Friend of Another (9/20/98; 19:03:15 Msg ID:43)
The Markets!
To All: It's an interesting corner that the Euro people (BIS) have put the US government and the dollar into. As the only reserve currency, the dollar must fall in value in order to reflate the world economy. But, a week dollar is exactly what the Treasury doesn't need with the upcoming Euro. Now, all Europe has to do is wait and watch as the markets do their dirty work! If the dollar stays strong, the countries in crisis will sink even lower. In doing so this will create a US trade deficit never before seen in modern times.
It is no accident that most of the economies in crisis are many of the chief trading partners of America. It's also no accident that they all are IMF/Dollar advocates. Meaning, they hold little Gold and much US treasury debt as local currency reserves. The US will be forced, by deteriorating market conditions, to lower the exchange value of the dollar. But, if Greenspan lowers local interest rates, Europe will begin to dump the dollar. For them, they don't need the dollar as a reserve currency anymore! They will hold a small amount of it only as an currency exchange intervention vehicle.
With this new definition for the dollar it will be required to carry a good interest rate. They have the Dollar in a trap that will force the Fed to lower it's value through the foreign exchange window. All the while pushing interest rates up or holding them steady to protect this reserve currency.
This isn't a strange twist as it happened once before during the 70's. Only this time a new world reserve currency is coming online, giving many countries a choice for the first time. I think China can't wait to unload it's US treasury holdings for the Euro.
I agree with Another's last post (in the archives) about the vintage wine. Gold is that reserve vintage that many people kept trying to open before it's time. By the end of the year, the currency wars will bring this fine wine to completion.
Once it goes above $360 some major defaults will occur, changing the entire aspect of the market. Add to this the introduction of the Euro and the old US Dollar gold market will disappear. Some investors are buying gold for the Y2K problem. I thing the Currency Wars will destroy the markets long before Y2K does it's deed!
Also, I am very excited to hear of this USAGOLD FORUM. I think myself and Another will have much participation with this new discussion group! It will, no doubt, be followed by many Gold investors. Who knows, perhaps even a Central Banker or Government leader? Thanks FOA
Friend of Another (9/20/98; 20:09:53 Msg ID:48)
TO BNACD:
We continue to watch the BOJ to see if they are selling US Treasury debt. I don't think that is going to happen. They will buy gold, they will talk a great deal, but they can't sell US debt held as reserves. Why? From the beginning Japan has tied it's future to a US dollar world. They built their economic engine by trading with America using a dollar surplus mode. From a USA viewpoint, that's a balance of trade deficit in American dollar currency. It was always a week Yen (in real terms) that created the demand for goods made in Japan. The huge balance of payments surplus, held by Japan in world reserve currency dollars gave them the reserve assets to grow their economy. As governments manipulated currency exchange rates (known as the dirty float) for the benefit of an IMF/Dollar reserve system, this action gave Japan an enormous advantage in trade and finance. As this has gone on for over twenty five years, Tokyo could not help but represent a bloated financial system. Today, they have reached an end that no one ever thought would come; the dollar reserve system is ending.
As one might expect, Japan having received the largest return for supporting this system, will now suffer the largest loss. They simply do not know how to play a different game. The Yen will one day fall with the dollar. Will the BOJ buy enough gold through the BIS to offset the complete destruction of their financial system? They will no doubt try, but I doubt their is enough gold out there to make a difference. At present valuations, all the gold held by Central Banks is worth what, 300 billion dollars? If we doubled or tripled it the amounts would make but a small speck compared to the loss of the second largest financial system in the world.
You see, the current supply and demand for gold as a commodity or weather one CB is buying or selling some of it today is really a non-event compared to a changing World Financial System. For the regular citizen, gold priced in the many thousands will have little effect compared to oil priced at $200 or $400 a barrel!
My friend, we are coming into changing times as never before. It will be here, on the USAGOLD Forum that we will follow these events. As Another would say, "We watch this new gold market together, Yes?"! Be assured, he will post here as soon as this site is known to be open. Thanks
Friend of Another (9/20/98; 20:16:24 Msg ID:49)
BMACD:
My last post was to your 18:29. Also, I somehow double posted? Because not many are here, perhaps we willtalk for a while. I expect Another will send something if able. I will reply to your 19:30. Thanks
Friend of Another (9/20/98; 20:48:44 Msg ID:51)
BMACD:
Here are a couple of items I read from someone else:
"The China Daily published a special report from the Chinese state planning commission that outlines a plan to reallocate foreign reserves ratios away from U.S. dollar holdings. It recommends reducing U.S. dollars as a percentage of reserves from 60 percent to 40 percent. This suggests U.S. dollar sales of $28 billion. The report went on to say that China should prepare for a weaker U.S. dollar on grounds that the U.S.(as a net debtor) consumption boom has created a Bubble."
Also:
"CHINA MAY BE FORCED TO TURN RESERVES INTO EUROS: ECONOMIST BEIJING, Sept 3 ( AFEC/AGENCIES ) - China may be forced to switch much its enormous foreign currency reserves into the new Euro if the dollar falls in the future, a leading economist was quoted as saying Thursday. While there has been widespread speculation over a devaluation of the Chinese yuan, state development planning commission economist Wang Jian said China would have to watch for any fall in the dollar when elaborating its economic policies, the official China Daily newspaper reported. Wang said the US economic boom of recent years was a "bubble," caused by a massive influx of foreign capital, which could burst when the Euro is introduced on January 1. China has around 140 billion dollars' worth of reserves, with about 60 percent denominated in dollars, the China Daily said. It also has around 60 billion dollars of US treasury bonds. Wang said China would reschedule its reserves so there was around 40 percent in dollars, 40 percent in the Euro and 20 percent in Japanese yen. China currently also has German marks, Swiss francs and yen reserves. The Euro is to be launched with 11 European members from January 1 next year. The government has insisted in recent weeks that it does not intend to devalue the yuan, inspite of the Asian crisis which has undermined its exports, and that it was ready to use its huge reserves to maintain the official parity. "
I think the question of the Euro will be answered by the actions of the official government Central Banks. For a citizen living in Europe and using the Euro, it will become the best of all worlds. Not much different from the American using dollars to buy goods (in discounted real terms) from Japan or any other third world country. Only, now the shoe will be on the other foot with the USA trying desperately to sell it's goods to Europe for EUROS. This will be another strange twist as many/most of Americas foreign goods producers will, by then have stopped using dollars as reserve assets.
The outcome of a change in reserve currency is mind numbing. For the small person outside of Europe, they should "Follow in the Footsteps" of others. The holding of physical gold can and will be considered holding a currency asset as will the holding of Euros. However, the Euro will not come remotely close to the appreciation of gold as valued against all things. The ECB and the BIS will make it that way. You sir (or Ms.) will see this come to pass. Thanks
Friend of Another (9/20/98; 22:02:45 Msg ID:53)
BMACD
Before I continue, I want to thank Mr. Kosares for creating this Forum. This effort by USAGOLD will reward many readers with interesting discussion and debate about the future of gold in the world society. Michael, thank you!
Also:
BMACD: In reply to your 20:48. Hashimoto made the comment, but what position do we find Mr.Yen in now? I think it was a comment created by political need at the time. What would happen if Japan sold (dumped if you will) their US dollar reserves on the world market and/or brought Gold with the proceeds? Even if the Federal Reserve purchased some of the debt, it would no doubt drive down the value of the dollar. But this action would not help their economy as they still operate worldwide in a dollar reserve system. The dollar price of gold would rise, but not enough to liquefy their financial burden. In short, they still have to sell goods and services to the world, in order to raise their GDP. This will not happen if the Yen appreciates against all other currencies!
As you can see, this is the box they are in. It is also the predicament many other countries are in that operate using the dollar as a reserve currency. For many of them, a rise in the dollar price of gold will not help them, yet. Gold has not been brought to the forefront as a true currency reserve asset. It will when the Euro is created. At that precise time these economies will have a new market for their goods and they will accept payment in a new reserve currency.
Until this reality becomes apparent, the world financial system will continue to slide down the dollar reserve slope. This slide will create the illusion of a economic deflation, but then isn't the dollar really an illusion also? Thanks
Friend of Another (9/20/98; 22:12:19 Msg ID:54)
ALL:
To some of my friends I say good day and to others good night. Will return for more discussion and thoughts. Thanks
ANOTHER (9/22/98; 07:00:04 Msg ID:79)
Aragorn III (9/21/98; 16:07:21 Msg ID:71)
Mr. Aragorn, Your write offers good thoughts. I also often question why a person would want to hold the "silver for the little person"? Indeed, the gold can be divided into very small parts and still it holds the good value. I think the silver issue comes from the same view point that gold should not be "up valued" against paper currencies. It has always been seen that an official reset of the gold price is "the bad thing". Always, it is "at all costs do not raise gold price"!
The political Western stand is "Give the citizens silver and let that price rise, but, keep the gold low and we purchace it for our well being". It would seem that those of the "democratic power" want to hold the gold for "insurance" (as Mr. TYoung rightly does) and never allow it's good effects to pass to the "little person", as you say. Perhaps we do still see the "human nature" at work with silver. Persons are always attracted to the leverage argument in any investment. Again, the western analysis uses the past dollar performance of silver to make the point of "it will rise at faster rate than gold". I think, if the past economic and monetary performance was to continue, this could be true. However, we come to the end of this era. The changing of a monetary system for the benefit of removing "debt load" does also require the changing of rules for past game!
History will be written as this: "we now know that in times of major financial change, real gold increases in value and holds that value far greater than any paper gold derivative" also " no other form of commodity (silver and platinum included), even food, was valued as gold". Even in times of past war, soldiers and citizens were found starving for food, but still, gold was found in the pockets, not food!
Thank You
ANOTHER (9/22/98; 07:36:39 Msg ID:80)
Goldfly (9/21/98; 21:37:48 Msg ID:77)
Mr. Goldfly, Perhaps your question will be answered in the future we now approach. However, for today, if we place ourselves in the land of Russia at the entrance of the "once most strong bank". What price do you offer for gold to replace the lost savings account? It would seem that in the process to return a portion of your wealth, that does represent a "lifes productive efforts", any price for gold would be as "the bargain".
I do admit that it is not the good position for ones family to be in, as others will also bid for this opportunity to gain gold. Tomorrow, when you and your neighbor use Euros to purchase the gasoline, a much smaller supply of gold will be divided by the dollars in existence. Few will concede that gold could be so high, as at present, "dollars price gold". But few have known a time when "Gold priced dollars"! Thank You
ANOTHER (9/22/98; 11:15:31 Msg ID:85)
REPOST:
My post to Mr. Aragorn is lost? Will send again if able.
Friend of Another (9/22/98; 15:21:04 Msg ID:92)
TO: RAINMAN (9/22/98; 10:19:25 Msg ID:83)
Rainman, We do disagree on this reserves issue! To make my point I'll start with my most solid concept and work forward. First, people are the real backing for any currency/money. It doesn't make any difference if circulated money is gold or if circulated paper currency is backed by gold and silver. When no one will use it or accept it, money it is Not! All the gold and silver in the world could be stamped into coins and if people are not willing use it, it can't be money.
You have heard this called the confidence factor. Well, I think a persons confidence in money is built after money is seen working, not before. We are not born with this confidence, it comes only if money continues to buy goods and services at a constant price, over time. People will accept fluctuations in the buying power of money, but that tolerance has limits. Once currency starts to fluctuate in it's purchasing power or exchange rate, citizens begin to require other types of backing for their money in order to maintain confidence.
This backing, to maintain stability comes in only two forms that I know of. The currency can be turned in or exchanged for real items held by the government Treasury as backing (gold?). Or, the Central Bank can purchase the currency in the open market using Exchange Reserves as Backing. The obvious, well documented problem with this comes when the government doesn't have enough Backing to maintain confidence in the currency. As in the case of the dollar, they have created more currency unit obligations than they have Exchange Reserves Backing to defend it with. If the need arises. I know that you already fully understand how this works.
