just withdraw it from backing. In fact, the entire validity of backing any currency with a fixed gold amount was in question with this new age of "super nation blocks". For it to work again, gold and the reserve currency backed by it would have to reside in different "power blocks" to guarantee delivery. That wasn't going to happen. Indeed, with supply of the worlds major oil reserves being controlled outside the US, the dollar was now backed more effectively by a commodity that could be used to devalue it (through the oil price) should the money supply run wild.
This system balanced, as the value received from oil by the goods producing world outran the loss from price inflation initially created from rising oil prices. ORO, this does not explain everything , by any means. But, it does at least give us a handle on the dollar transition through out the 70s and 80s. Looking back one can see that "money theory" wasn't thrown out the window, only reworked a great deal. It offers a reasonable understanding as to why the dollar continued, even as the US treasury took control of the world financial system.
Today, the situation is changing in a much more dramatic way. I'll later offer a view as to where we are and where we are going.
Thanks FOA
FOA (1/11/00; 19:10:15MDT - Msg ID:22711)
Current events
Cavan Man (1/11/00; 13:08:03MDT - Msg ID:22702)
Dear FOA
---------I am not certain how many visitors here carefully read and digest what you write.
Furthermore, I am even less sure how many of us really believe what you write----------
Cavan Man,
Yes, I think you are right. There really is no point in going back so far. Nor is there any gain in diving so deep to explain political strategy just ahead. Mostly we want to understand the short term. Another warned me about this once before. Saying I should stay on the surface and discuss events as they apply. Looking back I see why he doesn't send me anything now. The point has been made and the correct people have seen it. Now wait for events and discuss the market response.
So be it. I'll ride the soft river and stay off the hard trail.
Thanks Cavan Man, your words have helped, I presume too much, FOA
FOA (1/12/00; 8:21:11MDT - Msg ID:22768)
Thinking and talking out loud?
ALL:
What a mess! Cavan Man, (I know you are still reading) I used your Thoughts as a measurement of what I was doing. This is a "very" large group to walk with, as such we often only hear the nearby discussion, yet many are along for this walk and choose not to talk. So, I find myself walking in the middle, the front and the rear, in a effort to not only be close and hear the talk but to "see" the map they read. In life, I have seen how often "the more verbal ones" project the direction of the quiet groups and I take this in. Cavan Man, you did not change my will to hike, rather your post made me "think out loud".
There is no leading or following here, as we are all on this journey whether one acknowledges it or not. I am only a small part of the group. It's just much more interesting is we can see the real "natural wonders" on the right, left, behind and in front, instead of just the next step before our aching feet. Yet, I understand how some would rather see the trail as only a series of completed single steps. Each with definable distance, impression and easy to collaborate. Ha! Ha! Indeed, it may be more of an American Journey if one can "float on the surface of a river" within easy view
and "earshot" of those walking the hard trail! (smile)
Mr. Lawrence, I'm sorry I spoke so loud what I should have thought so quietly. You will return, yes?
I do thank everyone for their kind words and honest directions. I'll continue to talk and "listen" as we walk this golden trail.
FOA
FOA (1/13/00; 6:16:24MDT - Msg ID:22819)
one quick post
ORO,
Thanks for your "some comments" posts 1, 2, 3,. I have only read them quickly and am pressed for time. Will reply (rebuttal / agreement (smile)) to these excellent thoughts before I post my next "overview". In the mean time something to consider; by the late 60s, dollars were not "arbitraged" into gold with the effect that "hard monetary theory" had envisioned . It was becoming more of a "concept" as the money supply continued to grow much faster than gold was shipped out of the country. This "soft" link to gold was growing as dollar production was being fuelled by the oil perception. Officials brought into the concept that for much of our natural future, oil would always make "things" cheaper, faster and in greater supply. As such no amount of future debt and the money supply growth that followed it, was too much! This process of making the evolution of "oil productivity backing" a more real backing than gold.
Sorry I cannot write now,,,,,,,,,,,,,,,,,,,,,FOA
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ALSO:
Welcome Traveller and all the new posters here!
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USAGOLD (1/12/00; 9:31:05MDT - Msg ID:22771)
Today's Gold Report: Swiss Lean Toward Liquidation through BIS
Hello Michael,
The background of this Swiss statement is more exciting than the announcement! We have offered for some time that future "official" Euroland sales would evolve into ECMBs (European Member Central Bank) buying gold "off market" and out of the reach of the LBMA . First the Dutch and now the Swiss have begun to open the door to this. The full 2,000 tonnes of gold covered in the Washington Agreement may not come to be used as collateral behind current gold paper. Truly, they (ECB/BIS) are cutting them off and starving the market. The next step will be the revelation that the "transfers" are occurring at higher dollar prices (and probably lower Euro prices, if they are done in that currency) than the spot market. Behind the stage, we have been "on the road" to higher physical prices ever sense the "agreement" was announced. The BIS has always had the power to break the Bullion Bank's from market controll by changing it from contract form into physical. Our current price doldrums do not indicate the frantic nature of life in this new "fast lane". Most traders are watching the paper markets and feel they are "dead in the water". This perception will change in the next act of paper destruction. We have had act #1 and each ensuing one should be more severe. Lease rates rise, paper prices gun up, major loses then a load of more gold contracts dumped to force the price down. I bet they have run out of small lenders after the last run around. If so, (maybe the next go around) the contract discounting begins?
Note: Michael, I received your News And Views and read it for the first time. What a wonderful commentary it is! Everyone should get it!
Thanks FOA
FOA (1/15/00; 11:00:06MDT - Msg ID:22951)
Comment
ALL:
A few quick words then I'll post a reply to ORO with my next overview (perhaps an hour?).
Ha! Ha!, light sweet crude over $28! Now there is a fact one can chew on, right Permafrost! Tell me , everyone, what good were the "facts" from the beginning of 98 -1999, when they were used to point people to COMING $5.00 OIL! Not much, right?
Speaking of facts; In Barrons today they did an article on the Euro. I think they said "the Euro is the next biggest thing to impact us on a level equal to the internet" (or something like that). The major thrust of the write-up was to point out how the Euro had overtaken the dollar in international bond issuance. What a "blow out" in the first year of existence!
Can anyone remember all the negative "facts" being promoted regarding the Euro in 1998 and the beginning of 1999. All kinds of official statistics were used to indicate how it would never be born, never be used at any level equal to the dollar. In "FACT" every possible shred of evidence was paraded about to show how the Euro would die, soon after it's beginning.
People, the point I'm making here (and to Permafrost) is that facts don't tell us what's going to happen, they tell you "What Happened"! Further, it's the motivations and political intentions of international leaders that shape the real world we live in. When these "minds with power" decide on a direction, the reactions in the marketplace then create the facts we all need to see. After the policy changes were made!
On this forum, you often read what is being promoted, what is being thought and what direction this may take in the real world. We look for "Events" to produce the "Facts" that pertain to these posts. Many of our loudest critic proclaim that our Thoughts are "dishonest" because no "facts" are available to collaborate out projections. Well, if their understandings, perceptions and connections to and about how leaders make "private policy" limits their (the critics) ability to look forward??? Truly, this is a curable disease, that's best defeated by reading USAGOLD FORUM 2nd and asking for Michael's News and Views 1st. (smile)
Finally, I add, we walk this trail looking forward "first". Before the left, right and back is observed.
Thanks all,,,,,,,,,,more in a little bit FOA
FOA (1/15/00; 14:58:12MDT - Msg ID:22961)
REPLY
Some discussion for ORO beginning with:
ORO (1/12/00; 10:01:35MDT - Msg ID:22773)
FOA - some comments - Part I
You write:------------------------I am trying to put the two issues in perspective, (1) the break in the gold backing and (2) the need to price oil at a higher dollar price for the dual purposes of (2a)"strategic", locally controlled oil, and for the simple (2b) prosperity of the American oil patch and its highly connected people.
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foa: ORO, the oil patch was hated in New York and Washington. Two different cultures, you know. The Government just wanted them to produce oil and shut up. If they needed to make money in the process, so be it. The "oil windfall profits tax" later proved the point that oil was more seen as a "public utility" for "monetary policy". Not something that was privately owned.
Your words:-----------------------
Which do you see as having been more significant? Or was it a monetary decision based on a new concept in commodity money? Or, what I consider more probable, that it killed so many birds in one stone that it was just too attractive to let go without one good try? The additional seignorage from this concept would also have made it attractive.
Besides, considering that the US was then so far outsude of any possible internal remedy to its gold receipt (dollar) printing problem, it was just a matter of a few months till it would all have broken apart in 1968 - the Fed and the government then facing the hard choice between having a banking system or a currency. I can see that the system was saved in 69, when the London gold market moved to gold pricing in dollars and the OPEC countries stopped taking currencies other than dollars. The US managed to even stretch that arrangement past the breaking point. ----------------
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foa: ORO, my friend, they were not using this concept as a real "commodity money play" in the "gold standard perception". At that time we were buying local oil with "fiat dollars" (made so by the 1933 internal gold confiscation) and foreign oil with "gold dollars". But, as you pointed out, dollar production was so far past it's "gold backing" that it was obvious they (USA) were pegging dollar printing to oil prosperity. Still, with London gold and oil mostly settled in dollars, the foreign dollar
oil deals fully well expected to cash in unneeded dollars for gold. As we can see, reality and present day events of that time were as "mismatched" as today!
All of the dollars success was ultimately made possible because oil could (and was) priced so far below it's "economic worth" to the world. At that time, even our Middle East friends had no idea just how useful oil would (and had) become to maintaining the world economic base. As we will see in a minute.
Your Thoughts: as I break them apart and comment
-----------------------
Yes, among the true drivers of the US economic boom was the cheap domestic oil it enjoyed till the mid 60s. Economic freedom in the US was limited since Roosevelt took away our few remaining economic freedoms and the cash. The timing of the break in US oil production belies the truth of your analysis of the thinking behind this ingenious way of solving a stupid and costly problem. The steep drop of US oil production, as if off a cliff was impressive. But there were many alternatives to the solution chosen; oil could be imported and stored, and that would have set the price for internal production.-----------------------
foa: No, they were already shipping so many dollars out and any more would further aggravate the "possible gold drain perception". This was everyone's problem then as the industrialized world wanted to still get gold if needed, but they also liked the "non inflationary" (relative to that time) expansion of the dollar base as it expressed the new oil economy and it's real goods produced wealth. The US wanted new oil reserves to be "Local" (the Americas), because it could be paid in "fiat 33" cash, not the more golden "foreign cash". Both our neighbours to the north and south ever asked for much gold. In this light they acted like the local oil companies that received post 1933 dollars for oil (as mentioned above). Yet, to get these new reserves for fiat 33, they had to prevent the very cheap Middle East oil from supplying it all (if dollar prices were higher).
---------------
Oil imports could have been taxed to provide local and "most favoured" neighbours with better prices. ------------------------------
foa, they could have, but they didn't?? A lot of conflicting international political agendas with that one.
-----------------
The reason the US went off of gold did have to do with oil offering backing for the dollar, on an "as needed" basis, but there was a reason that was necessary. The reason was the meteoric rise of government expenditure in that era. The US was throwing fiscal and balance of payments caution to the winds till the last day before going off the gold standard. That day marked the end of the government expansion relative to the economy.
The 14% of GDP level seen in 1969-1971 was never seen again. In reality, we are back below 1959 levels at 11%, while the Federal government has shrunk to some 3.5% of GDP from the former peak of near 7% in 1970. ------------------------
foa, Again, I pointed out above, the new found prosperity from cheap dollar oil was being used to justify mountains of dollar debt. As long as a barrel of oil could be used to produce more relative real wealth than the dollars used to buy it represented, dollar inflation worked in the only political measurement that counted. "An increase in the standard of living"! Don't get me wrong, I didn't say, "an increase in the value of savings", that's something else in the minds of "Western Thinkers". Further: GDP measurements and SOL (standard of living) are clearly not relevant to each other then or today. All through the 70s the American worker groaned under a financial / currency
system gone bad. Yet, compared to the SOL of even Japan, we were always way ahead!
------------------------The question that comes at this point, is why were the Arab oil suppliers willing to do this? Was it because their oil would continue to be priced in gold, and this whole thing with the dollar just did not matter? Why did Europe go along with this scheme?
I think it was the "strategic" element of the time, a malevolent and reluctant Soviet system and China in complete chaos in the "cultural revolution", led by psycopathic crackpots, that played a part in convincing Europe and Oil to back the scheme. There was a need to continue support for the US so that it could retain/gain superiority over the Soviets. The "exorbitant privelege" had to be maintained for both the sake of the US and of Europe. For Arab oil, pricing was fine so long as they got their "fair" amount of gold per barrel. The Europeans would pay for the US military sevice by taking US dollars. Do you see this as the "whole" of the strategic significance of the deal?
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foa: ORO, First and foremost, everyone was caught flatfooted as the dollar broke from gold. Like I said above, the industrial world loved the dollar expansion in the oil context presented. Caught between what appeared as a good system based on cheap oil and the loss of gold delivery, they let it drift too far. Even as we left gold behind (71) and oil went up (78), the system still worked because oil was perhaps delivering $100.00 worth of value and being brought for $30. Yes, this new price did create a financial panic, but more so because everyone was leveraged for the status quo, not a rising price. Like a company business slowing down because they expected 100% profits and invested in equipment for it, yet only got 50%.
The producers never expected the cartel to get such a high price from their political embargo. They also wanted more dollars to compensate for the gold loss, yes. But the runup they got demonstrated to them just how good their product was. They thought a barrel was worth so much gold (pre 69-71), yet after the fact (71-79), it was worth much more gold than they were ever getting. It was a real education.
As far as going along with the deal, they didn't! Hence the gold runup. But, I tell you that little gold run was nothing compared to what could have happened if they pressed for it. Later they experimented with circulating dollars as a stop gap measure until another system could come along.
MORE:
ORO (1/12/00; 10:03:24MDT - Msg ID:22774)
FOA - some comments - Part II
Your words: ---------------------The problem of oil as money is in two ways, it is wealth when it is in the ground, but it is a medium of exchange when it is taken out, shipped and used. It must retain a wealth money to back it up. The wealth money was to be found in the gold exchange of oil to gold, as I take your view. Or, as ANOTHER put it, gold and oil must travel in opposite directions. ---------------------
foa: ORO, once oil is "used" it reverts back into it's wealth (and real money) in the form of the real goods produced. This "spent" oil wealth / money can be retrieved by buying some of these real things with dollars. Still, the portion of real value regained is very small compared to the oil wealth / money spent. This loss of value is partially viewed as payment for your " "strategic" element" " mentioned further above. But, this is a gross amount to pay for this protection. Much more than regular financial thinkers understand. As such, this loss is made up by receiving a "kicker" in the form of cheap gold provided from a "paper contract marketplace". A market that reduces the amount of real gold world investors hold by replacing it with "dollar derivative gold contracts" based on the price movements of gold. This concept has lured "hard money" players into an illusion and allowed the flow of real gold to move opposite of oil. It is this simple. (smile)
Your thoughts---------------------
The next issue, that of the US government floating currency in proportion to oil production through the 60s, in effect assuming that the oil, rather than gold is what actually backs the dollar, I can see that thinking in much of the theory written in the decade before, namely by Friedman and the Chicago School, but the problem I had then, and have now, is that the currency itself does not in reality allow for any value whatsoever so long as there is no direct arbitrage between the currency and its backing. In the US there was no arbitrage into oil. It was only by the tight control of oil supplies in one tiny block, and the happinstance of gold just being controlled on the other side of the trade that made this work, and as badly as it had.--------------------
foa: ORO, fiat currency today is little more than a future contract (I posted on this before) of human production. Yet, our SOL (standard of living) could not exist without it. Presently we are in a transition between "wealth money concept" and "digital money concept". History has proven over and over that fiat money can never be a valuable as "real wealth". Through out time, everything real we own has represented both out wealth and a spend able (tradable) money, gold included. Early on, paper money had no other purpose than to represent real things in contract form. Today, even with all it's government manipulations, that paper settles high speed trade better than real wealth
contracts (dollars backed by gold?) because it can match the efficiency advancements with a growing money supply. And do so without revalueing the currency upward (deflation) in the way hard money requires. It's a hard perception to stay with, I know, but people have proven that they want their currency to stay even with economic function, not move up in value against it. Modern humans (not necessarily western) would rather hold their wealth in part in real things (gold) and settle trade in digital currency.
There is a precedent to this even in the history of our world gold supply. As a pure hard wealth money, it does increase in amounts (ounces mined) over time. During the old world growth rates this could have worked, but gold supply cannot match modern advancements without rising in value far higher than even I project. Truly, digital currencies can work for a modern world, if only they are not backed to gold in contract (fixed gold standard) form. Most of this latter days currency problems have been in trying to keep a "hard digital money concept". It has not worked.
Yes, the percent system has blown itself completely away from official inflation. Inflation far beyond any future human production. Still, had we witnessed a true "free trading" "physical bullion only" market place for gold and allowed it to function in a goods buying settlement,,,,,,,it would have marked to the market the over production of currencies. OK, now that we understand this:
You now state many of our modern money problems in
Your thoughts:--------------
The economic expansion of the 50s and 60s in Europe and Japan was no less than that of Asia in the 80s and 90s, astounding. Similar to that growth that the US had under a tight gold standard from the end of the Civil War to the first World War.
The reality of deflation in a commodity money economy is fine if the banking system is either a "free banking" system (government is not involved but for prosecution of fraud), or the banks are regulated to disallow them the fractional reserve system completely, so that the fiction of having bank debt balances being presented as money is removed. Thus the bank issues bonds or depository receipts (only for vault reserves) but can not stretch the meaning of customer balances to mean "cash". Thus banks are forced to either live up to their fiction in free banking, or prohibited from the fiction altogether. The interest rates of the period before the Fed then were tremendously low. There was such a thing as a perpetual bond. Innovation was tremendous. Though this period was punctuated by bank runs galore, the system - as a whole - worked. This despite banks being allowed their fiction and their being supported by many legal priveleges. There is no economic reason for fiat currencies at all.
The only reason is political. To allow government seigniorage and to allow its sometime friends in banking the assymetry of risk that raises their profitability and assures the great banking famillies of retaining control of their franchise at public expense. It also ended up costing them "ultimate" control in that their banks are now edifices of contracts that are all backed by the government printing press and thus in constant danger of political expediency changing against them.
The expansion of currency in relation to the growth of the economy is simply another way for government to tax its people. In the case of the US, it was a way for the US government, in its true Roman idiom, to tax the world as a whole. That it was necessary is arguable. I would venture to say that by 1959 it was not necessary at all. Europe had grown to the point of being able to support itself militarilly. The US was fearful of an armed Europe going communist, not needing the US and its military. Not paying tribute/protection money.
No, FOA, there was never a danger of deflationary spirals forming if the US had not insisted on socializing banking costs as the cost of the political bargain for subjugating the whole of the country's wealth to direct Federal government control. Did the war/wars both cold and hot make this the only politically acceptable way? I think that was not the only way, even when going into a prolonged "cold" war. What it was for is obviously to "disappear" the cost to both Americans and Europeans. The decision to back the dollar with oil was based on any new concept, it was simply a new way for the US government to retain control of its economy through currency control. I could venture a guess as to Hayek being an intellectual backer of the compromise plan (compromise between reality and the wish of the Johnson and Nixon era bureaucracy to retain hegemony), since he understood well how oil is important economically, and how a currency works. .---------------
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foa: above you say:
"The decision to back the dollar with oil was based on any new concept, it was simply a new way for the US government to retain control of its economy through currency control."
ORO, I could not agree more. This was not a new concept, rather "A" concept that became "the official unwritten policy" that few understood outside Washington. It also evolved into a way for "others" to keep the dollar game going until a replacement was found. Indeed, our Officials now see the threat clearly.
More of you:---------------
Second point on deflation is that it is healthy for the debt system. It removes assets from the weak and moves them to the strong. Businesses often fail, but rarely do the assets of the business disappear.It is only those businesses built on complete folly or on speculation that routinely fail leaving behind no assets. It is this environment that spawns 1% short/2% long interest rates, at which the rate for gold remains to this day.--------------------
foa: Deflation under the old system deflation (rising value of cash gold) worked because it brought the dept in line with the rate of growth. A rate (growth) that was much lower then. Let's face it, during the last 30 years economic production and it's real debt rates of growth (not the gross manipulated debt rates of present) were off the scale of anything ever seen from the beginning of time! Given the choice of borrowing "PHYSICAL" gold from a true physical market at 2% for trade settlement against borrowing "physical dollars" at %10, the dollar would have been pushed from "actual market forces" to slow it's inflation to match real modern world growth. Match this against trying to keep a government treasury from issuing "too many" fake dollar gold contracts and it's no contest. It never worked.
ORO again:-------------------------
Regarding oil as money, my second point is that oil has a couple of problems as money backing -one is its low value density, it is too expensive to move around for trade. The second is its susceptibility to political disruption. Both as wealth when it is in the ground and as delivery contract relying on retention of smooth transport conditions (as exchange money), the black gold is not as safe as the actual stuff, and hoarding it is very costly. The only ways to trade it are in the form of obligations ("oil debt") or as title to oil reserves.--------------------
foa: I covered this far above. No one was ever trying to actually use physical oil as money. Rather they (USA) were using the disparity of real oil worth to cover the inflation of the dollar.
ORO:-----------------
While dwelling on this, there is still another set of details to this issue. The electronic settlement demands on currency make no difference as to its backing. It can be gold certificates, it does not have to be fiat paper (a promise as empty as the vault). Even as broadly usable a commodity as oil, its marginal utility is lower when available at greater quantity - its price relative to other goods falls. A money must have a steady marginal utility. As the world grew to make better use of oil out of necessity, due to an artificially inflated cost and an artificial scarcity, the world lost much to the new oil backed dollar. It had to deal with an oil cost based on the cost of producing oil in the "strategically" preffered but economically absurd location. The capital cost, the wasted engineering talent, and the years of discomfort in cramped cars and public transport (particularly in Europe) are but the tip of the enormous ice-berg this piece of idiocy cost.
There is no benefit whatsoever derived from the oil being local but for its strategic significance for military and political reasons. No amount of theory can find a benefit from the waste of resources on a problem we did not face (at least not for another 30-50 years at the time) and from the uneconomic consumption of the intermediate range reserves. Now we have broken the natural cost structure of the oil industry and put in a big hole between the low cost oil and the high cost oil. In the meantime, we have destroyed the coal mining industry with a boom and bust cycle, we drove natural gas exploration too early and wasted it, We broke down the economies of many nations. This folly did not allow the growth of the world economy to proceed unempeded by the restraints of gold, it slowed down the world's growth and diverted its energies.------------
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foa: Yes, to all except one." " " There is no benefit whatsoever derived from the oil being local but for its strategic significance for military and political reasons. " " "
As time went by (80s on), Europe encouraged this arrangement because backing dollar creation with foreign oil allowed a self destruct function.
Under the old gold standards, it was up the individual nation to pay out gold against it's money. A process especially usefull to others if said money was inflated. Still, modern power structures proved that this did not work. A large nation would just not pay out gold if it didn't want too. The US did this locally (1933) and internationally (1971). So what good does it do to back a currency with gold it that gold reserve is in the same nation? Obviously, none!
By allowing the US to back it's economic viability (and therefore it's currency over time) with further oil settlement, it allowed the removal of said settlement (backing) at a later date. Especially if another, closer to home and more appealing reserve currency came about. Unlike gold reserves, that resided in the US, playing the present oil deficit against the US economic need of this oil is proving much better. Oil is a real commodity need, that must be paid for. A local (USA) oil reserve deficit can bust the dollar value if foreign oil rises in price. Much more so if oil is pegged in Euros while "parity" is in range!
More ORO--------------
I suggest two things regarding the ill-conceived ideas of the decision makers of the time. (1) Their motive was not to secure "strategic" oil supplies alone, but to make sure the whole world pays the price of this strategic decision, whether they want to or not. (2) In the way a large debtor can destroy his creditors, the US and the global banking system built around its rag of a currency did not want to lose control of their banking and commercial empires through the process of bankruptcy, and resorted to threatening their creditors with it. The resulting rollover of US debt resulted in perpetuation of the problem for the next generation, and allowed the continuation of American debt accumulation.
The US, in banging o�����������������������������������������
FOA (1/16/00; 10:23:29MDT - Msg ID:22997)
Comment
ALL:
It looks like we lost a big piece of my FOA (1/15/00; 14:58:12MDT - Msg ID:22961). It was all on this side as my whole system locked down. I lost quite a bit also.
Most of the remainder of that post was agreeing with ORO's views as he perceived them. What happened back then could be accepted from several angles, as real events offered the same outcome. My purpose for presenting them in our perspective was to generate a beginning sequence of influence for our present situation. In other words, this is where the official thinking started from on this matter. Did this influence monetary events to proceed as they did? I would say at least 70% so. Still that was the past and we have evolved substantially today.
If my computers (and their links) don't fail again, I'll post "Overview" and some comments / replies.
thanks all FOA
FOA (1/16/00; 12:52:52MDT - Msg ID:23002)
More Overview
Moving on from my earlier posts, today we see where we are and where the trail may lead::
FOA (01/10/00; 20:39:02MDT - Msg ID:22663)
An Overview
FOA (1/11/00; 6:23:10MDT - Msg ID:22690)
More Overview
-----------------------
http://home.att.net/~gmoritz/public/Deficit.jpg
We stop and share the view!
In the early 90s the world was not experiencing any visible results from our new Euroland currency creation (Euro). On the surface things continued much the same as before. The EMU (European Monetary Union) was somewhat in order, but most of the world financial analyst completely wrote off any of it's possible effects on the dollar. A view that was accepted because the US and the dollar were becoming ever more dominant in world affairs. Still, an increasing dollar reserve base impacted the economies of foreign nations as the US dollar trade deficit and the debt
that represented it expanded without relief.
I'm told that an excellent graph of this is still available on the net at the above link. It shows how dollars have been building up overseas without fail from 1976. Yet, in this visual expression of dollar flows we can see the first fluctuation of a new currency order taking shape. Between 91 and 94 our dollar flows made an abrupt turn for the negative. Some would say that this was just a function of the dollar becoming stronger. We say it represents a new "hands off" policy by foreign decision makers. This turn was in effect allowing the dollar to enter a multy year self destruct mode, during which deficit dollar flows would expand into oblivion. The US would be flooding the world with dollar reserves at the exact beginnings of Euro success.
After over two decades of non-stop foreign dollar inflation, the dollar float had become so large that any transition from dollar settlement into "Other" settlement would permanently remove it from reserve status. This forward looking thinking would eventually be spelled out in the events directly before us today. In these events we will witness and document the "Facts" of a dollar fall from
grace.
Unlike past bouts of local US price inflation affecting dollar value perceptions, this transition from dollar reserve use will be felt first in currency exchange rates as the Euro slowly replaces the dollar as the major trade holding. The later impact from this will be a massive "super hyper price inflation" in the local US marketplace. Much the same as seen in the third world country panics in Asia. But prior to this, the largest of all currency exchange rate transitions will try to express itself. That will be the true dollar value exchange rate of gold. A transition so large and all consuming that it will completely wreck the present leverage in the paper contract gold market we today call "the gold market". Long before this new real physical price of gold is realized, the marketplace will stop all function as physical deliveries, at any price come to an end for a time. Eventually, a world physical market will return.
Onward for another view:
The strong US economic success has been spelled out more in the our SOL (Standard Of Living) than if expressed in financial accounts. Dollar exchange rates, interest on dollars, stock market values, home values all represent what an American "can buy" if they decide to spend their wealth. Not what they presently have as owned wealth, paid up 100%. This leveraging of dollar affairs has created an "illusion of savings" that in effect allowed a high SOL. In other words, we live high on the hog today because our present equity values and savings don't really exist. Time has transformed the entire dollar system into a giant "futures contract" that only represents the wealth we could obtain in partial "future purchases". Just like the gold market, we mostly trade paper wealth and call it real. Yet, if a large percentage demand for delivery ever happened, the contracts
would fail. Yes, our wealth and economy status is really based on us cashing in and buying just a little at a time. if we didn't, the illusion would be exposed. Only our present dollar economy is "super leveraged" not just into the future of US goods production, rather it also completely depends on future foreign fulfilment to produce those real goods. Truly, most of our present sizeable financial wealth is little more than a function of the "acceptance of dollars overseas" by others.
Few locals today consider the view from the other side. They proclaim that the dollar is king because the "others" want to spend it here. It's the very same mentality of a gambler that's winning. He doesn't want to hear that the house is on fire and will accept any other "good news" that prolongs his current "prosperity". In reality, if the above dollar deficit chart was ever forced (from outside pressures, Euro?) into reverse, no amount of real US goods production could be brought using present dollar price rates. In other words, foreigners could never spend their dollars at a rate that matches our SOL values. Indeed, some of the biggest players now know it! It's all an illusion that has spanned 25+ years from the loss of the gold standard and it's about to be tested.
Onward as we look behind and before us:
In the 90s, big oil understood what was driving the acceptance of dollars. And from my earlier posts, we can grasp how their knowledge was gained through the oil embargo effect. Still, as long as international oil could be settled in dollars at prices well below it's economic value return, US debt, dollar reserves and dollar investments looked very good This train would run as long as another system was being built. Keep oil cheap and the dollar deficit flood would continue.
Why would they do this for free? They didn't and neither did Euroland! People "in the know" knew the effects a new reserve currency would have on dollar values. They also knew the future impact on physical gold. As long as the gold market kept gold priced at a discount to the real value of oil, buying some gold with excess oil dollars more than made up for any loss of investment or loss of reserve values. Europe needed this concept to work and they helped maintain the present gold market trend for this purpose. A good way to wait for a dollar retirement, no? If the Euro was not born (a real possibility a few years ago) big oil was more than prepared to include physical gold settlement into it's payment package. Just a minor inclusion of gold would have gunned the market and replaced any lost investment gains from a botched Euro introduction. So, the participation in gold and gold banking made good sense.
Indeed, even now the paper gold market expressed a major "duality" in real value depending on the strategic location of it's contracts. Some leveraged gold banking backed with Euroland guarantees is today far superior after the Euro success. (I think this concept is hard on most people.
Still, it will look much different after the train wreck that coming.)
Going further into the duality values from my earlier "overviews"; Oil prices today are on the rise and doing so in total conflict to perceived marketplace function. It's no mistake as to why this dollar price rise is happening now after the Euro was born (we have been discussing this for some time). Just as a high gold price would expose the dollar by presenting it's true past inflation (world dollar money supply growth), a rising oil price exposes the US economy to the super leverage it contains. Especially if one can grasp how that economy was built on oil backing through dollar settlement. Once the threat of a dollar slump is made possible by high oil, expect big oil to run to Euro
settlement for international trade. Perhaps run is not a good word? Let's just say a transition will begin that shows the world the trail ahead. This is the period when the Euro will rise very much against the dollar (2.00 or 3.00 Euros per dollar?). As oil becomes cheaper in Euros, their local economy (Euroland) will experience a dramatic positive shift in activity relative to the US and other countries tied to US trade. Does Japan sound like one on the wrong side? (TownCrier, yes, no?)
Because the ECB has no pressing need to keep gold prices in place, gold could initially run in Euros also. Still, eventually Euro gold prices will not be anywhere close to dollar gold prices as international dollar reserves are liquidated. In effect, the disgorging of dollar reserves will show no negative accounting on ECB books as gold prices more than make up for dollar reserve destruction. In fact, once the Euro becomes the world reserve, there will be no reason to hold dollars at all.
Onward, looking only forward:
In fits and starts, oil prices will keep rising based on an expected reserve currency transition, not dollar oil use economics. Any substitution of alternate oil resources in the US will run head long into a local cost inflation roadblock. $200 dollar crude will not be seen as enough to drill for reserves nor switch to other fuels.
The Euro will keep taking market use share from the dollar, especially if major US players continue to trade the Euro down to parity. Eventually (and presently as this is happening now), dollar reserves held outside the US will be forced into shorter and shorter maturities as the "return on" these holdings becomes more important than their "use as trading currency". This will drive dollar rates far above Euro rates, draining liquidity and forcing the Fed to continue "Most" of it's pumping action (what so many thought was Y2K related). Rising dollar rates will be in response to this new currency problem, not the present non-existent local US inflation. Later, the fed will be seen as far behind the inflation combating yield curve. However, these rising rates will fully cap the local stock market. Weather it falls will depend entirely on how fast hyper inflation later accelerates. In this environment, foreign exchange controls will play a major negative roll in pricing stocks.
Gold will, at some time meet it's 2nd bout of paper destruction. The next will be far worse. If the currency crisis becomes in full view, there will be no small physical gold lenders to soften the blow. We shall see.
More and replies later. FOA
FOA (1/16/00; 14:16:45MDT - Msg ID:23005)
Reply
Solomon Weaver (1/15/00; 22:16:10MDT - Msg ID:22983)
Hello Solomon,
Good post!
Your point about how average citizen there has a " "dramatically lower material quality of life" " is something I completely agree with. I have known more than a few of them. This is the real difference between their "leveraged experiment" and ours (US). Theirs was based more on trading with America and it's dollar to the effect that it built "paper asset wealth", not a better SOL (standard of living). Because we own and print the reserve currency, we gained the same "leveraged wealth" but also increased the SOL. When this system fails, they will never have had anything to show for it. This is the road they are on now as their currency function has run flat into a failing dollar world. Hyper inflation is in their future!
Their social fabric and organizational skills did create a producing machine, but at what cost in human means? You see, it's impossible to produce yourself rich if you trade the efforts for some "rights to future buying power" like the dollar.
I wish we could all operate a well as they do and also use their ethics (well some of them). Perhaps, in a later time, across this dollar valley we will unlock the creative spirit in all nations as have the Japans done for themselves.
Mr. Weaver, you write:
-----------------But will you not agree with me that the example of how the dollar could leave gold behind or how the Japanese could bootstrap themselves as an island nation with no resources to have more wealth than any Arab nation who has all the oil and gold...that these examples show that "the creation" of wealth in the future is not connected to gold ownership.-----------------
Solomon, gold ownership does not create wealth, it retains wealth created. Just because gold today has a massive amount of past "wealth representation" hidden from view, does not mean that the new owner of gold will have had gold create this new wealth for him! It's no different than if you found a $100 bill on the street, "it's new "wealth representation" created by someone else and found by you". This is our main story. I think far too many confuse out thrust for gold today with "trading for profits" motives. This is not the case.
Further you say: ---------
But, humanity, and its technological economy is evolving into something which will always be filled with debts and promises...if it were to all collapse today..the gold owners would feel rich but there would be a lot less they could buy....----------------------
foa: Unlike most die-hard gold bugs, I view gold as another form of wealth currency in transition. Not a run for the hills the world is falling investment. Yes, the US will lose a lot of not real wealth. But, as I have said so often, this is a perceived wealth based on an illusion. We will not lose something we don't have. Still, I expect a great deal of prosperity as this progresses. Just as many other countries have suffered tremendous loses as the US gained a greater SOL, the reverse can also happen. Many think that without a US powerhouse, the world will fail. It never has and never will. Just a Clark Gable (Mr. Butler in "Gone with the wind") travelled the world after the Civil war, I submit that the same world will be waiting modern travellers that retain their real wealth.
As you say " " humanity, and its technological economy is evolving" " , I agree and it will not stop if the US pulls back.
Also you note: --------------
.I see the large owners of gold taking gold out of the vaults and consigning artists to fashion massive sculptures each weighing several tons (about $10 billion of today's dollars and maybe $100s of billions later on). In time, there might be about 10,000 of these statues fabricated. They would be displayed in public places like banks, corporate headquarters, governmental buildings, world fairs, etc. Each sculpture would............. (and the rest of your post)
Ha! Ha! That is a good way to see it. Let's watch for this to happen!
Thanks FOA
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Aggie (1/15/00; 20:27:06MDT - Msg ID:22970)
Another????
Hello Aggie, yes there is a new Another and he is from Provo Utah, no less. Stay with him and do exactly what he say's. I promise you your life will be forever changed! (great big huge sarcastic smile) Oh, by the way, I'll stay with the original here.
FOA
-----------
Cavan Man (1/15/00; 17:24:07MDT - Msg ID:22966)
Cavan Man, thanks FOA
FOA (01/16/00; 20:56:17MDT - Msg ID:23018)
Reply
Hello Cavan Man,
You write:------------- Cavan Man (1/16/00; 15:23:37MDT - Msg ID:23006)
I can assure you that most of the people I know who are highly leveraged, own no gold (not even gold equities) and are mostly invested in US equities for the most part do BELIEVE their perceptions however misconceived are their individual (and collective) reality.------------
foa: It's only been in the most recent period that such great wealth is held as "documented contract bookkeeping entries". Weather these numbers are stock values or saving accounts, they are all derivatives that indicate what "someone could buy, not what they have brought. As a percentage of American holdings, the actual converted and paid up wealth in the form of real useful things (cars, houses, furniture, etc.) is tiny compared to the overall leveraged paper wealth holdings.
Most people equate the system like this:
" " I can cash out my winnings anytime and buy a gold bar. In fact, I did sell a little today and brought a Maple leaf. This proves that we can time our exit for our benefit" "
Truly, what this person is missing is that his actions completely mimic the overall American system and are what preserves it. Just as I equated the dollar to a gold futures contract, so too is the total dollar economy. In this system, we are, every day, taking delivery of some goods (comex gold delivery), just not total delivery as stated in the "full money supply" context (comex open interest).
As long as all of us don't try to buy with more than 5% of our assets (calling for delivery for say 100 contracts), the system works. Yes, any economic system operates with some relative savings for future delivery (retirement, saving for school, etc.), it's just the gross extent of our leverage today has no possible comparison. The present risk is outside any historical precedent.
Without any yardstick for measurement, most people are comfortable that their paper wealth is somewhat real and remain with it. Only now, the foreign holdings of dollar assets has grown so large that if it "comes home for delivery", it will break the system without our buying help!
Your words:-----------------
I submit to you there are very troubled (social unrest) waters ahead in this country if events progress as you forecast. What do you think?-------------------
foa: C Man, from the beginning of time people have been gathering and losing what they have. It seems that as a people, it's our lot in life to, periodically do battle over "who took what from who" and "who failed to honour their contracts to deliver". It's nothing new. However, there is a recent precedent that says things will be bad locally but not internationally.
The recent downfall of a world "nuclear super power" happened without a world war or the use of weapons of mass destruction. Russia was bankrupted without a shot being fired at the west for doing it. Does this mean that the US will sit still as it's dollar is gutted on the international markets?
You say: ---------------I remember the animosity paid toward ME persons and nations during the 70's due to the oil crises. Americans can become inhospitable with great alacrity when it comes to their gasoline. How can all come to pass (as it evidently must) without major domestic and (hopefully not) international upheaval? Add xenophobia to politics and the recipe for disaster becomes written upon all minds.------------------
foa: I think that locally, the US will experience some bitterness as people realize what they never had. We borrowed so much from our unborn children that it could never be paid back. So, the international community changes the rules in a way that forces us to pay our own way now and we don't like it. Interesting, our debt supports a life style higher than most of the world and anarchy is expected if we must repay it.
We will all have to see how this plays out. thanks FOA
FOA (01/16/00; 20:58:26MDT - Msg ID:23019)
Reply
-------------------
Journeyman (1/16/00; 15:55:09MDT - Msg ID:23007)
Oil shale: A spoiler, FOA?
But FOA, there is one factor, it could be minor, I don't have the context knowledge to judge, which may affect your thinking a bit. Oro, you especially may be able to put this into context in terms of "strategic" value.
Clearly the size of the reserves is significant. The question is, is it significant enough to affect your scenario FOA?
---------------------------
Hello Journeyman,
If not another drop of foreign oil was imported into the US, world oil production could be cut in half and still receive the same dollar revenue as today. You see, oil prices are only one part of this drama. Dollar use and value outside it's reserve roll is the main problem.
In addition, as stated before, even $200 a barrel for west texas crude may not spur oil shale development if local dollar price inflation becomes too great.
See the picture? thanks FOA
------------------------------------
Strad Master (1/16/00; 18:39:13MDT - Msg ID:23008)
Hello Strad Master,
The same answer above applies to your question of using the US oil reserve. Also, in the past it was a real political card to play, Today, it's just a card.
You ask:-------------
2.) Would it be prudent for those who speculate to buy Euros with dollars and just hold them against an inevitable price rise you see in the relative near future? -------------
I would say one should choose their savings accounts with all the considerations offered here. The world financial system is always slipping like an earth fault. The question is can your wealth survive a full quake? For myself, Euros look just like a regular way to save some of my money.
Also:-----------
Do you remember my question of a few days ago about the circumstances in which you and Another might reveal your identities? Is that ever a forseeable possibility? ----------------
foa: the major push of these posts is that you look for economic events that explain where we have been walking. If they tell you your trail is correct, then we are thinking for ourselves and perhaps seeing the world as others do. Not knowing us forces you to look closely with your own eyes. The understanding gained in this way is wealth that lasts forever. Thank you for reading and thinking
FOA
FOA (01/16/00; 21:39:45MDT - Msg ID:23025)
Time to go!
SteveH (01/16/00; 20:28:31MDT - Msg ID:23013)
" " one can only surmise that it is the dollars exit strategy or that all of what you say is mere conjecture." "-------
foa: Steve, every thing we humans say and think is conjecture until "something real happens as a result" of that conjecture. Ha! Ha! The real trick is in understand what is "mere conjecture" and "conjecture with a severe purpose". (smile)
Also: The man is doing the best he can with the tools Washington gives him. No more, no less. Besides, Peter has it right: Peter Asher (01/16/00; 20:33:14MDT - Msg ID:23014)
--------------------------
Al Fulchino (01/16/00; 19:17:23MDT - Msg ID:23010)
-------------You are in effect stating that Alan Greenspan was not truthful when he said this money ( I believe around 150 billion) was strictly for y2k confidence among the citizenry.------
foa: Al, did he really say that? (smile)
--------Secondly, is there evidence that dollar flight to the euro is taking place now? -------
foa, I think it's more like the Euro is becoming more useful a tool than the dollar. Read the Barons article this week. If indeed, the assets are drifting towards the Euro as a rising US rate is indicating, then a flight could occur. However, I doubt they want a stampede now. A slow drift would be much better.
------Afterall, oil is in fact now making its run upwards, yes? ----------
foa: Looks like fits and starts to me. But the trend is there. Truly, someone is turning the valves to adjust the dollar oil price.
-------If, it is yes, gold should be being unleashed right now. ------------
foa: If the gap that Michael talks about is still working (I think it is), then the paper market is running out of physical supply. The fact that they had to call in markers from small official sources the last time (to get physical lent), indicates that we have reached the last of the private stocks. We shall see.
--------------------------------
Thanks all,,,,,,,,,,,,,,,,,,,,FOA
FOA (1/19/00; 8:53:32MDT - Msg ID:23197)
Last "overview" for a while
Hello TownCrier:
I read your "Golden View" about the Euroland Gold valuations in (TownCrier(01/18/00; 20:42:11MDT-MsgID:23158).
Do we see the beginnings of a new official gold market being traded through the BIS system. One could almost see where the gold is moving into the EMCBs and only being traded and valued in Euros. We have promoted this shift for some time and anticipate it to grow as Euro use in the international community expands. Especially as the Swiss sales begin. This lack of CB bullion liquidity will eventually starve the London paper gold system, mostly a dollar settlement system for the maintenance of dollar gold prices. Again, it (Euroland agenda) was a process that was designed some time ago and implemented with the Washington Agreement. Indeed, the WA is not the end of this "changing of the rules".
Further:
True, they (BIS) move a lot of gold for CBs and always have. Only, this time (from 1990 to date) they have shifted their agenda in favour of the ECB system. A shift that will strengthen the Euro as it weakens the dollar. This entire evolution of BIS direction and support has taken Washington, Britain and most economic thinkers by surprise. Yet, over the last twenty years it was a very visible and logical move with the Continent coming closer and closer to a new common currency. It's no secret that they (BIS) became ever more apart from political dollar support as this (Euro)new weapon was growing. We can trace this shift's beginnings from the Jamaica Accords (mid 70s)and the first creations of the EEU (European Economic Unit)(early 80s). Later (mid to late 80s) the BIS fully promoted the EMS (European Monetary system) and used it's stability as a selling point around the world. This new architecture is what drew in Arabia to become a member and now sees a new BIS office in Hong Kong (opened in 98??). China will be the next member and a big Euro / gold suporter.
The entire (current) process involves a gradual weakening of the gold market (the paper function of it, not the paper price) to match the Euro expansion (5 years per the WA timeline?). I expected the paper gold marketplace to fail sooner and fall into discount. But the market has yet to fully grasp the impact of these events and still bids contract gold at par. However, we look at the dramatic speed of this change (Euro acceptance) and can see gold coming into severe stress much sooner now. At the rate that Euro financing (and use) is growing, they will be imploding the paper gold market much sooner as they must revalue gold faster.
We watch for the dollar to come into real stress when the LBMA has it's system tested. This is where the real currency transition begins to grow! Again, I do not offer our words as proof, watch for events to confirm. As Another said, "Time will prove all things"!
Also:
Our stance is and always has been that the world will be using paper digital currencies for the rest of our lifetime. I for one, have never heard any official voice his stance that we will move back into a gold standard. Their (Euroland) direction has always been to keep a reserve currency system and strengthen it with a free physical gold market trading in the background. In none of our meetings have we heard where a fear was expressed that the governments will lose control of digital currencies and give it (that control) back to gold. That is simply not going to happen, no matter how severe a down turn the loss of the American dollar system creates. Believe it.
This has been the fundamental thrust of this news. The dollar system is failing as we move into another stronger (relative to fiat currencies) money system. I support, use and promote the new Euro simply because it is and will create the next trend for the future. Not because it's a gold currency of extra hard value. This (Euro) future will see us all using digital currencies, for better or worse. Therefore, by logical extension if I must use a reserve currency of account, I move into one that has the best strategic ability to survive and denominate my assets. In addition, it's creators are restructuring the gold market to the physical bullion holders advantage. This is the only reason I "Walk In The Footsteps Of Giants". They created this bullion path and the world will follow in due time. Therefore, my position of Euro assets and physical gold. Mostly (because I am American), I lean to gold for this transition.
Further:
One can take the radical position that the world financial system is going to end without the dollar. You can also say that the Euro will fail as this process evolves. One can buy gold for these reasons only and still prosper, whether your grasp of politics leads you this conclusion or not. Our sole reason for writing is a private commission to share official directions and perceptions with the average citizen of the world. Nothing else.
Still, stand alone logic and history promote that the world will lose the present system to paper inflation and move into another as it has done before. With this, gold will bankrupt (through extreme price devaluation, $10,000 - $30,000) the outgoing system as hyper inflation runs through it. In a broader view, all total dollar dependent economies (Canada, Mexico, Japan, etc.) will share this fate.
This view gives you no facts only our perceptions from the builders of the future. We offer only the events as they occur for our proof. Indeed, strong events are ahead on this gold trail we all walk.
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Al Fulchino (01/18/00; 20:58:12MDT - Msg ID:23160)
Aristotle
------------And like you, I see what is coming. And I see where FOA's thoughts regarding the euro and oil lead us. --------------------------------
Hello AL, as you have read all of our posts, one can see how oil is the swing power in this currency war. Their commodity has been used to back the outgoing dollar system for some time and in the process keep it alive. Their price in return was a "cheap gold market" and their percent of return will be a new stronger reserve currency and acceptance of physical gold as a real settlement option in international finance. We will all get a feel for this as the oil prices lead the US dollar, and it's world dependent Economy into a slowdown. At the same time, the entire Euro / gold market changes will impact world perceptions about their values.
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Solomon Weaver (01/18/00; 21:46:49MDT - Msg ID:23168)
Compliments to FOA
FOA (1/18/00; 6:57:14MDT - Msg ID:23098)
--------More than ever before, collapse will be of our own doing. Perhaps what we need most is a very dramatic shift in our SHARED UNDERSTANDING of what global politics and economics really is. Perhaps, as the cat gets out of the bag, the politicians and power brokers will not get it back in...at least by the same hole it gets out of. -----------------------------
Hello Solomon, add the above to my "overview" posts and we can see how the shift will affect Western investors the most. This is the segment that is most (mentally) unprepared for a true "marking to the market" of their paper dollar wealth. Again, they will lose nothing but their perception that their buying power was so great. It never was.
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lamprey_65 (01/18/00; 21:47:13MDT - Msg ID:23169)
It's getting very interesting
http://www.itn.co.uk/Business/bus20000118/011805bu.htm
"The Japanese car manufacturer Toyota has threatened to pull its business out of Britain unless thegovernment signs up to the Euro."-----------------------
Lamprey, I can just feel that dollar in my pocket that Michael will owe me. If Britain backs out though, my bet with USAGOLD may break me. (smile)
------------------------------------
canamami (01/18/00; 22:10:58MDT - Msg ID:23172)
Lease rates tumble again
--------------When will the Asian CB's (or the ECB as per FOA), or big Saudi money, or anyone, finally go long big time for gold?---------------------
Hello canamami, they already have, didn't you see it? No, you can't watch the paper contract markets, because they stopped buying those early last year. Also: Forget the current lease rate charts. It's so thin it doesn't reflect the real lending. Most of that has gone off-line. When they do come into the visible market again, it will be as before, in a big overflow that guns rates for the next crisis.
-------------------------------------------
Thanks ALL Good Luck! I'll be after more info and will be gone for some time. FOA
FOA (1/29/2000; 19:12:43MDT - Msg ID:23839)
For anyone that would like to know
http://www.weforum.org/
DRAVOS
ABOUT THE FORUM
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Members, constituents and collaborators have a unique opportunity, through their association with the World Economic Forum, to engage in processes of developing and sharing ideas, opinions and knowledge on the key issues of the global agenda.
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NEW HEADQUARTERS
In November 1998 the World Economic Forum moved into its new headquarters overlooking Lake Geneva.
The new building reflects the culture of the Forum in the following ways:
Our environmental responsibility by being completely integrated into the landscape. The rooftops are covered with grass and recycled glass, and energy consumption is kept at a minimum. The offices are completely open space, creating a true team culture without any hierarchical differences. The new working environment reflects today's network society, not only by being equipped with the latest communications technologies, but also by providing 27 different meeting points and lounges for personal interaction
The building also serves as a "clubhouse" for members and constituents of the World Economic Forum, allowing board and other meetings for up to 120 persons.
The World Economic Forum's headquarters have been established in close cooperation with the Government of the Canton of Geneva and the Commune of Cologny and will integrate a communal shelter equipped for several hundred people.
Message from the President
There are three reasons our Foundation is so special:
First, we constitute a unique partnership of representatives from business and government. Our basic philosophy is that the great challenges facing humankind as we move into the next century can only be met through joint efforts on the part of government and business. But these efforts have to be stimulated by the best minds and have to be made transparent to the public. In short, what makes the Foundation unique is that we are a truly global community, a global partnership of business, government, academia and the media.
Second, we are not only a unique community; we have a very special role to play.
At the beginning of each year during our Annual Meeting in Davos, we brainstorm to help define the global agenda. At this meeting and, indeed, during our numerous other gatherings throughout the year, we discuss the key political, economic and social issues.
And this leads me to the third reason our Foundation is very special: we all have a responsibility to fulfill its
mission: "Committed to improving the state of the world". We are aware that entrepreneurship is the basis for all economic and, ultimately, social progress, but entrepreneurship has to take place in the framework of social responsibility. Therefore I call on each of you to keep in mind our motto: "Entrepreneurship in the global public interest."
We are building the network society. This means that elites will more and more disappear. The new network society will be open and access should be guaranteed to everybody. For this reason, the World Economic Forum has increased its exposure by creating a web-site that allows all the members of the global civic society to be integrated into our activities.
Klaus Schwab
Timeline 1970-79
1970
Klaus Schwab, Professor of Business Administration, takes the initiative and the personal risk to convene Europe's chief executives to an informal gathering in the Swiss mountain town of Davos in January 1971, to discuss a coherent strategy for European business to face challenge, in the international marketplace. He secures the patronage of the Commission of the European Communities, as well as the encouragement of Europe's industry associations.
1971
Klaus Schwab founds the European Management Forum, a not-for-profit foundation, as a framework for further initiatives and activities. The foundation's Annual Meeting in Davos is now considered the global summit which defines the political, economic and business agenda for the year.
1973
Country Forums are created, to bring together the international business community with the political and economic leaders of specific countries. By 1995, more than 500 such meetings have taken place - in some 30 capitals or at the foundation's headquarters in Geneva, making the foundation the leading interface for global
business/government interaction.
1973
After concentrating at first on management issues, the foundation increasingly integrates into its activities (after the oil shock) political, economic and social issues. It starts to play a major role in confronting environmental challenges as expressed, for example, in its role as an official adviser to the Earth Summit in Rio in
1992.
1976
With the creation of the first Arab-European Business Leaders Symposium in Montreux (2000 participants) and the first Latin American-European Business Leaders Symposium in 1977, foundation activities take on an international dimension.
1976
The foundation transforms itself into a membership organization, becoming the catalyst for the foremost global business network.
1977
The foundation starts to organize Country Forums in developing countries. In such a way it highlights the potential of emerging markets and helps to integrate these countries into the world economy.
1979
The publication of the first annual World Competitiveness Report marks the debut of the foundation's research activities.
1979
The foundation is the first non-governmental organization to initiate a partnership with China's economic commissions and starts activities in China. Since 1980, an annual Business Leaders Symposium is held in Beijing and a high-level Chinese delegation comes every year to Davos. No other organization has brought so many businesses to China; many flourishing joint ventures today originated within the activities of the Forum. The foundation has had a substantial impact on the economic reform policies of China.
Timeline 1980-89
1982
The first Informal Gathering of World Economic Leaders takes place on the occasion of the Annual Meeting in Davos, bringing together cabinet members of major countries with heads of international organizations (such as the World Bank, IMF, GATT). This serves as a model for similar initiatives in the global public interest, including: the Club of Media Leaders (editors-in-chief) the annual informal gathering of heads of the world's foremost non-governmental economic research organizations the Informal Gathering of Regional Leaders the Informal Gathering of Global City Leaders the Roundtable of Industry and International Organization Leaders.
All take place on the occasion of the Annual Meeting in Davos.
1982
A special Informal Gathering of Trade Ministers from 17 countries is organized in Lausanneby the foundation, which spurs the launch of the Uruguay Round.
1983
Governors Meetings, integrating the chief executive officers of the world's most important corporations, are created in specific industry sectors. These "CEO clubs" add an industry orientation to the foundation's well established country-related activities. Today, ten such industry groups exist with more than 400 Governors.
1985
Regular meetings begin in India, which have a substantial impact on the opening-up of the country. Concrete proposals made by business participants are taken into account by the government in shaping its policy.
1987
In order to reflect its increasingly global outlook, the name of the foundation is changed to World Economic Forum.
1987
Hans-Dietrich Genscher, Germany's Foreign Minister delivers his famous "Let's give Gorbachev a chance" speech at the Annual Meeting in Davos. This is considered by many historians to mark the beginning of the end of the Cold War.
1988
World Link magazine is launched, covering global business and economic issues for 35,000 decision-makers worldwide, increasing the foundation's publishing activity.
1988
The foundation has played a role in major reconciliation processes in the world, with the first of these initiatives in 1988. Examples are: Greece and Turkey: after being at the brink of war, signing of the "Davos Declaration" between Prime Ministers Papandreou and Ozal, Davos 1988 Korea: both Koreas meet for the first time for discussions at ministerial level at the Annual Meeting, Davos 1989 German Chancellor Helmut Kohl and East German Prime Minister Hans Modrow meet, accelerating significantly the process of German reunification, Davos 1990 East Asia: bilateral contacts lead to the normalization of relations with Vietnam, Davos 1990 South Africa: the first private meeting of all political constituencies of South Africa is held in the Forum's headquarters in Geneva in 1990; the first joint appearance outside South Africa of F.W. de Klerk, Nelson Mandela and Chief Buthelezi brought new impetus to the political transition, Davos 1992 Middle East: Israeli Prime Minister Shimon Peres and PLO Chairman Yasser Arafat reach a viable draft agreement on Gaza and Jericho, moving forward on the road to peace in the Middle East, Davos 1994. Middle East: Israeli Prime Minister Shimon Peres and PLO Chairman Yasser Arafat reach a viable draft agreement on Gaza and Jericho, moving forward on the road to peace in the Middle East, Davos 1994.
1989
WELCOM is created, the first electronic networking system between the foundation's members and constituents. This pioneering effort, operated on a limited scale, has provided the foundation with experience to develop a strong digital information and communications dimension for its future activities.
Timeline 1990-2000
1990
The foundation launches in Davos an unprecedented All-European Summit of heads of state and government, followed by substantial activities to integrate Central and Eastern European countries and the former USSR into the world economy.
1992
The foundation initiates the annual Europe/East Asia Economic Summit with the objective to strengthen economic and business links between the two regions. The first meeting in Hong Kong gathers 400 participants;
it is followed by a second in Hong Kong in 1993 and a third Summit in Singapore in 1994 attended by over 600 participants. Calls were made there for a meeting on the level of European/East Asian heads of government to be held in 1995, creating between Asia and Europe an APEC-type organization.
1992
The foundation creates a new network, Global Leaders for Tomorrow, composed of young leaders from business, politics, academia, the arts and the media, all of whom are under 43 when chosen and are already well established through their achievements and their positions of influence. The first 200 Global Leaders for Tomorrow are appointed, to be followed by another 100 each year. The network provides an additional source of forward-looking ideas and initiatives.
1992
The foundation sponsors the creation of a sister foundation, the World Arts Forum, which convenes 200 artistic and cultural leaders from all over the world to a special meeting in Venice, Italy; based on this experience and contacts, the foundation integrates a stronger cultural and artistic dimension into all its activities. From 1995 onwards, it awards a prize (the Crystal Award) to personalities who, in addition to having made a real difference in the world of arts, have also made an outstanding contribution to cross-cultural understanding.
1993
The first Southern Africa Economic Summit takes place and is followed by a second in June 1994, coinciding with the emergence of the first democratic Government of National Unity in South Africa.
1993
The foundation launches the Industry Summit outside the Annual Meeting in Davos, to serve particularly entrepreneurial "Global Growth Companies". The first Industry Summit is organized in Cambridge Massachusetts in cooperation with MIT and Harvard University; the 1994 Summit takes place in Palo Alto, hosted by Stanford University, and with the collaboration of Caltech and the University of California, Berkeley. The cooperation of the world's leading universities ensures the latest technology-research and
knowledge-oriented input into the activities of the foundation.
1993
In order to reinforce the club character of its networks, the foundation limits its activities to members and to their special guests only.
1993
The foundation starts the concept of Forum Fellows nominating some 300 top experts in the political, economic, social, cultural and technological fields as pertinent advisers and contributors to its activities.
1993
The Informal Gathering of Editorialists and Commentators is created to provide the media with its own networks and with the opportunity to interact intensively with the other constituents of the Forum.
1994
The foundation welcomes its 1000th member and launches two new forms of membership in addition to the 1000 multinationals forming the core of the foundation membership: the Global Growth Companies, a second pillar of particularly entrepreneurial fast-growing companies; and Regional Membership which allows the integration of companies with a specific interest in a particular region, such as Asia and Southern Africa. Already more than half of member companies are headquartered outside Europe.
1994
The first Middle East/North Africa Economic Summit in Casablanca is convened by the World Economic Forum in partnership with the Council on Foreign Relations, under the presidency of King Hassan II of Morocco. The Casablanca Declaration produced at the Summit proposes numerous concrete mechanisms to support the peace process in the Middle East and to launch the concept of a Middle East/North Africa economic community.
1995
The foundation holds its 25th Annual Meeting in Davos.
1995
The foundation takes members on a Special Trip to the Greater Mekong Subregion, creating a new identity and new forms of cooperation in this rapidly developing growth area.
1995
The Forum has actively promoted the integration of Latin America into the world economy for many years, and in 1995 the first Mercosur Economic Summit is held in Sao Paulo. The Summit is instrumental in overcoming a crisis situation (an automotive trade dispute between Argentina and Brazil) which threatens the existence of this newly emerging economic region. On the occasion of the second Summit in Buenos Aires (1996), Chile formally joins the regional trade group (Argentina, Brazil, Chile, Paraguay and Umguay) as an associate member.
1996
The theme of the Annual Meeting of Foundation Members is "Sustaining Globalization," and worldwide attention focuses on Davos as the centre of a growing debate, initiated by an editorial, written by the foundation's president and managing director, published in the International Herald Tribune and widely cited in other media.
1996
The first ASEM (Asia Europe Meeting) meeting takes place in Bangkok. This meeting of heads of state and government of European and Asian countries was initiated and prepared by our Europe/East Asia Economic Summit.
1996
The first Central and Eastern European Economic Summit is held in Salzburg, under the patronage of Austrian President Thomas Klestil. Attended by all the relevant heads of state and government, in addition to a significant group of business leaders, the meeting creates a new identity for this region inside the larger European framework.
1996
The foundation publishes its Global Competitiveness Report . The report is highly valued by governments worldwide as a benchmark for their own performance. The foundation recognizes its responsibility in this area and brings back the report under its sole control. Jeffrey Sachs, Director of the Harvard Institute for international Development, is co-chairman of the Report's Advisory Board.
1996
The Council of the World Economic Forum meets for the first time at the Annual Meeting in Davos. The World Economic Forum integrates its Foundation members in the decision-making process via the Council, which is made up of some 40 eminent representatives of member companies. They meet twice a year.
1997
The Africa Competitiveness Report is published for the first time. This new study undertaken on a region's competitiveness is based on the model of the successful Global Competitiveness Report. It is the first comprehensive competitiveness study on the African continent.
1998
Creation of the Business Consultative Council, a group of over 30 heads of business associations from around the world and heads of several United Nations bodies meet for the first time in Davos at the Annual Meeting. This innovative initiative of the World Economic Forum offers the UN the support of business and aims to install a permanent relationship between the business community and the UN system.
1998
The Forum moves into its new headquarters at 91-93 route de la Capite, 1223 Cologny/Geneva, Switzerland.
2000
The Forum holds its 30th Annual Meeting in Davos.
FOA (1/29/2000; 19:22:46MDT - Msg ID:23841)
Is this more clear?
World Economic Forum in Davos, Switzerland
"Informal talks" as reality overcomes illusion.
I was just thinking:
In the January issue of News and Views" from USAGOLD, Michael Kosares noted that; "In my view, we are witnessing the breakdown of the dollar based floating rate system erected in the 1970s to replace the ill-fated Bretton Woods arrangement." He then gave his many good reasons for that view.
I couldn't agree with this more, especially the above statement. The late 60s into the early 70s is where our current gold trail began and today we are seeing more twists in this winding path. From the beginning, our gold marketplace has been little more than a reflection of the same forces political powers exerted upon all world markets. Indeed, gold has never ended it's function of being a major currency component of international reserves. Because of this, it has received the same exchange rate pressures that governments have exerted upon their own paper moneys. Today, our private gold marketplace is maneuvered to act as a proxy for the governments political needs as it (the marketplace) prints gold as needed to impact it's price. No different from the treasuries printing money and intervening in currency exchange markets.
Can there be an end for this?
In these power games we know that nations states always have an agenda. This purpose is slowly revealed as the repeating force of policy direction eventually exposes their thoughts. In time, these political thoughts are shaped into real events for all to see. The recent Washington Agreement and the BOE gold sale are a prime examples of this. Still, if one can feel the political purpose ahead of time, just the background events can mark a clear trail. From our (Another/FOA) table we offer the "Thoughts" that in time can give birth to official acts.
The Currency Trail and The Gold Trail, two moneys on the same path?
On this forum (USAGOLD) and many others, readers are sometimes exposed to opposite extremes of "money" thought. I submit that History and Logic say neither of these extremes will "Play" in this "Modern Drama".
On the radical side, ........."the serious gold bug" says all currencies will fail and only gold is the correct investment. All currencies are created by the same evil, misguided governments and should be avoided at all costs. Even degenerating into a lower scale of emotion, they point out that all forms of money politics are gross manipulations of the public. All with Secret Agents and a New World Order that controlling the worlds wealth......
The intrigue never ends! I submit that this is a "common view" that's been promoted for 200 years. Today, serious investors know that as a modern people, we can only hold real wealth for endurance, not daily use in commerce. Patiently, knowing that in time society always creates the political motives that unlock gold's value hidden by the "illusion" of today's reserve currency system. In gold today we find this hidden wealth and observe the march of "Giant Footsteps" in a direction that's unlocking it's value. Still, in the end, society will use a currency system to denominate this wealth transition. A different system, yes, but a digital one never the less!
On the conservative side,...... "the dollar inflation experts" have witnessed the ebb and flow of minor price inflation events over 25+ years and base their preparations on the next event being the same. As such, this view expresses an expectation that this currency (the dollar) will continue on indefinitely in inflation and deflation cycles. It assumes the dollar system has retained the same fundamental values it had in the past cycles and the world will continue to use it. Yet, hidden below the surface is the rot of massive dollar expansion and the debt that has produced it. Each cycle of economic expansion was built on a greater multiple expansion of dollars. All without an overall increase in productive abilities of the American machine. Indeed, some measures show that the ability of the US to produce goods locally has declined in real terms as they transferred a large portion of said production to other peoples overseas. A dynamic that actually further removes more economic function from backing the dollar money supply.
I submit that this modern "American Experience" of dollar production has completely overtaken the ability of this system to engineer "one more cycle" of regular dollar inflation!
For ourselves, we walk far away from these two concepts. In reality our position remains in the absolute center.
In our view, the buying of physical gold should mostly be form dollar asset holders because this is the currency system that is going to change. A strategy for both foreign and native dollar investors with foreign holders changing settlement to Euros.
Yes, history does show that no currency has ever lasted and all will fail. A point we completely agree with. However, recent history of our modern time clearly demonstrates that as every past national currency failed, the world economy moved on to the next functioning currency system. We have progressed too far in trade efficiencies for us to function without a digital fiat system. For our world, there will be no going back to "gold alone" Therefore, we fully expect, accept and plan for a reserve currency system to be in operation as the old one fails, and so should you. It's a prudent, conservative concept. In this transition, dollar gold prices will best reflect the hyper inflation that will wreck the outgoing system.
Further in our view, we feel that the dollar timeline has ended along with it's past "minor inflation" cycles (8% to 15%). This time a new price inflation will take hold and "run away" as the world evolves into the next system of settlement. Again, the dollar will remain the the US currency unit. America will continue to buy and sell using dollars, much the same as other countries with major inflation It's the reserve currency settlement system that will change and effect the dollar value.
Onward:
Why so much gold now and not before?
It's always been a good individually policy to hold some gold. Especially after circulating gold lost it's ability to function in a modern evolving economic architecture (1933?). Yes, over all these years, one aspect for holding physical is that a natural disaster, a local banking panic or short term trade dispute could find one using gold coins. However, this has always had a short term impact with long-term effects on wealth. Look around at the other national economies that have been destroyed lately (and in the past)? Go there and we find that they are still using the broken, local fiat systems. Had they held some of their savings in gold or strong major currencies, most of their wealth would have remained intact. So, holding some gold (or gold stocks in a foreign account) worked fine.
But today, the world has evolved. In our modern perceptions we hold gold for two reasons. 10% (of the reason) is still for use in a temporary currency breakdown. 90% (of the reason) should be for gold to represent your real wealth in a form that negates the effects of a "failing WORLD DOLLAR reserve currency system", not a just another "local" cycle of inflation.
It's in this second 90% reason that we find the most misunderstanding of our times. Many gold investors of "Western Thought" own some gold for the above 10% reason. The rest of their wealth is denominated in the currency they expect to survive the best, the dollar. In addition, they retain gold derivatives that owe their existence to a world "dollar marketplace". For many years they have lowered their holdings of physical gold and replaced them with these leveraged dollar gold derivatives. All because they accepted the concept that the dollar and it's world markets will remain intact through the next cycle. This massive discarding of real gold has altered the physical marketplace by supplying gold for commodity use and creating a demand for paper gold products. In effect, Western Players shorted real gold, then brought into gold mines that also shorted real gold! To date, the massive volume on the LBMA is a testimony and confirmation of this new gold market based on contract gold.
Again, on one side we hear a conservative voice that says the dollar will complete another cycle of price inflation as past money supply expansion works it's magic. Just like the 70s we will see prices rising 6%, 8% or even 13%. Knowing how money principles work, the average investor has but to position himself in "derivative inflation hedges", gold stocks, oil stocks, REITs and commodity futures. Then wait the cycle out. Expecting some inflation or a partial dollar breakdown, they consider themselves prepared by holding paper wealth based on a continuation of the dollar marketplace.
Something has changed!
They totally ignore the fact that past dollar inflation produced price inflation, early on. Yet today, world dollar liquidity has grown at huge rates for many years (perhaps a decade) without this price effect many had expected. Some have been positioned, on and off in resource investments that have yet to produce the gains "relative" to those experienced in the 70s inflation. Financial panics come and go, yet dollar use has only increased. The US trade deficit explodes for years with no ill effects. Local and world dollar interest rates remain somewhat tame in the face of what should have been a panic flight from US investments.
All of this clearly points to a currency system that "WAS" being held together and supported by world Central Banks. There is simply no other answer for this action. As this support unwinds, look for the old rules to be broken.
We walk this trail today!
A rising dollar today is an indication of "deflation stress" under the surface. Players scramble to unwind positions as dollar liquidity dries up. The withdrawal of dollar settlement in world financing, savings and CB reserve structure destroyed dollars like soup on a slow boil. In time (like today, like now!), dollar exchange rates are driven up in much the same way the Yen is. The process represents weakness in the background financial function, not strength inherent in the integrity of the currency. The reverse leverage in the market destroys more assets as the currency rises.
The US Fed must flood the world with money in order to stop the stress. It is! Indeed, the BOJ has and will follow the same course. It's called the final inflation.
The world dollar gold market we all thought we knew will respond in a way not expected. It will fail! Contract gold prices will be stressed from two forces........... From one side, major users of this paper market will flood the market to the full extent of their equity. Creating gold contracts out of nothing but the dollar bank accounts that stand behind them. Just as the Fed is pumping money to try and protect the banking system, so too will gold contracts be created to try and protect the gold banking system ................From the other side; As this unfolds, major demand for physical gold will erupt from official sources world-wide. Not the kind of coin buyer demand we know of
from the past. No, this is the kind of serious buying none of us have ever seen! As the "dollar boil" becomes more obvious it (physical demand) will completely avoid the contract market and go straight into the much smaller dealer market. In effect, allowing contract gold to experience a void on the "buy side" as physical gold completely disappears on the "offer side". Some "traders contend that they will sell their gold if it goes into the thousands and buy a car, new house, etc.! This from "behind the desk" players that think they will lean back and observe the largest shift in real wealth ever to occur. And do so at a computer screen, no less. No, no they will not! We hear these words in the context of today's soft reality. Later, it's the extra houses and cars that people will be selling to buy more gold. Believe It!
None of this has happened yet, or has it? From the Washington Agreement to date, all aspects of the contract market have become "strained". Major players have withdrawn from the physical lending markets and left behind a small facade of unbacked "paper lending". Hence the low lease rates. Some mines are in default on major gold loans and Comex Open Interest falls away. I expect the comex to receive some major use when the next (real!) spike arrives. Perhaps from paper hedging paper? We shall see.
A Story: There are facts, reality and only one's perception separates them.
------A New York plumber walks into a hardware store for supplies. After paying and receiving his change, he accidentally drops a penny on the floor while walking away. The checker points out his lost penny. The plumber says he can't afford to pick it up. The checker asks why? My friend, he says I makes 60.00 an hour. That works out to .0166 cents a second. If I pick up that penny, I'll lose money. In fact, just talking to you cost me .20 cents. Let me out of here or I'll go broke!-------- (smile)
ALL: The world does not think this way, but to hear some people talk you would think it does.
---------When a stock goes from $10.00 to $100.00 the same day, it's reported it went up 1,000%. If it goes down to $50.00 the next day, it's said it dropped only 50%. Yet the investor that brought it for $10, just lost half his 1,000% gain, or -500% down! --------------
--------If we are told that a stock that's been falling for years and is down 95%,,,,,,,,,,often the same bullish trader has been in and out of that issue "all the way down". Most of us would agree that human nature being what it is,,,,,,,,,,, he lost far more than 95% on this long journey! In addition, the "mind set" created from this trip must affect ones judgement of wealth? Often making it impossible to walk a different trail. ----------------------
I'm back into the sea of thoughts, now. Be back when I can,,,,,,,,,,thanks FOA
FOA (1/30/2000; 11:37:56MDT - Msg ID:23870)
Comment
ORO, Cavan Man:
I put the Dravos web site up so everyone could see what they were about (at least some of it). I'm not in their mind set nor do I agree with some of their ideals. It's just a view into their forum agenda.
Also, they are in no way the powerful minds behind the worlds political thrusts. They mostly represent the viewpoints of the major players behind them. It seems that the real movers in this world don't look good on TV, can't talk to audiences and in general do not present their thoughts well. They usually present an agreed architecture concept and leave it to the professionals to implement. At least this is my view and experience of this?
Cavan Man,
What is the USD camp response? Well, the fire has been burning from march of last year. It started small (in the basement) and is spreading now. I think Mr. Greenspan has been trying to put it out with a money spray, but he and everyone else knew that would only work for so long.
We said once before that the game was over and the US would "manage" this crisis to the end. Even to the point of forcing the IMF gold sales into open view and creating a contentious outcry. If you remember, I said last year that the US was coming around to letting gold rise because its revaluation could help control the dollar fire. Just like turning around a tanker, the political dollar machine had to slowly reverse to encourage this. Did they know congress would jump on the IMF gold sales and force a revision? It's your guess. Never the less, the IMF is now well on the road to reworking (even more now) it's gold stocks for the purpose of supporting the dollar with higher gold prices.
What a reverse, huh? For years they want gold down, now they want it up. Well, it had to happen once the dollar fire began to burn out of control. Besides, with oil prices spiking, there is an obvious (now) disconnect between low gold prices and cheap oil. Want to bet that the creation of the Euro had anything to do with this? (smile) Notice that they (USA) signed onto the Washington Agreement. They didn't have to, you know. Are we reading the trail clearly, now?
The only players left in the paper gold market are the final fall guys. All the LBMA people. They now hold the full deck of cards in this modern gold market and the CBs and governments have walked away from them! Yes, their (CBs) support is still there, but only in the form of crisis management if gold runs completely away. Witness the small CB lending at the height of the last crisis. Truly, the entire world currency architecture is shifting away from supporting the past paper gold market and allowing it to slowly die. At some point (Another says $360) it will begin a real breakdown and close it's doors to trading.
Just as the Fed is now "managing" an all consuming dollar fire, so will the last of the gold bankers "Manage" their now ongoing fire. Eventual, it will take them completely out of the gold banking business and leave a wake of scorched earth. Everyone (and I mean everyone) that must utilize gold derivatives to work this modern market will be hurt by this. Even some major players are showing the road ahead as they must unload big positions in gold derivatives (last Friday) because of (you guessed it) this dollar burning crisis. And we are only just getting started! Who is going to bid for future gold (paper gold) when it's delivery party is being cleaned out on the cash side from an unrelated play? Indeed, will anyone bid for paper gold when they themselves are being skinned in this? You see, there will be no security in dollar gold derivatives when the whole dollar house is on fire. They will bid for metal that is available "right now" or not bid at all! Only the "straight up" "cash bullion only" dealers will come out clean and strong in this. Is this a correct read of the cards all the players are holding? Let's hold some physical, lean back and watch the events unfold. We are "on the road", but the paper prices we watch may spike either way. It's now a political match that's between who can manage the fire best as it finishes it's work.
Back to the dollar: The Europeans are going to eat everyone's economic lunch with this low Euro! Just think, the markets have done for the ECB what the BOJ has been fighting like hell to achieve. Now, they (Japan) must gut their financial system with a "real live inflation" just to get back to a competitive zone (currency wise). Read this analysis someone sent me and then consider that some investors thought Japan was a good play:
****
I'll get back when able
Thanks for reading and thinking,,,,,,,,,,,,,,,,,,,,,FOA
FOA (01/31/00; 20:29:25MDT - Msg ID:23964)
Part 1
Part 1
Hello everyone,
Finally I have some time. Permafrost has come into this forum and made a few posts that need review by us all. I'll present my case against his position as in a court with all of our forum members as the jury.