My point? Modern digital currencies are today defended in the open market with Currency Exchange Reserves, not Gold. Most countries call their gold reserves. But, no country today classifies it's Gold as Usable Exchange Reserves . The Euro will!
Of the 40 to 50 Billion in reserves that the ECB will hold to defend the Euro, some 15% will be Gold Bullion. Unlike currency reserves that will be sold to purchase Euros as defense, gold reserves will be added by selling Euros to buy gold from the EMCBs. At present, the dollar has only one competitor for reserve currency status on the world stage, gold.
The dollar has been made strong in a low gold price.
To compete with the dollar for world reserve recognition, the ECB will add Euros to the EMCB (European Member Central Banks) to replace their gold. The EMCB will then be free to purchase gold on the open market, using no longer needed US dollar reserves. Remember, the Euro will be the main currency reserve of Europe. The ECB will not have to sell it's currency dollar reserves as they are a small token amount for balance. The roaring price of gold in dollar terms will now make up the lions share of Real Reserves backing the Euro!
In this context, the ECB will have no problem using the new dollar gold valuations to cover any dollar commentments of it's overextended members. Now my friend, you have my view! Perhaps you now understand why some natural resource countries value gold today at a Far higher dollar price than currently exists! Thanks
Friend of Another (9/22/98; 15:32:46 Msg ID:93)
LOST POSTS?
To All: I was going to reply/debate some other points but we have lost the prior posts. If anyone can repost, I will surely copy them first. These things happen! Thanks for the Forum Michael, it's still a great place!
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
Friend of Another (9/23/98; 07:06:03 Msg ID:102)
The direction of gold.
TO ALL: I think we now are now in one of the best periods for gold ever to occur. You have every hedge fund, trader and producer ready to short/sell into any major rise in the dollar price of gold. They will be wrong, this time!
During the lows a short time ago, major CBs were buying gold in small amounts through the BIS. All of the small sales announced by other CBs were taken in with ease. The BIS did not make a public announcement that these buying banks were behind this coordinated effort driven from the BIS. Many years ago this would have been the case. This time they will not want to start a panic with the Euro about to commence operation. Am I correct with this view?
We should see each pullback in gold stop at a higher price. These pullbacks will be used by major buyers to complete their acquisitions of gold and hence the distribution of dollars. Well before the end of the year, many will look back and understand that we will never see these dollar prices for gold again, ever! The same forces that confounded the efforts of gold theorists to explain the drop in price, will now confound them again. The next 18 months or less will give rise to this metal in a way that will have gold bull analysis calling for a large pullback. It will not happen. We will run through $400, $600, $800, $1,000 and on. Each time a pullback occurs, massive buying will ensue. For guidance, look to the US balance of trade deficit and a fast changing negative exchange rate for the dollar to chart the course.
Also, as this unfolds, look for the US Federal Reserve to raise interest rates solely for the purpose of defending the currency. A currency with a future that no longer holds resurve status. High rates will be of little help, much in the same way that Canada, Mexico, Brazil, Korea and others have raised rates to no avail. Some would call this an extreme view? From what I understand of this era, it is an extreme view for extreme times. Perhaps what Another has told me is true, "many are to comfortable with familiar habits of finance to understand the potential for change". We shall see! Thanks
Friend of Another (9/23/98; 19:21:21MST - Msg ID:120)
WELCOME!
Welcome Tyler Rose and Aloha Pu`ukani, I have seen these names before! TYoung, I agree with you that it would be really nice to have the archives so we could read them back in time. Aragorn III, that was some post! Good to see people writing their views for everyone to see. Questions are nice, but you can not follow a market properly without seeing it through everyone's eyes, both large and small. In this light these discussions make markets become real life events, impacting our real living habits through time. Not just a moving graph line on a computer screen. For the future, myself and a few others truly do think that these monetary changes will not only be something we see, but will be something we will feel in our homes. Our families and neighbors will have to make adjustments to account for the very events that we chronicle here. Thanks of considering! FOA
Friend of Another (9/23/98; 19:37:43MST - Msg ID:121)
Tyler Rose (9/23/98; 19:09:59MST - Msg ID:119
Tyler Rose, I don't think we are going back in time to a gold backed currency. Even as Aragorn III (id:112) spells out the possible correct way to divide the metals for one, he also shows that it is an undertaking that requires political agreement by most countries / Treasuries. An insurmountable task, for elected officials. I can't add to his post, but I can show more to think about! Unfortunately, the future for the Euro will most likely present an evolving monetary system that we in the audience must watch as the play unfolds. No doubt, if the world financial arena becomes bad enough, Europe could evolve back into a Gold Standard. They have been there before but human nature being as it is, this is not where they want to go.
The one positive aspect is that the Euro will become a major transactional currency for a larger functioning gold market. To unseat the dollar gold will have to be brought back as a true currency evaluation tool. Much more so than it is today.
Following these lines we can see that the world value of gold will have to increase many times in order to create a large enough pool of value to be of use in measuring the billions of currency obligations outstanding. Just as none of the governments, that supported the old London Gold Pool never wanted to re-value the gold price upward in their currencies, they will now be forced to accept an open gold market evaluation!
I fully expect a soaring gold price in US dollars to force the American Treasury to implement foreign exchange controls for it's currency. They will never accept the public vote of no confidence that gold will deliver. Note that none of this can take place during the time that the World gold market transforms from being a dollar settlement system. This was a function of the dollar reserve currency status that is soon to end. That transformation will be part of a financial panic that witnesses the default/liquidation of billions of dollar/gold assets, built up over many years. The trading of gold in dollars will stop for some time as these loses are worked out. Only after this debacle will gold be able to naturally trade in Euros exclusively.
I know this doesn't address all of your reflections, but I thought it needed to be put forth. I think all of this will be well discussed as events begin to play out. We shall see. Thanks
Friend of Another (9/23/98; 20:25:45MST - Msg ID:125)
BC (9/23/98; 19:08:38MST - Msg ID:118)
BC, Hello! Will they be at greater risk than central banks with larger gold reserves? Yes and no. It depends on the productive capabilities of the country. I think we must remember that gold (in a goldbug interpretation) is money, not part of the goods and services it is traded for. If a country has something the world wants, the world will deliver gold to their door to pay for these productive efforts. The world may also deliver currencies acting as money. As long as we have an open market gold valuation to keep the paper money honest, any productive country can develop a positive balance of trade. This can create a surplus that could be used to add gold to the national treasury.
A nation selling it's gold cheap is no different from one that sells it's trees, land or any other real thing at two low a price. They made a mistake. To correct this they may also repurchase these real things with productive efforts. The whole argument of gold, currencies and debt comes from cheating by the Central Banks with a dirty float of exchange rates. In progression this leads to over creation of the currency by it's treasury. Further on, the real purchasing power of the national currencies can never represent the true productivity of the country. A better answer/reply to your question would be: In the future a CB with gold has a better chance of covering it's past mistakes than one that doesn't. A lot of past mistakes with too little gold does put them at risk. That risk being that the citizens will have to produce more for less. Thanks
Friend of Another (9/23/98; 20:47:25MST - Msg ID:127)
bmacd (9/23/98; 20:11:08MST - Msg ID:122)
bmacd, one last thing then I have to go. Canada (your home country) is a good example for my last post to BC. They are a fine group of hard working people, in a country full of natural assets that the world wants and does buy. Yet, by allowing their government to gamble with their currency in a effort to stay in a Dollar/IMF world monetary system, they are going broke! In time they would look like Russia if this system doesn't change. By selling their citizens gold, the stage is set for them to, again, dilute another productive part of the economy. That being to tax and/or grasp for the gold mines of the nation to minimize the CBs past mistakes! I think this is a real possibility that is never discussed by the industry in front of stockholders. Goodday
Friend of Another (9/24/98; 06:29:33MST - Msg ID:133)
Possible large default in gold paper? LTCM
Thursday September 24, 6:50 am Eastern Time LONDON, Sept 24 (Reuters) - Gold rose then paused in early European trade on Thursday as bullion dealers sniffed a possible recovery in prices and looked to New York for guidance. London and Hong Kong dealers said another factor lifting prices was market talk that a U.S. hedge fund was covering short gold positions.
Friend of Another (9/24/98; 06:39:18MST - Msg ID:134)
Pete (9/23/98; 21:26:13MST - Msg ID:131)
Pete, Looks like you are on top of the market news! Haven't seen you in a while. Another read most of your old posts. Here is a partial copy of my (FOA) last post on the old USAGOLD Another (Thoughts!) board. The full write is still there in the archives.
Another had told me that a large default in paper gold was coming, real soon. I didn't have a clue who it was. Now we have a BIG clue!
(COPY AS FOLLOWS)
9/3/98 another archives
Michael, I'm looking for a large default in the paper gold market. With the major CB only buying now something is about to give as the most extended shorts can not cover. A default is most likely part of a game plan to get the ball rolling. This spike in gold will no doubt crush the dollar. The next few months will offer the last period of time to roll out of dollar assets at a good price. Of course, all of this is my opinion from and for the most part, Another's.
(END OF POST)
Friend of Another (9/24/98; 06:58:47MST - Msg ID:135)
MORE TO: Pete (9/23/98; 21:26:13MST - Msg ID:131)
Pete, To answer your questions: Yes, this is only a very, very small tip of the iceberg. Many of these people are short the gold paper market and they are the ones in the know, at least we are told? And just look who is in the rework group: Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter & Co., Travelers Group Inc. and UBS AG will make up the committee.
Pete, I wonder how many tons they move in world gold markets! The change in motion by the BIS, concerning gold and the Euro is going to play them right into the European game plan! Read a few of the last (Thoughts!) archives at USAGOLD. I may reprint some of the things written here the last few days, it begins to tell the story that is before us. The Fed will push money like mad for now, but they will be raising rates like mad a little later as the dollar falls off the charts! Keep up your analysis, as you see things some of us don't catch. All minds don't work the same and it helps to mix Gray Cells in different portions. Thanks
Friend of Another (9/24/98; 09:31:38MST - Msg ID:138)
ARCHIVES?
AUBUG and TURTLE, I did the smart thing this AM and saves yesterdays Noon to Midnight posts. If anyone wants me to I will post the entire discussion at another time. It was quite a bit. Turtle, Pete is a knowledgeable poster I have seen on Kitco. To bad we lost it all, some of it was about what is happening now! I will repost one item I presented earlier. Thanks
Friend of Another (9/24/98; 20:31:48MST - Msg ID:156)
COMMUNICATION PROBLEMS!
All: I am having major link problems as my feed is thru the caribbean/bahanas into Florida (USA). Am told the Hurricane is the problem? Will return ASAP.
Friend of Another (09/26/98; 14:43:15MDT - Msg ID:189)
Forum Open?
I see the Forum is open. I'll check my system and hope to be back here in an hour or less. I think there is more to discuss now than ever before.
Friend of Another (09/26/98; 16:42:37MDT - Msg ID:192)
System working.
My link is up so I will be able to post. I'll start with a reply.
Friend of Another (09/26/98; 17:00:37MDT - Msg ID:193)
Goldfly (9/24/98; 21:05:32MST - Msg ID:159)
Goldfly, "By the end of this year" is laying it on the line"? I hope you didn't think I meant that gold would go to $1,000 by the end of the year! It could, under the right conditions. We will most likely see it begin a climb past the $330 / $340 area. Remember, if it gets past $360 before the Euro comes out, it would create a panic that could destroy many of the shorts. As you can see, a large portion of them are Hedge Funds! These same funds are big into currency trading. The disruption in the financial arena would , as Another has shown, be catastrophic! You wouldn't have an official gold market to buy from! Another has not sent me a reply yet, but later on we may get some discussion from him. FOA
Friend of Another (09/26/98; 17:32:18MDT - Msg ID:195)
Victoria (9/24/98; 17:34:06MST - Msg ID:150)
Victoria, Welcome to the discussion group! It has taken a while to reply with the bugs in the Forum and on my end.
Many disagree with a physical gold only investment. Another has spent an enormous amount of time, writing how the times will be different in this era.