Hello Permafrost,
Nice to see you today as we stand before the court of public opinion. Now we can feel the pressure many of my friends feel before voters (smile).
ALL: What we have here is a person walking into our convention where FOA has been offering his reasons for gold for a year,,,,,,,,,then Mr. Frost stands up and says ""he's (FOA) telling you to buy Euros"!
He comes in on (12/24/99; 2:31:01MDT - Msg ID:21594),,,,,,,,'saying
--------Hailing from a "Third World Country"! Mes Compliments to you all! Dear Forum particants, I have stumbled upon this Shoe Box while shuffling my cyber feet to locate the LBME site. After a few weeks of perusing the postings, especially those by the Elders----------------
,,,,,,,,,,,,,,and suddenly he is an expert on my position?? From a person that has read for a "few weeks" and is so new he just found the LBMA web site!!
(Your Honour: this line of reasoning goes to "experience credibility" in the affairs of the modern information markets.)
My Position:
I state this from the beginning: no one can claim an understanding of a book if they read and use only the last chapter for reference. This is essentially what Mr. Frost has done. By design of purpose or by mental accident he has stated my position out of context and continues to do so.
Before me, Another proclaimed that gold was the only wealth investment Westerners could count on in the long term. Not stocks, not bonds, not currencies or paper gold derivatives. Using hundreds of posts he offered bits and pieces of the puzzle he referred to as the "New Gold Market". Time and time again, he pointed out the relationship between oil, gold and currencies as they were maneuvered by the political wills of the world. Of course, just like you, me and everyone that reads this forum, he holds other investments. Yes, all the usual paper items traded in this modern world along with the other hard things. Like property, businesses and personal belongings.
Still, the thrust of his logic was "always" that the dollar would fall and gold would rise! His reason dictated that one could extend their wealth, safely through this coming transition by holding a large position of physical gold.
Myself, I have also produced hundreds of posts on this forum,,,,,and they all presented the "logic" and "reasons" for holding gold. Yes, some of them said that the Euro will eventually be strong. But, always the "Euro Event" in our time was viewed as the main catalyst that would propel the dollar down and gold up.
Mr. Frost; you must present a series of my thoughts that in a chain of reason conclude what you present as true. Otherwise your posts are false and without credibility. Show us where my "chain of thought" or "logic in progression" has directed one to invest in Euros without gold or in Euros and not gold. If you cannot demonstrate this reasoning, your contentions are worthless for consideration and must be discarded.
My thrust and feelings for gold as stated in from hundreds of posts, are most clearly stated in the end of FOA (12/28/99; 8:34:38MDT - Msg ID:21734):
Gold, the only investment needed for the next thousand years
Onward:
In Mr. Frost's post of (12/29/99; 7:40:27MDT - Msg ID:21773),,,,,,he replies to Cavan Man
---------I find your train of thought quite pragmatic for the most part. But I personally don't think we'll have a "fix" to our dollar-based monetary systemic problem. That would be like trying to cure the disease...I think it'll be a wake up in the morning into a new world sort of cathartic affair. For gold and finance are mutually exclusive. ------------------
ALL: This is in part something I completely agree with. Our views part ways in that I see the Euro eventually taking over the dollar's reserve function. Reducing the dollar to a much lower standard in world affairs. For this transition I proclaim that "Western Investors" buy mostly gold. But, knowing that everyone holds other assets, we should try to denominate those (other) holdings in Euros if possible. So, just like he says (Mr. Frost) ------I don't think we'll have a "fix" to our dollar based monetary systemic problem ---.
Part 2 is next.
FOA (01/31/00; 20:34:19MDT - Msg ID:23965)
PART 2
Part 2
ALL: Early on Mr. Frost addressed me in (12/29/99; 3:21:27MDT - Msg ID:21765)------Dear Sir, Based on your logic, two outcomes are possible.----------
How nice, he even said Dear Sir. Proving the point that he is capable of civil conduct in the affairs of professional people. (Your Honour, this line of reasoning goes to purpose of action,,,,,,his later caustic conduct is wilful and meant to discredit)
As evidence: My reply to him is reproduced below. I submit that it clearly lays out my reasoning, logic and produces an expected course of events. Please read for the peoples court.-------------
FOA (12/30/99; 16:38:17MDT - Msg ID:21859)
Reply
Hello and welcome Permafrost,
I'll comment on your items in order:
------------------------------------------------------------
PERMAFROST (12/29/99; 3:21:27MDT - Msg ID:21765)
FOA Msg ID: 21734
Dear Sir, Based on your logic, two outcomes are possible.
1) If you're right and we are witnessing the re-monetization of gold than all those that benefited from the fiat money scheme will lose their power. ------------------
Mr. Frost,
Not all of them! Only the ones that did not hedge their power effectively. Surely the Euro will carry some of the same political agendas the dollar currently does. Only, it will be controlled more so by the cross currents evident in the various old world countries. Let's face it, we all need a dollar like currency if our modern economy is going to function. What we don't need is a single reserve currency that precludes any avenue of escape if it hurts other countries. If gold is trading in a free physical market, no one is going to run to gold as a single currency and leave the Euro entirely. Indeed, a free world economy needs and demands a currency that can expand and contract with changing conditions. The curse of the old gold standard was that it didn't allow this latitude and always created a crisis when needs required this flexible money supply. Only a separate gold market can offer a means to truly measure the success of the money creating treasuries. This is the direction we are heading, for better or worse.
-----------A gold backed and restrained financial system (An oxymoron, in my belief) will simply preclude them from accumulating goods and services against monopoly money -- the source of their power.--------------
Well PF, the power you speak of can also be held through the use of gold itself. Many a king and monarch ruled the land with the effective use of bullion. Your oxymoron is not in the restraint of the monopoly money, rather in the present lack of a free choice between "gold wealth" and "dollar wealth". The blending of these concepts will create a new power block that must conform to the needs of all.
----------2) If you're not and gold is merely being used as a relatively-untapped "new" source of non-debt-backed dollar creation, than it's a very old game we're playing, indeed. Was not gold itself responsible for one of the greatest INFLATIONARY explosions in History when the Conquistadors "expropriated" Aztec gold and brought it all to Europe to consume (chaseafter) a "limited amount of goods and services"? Colombus turning over in his grave? -------------
PF, During the time of the Conquistadors, we must consider that goods were not being inflated in price, rather gold was being devalued! At the very least gold did not disappear as bank notes do. No, the coming run in gold will be a reflection of the tremendous dollar inflation already in the system. It's only in the eyes of the Western dollar saver that this price inflation is unwarranted. Again, they are only loosing something they never had. An illusion of wealth on a grand scale.
------QUESTION: Do you know of any emperor (I think you called them 'Grandees' here on this forum) who's willingly abdicated power--Besides God himself?------------
My friend (PF), power belongs to the swift of heart and mind. This world waits for no one as power flows from peoples to peoples. Even the strongest emperor knows to occupy the high ground before the flood. The powerful in tomorrow's future will own gold today. Thank you, FOA
------------------------------------------------------------
ALL:
At the beginning of this post (above) I made the statement: " " Surely the Euro will carry some of the same political agendas the dollar currently does. " " .
This item alone is proof of my opinion of this new digital currency. It will be little more than a digital contract item of settlement,,,,,,a fiat currency in competition with the dollar for reserve use. It's advantage is obvious ,,,,,,,,, it's new! History has shown that every currency system "at least" has it's time on stage,,,,,,,and they always start out with low debt and a dearth of holders. For this reason alone it will function for at least a while. Do I say "hold only Euros and no gold"? Of course not! Who here could read such a position into this given viewpoint?
Further:
Again he addresses me in a civil manner as below:
-------PERMAFROST (1/3/00; 3:35:05MDT - Msg ID:22106)
Dear FOA Sir,Having noticed that the last of my three part posting is shown first, I thought you may mistake the tone to be on the inflammatory side. It's not the case. I consider it a privilege to have an intelligent conversation with people of knowledge. Please go to Msg. #1 then proceed
"upwards." Thank you!-----------
To the court: The gentleman posts in a civil tone only to give way to a caustic format later. For what purpose does one so obviously break the social rules of forum conduct?
Again, I reply to all of his items and clearly present my position. This is an important post as it dissects most of Mr. Frosts future comments about my position. It clearly shows that he did not comprehend it.
Part 3 is next
FOA (01/31/00; 20:41:03MDT - Msg ID:23967)
PART 3
Part 3
ALL: Below, I clearly demonstrate my position on the current evolution of financial affairs. Please read for the peoples court:(I will comment on each part with ALL: preceding my analysis)
-----------------------------------
FOA (01/08/00; 17:34:05MDT - Msg ID:22538)
Reply
To ALL: I'm trying to catch up now. More to follow.
Hello PERMAFROST,
Sorry to see you go (if you still are gone?). I'll reply to your comments, somewhat in order.
You write in :------------
PERMAFROST (1/3/00; 2:31:57MDT - Msg ID:22103)
FOA Msg ID: 21859 Part 1
Dear Sir, Thanks for your response.
--------You are advocating a global financial system predicated on the peaceful and mutually-beneficial "concubinage" of gold and the "new girl in town" fiat money the Euro which you unwarrantedly presume to be relatively more "chaste" than the Old Whore, the US dollar, ONLY because it is not "backed" by as much debt as the dollar, and its "lovers" (the EU Central Bankers,the Rothschilds?; an assorted variety of Illuminati and various other power brokers playing both sides [the sheeple?] against the middle [more sheeple]) tip their hat at gold without solemnly declaring their allegiance at sovereign money, PM etc. ------------------
No Mr. Frost;
I don't advocate that. I think this is your perception of future events. This transition will not be "peaceful" in any way. Any time one large official faction (Dollar/IMF group) has it's money power replaced by a new official faction (Euro / BIS), it's never peaceful and not without significant loss of wealth by some of the players. I add that both little and big players get hurt when these events happen. Usually, it's the little "uninformed" players that lose the most. Your observation that people are "sheeple" comes as they step in front of a train with no breaks. Then you tell the world that "someone" is out to get them. My experience is that the average investor is much more intelligent than that and they can do a good job of "moving" off the tracks if it's pointed out to them that a train is coming. The dollar is giving up it's reign as a reserve currency, not "only" because it has so much debt. It's being replaced because it's inflation (total money supply, dollar derivatives supply, dollar debt supply and the official liabilities foreign nations hold as reserves supply) has discounted so much future real US production, at a constant exchange rate, that it is losing the ability to function as a reserve currency. Every currency on earth has one day come to this end. We call it a "fiat money's timeline". At this point the users of this money begin to either "deflate it's supply" through debt and payment default, or the they devalue it by bidding up the value of real goods (price inflation). Once either of these begin, the money function of that reserve currency declines. Further, one will find that deflation is only a choice if no other official world currency is available to run to. World citizens vote with their feet at this point and greatly discount unpayable debt thus causing said deflation.
Inflation is the choice when people can "refinance" into another currency media. Leaving the old to contend with an ever increasing velocity of the useless money supply. This is the fate that waits the dollar.
Is this some structure brought about by a New World Order? If you want to see it this way, then remember the world has been doing this from creation. I only add, why bother to put the "New" on it? Let's just call it "Next World Order"! Besides, it's only one peoples as a nation group (EURO/BIS) trying to protect their wealth because another nation group of peoples (Dollar/IMF) borrowed more that they could ever pay back! Still, I read this New World Order faction (NWOF) as loudly declaring the Euro as a fraud, yet they (NWOF) are hip deep the dollar assets of a country that "defaulted on it's gold delivery. Twice! Then they (NWOF) yell because no one is creating a new gold or gold backed currency. Why do that? So we can be defaulted again by the "NEXT World Order"?
-----------------------
ALL: Later on Mr. Frost tries to paint a picture that I did not hold this logic. His future contention that all the "boys in control" are in the same club and the Euro is but another dollar. My chain of reasoning demonstrates how his logic is flawed. The very fact that we find "tribes" and "sides" on this forum speaks volumes about human interaction. In like kind, world power brokers also form "tribes" as they jockey for position in world affairs. Is this not plainly obvious to all of us? They even fight among themselves as witnessed in the Euroland struggles. But this is no different than the US political fights. Still, we all band together in larger groups when it comes to world affairs. Financial power is no different. Sure, they all hate gold, but they will embrace it if it gives them an advantage in currency warfare.
In my next reply to his several part post, I offer the logic and reasoning behind the dollars position. Why it is managed today in a defensive posture. It presents it's weak link from where the Euro/BIS faction can attack.
------------------------------------
-----------------------------------
You write:
-----------------
This fiat money is necessary, you say, because it will allow management [manipuation] of the economy without suffering the deleterious side effects that a rigid gold standard has saddled us with in the past. Would you care to draw for the benefit of the forum the the philosophical line that separates you from, say, an Alan Greenspan, as per the gold/fiat money relationship? do we not have TODAY a fully-floating POG alongside the dollar? What shall we gain in re-baptizing fiat money with a different name, i.e., the Euro? except the prolongation of the Game? IF gold IS money than nothing else is. Disagree?
--------------------------
No PM;
We don't have a fully floating price of gold today. This is the illusion (paper gold) that has many people (such as yourself) locked into a narrow view. Mr. Greenspan has always seen the gold money relationship from a US dollar perspective and holding the US as the only dominating financial power. He knows that the dollar could never retain it's position if gold became a "separate settlement currency" through a true world free physical market. All of the dollar price inflation that is currently locked into the present dollar supply inflation would present itself. Dollar reserves held world wide would become useless unless they could be used to buy real US goods (at a non inflated price).
Truly, Mr. G. only sees gold from a Washington view and even that must be locked in the cellar. He manages a system built by others and must use the tools this system allows. The present paper gold market is as much a function of the dollar value as interest rates and it is controlled as such.
Today, gold is money, I agree! But, it is not and never can be a fluctuating (in supply) digital money of high speed settlement. For it to work it's past magic in this modern world, it must trade in physical form without derivative use. It will.
----------------------------
ALL: next I conclude the replies
----------------------------
----------------------------
You write:
PERMAFROST (1/3/00; 3:02:19MDT - Msg ID:22104)
Reply to FOA Msg. ID: 21859 Part 2
Capitalism, this familiar but insidious term really stands for the wilful confusion of a descripitive proposition [that private property exists] with a PRESCRIPTIVE one [that private property and the wealth that can be generated from it is GO(O)D]. -------------------
No PM,
not at all.
This is the standard (higher level) teachings in modern Western education. History proves that "real private property" has and always has been both wealth and a purchasing power medium (money). Through the best of times and the worst of times, in war and peace, people have always had private property. Even in Russia of old, they had to allow people their things. Even if these positions weren't recorded "officially". A universal truth is that no form of official ruler-ship can function unless people have some private wealth. Never has worked for even a short time and never will. Further, generating more wealth from private property (owned wealth)is only good if one can overcome the "RISK" that comes with it. This is nothing new to most of the world. It's just a different concept for modern Western man.
You write:
---------------
It's a logical fallacy that doesn't survive the glare of critical analysis. Omit the adjective "private" from the premise and what you end up with is the other side of the coin, or communism. Both systems are basically worship of materialism and humanistic (man is the measure of the universe) propaganda. Now, whereas communism theoretically aims at generating its "GOD", or 'goods and services' in economic parlance, via the sweat and toil of its fellow gods (the proletariat), capitalism is predicated on CONSTANT INSTABILITY [the insidious rhetoric of the bankers notwithstanding] of the prices of these very goods and services, the [managed] fluctuations of which allow the people Greenspan works for to earn wealth they did not work for. -----------------
PF:
I'm glade you understand this ages old function of humanity. Through out time and space our life quest is influenced by others that try to control our desires. The successful time traveller lives his days in harmony by adapting to the "lay of the land". Today, it's time for gold and Euro assets.
Indeed, what you have just written is the very action that has brought the dollar to the end of it's timeline.
------------------------------------------
Again, your words,
PERMAFROST (1/3/00; 3:09:12MDT - Msg ID:22105)
Reply to FOA Msg. ID: 21859 Lastly,
As to even the 'emperor running to higher ground when he sees the flood coming'--if he were to do so, he'd be emperor no more for what makes an emperor an emperor is the "land" he rules. Without it he's nothing. That's why captains do not abandon their sinking ships; and why sometimes even emperors get their heads chopped off. To die an emperor is perhaps preferable than to live as a normal human being for some...You?
--------------------------------
In addition PF,
the history of gold shows how one may remain in their chosen land and retain their wealth. For gold needs not return to a native place to receive it's value. We do indeed chose the high ground, with or without our heads. (smile)
--------------------------------
--------------------------------
ALL: Here again, I promote gold as the high ground, not the Euro!
-----------------------------------
Further you add from :Msg ID:22104
-------------------------
Therefore; I find myself obliged to conclude that, due to your avowed devotion to the Euro and the "The King is dead; long live the King" tradition it propounds, the only difference between you and an "Alan Greenspan" lies in your respective handles. If you already are not one of them, you wanna join 'em. Incorrect?
------------------------------------
Very incorrect my friend (Permafrost).
The difference lies not between myself and others, rather between the life experience of "you" and "I". Somewhat like the movie "The wind and the Lion": You like the wind hold the power of force in your words. I as the lion roar in defiance as the sand stings my eyes in a land I cannot leave. Yet, as a lion, I know my place on earth while as the wind, you will never know yours!Thanks Much ,,,,,,,, FOA
---------------------------------
------------------------
ALL: Here (above) is where Mr. Frost begins to promote my "devotion to the Euro". It is completely out of context and misguided. The complete evidence, inherent in all my posts point to using the Euro as the political tool for making gold rise in dollars.
Because all of the Another / FOA public viewpoints were presented on the Web,,,,,,,,,,I hold that Mr. Frost could be much too new to this venue to have read them all (smile?). I don't think so, but still as evidence of this I offer his ------------(1/5/00; 6:55:41MDT - Msg
ID:22322)---------Now, could you tell me what "IMHO" stands for? Thanks!---------------
Later, after Cavan Man told him what it was he posted --------(1/6/00; 4:42:35MDT - Msg ID:22396)--------Not good, IMHO (now that I know what the acronym stands for).
----------------------
Part 4 is next
FOA (01/31/00; 20:49:50MDT - Msg ID:23974)
PART 4
Part 4
ALL: Now we review a post that I submit is pure garbage! I'll break some of it up and commit.
----------------
PERMAFROST (1/13/00; 3:18:40MDT - Msg ID:22817)
To the Forum...So; are we to believe the pagan [Aristotle] when he says that the dollar is NOT backed by oil—please arrest needless mincing of words--or the holy trinity [ORO, FOA, and the "holy spirit" ANOTHER?] when they make noises to the effect that it is? The fact is, it is NOT--de jure, de facto; in reality or in illusion. ATTN: ALL THOSE THAT EQUIVOCATE THEIR PERSONAL SPECULATIONS TO ACTUAL FACTS;
You are doing this willingly because the content of your postings display articulate intelligence and considerable knowledge. The only conclusion I can deduce from these FACTS are that you are either trying to surreptitiously mislead your following or simply making an [---] of yourself.
Unfortunate in both cases.
--------------------------------
ALL: Some chain of logic? One would think he would respond to all the previous discussion ,,,,, and do so in a manner that spells out his position. Instead he uses the old ---I can't present my views in a way that proves me right so I'll tell everyone that you're an (---)!
Then he goes on:
------------------------
TO THE FORUM PARTICIPANTS:
Your fawning and obseqious behaviour towards the local gurus places you in the same ship [the Titanic?] as the sheeple you frown upon.I've been reading this forum for a month; thence follow my observations for those who care to read them:
-----------------------
ALL: Again I say, "What a bunch of garbage!!" He admits that he's been reading the group for a month,,,,,,no less,,,,,,,,and has us all pegged. And later on says that I am talking down to everyone!!
Then he goes on:
-----------------------------
1) Only A=A. If gold=A then NOTHING ELSE equals A. Period. No Euros, dollars, dinars or
liras.
2) Positing premise #1 to be true, all those here claiming that the Euro constitutes the lifeboat off of the Titanic [the dollar] are LYING, because YOU know that they know better!
3) Now I ask YOU who previously considered yourselves to be so well informed; WHY would they do such a thing? Do they have a hidden agenda or are they plain you-know- what?
When they disparage one fiat money [the dollar] and sing the praises of another [the Euro] they are talking from both sides of their respective mouths. Sheer dishonesty!
---------------------------
ALL: Again I say "What a bunch of garbage!!" You have all just read our (FOA/A) position as given. Did anyone feel "arm twisting" ,,,, or "mind control",,,,,or a "hidden agenda"? I ask, where is his logic chain,,,,,,,his political analysis ,,,, his reasoning. Does he just give "predictions" based on his perceptions without laying the ground work of how political logic would bring his events about?
------------
Mr. Frost says (part of his post) in (1/13/00; 6:59:28MDT - Msg ID:22822)----------Even assuming Aristotle's words were written in stone, YOU are still confusing an alleged (by Ari) RESULT with an actual CAUSE of that result, or fact (irrationally assumed by the lot of them) that never was the case: THE DOLLAR WAS NEVER PEGGED TO OIL!--------------
------------
ALL: But he never offers his reasoning as to why! Nothing! Deep stuff, huh! Big help to the forum as a team effort! Here is another of his team effort-----------(1/13/00; 7:15:04MDT - Msg ID:22824)---------You're right Steve; nothing wrong with being friends and sharing thoughts. But I sensed a whiff of insipid and insidious tendencies and aired out the room. See? now we got fresh air, and that's good as well.----------------
---------------------
ALL: finally we get some analysis in 22826 and 22875, but it's again mostly rebutting other posters.
He attacks me (and others) with innuendoes and then states the following---------(1/18/00; 2:39:41MDT - Msg ID:23093)-------RossL; and Forum also To condemn someone in public without elaborating evidence or at least an argument is not a sensible thing to do. IMHO, I am simply reacting to what I perceive as being the promulgation of half-truths and wilful creation of confusion and intellectual miasma on this forum.------------------------------------
ALL: "What a bunch of garbage!" ,,,,,,and "What an incredible contradiction!"
He is "simply reacting to what I (he) perceived"-----and after only reading the discussion for a month or so. Does "his perception" give him the right to step all over other participants?
--------------------
Mr. Frost says in --------(1/18/00; 8:28:03MDT - Msg ID:23104)------------------Mr. Peter Asher; With all due respect, sir, I never stoop to calling people names like your camp has done re Msg. ID 23098 by FOA.FOA; Strange...I have the nagging feeling that what you wrote there (Msg. 23098) hurt YOUR credibility more than it did anything else. For God's sake man, you actually called me a nut! Was that really warranted? Does THAT fit the guidelines?
-------------
ALL: "What a bunch of garbage!" He just said that we offer ----half-truths and willful creation of confusion and intellectual miasma on this forum------,,,,,,,,and then says he never insults anyone!
Then admits that in my Msg. 23098 he was the nut referred to. Read my post,,,,,I never referred to him. "What a bunch of ?"
---------------
And Further:
He continues his posting with----(01/20/2000; 06:13:29MDT - Msg ID:23242)----As for your mentor, FOA, he states that #23197: "In none of our meetings have we heard where a fear was expressed that the governments will lose control of digital currencies and (give it) back to gold. That is simply not going to happen, no matter how severe a down turn the loss of the American dollar system creates. Believe it."
beesting, why should we believe your mentor? This guy is talking about NOT giving control back togold which YOU YOURSELF equate with SOVEREIGNTY. He wants gold bridled and the Eurobewinged to monetary heaven and you want to put him in the HOF?----------------
ALL: did anyone read my entire post and receive it in the full context of what I presented today? His perception of what I said is garbage,,,,pure and simple. Then he goes on in the same post
----------This, the banker community, of which I suspect FOA to be a member of as evinced in his own allusions to be speaking down to us from "official" spheres, are trying to hide from us by advertising the Euro as the one lifeboat off of the dollar-Titanic.-------------
Again, after all this guy says about our discussion, I am accused of this trash!
There is more------(01/21/2000; 02:39:57MDT - Msg ID:23334)----------BEESTING: FOA has discredited HIMSELF. Just as you yourself did by standing by a man who's betrayed you.----
ALL: What was that ????,,,, where did that come from? Why am I standing on the same stage and attempting to add to this convention while this "!!!" is saying anything that comes to mind?
--------------------
Now I'm told (by a friend) who he is
--------(1/28/2000; 4:37:35MDT - Msg D:23715)--------Someone was asking Leigh if I was TZADEAK and had any good leads that would presumably help him/her make a buck or two. Well; here's my "predictions" for 'you'...-------------
---------------------
Well I have to thank my good friends for tracking much of the gold talk on the web. They are the ones that saved all these posts and pointed out that this PERMAFROST is indeed of the same mold as TZADEAK that posts on Kitco. Today, he and Disney go round and round using several handles (go follow it past and present and you will understand). This is the same type of guy (or is he the same?) that came over here using the Mello88 handle and NewGold. He has always tried to claim that he is Another or had Another's ideas or some other ridiculous crap,,,,,,,,,,,,,,and does it in a totally caustic fashion. His postings are well documented (PHinLA you witnessed his incredible conversations)and Another would never share a stage with ANY SUCH FOOL or the Lurking Gold Bug idiot (ON k),,,,,,, once he realized their tactics.
My writing is a reflection of him (Another) when he's not posting and I must honour his directions. I said I would walk off this stage if there kind were allowed here. It was bad enough to hear Stranger literally stomp me into the ground, then promote himself as a professional pillar of the community,,,,,apologize and return. But, no amount of camaraderie is worth being associated on stage with this other nut.
Sorry Michael. This decision was made for me. From time to time I'll send in something for you to post in another area (off the forum) if you will allow (OR WANT). But this is where I MUST draw the line. This is final, good luck all.
FOA
FOA (2/3/2000; 8:11:45MDT - Msg ID:24209)
Changes
Some changes I was asked to make.
Hello all,
The last post (s) by Rainman only underscored the point Another made to me earlier. His (Another's) message is so strong and political that it will always draw out "verbal assassins" in an effort to destroy the concepts (MK understands this and communicated it to me also). Especially as they (events) start to really confirm this new direction. Some of these (forum) disruptions are deliberate and some are due to mental dysfunction, but all of them divert most people from fully grasping the trail in the context given. I don't think everyone fully realizes just how much of an impact these "Thoughts" (as political wills force the issue) will have on the international assets and business plans of major people. Some of them will argue against these viewpoints as if all their wealth depended upon it. Indeed, it just may!
Some time ago (many years), he privately planted these Thoughts very deep in the minds of a few. Only recently were these items produced on the Web for all to see. It was done in a way that did not betray things gained in confidence, but still made people see the world as others did. Another withdrew when the attacks (he knew would come), arrived. I wanted to continue on in a "narrative" fashion that would spell out these changes (events) more clearly as they occurred. As an American, I knew that most "Western Thinkers" would not ,did not and will not grasp these political changes until they were well underway, or worse. Even then, every attempt will be made by special interest groups to show events in a different (more dollar friendly) light. Virtually assuring a stampede once the real bell is rung.
Truly, other major changes in world affairs are coming. Once they are visible, I believe Another will return and comment. Again, he does not write to engage people, he writes to place other minds "in the pipeline of political thoughts and directions". I truly think it has more to do with ethics and honour than the love of man. This may be a harsh observation on my part, but some cultures (as well as individual standards) require this.
So:
My posting here as FOA has attracted to much of the same caustic attacks that he walks right through. In reality, he is thick skinned as one could imagine such a person to be. As one of you posted an "A" item earlier, "these attacks are as boys having words with the wind, yet a strong wind has no ears" (or something like that). But, as the "thin skinned Westerner" I am, I do a poor job of representing his thoughts the way it was done before. After Permafrost continued his mindless comments, I was "asked" to no longer post as FOA in a give and take forum setting. Even though I offered extended reasoning, it was never addressed in a clean logical fashion. The Rainman item only underscored this. But (if MK will allow), I will continue (as FOA) the "Gold trail Hikes" in posted letter form somewhere else on the USAGOLD site. We can still address many of the forum discussion items as deemed necessary. Yet, it will be done more in a letter format. If I am to post again on the forum (sparingly), I must use a different handle and debate the issues as myself, rather than represent the Thoughts of Another. This removes me from a conflict most of you did not know existed.
Also:
To everyone that wrote here in support of these writings, I reply with a thanks from a true heart. I accept this knowing that your words are also for all the other fine persons that post here.
MK, you are the Hollywood producer and director of this drama. A film being shown around the world for all to see. It's your call my friend?
Thanks FOA
-/- (More snips) ---
Did the IMF revalue its gold some time ago??? (1999) There was talk of this:
FOA- IMF Plans to Revalue Its Gold Reserves
Anyone,
I'm a little slow so I need some help here.
Let's say I owe the IMF $210 and I am unable to pay, I'm going to default.
The IMF then says, "Please do not default. We will loan you a 1oz gold coin that we value at $42. You now owe us $252. Tomorrow you pay us back the 1oz gold coin at market value of $252 and we will call it even.
We will then put the 1oz coin back in the vault and deposit the $210 principal payoff in a special account to draw interest.
You are debt free and we made $210.
Did I miss something here?
-/-
One way or another, the modern gold market of today is going to fail. Weather the trading price goes to $1,000 or falls to $10, the massive overhang of gold derivatives cannot be honoured. What physical gold that remains in private hands will be cut free by this failure and trade for a while in "street form". (see Mr. Holtzman in the HOF for a better understanding of this)
Our dollar/IMF currency operates on contract liquidity by creating paper IOU that are never called. Be they cash, bonds, CDs or stocks, they represent elevated wealth only because they are never liquidated into real things. If humanity ever decides to sell them (something they will do only if forced from fear), the value of real things quickly increases to a level much higher than the total value of such paper. It does this because, in a panic, things are held back, thereby lowering supply.
The recent (last 10+/- years) gold market has reflected it's transition into a similar paper "contract liquidity" system. This was done to enhance the credibility of the dollar in the eyes of it's trading partners. Today, the Euro system has offered a reason to test the credibility of this gold system. This "new gold market" is not as before and will run in dollar terms unlike anything anyone has ever seen. Gold is now in the process of becoming money and that pricing process will destroy most any contract ever written against gold.
-/-
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
/
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 (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
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
The Traveler (02/16/00; 01:22:22MDT - Msg ID:25439)
The Perfect Monetary System - Installment One
Greetings to all!
Since my last post (23712), I have been quite busy with new endeavors. Yet I have kept up with the Forum's more significant topics of debate. With your permission, I will give my humble opinion on topics to which I am qualified (22788) to speak. So, lets go......
The perfect monetary system of Aristotle, Trail Guide and Oro .....Installment One
Purists. Well meaning, well reasoned and intellectually sincere but at times the debate is reminiscent of those who crusade for world peace. Given man's inherent character flaws, world peace and a perfect monetary system will eternally be but a worthy ideal. When the dying dollar settlement system gasps its last breath next week or next decade due to the stranglehold of defaulted dollar denominated debts, will another settlement system be demanded? Yes, of course. Will it be perfect? Never.
Considering that most posters and lurkers here have only a vague understanding of the theory of money and credit and trade, how successful will the apostles of Jenny, Jerry and Ophra be at evaluating the merits of the system proposed by their esteemed leaders? How much more successful will those dysfunctional creatures be that agree to appear on their shows? Cardinal De Retz of the 17th century once quipped that nothing sways the masses more than arguments they can't understand.
Consider the historical record. The Nineteenth Century was the century of the wealthy a/k/a the creditor class. Thus while woman and most minorities then could not vote (and thus elect sympathetic redistributors of another's wealth), the gold standard prevailed. Remember, America's cherished Constitution originally set forth that only men of property could vote - some with only 3/5ths of a vote. As I mentioned in my last post, debt instruments written by and for the creditor class ("he who has the gold makes the rules") traditionally contained a "gold clause" that required repayment in cash or at he option of the creditor in a set quantity of gold of a defined fineness. Every member of the creditor class knew of the propensity of the debtor class (this includes national, state and local governments) to inflate away the purchasing power of the dollars to be repaid.
With the immigrant surge that began in the 1880's, the struggle between the creditor class and the debtor class intensified. In 1894, the first federal income tax was passed (2% on incomes exceeding $4,000). It was held unconstitutional by the Supreme Court one year later in RE: Pollack v. Farmers Loan and Trust Co., because it was a direct tax on income from real property that was unapportioned among the states by population.
Then in Chicago in 1896, Democratic candidate and populist William Jennings Bryan delivered his eloquent speech that demanded the free and unlimited coinage of silver (bi-metalism) in order to reflate the economy (more money in circulation) and thus give relief to the nation's farmers and laborers. Who has not heard the rally cry, "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." In a delaying action, the creditor class won the day with the presidential election of "sound money" advocate William McKinley.
In response to the massive accumulation of wealth by industrialists and railroad tycoons (capitalists) like the Rockefellers, Cabots, Goulds, Morgans, Vanderbilts and Astors and inflamed by socialists writings such as that of Edward Bellamy (Looking Backward - 1888), Ida Tarbell (The History of Standard Oil Company- 1904) and Upton Sinclair (too numerous to cite), the Sherman Anti-Trust Act was passed and upheld by the Supreme Court in May, 1911, by a 9-0 vote.
This victory was quickly followed by the proposal in 1909 and ratification in 1913 of the Sixteenth Amendment - the power of Congress to tax any source whatsoever without apportionment among the states (Read: progressive taxation or a "scaffolding for plunder"). Two side notes - As 7% was then the maximum marginal rate, has the appetite of government been held in check or was the door opened for voters to begin voting themselves benefits taken out of the pockets of capitalists? Second, this same amendment was the foundation for a Supreme Court case in 1988 (South Carolina v. Baker) which upheld the right of Congress to tax interest income from state and municipal bonds if Congress saw fit to tax that income.
This amendment was the companion needed to put bite into the Federal Reserve Act of 1913. How would this private bank receive its risk-free interest payments if the full faith and credit of the US Government (Read: ability to tax progressively) was not in place and available for use? To complete the decade's trifecta, the Trading With The Enemy Act of 1917 was passed. This act gave the President the power to regulate or prohibit at his sole discretion any transaction in foreign exchange regarding gold or silver coins or bullion or currency. The victory of the poor and huddled masses was now complete.
The First World War (1914-1918) further damaged the creditor class as the British Pound Sterling, a casualty of war, lost its reserve currency status (apparently the sun did set on the mighty British empire) and the Bolsheviks with their "Laborers of the world unite!" political philosophy began fanning the flames of anarchy. The creditor class was scared stiff for it is hard to buy-off a crazed mob looting your compound.
The easy money of the Roaring Twenties bought some political relief as nearly all shared in the financial euphoria of the day. The Crash of 1929 and the subsequent New Deal remedies of the federal government (for example, alphabet soup make-work agencies, FDR's court stacking and the Social Security Act - which until 1971 was not indexed to inflation and required a maximum of $71 in FICA taxes annually) enhanced the victory that the debtor class won over the creditor class.
The creditor class still fought skirmishes though. Recall that General Douglas MacArthur ordered Col. Dwight Eisenhower to roll tanks though the streets of Washington D.C. to put down the mob of WWI veterans that were marching for their overdue benefits.
With the confiscation of gold by Executive Order #6102 dated 4-1933 (punishable by a $10,000 fine or 10 years in prison or both for not sending your gold to the nearest Federal Reserve Bank within 25 days of the decree in exchange for $20.67 of FR Notes) and the passage of the Gold Reserve Act in 1-1934 (which authorized FDR to revalue gold to $35/ devalue the US$ by nearly 60%) and by striking the "gold clause" in 2-1935, the complete defeat of the creditor class was achieved. Granted, occasional insurrections are attempted but they are quickly defeated.
Given the above summary of the intense four decade struggle between the creditor class (advocates of hard money - gold backing) and the debtor class (advocates of soft money - fiat paper with the propensity to inflate away or decrease in purchasing power), does anyone believe that the settlement system to come will reverse the outcome of this class warfare?
In summary, debating a perfect monetary system is for purists and academicians. Given the failings of mankind, a perfect monetary system is not practical in a nation that has democratized credit (its a right of all to have) and socialized credit risk (all share the pain of default).
Thanks for staying with this post to this point. Soon I will post a practical view of the role of the "Lender of Last Resort" and a view on what motivates bankers. My view has been garnered from over twenty years in the industry. Believe me, the motivation is deplorable but not nefarious as Sir Oro suggests.
Best regards to all.....
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.
Henri (02/16/00; 20:55:20MDT - Msg ID:25487)
The Traveler Msg ID:25439 and Trail Guide,Oro et. al.
Isn't it interesting that we cannot discuss gold and its role in society without discussing politics. Traveler, I really enjoyed the disection of the problem from the perspective of a battle between the "haves" and the "have nots". As you pointed out quite astutely the "have nots" have finally carried the day and fulfilled the admonitions of our forefathers. That a democracy as opposed to the originally intended Republic)leads to a looting of the treasury and the voting of its largesse to be distributed to the public, by majority agreement.
When we discuss the US$ and the debt structure it represents, it cannot really be called "fiat" I think. At the very first moment in a world far away from today, a man's word was worth more than a pile of gold. For on it rode not only his own reputation and his immediate family's but that of his parents and his progeny as well. Surely a man's promise to repay is not "nothing" as the word "fiat" is I think meant to imply. A fiat currency has no backing whatsoever and is a unit of value only by common agreement or more commonly by enforced usaged at the behest of the local powers that be.
I submit that a debt currency, while not having experienced a desirable end, was at first presented as an experiment, even if it was in the progenitors intent no more than a premeditated fleecing of an entire nation's wealth over several generations. It was a time when a gentlemans word meant something special again by common agreement and the knowledge of what reputation would befall the ilk of those associated with a scoundral not only by blood but by association as well. It was an exceedingly "polite" society and yes, armed. Much of this had followed the Americans from Europe where such a system had been in place for years.
Ah but this new society was born of the ideas embodied in the Constitution. These ideas themselves having their origins in old and not so old writings on governance from Europe. This new society was an experiment. An incredibly successful one at first. The guiding principle was individual freedom and responsibility for ones own actions.
I can not help but notice that on this side of the pond, we (the Americans...for that is the side from which I was thrust from the peaceful security of my mother's womb)that we have sown the seeds of our own destruction. Thank you Traveler for showing us how this occurred in a monetary sense. But there is more to it. It cuts to the very fabric of our Constitutional jurisprudence. The current EU type of culture and the US variety being both good experiments in human understanding are essentially incompatible.