I think most of the diversion comes in where investors can not envision gold going up in price all that much. Most don't feel they can create a meaningful return through holding bullion only. The slant is always towards the leverage of mining companies. Most think they will be able to exit these securities and move to physical after some of the future rise in price is complete. That's good if we continue to progress into another economic cycle typical of the past. However, the American economic system is about to change in a way few can follow. The small person will come out far ahead of the large investors by holding onto gold through thick and thin.
As for the large Gold resource countries becoming more powerful? That's a good question that I would like to see others, including Another commit on. It gets right into the politics of money! Will oil rise with gold? I have to agree with Another, oil in dollar terms is going to go up out of sight. But then again, the dollar is also going to go down out of sight. I think these very items will get a good amount of coverage right here as time goes by. Thanks
Friend of Another (09/26/98; 17:43:47MDT - Msg ID:197)
ET
ET, The swings in the markets (all markets) will get larger untill the average investor cannot stand it anymore. Remember, during the great German monetary inflation their stock market went wild, even by today's standards. Today, the people in the know, know the risk! They are playing the same game, with the same mindset of a currency holder. I can get out before anything goes wrong! The problem for them now is that they think the markets will stay open while they cash in, it won't!
Friend of Another (09/26/98; 18:31:32MDT - Msg ID:200)
Ph in LA (9/25/98; 10:09:42MST - Msg ID:175)
YOUR PARTIAL QUESTION: "Would it become impossible and/or difficult for citizens to repatriate funds/assets held outside the country? It seems hard to imagine the chilling effect "currency controls" would have saying that holding gold outside the country under such circumstances might be unwise, too."?????
Ph, The possibility of FXC (Foreign Exchange Controls) is very real. This topic has been discussed in several well written books spanning 25 years. In a way, the closing of the gold window in the early 70s was a form of FXC. Anyone outside the country could no longer get their gold because too many dollars had been printed to cover the gold in the US treasury.
Today, to many derivatives have been printed (paper gold is one of them) than can be covered by the outstanding dollars! The US Federal Reserve either prints a load of dollars to cover this contingent or the system falls apart. If the Fed prints, the Americans get inflation. If the Fed doesn't print, the world financial system, based on a dollar reserve currency, starts to implode and foreign holders of dollar assets try to exchange these for their local currency. To do this they must take the dollar home to the USA for exchange! During this exchange, if the dollar loses to much value in the exchange rate, these foreign holders just SPEND THEM in America!
Again, the US experiences price inflation, only this time it's during a global deflation in dollar assets. To stop this chain of events, this time the US Treasury closes the dollar window. It's usually a last effort to hold the banking system together. The gold window was closed by holding gold at a low price valuation and not selling any of it. The dollar window will be closed by buying dollar currency at a rate so low as to stop most major holders from exchanging. This usually brings a two tier market , dollars inside the country worth more than outside the country. For some time, all dollars outside the US were called Eurodollars! Will we see these Eurodollars exchanged for Gold ???? In some countries, the CBs already have. Thanks
ANOTHER (09/26/98; 19:41:45MDT - Msg ID:201)
TYoung (9/24/98; 18:46:57MST - Msg ID:153)
YOUR POST:
"I mentioned to Another the other day that I thought derivatives would cause loss of confidence in the US$ and asked what he thought would be the cause. Well, looks like derivatives are at the forefront. I was really just pitching a high fast ball to a high fast ball hitter.... Another...but I'd still like a comment. Yes? Tom"
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Mr. Young, while in the US I have seen your new fast ball hitter! A good eye has he, and a fine person. His composure and stature as in play, is the image of a true American to many from afar. Sir, I will swing for your pitch as my view now becomes clear. This LTCM, they stand in the open for all to see. This "Noble House" holds no resources above or below the ground and many now ask "how this palace of paper could stand"? To this I add "how will they deliver the real items they owe"?
Others have built their fortune holding the debt of these traders. And now Default will follow default and all will look to settle for real things that become short in supply. Sir, the confidence in this dollar was purchased with "the greed of men". Soon, this "backing of greed " will lose the support of oil. For the value of a world currency is not made from the "fools gold" found in a gambling den. Thank You
ANOTHER (09/26/98; 21:57:35MDT - Msg ID:203)
Pete (9/25/98; 10:06:55MST - Msg ID:174)
YOUR POST:
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ANOTHER & FOA-THINGS TO COME?
My Dear FOA,
Thank you for your prompt reply. If only some(NOT ALL) posters at Kitco were as courteous and gentlemanly as yourself and ANOTHER, Kitco would be much better off. IMVHO. Their loss is USAGolds gain. My views are very simple minded. I have not the brainpower or ability to dissect every little nuance in the markets and therefore try to analyze as best I can. My thinking is that the current currency crises occuring throughout the world was and is unsustainable. The FRB is between a rock and a hardplace. The strength of the dollar has to be decreased to help most currencies before a world wide depression took hold. In other words something has to be done before the dollars strength destroyed the world economy. My 1st thought was that the FRB would be forced to devalue the dollar by a rate cut. My 2nd thought was that this would be a temporary solution. The derivative markets have been in a no lose, win situation for several years due to such things as the yen-gold carry trades which in time were carried to extremes. That these would eventually default because the dollar would have to reverse course soon. Once this reverse happens, many highly leveraged derivatives would be caught in a squeeze that would put the dollar in jeopardy forcing the FRB to again change course and defend dollar by rate increases which in turn will tank the equity and bond markets. As you stated in a recent post that you and ANOTHER expected a major default which will mean the beginning of the end for the dollar. The recent hedge fund bailout is as you say only a small tip of the iceberg. More will surely follow as sure as day turns to night. Your prognostications such as a Jan 1988 post?(Can't find it for now) that some on Kitco used to trash ANOTHER predicting that a rush to cover may be difficult to contain and predicting that the price of gold would be $320-$360 by year end was and is right on as of now. Also your post on Jan 10, 1988-21:03 predicted with no uncertain terms that the BIS would not allow the price to go below $280 has also held to date within acceptable parameters. I am still trying to determine in my mind why a concerted mean spirited effort was made by certain posters on Kitco to so desperately squash your input and what their true motives were? We will watch closely as events unfold, yes? Thank you for listening to one of a simple mind who has as much faith that gold will triumph in the end as I have in God. Pete
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Mr. Pete, This LTCM, it begins the beginning of your increase in wealth. As Mr. TYoung has spoken, I do add that; "these boys of summer have struck out"! This game will never be played beyond your shores again. As I write, all that hold the debts of America ask, "of what form does the collateral take"? The dollar is represented as the "gambler's tool" and of little use as a builder of wealth. This Euro, it does hold at least, "the pretense of respectability".
Sir, what you have written, it is done well. Follow this change of weather as it is at the door, perhaps it has entered your home as the new season for gold. Even I, myself will add flavor to this new gold market. Of the "mean spirited ones" you speak? They are seen in all the world as "boys that curse the wind, but a strong wind has no ears". Thank You
ANOTHER (09/26/98; 22:00:47MDT - Msg ID:204)
I will be gone for a time.
Thank You
Friend of Another (9/27/98; 08:35:40MDT - Msg ID:209)
el St.One (09/27/98; 03:25:04MDT - Msg ID:206)
St. One, ________ It's the same story for any financial operation, if the economic cycle repeats itself. Everything will work out fine. I have been forced to rethink any investment direction because of the input from A (Another). History shows that we get caught the worst when the times change. The banks are no different. They are run to make profits by people using the established architecture. Foreign currency accounts are not provided for customers with the intent of creating a vehicle to protect against changes in the national law (read that established architecture). If FXCs are implemented, your account is voided to some extent? Foreign currencies are just like your dollars, the bank doesn't hold them in the account. It's loaned out and the bank Credits you for the money. With FXCs they cannot import the real thing, even if asked to by a customer. Even if they could the new exchange rate would destroy your purpose for holding the account in the first place. That's my view on it? If anyone can show this to be incorrect, please do? FOA
Friend of Another (9/27/98; 18:11:12MDT - Msg ID:213)
Ph in LA (9/27/98; 11:39:16MDT - Msg ID:211)
PH, I may have sent you (and others) the wrong signal in my reply to el St. One . In your post you noted:
"Yet you also said yesterday to el St. One "...the new exchange rate would destroy your purpose for holding the (foreign currency) account in the first place."
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You must read that statement in context of St One's question. At least as I understood it. My thoughts to him were from a standpoint of having an account in "a bank in the states"?? See his post (Msg ID:206). My explanation was directed towards a person that wanted to hold foreign currency in an account "in the states"! Does this make more sense? Ph, I thank you for giving me your interpretation of this. It has been one of my greatest problems, trying to refine some of Another's message. Many people have picked it up out of context without receiving a better "English" explanation! Sometimes I don't get all of it in the first read. As time goes by, events have made it more understandable. On this Forum, I am able to explain in the company of very polite interesting people.
Also: It is clear to me that this Forum is not for the use of only a few. It is for ALL thoughts and the understanding they impart. I consider myself but a guest in this grand hotel! Thanks
Friend of Another (9/27/98; 18:15:20MDT - Msg ID:214)
TYoung (9/27/98; 15:29:10MDT - Msg ID:212)
TYoung, That post was excellent!
Friend of Another (9/28/98; 13:53:09MDT - Msg ID:224)
Goldfly (9/27/98; 19:47:36MDT - Msg ID:219)
Goldfly, --------- I don't mind being nailed down on price predictions. It's just that in the past I haven't had a time parameter. Read my post of (9/24/98; 09:38:18MST - Msg ID:140), them add to that what Another said in his (ID:203) post that he would add flavor to this market. Now I feel we can say that gold is going to start moving, now! After today's action, I can see someone is adding that "flavor"! My direction on gold? We will be through $300 tomorrow and be in the $320 range in a week or so! It won't stop there now that the BIS has blocked the funds from covering by buying any new large supply. I don't want to see it, but I think we will break that $360 level before the end of the year. Before the Euro comes out. Also, all the movement in the price of oil this year has been little more than posturing before the long process begins to remove oil from the dollar standard. We shall see? FOA
Friend of Another (9/29/98; 08:44:25MDT - Msg ID:232)
BMACD:
bmacd,--------
Everyone all agrees that gold is a political metal. Having been used as real money (both in coin form and in paper receipt form) for thousands of years, it's natural human nature for governments to try and control it. It's nothing new and for generations, investors worldwide have come to expect it. Political structures will always manipulate whatever form of money is being used at the time. Today, they rework paper money on a grand scale no one could have ever believed only 30 years ago. People get very nervous as gold was worked over this last decade and fear to hold it through this process. Yet they hold paper currencies that, on a world scale, have been engineered to degrees that make the current gold markets fluctuations look normal! The same investors that have held Yen in 1990 at 64, then watched it go to 120 in 1995, and finally back to 72 in 1998! Now mind you, this is a major currency, not gold! We can also see it in reverse as American citizens held dollars in 1990 that would buy 156 yen, then in 1995 would buy 83 yen and back to 138 yen in 1998!
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Bmacd, -----------
observe all the paper money today as it swings wildly on the exchange market. Those swings translate directly into major swings in price for every item traded in the world economy, not just gold! You may not see these price changes directly on the goods purchased as the fluctuations are absorbed through producers profits. But they are real never less. The market price for gold is not absorbed by anyone as it delivered directly to the buyer. But, then again, gold is also money so it is normal for it's exchange rate to change, just as any other currency does (Yen?). The notion that investors will not buy gold as it's exchange rate changes is ludicrous. In 1995 did Americans stop buying Yen when it suddenly became expensive with one dollar able to only buy 83? No. But it went up in price almost 100%. How could anyone afford it? You see, today we know gold is a major currency because it's being manipulated to no end, just like the rest of them.
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What does all of this have to do with your question of the IMF? If gold is going to $170 in dollar terms, it's because the political powers want it there. It's a currency, and will be moved up and down. It doesn't fluctuate in simple commodity supply and demand terms. If it did we would have seen it much higher in all currency terms years ago. Trading of gold, on and off official markets dwarfs not only new mine supply but is even larger than all existing stocks. LBMA, trades a million ounces a day! And that is only what is seen. The IMF could sell it's gold currency assets in the same fashion that it could sell Dollars, Yen or Marks. A ready market exists.