The US culture/legal system has evolved under the concept that individual rights are paramount. The countries of the current EU do not allow for such strict indulgence in individual rights/privilege but instead seem more focused on what some call "Social Justice" that being (I think) to borrow a phrase from Mr. Spock of the planet Vulcan, "the needs of the many outweigh the needs of the few". The way I see it, there is nothing fundamentally wrong with either of these systems of governance. Indeed we have seen both types of organization flourish and prosper in real terms over the last twenty years. The problem only comes when there is an attempt by one or the other to incorporate some of the aspects of the other system. For instance, trying to legislate "social justice" and integrate it into a system fundamentally geared to favor the rights of the individual has led to unmitigated disaster and may be one of the major factors that is tearing the fabric of US society today.
We say we favor individual rights and responsibility (US system) yet we pass legislation that legitimizes the concept that individuals are not responsible for their actions or their "condition in life". We then institute all these bureaucracies to favor one "group" or another because "it is the socially proper thing to do"...it has "social justice".
The evidence is that these two systems of governance and jurisprudence are fundamentally incompatible from a legal perspective. Not to say the two systems cannot coexist peacefully side by side 'til kingdom come. However for one side to take "pot shots" at the other and criticize the way they do things only serves to encourage more attempts to take the best of both worlds and try to integrate these things where they cannot comfortably be integrated without violating their own fundamental precepts.
What it all boils down to in either system is that ultimately the individuals that make up "society" must take responsibility for what is done and for moving their "society" peacefully along to hopefully a more enlightened day without conflicts of any kind.
Not only is the world still experimenting with monetary systems, the world is still experimenting with order and governance. When we try to blend the best of two systems that we all can see both "work" we blur the point of the experiment which was to observe the effect of the diversity on each system. In short, the collective beaker explodes in our faces.
I do not have the answer other than it must involve people taking individual responsibility for doing what is right. In our system (US), people do the right thing often without it needing to be legislated. In both systems often people do not. This will continue.
Yes there is a problem that is tearing the fabric of American communities. From my observers platform, its name is "Social Justice" Not the principle itself, but the attempt to integrate it into a society with a basis that starts with individual rights and their concomitant responsibility. "Social Justice" removes the "responsibility" part causing extremely confused youngsters. We can no more successfully integrate "Social Justice" here than you could integrate legal precedents of individual rights that supercede the "common good" over there.
You can't have it both ways! Each system left to its own fundamentals works and together they work in harmony for greater good, but they should not "interbreed" for it weakens the entire "gene pool" of governance.
Now consider the ramifications of this once proud society facing literal bankruptcy, Yes Yes there I've said it. It is quite likely even without a reckoning of sorts that the enormous debt structure of the US monetary system cannot be brought to account. The only way out now is inflation to insignificance. Truth be known that even the Russians, as pathetic as we make out their circumstance to be are probably better off than the average American from an International debt standpoint. Why oh why they did not immediately disavow their foreign debt service upon the dissolution of the Soviet Union is beyond me...but that is another world. In a similar sense, the formation of a new confederation of states the EU can incorporate their collective prosperity and bank it on the new monetary concept called the "Euro". To be sure it is at first a currency of hard account but only by virtue of its method of retaining gold reserve..the so called nuclear grade weapon for currency defense. We are I'm afraid engaged in a great currency war...much of it being fought behind closed doors. Out of the Limelight so-to-speak such that a world financial upheaval is not created while an old system of account is replaced with a new system. But it is war nonetheless.
I find it ironic that, the old European values of honor and freedom from tyranny created the new republic and at once, having seen what they had created, began to sow the seeds of its demise by first debasing its currency, then its social fabric. In America, I'm sad to say, because of the social and legislative confusion and jurisconstipation induced by the comingling of "social justice" with individual rights and responsibility, we may not even really have to feel bad about what we have done to ourselves. We can blame it on the "system". It is not our fault. The finger can point to....hah! over there. A Rhodes Scholar!
It may well be that a free gold market and the Euro combo are better than belgian ale. But for how long? See how easily the gold market is manipulated. Indeed it might take 56,000 US$ gold to rid the planet of the American debt plague. But what then, yet another cycle. I am not bitter, even a mere middle school child can see the futility of pursuing the US$ farce to the end. I only hope it can die a graceful and timely death without widespread violence. One would have thought that it would have been the proponents of social justice that would have adopted the idea of collective debt currency and the proponents of individual freedom that stuck with immutable objective wealth in the form of gold coin of the realm. perhaps we can return ther when we roll out the new monetary plan for this side of the pond,yes We still do have gold (legendary at this point) but presumed by all to exist. Think of it compatible but diverse societies using compatible but diverse currencies in trade. Now if we could only delegislate about 20 years of social engineering from the books and get back to individualism and good old responsibility for our own actions.
But I am not so certain that our Rhodes Scholar likes losing ...or has he won? Its all so confusing. I guess it really doesn't matter in the end. I just hope his recent contact with Putin didn't involve a wink and a nod that says, Well I guess this means its US against them again ...whaddayasayweburytheoldhachet and figure out how we can contain this new upstart that comes out wearing such large britches and speaking of guaranteeing its own security. Whats up with that?
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 than 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 family 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 transferring 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 amount "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 controlling the gold exchange 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 disadvantage 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 corporations’ assets that they were barred from owning before. Hyena and Vulture LP had their day. We were spared disaster for another three years.
ORO (4/27/2000; 23:53:57MT - usagold.com msg#: 29498)
Euro Crush and the Dollar parabolic spike
The dollar is at the extreme of a short squeeze on the world markets as a result of the Euro transition. The Euro is undergoing an inflation of its float of the sort that had occurred in the dollar during the 70s, but way more quickly. The Euro is establishing a debt base. As a group of nations with an aggregate current accounts surplus, Euro land will soon find itself in the Japanese position of 1998.
Just as Japanese companies prepared for a strong Yen years before it came by building auto manufacturing facilities in the US, so are European corporations doing now. That is further assurance that the situation will reverse.
To Q3 99, the Euro debt base (their "Big Float") has grown 23% in one year despite Europe having a current account SURPLUS (We have a deficit). My tally out of the official US "Big Float" according to the BIS, is 5.8 $Trillion - growing at 6%, with bank debt FALLING 1.5%. While that of the Euro was 4.5 $trillion (including internal transnational debt within the EU), up from 3.6 $trillion.
This fast growing debt base will generate demand for Euro in the future as interest must be paid by the speculators and US based transnational corporations who borrowed it into existence. Since these corporations and speculators are dollar based (for the most part) they will be in the same position as gold is in. A current account surplus will prevent Euro from coming to market through trade, leaving these corporations and speculators with a dollar supply they will HAVE TO convert into Euro.
Combined with the US trade deficit, the Dollar's big float has had a 7% gross supply rate vs a 21% supply rate for the Euro (including current accounts surplus). Despite this rise in Euro supply, the EU has a MUCH lower price inflation (2.3%)than the US, and they do not massage the numbers. "Deprocessing" the US numbers, gives a 6.5% price inflation rate for 99, and it has been growing even with steady commodity prices over the last quarter, due to the strong dollar. The excessive Euro creation is predominantly a currency market phenomenon, and the parties taking on these Euro liabilities are not European, but Caymans, London, and New York based. Unlike US "Big Float" for which Americans are on the hook, since it was generated internally. This Euro "Big Float" is one for which foreigners are on the hook - not Europeans. The EU is not supplying Euro to the markets, the financial markets are creating them.
In the meantime, the situation is such that US transnationals are losing market share and profits to EU competitors who have better financial terms and better export policies. This is forcing the US transnationals to seek further Euro financing instead of dollar financing. While this is pushing the Euro down NOW, it will be a death trap for the dollar LATER. Already, the US income payments balance is over 10 $ billion per quarter in the red. By the end of this year, that figure will hit $40 billion on top of the trade deficit. While high interest rates may cool down the economy somewhat on big ticket items, these same high rates will increase the outgoing payout of dollars. If the process ceases because of a local slowdown, then the Fed will lower rates in order to create monetary "stimulus", but both a lower rate and an economic slowdown will create a rush of funds dumping their dollars at the exchange window for whatever they can get and rushing back home. IT IS DAMNED IF YOU DO, DAMNED IF YOU DON'T.
The Euro's decline rate will ease up as the Euro float growth rate flattens this year, now that both EU and non-EU corporations are completing their transition to Euro finance rather than Dollar finance (at least for EU operations - though they seem increasingly inclined to raise Euro funds for global operations as well). Interest payments due on the Euro debt will reach significant proportions soon. The Euro float should reach Dollar float size by the end of this year, however, that increase will have been on top of a bigger debt base and without support from trade deficits. The ECB will then start an "aggressive" move in rates to "fight inflation" and will create the most massive short squeeze ever seen. Greater than that of the Dollar in the past 20 years, or the Pound in the 1920s and 1930s.
Since the Eurodollar rates spiked from 6.6% to 6.75% (new high) during this dollar spike, it is obvious that the displacement of dollar borrowing in global markets has been so severe that dollar supply from the current accounts is not enough to cover current dollar interest payment needs, now near $500 billion at the current, higher, interest rate. The Euro debt requires only $250 billion, and is getting all the necessary supply ($600-750 billion) from new borrowing by non-EU organizations. The Dollar supply is wholly from the current accounts deficit and stands only at a $400 billion level.
The US current accounts deficit has had the predominant effect of transferring dollar obligations from foreign non-Fed members to US based Fed members should now be over 40%, up from 33% in the first half of 99. By the end of the year we will be near 50%, and then the pressure on the Fed to add reserves will be tremendous as "Big Float" liabilities will be to foreigners and assets will be debt of Americans.
EU Political situation:
The EU socialist governments will be thrown out soon enough if they continue trying to out-Japan the Japanese in order to avoid succumbing to competitive pressures that are demanding they reduce regulation and welfare expenditures. The latter are a result of the Euro zone allowing much better mobility of capital - the capital base of the various nations is no longer captive to government pressure. Japan had to "Big Bang" its reforms over, what to them, is a short period. The EU leadership, unlike Japanese leaders, are aware of what they need to do (but for Lafontain, but he was "ejected"), and will do it though they loath to do so.
So long as the governments do not lose their nerve, they will be able to use the Euro crisis as an excuse to "take extraordinary measures" to tighten their belts and deregulate more quickly. For those who do not realize this, Carter was the president who started the bulk of the "small government" reform in the US - Ford and Nixon started the trend but did not initiate much. That is why Europe has chosen socialists to get the bulk of the deregulation programs started. The expectation has been that they will do a "kinder" restructuring than the center right and definitely more so than the liberals (no, in Europe liberal does not mean socialist, it sort of means "libertarian").
Finally, a summary:
1. The Euro is falling because there is a big supply coming into the markets from non-EU sources. Just like the Yen Carry Trade that went bust in 1998 and resulted in a 44% rise in the Yen/dollar in less than a year.
2. The dollar is rising because there is demand from old dollar debt, but dollars are being destroyed abroad instead of being created. It is a liquidity crissis. In an upcoming post I will use a recent example to demonstrate.
3. The Euro external float expansion is a creature of speculation and is not related to the EU internal monetary policies nor to the EU economy itself.
4. The very justified critique of EU government foot-dragging on reform will give way to kudos as they start to take action. Unions will take to the street and chaos will reign in cycles of strikes, but the governments - socialist or not - will take action. We need only one to demonstrate and force the others to compete. Ireland is one good example. It may be enough. The Euro drop will help them politically in selling reform to their public.
5. The dollar shortage in the currency markets is partially induced by Japanese accumulation of dollars, but it is high US rates that are preventing new borrowing (dollar creation) abroad, and intensifying a short squeeze on dollar debtors.
6. Damned if you do, damned if you don't. The Fed raising rates increases our trade deficit and raises the flow of dollar income out of the US. It is causing destruction of the dollar debts that kept the dollar alive.
7. When the ECB does make a move to raise rates, the unwinding of the dollar - Euro carry trade will be even wilder than the ride we got on the Yen. Unlike the Yen, at 0% interest and 2.5% long commercial rates, the Euro bears a 3.5% interest short term, and nearly 6% commercial long rates, and these are rising with the carry trade.
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 (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
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; 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 tonne 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 (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 coming 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 generation.
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 control 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 (05/30/00; 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 its 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 vast 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 its 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 (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
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 its 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 (08/22/00; 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 its 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 (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
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 within 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 its 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 its 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 its 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 becomes 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 its 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 its 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 its (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 some time 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 its 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 its "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. Its use is now behind us.
In the future, rising physical bullion stores (and dollar prices) will play an important role 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; 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 (10/07/00; 16:53:08MT - usagold.com msg#: 38490)
Comment
Hell everyone,
I wasn't going to add anything to the trail today, but we decided it was time to begin placing things in clear terms. It looks like our political posturing is leaving the "let's talk about this behind the door stage" and entering the "show us your cards stage". This is not just predicated on the recent ECB rate hike alone. Some other things are in the works and with this new climate, it won't be long before we see it on the news.
Certainly, we must talk about SteveH's recent posts. He has made a real effort in trying to unravel the gold value question. In addition ORO has some good reasoning that must be addressed. So before I begin:
Hello Hermit Club, and welcome!
I fully well know just how hard it is to see the prospects of US dollar price inflation right now. Unless one has been following this trail for a long time the present economic momentum seems like an object in motion that must stay in motion. But as I tried to present in the Showtime post, the US domestic price structure is already primed to show it's price inflation dynamic. For the first time we have placed ourselves in an unretractable situation. The dollar is terribly strong from this currency competition that it was forced into. If the Federal reserve tries to raise rates to slow our runaway expansion the dollar will only get more overvalued. That process alone will drive our deficit to the moon. They will not are not going to allow this much longer. Yet, the fed has little choice but to stand pat or even lower rates in the face of any perceived slowdown. With the current debt and derivative stress built into the dollar system, their only card is currency exchange intervention to lower the dollar. But we will always hear this as supporting some other currency.
As Giovanni Dioro said in #38437, " but judge them not by their words, but by their actions".
Hello GD, we do judge them by their actions. Just because the Western press, official press releases and various traders say the recent intervention is for the Euro doesn't mean it's true! On one side of the equator the drain water swirls one way while on the other side it goes the other, no? So if the Euro is up the dollar is down? Or is it if the Euro is down the dollar is up? Which perception is right?
We watch the actual local buying power relative to the local currencies to judge which way the water flows. Not only is Euro purchasing power relatively stable, it's basic across the board interest rates are lower than the US. The ECB could just as easily raise their rates to par with the US and the Euro would spike well above the dollar without any intervention at all. But making the Euro "as strong as the dollar right now is not their plan. The dynamic is to lower our over stressed dollar back to a "strong Euro level"! Now that's a different picture when one sees the Euro where it is with it's low financing rates. Rates that are building a solid foundation under their markets. In time here is where we will see who has the power!
But Euro weakness is not and never was the problem. The ball is squarely in the US court for them to lower the dollar to save their economy busting trade deficit from blowing them sky high. That will require the US to buy Euros or lower their rates and both those actions will greatly expose the current built in weakness within the US structure. Yes, indeed, everyone is following the Euro weakness ball, but we are watching the entire dollar game. And that tells us that the recent action is part of a larger gameplan to unseat the dollar.
So, take the strong dollar position if you will, but doing so will place your bet in the right direction, but on the wrong horse. Just like trying to leverage a gold market position using a paper dynamic; good bet, wrong horse.
More
Trail Guide
Trail Guide (10/07/00; 21:53:36MT - usagold.com msg#: 38526)
Reply
JavaMan (10/07/00; 19:13:20MT - usagold.com msg#: 38503)
Now THAT doesn't sound good. Please, Trail Guide, for the common man, would you care to expand on "the US fed will see to it it's downhill from here on out"?
JavaMan, Hello!
Well, the US economy is going full blast now even as the dollar is at it's peak. In the past, at this stage the dollar would have already rolled over from the effects of fed / treasury / government intervention to slow the boom. In fact, contrary to everything we read and hear, they have been trying to slow this thing down for some time. We only hear it as; "it's the new computer, highly productive, new wave, next economy that's driving all the money into the US and their markets"! But, in reality something was out there driving the dollar higher even as the brakes were being applied.
Now the government is in a box it's never been in before. It they raise rates or slow reserve creation this will just drive the dollar ever higher while at the top of a boom phase. The explosion in deficit trade balances would at some point cause a crack up from where there is no escape (deflation?). They can only play the intervention card to lower the dollar and that (because we are the dollar creating entity) will cause an inflationary run. Further, in conjunction with intervention, they could also lower rates. This will have the same effect in this overheated marketplace. Either way, the dollar is going to drop to the level of the Euro.
Note: again, I ask how are we going to know that? It will spin as "the Euro finally rose to dollar par"!
Then and only then will we all have a look at our respective US and European financial structures on a relative even basis. I expect to see the Euro Zone taking off with some price inflation and a declining trade surplus heading toward deficit. All the while the US goes hyper with mountains of dollars coming home. And I don't mean coming home for investment. I mean coming home to exercise delivery against real US produced goods. I expect that before this is over, we (US) might be forced to use our gold card to help devalue the dollar. That would involve a forced restructuring of. the gold markets so as to make gold rise. A few political heads would roll if this takes place. Believe it!
So, will this all begin before the elections? The fuel certainly is in place. We shall see.
Trail Guide
Trail Guide (10/07/00; 22:10:49MT - usagold.com msg#: 38529)
Reply
beesting (10/07/00; 19:25:14MT - usagold.com msg#: 38504)
It seems since Sept. 22,2000 the up and down movements of the paper Gold markets close-ly follow the up and down movements of the Euro value on the FOREX markets. Is this movement a coincidence or is there some sort of correlation going on between the (perceived) price of Gold and the value of the Euro?
Hello beasting,
I know that somewhere,,,,,, out there,,,,,,, some smart brains are starting to put a relative value on the Euro using it's relationship to gold. It's only just starting, but it's almost like using Euros in place of what Gold stocks used to be. Indeed, if the Euro becomes established as the premier settlement currency and fully allows gold to price out to whatever level,,,,,, then in dollar terms Euros will return an awful lot. Just look at it like a native holding dollars during one of the Asian meltdowns?
As time goes by gold and Euros will most likely run together. Again, we shall see.
Thanks
Trail Guide
Trail Guide (10/07/00; 22:26:10MT - usagold.com msg#: 38532)
Last post.
ET,
Your question about oil and it's continued use in this unfolding drama is a whole chapter's worth of replies. Oil will some day be priced very cheaply and this will make an end run around fuel cell technology and what have you. It's not the supply of oil that's been a problem, rather how we pay for it in real money.
Thanks all
Until the next time on the Gold Trail
Trail Guide
Trail Guide (10/17/00; 12:55:38MT - usagold.com msg#: 39235)
Reply / comment
Knallgold (10/17/00; 08:58:16MT - usagold.com msg#: 39216)
Hello Knallgold,
I will never finish my fresh herb garden if I continue to read these posts. Good health and a strong spirit from fine wine with food is much better than gold, you know (smile).
Yes, I also own some gold shares. It's quite an amount, even at these prices. But it is in a reasonable proportion to my other assets. Should have never said anything about it because I knew very few people would understand the rational at that time.
Brought the companies for their philosophy, not their current (at that time) share values. This was done with an eye on the future, on the other side of this battle. From the beginning, it was fully well understood that the paper price of gold would fall until some convulsion crushed it's credibility. Where on the dollar gold price range this would occur depended on the players at the chess board. But, the ongoing dollar price was never to be the gauge of success, anyway.
With this in mind, the very best shares were chosen (there are only a few good ones around the world). Both bullion (large amounts, still accumulating) and shares (small amount and one time buy) were brought with an expectation of a zero price in dollars. In other words; we brought shares for their possible survival and we brought bullion to own ounces outright, not dollars per ounce. This is a far different and stronger mental position than you read from leveraged traders, no? If gold soars tomorrow, good! If it plunges tomorrow, good! I am on this trail for the destination, not the game. Even though, the sights along the way will be incredible to behold.
For better of worse, richer or poorer, in sickness and good health,,,,,, this is the path I follow. After reading that line, you are correct to assume I am married to this position (smile). I can tell you it is a very large ongoing wedding, because none of us ever walk this trail alone.
Further:
I have to say that had the mining industry promoted it's product as a wealth holding and pushed for investors to buy gold first, ahead of and in greater quantity than their common shares; there is a good chance the markets would have changed long before now. No different than watching Ford push their vehicles and ending up with people owning and always buying more of their product. Never hear of anyone saying their ford shares can carry just as much as a new ranger (smile).
But, by promoting paper leverage (of all kinds) as being the same or better in value than what history taught us about gold, trader advocates played themselves and their investors right into the slaughter of open currency warfare.
It would be great if these markets would break, right now. Giving some type of paper run that allowed many regular people time to reallocate. It may, but political will is against it. As it is, many such as yourself (?) are striving mentally to adjust their diminished capitol so as not to risk it all.
By the way,,,,,, the very old investor I mentioned some time ago,,,,, the one that was slowly allocation a decades long ride in the dow into bullion. He is now completely out and in cash and bullion. He trusts gold and knows nothing about oil or the Euro. Yet, still strong in his feelings that a big inflation may lift the dow further. I don't dare debate him because his record is flawless for some many many years,,,, and his wealth is truly great.
good luck
(now back to my hobby)
Trail Guide
Trail Guide (10/21/00; 08:50:07MT - usagold.com msg#: 39569)
Comment
-----------------------
SteveH (10/21/2000; 5:03:21MT - usagold.com msg#: 39550)
Stuff
http://www.the-privateer.com/gold6.html
Snippet from above link (even the-Privateer is getting on the Euro for gold band wagon now):
-----------------------
Hello Steve,
I'm hearing more and more where various commentators are allowing for a change in this direction. Most of them still do not think it's a real plausible event, but can at least see the pressures building in that way.
When I said a few days ago that it was showtime, several major moves came out of the woodwork.
Paris, Friday, October 6, 2000 ------- ECB Raises Key Rate ------ 'We see no threat to growth'' from this rate increase, Mr. Duisenberg said. He said the euro-zone economy was at ''cruising altitude.''----- "the forces underlying solid growth in the medium term remain in place"-----
also:
Dubai Monday, October 09, 2000 ---------
Mr Jacques Santer, former president of the European Commission, has called on Gulf Arab oil exporters to price their crude in the euro rather than the US dollar as a means to stabilize the oil market --------- "It could be the instrument to consolidate oil markets" and would be less affected by US foreign policy, he told a Gulf-Euro conference in Dubai. ------ "Trust and partnership spirit between the Union and the GCC could well increase if we were to consider trading the barrel in the euro" instead of the dollar,-------- the future will certainly offer us opportunities for a move in this direction," he said, describing Europe as the world's biggest oil importer. ---------- "My contention is that the euro will move again toward parity with the US dollar by gradual extension of the euro in international transactions"--------
Also:
BAGHDAD (AFP) - - Iraq's central bank has begun to buy european currencies, following Baghdad's decision to stop using the dollar, the INA agency reported-------Iraq's cabinet commissioned a team of economists on September 14 to prepare a study on the possibility of using the euro or any other currency in Iraq's trade instead of the Dollar.----
Steve,
These were powerful diplomatic thrusts and they received very little commentary in our media. Santer's proposal is "in the works" as we speak and will impact the dollar now and for a long time into the future. It has to be appealing to the producers in that region because the bulk of their supply goes to EuroZone countries. Why do you think Duisenberg is playing his hands off policy so openly now? Market traders don't have a clue to the "whys" of his recent remarks. They think he is some fool. He's offering them (producers) a completely independent currency, exactly what they wanted and lobbied the ECB / BIS team for during pre Euro formation. We in the US are standing on our heads trying to explain how the Euro has fallen against the dollar. Stand on our feet and it's easy for anyone to see that the Euro is fine and in a strong position. It's the dollar that has risen far above other hard currencies lately.
This whole scene is playing out in a fashion that will allow producers (and ultimately many others) to shift (sell) out of dollar reserves while it's over valued. I cannot stress enough how important this development is or it's influence on American money policy in the months and years ahead. Everyone thinks "showtime" means a spike in gold. In reality, it's all about a currency war that is setting the stage for a crushing failure in our gold pricing mechanism.
I remember when we used to get post after post of Middle East experts telling us how the US had all these producers under their thumb. We would never allow them to raise prices, they said! Again, that's walking forward while looking backwards. In the early 90s desert storm era, this was true to a degree. But, I point out that the Euro was not available then and most everyone said it wouldn't even be born. Today, it's a whole new political initiative because money always talked louder than guns.
Here we are with $30+ oil (who of these poster experts would have believed it, back then??? MK knew!) and the prospects are for it to go much much higher. So, what is our heavy handed, massive influence in the region doing to change this? Well, we take a serious, strong approach in the matter to show the world just how much our US military might can buy in production increases: "we release oil from our strategic oil reserve"!!! OK! That should send a signal that nothing has changed in the affairs, right??!! We rule that part of the world, right?!
Steve,
the whole notion that we would back out of any military conflict in that region because they dropped our dollar is ludicrous. We must defend their oil production at all costs, no matter what currency they use. We simply cannot afford to allow that supply to completely fund EuroZone development at a cheaper price than we can get it for. That is exactly what would happen if we do not continue to back their governments and economic systems. Without free military and funding for their economic structure's longevity, we would ultimately lose all influence in the region. This is strategic planing not discussed in the open by any of our want to be experts. For us (USA), keeping all oil, worldwide, priced somewhat par (in any currency vs the dollar) is extremely important to US vital interest. Both military and economic.
So:
Today, all Euro oil supply is headed to being priced and settled in Euros. This change will greatly impact world perception as to the value of holding US dollar reserves. It is a change that is now "on the table" and producers are not taking the decision lightly. Once the ball starts rolling, it's good buy dollar overvaluation,,,,, and hello US hyper inflation. Especially if we want to keep our DOW and financial structure away from bookkeeping failure. Roaring prices for goods, yes, but bookkeeping failure, no! This is how a real inflation plays out!
ALL:
Again, ThaiGold, Traveler and others make good points, but these positions do not factor in the political will that's now in process. ThaiGold's argument that physical gold will be confiscated has been around for a long time. It has often been used as a reason to buy paper gold substitutes (mine shares, ex?) because of their past response to such an action. But, today taking such a position is not working, is it? That's because it doesn't factor in the new "gold market direction" Another pointed to long ago. I only recently understood completely the ramifications of it. Anyone reading my Trails posts also understands it now. As far as to FreeGold and Legal Tender problems; our discussions about these items are numerous and date back to pre Thai days. Most of you long time readers have followed it as ORO, Aristotle and many others debated these issues.
Whether our paper price making markets take contract gold values higher or lower here is not the complete issue. The whole presentation is based on an utter failure of the entire dollar markets for gold as they now exist in paper form. The little physical gold that trades relative to the gargantuan paper trading today, will be completely overwhelmed as the dollar is transitioned from reserve status. This "crushing of credibility" of paper gold will have an extreme impact on market valuations of all gold shares. "Semi hard money paper gold bulls" used to tell everyone that they would hold these shares through any crisis. Now we are finding out just hard their claim is in the face of the real ramifications of dollar destruction! The facts are that paper gold only functions well in "regular inflation's" like we saw in the 70s and 80s. When "real events" start marching our currencies into open warfare, paper gold is worthless. Unless you can hold them through a complete trading shutdown where their mark to the market value would be "ZERO"!
Many market watchers have always said that the battle was between the dollar and gold. That was true until another digital currency could take it's (dollars) place. We have been putting this private discussion in front of the public for a few years now. Recently with the help of Aristotle, SteveH, TownCrier, ORO and many others posters (too many to mention), Michael Kosares's USAGOLD forums are blazing the trail for all to see.
All of the many items ThaiGold posted today about government control of gold pertains to past policy in a different ""gold is official government money era"". The use of gold through that era is riddled with failure. In the future (see my latest Gold Trails) currency reserve competition will require a country to keep gold free for private trade. Making price discovery a physical affair only. This will come about in a completely different atmosphere from today where gold is still manipulated as a world "official currency" asset. Mostly now manipulated by a failing IMF/dollar system. The next reserve currency, the Euro will not compete with gold and will require it to find it's FreeGold value level. The US will have absolutely no incentive to controlling gold to defend it's currency in that era.
Traveler,
Hello sir! I certainly do respect your thinking and have agreed with some of it for some time. However, I believe that Another is very right in that "Events" are telling a different story than the one we are used to. I doubt we will ever see a real restrictive money policy in this country again. We shall see.
Sir, I know oil from it's "down hole operations" into and "far past" the influence of the old Texas Commerce Bank! If those" Cherry Wood" wall on the 40th(??) floor (if they are still there) could talk, some tail they would tell. Indeed!
But those days are long gone and far removed from today's reality. I don't think we could have ever had a very private conversation at the petroleum club, it you did know me you would know exactly why. (smile) :)
Some people think I'm MK (hello Michael (smile)). Well, in my current time and stature of life, if two people saw a picture of Michael and myself, standing at "Roy's" for dinner,,,,,, You would most likely hear:
-------------
"OH! OH!, I know that one,,,, saw him on TV! He is in the movies!
"NO! NO! he's Michael Kosares, very famous and photogenic ,,,, but I don't think he's been in hollywood" ,,,,, Who's the other one ,,,,,, standing kind of in the shadow?"
OH! OH!, I know I've seen him before,,,,,, can't think of where,,,,,, Now I know,,,, saw him the other day ,,,,,,, He's Michael's ,,,,,,,,,,,,,, gardener?????????????
----------------------------------------------
HA HA, talk to everyone another day, on the trail.
Trail Guide
Trail Guide (10/24/00; 10:58:56MT - usagold.com msg#: 39784)
comment
Hello Traveler,
Let's talk:
Your words first, then
====my words====more
--------------------------------------
The Traveler (10/24/2000; 0:25:21MT - usagold.com msg#: 39771) Deflation Scenario II Greetings and warm regards to all.
Tonight, I will address the inflation or deflation debate that was highlighted this weekend by the formidable and never to be dismissed Trail Guide. Forgive me as I tell you my view from 30,000 feet. Much closer and the details would get in the way of full understanding by many here.
First, I thank Trail Guide for referring to me as a smart hard money thinker. His companion comment that I and many others walk forward down the gold trail but are looking backwards is similar to saying generals always fight the last war during a current conflict or that you can't see the economic pot holes down the road if you are always looking in the rear view mirror.
Fair enough.
I however reply with a well-known admonishment from Lord Acton. This Cambridge historian of the 19th century wrote that those who do not know history are doomed to repeat it. I have devoted a professional life and investing life to knowing "something" of economic history – both domestic and international history. My summary viewpoint as expressed @ 39423 is reproduced below.
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The economic lesson is ... ... ... ... ... .
Deflation is everywhere and always a monetary phenomenon -- a lack of sufficient currency and CREDIT in the economy to support prices. When the growth in credit slows or turns negative due to higher interest rates and higher default rates, then the above illustration [about the collapse of real estate] plays out.
================Mr. Traveler: conversely: the "real" inflation I point to is largely a cash phenomenon, where all the past massively over created credit instruments are brought up by the money making authorities and paid for with printed cash or allocations to the owners digital cash accounts.================= more
Some wise ones here state inflation is the curse waiting for us over the horizon. I doubt it because we are already highly inflated. I point you to the NASDAQ's PE, home prices and auto prices for but three easy references.
================ Sir, your three examples are the beginning "price" results of our highly inflated financial credit structure. However, as I pointed out above, that structure today is in the form of "highly reproduced" (inflated) credit instruments. In addition add to that mix all the vast paper derivatives in place and we can see how very different our present money inflation has been. Even as it only begins to raise prices.=============more
For hyperinflation to occur, even more credit would have to flow from Mr. Pump.
============Not true, sir. As your own examples pointed out above, rising prices in your examples above indicate how we are already receiving the effects of a hyper inflated credit system. Again, these are only an advance example of price inflation that's beginning to reflect the "real" amount of "credit money" we have created over 20, 30, 40 years. ============more
But to whom? The consumer is over leveraged already. The consumer has binged on easy credit to the point that debt service now takes more than 90% of disposable income for 80% of consumers according to the St. Louis FED. See why the economy has soared. If the above illustration does play out, most consumers -- still anguished by their recent credit traumas - will avoid the credit trap and thus Mr. Pump will be "pushing against a string".
Remember, the consumer represents 65% or so of the GDP. As credit goes so goes the economy.
=================Good point! It's one we have used to explain why deflation in a credit inflation is always a real possibility. But, hyperinflation cannot happen in a credit society unless the credit starts being made into cash.. Our (yours and mine) "pushing on the string" scenario is predicated on pumping more credit to those that don't need it.
However, in the real hyperinflation that's coming as it follows our current credit inflation phenomenon it's not the borrowing class that's liquefied, it's the lending class! Remember, out there in our vast dollar world, for every dollar a consumer has borrowed, some entity holds the other side of the credit instrument. Our classic deflation begins when these holders are no longer being paid, resulting in the write down of their assets. Across the land, banks, credit unions, citizens with lend able funds and every other form of lender no longer own a credit instrument that's sellable at par. That's 100 cents on the dollar.
Hyperinflation begins when pushing on the string no longer is an option. As you pointed out; "the consumer is binged out"! But there is more (smile).
We would not embark into such an obvious currency destroying process if we could drag the rest of the world with us into a cleansing recession. Call it an "almost deflation" where we start the inflation / deflation circle over for one more credit cycle. This is our record from most the dollar's life.
No country ever hyper inflates for the pleasure of the ruling class, as many want to believe.
They / We inflate to keep the domestic system in use and do so because it's the last resort. In other words you are forced into it! Today, the advent of the Euro has created a currency competition that will allow world investors to run from any deflationary, restrictive policy the US can offer. Our currency will be lowered to non reserve status no matter what route we take.
Just as in many other historic examples and present examples around the world, nation states always choose hyperinflation when no other way out is offered. No nation on earth has ever cascaded themselves into deflation once they are off the gold money system.
Below Traveler addresses some of the very aspects I detail in the above.======================== More:
Our worthy Trail Guide declares in his fireside chat along the Gold Trail @ message 43 that it will be different this time. It may be but as Cavan Man, a Missouri resident, might say: "Show Me". In part, Trail Guide states:
The US cannot walk away from hiking our ""gold trail"" now. Because "this process" is one of the few tools available to them for keeping the dollar perception in a good light. In effect by slowing the currency transition process they are doing exactly what world dollar holders need the[m] to do.
They will inflate these derivatives until in effect; our modern gold market bankrupts itself as supply is exhausted. I say, good! (smile) But once we get to that stage, I expect that a super US economic downturn will ensue.[*] Then the fed will go wide open and cover everything in sight to keep us going! The ongoing price inflation will be driving everything from physical gold to real estate through the roof.
[And a paragraph later... ... .]
Yes, it eventually breaks everything! But this is nothing new for us gold history buffs and it's what has happen in countless modern national fiats around the world today. Nations that don't have a reserve currency to play with. We will do like their citizens do, continue to use dollars but carry in our pockets whatever new reserve is in fashion, as a backup! Be it gold or Euros or both. In addition, our entire financial structure (like in these other nations) will change to operating in an inflation economy. Money will be lost, big time and made big time, but things will still be financed, brought and sold. Houses will double, triple then double again in price, even as financing rates approach 35%, 40% or whatever. We will also follow the (then) prevailing world policy concerning physical gold, solely because it will make economic sense to our officials.
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Do read the complete message for a fuller context and more vivid understanding. Your wealth and your grandchildren demand this of you.
Perhaps the point of debate between us is: (A) Does severe deflation come next at [*] above followed sometime later by inflation and eventually hyperinflation, or (B) Does the US go directly to hyperinflation? This debate has many, many dimensions and is complicated to map.
But let's give it a whirl.
ORO @ 39481 has stated that the FED will do the bidding of its owners (the banks) if events don't get too far beyond their control. I agree. Do banks and other holders of debt instruments (loans, mortgages, gov't and corporate bonds) want their wealth withered by hyperinflation? I don't believe for a moment that the creditor class is this egalitarian.
==============No Traveler, I doubt the creditor class as a group is seeking to remove the financial inequalities that separate people through this coming process of hyperinflation. Far from it. As I stated above, the credit hyperinflation has already occurred. It's there, in place as we speak.
What is now faced by this non egalitarian lending crown is the choice of: having their debt instruments defaulted on and losing everything,,,,, or playing let the fastest runner win the game!
My friend this is the choice you get when the currency your assets are denominated in hits the end of it's "timeline".
Human nature has followed this path for thousands of years. You know the old joke about out running the bear? Well, these lenders will influence our financial policy as such. They will try to get their debt securities liquefied first, spend the fiat and in this process out run you and I.
Leaving anyone they can beat to the mercy of the hyperinflation bear eating their remaining fiat assets.
Your point above about deflation and then inflation is still valid; if we cannot get the borrowers to borrow more and in doing so stop the economy from serviceing "OUR DEBT SECURITIES",,,, ! But we cannot risk the markets, in this particular time and place to make that decision.
Here, we and the world would for the first time make a "judgment call"; ---can the "dollar fiat system" our wealth is stored in endure the deflation / recession that must follow?---
To date, everyone stayed with the only reserve currency available. Tomorrow they will not because they have a choice.==================more
According to the IMF, foreign holders of dollars (including Central Banks) have a $6.5 trillion stake (roughly 60% in debt instruments) in protecting the value of their dollar holdings. Do they wish to see their purchasing power drop TO 25% or so under a hyperinflation adjustment
============Again, dollar holdings by foreign CBs are worthless anyway when the nation issuing them does and must run a constant trade deficit. The money can never go home, only build further on digital account.
This is the reason most Hard Money Advocates fall so short in evaluating our present gold values using only the commodity use of gold. They completely miss the fact that current dollar pricing of gold vastly understates it's wealth asset value.
Especially to CBs if their dollar assets dissolve in bookkeeping form, the way they would do in a hyperinflation. No, the billions in assets they hold in dollar debt instruments would not disappear, only be transferred through a massive devaluation of the dollar against gold.
================== more
or increase TO 175% or so under a deflationary adjustment?
=======================Again Traveler:
My above explained why a deflation cannot be in the cards. But if so, foreigners holding even government guaranteed paper debt in a deflating currency is little more than bookkeeping wealth if the actual goods buying power of the currency is compromised.
Yes, our US would continue to print dollars to service it's debt, making the accounts look good.