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If gold is a currency to today's political movers and shakers, we need to see it in a different light. To understand gold, is to grasp that not all world entities want it to fall further in dollar terms. Just as government CBs battle over currency exchange rates, they also form opposing sides on gold valuations. Western investors may not view gold as an asset to evaluate the worth of circulating paper money, but many resource countries do! The value they place on a currency is directly related to how much gold it will buy. This view is not lost to ECU nations either. It's easy for them to see that the number of American dollar assets worldwide takes the valuation of the US gold holdings into the many thousands and makes the current illusion of gold in dollar terms a fraud from manipulation. They also know that the US gold is held in the Treasury, not the American Central Bank, and therefore does not represent any form of backing for the dollar.
Perhaps this is the reason that the Euro gold reserves will be held by the ECB (not the national treasury as none will exist for that entity) as part of the foreign exchange reserves that DO / WILL back the new currency. It's also easy to see that the reserve gold currently held by the EMCB will find no home on the dollar market as they will have too many dollars as it is. Even if Western analysis think the Euro will not fly, it's still a fact that it will be the reserve currency for the ECB and it's EMCBs. In the coming years they, the EMCBs, will be in need or more Euros for their expanding economy and the way they will get them will be to sell gold (at a much higher rate from today) to the ECB. This need for Euro money will be driven by countries that wish not only to sell products to Europe, but also to retain the Currency as a Foreign Exchange Reserve. In much the same way that dollars are retained today, nations with a balance of trade surplus with Europe will end up with extra Euros, the same Euros purchased with gold by the EMCBs. That gold will make the Euro a truly well backed strong currency in world eyes. Especially if the dollar price of gold is soaring!
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Back to the IMF: That gold is the only remaining link that the dollar has to metal. It is also out of the US government's control. I believe Arabia has some control over the IMF and it's gold as they are major contributors of assets. Perhaps someone could correct this view? As Another has told me. "If the IMF sells gold, a good deal for someone , yes? Yes!
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Also, a thought? If the dollar is the current world reserve currency and all dollars circulating outside the US are called Eurodollars. Then, If the Euro becomes the new world reserve currency, will all Euros outside Europe be called,,,,,,,,,,,,,,,,,, Dollareuros? Thanks FOA
Friend of Another (9/29/98; 11:29:42MDT - Msg ID:238)
Good to see you back.
Rainman,-------------- Nice reply! You bring up exactly the kinds of political posturing that is affecting all investment markets. Not just gold. I think I can offer a timely reply to each of these items. Hope to post later today. Thanks for the consideration. FOA
Friend of Another (9/29/98; 18:27:57MDT - Msg ID:243)
My view.
Dec. comex gold did not make through $300 today, but it came close. Slowly the liquidity of physical supply, that was so available 24 months ago, is now drying up on world markets. The lease rates have not risen much simply because many of the Bullion Banks now understand the risk and don't want to supply leased gold for the purpose of covering the bad bets of others. In this process, the demand for borrowed gold falls away
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From the beginning gold was sold down to give strength to the dollar. As the process continued, funds, large traders and investors arrived on the seen with their own oversupply story as the reason to sell. We were told that gold was no longer an asset and it would fall in value for the rest of time! Now that they have told their story and made their sales, the true gold market is about to speak. It's not a story of oversupply or undersupply. It is a story of market need for a currency evaluation tool. A way for governments not supportive of the dollar to show it's true value through gold.
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Some of these short traders have already started to cover. But it will not be until gold moves into the low $300 range that they grasp how tight the market will have become by that time. It has taken years for this selling to build and it will not be covered in a few months. Perhaps many of them will have to be bailed out as LTCM was? We shall see.
Friend of Another (9/29/98; 19:48:29MDT - Msg ID:247)
USAGOLD
I was creating a reply to rainman and found USAGOLD here. Let me read your post and I will reply. Thanks
Friend of Another (9/29/98; 20:20:46MDT - Msg ID:252)
USAGOLD (9/29/98; 19:04:04MDT - Msg ID:244)
USAGOLD, -------------- Your words:
"Would the Swiss central bank in a case like this be forced to lend UBS gold to pay their creditors, or face the prospect of Europe's largest bank going under?"
Michael, In the circumstance you describe, no CB would set the precedent of supplying gold to cover a gold contract (not of their making) that has failed! They may find themselves in a position of not having enough gold to cover all possible claims. This would also imply that it would be legal to use a nations gold in this way. It may not be.
I think, the major players on the receiving side of these gold contracts only deal in paper that would force the CB (or any supplier of gold) to perform in the event of a Bullion Bank failure. More often than not, the problem for the bank would be to collect the currency that was created from the proceeds of a gold loan. If that has been lost then they must purchase the gold back from the entity that it was sold to. If that is an option! Or the lender of the gold (CB) could extend the contract, however, once the contract is found to be in nonperformance, it all goes up in smoke! A mess indeed! Thanks
Friend of Another (9/29/98; 20:33:16MDT - Msg ID:256)
TYoung
Did you expect gold to cross $300 today? Or did it do as your tea leaves predicted?
Friend of Another (9/29/98; 20:36:51MDT - Msg ID:257)
BMADC
If the dollar falls to low how will Mexico sell to the US? Perhaps this is as it should be. The dollar worth less than the peso!
Friend of Another (9/29/98; 20:46:40MDT - Msg ID:261)
bmacd
Speak of manipulated markets, look at Japan! They have taken rates down to nothing and still no recovery. Is this the same fate for the USA?
Friend of Another (9/29/98; 20:50:34MDT - Msg ID:262)
IMF sell gold?
Only if the right people ask for some supply. You can bet no one will know who buys it. All the attention will be on how gold was sold and it isn't even an asset anymore!
Friend of Another (9/29/98; 20:54:36MDT - Msg ID:263)
Again Mexico?
Not long ago the whole world was at risk if Mexico didn't get help! Now they are small peas in a big pod. Just remember, the world is selling gold because no one needs it. That is all the citizens need to know. But I think TYoung knows better, Yes Tom?
Friend of Another (9/29/98; 21:14:34MDT - Msg ID:269)
bmcad: Japan?
I know people there, they are in a bad way. The World press does not do a good job of telling the story. They do not compare apples to apples when it applies to living standards. People in Japan have far less space in the home. Often they count their savings in a retirement plan as ready money. It isn't! I must travel also. Will complete my reply to Rainman tomorrow. thanks
Friend of Another (9/30/98; 07:21:11MDT - Msg ID:275)
TYoung
It looks as though we will have a rough day in the equity markets. Perhaps the quarter point drop in rates was not only a political move for LTCM, but also a market move to create a default situation for the derivative players. Once they are taken out, and their short positions received by new owners (banks), rates will begin to increase. This would certainly bail out these short positions, now held by the largest and most connected bank entities. No matter how it works out, the American dollar economy is about to be shaken as never before. I'll be in and out during the US market day. Good luck
Friend of Another (9/30/98; 09:39:46MDT - Msg ID:280)
RAINMAN (9/29/98; 11:01:17MDT - Msg ID:237)
Rainman,
Nice reply! You bring up exactly the kinds of political posturing that is affecting all investment markets. Not just gold. I think I can offer a timely reply to each of these items. Hope to post later today. Thanks for the consideration. FOA Rainman, You offer a different view of the present predicament the world finds itself in. While I do not hope to show where your thoughts are wrong, we may attempt to see this through different eyes. Not yours or mine, but others.
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Your words: "You assume in your post that the EMCB will eventually purchase GOLD in the open market . Isn't that wishful thinking?"
No sir, I would call it thoughtful thinking. The EMCBs (European Member Central Banks) are the CBs of the eleven nations that will join in monetary union. They hold a good deal of gold that was left over from previous monetary wars with the New World, America. You are correct that they lost that war in 1971 when the US closed the gold window. However, that was yesterday. My friend, the generals of lost wars have long memories. In those days countries wanted off the dollar hook more so for national reasons than financial. We now know that, compared to today, the dollar in 1971 was in great shape! The leverage of third world debt was nothing as compared to the current dilemma. The push to get gold in exchange for dollars, in that time, was precipitated by a belief that the present world currency crisis was to occur back then. Perhaps by 1978? What the history of world economic finance succeeded in teaching them was that they were wrong in their expectations of dollar debt EXCESS! I'll get back to the question of gold buying in a minute.
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Your words: "The US was able to export financial calamity to the world without paying the cost for years."
Absolutely correct! With the collapse of the gold wars, there was simply no competing currency that could function as the dollar in a reserve status. The oil countries saw this almost immediately and proceeded with the " Beruit Resolution" to allow them to compensate for any loss in purchasing power by the dollar. It would seem that even though America won the gold war they were still receiving "incomming" from other nations! Even so, the world was forced to accept the dollar. They didn't like it then and I can tell you, they like it even less now! ----------------------------------------------
Your words: "Nothing would prevent the US in this kind of circumstances to issue a new $ which would be exchanged at par domestically but on a different ratio (if anything at all ) externally."
Rainman, I read your words as a jump to present time. What you speak of is Foreign Exchange Controls (FXC) for the US dollar. I wrote a piece to PH in LA and others about FXCs. The only way the US would ever enact these controls would be in the event of a national economic emergency. For the last twenty + years to present America has run a Balance of Trade Deficit.
In other words they send dollars out of the country as they buy everything in sight as imports. It's the same thing you speak of above "able to export financial calamity to the world ". Without the ability to export dollars at a high exchange rate (read that manipulated strong dollar) for the benefit of US citizens, the American economy would revert back into a regular economic system. In other words, FXCs would block the very thing that keeps inflation low and the GDP running at a high rate. Never the less, in an economic emergency (the dollar coming home because it is no longer needed as a reserve asset) FXCs would be enacted because the resulting inflation would be ten times worse than without it!
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Your words: "Most central bankers don't think in the same terms as most do on this site. They don't foresee the demise of whatever remains of the world financial system."
Well, I know someone that has the brain of a Central Banker and they are very concerned about the orderly progression of the world financial system. They are pragmatic in their belief that a currency system based on the dollar has indeed reached the end of it's ability to expand! What we are witnessing today shows that the world dollar debt load has reached it's limit and must be dealt with. In the current system, if the debt cannot expand, new money (purchasing power) can not be increased. No, the press will never print these views of CB leaders. But that is the nature of the political game. Always has been, always will be! Most Europeans have come to expect it and work and live around it. It's just the system.
As for what to do about the dollar? Back in 1980, the Europeans started the birth of the Euro. It began as the ECU (European Economic Unit). Much of the world has waited for this Euro in a period that seems like forever. During this time the world dollar remained the only game in town, and in consequence the only way to keep the economy alive. So the dollar debt was expanded in degrees no economist could have ever dreamed of. In fact, most of them thought the end was reached back in 1987! Boy, those were the good old days! We come to today, traveling on the back of a derivatives nightmare that from the beginning was the only, last way to expand debt further. It is done and none too soon as the Euro comes out in 1999!
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Your words: "Moreover , W. DUISSENBERG more than any other , holds GOLD in extreme contempt. It was only under intense pressure from FRANCE , ITALY and GERMANY that he accepted to include any GOLD in these reserves. He was instrumental in engineering the sale of NETHERLAND CB 's GOLD in the last 2 years."
Rainman, --------you have hit the proverbial nail on the head. Yes, France Italy and Germany did apply pressure on the new ECB. But, that is the point, the ECB unlike the Federal Reserve that is controlled by a single power, will be controlled by three countries of different economic and financial purpose. This will create a balance never before seen in a world Central Bank as it controls the world reserve currency! Forget all the talk and conjecture about an independent ECB. That's just for show. The European citizens are far to knowledgeable of political motives to ever expect an un-manipulated Euro.