But, in such a deflation situation, foreign exchange controls are a 100% guarantee. Foreign held dollar assets would not come home, at least not at the same exchange rate one needs to become financially whole!
When the world begins to abandon a currency at the end of it's reserve timeline, deflationary gains on debt instruments are an illusion of bookkeeping. There would be no 175% real purchasing power gains allowed. ========================more
If those wise monetary strategists and Euro creators thought that the dollar would go "up in smoke", why do they continue to hold on to the US$ at an INCREASING rate of accumulation?
The ECB holds nearly 80% of its assets in US Treasuries (with 15% more in gold and 5% more in Yen). Is this the position of a shrewd central banker or wealth builder who is nervous about the future purchasing power of the US dollar? Why have not foreign dollar holders transitioned more rapidly away from the dollar and into the Euro, gold and other vehicles that would protect their wealth from the confiscation of inflation and later hyperinflation. Given that its "ShowTime", one would think that the transition would be more complete than still having $6.5 trillion "At Risk" of going up in smoke. (Actually, it is "ShowTime"but physical gold is a sideshow in the unfolding three-ring circus). I suspect all those foreign held dollars are still in the USA because of an explicit promise -- Your dollars will increase further in value as we deflate the debt bubble and you are able to buy hard assets for dimes on the dollar.
====================Traveler, I addressed this in the above. Still, their asset base is safe in any circumstance.Their gold sales are largely to each other and much of the very gold they are delivering to certain clients will return for Euros once a dollar transition begins.
Indeed, there has been massive ongoing physical gold buys the world over. Who do you think has been buying all the gold non official "Paper Gold Advocates" have been divesting themselves of? The key to understanding the scope of this is in seeing through the dollar paper gold pricing system. Had the prices of paper gold been rising all these years, it would have indicated a continued support of the dollar based gold markets. As such, the world today expects this currency system to fail, taking it's paper bullion markets with it!
These "shrewd central bankers" are no fool to the economic world nor the political world. The US is still a major military and political force and will continue to be for some time. Allowing the US to destroy our own system and offering an avenue of escape for investors worldwide is a master political play. Why dump your dollar reserves when such an action would make you the bad guy? Buy some gold quietly, yes. But, better to let your dollars dissolve and have your assets transformed by a dollar / physical gold devaluation. FreeGold will do just that!
======================more
To RossL, Nickel 62 and others, your question is thus answered. Those dollars sent overseas by the trade deficit have ALREADY returned to the USA in the form of capital flows into debt instruments (60% or $4 trillion) and to a lesser extent equities and other assets. This gleeful repatriation of dollars is historically unprecedented and has been done for a reason. Like those of "Giant" domestic wealth builders whose dollars are now sitting in debt instruments, these instruments will be converted - in the fullness of time - into currency to purchase hard assets ("old economy" companies with captive customers, positive operating cash flow, little debt and little remaining CAPEX, or trophy real estate or certain other proven factors of production) once the deflationary spiral has exhausted itself and driven the price of all these factors into the ground.
ORO stated that the banks want the gold mines and telecoms on the cheap. The above is the process for setting up the BUYS of the CENTURY. Perhaps a real time illustration would serve us well at this point.
================= Your presentation shows a lack of understanding about how exchange rate risk works during unsettled times. Failing nation states that have opted for a fully """""fiat currency"""""" (the US dollar) do not simply stand by and allow ownership of everything in the country to be transferred to foreigners. Or even local creditors for that matter.
Truly, the vast bulk of overall debt assets standing against US credit extending institutions dwarfs our ability to service with real goods. Even at vastly deminished prices. These debt structures are held for further fiat accumulation only. Truly a Western Thought concerning wealth. Once an economy begins to get into trouble, everyone flees these very instruments you stand by in your analysis. Truly, people understand political risk as it pertains to the fleecing of constituencies. It doesn't happen in powerful states and investors know it.==============more
A Denver ========"Traveler's example"====company at 40 cents.
In the late 80's and early 90's, some banks liquidated land at an average 24% of the then CURRENT appraised "Fair Market" value, incoming producing properties at 50% of replacement cost or about 60% of then CURRENT appraised value and residential homes at 81% of the then CURRENT appraised value. Less than a decade later, most properties had handsomely appreciated from the FED induced credit expansion. Boom then bust then boom is the age-old
cycle of wealth transfer TO the plutocracy.
========= These cycles end when the currency timeline ends! ==========more
Next, ... ... ... ... ... .
Does the US Government want hyperinflation? A close call depending upon timing and how events unravel. It could silently default on its outstanding debt and contingent liabilities (such as EXIM and SBA loan guarantees, FDIC insurance, etc.) by passing out wheelbarrows of FRN ala Weimar Germany. On the other hand, so many middle class welfare programs (the Big 5 are about 48% of total outlays) are indexed to inflation. They could never be met from the current tax code which has indexed rate brackets -- Thank you Ronald Reagan!
===========This is exactly what many people see and are preparing for!
==========more
Many models have =======more of Traveler's examples of possibilities=====apostles of
Jenny, Jerry and Ophra.
Physical Gold Advocates fear not. Gold historically has done ITS BEST during a deflation! Yes deflation. When all other assets were spiraling down in value because defaults soared and collateral sales pressured the prices of all hard assets, gold alone increased its value. It has no liabilities (no one to default) and is portable to destinations without domestic deflation. See Professor Roy Jastram's The Golden Constant (Wiley & Sons, 1978) for a 416 year history of
gold under four major deflationary periods of the past. If you are a bit lazy or pressed for time, simply recall that gold in the 1930's went from $20 to $35 during that deflationary depression.
One caveat: All four were under some form of the gold standard.
=============== OK, now you say: """"One caveat: All four were under some form of the gold standard.""""
Boy Traveler, that's some caveat! (smile) Four hundred and sixteen years of history examples can be toppled by one little caveat. Truly, that little point is exactly "the point" for today's time!
Our modern dollar world has created a fiat debt structure money system of biblical proportions. Nothing like it has ever been produced in the annals of time. We got to this point because our money was gold in the beginning. Then we allowed our confidence in gold as wealth to grow into the abilities of mankind to continue such a money system without gold.
The result is a massive debt against every thing except gold! Every asset that exists in the USA is fully covered by such debt several times over. Either directly or indirectly through various official government debts.
There is simply no historic example in the history of mankind that shows where everyone surrendered their assets to satisfy such debt. Yet, this is the process you Traveler, fully well expects from a deflation. A deflation by the way, that no gold standard today says must happen?
Truly, had the dollar advocates allowed it to be devalued against gold long ago we would all know where we stand. Free trading Physical gold would have slowly risen in dollar prices in an ongoing process that would have taken gold prices into the heavens. But, it didn't happen and an imploding debt structure (caused by pushing on a string of consumer credit demand) will be "QUICKLY" countered with debt instrument purchases from the official level. The old 1980 monetary control act is already in place and allows our fed to buy everything down to your shoe laces in order to stop any debt defaults. ===========================more
Is not deflation the very outcome that the Austrian economist Mises predicts following periods of rampant credit excesses? Furthermore, if one has escaped indentured servitude (being a debtor)through hyperinflation, how likely is one to "re-up" by borrowing at floating rates of "35%, 40% or whatever". What could one invest in and reasonably hope to make a positive spread (return on investment) if this is your cost of capital?
============Well Traveler, if you go to just about any third world country today, there are many extreme examples of what "re-uping" is all about.
Further, deflation's following the credit excesses Mises talked about only happen when people believe the currency system will last and opt to stay with it.--- OR -- They escape the bad credit risk inherent in remaining in such a deflating system by jumping to another system of younger stature. Still, it leaves the choice of hyperinflation as the only route after a fiat expansion.
When such processes unfold today, people look for security in a fiat. One that will back itself with gold valuations conducted in an ongoing nature. Something the US fought so very hard to avoid all these years!===========more
With respect to Trail Guide's "living in many, many lands and have witnessed and used such inflating systems," I would point out these key differences in economic profiles.
Unless he was economically alert during the last time a reserve currency "fell from grace" (the pound sterling following WWI), then the experience of Mexico, Argentina, Russia and other commodity based economies are not on point.
==============Well, the pound opted to have the dollar back it's "transitioned" currency so the effects are not the same. Further, their debt structure had not come anywhere close to what we currently have. So they muddled through. The same could be said for the dollar if it took the Euro as it's reserve backer. However, comparing the debt levels of Britain then and the dollar now is like comparing a baseball to the universe!
===============more
Furthermore, hyperinflation is difficult to introduce when a country's government, businesses and citizens are already overly leveraged and are having trouble meeting debt service obligations ($2 trillion annually as recently posted by ORO). Total debt in America is often quoted in multiples of record high GDP. It is one thing for the FED to pump money vigorously into the economy. It is another matter all together for the banks to find credit worthy or semi- credit worthy users of this fresh tidal wave of liquidity. By some estimates, corporate America has already leveraged up from a conservative ratio of 25% debt to 75% equity to a precarious 75% debt to 25% equity ratio. That is almost a 10 fold (1,000%) increase in debt!
============= Traveler, every time you bring another log to our "Gold Trail" fire, I pour gasoline on it and burn it before it becomes of use. But keep trying, sooner or later I'll run out of fuel. (smile)
Again, hyperinflation in our economy will (as I demonstrated in the beginning) begin with our government buying the debt from creditors and changing the terms of it's payment for over leveraged citizens and businesses. Further, a rising price structure of an extreme nature, such as this, quickly raises all wages and income levels. Allowing everyone to service easily what seemed like a mountain of debt before. No different than looking back to when minimum wage
was $1.00 and now is $5.00+/-. Only happening on a super accelerated scale.
=======================more
In summary, he who has the gold makes the rules. The creditor class -- both the domestic plutocracy and their foreign cousins, has the gold -- both literally and in the form of debt claims. They would rather convert their paper claims into foreclosed hard assets following a deflation and at worst loose a billion or two from poor collateral valuations while reaping trillions in new purchasing power. That beats passively loosing 20% - 40% - 60% of the value of the entire debt portfolio from hyperinflation.
=============== Exactly who in the voting public do you think is going to sit still for this paper conversion? You,,,, me,,,,that man behind the tree? Ha! Ha! """NoONE""" leaves their debt claims laying around in a country where their citizens are being economically tortured by huge, all consumeing debt claims! At least not without massive risk returns. That's why rates soar so high. You either run for it or take a big chance in staying,,,, most run if a stable medium exists. Providing that medium in either Euros or a Free Trading gold market is where the ECB / BIS can play the good guys============more
Furthermore, if the word came out that hyperinflation was the policy of the USA, who would lend their funds for the prospect of receiving less purchasing power later? I for one would rather take my chips overseas to an economy that is stable and offered good returns for definable risks.
Domestic usury laws can only be raised so high and bankruptcy laws tightened so tight before the great unwashed revolt.
===============My feelings exactly!===============more
The major risk to the scheme of the plutocracy is a revolt of the masses -- whether politically through election of populists who pass legislation such as foreclosure moratoriums or violently though protests, strikes, lynchings, pogroms and the like. Thus inflation followed by hyperinflation will be instituted by the FED at the instruction of its masters once the fear of loosing it all exceeds the greed of gaining another prized asset on the cheap.
================Very good!=================more
Lastly, consider this. Current wealth of creditors only increases during deflation as each dollar now held becomes more dear.
=============That used to be true before the volumes of debt securities began to dwarf the universe. Today, most asset holders are true to nature players of the trading mentality. If inflation becomes the risk, they will exit the door in an attempt to out trade you and me (and that man behind the tree (smile))! Most of them will simply run up the inflation ladder seeking the next higher return. In the process marking the market down in existing holdings until the government must also buy those items at par. ===============more
Inflation is a wild card for everyone. For example, my one ounce Maple may be worth $20,000 or $30,000 once deflation is turned into hyperinflation (and former creditors have switched to being net debtors). But what is that $30,000 worth in today's purchasing power - $3,000 for a 10 to 1 return or $300 for a big waste of time and energy?
==============ALL:
This is one of the major flaws in Western Hard Money thinking. We tend to view the dollar price of gold in a static purchasing power light just because it's bookeeping priced through paper accounting deals.
Lost in our perception of all this is the fact that current bullion prices must rise into the thousands just to reflect the US credit inflation that existed 20+ years ago! Much less reflect it's value relationship to the current trillions of debt.
Our modern dollar paper gold derivatives have masked the true gold values all this time. Start with a base of gold holding it's international wealth value at $3,000 to $10,000. Then extrapolate that to handle any future money printing to buy our already hyper inflated debt!
Now you have an idea why PGSs (Physical Gold Advocates) are so quiet as they buy bullion today.
The current marketplace has so understated it's true dollar value, physical gold must rise far beyond any price inflation that's in our future. Only Western commodity traders using a thought process that says; """the dollar market price of anything is correct because the dollar price says so"""" think gold today is a "one - on - one to price inflation" proposition. Nothing could distort the picture more. ==============more
Truly, what waits for us economically just over the horizon will be calamitous and stunning for all but a few.
===="""We watch this new gold market together, yes?"""=====
Black Gold, Yellow Gold - the only wealth worth physically owning.
=======Absolutely, Sir Traveler, Absolutely!!!!=============
Thanks
Trail Guide
Trail Guide (11/19/2000; 19:31:16MT - usagold.com msg#: 41777)
One quick post
Hello all,
I'm still working through a few private things. But, rest assured that I'll be back before this election is over.
I think (smile)?
You know, both Bush and Gore are good guys. I bet they are at least equal to the best members of your family "in laws" (huge grin)!
Below, I'm perhaps saying the same things in several different ways. Give it some thought?
--------------------
All of us are them,,,,, those two guys!
Looking out across this national stadium, filled with millions of people, I ask myself; "does everyone here, expressing their views publicly, understand that "they & we" are this society as a whole"?
Mostly, I think that deep down we do and our brash accusations are a form of posturing for our own self interest.
But, when some negative people speak or write the same challenges over and over we can't help not to place their private sincere position as being the same as their divisive public stance.
If that's true, then fortunately for the rest of us, large societies do act as a mass and the finality of their political choice always drowns out these vocal few "trying their hearts out" to speak for "US ALL".
The citizens of this great land are far smarter than the media or many private speakers make us all out to be. I know, because I hear and talk to our "regular people" all the time, just like they were family. Ha! Ha! Many of them are (smile).
We "regular people" know a thing or two about real life and how it works---------
Truly, in western democracies, no one controls group think, even as many would have us fear that some power players can. We, like the great herds of buffalo of yesterday - year, move in a way that makes observers think a shepherd directs us. But just watch them media boys dive for cover when we go that way instead of their way!
So here I am,,,,, here we are,,,,, right in the middle of this, the largest mass of opinion in our human group. Feels good and safe here, doesn't it?. I'm happy here and think most all of you readers feel the same.
We all move together, sink together, swim and sometimes succeed together as a nation,,,,, for better or worse. Thank goodness we have so many around us that our strength is so strong. In this light I always say; "god bless America but heaven help the world"! (smile)
This evil society?-------------
Why, it's us, we know it! So please, sir don't keep repeating Gore's and Bush's bad traits so loudly? You're talking about "us". you know.
Does anyone writing here think we as a political people are not an awful bunch of self centered manipulators? Ha! Ha! I didn't think so,,,,,, so what's the problem?
We take our own little self interest as far as possible until the larger mass puts a stop to it. Good! Because then we all become governed by the larger mass's self interest ,,,,,, and that becomes the strongest trail we can follow ,,,,, as a group ,,,, for better or worse. At least they create "our" lawful order, as bad as that may be. And in that structure we live "kind of" peaceably, even if it's not the same moral choice for all of us.
Still,,,,, bless this nation from sea to shining sea!
In most modern western societies political power has no strength without wealth and that's good. So it takes us off our usual course of chasing money for a while. That's ok because their control of public wealth is not conceded to them without a good fight and a good fight comes second behind this winning the majority of human support first. So, during these brief power transfers, the nature of, control of and longevity of any particular nations wealth assets is subjugated to lower status while winning the greatest number of votes comes in on top. Not winning the support of the most moral, mind you, just getting the votes any way one can. It's a terrible way of doing things, but that's ok,,,,,,,, it's us! We accept that privately when no one is looking, right? I thought so. You newcomers to this, that think it's all so unlawful, remember, we been doing it for over 200 years.
Taking this high ground for a firm footing----------
I now point out and ask; "no leader can ever do everything promised, nor can they accomplish our agenda while being everything moral for the greatest mass of this self centered nation,,,, So why do we place them upon a platform that not one of us can stand on ourselves"?
Yea, I know,,,, you already knew it's the best we can do and the best they can do. I thought you grasp that.
But, reverse the tables in our current presidential election and ask yourself; "would Mr. Bush not do the exact same thing Mr. Gore is doing? Don't answer that out loud or someone will hear it in the other room (smile). If he (Bush) didn't, then he would not be fighting his best to represent the best thrust of our national will. Right? So why can't Gore scratch and claw for all he is worth?
You see, we expect, demand and need a leader that is most like us. So don't be presenting Gore or Bush as something they cannot be to the mass that eventually places them in power. If you do, then your opinion does not represent the greatest strength of our nation. That being;
"the power of a people to govern themselves by finding a leader strong enough to win this no holds bared fight, for the support of most of us good people".
Ruthless? You bet! But knew that already, didn't you?
Crooked? Yes! But knew that already, didn't you?
Moral? Probably not! But knew that already, didn't you?
Honest? Only to the extent that our desires will allow him to be!
So, myself and the greatest majority of Americans I stand in the middle and say;-------
"let the best person win the hardest fight over the longest mile. We demand it because we are one tough bunch to govern. So be it and good for us"!!
Further:
As a national family we choose to shake the walls of our house as we please and damn the outsiders looking in! General Patton said it best: " Americans love a winner and won't tolerate a loser"! Indeed, when this is all over we'll all be winners, like it or not.
Closing---------
I say to my fellow Americans,,, my good friends and bad;
"put up your dukes and let's go for it,,,, after all I'm the best neighbor you ever had or ever fought with ,,,,,, Oh, by the way ,,, how are the kids,,,, God bless you and yours ,,,,, and do you need anything from the store,,,, I'm going that way?
---from one of "us" that's just like "them"---
thank you all for reading and happy thanksgiving
Trail Guide
Also;
Thanks for the thoughts Michael! (big smile)
Trail Guide (01/03/01; 15:54:16MT - usagold.com msg#: 44966)
Comment
Randy (@ The Tower) 13:32:16MT - usagold.com msg#: 44957)
-- surprise rate cut was in the works. Any other rabbits up your sleeve?------
Hi Randy,
Your post made me comment!
Ha! Ha! Allan blinked first and a small few knew it! Picture him and the ECB standing head to head, not moving an inch. He moved and now the dollar is lost. With all the quick short covering on the stock and currency markets, "noone" noticed how much the long bond got smashed.
------ A 30-year bond fell a whopping 2 10/32 to 111 2/32 to yield 5.48 percent -----
Now our strong dollar support system is fracturing away. This year the dollar will lose it's reserve status to the Euro. Or at the very least share it. Nothing is going to fall again as a "Real" inflationary bias begins to build in our dollar world. Stocks, real estate and even basic economic activity will all feel the effects of a super dollar expansion. Done only to keep the dollar status somewhat in the game. Deflation will not be allowed. Nor will the gold derivatives markets be sustainable in dollar terms. Everyone in the world will be selling paper gold short in an effort to make some hay as it's structure crashes. It's called piling on!
This move by Allan is as important as the Washington Agreement because it marks the first time we are forced to action by a "competing" financial system. This game is well known to some and it's outcome is being positioned for. The Gulf producers, Europe and the BIS have been doing so for many years.
TrailGuide
/
Timeline:
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
/
Trail Guide (01/03/01; 15:54:16MT - usagold.com msg#: 44966)
Comment
Randy (@ The Tower) 13:32:16MT - usagold.com msg#: 44957)
-- surprise rate cut was in the works. Any other rabbits up your sleeve?------
Hi Randy,
Your post made me comment!
Ha! Ha! Allan blinked first and a small few knew it! Picture him and the ECB standing head to head, not moving an inch. He moved and now the dollar is lost. With all the quick short covering on the stock and currency markets, "noone" noticed how much the long bond got smashed.
------ A 30-year bond fell a whopping 2 10/32 to 111 2/32 to yield 5.48 percent -----
Now our strong dollar support system is fracturing away. This year the dollar will lose it's reserve status to the Euro. Or at the very least share it. Nothing is going to fall again as a "Real" inflationary bias begins to build in our dollar world. Stocks, real estate and even basic economic activity will all feel the effects of a super dollar expansion. Done only to keep the dollar status somewhat in the game. Deflation will not be allowed. Nor will the gold derivatives markets be sustainable in dollar terms. Everyone in the world will be selling paper gold short in an effort to make some hay as it's structure crashes. It's called piling on!
This move by Allan is as important as the Washington Agreement because it marks the first time we are forced to action by a "competing" financial system. This game is well known to some and it's outcome is being positioned for. The Gulf producers, Europe and the BIS have been doing so for many years.
TrailGuide
Trail Guide (1/12/2001; 7:33:54MT - usagold.com msg#: 45541)
Dots
Once again, I find myself waiting for a travel connection. Thank goodness for USAGOLD.
=================
RossL,
Well, my first reply is; As Mr. Fleckenstein often say, "you are not connecting the dots".
I am giving Black Gold the same association as Black Market Gold dealings. This broad name gathers up all gold produced, refined in some reasonable fashion and used in commerce or black barter. It also covers what would have supplied excess, unreported official holdings.
The main points for us to consider when digesting Mr. Guyatt's work is:
Much of the past world gold production both White Market and Black market, prior to say late 60s early 70s, went into paper currencies. That is to say it was sold for industrial use (for paper money), sold to governments for reserves or coinage (for paper money), or refined into worldly recognized and tradable bars (again later sold for paper money). The amount of this pre-71ish gold production that was mined, refined and retained was very small compared to the off record amounts channeled into secret places as described.
The reason this perception is correct in negating our author is that all the gold, Mr. G. speaks of, is in some vault, somewhere,,,, it is not in raw ore form. The process of refining, at that time cost as much as the gold was worth.
Soooo, in order to build these vast stores of gold, not recorded before, would have cost the owners, at the time, more capital to retain it than to sell it for cash and just keep the cash. Further, as our bright Randy points out, during the period that this volume of Black Gold had to be built up, world production could not have come anywhere close to supplying it (dug on the side and out of sight) as any major profitable ore bodies were closely followed by everyone in the business, including governments. Remember, it's only the modern advent of Heap leach and the recent run over $100oz in the 70s that created the ability to mine cheap bodies.
I agree, there is a lot of gold out there in circulation and it is large. But, that gold does exactly what private gold does best; it circulates as is. No one in their right or wrong mind would use that gold to issue derivatives against in the way Mr. G. suggests. Yes, recent bullion owners can and do sell their holdings for cash and the BB then leverage that bullion into x paper. But, that is the same process I have pointed out for some long time now. Such circulating gold has been used to fill the demand gap as it's owners become single derivative holders. But, more to the point, the derivative printing is leveraged 100 times this actual physical inflow by the BBs. If indeed, the supply was balanced, there would be no reason to leverage with paper supply, they would just sell the gold outright and drive the price.
Further,
Yes, the gold may have been stolen and put into storage. But it could not have been in the excess amounts described, beyond worldly knowledge, because of the above production realities at that time. Hell, even small time outlaws, taking and selling thoughts or software require some kind of infrastructure and collaboration in the open market to succeed. Much less take, store and paperize million of tonnes of gold bullion. Connect the dots.
================
Randy
As yourself and Stranger point out, the money supply rise is breath taking! Again, I say, for the first time in our history we are about to feel the effects of reserve currency competition.
As pointed out further back in the GoldTrail, Allan will not tighten again. To do so will fully concede the dollar. His only avenue in this "new world" of money warfare is to forget the dollar's value and retain it's usage as much as possible. All done to combat the Euro.
We started down this trail when the Washington Agreement put us "on the road" to high priced gold. The fed will now "manage" a progressive destruction of dollar credibility.
That will entail:
----a loss of credibility of the entire gold market system and corresponding bid down of it's transactions and assets---
----a falling dollar vs the Euro-----
----a falling interest rate environment on par with the recent decade of Japan experience-----
--- the use of our 1980s monetary control act that allows the fed to buy debt from all comer's---
--- a stock market that will not fall as much as we think
(use the old German example here)-----
--- the loss of our ability to shield ourselves from price inflation by buying cheaper foreign goods---
--- the growing loss of trade as China and EuroLand evolve into "the trading block" the world strives to deal with-----
---- real life hyper inflation as this country and generation have never known -----
We are on the road, my friend. It's going to be some ride.
=========
Michael, Thank you for your messages! (smile)
==========
TrailGuide
Trail Guide (1/18/2001; 7:26:19MT - usagold.com msg#: 45842)
Comment
Hello all!
Some of my friends (and apparently many readers) often ruminate on why I am so fractured when writing. Often giving the impression of rambling on, not to mention a poor english structure, spelling and grasp. Someone asked, "Your not that way in person, so why such a literary style?" I'll try to answer what I did strive to explain once some time ago.
My full grasp of english is somewhat poor. But, that's because of a mental structural problem induced by a worldly exposure. With that simple reply, I'll leave it to your best imagination's ability, to decipher (smile).
A better reply, though, would be; it's just my way of following a format introduced by Another. In other words, in his words to me with my (words added) -----
"one should not tell readers (his) exact knowledge, position in life, or what (other's) thoughts should be. Such (talk) extols the self and lessens the reason pursued. (Rather,) let anyone that will listen, think your Thoughts (thru), seldom exposing (them) to (your) fully concluded points. They (people) gain our understanding on (their) own terms, in (their) own way, in (real) events, over time". He often said; "we are not (here) to prove things, my friend, time will do (that) for us. It (time) will (also) expose (our) standing in world of Thoughts" and "is it not better to stand (in) a crowd and speak softly to (the) nearest ear" and "truth (is) never hidden or (not) exposed, it (is) simply not reasoned by exposure to understanding".
So, (smile)
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
This is the first part of Robert Frost's fabulous classic, as printed above the USAGOLD Walking The Gold Trail page. I'm not sure if it was Randy or MK that choose it, but it was perfect in all the ambiguity such words could convey. For thinking, reasoning people it creates an air of where we are today. We have rounded "The Curve" of understanding and now must contemplate the trail to follow. Truly, most everyone knows, now, that there are two paths we can go down. Each path denotes following it's own economic block, world currency block and gold price structure block. Indeed, our future quality of life may depend on how much we understand about these two paths.
more
Trail Guide (1/18/2001; 9:32:39MT - usagold.com msg#: 45846)
Comment
Randy (@ The Tower) (1/17/2001; 11:20:40MT - usagold.com msg#: 45784)Excellent! Here is only a small excerpt from MK's FULL report today -----------
Randy,
Yes, that MK is something! While I cannot get his entire News & Views, what you have provided speaks volumes of a mind endowed with good reasoning. His vision is well positioned to navigate and understand this modern money world around us.
------------
I have this to add:
Who among us, ten or twenty years ago, would have ever thought the fed would still be exploding our dollar production today? Back then, such an "inflation of the currency", over this long a time span, was unthinkable. It would surely lead to an immediate destruction of the dollar. But, here we are, watching as dollar production is gunned for the ????? time.
Everyone with any knowledge at all, the Ruffs, the Browns, the Schultzs, etc.,,,, all knew any such currency inflation, as we see today, would send the world off the dollar standard! Where would we all go for money relief? Why, gold and silver, of course! But, what happened? Well, the world economic structure changed and those extra years sold time to others for the creation of Another currency.
You see,,,,,,, this was the trick (or ploy) of "one world trade". This concept alone produced the extra demand that needed "trading dollars". This short term transition, aided with cheap oil deals, demanded "digital money" for trade, not savings. It was this new "one worldeconomic expansion demand" that put our dollar so much more "in play" for it's settlement function. It's value as a savings utility was not in demand, but it's need to denominate and close settlement was. This exceptional surge in trading demand overcame it's loss of demand as a "holder of value".
However, this "digital need" would not alone, negate the run into gold others forsaw. For that sector, our new currency creators needed an overflow valve that would cover this demand. Paper gold! A devise pushed at first by all dollar users.
But what of all the dollar instruments floating around? Cash dollars, near dollar like securities and even Treasury issues? Even they are not the static holdings we knew them as twenty years ago. These paper digits are but commerce receipts and are now a 1000 times more fluid. In fact, few of us can say that we actually have an account that these things are deposited in. Yesterday, instead of real deposits, we owned "deposit credits" and account credits. Bad enough to own them then as it created doubts of redemption. Today, however, we own "deposit credits" of "deposit credits"! In other words, our entire money universe if completely liquid and fluid in nature. We as an American Western society own no form of a stable currency structure. It is completely a "digital settlement receipt" money.
In this fashion, no form of trade slow down can be allowed. Economic slowdown today, is the death of dollars on a scale never known. Where dollar assets and liabilities, matched on banking books, would once cancel out, creating just a simple alarming deflation,,,,,,,,, today, one dollar loss wipes out hundreds of dollar derivatives assets based and created against that one single deposit credit asset. Even a minor slow down will have the effects of a colossal banking failure. Therefore, the Fed is now in a different universe than the one most economic forecasters are following. It's not a case of changed rules,,,,,, it a case of a completely different environment.
The fed must create an inflation on top of an inflation. To not do so, they will immediately concede the currency world to the "old world's" new currency and it's physical friend. Gold! Even most Euro doubters are beginning to see this new light:
----"Picking a new currency to switch into may seem tricky, but there are only a few sound choices. The euro, a currency nobody ( including us ) had a nice word for in a year, is now one." --
---http://www.gold-eagle.com/gold_digest_01/schultz011901pv.html----
So,
This, my friend, is the new dollar money world we have evolved into. A process that has expended the value and timeline of any and all dollar based assets. As Another said; "your wealth, it not what your dollar say it be". Indeed, what we own is but a shell of a transitional world currency system. Somewhat like owning the common stock of a trading shell company. No assets, but still has a useful bid? It leaves us with little value once it's digital bid, it's "USE FACTOR" moves on and that factor will leave if the world economy slows in the slightest way. In common language, a recession will bring the Western dollar world a modern hyperinflation the likes none of us have ever seen or read about in our time!
Major players in the gold world have not been blind to this ending dollar timeline. Physical gold is not off their radar screen, just paper substitutes hard money assets not backed by Euro governments! They are not blind to the continued use and need for paper gold to govern the dollars slow demise. Collapse this paper gold world too fast,,,, and the dollar is toast,,,,, too fast!
Indeed, without a Euro to take over the dollars "digital roll" we would be headed for an full blown economic nuclear event. Something oil producers are loath to accept. To this end, the Euro is forced to survive,,,,, warts and all! It will also be physical gold that carries the bulk of past dollar inflation, and the wealth that represents, in the form of gigantic dollar gold price increases. The world's wealth, as denominated in money will not disappear, it will only change hands and form as it supports a new currency system. CB gold is today, traded as an asset, not sold as a liability. Only Western Media reports 1/2 this fact to extend paper gold's decent.
Gold substitutes? Who needs them when their value is based on a failing paper price structure.
Today, who knows the price for physical gold?
It has no market price in our dollar world!
Physical Gold Tomorrow? It will outperform every other asset ---- because it's value as wealth is so misplaced in our time------
As MK so boldly observes;
-----"There comes a day of reckoning..."-----------
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Trail Guide (1/19/2001; 16:53:56MT - usagold.com msg#: 45944)
Reply
USAGOLD (01/18/01; 19:34:02MT - usagold.com msg#: 45876)
To FOA. . .A challenging question from the C-Man. . . .
Michael,
Thank you for inviting me up here, on stage. I'll offer some frank discussion to Mr. Cavan Man's challenging question. Only, I hope my oratory doesn't drive the audience from their seats. (smile)
---------
Hello everyone,
I assume you were all given and have reviewed USAGOLD's #45876. Good, then we can get right into it.
C/Man's permanent question is; "Why doesn't Greenspan do something about this? He must see what's coming."!
This crosses all the endless boundaries of political vs human wants and needs. Any answer to such a question exposes our own reality of just how much we all live together and compete together. As I mentioned before; we all are floating down the same river of life,,,,, bickering and debating, living and working,,,, even taking each other into court and war,,,,,, and doing all this as our floats ride the same current of water to it's destine end.
To better understand my replies, let me profile myself a bit. In both the physical and mental image.
The physical:
Am obviously a male and in the second half century of my life.
Have been married only once, to the same wonderful woman for several decades.
I am religious, understand the bible and do physical deeds to convey that knowledge to others.
I strive to live a moral life in every physical sense.
Am in good health and work at treating others as I want them to treat me.
The mental
By some gift of destiny, I know the people world around me. Perhaps better than some?
At all times I am intensely aware of the diversity of human life we all must operate within.
Myself and each of us have our right and wrong codes we live by and these are not always the same.
Yet, and because of this, society as a whole must function thru consensus or make war.
I fully well understand a successful person's (and nation's) feeling that they alone made their way in this world thru hard work and self sacrifice,,,,,, and I admire that pride and courage.
I also well understand that, by far, 99% of these people got where they are at with luck and good fortune,,,,,, more so than their special talents or moral good deeds.
And too, I bridge boundaries of thought, without judgment, in order to promote a common good.
So,
>From that "heavy" description, I'll lighten the room a bit with a true short story I find most remarkable for it's human clarity, scope and definition as it applies to all of us (smile):
------I was once at a bar in a very exclusive, very private country club. In this part of the club there were no waiters, only a large team of bartenders that always stayed behind the bar. They would be fired, on the spot if they walked onto the small club floor. By code, this area required members to get their own drinks for ourselves and others. Kind of a step-down from the "big life" so as to bring us back to "regular status". The talk was very friendly and no business discussed.
A new guy, who I'll refer to as "newguy", had just come of age (new money) and wanted his place in the group. I think he was Australian, if my memory is correct. Standing at the bar, within a crowd, he boasted openly about his new boat, 14 meters+/-, and how cheap it was to operate. Conveying a sense of wealth availability. "At this rate I could have several",,,,,,, he said this with a smile and an honest intent. But I (and other older men) knew his motives were as usual for fresh money. After a short chat, he felt like he was fitting in and really making his position felt.
Then, (I'm laughing as I recall this) another much older member strolled up for a drink, just catching the tail end of newguy's talk. Now, you have to understand, this other fella was world class wealthy, but you would never know it. His way was always light and easy. He poked his head into the group and told newguy,,,,, in a low gravely voice:
---"Boy, you made a good decision on that one! I also down sized to one of those little boats. Saved me a tonne of aggravation. Hell, I now have the rest of my slip rented out to two other members. Good for them for having the space,,,, and good for you for doing the same. You know, the world doesn't need attitudes like we used to have. Good un Mate! (as he walked away)------
Ha! Ha! Ha!,,,,, everyone around newguy kept a straight face as he kept the beer mug at his lips, while looking at us over the top. Then he lowered the glass and said with a straight face,,,,,, ----"He's right, ya know!"----
Ha! Ha! Ha!--- then we all had a great laugh -----------
Ok, where was I?
That story not only tells us who we are in society, but how we react against competition in society. Sometimes the act is extended into a life long play. The above little interaction is carried out in board rooms and on the street,,,,,,, at the CIA and between nation states. No matter if one is rich or poor,,,,,, buying and selling countries or teacups,,,,, operating businesses or pickup trucks,,,,, we all do our part to "puff up" as a defense against the world we perceive is out there. We adapt into the social and business flow that's at hand. The norm of the occasion,,,,, and the political reality that's in our world around us. Our personal codes of life are often at odds with the consensus of the diverse world we must operate in. Such is life!
You see, in real life, we must often take on the appearance of that world around us. This action isn't lying or cheating so much as it is trying to act out a play that is essential in dealing within our hugely diverse society. A society, by the way, that is mostly made up of people that aren't "the good ones" as we so often perceive ourselves to be.(smile)
This line of comment now lays a foundation that takes me to politics. As I have come to understand the captain at the helm,,,, the driver of the corporation,,,,,, the general at the controls,,,,, they are all just like us. Working outside our personal moral standing standards, they must function using a diverse crew that's usually not of the same thought. Do these leaders lie and cheat if the stress becomes great enough? Of course, how do you think the ,,,, workers of different moralities are jostled to perform,,,, the job gets done and profits get made,,,,,, ! Do these bosses all get caught? No, the ones we extol as "good ones" don't.
Does the democrat tax and spend? No more than the republican borrows and spends! Is your group's moral or business objectives correct for the country? Only if they apply to the whole diverse society. Otherwise, you are imposing a will upon others.
Now, with that overview in mind:
Is Alan Greenspan doing everything he can to oversee a fiat banking system while functioning within our political society? I can answer that with .9999% certainty. Yes! In fact, throw a few extra 999s on that answer (smile).
You see, a nations rules, laws and moral requirements are never more than a consensus vote from changing. In such an environment, no leader can function for long at his own or our own standards. The office, itself is a reflection of power groups pushing their own position and that requires us to make our personal codes just that, personal codes. Not public codes.
Any person of clear vision could stand upon the highest mountain, look 360, and see that this country is not the same body it started from. Our codes of conduct, perceptions of right vs wrong and even our attitudes of wealth have all been diluted from other sources. This is not to say it's good or bad, as this dilution often comes from foreign political perceptions that preceded our nation' history. In some ways, it predates many generations. Right or wrong, good or bad, some of these accepted political directions have been used a long time.
Mr. G. is not trying to make us something we as a group are not. He cannot. His objective is to support, prolong and protect our financial system as it must operate in it's present evolution. Make no mistake, he and every leader in his position understands that fiat money systems are always in evolution. There is not and never has been a status quo when it comes to a nation's money. Recent history is ripe with such change, even during the usage of gold within the currency stable.
I can assure all of you that our fed chief does not confuse a strong vs week dollar with a stable fiat money system. This current strong vs week dynamic, happening over the span of 20+/- years is little more than wafting from bank to bank as we ride the river that is our currencies timeline. Our dollar is evolving even as our society evolves. It's use as a world reserve and even as a medium of exchange was never written in some code of world conduct or acceptance. Circumstance and consensus will change any currencies worth regardless of who manages it's trip through time and space.