Still, the direction is clear, to appease a thinking populous the Euro can not act like a dollar. It will have debt and problems, but those will be neutralized with the initial demise of the dollar as a competitor. W. DUISSENBERG ? He's a good choice. Read his story of remarks over the past few years. I think the World Gold Council web site has a lot of it. He does have a slant towards gold and the EMCBs didn't have to push all that hard for it. Most of the squabble was public posturing anyway. He sold off the Netherlands gold to other CBs that in turn sold it to more important clients that they needed for Euro support. Mr. D thinks his country will prosper without gold in the Euro environment more so than other members. We shall see.
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Your words: "Most of the bureaucrats who make a living from European institutions, including the ECB, hate GOLD to the same extent. Thus I don't see an open financial war being started with the US on such a controversial asset."
I think you give these bureaucrats more power than they have. Europe has far less of them than the US and they certainly don't have the political lobby support. They are just like everyone else, they talk and think their pocketbook. Presently gold has no influence on them as the entire region is functioning on a dollar standard. Sure they talk of selling gold, but they only look at it now as a way to raise money to pay debt. When the Euro begins and the economy strengthens because of a strong currency they will again talk their wallet.
I can hear it now, "Lets keep gold for our countries because we can see how the dollar has crashed in gold terms." and "We need to expand out currency base to increase out pensions so lets issue more Euros to the EMCBs for gold".
Rainman, I agree that the ECB will be just as bad as the FRB in the US. It's just that they will be further back in the time cycle of currencies. I have only so much time here on earth so I accept the notion that was told to me, "live with it" !
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As for starting a financial war with the US, it's was already started long ago when they took the first steps to create what would obviously be a major block currency. The only difference today from 1971 is that the US dollar is tapped out to the limit! Again only time will resolve the outcome of this viewpoint. The same applies to the question of US armed support for Europe? My opinion is that if the US does have to intervene it will be because they want to save the world financial system! The New Euro financial system!
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My thoughts: As I have said before, the ECB will use newly printed Euros to buy gold from the existing stocks in the vaults of the EMCBs. That gold will be added to the present 40 to 50 billion in "exchange reserves" in the ECB to back the currency. In this process the EMCBs will receive what they really need for the future as all trade converts into Euro settlement. There will be demand for this currency so the only exchange intervention that will be necessary will be to sell Euros! Any dollar assets collected will be sold in the open market as dollar reserves will be useless for backing. More likely than not, these dollar sales will be seen as sending the currency home to the originator. If inflation or FXCs become a problem, then the dollar will be used to purchase gold on the open market, if there is one. There is more to it than this and I will ask Another to Chronicle these events for us as we proceed.
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Your words: "However , no CB GOLD reserves in the US or EUROPE will save the system "
Oh yes it could. Remember, money and debts are but an illusion in human minds made real with ink on contract paper. People may be ignorant of high financial affairs, but stupid in the ways of real wealth they are not. Trash the entire paper currency system today and the basic human instinct from thousands of years of history would return. They would revalue gold and issue currency behind it on a pay as we go basis. Yes it would be the same old currency play, but after a world economic debacle none of the present politicians would be in power. Life goes on my friend. Thank you so much. I invite your discussion as events unfold. FOA
Friend of Another (9/30/98; 10:36:43MDT - Msg ID:282)
Pete (9/30/98; 09:18:30MDT - Msg ID:278)
Hello Pete,--------------------------
Yes, I think you read it about right. It's chock full of political intrigue. For some time, Another has posted that dollar rates were about to be taken up, in his opinion, to defend the currency against the coming Euro. At this late stage of currency war preparations, it's world economy be dammed, the battle is about to begin. The LTCM group knew this, so they bet the farm on higher rates.
----------------------------
Pete, these people, at this level of power are not stupid. Gamblers, yes, stupid no! They work on real knowledge, not a traders guess as the press has portrayed them as doing. Problem is that their bet was as large as most countries and it would have caused a further CB embarrassment had so much money been made on an inside decision. I think they talked of lowering rates first to destroy their capital, then later took them over on the news. When it's done, rates will rise. That's why these major players are now selling off the Dow Jones on a rate cut, they know what's coming. Their position in the old LTCM portfolio will be sold off with a big profit, just as their old management had bet it would. The obvious portent from all of this is that the US economy is about to take a hit of unimaginable proportions from a currency war fought during a collapsing world economy. Wow! My best financial advise? Forget gold, buy a super fast computer so you can access this site later on! It's going to get real interesting! Thanks
Friend of Another (9/30/98; 10:50:02MDT - Msg ID:284)
Ph in LA (9/29/98; 21:09:44MDT - Msg ID:268)
PH,----------- I read your post about M-Lynch. It just shows what a house of cards this equity market has become. And brokers tell clients to buy the real value? If this system ever starts to unravel, it will take down everything. Yes, I do believe the physical gold market will close in due time. Perhaps assets in Spain will retain value? Do you have an opinion?
Friend of Another (9/30/98; 10:55:56MDT - Msg ID:286)
USAGOLD (9/29/98; 21:08:45MDT - Msg ID:267)
Michael, thanks for the notice. I hope it helps people see the world in a different light. It did for me. FOA
Friend of Another (9/30/98; 18:54:41MDT - Msg ID:295)
All:
PH in LA,------------ thanks for the kudos! That was nice. Perhaps by looking both ways we will not be run down by the train that's coming. By the way, as you know Spain is one of the EMU countries that will join in Jan. If you have assets or contacts there, could you update us as to how people are taking it? Always good to hear all sides. RAINMAN : on Market Rap with Bill Fleckenstein, September 30, 1998, he had a interesting report
------------------------------------------------------------
"Golden development... Moving on to the gold market, the Belgian National Bank, governing council member of the ECB (European Central Bank), said "The bank has no need or desire to sell gold in the future to satisfy reserve restructuring."
The "in the future" part of the phrase is interesting because in the past the ECB commentary hasn't mentioned this. Another bullish development for gold. Bills page is at:
http://www.stocksite.com/features/contrarian/rap/
ALL: -------- This was part of the latest from WGC. I think the lease rate action will work in reverse as the Bullion Banks also draw away from servicing their clients. They (BBs) may not want to borrow gold (acting as the dealmaker) and risk having a contract go bad. This action would push lease rates down for a different reason, "no demand from the middleman"! ??? So, the action in gold rates, up or down may signal a bull move from lack of liquidity?
"In spite of the short covering, lease rates jumped, with the one-month rate climbing from 0.4% a week ago to 1.7% amid reports that central banks were beginning to exercise a good deal more caution over the quality of their immediate counterparties, the bullion dealers, and the ultimate beneficiaries of leased central bank gold, the short sellers. http://www.gold.org/Pages/Home1.htm
Friend of Another (9/30/98; 19:10:56MDT - Msg ID:296)
BC
Bc, ---------------That was some post! If Mr. Greenspan is trying to signal something it will not be seen by the regular wall street boys! But, you can be sure that the major world investors are moving their assets before the change takes place. America has never fought a currency war from this position. Everyone still thinks the US military might has something to do with a paper fight, it doesn't. Look at Russia, a huge military nuclear power! But they lost the financial war without a shot being fired. Could AG be sending up the white flag before the fact? I doubt it.
Friend of Another (10/1/98; 04:53:53MDT - Msg ID:298)
PH in LA (9/30/98; 22:44:55MDT - Msg ID:297)
Hello PH, ------------ as I write this today the sun is shining not only on me but the gold market as well. The Comex Dec contract is up $2.00 US to $301.00 in after hours trading. It is my understanding that some entities are inquiring about for physical gold (not paper) to return leased material. Some of the old deals are in default? It makes perfect sense because, if the leased gold was sold to someone else, it's gone. What is left is the money from the sale and that may have been gambled away. Without the money or the assets that money purchased, there is no collateral to stand behind the lease contract for the security of re-acquiring gold. It's default time. Also, any and all derivatives that may have been used to leverage these assets further, such as gold OTC options, futures contracts (both on and off exchange) and LME paper is now floating with no coverage! In other words, these items are worthless unless the physical gold they are suppose to represent is purchased to cover. As TYoung would say "it's a whole new ball game". ---------------------------------------------- Your thoughts about LTCM come into play here. I don't think they actually sold gold short as the rumors say. These people only used the cheap cash, supplied by others, (3% rate?) from these sales to leverage themselves. As to the political motives for the Fed to kill them? PH, it's not that they were not the only fund to do this. All of these management's copy the profile of a well connected winning operation. You may have already heard that several other funds are in trouble and it is spreading with the rally in 30 year bonds! The truth is that the FED had lost control of this market because of the size of these investors. It was either kill them or risk a total meltdown later on, as opposed to a partial one. We shall see! Look's like Another rough day in the markets! Thanks
Friend of Another (10/1/98; 09:46:51MDT - Msg ID:301)
Will return later.
Jayne,---------------- I haven't received anything from Another for a while. Think things are heating up so we will wait and see. --------------------------All: I am called away for perhaps six days. It would be good for me to continue to read and post during these turbulent times, but urgent items must be addressed. Please continue to add your thoughts to these pages as I look forward to reading them later. Thanks, FOA
Friend of Another (10/7/98; 21:24:38MDT - Msg ID:438)
To All
USAGOLD and ALL: I have just returned. With the world markets creating havoc daily,I must attend to other items before posting. Another has sent several replies and a
Thoughts! post dealing with the conclusion of the meetings. In a day or so I should catch up and participate in these discussions. thanks
FOA
Friend of Another (10/8/98; 07:24:37MDT - Msg ID:443)
Is the position of LTCM in the clear?
ALL: A quick note for today. There are several stories that LTCM (and most other hedge funds) are covering their short positions. They are not! What they are doing (as the NY
Post article below shows) is further hedging in the paper gold markets to attempt to control the coming (huge) loses! That will not work as the BIS has changed the rules. Read my old post to Pete below:
------------------------------------
Pete (9/23/98; 21:26:13MST - Msg ID:131)
Pete, To answer your questions: Yes, this is only a very, very small tip of the iceberg. Many of these people are short the gold paper market and they are the ones in the
know, at least we are told? And just look who is in the rework group: Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter & Co., Travelers Group Inc. and UBS AG will make up the committee. Pete, I wonder how many tons they move in world gold markets!
The change in motion by the BIS, concerning gold and the Euro is going to play them right into the European game plan! Read a few of the last (Thoughts!) archives at USAGOLD. I may reprint some of the things written here the last few days, it begins to tell the story that is before us. The Fed will push money like mad for now, but they will be raising rates like mad a little later as the dollar falls off the charts! Keep up your analysis, as you see things some of us don't catch. All minds don't work the same and it helps to mix Gray Cells in different portions. Thanks
----------------------------------------------
There truly is not enough physical gold to cover these positions. We are heading into a total default event that will also impact your ability to buy real gold in a timely fashion. It will also impact the ability of the mines to function during this phase. The length of occurrence, that this pre-default period will span is unknown. We may enter into turmoil for a year or so? I believe the story of LTCM covering shorts (see below) is an attempt to calm the markets. We shall see! Michael, (USAGOLD) I sent you an E-Mail the other day that they were only using the money os sold gold, not short gold themselves! Now the cat is out of the bag!
----------------------------------------------
http://www.nypostonline.com/business/6373.htm
LTCM'S GOLD PLAY: THE LONG AND THE SHORT OF IT
By JOHN DIZARD
WHEN the Long-Term Capital
Management bailout became public
last month, there were stories
circulating in the market about a
gigantic short position it had set up in gold.
In other words, LTCM had borrowed a
lot of gold in the hope of buying it back later, ideally at a lower price.
Gold people believed that as this short
position, which they believed amounted
to hundreds of metric tons of gold, was
covered by purchases, it would add fuel
to the runup in the gold price.
I decided to check this story with
LTCMs p.r. firm and one of its people
dutifully reported back that Long-Term
had no gold position, long or short, and that the rumor had been started in an attempt to hike the gold price.
So I dropped it.
Now, based on extensive reporting
among gold market participants, I have
come to the conclusion that Long-Term
did not tell the truth.
I wouldn't have minded if they had said
no comment, but outright lying is
something else again. So my advice is
not to take these people's word in the
future.
A Long-Term spokesman reiterated his
previous statements on the fund's gold
position - or rather lack thereof.
According to my sources, by August
Long-Term had borrowed about three
hundred tons of gold. That's a lot, about $3 billion. After borrowing the gold they sold it in the market and used the proceeds to finance other positions, such as one in the Australian dollar.
Why do this?
If they wanted to borrow, why not go to
one of those overaccommodating
creditors and plain borrow dollars to
invest in securitized Antarctic
commercial mortgage forwards or
whatever other weird stuff they believed in that week?
Because the rates on borrowing gold
have been incredibly low - around 0.63
percent (annualized) if you borrowed it
yesterday for a month or 1.61 percent
(annualized) if you borrowed for six
months.
Usually, one-month loans are taken out
by speculators, and six-month or longer
loans are taken out by gold mines who
are going short gold in this manner so
as to balance out a long position that
they have from their mine production.
The problem, of course, is what
happens when the gold price goes up?
Gold has been in a bear market for 18
years, but theoretically, some day,
maybe now, the price in dollars will start to turn up in a bull market.
Mines don't have much of a problem,
because they can cover their short
selling out of what they produce. But a
hedge fund has to buy back gold, and
do so from a market that could turn
jumpy very fast.
Now apparently LTCM bought
out-of-the-money calls to hedge their
short position, which means that if the
gold price went up a lot, then they had
the right to limit their losses. But it didn't eliminate all their risk.
I understand that J. Aron, the gold
trading arm of Goldman, Sachs, has
been able to cover all or most of the
LTCM short in private transactions, with the intention of limiting the effect on the already stronger gold market.
So the Long-Term gold episode may
be drawing to a close.
What market participants have begun to
learn, though, is that the real danger to the system doesn't come from the
relative value hedge funds themselves,
which are in truth a very very small part of the financial system, but the banks and brokers who have been playing
hedge fund on a much bigger scale.
That's why the prices of companies
such as Bankers Trust, J.P. Morgan,
Merrill and Lehman have been marked
down so far.
How many of them have been doing
what is known as the gold carry trade?
Friend of Another (10/9/98; 21:40:53MDT - Msg ID:478)
POSTING?
ALL:
I will (all things willing) be posting and joining the discussion on Sat. 10. Perhaps starting during your 17:00 MST.. The days have been busy with thought. It is my loss that I have not had time to read your posts, but I will before then.
Regards FOA
ANOTHER (10/10/98; 16:38:31MDT - Msg ID:487)
Is the Yen door closed?
"Gold has walked this path before, many times. Now, the way home is blocked. All watch and ask, who are these that must follow a yellow guide? "
The G-7 have closed the Yen carry trade. Think you now, long and hard! To close a contract in Yen, it does create the loss, yes? Yet, a close with gold requires the supplier.
In which direction will the billions move? Free money was supplied to the greedy by nature. Now these gentlemen will perform a task written by others. Truly, only fools would think gold is offered without purpose. For the price of free paper currency be high when returned as real gold! We watch this new gold market together, yes?
Another
ANOTHER (10/10/98; 16:47:10MDT - Msg ID:488)
THOUGHTS!
Jayne (10/1/98; 07:35:38MDT - Msg ID:300)
Your question:
"To Another:
The NY Times and other papers ran an article on S.A calling on US oil co. to help them develop the kingdom's vast energy reserves. Saudis "desperately need capital to invest in their oil sector to keep the oil flowing" etc. How does this fit into your postings. On 10/19/97 part of the post Only one oil state counts, Gold very important to them, etc... Of course, I am assuming that S.A was the one oil state. Also, I believe you posted S.A. has enough oil for our parents, parents, grandparents. etc.. What is the real story behind this article. What and why does S. A. need US Oil Companys help. How does this fit into the US economy today with the oil for gold deal thats soon to end. Thanks by the way to Another, USA Gold for "book on Another" forum, etc. I've learned so much in such a short period of time."
Jayne,
You have seen the "business of oil" continue all of your days. It will also continue for all the lifetimes of those that follow you. This "business of oil" will always search for capital and expertise for it is this constant search that brings the results of "oil flow". However, we do not confuse the "conducting of business" with the "need for stable currency"!
Oil in the ground walks the quiet path and speaks with the modest voice. The power of this wealth brings not the need for confrontation, as all know this commodity could become a "currency" in and of itself, if needed.
The troubles we find today are troubles of a "paper currency nature" that brings to the forefront the need for low priced oil. Yes, you may extrapolate the order of confluence in this way; "paper currency created thru the creation of debt" then "always the continuation of more debt to expand business and commerce" then " the limits are reached for world trade to repay this paper debt" then "a further creation of debt for the creation of paper money with purpose only to save banks and governments" then "the need for raw commodities (oil and others) to be priced unfairly low for the continuation of business and debt payment"! Today, if oil was priced fairly, in real terms, the dollar/IMF currency structure would not stand.
The basic engine for Western commerce is run with energy, energy from oil! The "wealth of nations" is based on the continuation of business, for it is this commerce that
makes valuable the paper assets (currencies included) held by citizens. This is a common knowledge, little held by western thinkers. They say that it be the paper assets that give value for the purpose of trade. I say, a simple person does stand at the river edge and know from where the waters flow! If the current paper economy does destroy "the business of oil" then, this currency system will destroy itself. It does so today, as a low gold price in dollar terms does balance the value of reserves in ground, but the promise of good "future oil flow" is questioned if paid for in more debt. For as before, when this currency was expanded with "business as backing", today, the lack of alternatives forces the creation of dollars in the gamblers house! I will not hold the notes of a fool for the future of my country. I see our future with a currency from the "House of Europe" that will be used in payment for this future search for oil! You see, this "business of oil" it does continue, yes? Thank You
Another
Friend of Another (10/10/98; 17:26:55MDT - Msg ID:489)
EURO?
online.
Friend of Another (10/10/98; 18:15:59MDT - Msg ID:490)
Goldfly (10/10/98; 13:30:49MDT - Msg ID:483)
Goldfly: Hello!
Your question:
Who (besides Saudi Arabia- obviously) is collecting on the gold payments? I don't think we should look at these as payments. Because it is a free open market, anyone can
collect, that's true. But, most don't, not yet! If any large buyer began buying outright, the market would rocket. I think, much of the gold is contained in the form of paper
commitments. The actual gold still rests in the CB vaults. If it was ever officially signed over it would show up on the asset statements of the Euro CBs. (the answer to your "who is supplying gold) That's one of the reasons they don't want gold to rise yet, as the Euro is not available to offer as a repurchase vehicle.
This arrangement is most likely the main reason that the Euro will be a success, no matter what. Without a new reserve currency, the one major oil producer would
immediately reprice oil in terms of a small fraction of gold plus payment in ANY major currency. The ensuing run on gold would cause every world oil producer to join in on this
price set. Only fools would step back and watch their oil sold off for (at the then existing exchange rates) virtually nothing.
We shall see! FOA
Friend of Another (10/10/98; 18:24:39MDT - Msg ID:493)
MORE!
Goldfly,
The rest of your questions are good, but they are asked outside the context of what will be occurring during that time. A poster on Kitco (I think his handle was AllenUSA) once did a superb job of explaining the dynamics of oil pricing during a currency collapse and gold revaluation. I'll see if I can find it so as to offer it in his words.
thanks FOA
Friend of Another (10/10/98; 18:51:39MDT - Msg ID:494)
Virginian (10/10/98; 18:17:18MDT - Msg ID:491)
Virginian,
Welcome! Your observation of gold shows how different the market is today from the past. That's one of the reasons we cannot expect the past history of gold (from 1970s to
present) to be a guide for the future. Truly, that era was very good for an investment in gold and the business of gold mining. Today, gold should not be an investment. History
shows that stock equities (gold mining included) or any form of paper wealth do very poorly during massive currency destruction. I think, gold bullion should be purchased as a
currency only!
Yes, gold stocks will move up and down in a tradable fashion for the time being. However, when the real currency wars start, much of the current trading arena will close
from default. During these extreme times, FXC (foreign exchange controls) will no doubt, include gold as a currency alternative. Physical gold purchase, contrary to most analysis, will be encouraged in America as an alternate form of wealth (401-K or retirement savings) because it will redirect money from going into the Euro. It will, of course be at a much different dollar price from today!
I hope gold does not go up until the Euro arrives. To date it is still in control. But, the Asian (and China) problem have come onto the stage much more quickly than anticipated. I expect it will rise through $320 in a week or so, but $360+ would be a disaster. We shall
see. Thanks for the thoughts. FOA
Friend of Another (10/10/98; 19:42:23MDT - Msg ID:499)
My Thoughts!
Michael (USAGOLD),
I saw your Market report on 10-08-98 with the reprint of Reuters "Dollar could followFootsteps of emerging countries". Alfons Verplaetse (BIS) told it as he saw it. Isn't it strange how the perception of an alternative currency has moved so slowly for so long. Now every investor is trying to access the impact on their assets. We have never in modern history seen a move from one currency system to another. The rush to establish a Euro position will shock the financial system far more than the oil embargo ever did.
Because the majority of wealth is still held in dollar terms, the loss in dollar assets may prove to be The Event of the next 100 years! I think, with the support of oil producers, Europe may become an island of economic prosperity, even greater than the American experience. The next several years will prove the value of real assets for anyone outside the Euro arena. It will appear much to the typical American, looking in as it appears to the
typical Mexican looking across your Rio Grand border. Many analysis think this could never happen! The same was said of Russia, Korea, Asia and even Japan in the late 1980s.
A dynamic period lies before us! FOA
Friend of Another (10/10/98; 20:37:33MDT - Msg ID:507)
PH in LA (10/10/98; 19:17:02MDT - Msg ID:496)
PH in LA , Hello!
The $360 question is a difficult one to explain. I'll try. If you remember, after the Gulf War, gold began a strange (not understood) drop through the first part of 1993. About mid to late 1993 a group out of Asia began buying gold, real gold. It may have been a legendary trader out of Hong Kong or some other group in China. It was thought that they had understood the implications and reasons for the falling dollar price of gold. Their
buying drove the price into a range of approximately $365 to $390 for several years. At one point this buying of physical and paper had leveraged them into a cornering of the
market to some extent! The offtake was incredible. This is where the political intrigue comes in that I am unsure of? This buying (and leveraging) threatened to unhinge the
delicate balance of valuing oil in dollars, through gold. Even though the buying was done with real money (paper not credit) and much of it was based in the hand over of HK to
China, if allowed to continue, it would have driven gold sky high. With the EMU still in trouble with no commitment to price oil in Euros, a run of gold could have evoked a
reprise of oil in gold terms. In early 1997, the BIS (the Euro group portion) came to some agreement about the Euro and oil. In return, the BIS smashed the Asian economy and
unleashed much of that gold. Few people grasp this, but I offer that if the BIS could take down Russia, a world nuclear superpower, Asia was no problem. It is at this point that we begin to understand the real power of a union of oil and the Euro (BIS).
To answer your question, a run in gold past $360 would mean this union has split and a firestorm of economic destruction was at the door. After all, it is oil that has backed the dollar these last many years, waiting for an alternative reserve!
PH, I cannot possibly begin to discuss this in one day, so I hope this helps. Thanks FOA
Friend of Another (10/10/98; 21:21:42MDT - Msg ID:510)
Jayne (10/10/98; 19:38:34MDT - Msg ID:498)
Jayne, Hello to you, also!
I must address something here. The book, "In The Footsteps" was written by Mr. Michael Kosares, not Another. I have seen only minor parts of it, sent to me by others. I
am also 95% sure Another has not seen it, but I cannot be sure. Michael has used his many years of experience to interpret the Thoughts! message and I am told it was done very well. As time marches on, no doubt world events will make it a worthy reference.