So, there you have C-Man. I wish you had asked earlier? Because; "I didn't know there was a problem." (smile)
TrailGuide
Trail Guide (1/27/2001; 10:54:37MT - usagold.com msg#: 46629)
Comment
Michael,
In response to your CavanMan question about Greenspan; I made my reply a deep and philosophical ramble, hoping to draw out some other's concepts and opinions about him. For some reason (smile), I feel I know the man and his reasoning, in depth, and wanted to see just what others would do in his shoes. A few replied and I will later, in kind. Perhaps, to our good poster PHinLA's writings, yesterday. Hope his power is still on (grin)!
As to your / our little bet (smile),,,,, I can dump a few K trying to make a point about physical gold vs futures, but dropping a US$ to Mr. Kosares over England would mentally and politically break me,,, Ho! Ho! Ha! Ha!,,,,,, Actually, I don't feel that you are a gambler, but business men of your stature must take public risks on occasions, no?,,,, So, on that account, I will not feel good about taking your money (grin). Besides, being so positive of my new gained one US dollar of wealth from USAGOLD, I already converted it into Euros and invested it (huge grin!) Ha! Ha! Time will tell, my friend!
To comment on your post earlier:
Adrian van Eck doesn't miss a thing and is usually right in the middle of every political motivation that's flowing at the moment. My observations are that this is but another example of the fluid political events we follow and do concur that the methods indicate open economic trade warfare behind the screens. Indeed, yourself, myself and anyone following the flow of comments here at USAGOLD are attempting to measure the impact of these moves upon our respective currency / economic zones. Even as these nation states combat each other, behind the doors for an upper hand.
Boy, I have a hard time replying any better than our Mr.CavanMan did in his (01/26/01; 19:07:51MT - usagold.com msg#: 46590) and everyone should read it again. You have been holding back on us sir (smile).
His point to you, Michael, is that of history and the ebb and flow of greatness in nation states: ---
--"The UK trade flows to the East naturally. As usual, your thought is excellent. However, the British being primarily a conservative people will not make a (quantum) leap of faith across the pond I do believe. Rather, they will be a key member of the EC over the long haul."---
So, I can only support his complete post with my comments followed with several copies from Dravos.
My Coment to a few others:
Codoleeza Rice, G.W. Bush's foreign policy advisor, is only doing her job. But, her proposition alone does not negate the obvious; the US in coming off an economic peak inspired by a huge Fed engineered currency inflation. And, because this dynamic is happening at a point and time unique in history, world reserve currency trends will now control how the US handles this particular liquification of it's system. This simple point is painfully in plain view throughout the Euro Zone block. It's on record within so many ECB, French, BIS and multi EuroLand publications we cannot begin to repeat it all. They (EuroLand) saw our expansion for what it was, knew it's reason for building, noted that our dollar was driven to "overvaluation" by political means, and knew the Euro "under valuation" was but a passing thing. The British were not yesterday, and are not today blinded to this fact. They, as have other dollar trading blocks, completely based their financial structure upon an endless extension of the world's present reserve currency structure. Yet, today, for the first time in modern US history, there is a real risk that that reserve structure may fracture, taking those financial houses into a hyperinflation with us.
Bringing Britain into NAFTA would be a great accomplishment and is as good as any a political and economic point for the new Bush people to aspire for,,,,, but points are for arguing while reality is the game that wins votes. Do we really think England will dive for this even as Mexico reveals the danger. From Dravos:
------ http://www.iht.com/articles/8763.htm------------
Mexico Will Seek New EU Trade Links
Alan Friedman International Herald Tribune
Friday, January 26, 2001
Fox Wants to Offset Potential Harm to Growth From U.S.Slowdown
DAVOS, Switzerland President Vicente Fox of Mexico said Thursday that the U.S. economic slowdown could damage his country's growth target this year, but he said he would work to replace lost U.S. trade and investment by forging new commercial ties with the European Union.
"The slowdown in the United States could affect our projection of 4.5 percent growth in 2001, but we want to substitute it with more European trade and investment and make use of the recently signed trade agreement between Mexico and the European Union," Mr. Fox said Thursday night in an interview in Davos with the International Herald Tribune.
Mr. Fox said he would soon visit France, Britain, Germany, Spain and Switzerland to promote Mexican exports and to seek fresh European investment in Mexico.----------------
-------------
HA! HA! Well, Michael, CMan, what do you think of my rambeling on? Can't you just see Britain wondering why they are coming in the front door while Mexico is running out the back? Oh Boy!,,,,Here comes Fox, a smart cookie I might add, signing trade expanding pacts with EuroLand because he can't make his numbers with the US. So what is England going to trade to us that could undercut Mexico? Makes you think, right? (smile)
Also,,,,, Why in the world would Britain want to joint up with this bunch, at a period where they are all driving each others profit margin down the drain, just to recessitate a plunging economic and financial structure built on dollars? And,,,, If anyone doesn't think that Japan does not stand head and shoulders within our little NAFTA organization, they better get new a new financial planner because their own thinking is way off. Their Yen economy is back boned into the USA and it's dollar. More from Dravos:
---------- http://www.iht.com/articles/8916.htm ------------
Japan Fights to Counter Gloom Over Its Economy
Alan Friedman and David Ignatius International Herald Tribune
Saturday, January 27, 2001
DAVOS, Switzerland Prime Minister Yoshiro Mori of Japan will use an appearance here on Saturday to try to counteract the extreme gloom about prospects for the world's second largest economy that has emerged at the annual economic conclave here.
Mr. Mori's appearance at the World Economic Forum, the first ever by a Japanese prime minister, comes as bankers, business executives and economists are wondering aloud if Japan is in recession. Fears are mounting that, after a decade of anemic growth, the country's political paralysis, high debt and snail's pace approach to deregulation and reform could combine with the U.S. economic slowdown to damage global growth prospects this year.
According to a senior Japanese official familiar with Mr. Mori's speech, the prime minister will offer both hope for the future and a frank, even humble assessment of what the official termed "the lost decade."--------------------
Also from Dravos:
------------ http://www.iht.com/articles/8762.htm --------
Fed Chairman Warns Growth 'Is Close to Zero'
Mitchell Martin International Herald Tribune
Friday, January 26, 2001
Greenspan Backs Big Tax Cuts, A Political Boost for Bush Plan
NEW YORK The U.S. economy has virtually stopped growing, Alan Greenspan, chairman of the Federal Reserve Board, told Congress on Thursday, a surprisingly gloomy view that increases the prospects for a deep interest-rate cut next week.----------------------------------
So, Michael,,,,, the fifty-first state? I don't think so. If they do it will be like buying all kinds of leveraged gold substitutes several years ago when some thinkers where saying stick with the real thing instead (smile). By god, that would have been the type of political advisor the Queen needs today!
Britain, like Physical Gold Advocates today, may show some ware from linking to the huge economy of the new Europe, but those minor scares will be nothing compared to the loss (like gold paper players) of going deeper in dollar leverage or staying at all within the US financial and economic trading block. Just at the time in history when we must super inflate away our debts.
------------
Further to your post, Michael: They cannot keep the pound as it stands. It's almost a dollar derivative now. In fact, I know they are monitoring the Gulf Cooperation Council, looking for pointers on how they will structure a parallel currency that uses Euros for settlement, all prior to joining. Besides, they (HM Treasury) have already shown their hand to us by clearing out as much of their favored Bullion Bank gold debts as possible before EMU.
As to their becoming a halfway house, bridging trade between a future inflating NAFTA arena and EuroLand? Great idea, but Mexico is already showing that won't work. They and everyone else will undercut Britain long before they can "rule the waves again" (smile).
You are a good historian, my friend, and any assessment of world power flows requires just such an input if one is to understand these modern moves. But this time the real history is before us and we will be a big part of it! Oh yes,,,,,,,,, we will!
Now, I'm going to take my little boat and go fishing. Mans got to eat, you know. Be back later, after a fish dinner! (smile)
TrailGuide
Trail Guide (01/28/01; 15:32:22MT - usagold.com msg#: 46753)
(No Subject)
I have several unfinished discussions I wanted to some day return to. The Traveler series was a good one. The aspect of Black Gold was another. Then we could breakdown Mr. Greenspan's thoughts. All in good time. Recently, I began what would be quite a side journey at the GoldTrail Page. Just now I see a need to explain the entire timeline of events that lead to our offering "Another's Thoughts". Why he said what he said when he said it. All this in the middle of an ongoing adjustment I'm making myself, in my life. And,,,,, I offer all this to all free spirits that would consider these things. What do I get out of it??????
How about: "Hey, I read your stuff and don't like it. But, thanks for the effort".
OK! Fair enough.
How about: "Hey, you are all wet and here is my views why you are wrong".
OK! Fair enough.
How about: "Hey, that's interesting, thanks for the effort and here is another question if you can get around to it".
OK! Fair enough.
How about: "Hey, I don't buy it but your story is a process that's not finished yet, so keep talking and I'll keep an ear open.
OK! Fair enough.
You know, Another said a long time ago that we had said enough for most to follow. And he felt he had disclosed enough to average people,,,,, even how they could ride out what was coming. He was going to drop it until it all starts to unfold. Then start again. But I thought, being an American, that it would be interesting for everyone over here, if I just walked along and pointed out some of the play by play action so the train of thought would not be lost to the average guy.
But then, I never realized that there were so many nuts in the world. Like that one that stomped Another at Kitco, endlessly. I thought they were few and far between. Then several of them even started in on me over here. I don't know, but it seems they all went to the same school,,,, or they are all the same person? Their line of reasoning always starts out as a regular discussion, then degrades into some personal attack. Again, always the same thought process saying: "you people are all being mind controlled if you discuss any of this with them". I have to ask you all ,,,,, What the hell is that anyway?,,,,,, what are they getting at?????
Now it comes to, when someone can't make his point, he switches directions and practically calls me an agent of drug dealers. Jesus! This is the absolute worst hit I can take!!!!!!!!
What is next? Will he ask Stranger, are you some agent dealing drugs with your trading in and out of NEM? How about Randy, will you be profiled as moving opium out the back a pick up, using the trading profits from your gold trading? Is there no limit to this?
I guess it would not be so bad, but,,,,Why is it everyone here presents themselves as conservative and glad to get them people out of the White House,,,,,, then several of us goes on to ask Thaigold to further his logic as to how Giants are moving dope along the Trail???????
Good God!!!!, how do you think this reflects on me and others on this side of the screen?
Well, go ahead and jump to that boy's website and while you are at it let him explain how the gold world works! Let these guys explain the reasoning of international politics and money flows,,,,,,,, even let them explain the "Thoughts of Another",,, I damn sure won't now,,,,
Because I wouldn't want any of you having your kids see their parents discussing gold on the internet with some outlaw like me!!!!!!!!!! The more I think about this the hotter I get!!!!!
To all of you that have supported this effort, I thank you from my heart. And I will continue to hike the GoldTrail. But on that venue alone I will stay for a good long time!!!!!!!
TrailGuide
Trail Guide (2/9/2001; 7:58:39MT - usagold.com msg#: 47869)
News item
http://www.usagold.com/DailyQuotes.html
Taken from the USAGOLD news link above:
Japan's Central Bank Cuts Rates As Economy Sputters!
Friday, February 9, 2001 9:32AM EST
TOKYO -- The Bank of Japan sliced its official discount rate to 0.35% from 0.5% in the face of immense political pressure to boost the sputtering economy. ---- The cut, the first for the discount rate since September 1995 ------ the bank will resume outright purchase oftreasury bills for the first time since April. The announcement came after a one-day meeting of the BOJ Policy Board held amid pressure from the government and the ruling coalition to ease monetary policy.
--------- see likn below
http://dowjones.work.com/index.asp?layout=story_news_main&doc_id=34388
---------
Thank you beesting (usagold.com msg#: 47794)
Now we can all say: hyperinflation in Japanese;
-----Kwabun fukurasu koto-----
More
Trail Guide (2/11/2001; 9:41:57MT - usagold.com msg#: 47990)
Comment
http://www.nyt.com/pages/world/index.html
USAGOLD (2/10/2001; 9:45:48MT - usagold.com msg#: 47938)
Winter Thoughts on Another Thoughts
-----------
Hello Michael,
Thanks for taking some Saturday time to digest our subject. It is all consuming, isn't it? I think it's obvious to anyone reading it (background post on TrailsPage) that the post is structured in "rough draft form". I started to define it into a real publication and realized such a work would quickly grow to over 20 pages (smile). Later, I stopped and just posted the general thought outline. Besides, defining today's modern events is a job for each individual reader that comes here and is what I truly hope they will accomplish. My hope is that the play we are all viewing is engaging enough to draw people to think, as Another so wanted everyone to do.
For yourself, Michael, I see you had absolutely no problem defining your thoughts as your post above clearly described. By the way, try to read Mr. Roger Cohen's piece on the NY Times News Service link above. Titled; Europe's Shifting Role Poses Challenge to U.S.,,,,, excellent conclusions and he's just a step or two behind your steps. I can see him in your dust on that blazing trail. (grin))
I think one of the most difficult understandings for all of us to grasp lies in perceiving the rising value of physical gold while the dollar world around us keeps telling a different tail. People that pay the cash price today, for the advantage of having gold, then sell that gold into a falling paper marketplace are doing no different than the mines do. That is selling hard reserves into Another's pocket and doing it for almost a free price. Losing the very same wealth that the paper goldbugs lose as they, in parallel, move in and out of paper contracts. All in a vain attempt to circumvent the effects of a dying dollar gold market.
In doing this they are just playing the same trading game Western investors have been conditioned to do so very well. In the process they will end up with impaired balance sheets when they need real assets the most; when this currency / political transition breaks into the open. In your piece on the News & Views page, you outline the sad nature of a gold industry being taken to the cleaners because their inability to step away and consider what is being done to them. Absolutely correct perception and well structured thought!
Yet, in retrospect, this is a common problem in any business that's in operation to make a paper profit, isn't it? The trouble, in our gold arena, is in how investors have been lead to perceive gold mines as personal gold reserves. But someone forgot to tell them that these entities must function or die. And for a mine to function they must sell gold into the same currency market that is used to price their equity.
I guess people didn't "think hard enough or long enough" about how that would work if the vast metal contract markets grew so large that trading the contract superseded the validity of receiving the mine's product (gold). In other words, as paper supply grew, paper prices fell and most holders simply took their losses as they dumped the paper holdings. Never taking delivery because they didn't want it and even, at times, running from it! All in a perfectly legal use of the system as it is structured. Such performance leaves open an easy door for non-hard money traders to make a "business man's profit" by exploiting said dynamic. Of course this trend was encouraged by the CBs. But, that encouragement or conspiracy as some call it, is no different than a governments encouragement of turning the Arizona desert into a playground with water. Ha! Ha! It's all in how we see and feel the effects, isn't it?
Investors forgot that only a few short years ago, a world currency was treated in the exact same manner as our contract gold markets today. Randy, ORO, yourself and many others all understand this well. The dollar was over printed and traded until everyone simply traded it's price (exchange rate) and no one was taking enough gold delivery to shut the system down. Same dynamic, as you so well know, my friend.
Back then, just as today, paper gold, those paper dollars as they were called, became the denominator of gold's value without the discipline of a physical exchange to right the misconception. We all know the results and it's eventual consequences. Perhaps the beginnings of today's final death march into the sunset of our currency. A Timeline end, so to speak.
Today, miners sell their product for a cash price because that was the "business plan" they signed up for and it included using this paper pricing system. No one would squawk one bit at how wrong it all is if gold was at $500! Yet, the same logic to end the terrible practice would still exist. I wonder if Criss Powell could address that segment for us? It does need discussion if only a supposition, right?
Further, I suspect their actions, GATA may be opening a can of worms that could accelerate the very process I have been describing. Quickly cutting off the avenue for many to escape the paper strangle hold?
One more thought for everyone:
If mines had charted their companies to sell the product outright and retail, the problem would not have changed because we all would still trade their product (gold) at the contract paper price. Trying not to own the metal, just trade the price, no?
------------
Back to your thoughts, MK,
The only near term hope for gold is in a restructuring of gold trade, worldwide. Thank goodness we are at the end of the end and entering that beginning! The political process that's now on trend is doing just that. In every political motivation, found in the Old World, the need for physical gold to be valued in modern life terms is evident. Yet, this completely conflicts with every Western agenda that demands gold remain within it's perceived dollar commodity price band. Ironically, if the West were to somehow win, leveraged gold bugs would make only inflation adjusted gains. Something in their view that would be just fine. Indeed, the very system they deplore would pay them their due.
Conversely, if the Euro faction wins, Physical Gold Advocates would enjoy outsized real gains along with future dollar inflation gains. Fortunately, for Gold Advocates, physical gold will win the day anyway. Not because we are playing a world game, but because the natural laws of physics are ending the dollar's time.
As we look down this path, I see nothing but a one-way trend as gold traders are cleaned and gutted by their own desire to play leverage in the very paper market that's being restructured. To this end Western Thinking will morph (that word again) into a new understanding of what is real and what is not. For most, that education will require a big price before it's completed. But then again, just look at the cost of many years in college? Perhaps learning is always expensive? (big smile)
Thank you, my friend and everyone for reading
Yes, Wintering well.
FOA, just a simple TrailGuide
Trail Guide (2/12/2001; 8:00:44MT - usagold.com msg#: 48077)
Comment
lamprey_65 (2/12/2001; 7:40:22MT - usagold.com msg#: 48076)
Hi Lamprey,
The bank has the prerogative of cash settlement with these options, for the premium alone, or reorganize that portion of the financing into a gold loan,,,,, using the put as part of a physical deal. It all depends on whether the actual lender (whoever that may be (smile) is seeking immediate gold or not. Yes, the put writer may just function on the side with a cash settlement, completely outside the physical play, to his favor or not, depending on the price. And physical gold may or may not be forced into the play. This is the problem that has overhung the whole paper market for a long time.
All through out this period, no one knows when someone is going to forces real gold to move. Usually, when it does, it's because a need exists in someone's portfolio and that need requires existing material. Not mined gold over time.
TrailGuide
Trail Guide (2/12/2001; 13:30:43MT - usagold.com msg#: 48106)
Reply
R Powell (2/12/2001; 9:13:48MT - usagold.com msg#: 48083)
Harmony hedge
-------------
Rich, we still are on different channels. Let me take another poke at it (smile). From your post:
----Trail Guide, whether or not the one time cost (premium) of the put options is included in the loan is irrelevant.---
Ok, I completely and totally agree with that item. The premium that H paid to buy the option contract came out of their pocket and has no place in the context of this. Whether they get the premium money back or lose it all means nothing to this discussion. next:
---------The loan was for mining expansion.------------
Ok, the bank gave them a bunch of cash to spend on infrastructure. As H makes money from their business plan they will pay back this loan. next:
--------The bank was worried that Harmony wouldn't be able to repay IF POG sank lower SO the bank required some insurance of the Harmony's ability to repay. ------------ Harmony bought the right to sell gold at a future date at a set price. They own this right, it is NOT an obligation.
-----------
Ok again!
However, before they sign on the dotted line, H buys an insurance option so the bank can be covered. True, in standard nomenclature an option,,,, "in and of itself" and "standing by itself" is but a right to do something, not an obligation. BUT, H does have an obligation to perform on their loan AND this option is tied to that performance. In contract law, that obligation on the loan is passed thru into and upon this insurance collateral called a put option. Therefore, because that option performance was made in conjuncture with the loan, H will be required to use it ""as the bank directs"" --IF-- their business function is impaired by a gold price so low that they cannot conduct ALL their business in a reasonable profitable manner. Next:
----------If you buy an option to buy a piece of land at a set price for a length of time, youhave the right BUT NOT the obligation to buy. ------------
Absolutely! next
--------- Harmony can sell gold at a future date for a set price. If POG is higher than that set price at that future date, Harmony will get the higher price.-------------
Rich,
Harmony can do what ever they want with this option contract AS LONG as it does not infringe upon the collateral the bank used to make the loan. But, you see, that option is part of the loan collateral. This option, this contract right to do something is part of what the bank claims as an asset against the loan. If the price of gold went to $200, as an extreme example, the bank may not allow H to just sell the option for a cash profit. The bank also has several implied "RIGHTS" within the loan agreement on how to make the best use of "collateral assets" in a default situation.
We, as outsiders may not make assumptions as to what liabilities the bank incurred to supply the cash for this loan. The assets that originated this transaction, that is, "where the cash came from", may want themselves taken completely out of the deal if gold was to tumble. Or they may want physical gold outright? Or the bank may want to simply retreat also. So,,,,, in the event of Harmony being financially impaired from a too low gold price, the bank may seize the option, borrow physical gold at the then much lower price and sell said gold into that option's higher price. Then simply hold this new cash in an interest bearing account that would pay the low borrow rate on the gold loan. Still, H would be on the hook because their assets, gold in the ground that was already attached for the cash loan, would be attached to eventually pay off the new gold loan. No, if prices remained too low and H could still not operate, then the gold loan would just sit there and roll over and over.
This may or may not be the case for them, and I am just explaining how some of these things work. But it is a very common structure today. next:
----They did not sell forward, they are not "locked in" or obligated to sell at all, at any price.---
True, I never for a moment thought that they sold forward.
But they are locked into a cash loan obligation and that contract's credibility depends on the bank's ability to use several methods to remedy a future situation. Sure, if we freeze the moment and all prices stay the same, their contract is static and everything is fine, just as is any other contract in such a situation. But, any and all loans are dynamic, my friend. Ha! Ha!, ask any banker? What you can and cannot do is subject to future circumstances. next:
---- If they do want to sell, they have assured themselves a minimum sale price. Futures sales = obligations ------
As long as they are up to date, and have permission to liquidate loan collateral, yes. next:
-----Options may or may not be exercised.------
If your option is not part of a loan obligation and held as collateral, this is true. next:
------Many of the complaints (forward sales) against the paper gold market are valid, this one does not hurt POG and seems misunderstood.----------
I don't think any big players are confused about this. Perhaps the investing / trading crowd may not grasp it fully? It's the possibility that all these paper hedges may be forced to crowd into the forward sales area that shakes the market dynamics. Further, it's all together possible that naked shorting and carry trading could overwhelm the paper supply and force paper prices into a future lower price range. Staying on such a trend, paper gold could lose all credibility to perform as a proxy for physical gold! Eventually trading at a discount. All because every long holder that's in the game for paper trades only, is trying to unload because of all this new supply. This is why I said a long, long time ago that at the end of all of this we may see a colossal spike in comex futures OI (400,000 1,000,000 contracts) as everyone tries to cover their cash risk. Caring nothing about who is , can or wants to take delivery. Long before this begins, the premium on physical gold will start a vertical rise the likes we have never seen! (smile) We shall see.
That's my take on it, my friend
TrailGuide
Trail Guide (2/12/2001; 20:18:53MT - usagold.com msg#: 48125)
Reply
SHifty, I have your post now, but am trying to keep these two Grizzlys from eating me up. Be with you as soon as able.(grin)
----------------
OK, John Doe and R. Powell, now we are diving in (smile).
I want to flatly state that all of what I have been talking about here is using Harmony as an illustration. They may or may not be in the situation described. Even though I don't own them, they are a good gold company. Out of a trillion bad ones.
Rich,
I may have to take your posts a little out of sink to address each item, but will try to stay in order. You said in R Powell (2/12/2001; 14:58:56MT - usagold.com msg#: 48109):
------ However, if POG does fall, H can still sell gold at $250/ounce- a price that (the bank is satisfied) will keep H in business and repay the loan. Answer to your question, Harmony will exercise its option to sell at $250 if POG is lower than $250 but is not forced to.-------
Now,,,,,,, we need to think about this a little bit? On one hand we say that H does not have the obligation to use their puts, only the right if they choose to do so. But, on the other hand, if the price of gold falls below $250, they would not be forced to sell into those puts? My friend, that begs the question; "if their loan package is built on the presumption that they must have $250 or better to make their payments, who would they sell their production to if the world paper price is below that"? Will the bank let them just hold the puts and sell into a lower world price? That's right, they won't. It's not a question of them being forced to sell into those puts, they "WILL" sell into those puts. And the bank will make sure of it. Below $250, H has no choice and the obligation stems from the loan structure itself. As I stated below, the loan itself implies that the puts are collateral and controlled by the loan covenants below $250. next:
-------The seller of the option holds liability for its exercise, the buyer (holder, Harmony) of the option has no obligations, just the choice of whether or not to exercise the option.------
Even though you understand the function, I think you are somewhat out of context and seeing these puts as being entered into more as a business speculation by H. These contracts are collateral against the loan and carry an obligation of use below $250 in order to season the loan further. Again, as I said above and below in #48106, H will use these puts under these conditions, as they will have no choice. next:
-----------The banks have no control over Harmony's business- they can foreclose on the note if H does not make the payments but- just accepting a business loan does not give the bank control over how you run your business-----------
Rich, how did you come to the conclusion that these puts are part of H's business? They did not own them and didn't want them prior to the loan. As the article in Barrons (and their own statements) make clear; they were forced to make these part of the loan structure as collateral. Once again, below $250, the conducting of H's business has no bearing on whether these contracts are used. The loan requirements will make them use it even if they somehow didn't want to. I hope we have at least established that these puts assets are bank collateral and cannot be harmed. Yes? next:
----------If POG is less than $250, Harmony also has the choice of selling gold (at that option price) or selling the option which amounts to a cash settlement (no physical involved). Either way, H has insured that it will be able to repay its loan. Trail guide, If the puts for $1 million ounces of gold sales (or cash offsets) generates enough money to make the loan payments, then the banks would have no further interest in marking to market gold in the ground or anything else at Harmony.-------
Rich, this is where a lot of us investors go off on the deep end if we are not careful. Myself very much included. (smile) I think you know that these loans are made based on the performance of the entire company, not just the one little segment they finance.
Sure, H could sell gold into these puts or cash them out as needed to cover their usual expense,,, then out of profits make the loan payments. But in order to do that they must still mine gold and that requires all ongoing operations to at least break even.
I point back to the context of my earlier post. We, as industry players are concerned of a sudden fall of gold to say $200. As my example below used. At that point, H, as a viable operation in it total would be impaired. Yes, that one loan could be covered if they run just that one segment of their business and sold into these $250 puts. But, no lender will carry such a loan. If they originated the loan with limited liability, they still must act prudentially.
They will not let H simply eat up that put to keep them going. Just because the loan is being serviced, doesn't blind the lender to the fact that his total collateral assets are being impaired. You can't park your brand new ford pickup in the ocean, up to it's engine, and still expect the bank collectors not to come for it? Even if you are making payments!(smile)
Because that put is collateral, it is subject to seizure and use to not just pay the loan but close it out. In the case of many of these mines, the sale of the hedge securities, Harmony's puts in this example, would not cash out the loan. It's not enough. That could only happen by the lender borrowing gold and selling it into the put. Then they would have full cash with a very small or almost no payment liability. Sure, they would oue gold. But, that trade off would stick as an attachment to H's unmined assets until something happens??? Don't think for a min. that their reserves are not totally involved in a loan with gold at these current levels. next:
R Powell (2/12/2001; 15:29:48MT - usagold.com msg#: 48111)
-------- The bank expects repayment of the loan but (unless the bank owns the puts!) the bank can not force business decisions involving the puts. The bank can foreclose on a business for non-payment but they can't force business decisions on a company just because a loan exists.-----
Once again, Rich, it's the old "pick up truck in the water" analogy. I guess, in a way you are right. If you lent someone $25K to buy a pick up and he left it in the ocean one month later,,,,,,but kept making payments,,,,,,, you couldn't force him to make a reasonable decision,,,,,, and place the truck in safety. Yes, it is his business to run. But, somehow, someway, I bet you as the lender would try to take control of the way that truck was being used. I think laws concerning collateral assets give lenders (yourself in this case) the ability to grab their collateral! And even allow then to use it in a way that covers their exposure. Boy, in my past life I must have been through this before because I just know I'm right,,,,, (grin).
My guess is that you would try your best to remove yourself from "salt water truck ownership" and get as much of your money out from behind that collateral as possible. Just as the lending banks would do in H's case,,,,,,if gold fell to $200. You see, the whole darn truck is worthless at $200,,, I mean with all that salt water and seaweed! (smile) next:
R Powell (2/12/2001; 15:49:13MT - usagold.com msg#: 48112)
------Agreed. If I have payments due on a new truck, the bank wants it well taken care of (and not sold) unless the bank is paid-in-full. As the purchase of the options were conditional to obtaining the loan, their well being (even though they are time wasting assetts) is a concern of both lender andborrower. Harmony has also obligated itself to performing as profitable enough to repay the loan which it will do by conducting its business which is gold mining.-----------
Well sir,,,,,, My whole thrust has been regarding what the impact would be on the total marketplace if gold fell into a very low range. H is just our example. Your point leaves out several things. They cannot conduct a profitable business of gold mining if the price falls too far. If they begin using these put profits to fund the entire operation, the collateral behind the loan is degrading just as a truck would do in salt water.
They (H) purchased these options as part of the loan package not "next to" their loan package and these puts became collateral "within" that package. The loan officer (lender) will seize that truck (put options) and sell it (cash out the put) to cover the loan. If that action does not cover the loan, then he will drive the truck personally (sell borrowed gold into the put) until his lost asset is recovered as best as able.
Rich, you have misconstrued my point. Under certain circumstances, to low a gold price, the lender will be the one borrowing gold and dumping it into the put,,,,,, not H. Yet, the degradation of H would be just the same. next:
John Doe (2/12/2001; 16:05:50MT - usagold.com msg#: 48113)
Hello John,
------- @ Trail Guide
The only way Harmony's put deal could drive gold down is if the originator of the put (whoever that is) bothers to hedge its exposure to the put by borrowing and selling (i.e., a direct physical short)some or all of the gold covered in the contract. As the normal course in these types of common derivatives is to maintain a continuous delta hedge, perhaps some small amount of the total 1 million ounces has already been shorted and more would be added as the price falls (if it falls).-------
OK, I could live with that position(smile) next:
------As the originator's hedging away of the risk of selling the put to Harmony can be carried out in the futures market without any physical involvement whatsoever, even the sale of physical is notassured, though one could assume, though a chain of trades offsetting the futures, that eventually, someone, somewhere, will sell enough physical gold to maintain a "valid" hedge. As some principal somewhere is likely "good" for naked shorting, even a terminating physical sale is not necessarily assured.--------
Again, I'm with ya! next:
---------- Harmony, is, at worst, only driving the gold price down indirectly, if at all, and then only to the extent that its put purchase is being delta hedged by its counterparty, if at all. ------------
John, all of what you present is how it's usually set up. It's after the clock starts that the real action begins. I posted earlier that:
""" True, I never for a moment thought that they sold forward. But they are locked into a cash loan obligation and that contract's credibility depends on the bank's ability to use several methods to remedy a future situation. Sure, if we freeze the moment and all prices stay the same, their contract is static and everything is fine, just as is any other contract in such a situation. But, any and all loans are dynamic, my friend. Ha! Ha!, ask any banker? What you can and cannot do is subject to future circumstances.""""
That "future situation" I speak of is a quickly falling gold price. Falling well below most everyone's ability to function. If gold falls, it's not just H that is in the "salt water", the whole industry is and all these paper hedges will be seized long before the companies can use them to hang on with. This is when the system really implodes as every bank with a contract (read that salty truck) will be trying to remove their money from the entire sector. Not just make the loan payments. To do this, they will sell borrowed physical until it's supply is gone,,,,,, even at a very high rate. All this supply coupled with everyone unloading long paper positions that can no longer be credible,,,,, will crash the gold market!
This, is a very crude micro explanation of how and why any amount of further hedging is giving the sector the shakes. It's far worse than you think.
On that happy note, I'm done for a while
TrailGuide
Trail Guide (2/13/2001; 7:18:38MT - usagold.com msg#: 48152)
Reply
SHIFTY (1/4/2001; 3:11:38MT - usagold.com msg#: 44999)
Trail Guide/FOA: I am a small placer miner and own physical gold ( in most all forms) and also un-hedged mining company shares in equal amounts. I have a problem understanding how Gold will have a tremendous value and that this will not also be the case with un-hedged mining companies that produce the very substance that you say will be so valuable.If we hold physical gold in a safe place to be pulled out for use when needed , what makes the gold I hold better than the gold that will be poured into a bar on the same day in the future? Will it not have equal value in whatever is being used as the medium of exchange. I can see where physical may out perform shares ,and I also can see where hedged mines can go bust , but I must be missing something here. Are you saying that mining will be outlawed in the future? Or will it be performed only by a world government of some sort and all the people that own the mines can kiss their wazoo? I hope when time permits that you can shed some light on this for me.
================
OK, shifty, you write:
------Or will it be performed only by a world government of some sort and all the people that own the mines can kiss their wazoo?.------
For the record, I never have even for a moment considered some one world government. I also laugh at the notion of some great Cabal running the show. These shallow statements are the dream work of people that confuse social order with someone controlling their lives. Our world history is full of rules and laws enacted by various factions from the beginning. Face it, laws always infringe on some group as they yell big brother! We will never be without some segment being controlled for the society at large! It always the easy way out. Broadcast that some small bunch is profiting by ruling over us.
For better or worse this is the way human kind has governed itself. During some time frames it's real bad and in others it's real good. We slide from one side of the bank to the other as everyone rides this river of life. But never has any one group been smart enough or powerful enough to control us all. And never will be. It's a waste of of our short lives to base our decisions on when the all powerful Guru will take us over.
-------Are you saying that mining will be outlawed in the future?------
Shifty, did you really mean to ask that? After all the countless references to taxes, production controls,,,,, the precedent of the Texas Railroad Commission,,,,,,, the reasoning for governments to write legal tender laws and their ability to implement them,,,,,, the recent control of California power distribution?,,,, the foundation of a changing reserve currency system,,,,, In all this you ask in the context of something done outside the law?
Is your income being taken as an outlaw act, because it's taxed? Is the speed limit range an outlaw rule because it 35 mph? Is the dumping of sewerage in the Mississippi an outlaw act, or should the law be changed to stop infringing on the free rights of some? Do you see the rules that control someone else's assets as good because it benefits your cause? Do you think rules are bad if they suddenly impact your investment assets?
If gold production is limited, and the amount produced controlled by law. Would this be an outlaw of mining or the better use of a limited resource? Any number of controls could be implemented and they would certainly impact some. Yourself? You will then be one of the ones that's being ruled by the mass, right? So you can't dump all the waste in the river you feel you should be able to? You can't drive as fast as you feel you should be able? You can't take as much money home because the IRS takes more than you think they should? So gold production is limited and said production is taxes in some controlling way? So what's new in the world?
Remember, in the 1800s there was no income tax,,,,, at all? People back then said the same thing you do now,,,,,,, "What now, is making money being outlawed?
Shifty, the world moves on whether we want to be on the ride or not. Fight it if you will or adjust yourself. I'm also in the boat and just navigating the rock in the river. Watch your Bow, my friend, rapids dead ahead! (smile)
TrailGuide
Trail Guide (2/13/2001; 9:48:46MT - usagold.com msg#: 48160)
Comment
Chris Powell (2/11/2001; 12:32:20MT - usagold.com msg#: 48009) Is GATA cutting off paper gold's escape? (Corrected version)
-----------------
Hi Chris,
Thanks for clarifying your position. I fully well understand where GATA is going with their efforts.
Anyone that has invested in the gold industry during the 90s has had a real negative impact on their wealth. If one used the past decades as a precedent for rules , typical equity valuations or laws of conduct within this arena, their assets should not have suffered as they have. Cycles of highs and lows were expected, but a complete washout of product (gold) value was never in the cards. Did someone change the rules or were the rules just never fully understood?
My position is that the rules didn't change and the system is functioning within it's range. What did happen is that investors never owned these securities during such a period. Therefore, they never had a chance to experience how they would react outside the perceived fair pricing band.
This commodities pricing band, that gold is conjectured to belong in, was never forced outside it's fair value perimeter until this decade. Allowing for past inflation calculations. Reading what Mr. Parks wrote the other day in "It's Not Your Daddy's Gold Anymore --- by Lawrence Parks" (see my 2/9/2001#: 47878 for ref.),
we can get an idea of how it all happened. Without an investment need on the horizon, western gold demand fell back into an industrial mode with jewelry being the greatest portion of that segment. Further, the selling of existing gold savings, no longer seen as real wealth, added to the supply.
>From my location, I could see where the common paper pricing of gold that was used through out most of our modern times had never functioned without a backdrop of bullion accumulation by the Western masses. Once this liquidation trend was in place, anyone from the shoe boy to the CB could simply sell contracts as part of the crowd and no one would argue. With everyone now betting on gold's price moves without wanting the metal, paper gold could be traded with very little ownership demand for metal. The volume of this particular type of trading could and did completely overwhelm the physical segment of the markets. Sold over and over, then brought back from a disgruntled "trading public" at a lower price. "Someone is after us", was the cry! Yes indeed, it was us!
Actually the proof is in the air, all around us, and your position, Chris, bears this out. Taking a line from Mr. Parks, ""It's Not Your Daddy's Gold Anymore", paper traders do not endorse the physical advocate's side of the equation. For us advocates, gold at even a dollar is a good thing.
Where as gold below the mine production range is a negative manipulation of the system for long paper traders. Again, had gold risen to $600 because the Governments, the traders, the players, the banks and all, jumped into long paper,,,,, not a word would have been said. Yet, the physical gold buyers of the world would have had to pay dearly for their new savings.
Chris, your comment saying:
----"But what are we at GATA to do? It didn't seem enough for us to sit back and let nature take its course----"
This intrigued me. You know, you could have said great day for gold, lets all buy the metal and not add any more to our industry investments! If the Cabal wants to use their illegal operations to drive gold into the dirt,,,,, bring it on, yes? You know, no industry ever went broke from people buying it's main product,,,, in mass! It's funny how the industry investors always try to remedy the same dynamic by asking the mines to slow down. Yet, this is something they all fear that new government controls on production would do???? But, jumping to the physical side of the fence is never an option?
Yes, promoting the metal, buying the product, would eventually cut off the paper selling far easier and faster than any legal action. Bill Gates didn't get where he is at by telling everyone that his company shares were a far better thing for the public to buy than his software???? (smile)
You say:
------- Governments and mining companies have responsibilities beyond themselves --governments to the public, mining companies to their shareholders and employees and even,especially in mining-dependent areas, to their countries as well. -----------
True, but these are still businesses, not one's personal reserves. When we "Western Children" told everyone that would listen to stop buying their main product (gold) and buy near product substitutions,,,, what does one expect to happen? Then we blame the government for exploiting the issue and the mines for falling into the hands of manipulators that offer them the only way to stay in business,,,, sell forward.
Just because all this happened to fall in a time period where currency issues are impacting the problem doesn't negate these faults of thought in the industry,,,,, or it's dogmatic promoters. Had gold product been promoted, it's physical demand could have easily overridden any political motivations,,,,,, hands down. We chose to bet on a lame horse and now want satisfaction because that animal is under an attack it cannot overcome. Physical gold today, even allowing for it's incorrect currency valuations proves that it's the better defense during strange times.
You say:
-----FOA/Trail Guide is right that GATA may accelerate the breakdown of the manipulated paper gold market -- that indeed is our charter, exactly what we set out to do. If GATA helps "cut off the avenue of escape" from the paper gold market, so be it. -----
Why did you not see the physical side of this? My friend, I was referring to the escape from all paper substitutes and the escapees being from all walks of life. Not just the big BBs or trader types. Truly, what you fear is what we embrace; that gold will fall further while physical supplies last.
I perceive that your actions will accelerate a breakdown in this paper market and that breakdown will not shut down the market. No, it will leave the system mired in legal moralizes while the premium on physical gold spikes well above the paper trading price. Leaving both the gold advocate and gold substitute bug no avenue of escape.
The longer the physical markets can operate next to a rapidly inflating paper market, the better it will be for gold buyers.
You say:
-----Gold IS special, but the kind of trading that distresses FOA/Trail Guide -- the trading in gold's mere price, as opposed to trading in the metal itself -- is hardly unique. Most markets trade this way, commodities and currencies. Speculators pile on for the ride whatever is being traded. As long as there will be trading in gold, there will be speculation. ----------The difference with gold is that its being more than a commodity -- its being a universal currency in itself, -------
As I said, had the price of gold stayed within a $400 to $600 range, the present system would not be opposed one bit. It would even be suggested that gold is performing it's historic roll of documenting currency inflation. Even though such inflation would be well beyond the commodity price of gold. All is well as leverage players use the very same system to profit themselves at a level equal to the real inflation rate. And doing said profiting as both big boys and small operators alike. Leaving the much larger world public no place to gain an equal share by owing real gold.
We indeed, as Mr. Park's children, stand in a mirror and do not see ourselves draped in Western thought and wearing new world ideals about old world wealth.
"Free markets", the paper traders claim, siting on both sides of the fence. "Free Markets are what we seek, as long as they trade our way".
My perception, Chris
My perception
TrailGuide
Trail Guide (02/15/01; 10:47:43MT - usagold.com msg#: 48286)
Comment
I was just out talking with a fella that helps me with my garden crops. Held one of those Oregon Sugar Snap snow peas up to the sun,,,, could see all the little peas in row,,,, in the pod. Tasted it. You know,,,, some of the good things that grow from god's fertile earth are worth much more to a person than gold ever has or ever will. (smile)
Speaking of gold: (some of you may want to skip this one)
raspberry (2/13/2001; 13:56:24MT - usagold.com msg#: 48174)
Exhausted
------ After several years of analyzing, buying, holding, hoping, and reading this forum, I am cutting back on precious metal positions. ------- cash has not been trash, even when it comes to PM stocks. ---------
You are not kidding, "rasp",,,,, everyone is learning the difference between trading a "precious metal position" and owning real gold for it's "advantage" over currency! Cash and real gold are not trash in today's world and never have been. It's just that over the last few decades "physical gold advocates" got morphed into the same basket "gold bugs" were in. The media projected that being a gold bug meant trading gold stock options, gold options, gold stocks, gold futures, gold options on futures, unallocated gold certificates at banks and even delving into leveraged gold contracts at some back coast gold dealers acting like coin shops! Did I leave anything out, there must be others?
Just as soon as all this garbage sank faster than the real thing, the media jumped in and said owning gold is a real bummer. They say this after decades of telling us that a "gold position" and "physical gold ownership" were one in the same. Is it no wonder the public talks about it all in the same context. You have to ask yourself:
----"The Western View, were you born with it or did you have to learn it?"------
I know where Gata is going with their line of attack and I support them for it. There are some bad guys out there that are going to be eaten alive when the GATA pressure is high enough. But, I think we have to allow that a little part of my conclusions are what Chris was pointing to when he said; that people got sold a position in racket. Even if my purpose is outside their thrust, my logic can mean everything in building a new gold advocate's understanding. (Hello Sir Chris, thanks for thr reply. I'll be talking with you in a bit.)
>From his post of: Chris Powell (2/13/2001; 21:20:26MT - usagold.com msg#: 48208)
-------------
"We may agree that real metal is better than paper. (I hope we agree that the generous proprietor of this forum is an excellent source of the former.) We may even deride those who have found themselves on the wrong end of speculation in gold paper. Certainly GATA has done as much as anyone to expose and explain the gold derivatives racket.
But then what of people who invested honestly both in gold paper and in mining companies under the misapprehension that the ordinary rules would be followed and that there was a free market in gold, the free market that their governments told them there was?"
Note: please real all of his post.
------------
Well people, all the "gold positions" I mentioned above are, indeed included in those very same derivatives he speaks of! Sure, "Gold Bugs" speculate on them, make and lose big money. But, most conservative "Gold Advocates" never consider them as the place where one buys gold?
When someone invests honestly in gold paper, in Chris's context, they have to follow all the rules as they stand. This includes accepting that our physical laws are part of and form our very trading assumptions. Not thinking, investors apply half the logic, trading just the price of something, expecting our real physical laws to apply anyway. They won't, on their own, unless you make them apply to your position, by taking delivery.
Trading the price alone from the long side can work, but getting away with it only happens when we are in a certain "historic price band". That past price precedent has made us think we were following the rules and succeeding. This classic, mental omission has been the source of untold loses, brought upon ourselves as we try to play half the game,,,, all the time. Today, as we leave the comfort of those "safe price ranges", the dynamics and the nature of all this is exposed as two separate markets.
Basic investing rules include selling out any long position if supply is created faster than demand. The paper half of this gold market is in such a situation. Unless you plan on bridging the two markets by taking delivery, you are buying the wrong side of the gold dynamic. Whether we like it or not, even though real gold supply is in deficit to it's demand, paper supply is way more than it's demand. When the price ranges left their "commodities range" it created this new divergence. Almost like saying "it's a new gold market, yes"?
Again, this is a real world we live in and real world physical laws are what makes the trading rules work. In that real world, if someone is "honestly" long to get gold in the paper market, then stepping up to the bar and taking delivery would be the "honest move"? If not, I say again, he is playing the wrong market, and paying for it. Because the paper supply / demand dynamic is against him. The officials didn't change the rules on this portion, we brought it on our selves.
Exercising one's contract position for real goods, even if if the price drops, changes the dynamics of supply and demand for the actual metal. And does so in line with whatever the paper supply is. If the demand for paper is made to be equal to demand for real metal, then noone could sell more fake paper than the gold that exists! It's that simple of a physical law. In this state, there could have been no "dishonest markets" as our perception proclaims. We would have owned it all! You guys are with me on this, right?
Let's face it, Western Gold Bugs played a part in this political game because their investing habits led them there. International currency trading do include gold values, no matter what London says and it truly is His Majesty's "lion's den". Had we all stayed conservative, and physical, the government forces would have been forced into another form of a 1971 gold window closing long before now!
Paper Gold Bugs take on a gold position and "play like" they (and everyone else also) will demand delivery if it drops. This is the source of the silly notion people get when they watch OI. They stick their chest out and say; "boy, us and them are going to squeeze this market with delivery demands if the price keeps falling"!--- "Looking around the room for others to agree with them as they talk"!--- then the price just keeps falling.
Yea right, they can just afford the margin and are scared stiff that they may have to post more,,,, And they are going to go 100% AND PAY UP?? ,,,,, yea right! You say Gold Bugs and Gold Advocates are one in the same? No, there is a big difference, my friend. Cunning Gold Advocates take the Gold Bug's margin money then turns around and buys physical gold with it. Awful bunch of people. Nice, GA's are safer and never get involved in the whole process. They just buy gold for it's advantage and wait out the serious wealth that's coming.
So, when the price drops, paper Gold Position players run away and say it was just a game of hid and seek, after all. "But, we'll be back!", is their yell,,,,, looking over their shoulder at a full gallop. Ha! Ha! They were just trend followers, after all. I have to return to using my earlier reference to Park's post and then say,,,,," the children just want to play a game",,,, and cry when they lose. You want to hear how the big boys think? Close your ears, because it ain't nice.
---The governments are all going to let this thing die just like the 71 dollar with it's gold backing. They are not going to kill it by declaring worldwide position limits or 100% margin. They would look too dirty if they did. So, when guys like us (gold advocates) see the action, we take a bite.
We buy all the physical the market will offer us at ever lower prices and sell the hell out of "gold positions". It's happening the world over! Knowing full well that the boys ("Gold Bugs") will run from delivery. Hey, why not? At least half the equation is politically correct for today's era. The trading era, that is! Besides, people go to Vegas, dumping more money than the paper gold crowd, ever will. All the while knowing full well that there is no payoff. Atlantic City is just as full of gamblers and they are not asset players either,,,, just want to spin the wheel for fun, like these paper Bugs". Hey, we are the good guys in all this,,,, at least we are buying the mine's product,,, gold. We aren't killing anyone's job,,,, the paper bugs are by supporting the system with their buys and never taking any product!!!! -------
Ouch, that hurt! The truth has a mild sting sometimes.
OK, once again, the market place will follow this trend of inflating world "gold positions" because people keep buying those paper positions. How does it go?? A trend in motion goes to conclusion? If there is one thing we have learned in this world; if there is a demand, someone will give it supply. (smile)
As long as it's just paper on margin we want, they got plenty to sell. Now, if anyone starts shifting their buying habits away from paper, this game will end. But don't worry about that because everyone is waiting for someone else to start that trend. You see, it's just like a business cycle, the supply will build until demand falls away or the whole infrastructure disintegrates. I'm betting that the market itself will fail.
One more thing, "Rasp", there is nothing wrong with owning mines. But we have to understand that their trading stock price is based on a never ending supply of paper gold. Knowing that, I expect my gold mines to match the paper price right to the end. But then, because they are a small portion of my bullion budget, the mine owners love me as I will keep them far longer than anyone else will. Perhaps across the valley and into the profit range we will all see the reasoning for this? (smile)
"Man's just got to know his limitations",,,, and what he's buying! (smile)
more later
Trail Guide (02/15/01; 17:02:46MT - usagold.com msg#: 48325)
Reply
Hello again,
--------
Mexpat (2/11/2001; 9:01:39MT - usagold.com msg#: 47986)
FOA/Trail Guide - Background No. 2
Hello all..Greetings from sunny southern Mexico.
Usually, if I read the material carefully and ponder it a while the meaning becomes clear but one paragraph in FOA's recent posting went over my head, particularly the last sentence...this is the paragraph:
FOA (02/09/01; 14:29:38MT - usagold.com msg#60)
------- In addition, their marking gold to market is a prerequisite to following the Fed's new inflation stance by scoring the dollar against the Euro gold price once the paper gold markets fail.-----
Perhaps FOA or another of the forum's knowledgable posters could break down that last sentence a little for me. ---------------
========
Hello MexPat and welcome Sir.
The ECB has been marking their internal gold stores to the market for a while now. This was part of their charter. If I remember correctly, it does not include the entire amounts of bullion held within the full system of european central banks, just the ECB portion. Later it may score the entire amount, which is already some 30% at these prices! USAGOLD's site master, Randy, has been posting these quarterly reports for us. To date, the initial significance of this move by our Euro friends is cosmetic. Most of the financial world does not make much of it.
What is threatening, to date, is the open conflict of money policy this points to. The US Treasury, IMF and Fed, as a group have been demoting gold as an asset backing against their internal currency, our dollar. I think their most aggressive stance goes back to the Jamaica Accords and or the SDR evolution. We, America, promote the value of our dollar in and of itself. Mostly pointing to our goods, services and assets that dollars can buy. Of course, if you have followed this for long, you know the dollar and near dollar supply has shot to the nearest star and will never actually convert into these products in total. At least not at current exchange rates or internal price levels in the US.
So,,, we promote the dollar using a different format, by saying that foreigners can invest here, not buy, and find the best returns. This works as long as foreign CBs support our dollar as a reserve by saving it themselves. Making for a stable exchange rate and benign price inflation (in the US). Many thinkers have said, over the last 30 years, that those foreign CBs would never continue to do this. Well, confounding everyone, they did! Their real reasons have been our topic for years now.
However, we are now at a point unique in our time. The advent of their Euro is fracturing the ECB reasoning for continued dollar reserve support. This all moved beyond the software stage and entered the hardware era a year or so ago. Now, as some reports are confirming "for all to see", Euroland is moving away from dollars. They started selling their interest received on US reserves a while back, and continue to do so. Randy has the actual date for this somewhere. The ECB is now, outright, selling some of it's actual reserves. The game progresses.
So, what of their gold values? Eventually, as the dollar works it's way toward becoming just a regular money, it's exchange rate will tumble. Vastly aggravated by our world class trade deficit. A deficit, I might add, that has become structural to the function of our economy in a non price inflation manner.
Further; the high energy prices we have recently seen did not just come out of nowhere. Our energy markets and / or their political plays have not changed for 20 years. What has changed is the producers advantage of having a choice of currency to settle oil in. The Euro or the Dollar! This process has also been a long-term topic of ours.
Contrary to what everyone thinks, the US is at double the economic oil price risk as EuroLand. Even though, initially their price goes higher than ours, because of continued dollar settlement, their entire financial structure is far less leveraged. The producers can sit back and watch who functions best, over time. And time is already working it's will within the US. You have but to read the headlines of Black Blade to know that. Thank you Mr. Blade for an exceptionally fine job!
The one thing that was negotiated into the EMU was gold's place in the world. Indeed, this is where the ECB and BIS knew their oil neighbors well. By signaling gold to be an asset, not a currency, it could be promoted to rise outside it's commodity range without competing with the new currency. With the history of the dollar's use of gold, America's war on gold and it's locked in political stance on gold, Old World Europe played a Master Stroke. This could not help but solidify an evolution into Euro use by practically every country outside the dollar world. South Africa plays large in this. One or two of their mines will also.
Now,,,,,, as the dollar begins to weaken and price inflation starts to march, the demand for real gold will eventually spike physical premiums thousands past the paper dollar gold markets. In ANOTHER master stroke, the BIS knew that the entire bullion house structure was endorsed and supported politically, to frame gold in a dollar price band. Outside that band, up or down, these paper markets cannot function. Especially if the driving force becomes a physical demand that drains all settlement credibility from contract gold. There will be no squeeze in these markets now, as they will be allowed to kill themselves by trying to save themselves. Inflating the supply is that process. The loss of such credibility will eventually come as trading just stops, virtually closing the dollar contract markets as we know them. Opening the door to an ECB sponsored physical market.
If I had to guess, we will see Shanghai, Johannesburg and Dubai all joining with major internal Euroland financial centers to form the EBES (Euro Bullion Exchange System). By this time, the ECB quarterly reports will be seen as a scorecard of Dollar vs Euro values. We shall see!
I think you can take the microphone from here, sir. I've said enough on this. (smile))
Thank you
TrailGuide
ANOTHER (THOUGHTS!) (04/14/01; 18:08:54MT - usagold.com msg#: 51887)
Thoughts!
To this USAGOLD Forum and Mr. Kosares, good evening.
Thank you FOA for your time and work.
We talk once again my friends. This forum, it grows strong for all ages and nature of peoples. Read they do, from all places on earth. I read and see the knowledge as written, but it be the knowledge we still must see that speaks with greater strength.
Walk the gold trails of my good friend, do I. On my feet are "strong sole" of thick leather, purchased with much knowledge of physical gold. These shoes not go bare before our journey is done. On trail I see your "thin sole" gold investments cast aside and scavenged by beasts. Their owners walk no more as these investments took not this hard road of dollar transition. Many more will wear paper gold wealth thin before this walk be done. Only physical gold will see sun after this storm.
Some say dollar strong and holds much value still. It bends not and is strong and worthy. I say their vision is limited to see only post supporting roof. Not what on roof already or what must be placed on roof. When new Euro currency is done, full weight of dollars will return as your wet snow. In that day, we check curve of this good post, not before.
Some say dollar buys much gold and is strong in metal. I say, paper gold be not metal! We have more dollars than gold in world. As long as your system works, you sell gold to gain real dollars and we sell dollars to gain real gold. All be well in your world and mine, yes? Soon, dollar return in bank and Euro return in bank be equal, no? More later, dollar return become even less than Euro. Tell me about your paper gold value then, my friend. Perhaps, dollar then seen strong in this lesser gold only. You think long and hard on this before end of year?
I think Euro buy much more oil then. We shall see. I will return often now. Discuss our future then.
We watch this new gold market together, yes?
Thank You
Another
ANOTHER (THOUGHTS!) (04/15/01; 18:58:39MT - usagold.com msg#: 51943)
Mr Gresham (04/14/01; 18:44:54MT - usagold.com msg#: 51889)
Welcome Mr. Gresham. We talk for a time, yes?
You write:
"We who read here generally buy the coins, one ounce and less. The "Giants" you speak of are usually buying the large bars (100 ounce?), yes?"
I ask you, how many of your bars in tonne? This is the small purchase size.
"Is there a limited supply for them to get, and only through the large brokers with their "private wealth management" programs?"
I would say the BIS is best broker, always. It best to sell dollars for gold when gold is offered.
"I am trying to understand why this knowledge you bring is not being acted upon by some others with "deep pockets", such that the markets would be moved, or shortages occur, even before the dollar is seen in weakness."
My friend, you see the gold with "Western eyes". In mind, it be always, "how much currency does my gold bring". In this world of much paper gold, it bring not much dollars yes. In such matter, your currency makers do make your wealth lay low. This dream of much dollar currency for gold is the illusion in the "Western Mind". Your men of "deep pockets" do probe for shortages, however, their wish for low supply is not to be found. Their pockets are full with "credit gold" and sad are they at currency price this brings. It is the fools game to corner paper gold printing press, no? Sir, I stand with no fools!
Days and nights do pass and one morning will bring a dollar price for gold you have never known. In that day, I will cast this currency down and walk with real wealth. In this day, the gold will trade in Euros and no bribe of credit gold will be needed to mark this new money.
Today, I my world it be how much gold does dollar currency bring. A difference in understanding from yours, I think. Today, amount of bullion available for dollars no longer the reflection of bullion dollar exchange, it be now the most terrible bribe for world dollar use. An acceptable deal in most of world, such is real world outside your laws, no?
But, it is here, in act of making extra credit gold, where the "shortage" you speak of, is measured my friend. A good man with one eye does see this time as of but few years and short days. Aside from our Euro political changes, history alone does show all great currencies end with this overselling of credit gold as last of era. This paper gold credit is always for the fools first and last. It value is later reduced to same as currency, along with holders of no gold.
It be our good fortune (and yours) that bullion is offered still. For the simple man, such as I, this wealth is that for kings but more so for his people. For all peoples, gold will be again the wealth of ages.
In this day, at end of dollar era, all do see real bullion sold for sake of market credibility, only. Perhaps too, bank credibility, I think. In this world, the lower this dollar paper price, the more bullion becomes available for credibility sake. It is the good thing for men of "small pockets" and the curse against traders and fools.
I bid you the good fortune of "small pockets" with much physical gold! We watch this new gold market together, yes?
Thank You
Another
ANOTHER (THOUGHTS!) (04/18/01; 06:19:54MT - usagold.com msg#: 52086)
Reply
USAGOLD (04/16/01; 19:15:36MT - usagold.com msg#: 51997)
----- I would also like to take this opportunity to welcome Another back to this Table. The circle is now joined in continuity again -- all around. Already I have added to my own file of vintage "Another (Thoughts!)" with this shrewd observation:
"This dream of much dollar currency for gold is the illusion in the "Western Mind". Your men of "deep pockets" do probe for shortages, however, their wish for low supply is not to be found. Their pockets are full with "credit gold" and sad are they at currency price this brings. It is the fools game to corner paper gold printing press, no? Sir, I stand with no fools!"
The smile of recognition returns to my face as this point is made in these few, short sentences better than I have seen it made in entire articles on the subject. Welcome back, my friend. --------
Mr. Kosares,
Thank you for your welcome and acknowledgment. I add that within this circle many feet have walked and the prints of the Kosares show most lasting impression. I see the stature of this man as American, however no Western mind is found within him. One day all will rush and follow your path before strong tide washes the deepest heal mark from sand.
It be true, my friend, in history no man does corner printing press. Many have take this path before. Even declare themselves "leaders" of "financial knowledge" and "sophistication", do they. The Gresham does make wonder about such things and asks for reason noone does claim gold from printer?
Such demand be as 100 men with contract asking Spanish farmer for 100 basket of olives where clear examination in field display only 10 basket. Such good reasoning have these men, demand delivery and illusion of wealth to others be none! None ask full collection for fear of illusion to become reality, no? Perhaps, take what offered and wait next year. Better, sell claims for olives to Western investors with little eyes and clean shoes? Perhaps financial knowledge and sophistication of these paper sellers is more considerable than average fool. In the days that come,
"better one olive in house than six blooms on tree"!
We watch this new gold market together, yes?
Thank You
Another
Randy (@ The Tower) (04/17/01; 13:37:02MT - usagold.com msg#: 52046)
Mr Gresham, nice question (msg#: 52041)
--- "Was the Washington Agreement the most significant event in gold since you were last posting in 1998?"---
If I may be so bold, let me anticipate ANOTHER's answer with an answer of my own.
The most significant event in gold since the dollar's gold default in 1971 has been the successful launch in 1999 of a long-awaited new currency system built upon neutral (meaning, multi-national) management and, more importantly, a floating gold reserve structure that finally abandoned the now obsolete "fixed" gold legacy of the failed Bretton Woods structure.
With this new reserve structure, the prevailing institutional incentive from '71 to the end of the millennium need no longer be one of "price suppression" for the perceived market value of gold.
In this light, the most significant element of the Washington Agreement is seen to be NOT the amount of pre-announced gold sales, but rather, the self-imposed curb on gold lending operations by these European central banks. And if you think about it, this action with the Washington Agreement was nearly just a predictable inevitability from the moment the eurosystem committed to provide for freely floating gold reserves. The "tools" of the prior suppression are on the outs. Believe it. The WA simply announced the foregone conclusion in a package suitable for newspaper headlines.
Just as the value of the post-'71 paper dollar has long been propped by the international yet artificial "mandate" to hold these dollars almost exclusively as reserves (acting in tandem with the dollar settlement for oil and the overhanging debts of the "Third World"), through this new currency structure gold (and its price/value!) has now been "officially" set free to replace these dollar reserves (savings).
The reason this full transition has not already occurred is that institutional interest still exists to foster the smoothest practicable transition until that unknowable moment where the final remaining *SNAP* in the adjustment occurs.
Speaking for The Tower and personally, I continue to buy gold with excess funds because I prefer the real wealth of gold over managed paper (and digital) contract currency. As a bonus, the real wealth value of same gold will provide a pleasant benefit upon full completion of the transition in world currencies' reserve structures. (An understatement, to be sure.)
Trail Guide (4/18/01; 05:05:37MT - usagold.com msg#: 52084)
-- Silver slips as film sales fade faster than expected --
http://www.usagold.com/DailyQuotes.html
USAGOLD LIVE NEWS
03:27 GMT-04:00 Wednesday, April 18, 2001
----Silver prices fell for the first time in a week after Eastman Kodak Co., the biggest user of the metal, said photographic film sales are falling faster than expected.
Sales from the product line that includes Kodak's main film business fell 7 per cent in the first quarter, and the company said it saw no end to the decline. Silver this year has been trading at or close to its lowest price since 1997, mostly because of weakening demand from jewellers and silverware makers.
"This news from Kodak is going to hurt silver demand," said Jim Pogoda, a trader at Mitsubishi International Corp. in New York. Given the sales outlook, the company "has already bought all the silver it needs for this year," he said.-----
------------
Note: When the American economy goes into the tank, silver will be down there with it. We have but to watch, and learn as as the Hunts did, while this fact is proven once again. Silver, an industrial metal that never was gold. Only promoted to be.
ANOTHER (THOUGHTS!) (04/18/01; 06:41:33MT - usagold.com msg#: 52088)
Reply
Mr Gresham (04/17/01; 10:33:51MT - usagold.com msg#: 52041)
ANOTHER: WA, BIS
Was the Washington Agreement the most significant event in gold since you were last posting in 1998? Do you have any reflections on those events?
Mr. Gresham,
One must weigh the mind of this Randy. It be heavy, yes? Do read the thoughts of the BIS for these same are printed review as #52046. Hold a mirror to these events for reflection. Such descriptions I discuss come next day.
Thank You
Another
Trail Guide (04/21/01; 22:32:50MT - usagold.com msg#: 52322)
Comment
da2g (04/21/01; 12:12:17MT - usagold.com msg#: 52302)
Trail Guide- Silver
Hello da2g,
You write:
-----Is not a hyperinflation ultimately deflationary in that there is a dearth of credible means of purchase? Why would silver not benefit from this, at least temporarily? Could this be a means of transiently parking purchasing power, superior to paper that is quickly losing value? Could not silver benefit from demand as money? Could silver be a means of barter that changes hands in commerce, whilst gold is held in the background as a wealth asset?------
Well sir,
The coming super inflation of our dollar could more accurately described as a super currency devaluation. Where the Euro becomes the dominate settlement currency and our dollar reaches a level to match it's long term history of over creation. In making this point before, I pointed out that the dollar is going to reflect it's "unsupported value", where it is no longer propped up on world markets.
During this type of devaluation, the internal price inflation, within the US will have all the attributes of a real hyperinflation. With one compelling difference; another currency will be available for use. Foreign exchange controls will be in play, I'm sure, but will not reflect a total freeze on currency flow. The same will ultimately be true for gold. Mostly because we must import oil and other necessities and gold will be tradable as the one true measuring asset officially market to a free market. I also fully expect that our government will endorse the ownership of physical gold by it's citizens, if for no other reason than to blunt the rush for Euros. Still, as in my last reply, US reactions could be uncertain for a time. Therefore, the holding of rare / old coins is absolutely a must.
So, in this montage of events, in time, there will be ample dollars, Euros and gold for ownership. All reflecting their own values, of course, but trading never the less. Considering this point, this blunts one of the main attributes of owning silver as a trading vehicle in place of a usable median. More than anything, silver will reflect it's industrial use demand of which the US is the current major user by a wide margin.
Further, comparing the worth of an ounce of silver against an ounce of gold today is liken to balancing two entirely different structures. Such as asking which is heavier a ton of bricks or a ton of feathers? Obviously, they weigh the same but the weight comparison is worthless. Today, I could easily say that gold is much more a bargain than silver because an ounce only costs $260 where 100 ounces of silver cost $450. Any fool could see that gold is the cheapest and what a bargain for sharp investors! (smile) But, we don't do this because it isn't a valid value comparison. No matter the unit weight or size. Yet, the silver bulls try to sell this to anyone that will listen.
Also:
------ unless I am mistaken, I seem to recall ANOTHER stating years ago that silver may have some value in this situation.------------
Well sir, Another does hold this view and he has a grasp for the human dynamic like nothing I have ever seen. But, I will at least take a middle position in that this transition, from a US standpoint, may not politically follow my outline. There is always the unknown when at the peak of financial crisis. Still, most major players, both historically and today, hold gold bullion for such a situation.
Just as investors ran to bullion (and dollars) in the past, they will run today with their currency portfolio into the best managed currency. Right now the ECB has the best ship to sail during the storms preceding the coming transition.
For the hard position of their wealth they will run for the most officially supported free market. In the near future, gold will hold that position, hands down.
Further, when in a crisis, you don't want an investment and that is what all the statistics about silver are all about. In a major international currency war, you want a wealth holding that the world is running to. Not some idea about a return that will work this time yet, has failed more than a few billionairs in the past.
Thanks
TrailGuide
Trail Guide (04/21/01; 23:06:29MT - usagold.com msg#: 52325)
Comment
Mr Gresham (04/21/01; 17:01:59MT - usagold.com msg#: 52314)
Trail Guide: Silver
Mr. Gresham, hello,
I own some silver and everyone here that has read my posts knows it. But, just like gold stocks, it's a minor position compared to gold bullion.
More importantly, I have talked endlessly about the possibility of our paper gold market falling in price as these contract securities are sold into oblivion because of default fears and the piling on by shorts. Enforcing a situation where physical gold runs in the opposite direction.
There is a whole world of people out there that are leveraged to the hilt in silver waiting for the big event. If our paper gold market tanks, the pressure on the silver price will be enormous! In many ways reenacting the very leverage these bulls are looking for, but all of it in the other direction.
There are few people that will retain a position in an "investment" like silver if the paper pricing market is hit, bigtime. Forcing the selling of everything. Where as in gold the world community will grab all the free bullion available (jewelry included). Because gold is not perceived as an investment nor as an investment with an industrial use component.
In the initial crisis, silver could hit the floor and stay there for some time. It all depends on how this plays out. For myself, with the explosive potential of physical gold to show it's real value, I don't need silver. (smile)
Thanks
TrailGuide
Trail Guide (04/21/01; 23:21:44MT - usagold.com msg#: 52326)
Comment
ET (04/20/01; 08:42:22MT - usagold.com msg#: 52251)
Elwood
Hello Elwood,
You write:
-------"But, sir, none of these things are gold. Is it not the *label* of money, but its *use* as money that makes a thing money? How can we officially deny the use of pencils for writing, yet still maintain the "free market value" of pencils?" Yes - despite the volume of words, this simple point is left unaddressed. Thanks for your keen observations! ----------
Sir,
Can you use a "promise" as money? Sure you can and often do today, because that is how you paid for your last fillup. You use it, but that doesn't make it wealth money, just a fiat money. My talk to Elwood on the Trail covers this deep concept. (smile)
I'm gone now
Thanks
TrailGuide
Trail Guide (04/24/01; 06:53:27MT - usagold.com msg#: 52448)
Comment
Sir Belgian,
We have partial evidence that a gold swap between the US and the Bundesbank is considered legal. But no evidence the event occurred.
We have evidence that the Bundesbank has lent and sold some gold. But, their accounting over time does not show any drop of gold stocks larger than expected. Further, their gold lending could have been (and probably was mostly) in "nominee" form for the BIS.
We have evidence that the ESF can do swaps of their currency assets for other's gold. But no evidence that they have attached the West Point gold in exchange for other's gold.
The only "big fish" that was caught (and it is a very big one GATA should be proud of for sure!!) was the actual reclassification at West Point. Truly, this "event" is right in line with our view of current "political actions".
We shall see.
TrailGuide
Trail Guide (04/24/01; 20:23:14MT - usagold.com msg#: 52494)
Replies that help articulate
Parsifal (04/24/01; 01:13:36MT - usagold.com msg#: 52434)
Comments/Questions on Latest Trail Hike
Hello Parsifal, you write:
--------Me:
If the U.S. held gold in custody for others, and then reneged on the custodial arrangement and denied the rightful claims others had on that gold, that would be outright fraud, theft, no? I expect that theft of gold has been going on since forever.-----------
Sir, We need to remember that most of this "showing off of gold stores, from this point forward will employ a lot of political gamesmanship. Not unlike the BOE auctions. In that case they aren't really selling that much gold into the market. The BIS could have taken it all real easy, but England wanted to drag it out for effect. That way they got the most exposure and time. Allowing some of their favorite BBs to escape before the Pound goes EMU.
In the same light, most of the real gold that has left the CBs ended up in other CBs as statistics show. Political gamesmanship! Same thing is in process with our West Point business. Political jockeying for more mileage. As an example; watch a newcomer ride into town pulling an open trailer of cash. Every real estate broker from miles around will be at his feet. Now. that cash isn't in their possession, is it? Yet, it sure looks like it's been put on a trailer format for easy spending (grin). Custodial gold has the same effect in international gold paper players. Like these real estate agents, gold players now think they have USA bullion in the bank just because it's been placed in a trailer! (big smile)
Ha! Ha! Forgive me, I am laughing at my own story. My wife hates it when I do that while talking in public.
Parsifal, to more relate to your point; today, it's almost impossible to prove legal intent in the paper gold market. So, whether gold paper is backed or not is not worth asking. It's become so convoluted, the paper trails lose even the BBs. Note: If you want to own gold in storage, forget the boiler room, leveraged shops that lure you in only to sell you something else. They will only sink with the flood tide that's coming. Deal with a straight, clean operation that traces your ownership in an unbroken line, right to the vault. In allocated storage. I saw the name of one of those dealers just a min ago? Starts with a C.
You write
-----Why do any of the EU CBs lend any of their gold at all? If it is so valuable, why lend it a such low rates (into certain default?) and why are they so anxious to sell it? It seems the sales quotas were met very quickly.------
Go back and read through the archives. We went through a lot of storage space on that one. Even so, we will return to that subject as this all unfolds.
You write my words first , then yours:
------Trail Guide:
Eventually, the US will walk right up to the gold window with the intentions of selling, only to fall away as they stair at a mountain of foreign CB dollars.
Me:
I don't understand this part. Would that be the U.S. govt. doing the selling? What would the U.S. be selling, physical gold or paper gold? And what would the U.S. be trading for, ????? ----
Sir, It's all just political games, as in my analogy above. We will hear of the US getting ready to sell as the the end time comes closer.
Thanks
TrailGuide
===================
Mr Gresham (04/24/01; 11:18:01MT - usagold.com msg#: 52459)
Belgian, Econoclast, Trail Guide
Hello Mr. G,
You said: ----- It looks like the German document (which I haven't more than glanced at yet) is an "example" of possible transactions, and under the ECB umbrella at that, and that the press release made more of it than it should.---------
Sir, you may have hooked a "big one" yourself. Such wording being possible transactions under the ECB umbrella is a prelude to some big time card dealing between the US and ECB. How about a gold for currency swap? US gold for Euros? (smile) Don't laugh too loudly, this may come yet!
Thanks
TrailGuide
============
USAGOLD,
I read in your Commentary & Review page that requests for info is way up! ------- Over the past weekend we received a flurry of requests for information packets -- one of the top weekends in USAGOLD history. -------------
That is very good to hear, indeed. The more we investors get the message and help ourselves to your services, the longer we can talk in your back yard (huge big smile)
Thank You, MK, for all your fine efforts
TrailGuide
Trail Guide (04/24/01; 20:25:28MT - usagold.com msg#: 52495)
Replies that help articulate
Simply Me (04/24/01; 03:46:37MT - usagold.com msg#: 52439)
Welcome and Thanks----
Welcome back Another and Trail Guide!------------
Thank you for reading, Simply Me. Hope it all has some impact on your thinking.
TrailGuide
===============
Econoclast (04/24/01; 08:35:58MT - usagold.com msg#: 52451)
-----I feel discouraged right now. Not because the gold price is low, not because of what is happenning in the gold market, and by extension the financial world, but because of the fact that what I see for the future is more of the same.--------
My friend, our message and our position is that we are in one of the most exciting times of all the history of gold! We have seen that during times with the most radical transitions, the majority are usually defending the wrong asset. This unfortunate situation need not impact everyone today. If better judgment is the result of a full understanding, then some who read here will be exposed to tools that could help them avoid the mistakes of our Western hard money majority.
For Western Gold Bugs today, their culture, their system and their recent knowledge is all ensconced within the last 30 years of paper wealth. Yet they are using a hard money defense, written by masters preceding our modern era. They struggle to use that logic out of context, as it is thought to apply to this gold market today. These two precedents are leading them to reflect their gold values in some form other than physical ownership in possession. This mistaken detour from gold's true purpose will once again prove, by reality, the value of owning real gold.
Standing aside this group is the Physical Gold Advocate. For them, for us, these times will contain the greatest gain in real wealth ever seen. For those who are falling behind, gold is still within your grasp.
TrailGuide
================
Belgian (04/24/01; 09:17:49MT - usagold.com msg#: 52454)
Official Gold
Trail : Do agree with your correct observation. And...
Hello again Belgian,
you write:
----------We still remain completely in the dark as WHAT the intensions of the Official Gold-holders (OGH) are !--------
This is always a primary reason to own real gold, in possession. Gold Bugs talk endlessly about how these OGHs cannot forever manipulate the currency price of bullion. Then they go out and place themselves at the mercy of our warring OGHs, by owning gold investments that totally depend on the OGHs not holding the currency price down.
My friends, wars evolve battles and battles destroy weapons. In this case, the main weapon of the dollar faction is their control of the paper price. As the ECB strikes this stronghold's credibility, that pricing structure of gold will completely fail. Throwing most Gold Bugs into disarray and their investments into valuation uncertainty.
Sir Belgian, I bid you success in your quest for security in physical gold. But disagree in your comment of: ------- We must all realize that there is NOT ENOUGH gold to permit a free market.------
There is enough gold in one ounce to service the entire world's wealth needs. Broken into single atoms and alloyed into coins (MK may agree on this (smile)) that single ounce would work for us all. At the right price, a free price, all the gold owned now could be enough. No more gold would need be mined for the rest of humanities time.
It is the price of gold that has been managed and distorted into a perceived commodity value range. Because gold does not fit into man's credit money systems, man always will attempt to use substitute gold for added supply. Even in a pure gold system, if gold is lent between two humans they will try to alter the metal's purity to ease the pain of repayment.
thanks
TrailGuide
Trail Guide (04/25/01; 15:04:48MT - usagold.com msg#: 52536)
Comment to Randy
Randy (@ The Tower) (04/24/01; 10:38:48MT - usagold.com msg#: 52458)
Follow-up on my comment last week that China has lately been a net been seller of silver
------Philip Klapwijk, managing director of GFMS, explained at Monday's conference of the Gold and Silver Institute that China sold near 60 million ounces of silver in 1999, with additional sales of 40 million ounces per year likely over the next couple years. Continuing...----------------
Your words:
--------China is simply lagging by one Century in performing this act. Many of the other nations of the world unleased their silver reserves near the arrival of the 1900's when the usage of silver was abandoned as redundant within the banking sector. And in contrast, not surprisingly, global gold reserves have GROWN since those days. Further, the dollar can be expected to suffer a worse fate than silver when it, too, loses its particular reserve and settlement role within the international banking system. And gold? All reasonable signs show that it shall maintain the king position as THE reserve asset par excellence for a long time to come. Get you some. ------------------
Hello Randy,
You know, your thoughts got me thinking (grin). I have time to do that right now as my files are restored.