Your question of payment for oil, in what? I don't think that the exact day of Jan 01,1999 and the official start of the Euro will change all things. We will more likely see the
beginnings of a progression of events, moving the world economy away from US$ based settlement. A good many analysis have picked up on the Another line of reasoning and are
predicting a rise in gold for 1999. I don't think they understand what is before us as they are advising clients to hold US treasury bonds and gold stocks. That should prove to be a confounding combination for anyone looking for safety. In much the same way as investors invested in gold for a trade, then found that the markets did not move with
historic supply and demand features.
Even Pete (a poster here), may bet the farm on a Euro proposition. Pete, please, allow only ten or twenty percent of your acres of corn for gold, it will be enough!
Jayne, if you have gold bullion, then do as TYoung, watch and learn. Even the strong Mr, Young will swim with a strong ocean tide, as will we all! Thanks for your thoughts!
FOA
Friend of Another (10/10/98; 22:25:40MDT - Msg ID:516)
turbohawg (10/10/98; 21:06:04MDT - Msg ID:509)
turbohawg, Welcome!
I would like to build on Goldfly's and PH's posts.
Much of the oil produced today is high cost in dollar terms. Even now many producers make little profit. This fact is not lost to the middle eastern suppliers as they are able to pump today with large profits. True, they posture their loss of market share and show how they are going broke, but they have reserves that can supply twice the current daily
amount if needed!
To understand what is about to happen, one must see that in hard currency Euro terms, oil is going to drop in price (economic depression or not)! Yes, far below what the
marginal producers can supply for. They will indeed have a choice, sell oil in plunging US dollars, or not sell at all in Euro terms as it will be below their high dollar production cost! Much of the worlds inefficient goods production is a result of maintaining the high dollar production cost oil supply. This is retained for the purpose of creating a strategic oil supply for the benefit of American Dollar stature.
You see, the eastern producers always could supply the world, if only the world would pay in an honest currency! Falling oil prices in Euros will create a tremendous need for the world to sell goods to Europe to receive Euros. Oil purchased with Euros as a result of commerce and trade will drive the world economy in a way few envision.
America will find that they must trade with Europe as only oil purchased in Euros will allow for competitive pricing of goods and services. You will see a hyperinflation of the
dollar standing next to a full deflation of production costs in Euro/Gold terms. A new world indeed! FOA
Friend of Another (10/10/98; 22:47:06MDT - Msg ID:518)
Time to go.
Thanks for the discussion. I will be back to read everyone's posts at another time. Good Day All
Friend of Another (10/11/98; 07:58:16MDT - Msg ID:521)
Pete (10/10/98; 23:36:19MDT - Msg ID:519)
Pete,
What is shown here is the blueprint or chart of intentions. The changing of a world currency system is a tremendous political event. I offer the course and bearing that was set. It will be the captains of state that must sail the ship. The winds and currents may blow us far from the plotted journey, but the port of call remains the same.
I will use your questions in parts to explain.
Your words: --------"On the one hand you say that the Asians were purchasing gold in amounts that were disrupting the price beyond what someone expected thereby the BIS
destroyed their economy so that they were forced to sell the gold they had been accumulating and to put a stop to the acceleration of price above $360/oz. On the other hand you have been stating that recently the price has been plunging below production costs and BIS reserve valuations by the actions of the iceberg(Banks, brokers, funds) use of derivatives. "
Pete, In the currency world everything moves on perceptions of how current events will impact future flows. The same was happening back then. The Euro Group had never
thought that Asia would become such consumers of gold. They had always brought throughout the years, but never in these amounts. Something had changed. The Euro CBs had wanted to bring gold into the $320 - $360 range and keep it there until the new currency arrived. Remember this was the range they brought it to by early 1993 (check your charts for clarity). In this range the dollar looked good (gold could be purchased in long term commitments) and most importantly, much of the world production was still online. Mine production was important as that (in theory anyway) was what fed the replacement of loaned out CB gold.
You had on one side Super rich Asians (including the Central Bank of China) buying gold because they didn't want to be caught in a Euro world holding Dollars. On the other
side we found oil money that were waiting for a clarification of Euro policy, regarding gold. Any rise above $360 (prior to Euro launch) was seen as a loss of control that would create an every man for himself atmosphere.
That was then, a period from mid 1993 to late 1996. In early 1997 the Euro CBs attempted to lower gold and it touched off a buying spree that was unheard of! The lower
it was sent the greater the buying. Even LBMA had to openly show what was happening. Eventually, the BIS worked with China to control Asia by including them in on the Euro sphere. China had / has little use for it's Asian neighbors and the American Political / Dollar influence on the region. Besides, all of Asia was long sense hooked on a US trading partnership. You remember the APEC conference in Seattle. The American economy had "bet the farm" on the Pacific rim and turned a cold shoulder to Europe. Jump to the present and we witness the "Master Plan", as Another calls it. The BIS smashed Japan and it's neighbors and has left them holding a ship load of Dollar assets only months before a Euro launch!
That sector of the competition is done for. Now all that remains is to control the traders and speculators that have jumped onto the "Yen carry / Gold carry trade in the mistaken notion that gold is about be phased out of international finance. Well, you can see the results. They forced Mr. Greenspan's hand into crushing these players. I can tell you he never, ever wanted to lower rates as a dollar crush will be the result (it has started)!
I have jumped around a lot here, but I think you see why the influences on gold creates an atmosphere of confusion regarding "intent". Actually, some other things have happened in the last few days that will come out soon. I hope Another will lead the way on this in that I may commit on them. It's extremely interesting. Thanks Pete, I will be watching and posting here. FOA
Friend of Another (10/11/98; 20:57:50MDT - Msg ID:532)
Secret deal on $US-yen dive ???
David Linkley,
The drop in the dollar against the Yen does make one wonder what happened? We had almost every Major hedge fund in the world positioning into derivatives trades that would benefit from a rise in US rates and a further fall in the Yen. Billions (some say trillions) placed on bets that used low cost ( almost free?) gold and / or low cost (almost
free?) Yen to raise the gambling money. Speculation in the American markets had reached a level equal to the Japan bubble and the Fed lowers rates?? Yet the Yen carries rates of .25% +/- with it's banks going under and every investor worldwide runs into this currency in TWO DAYS to drive it up???
It makes one think that a door needed to be shut very fast so as not to let something out?? Well, the somethings are now locked in nice and tight with a lot of wealth needing to change hands to close the bets made with that, free money! You know, LTCM was a well connected group that many others emulated for the very reason that they were, well connected. Now, it first appeared that these gentlemen were reprimanded with lower US rates because they acted so boldly. In some quiet circles it is still seen this way. But the speed of the event makes me think that the Hedge funds positions were correct as was the information they acted on. Was some leverage applied to Mr. Greenspan and Mr.Yen to
force a quick resolution of their problem? Perhaps a problem of larger scope and importance was seen over the horizon?
This I do know. To cover the open gold positions will require far more than simple option strategies as loss hedges! We may enter a pricing storm for gold that will see it's value literally all over the map! The possibility of the large up and down moves may wreck many portfolios that have strayed from the simple action of buying plain physical bullion, without leverage. I offer this as a fair consideration for the simple investor / saver. We shall see. FOA
Friend of Another (10/12/98; 06:26:22MDT - Msg ID:537)
http://www.spokane.net:80/news-story-body.asp?Date=101098&ID=s464856&cat=
Note: This is part of an article about Russian imports. It also has a bit about the new gold coin. I place it here as a thought about how gold can take the place of other metals (silver) as money. The new Russian coin will have a gold content of about $6.00 US. As we see here they did not use silver for there was no need to do so. Gold can be placed into coins in amounts of a few cents US if needed for small exchange. Food for thought?
-----------------------------------------------------------
October 10, 1998
Russian imports plunge
Financial crisis means consumers can't afford most imported goods!
Leslie Shepherd - Associated Press
(partial reprint)
"The Kommersant business newspaper said Friday it had learned one proposal under consideration: minting a gold coin to raise money to pay overdue wages and pensions, as well as debts on government bonds.
Kommersant said 22 tons of the Central Bank's 550 tons of gold reserves would be used to raise 5 billion rubles, or about $316 million.
The coins would have a face value of 1,000 rubles, or about $63, and 5,000 rubles. But they would contain only 10 rubles (63 cents) and 100 rubles($6.30) worth of gold respectively, the newspaper said."
--------------------------------------------------------
Friend of Another (10/12/98; 21:04:17MDT - Msg ID:549)
http://www.bahraintribune.com/busi.asp?Art_No=189
Note: Will India and China become the next major consumers of energy?
------------------------------------------------------------
Tuesday, October 13, 1998 Bahrain Local Time 5:46:23 AM
Gas producers pin hope on India and China
Gulf gas producers have seen their traditional markets eroded by economic turmoil in Asia and hopes for a recovery in the next decade are pinned on India and China. Asia was until last year seen as the major market for Gulf liquefied natural gas (LNG) producers like Qatar and Oman. But most Asian clients have since been hit by economic crises that have stalled or even reversed growth.
Expectations that demand for gas from these markets would absorb increased output from Gulf states have not materialised, said analysts at a Middle East gas summit which opened in Abu Dhabi yesterday.
"The industry has turned upside down as the effect of Asia's economic and financial crisis have filtered through the energy sector ... "The list of potential new buyers is now effectively reduced to two: India and China," said Chris Holmes, senior downstream and gas consultant
with Gaffney, Cline and Associates' office in Singapore. South Korea, Thailand, Japan, Taiwan, Singapore and the Philippines have all experienced slowdowns in demand that range from slight growth in the case of Taiwan to negative
demand for South Korea. Middle East gas producers, which account for a third of the world's proven natural gas reserves, are also facing stiff competition from Asian producers like Indonesia, Malaysia and Australia.
"Demand growth in traditional LNG has all but stalled and exploitation of new markets has been painfully slow ... The industry faces a somewhat uncertain future," Holmes said.
Amid the gloom, Korea in particular is of concern to Gulf LNG producers.
Oman has agreed to supply Korea Gas Corp. (Kogas) with 4.1 million tonnes a year (mty) for 25 years from 2000, while Qatar's Rasgas has a 4.8 mty sales commitment to Kogas from 1999. But further deals may be a long way off. Korean LNG imports have risen from 1.7 mty in 1987 to 11.6 mty in 1997 and some were predicting a further growth to 30 mty by 2010. – AFP
Friend of Another (10/12/98; 21:10:56MDT - Msg ID:550)
Mr. James Turk
USAGOLD,
Yes, I will have some words about LTCM as seen by Mr. Turk. His analysis brings up a point for discussion. More in the AM of CST. FOA
Friend of Another (10/13/98; 04:55:12MDT - Msg ID:553)
NEWS
Tokyo profit-takers ignore bank rescue
by LACHLAN COLQUHOUN in Hong Kong
MORE progress on Japan's bank rescue plan went
largely unnoticed by investors today as they took
profits after yesterday's strong rally among Tokyo
stocks.
An announcement from Finance Minister Kiichi
Miyazawa that a new bank recapitalisation Bill
would inject 43 trillion yen into weak but viable
banks, in addition to the 17 trillion yen already
planned to protect depositors, kept the bank
rescue on track, but the fragility of the market was
emphasised by the profit taking.
Having seemingly won Opposition support to inject
public funds into ailing banks, leading figures from
the ruling Liberal Democratic Party said the
government is now pondering injecting money into
healthy banks.
On the market, firmer bank shares could not stop
the benchmark Nikkei from dipping around 2% in
the morning, but although the losses were pared
the index was still in negative territory, falling 312
points, or 2.3%, to stand at 13,243. The index
spiked more than 5% yesterday in one of the best
days' trading this year.
Some brokers attributed the profit taking to
investors raising cash to fund shares in the £10
billion float of mobile phones operator DoCoMo,
which makes its debut on 22 October. Among
active stocks, shares in Daiwa House fell around
2% after the company said it expected to post a 10
billion yen first-half loss, compared with a 14 billion
yen profit last year. Canon made sharp gains,
adding 5% on reports it had won a new printer
contract with Hewlett-Packard. Exporting blue
chips, such as entertainment giant Sony, were
clipped back after yesterday's gains.