Following your chain of thought about China silver,,,, I noticed a comment from Bush that we would fight them over Taiwan. Then silver gets hit real good. Could it be they are unloading silver so as to buy Euros and gold prior to calling it splits with us? They do have more silver than their needs require (possibly more than all of us require).
If they are, indeed, going to run with the Euro later and the ECB is marking gold (not silver) as their main "wealth reserve", then it makes sense for China to position themselves this way. It also makes sense because as an addition, Hong Kong has so many dollar reserves they, too, could never unload them. Following the Euro system lead, they could afford to let their dollar reserves burn as long as they had even 15% of that value in gold prior to full "Euro roll-in".
Further,
If any EuroZone based gold paper they own that had a US originator defaults, with China's approval, that paper could be restructured to pay back in Euro currency assets. Courtesy of the ECB /BIS. Forcing the US originator to dump dollar based gold hedges (that's a lot of paper gold) as they buy Euro coverage to ensure exchange matching. Of course, extrapolating this system wide, we would see paper gold credibility plunge (therefore it's bid price also) aside the Euro exchange rates spiking on the dollar. All the while out right trade in physical gold or "five day" (super spot delivery) would spike to the heavens.
I do wonder if we are, as I said a number of days ago, seeing history in the making with lease rates doing strange things now? (smile)
Thanks Randy
Also welcome back Sir ORO!
TrailGuide
Trail Guide (04/25/01; 18:00:42MT - usagold.com msg#: 52549)
Comment
(Sir, this was written before reading your recent post I'll read it also and reply later.)
Journeyman (04/24/01; 13:39:01MT - usagold.com msg#: 52464)
Mr. Journeyman,
Excellent presentation of your position! Thank you.
The main point I am making about gold and money is directly related to your first statement.
You write:
-------we DON'T need fiat, and neither "the people" nor "society" decided to go from the classical gold standard to FED fiat. That change was foisted on "the people" AND "society" by the banking-government cliques, with the express purpose of profiting these two groups at the expense of the rest of the population. --------
Absolutely Journeyman. Your articulated account is regarded as an unshakable law amongst our Western hard money crowd. Indeed, it is this very perception that drives the rethinking today about fiat's relationship with gold. That thinking is spelled out in self evident form in this passage from the trail:
"" It's not the management of money that was the problem, it was the management of man's authority to maintain gold and it's discipline. Over and over, we watch good monetary theory fail as society fails to control their controllers.""
This is the root problem we face in advancing another of your classical gold standards. The people could not rebuff the forces that "foisted" the evil upon them. The problem is not deciphering whether someone else did the deed, it is in the understanding that it can and will happen again.
Society nor mankind itself can manage those that can and do these changes for their own gain. This is what we face, this is what we address.
As a further measure of defining and rebuffing this dilemma, I went on to say:
"" The road before us is to not manage gold. Rather, stop (to stop managing) it entirely. Forget about calling it official money and let it seek it's own level against every fiat as a worldly wealth.""
Even if the charge of returning us to a "classical gold standard" was given unconditionally to Sir Journeyman, this person would face all the exact same pressured his predecessors faced. The account of history and our experience with human nature all say he would do no better.
Further, to mitigate the loss all of us experience as this repeats, I made this point:
"" Indeed, while we may never overcome the human failures of war and fiat inflation, the wealth of common man does not have to be expended while society tries yet another time.""
That simple reply, my friend addresses all our experience with moneys.
Also, to your point of:
-------As far as the euro being backed by gold,,,,,,,,,, and But is their currency tied to that gold in any meaningful fiat-supply-limiting way?-----------
We do not in any way consider the Euro gold reserves as being tied to that currency. For the benefit of everyone, gold will be a free priced reserve once the paper dollar forces are cast aside. If the Euro fails, as the dollar has, it will do so in a world where gold in the hands of man will balance the loss. With no incentive to match gold to any form of currency exchange rate, the Euro will for the first time a world reserve that's valued for it's collective management alone.
Thanks
TrailGuide
Trail Guide (05/11/01; 14:32:34MT - usagold.com msg#: 53425)
Of ORO's World
Hello again. I'll try to address several posters with this.
More comments on our current discussion, proceeding from my #53314.
ORO (5/9/01; 12:53:15MT - usagold.com msg#: 53296)
--------If Europe continues to expand and deepen regulation (as it has of late) while the US simplifies and thins regulation, the advantage would play in the favor of US industries despite higher dollar exchange rates.-------
Of ORO's world:
All of his conclusions above the closing (that statement is printed above) are based on the ongoing dollar reserve system as we have known it over several decades (even further back). Included during that time are all the excesses and faults dumped on the fiat money world by our nation making the best of it's dollar dominance. Also, included in that period were all the defensive plays taken by other nation states. To be sure, those plays were also filled with excesses and faults, but what else do we expect from political societies.
The ongoing over taxation, deficit spending, fiat inflation, deficit trade balances and mismanagement of private economies has always been with us. Yes, under different names and different degrees, that's true, but no recent period in money history, gold or not, was without an ongoing effort to cheat the system. It was always in a process of decay, no matter what the books tell you. To think otherwise is to disclaim humans as they are.
How often have we heard that some special "hard school of thought" has all this terrible process documented and neatly explains where it all went wrong? Then, goes on to show us how to set it all up again so as to start over on the right foot.
So, trying to present the society as a whole, as "the awful, all controlling big government" on one side and the "good private economy on the other side" argues the lesser side of the larger issue;
-----hard money policy cannot work for long in a credit based system----!
It makes absolutely no difference if we are even on a 100% gold use money system, if we as a society engage in credit commerce, we will break links with gold.
Consider:
I borrow 100oz of money gold from ten people so as to spend that gold doing commerce business. The hard money theory has us thinking that if I fail and cannot pay back the gold, this little portion of the money supply contracts. Thereby the gold system is perfect, as it slows the economic excess.
This is a minor example of gold banking. On a tiny scale. It works, as long as we don't act out our motions in a political way.
Conversely, if gold was not part of a banking,,,,, credit,,,,, lending system,,,, rather it is just a tradable, non-lendable non- official money asset,,,,, then those ten people would have given me their gold and became part owners in my (ours now) enterprise.
When it fails, our gold money is gone and no credit contract is lost in the process. Society at large will not come to our collective defense, no matter the scale of the loss. You see, we lost our assets, not society's official money!
The difference:
When gold is lent,,,,, when it's part of the banking system,,,,, when it becomes the object of a credit contract,,,,,, this whole hard money system falls into political RISK! No matter how perfect the "schools" have show this to work, in real life, political risk degrades our perfect credit money. This is the gray area that's not ironed out because we cannot iron out society's emotions. Let's see:
In the above, the ten people I borrowed gold from would be holding my IOUs for that 100 ounces. Be they private citizens, banks or corporations they have effectively lost their gold money. The very money of the nation state!
Rather than see their losses made final, and cause harm, they partition the government to intervene by recognizing those money (gold) loans as good on the books. Further, the government is asked to lend some of it's gold (collected through taxes) to me to extend my business life. I continue to function in a small way as I pay on those gold (money) loans. Further, those loans (held by ten lenders) become marketable as they become seasoned. Then, at a discount to their face value, they can be sold or kept as collateral assets. Over time, this is the political risk that seeps into any hard money system. Over time, even a gold credit system is expanded,,,,,, inflated,,,,,, until outright fiat must come into play.
It never starts out as "big corrupt government and their awful bankers" controlling the "good honest people",,,,,, rather,,,,, it's when a large enough segment of the "good honest people" are threatened with losing enough (gold) money that it could take down the economy,,,,,, they demand (elect into office) that their government and therefore bankers, expand the (gold) credit enough so as to slow the fall.
Further,
Now, if this remained on such a tiny scale as the above ten, nothing politically would change. But, modern economic structure is never on such a little scale. This is why I say "we are them"! Many are indignant that they be placed in such company and proclaim they would never be part of such fraud. Well, that is the very nature that splits the society into the same half's ORO sees today.
His closing statement comes at the tail end of a drama that was played out over decades. His small slice of context completely excludes how the USA dollar,,,, gold,,,,, reserve system was parlayed into a cost advantage that will not exist once the dollar falls. We will be the ones,,,,,,, much more so than Europe,,,,,, who ""expand and deepen regulation"" as our "advantage falls away"!
PH, I want to comment on your posts and will do so next. Be back as able. (smile)
TrailGuide
Trail Guide (06/29/01; 09:47:53MT - usagold.com msg#: 57160)
Money
Exceptional post Randy! It makes a very clear statement that's easy for us to understand:
--- Randy (@ The Tower) (06/28/01; 18:07:52MT - usagold.com msg#: 57115) Sierra Madre and the obscurities of a concept called "money" -----
I want to enter this discussion a bit and use both yours and other's statements. I'm following your lead when you wrote:
-----It's one thing to discuss money or monetary systems generically, but it's time we give the actual concept of "money" (in and of itself) some of the intense attention it deserves, particularly here at a gold discussion forum. ---------------------( Randy #57115) Gold is definitely wealth; its a highly liquid, immutable, tradable tangible asset. For that reason some of us can never have too much of the stuff. But is it "money"? In your comment to von Braun, you indicated that our units of "dollars" were once upon a time defined as a definite quantity of gold.---------------
ALL:
the above thought creates the correct mindset for grasping just what money is. Gold is not money and never has been. No more so than hats or any other physical item. Back when we had no form of currency both hats and gold could serve the same function in trade. What was that function? The using of an item of wealth,,,,,, the using of some real thing to trade for something else we wanted.
I challenge the readership, including ORO, Journeyman and all others, to search history and show me anywhere that physical gold was traded as money. In every instance you can present, I'll show you gold used in "wealth barter" and incorrectly labeled money.
Further
The only thing that separated gold from hats or any other wealth object was gold's rarity, beauty and unique physical properties. Indeed, a hat's value was worth something in trade, no different than a gold coin. Just not worth as much as gold's value in trade. Neither gold or hats were money then, or money now. Rather just items of wealth we trade for other items of wealth.
This very concept is what so confounds modern Hard Money thinkers and corrupts their efforts to regain the high ground of money thought and legitimate money process. It's also the mutation of this concept that, from the first introduction of "money", bankers and officialdom used to snare the hard money world.
Notice Sir Stocks, Lies, and Ticker Tape's #57150. In his post he makes a point that's perfect in example and truth of the above. But, I doubt this was his logic in making the statement. I'll reorder it for clarity.
-----Every culture upon discovery has quickly learned this monetary truth. Only in gold is money quantified.-------
Exactly, sir! Gold is the very tradable wealth that we can quantify money with. How? By giving everyone an exact amount of tradable "VALUE" to identify the currency's tradable value. The gold itself is not the money,,,, it's the tradable wealth we can value money with. In this, we know a currency money's exact value in our economic world of trade by tying it to a real wealth piece of that economic world. Gold!
Our world today is no different than it was in ancient times. We trade things of value for things of value. We barter with each other, things for things. Only, for modern speed and convince, we use money to denominate this barter trade. Mostly paper money.
It's well known that many of us conduct only half of this barter transaction. Preferring to keep, therefore save, the paper money our barter brings us. We chose to do this instead of finishing the deal by trading the currency for something else,,,,, for some other thing. The other side of the barter deal is left open by our retention of this paper money. This is the concept of a "Money Supply" in circulation! In our modern world, we own and save the unfinished side of a barter deal.
In this we risk the loss of value said money in circulation can experience. This is the entire theater of our years of political scrambling over money. We act out the play; of trying to make this circulating money retain value. From the beginning, man has entertained countless ways to lock his "money" to some form of "fixed barter able wealth, like gold. All done in order to keep it from falling in value before he completes the other half of the barter trade. That is spend his money. This is called price inflation and is the result of printing to much paper money. This process of tying our money to some form of tradable gold wealth does not make gold money,,,,,, it only ties the tradable value of gold to the money in a effort to slow the printing press..
We have a choice.
We can use physical gold , not money, to trade for other goods. It makes no difference whether the gold chunk is in official coin form or in pure unshaped gold form. When we use gold, outright, we are bartering wealth things for wealth things. No different than if we used the hats mentioned above. Two hats for one chair is the same barter as two chairs for one piece of gold.
The use of gold in a trade does not make said gold money in that trade. No more so than the use of hats in a trade would make hats "money". Gold is but one form of wealth that's been held throughout the ages and held for it's tradable value. It's not money. When governments mint gold coin for our use; they are minting an unit of wealth for barter trade and sanctioning it's use within our "money concept". The gold coin itself is not money and spending it constitutes wealth barter in lieu of trading money.
The other choice humankind has had is to use money to denominate all of our barter trade. In this form paper money,,,,, currency,,,, plain official coins are all just receipts of barter trade. That is what money is. It truly has little determined value outside what we can trade it for. I will give ten dollars for a hat because I have seen hats trading for around ten of those dollar receipts before. I can then use that value comparison to trade said ten bucks for a chair. This is the use of the money,,,,, the money concept.
The money concept mostly works as seen in our use of plain money for over 30 years. None of us Western users attach our money's value to gold. We attach it to what others trade it for. Yes, it has robbed us of much wealth value by saving and using it. But, even the use of gold in outright trade barter has some historic risk. See further below.
-----Money is not real wealth. It has no real wealth anchor outside what our use makes it. We and the majority of people use modern paper money for it's convenience in trade for wealth,,,, not it's ability to be wealth. We try to make our paper moneys be worth a fixed value of real wealth by tying it to a real tradable value, gold. Our paper money's value can be as stable as our printers deem it. They can print only a fixed amount and it would retain value. Or they can print as much as possible and it's value goes down.
It has no fixed, denominated value
This is the problem of money,,,,, the problem of the money concept. Grasp tightly upon this notion:
"" The use of money is the process of trading outside of barter. Money is a concept of "denominating a wealth value" whereas barter is "trading the actual value of a real thing"
For sure, neither has a fixed long term value. Even we have a time worth limit. We all become dust at some point. Still, the tradable value of both the "money concept" and "of real wealth" can and does change with man's wants and needs. However, real wealth trading has a long history of bring the most in trade over long time spans.
>From mention above:
The barter of gold has a fine example of not holding value forever. That can be found in history when vast gold stores were brought into Europe long ago. Still, the record of our "money concept" holding value is zero!
So, back to the problem at hand
-----( Randy #57115) But soon after, the bell ceased its clear peals, and somehow gold (under the bulk of its dollar weight
Thanks Randy!
Absolutely! No currency,,,,, no money,,,,, in our history has been able to withstand the socialist expansions of man's printing press. Even his minting press had expansive ways! When we used physical gold coin alone,,,,, that barter able wealth,,,,, and labeled it money,,,, we immediately expanded it's circulation by lending it from banks. Once it's labeled money, people will lend it and once it's lent your receipt for gold is no longer a barter able wealth,,,,,, it became part of the "money concept".
Make no mistake, mankind has before and will again use physical gold in barter by trading it wealth for wealth. But once we try to morph it into money, it's function is diminished by socialist design.
This is why the Kemp story is so important. Modern economics has come head to head with the drive by our socialist hard money school to place gold within the money world of credit bankers. A school of thought born of bankers and instituted so bankers could inflate money with no measurement by Free Gold. Once within the banking money world, the limiting nature of a "gold fix" is quickly printed away through the use of credit.
Completely opposite from what hard money thought teaches,,,, the trading of Free Gold,,,, when separate from the banking function of money,,,, enhances the utility of gold as a tradable wealth item. Ancient history proves this out. This history of barter trading of gold existed far longer than any currency ever has,,,,,, and did so whether a money traded by gold's side or not!
That utility function,,,, the trading of god wealth thru barter,,,,, is what creates it's real demand. Such real demand for trade and savings is what makes gold rise in value, step by step with the speed of any printing press of money. The hard school notes that gold would rise way to high! I say measured in what? It would not rise at all against other things,,,, once it's utility price was reached!
>From there it would mostly stay the same in value,,,, it's the moneys of the world that would fall as their never ending bubbles find their proper place in time. This was and is the only way to measure our printing press speed. It's needed, for we will never again stop those presses as they now have a digital function in this modern world.
Free Gold would allow both citizens and private investors to set the proper exchange rates for currencies and what free market interest rates to place on the same. Mr. Kemp has placed his finger exactly on this point! He is not the first to see this.
Our worldly trade function has finally hit the end of it's ability to coexist with gold and money being morphed as one. Even though the dollar left the standard years ago, gold remained in the official money credit grasp as our ongoing manipulation indicates. We can no longer afford to bastardize a wealth so important in it's trade and wealth saving function by tying it with our money concept.
This has been the thrust of the Euro Project all along as it replaces the failing dollar. The failing dollar and it's war on gold. The thrust the US is now trying to use to save it's failing system. To little, to late!
Thanks MK, Randy, ALL
TrailGuide
(IMHO it remains debateble whether gold is the same as a hat and thus not money. I'd say gold is not consumed - as many say: "you can't eat it", as hats are, and there is somewhat of a difference. FOA prefers to see gold as wealth outright(!). Others say it is a wealth consolidator/store of value, which is something different. Personally I tend to think of this matter as somewhat ambiguous. There is something to say for both stances, and in the end it is not up to us to theorethically find which vision is true, but the up to the people that use gold. And they will most likely remain devided on the subject.)
Trail Guide (7/8/01; 08:36:41MT - usagold.com msg#: 57668)
I must go where "Ears do not bite"!
I don't believe it people, but I guess this was bound to happen!
I just spent several days writing a piece that explained our whole philosophy. This time in a clear positive manner that was easy to read. I had decided to stay on the GoldTrail page only and elevate our discussion into a real time dialog. Events are close enough to a conclusion to warrant this. After a ton of asking and asking I finally convinced Another to write with me in his true academic / professional voice. Great! No more editing for me.
So,,,, he gets today's forum from me and what does he read?
====================================
------ Journeyman (7/8/01; 06:40:37MT - usagold.com msg#: 57667)Bet you never heard this story. Media control & Chomsky @ALL
------Chomsky's proof
By William Rivers Pitt The United States is unusual among the industrial democracies in the rigidity of the system of ideological control ---'indoctrination,' we might say--- exercised through the mass media. --Noam Chomsky -------------
-----------June 25, 2001
--In the early morning hours of Thursday, June 22, 2001, a man named Jared T. Bozydaj took to the streets of New Paltz, New York, with an Intrac Arms 7.62 semi-automatic assault rifle. He fired pointedly at police officers, wounding one officer named Jeffery Quiepo in the arm. The shooting went on for several hours before Bozydaj was disarmed and arrested.-----------------
--------Clearly this kind of control requires an extensive network of influence coordinated from some central "authority." If they cover-up (by failure to cover) this sort of thing, what about economic news such as the current major turbulence in Chile, Argentina and Brazil? Etc. ----------
-----Reminds me of ---another-- illustrious information guru. ---------------
---"Don't tell them ... then it will not exist ..." -Chief Nazi indoctrination "Information Officer" -----
======================
OK,,,,,,and if that was not good enough, here is one more! Go on,, read the whole post? A few items below:
========================
working-kirk (7/8/01; 05:49:57MT - usagold.com msg#: 57664)
---Which bring me to the subject of Crack Whores.-------
-------If you are selling sex you can get a blow job between $10.00 to $15.00. A Fuck goes From $25.00 to $100.00. A blow job takes anyway from a minute to three, and sexual intercourse can take five minutes to 15.----------------
===============
OK,,,,,,, good job men! Perfect timing! On subject and driving home the quality of this venue! I complained in two of my last three post about such discussion and most everyone here seemed to support a "freedom of speech" that included all of the above! Journeyman gets to associate Another with" indoctrination" and "Nazi" thought.
All right,,, good stuff J-man!
Well,,,,,, Michael,,,,,, Randy,,,,,,, All,,,,, For all my insisting to "him" that this venue was the correct place to build an understanding of our future world of gold,,,, I guess I was wrong? I got back a quick retort and firm instructions. Instruction I will follow till hell freezes over because I will not lose my connection to Another. He said simply "tell them right now our position and walk away, it's over"! And I can tell you when he says it's over,,,,, it is over!
So,,,,,,,,, MK, please understand that it's not old FOA walking away mad this time. The big guy said we are done. I'm back to discussing this in private with select people that want to hear it and debate it in private. I'll stay in touch with you and discuss as you may want? After all this work, I guess it's my turn to feel low now. What a bunch of garbage!
Good luck all, I did my best to plant the seeds of thought. Own the wealth of gold and they will grow for you!
You will now "watch this new gold market" without FOA or Another.
Your friend and hard worker,(smile).
Last post, Signed off!
USAGOLD (09/03/01; 17:21:29MT - usagold.com msg#: 60749)
On "Floaters", and Part of a Private Note from FOA Printed with His Permission
I received the following from FOA by private e-mail:
Michael,
I cannot post now as that area of my system is already being reworked. In my earlier mail to you I mentioned several weeks, same thing goes for trail posts. As to your question concerning all the various Another posters floating around:
--- "Is this Another or just a good imitation" ?----
It's not him, just another floater trying his best.(smile) A asked me to "walk away" from the old rough crowd at your main forum so people wouldn't associate their foolishness with us. If we decided to leave for good, you would not be reading me at the trail or getting this mail either. He would cut off all communications with the same permanence that was demonstrated at Kitco. Once gone it's over and he never goes back, that's his style. Besides, I can tell you (and those that know him already know this) that the last thing he would be doing is posting right now!
Have a nice labor day, this will be my last reply for a while. See you in a few weeks, my friend.
- - - - - - - -
MK: I hope this puts the speculation to rest. Anyone can go to our archives and cannibalize sentences from "Another (Thoughts!)" or "In the Footsteps of Giants" and make it look like a post from Another. If you want to read the real thing we invite you to go to the "Another (Thoughts!)" archives where you will find a wealth of information -- and it's authentic Another. . . .Those who are newcomers might find these enigmatic postings an eye-opener -- as have many before you. I do believe that when Another is ready to post again, he will do it here.
Also, what follows immediately below was contained in another private correspondence from FOA. Though a private communication to me, I felt it important enough to ask permission to post it here which he graciously granted. . . . .
- - - - - - - -
FOA: Looking back, Another was a true master of understanding people's thought processes. He knew that none of us, that's you, me or any of the rest of us raised inside a background of American financial understanding, would ever accept his position thrust; with him just spelling it out in the open. Especially when this whole financial / political transition has been taking place over more than a decade and a half. By the way, he started this some decades ago. So, he decided to ask readers and listeners to think for themselves; by presenting bits and pieces of the flaws in our "Western Thought" as others saw it and as it pertained to his world of gold and oil. Not wanting to prove anything, while asking us to prove everything for ourselves; as these long term events unfolded.
I understand that there are a large group of basic individuals that fully understand our line of what is happening and are buying gold. What I never envisioned was how many groups make up the gold trader crowd; all standing apart from the Physical Gold Advocates. Further, I never thought they would segregate into so many vocal tribes, each trying to advance their own minor position in the gold world and willing to step all over themselves and anyone else in the process. I find it all a real show / play to watch as it truly demonstrates the very human dynamic Western governments have use to distort modern gold thought. I now understand that Another did fully grasp just how distorted this chain of thought was and went around it all by waiting for events to completely destroy their concepts; instead of debating with a host of gold tribes.
In the end, physical gold will win out and prove to be the greatest wealth holding anyone has ever known. Unable to grasp that only a transition of political influence by old world players can break this modern American Western hold on gold, these tribes are vulnerable to the same government influence they long for. Their wealth will be portioned by those same Western governments as world political reality forces our American leaders to embrace a world "free market" in physical gold. While abrogating, thru taxes and windfall appropriations, all forms of paper gold ownership.
Today they chant; " we want our leaders to recognize gold again"! OH, it will all right and the impact such a recognition will have on these various paper gold plays will leave these gold tribes dancing around a midnight fire! (smile) If nothing else, the entertainment of watching them spew brime on each other will be quite an act to follow. If nothing else it will educate future investors as to where to look for reason. Indeed, the law of ages never changes as ones conduct in social interaction still identifies oratory as being worthy or no. People that relish rash interaction always find themselves surrounded by fools. Eventually broke fools! (smile)
- - - - - -
MK: Hope everyone had a restful weekend. Judging from the market action overseas today, we could be in for an interesting week.
USAGOLD (9/4/01; 10:52:32MT - usagold.com msg#: 60775)
Interpreting FOA's Message. . . .
Gandalf, far be it for me to interpret (paraphrase) FOA line by line, but you ask a very important question by e-mail which I will try to answer here for all. I hope you don't mind, but I think the whole Table Round might gain traction by your good question and my attempt at an answer:
Your question had to do with "interpretation" of the message I posted last night. Here's my response.
MK: I think what he is saying basically is that there are many vested and competing interests in the paper gold market that Another was well aware of long ago and that he (FOA) did not factor into his own thinking until recently. Rather than take on all these competing interests in an endless rhetorical battle, Another has decided to allow events to do his talking for him. What he has put out for public consumption in the past is a guideline that will get the investor where he or she needs to be -- in the physical metal.
(I find this sentence particularly interesting as it shows Another's basic methodology: "Not wanting to prove anything,asking us to prove everything for ourselves; as these long term events unfolded." Those who have studied Western philosophy are very familiar with the Socratic method of leading the student to an understanding through a series of questions and challenges. The word "education" derives from the Latin "educare" -- "to lead out of" -- as in to lead out of ignorance. To lecture is one method of "leading out of" but for long lasting results educators have long known that the Socratic method -- if it can be employed -- is the most effective. One wonders if educators nowadays even think about such things. We hope that to be the case! Another apparently understands the methodology.)
The key paragraph starts with "In the end, physical gold will win out and prove to be the greatest wealth holding anyone has ever known." All these competing interests will feel the sting of the metal itself as an "old world" belief system manifests itself in the markets (perhaps the European financial establishment?). All will be forced by the implosion of the paper gold market (and the dollar as well) to understand the real meaning of gold-in- the-hand. All gold related paper will burn along with most other paper assets. This is my interpretation, Gandalf, of the message in its essence. Others may have a different interpretation but this is mine. We welcome further discussion and interpretation. MK
turkey hunter (9/19/01; 18:11:04MT - usagold.com msg#: 61971)
Question from an FOA post from 6/9/01
I was wondering if what "Another" saw happening back in June is coming into view today? Any comments on this post from June 2001? Also I would like to know the meaning of "new reserve bankers"? This sentence is found in the 2nd paragraph. Thanks.
"All done as the saving wealth for your gold advocates and new reserve bankers finds it's new mark in our time".
FOA (6/9/01; 16:36:42MT - usagold.com msg#75)
A letter from Another to me.
My friend, I must now walk your trail in closer step. Events are closing that bring the changes we have long seen and prepared for. The time grows short as these conclusions prepare to make appearance. The last of these Euro price ranges are in sight and even the Duisenberg hints his work is done for this new currency. A hard task was completed by him, his acknowledge to the French in May 98 was with a timeframe few could understand. Now his containment is done. With introduction of notes and coins, this money will become it's own director and his work will be well received. A good day, indeed!
All were present at the meeting. I think contractual conversion became topic of some urgency. This BIS must now consider the values these forms will hold in ours and their new futures. Values that will no longer be dictated in dollars, rather realigned in conversion and gold market failure. Truly, this failure of current gold will be reflected as anguish in these western goldbugs, both bankers and investors. All done as the saving wealth for your gold advocates and new reserve bankers finds it's new mark in our time. Your work, good man, has been as trying to reconcile the religions of this world. Telling both they are just while only one can be right in the end. So it is in this day of gold.
Some knew what was coming from the beginning. With the Hague Conference of Heads of State in 1969 sprang Copenhagen Report of 23rd July 1973. We pointed and all continued to turn away to follow where power was, not where it was going. With the Solemn Declaration in Stuttgart (1983) closely followed by the Single European Act (1987) even the BIS then understood the final goal. Margaret (Thatcher) soon expressed that signing that proposition (the Solemn Act) was her greatest mistake in office. While I do agree with her on a strategic political basis, such reflections by British leader only exposes the ignored, nearing failure of their shared singular currency dominance (both USA and England). Little is expressed of the wealth lost of our peoples and that of most Western economies as these government's efforts to preserve this failing system drains real wealth from our world.
Now these leaders full attention must focus on this money transition itself as Blair's next initiative (the Euro) will lead to a realignment of contract values of all kinds. Before the fact! The Maastricht Treaty allows that by Jan. 2002, all contracts will be converted into euros and new contracts must be denominated in euros. Because Blair has overseen the signing of both Amsterdam and Nice Treaties, his closest people understand the full impact Britons intentions will have on this world's paper gold market. As it be contractually expressed in dollars. The credibility of these to not only represent gold but to maintain loan collateral on books will lead to several high level agreements to address this loss. Indeed, how does one transition a metal contract without moving the metal once again? Especially if the Euro suddenly, without explanation, rises in value. A rise that leaves only the door of metal fulfillment? All eyes must now search for a way to transition this beast as it's use and function will fall away as the Euro further expands. Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract liabilities from metal into Euros unless some real US gold is given up. Something your Bush will endorse but not without a price! As contract gold falls in price while expanding the physical price. I suspect it (official US gold) will be given up at the exchange rate of many thousands and even that will be the little drop of water that allows dollars to remain in this game. Our time arrives, my friend. Even as fools make effort to gain wealth in a gold market that will soon exist no more.
Tested now are the economies of both EuroZone and DollarZone with high crude values. The response of both is known. The ways of dollar wealth hasten their demise, even in the face of ECB restraint. Open and outright are they (FED) to discredit their position. This test is done and the verdict arrives soon. As with gold and oil, Dollars and Euros will neither any longer flow in the same direction.
Another
USAGOLD (9/28/01; 16:39:13MT - usagold.com msg#: 62604)
Victoria sovereigns. . .And a Belated Happy Birthday to this Mighty Oaken Table of Yore. . . .
Over one half the Victoria's are now sold.
We'll leave the on-line store open over the weekend and orders will be filled on a first-come, first-served basis. When you place your order, a confirm automatically goes to Marie's e-mail with the time annotated, so we'll know where the cut-off is.
Thanks to all those who have decided to do business with USAGOLD. . .many of you first-time buyers. It is your business that makes this web-site possible.
Congrats to BeerMan -- our first big winner. Does this mean he has to buy beers for the house? Now that might be a tall order. Page hits have really jumped. We now average 31,623 per day as of yesterday and, for whatever reason, 58,050 page hits on September 17. *********By the way, this Forum had a birthday recently -- on September 22nd! We are now three years old and still kicking. . . .Congratulations, O Mighty Oaken Table of Yore. . . . .Events pushed all kinds of celebration to the back burner including our annual birthday party aroun this Table. . . .********
The best post on that important day? The honors go to our old friend FOA, who had this to say (there is also an interesting gold price prediction from Another!! Read on.)
Friend of Another (9/22/98; 18:01:45 Msg ID:96)
Aragorn III (9/22/98; 16:13:17 Msg ID:94)
Aragorn, I doubt that the common man will feel there is gold in the Euro. He will know it but not fully understand it. The currency confidence factor comes from a strong positive exchange rate, much like that enjoyed by the dollar today. The average European will buy from the USA in the same way that Americans buy bargain goods from other countries. Using an overvalued dollar makes one feel as their is no inflation, even though there has been massive dollar currency inflation over the last twenty years (the real cause of price increases when the exchange rate is allowed to balance a negative trade deficit). As for the Euro being a clean, unmanipulated money system? Of course not! There will be all kinds of problems, but they don't carry the debt that the dollar does after all these years of reserve currency status. The Euro will be the lesser of the two evils. Perhaps by a factor of five. That is also why many major investors will hold gold as a proxy for Euros. Not to mention that it will increase in value a great deal. What exchange rate for gold in Euros? I think it will be more of a free market type system, but Another thinks $6,000 in todays dollar buying power. We shall see. Thanks for the consideration! I wanted to reply to your first posts but lost them? FOA
- - - - - -
I read that just a few moments ago and was struck with FOA's remarkable consistency over a three year period. Hope you are well, my friend. We look forward to your return. Though your message is often misunderstood and/or misinterpreted, it is always read by a large number of people. That summation above stands up remarkably well over a three year period, doesn't it? And you know something, you couldn't slip a new paper euro between your opinion then and philosophy you posted not more than a month ago.
- - - - - - -
Don't forget the posting contest goes to Sunday. So far, we've been very impressed with the entries with a fairly even displacement between the TRUE and FALSE. Some deep thinking going on here. . . Judging this contest will be very difficult.
As I said on that first day, and repeat now with the same enthusiasm:
"Post at will!"
USAGOLD (10/26/01; 09:37:03MT - usagold.com msg#: 64224)
Very Quietly. . . .
Very quietly, while only a handful of USAGOLDers were paying attention, we have been building the Gilded Opinion page into one of the top gold opinion pages on the internet. We have always gone for quality over quantity featuring not only top newsletter writers but the latest writings from think-tank level economists Jim Puplava and John Hathaway, to Nobel Prize winners like Robert Mundell, to some of the best newsletter writers in the business like Marc Faber, Bill Buckler, Doug Casey and James Turk.
We are now in the process of building a group of regular columnists (or new goal). So far we have the good Dr. von Braun whose bedrock analysis of this gold market is not to be missed and Jim Puplava whose weekly economic overviews are just about the best summary of conditions affecting the gold market available. These join our friend, FOA, who needs neither introduction nor comment. We just yesterday landed a top foreign affairs analyst as a regular contributor and I'll leave that announcement to our outstanding (and anonymous) editor. While a correspondent for Time magazine (beginning in the early 1970s) this individual's articles became 54 cover stories for the fabled magazine. We consider his cutting-edge anlaysis of foreign affairs incisive, provocative and weighty enough to catch and maintain the interest of even our most engaged and opinionated readers. I'll leave the announcement of this columnists' entrance to our able Gilded Opinion editor.
We've also decided to put up an occassional Ed Stein cartoon at the Gilded Opinion page and keep it at the top of the page. You may have to wait a short time for the download but it's well worth it. If Mr. Stein doesn't put a smile on your face, there's no smile to be had. Like the traditionally great cartoonists, his visual commentary cuts through to the hear of the matter. He's won more awards than we can list here, and those of you familiar with our News & Views hard-copy newsletter are already well-acquainted with the perspicacious Mr. Stein.
So we recommentd your visit to that page when you have time to print something up. . . .kick back and increase your knowledge. None of this is cheap seat thinking thrown up on the page just to fill space and hope that it catches your attention. It's ALL worth reading, studying and contemplating.
We hope you like the new gold price feed. This is the actual, real time gold spot price.
All just a complement of course, to the fine posting that goes on at this page.
Please let the discussion continue. . . . . . . .
I've nearly completed the Quarterly News & Views. . . . . . and may have some comments for you on the gold market over the weekend if not Monday. . . . .
Please remember it is your purchase of gold from USAGOLD/Centennial Precious Metals that nourishes these pages.
ORO (10/23/00; 08:46:08MT - usagold.com msg#: 39711)
Gold Oil Aramco and the two tier gold price
Got me a copy of Oil God and Gold by Anthony Cave Brown
One of the many interesting points in this saga of Aramco and the house of Saud is that of dual gold prices.
1940-1946
Dispute over royalty in gold pounds (sovereigns, about 1/4 oz each) which was 1/20 oz per ton oil, as per the original concession, that being the payment to the crown. The Americans (Aramco) insisted on paying the official rate of $35 per ounce. The Saudis want the Jidda rate of $70/oz, which was the post war non-central bank free market rate of 1947.
The concession was to expire in 1993.
The compromise of $51 + a package of "goodies" was accepted by both the US side, Aramco (Exxon 30% Mobil 10% SOCal 30%and Texaco 10%) and the State Department (who had a legation to the negotiations to deal with payments and strategic issues) and Ibn Saud, who was the Saudi side, represented by Crown Prince Saud.
Goodies included a 357 mile rail line and port facillities, as well as an airport (from the previous round of "goodwill" being purchased).
This dual exchange rate lasted from 1947 till
The fear expressed by the Aramco consortium during WWII was of Saudi moves towards the Sterling for additional monetary support, which the government constantly sought because of its constantly expanding leakage of funds throughout the court and later through its bureaucracy. Britain had US assistance funds from lend lease that could have been used to buy the Saudi government, who would then either transfer the concessions to an English firm, or Aramco would be forced to move to British jurisdiction. Obviously not where they wanted to be. The US won Saudi to its side through nearly $100 mil in fundings throughout the war, and made it part of the Dollar block rather than the Sterling block. This was the matter of most importance after Bretton Woods, since oil would be the most heavilly traded item of international trade for decades to come, and whomever had oil pricing on their side would increase substantially the likelyhood of becoming the currency of global trade, and thus enjoy a subsidy that would enrich the people, businesses and the government of the reserve currency at no direct cost and negligible investment.
Another dispute came with the Saudi demand that the royalty be paid twice: on oil as it comes out of the ground and as it leaves the pipeline. That was eventually settled with a lump sum payment and a new royalty.
In 1956, following the Egyptian seisure of the Suez canal the first official threat was posed to nationalize Aramco. This following a prior threat by the initially successful attempt by Onassis to obtain all the transport rights to Aramco oil on exclusive contract in 1954 through a bribery scheme that got to the king's foremost advisors. Next in line was the 1960 erection of OPEC, followed closely by the breaching of the Aramco line by the demand for executive decision participation by Saudi's Yamani. By 1967, all major oil producers but for Saudi and Gulf emirates had taken over the foreign oil companies.
In the gold-oil deals, still ongoing through the 60s but being paid in dollars up front, gold being secured indirectly, the Qatari Emir was surprised to find his agent having squandered $90 mil on copper futures instead of obtaining the gold he was supposed to purchase.
It should be noted that the Saud familly had seen the oil as its own private property, as well they saw themselves as protectors of the tribesmen and the holy places. The royalties on oil are passed on through generations and are not necessarilly viewed as "state" property, owned by "the people" much less the "Arab Nation". Thus funds were stashed everywhere around the globe both in specie and as investments in financial media by private parties of the royal familly and by the various merchants and mercenary courtiers and bureaucrats.
Another point of interest is the Saudi view of the relationship with the US as being preferable to the relationships with much hated former colonial powers Britain and France. Aramco was the filter through which Saudi grew to view the US. As a business partner, and a damn good one, but for the problem of the perrenial US financial overextension.