In Hong Kong early gains were erased by profit
taking after a four-day rally saw the Hang Seng
index breach the 9000-points level yesterday for
the first time in months. Easier local interest rates
and Wall Street's resilience helped sentiment at the
outset, but nervousness over the poor economic
outlook capped any continuation of the rally. By the
mid-session break, the Hang Seng had fallen 1%,
or 89 points, to 8944.
Market leader HSBC held on to its gains, however,
staying unchanged at HK$156.50, while the rally on
property counters ran out of momentum. In
company news, conglomerate First Pacific denied
media reports it was pondering the sale of its
banking subsidiary FPB Banking.
Elsewhere, markets moved in a narrow range with
a lack of direction from Japan and Hong Kong. In
Seoul, the Kospi added just over a point to 353,
with bank counters Korea First and Seoulbank
going limit-up, or 8% higher, after the government
said it would buy most of the banks' bad debts. In a
sombre warning, credit rating agency Moody's
described the country's bank system as "technically
insolvent". Shares gained ground in Taiwan, the
Composite adding 50 to 6971 on the back of
firmer hi-tech shares on the US Nasdaq market.
Thailand's SET was barely a point firmer at 291,
while Jakarta's Composite was virtually unchanged
at 308. Singapore's Straits Times was 0.7%, or
eight, down at 1009, while Malaysia's Composite
fell three to 386.
Reassuring comments about financial caution from
News Corp chief Rupert Murdoch at the company's
annual meeting today saw the shares put on 1.3%
in Australia. The All Ordinaries edged 12 points
lower to 2488.
© Associated Newspapers Ltd., 13 October 1998
This Is London
-------------------------------------------------------
Russian losses hit Frenchbank jobs in London
Boris Yeltsin has joined the list of those including
Robert Maxwell, the Italian fraudster Giancarlo
Paretti and two shareholders in the ill-fated
Long-Term Capital Management hedge fund, who
have caused France's Credit Lyonnais to lose
money by the truckload.
The state-owned bank has confirmed that its
Central and East European fixed-income desk in
London has been shut down, with the loss of
around 30 jobs. A spokesman would not deny
reports that this was linked to losses on Russian
GKOs, which collapsed in value when Moscow
defaulted.
Previously, Credit Lyonnais chairman Jean
Peyrelevade has said that provisions of Ffr4.2
billion (£450 million) for the first half were
due to the Russian and Asian crises, and that
apart from GKOs, the bank held practically no
emerging market debt securities.
Credit Lyonnais representatives head the French
delegation negotiating with Russia over GKO
restructuring, usually a sign that a bank has a great
deal at stake in the talks.
Credit Lyonnais would not comment on whether
further redundancies were planned in London.
The French government won a special ex-emption
from Brussels subsidy rules to allow it to prop up
the bank with a £13 billion rescue package. The
quid pro quo was that the bank would be almost
en-tirely privatised less than a year from now.
However, that timetable now looks hard to meet.
© Associated Newspapers Ltd., 13 October 1998
This Is London
Friend of Another (10/13/98; 10:51:03MDT - Msg ID:556)
My Thoughts!
USAGOLD,
I read Mr. Turk's article posted on your The Gilded Opinion page. It is a fine work of analysis of the gold market. If I may, a point of discussion can be brought up by viewing his thoughts from a different perspective.
Michael, from your earlier post this was pulled:
"In the course of our conversation the subject of LTCM's gold short position came up and he said in his understated, scholarly way that if LTCM's 400 ton loan position were
defaulted on that the central bank or banks which made the loan would have to consider the loan "a sale into the market" since they are unlikely to get their gold back. I asked Mr. Turk the same question I asked ANOTHER a while back. "If you are a central banker lending gold, what do you take as collateral (since gold is the ultimate collateral, all other collateral is inferior.)" Turk answered. "You take nothing. It is an unsecured loan."
"You take nothing. It is an unsecured loan." ! With this statement in mind, I begin.
As Mr. James Turk stated, " like big tail-fins on 1950's Cadillacs. An era has passed"!
Yes, I agree entirely. We now swiftly come to the conclusion of an era that has brought gold into the monetary forefront as never before. Gold has been fought over, pushed, shoved and manipulated in the 90s the same way as most major currencies. The only items missing during this quiet war was the an extreme increase in value that the investing public
must have to validate that gold is in use! As often quoted, "If the price isn't rising, no one must want it or need it". Truly a paradox of thinking in our time.
The facts, as presented by the World Gold Council (WGC) show that in 1997 only 406 tonnes of gold were actually sold from the vaults of the world Central Banks. This amounts to only 1% of all the gold reserves held in reserve. It is very important to note that the major countries that sold gold (Canada, Belgium, Holland, Portugal and a few others) made up the majority of this 1% reduction, if not all of it! They also are the source of most of the 5% of the Central Bank reduction in holdings during the last 10 (ten)Years!
To better place that last sentence in correlation with the current gold lease / lending market is to grasp that these banks, Canada, Holland and the lot, did actually sell their gold, not lend it. They don't want it back! Using this line of reasoning, then, if these countries made up the bulk of gold sales that represented the total reduction in Central Bank reserves, what gold was sold that represented the lease / lend deals?
Much of the conjecture amongst analysis in banking circles seems to center around one major point. A point that without acceptance, destroys the entire argument that gold
leasing sales are what have destroyed the market. That point is: "of the gold still held in the Central Bank vaults and carried on the books as reserve assets, some it was has sold
off and replaced with leasing paper"! Please correct me, but a bank may mobilize any asset for return and list it that way on the balance sheet. However, to list Physical Gold, that is not a paper asset, as present when it is not is "Fraud"! To do this on a scale that the present gold leasing market suggest is happening, would amount to a gross violation of BIS accounting standards. To view this in a better light I will use a phrase that Another has posted here:
"a simple person does stand at the river edge and know from where the waters flow".
To continue: The central purpose behind the Yen Carry trade and the Gold Carry trade is to place liquidity into the world financial structure. This action was made
necessary by the failure of the US dollar to function any further as a money creation vehicle. In these last days of the dollar, worldwide debt as denominated in dollars has
ceased to expand and is indeed contracting. This is a natural event that occurs in the latter time cycle of un-backed paper currencies. This contraction was expected to complete the fiat money cycle back in the late 1980s. It has been the Central Banks, lead by the BIS that created ingenious ways to expand liquidity until another currency system could be introduced. In these 1990s, the Yen / Gold Carry was one of those ways.
Much of the Gold lending dealings is more a function of paper contracts than actual gold sales. Using my "water flow" point above, if that much gold was actually sold out
into the industry, we would have seen major reductions from the gold asset side of the Central Banks. The true purpose of the leasing (not all of it , just most of it) was to create cheap money that could flow into other aspects of the economy and help perpetuate a boom, worldwide. As seen in the LTCM debacle, a little money in the right hands can be
multiplied into billions of new found liquidity. Now consider that some have stated that the gold loan contracts amount to 8,000 tonnes or more! Another has said that they, if actually closed out as gold deliveries would amount to over 14,000 tonnes! Suddenly we see where the money has come from to gun the world asset markets. A market of
trillions!
So, why are they called gold loans if the gold isn't used? The point is the gold is used. It is the final commitment or backup if the deals fail. When a hedge fund (or mine) cannot repay the "cash equivalent" of the gold or "the gold itself", then the Central Bank, as the
originator of the deal must deliver Real Gold or PAY IN A HARD CURRENCY!
One of the things that Another has been guiding us to for over a year is that the current gold deals amount to an all out corner on the CB gold supply. The major people that are on the other side of these Gold Loans (lets call them what they really are: currency loans on a worldwide scope that is backed, ultimately with much of the CB gold) will call for this gold that was already paid for over many years! The intent of the Euro Group CBs was to have these loans self liquidate in a normal fashion. If they did not them they would pay the equivalent of the gold owed in Euros! A function, in actually, of issuing Euros for
already sold gold! Furthering a pending proposition between the ECB and it's EMCBs.
Now, my friends, you understand why a Euro price for gold of $6,000+ (current rate), if in effect a year or so after that currency debuts will create a reserve currency of
tremendious debth and holdings worldwide. It will be a welcome development. With the dollar falling from reserve status and the total default of dollar based gold contracts,
physical gold will be an "investment for a lifetime" as Another has said! The demand for gold as a currency reserve by governments and as a currency alternative by citizens, will amount to more metal than exists.
I credit Another with most of this input. It is his wish that these thoughts be discussed by all, for all to see.
Thanks FOA
Friend of Another (10/14/98; 08:45:05MDT - Msg ID:566)
Euro use to gain?
Euro signals new life in bond market
by ANTONIA FEUCHTWANGER
With the birth of the single currency less
than three months away, the
euro-denominated Eurobond market is
showing signs of activity after the
summer's turmoil interrupted its
expansion.
Investor presentations begin today in Paris for
Mediocredito Centrale, the development bank of
Italy, which plans a debut issue in euro, while
Daiwa Securities has taken advantage of an
apparent vogue for the euro in Japan.
Daiwa's 100 million euro bond, denominated in the
ecu basket currency until one-for-one conversion to
euro on 1 January, was for the Kingdom of
Denmark. It was announced earlier this week but
according to the International Insider service was
sold by Daiwa the previous week. Daiwa, which
has just refocused its London operations mainly on
Japan-related activities, underwrote and sold the
entire deal itself.
Carol Hird, syndicate manager at Paribas, which
has a strong presence in euro Eurobonds,
commented: "Some Japanese institutions are very
concerned about how to account for the legacy
currencies (such as the French franc and
Deutschmark which are joining the euro). They
would like to go straight to the euro."
She added: "A lot of reports about the euro have
got through to savers on the street in Japan, who
are now very interested. At the beginning of this
year the market for ecu/euro bonds was very small
but it has grown fast." The yen's bounce back last
week has helped make the euro relatively cheap.
Warburg Dillon Read this week increased its 100
million euro issue for America's GECC to 200
million while the bank is currently making
presentations for a 175 million euro issue for
Generalitat de Catalunya, a Spanish regional
authority.
Paribas itself is advising Mediocredito Centrale on
its still unformed plans to issue bonds in Europe's
new single currency. The Italian bank is effectively
State-guaranteed but its rating is A1-/A. In most
European countries, according to Paribas, its debt
is zero-weighted for capital adequacy purposes,
which is attractive for bank investors. The bonds
could be fixed or floating rate. Mediocredito lends
to small businessses and development projects,
sometimes subsidising other banks' loans to
growing companies. It has a 41% stake in Sicily's
largest bank, which has depressed its rating thanks
to worries about credit quality in a relatively poor
part of Italy.
© Associated Newspapers Ltd., 14 October 1998
This Is London
Friend of Another (10/14/98; 10:13:46MDT - Msg ID:567)
Items.
ALL:
I must apologize for the poor placement of some wording in my post MSG: 556. My time was in short supply.
------------------------------------------------------------
Also: Someone (perhaps PH in LA) asked about Mr. M. A. Armstrong's various reports and my thoughts on them. I think we will see the many of the world economies that base
their future on a trading relationship with the USA fall into a major depression. Perhaps much as MA suggests?? As for his views on gold and the Euro:
I add that the nations that have created this new currency have been around far longer than the thoughts of any analysis. The gold market will also outlive the negative
predictions put forth by some.
The latest Oct. 9th work offered by MA has this statement: "The Euro has effectively been wiped off the face of the earth." I direct you to my last news post of Msg #556. If the Euro is wiped out then someone did not tell Japan!
Mr. Dallas Guns Msg #560:
You write: " Why is this the only place were this theory is being discussed? Wouldn't many more know the same as you and another?"
Dallas, in the 1970s few thought that gold would go to $800+ US and it was discussed openly by how many? Even less saw oil at $40+US or a Dow of 8,000+. The history of
world major events are filled with actions that were impossible to foresee, yet some record was always found of people that did not discuss the event but did anticipate and prepare for it. Today we see the birth of a new currency that was thought to be dead (and openly discussed as finished) yet somewhere, somehow a very large group of people were working diligently to create it. Don't assume
that your media and elected officials will always keep the public informed of impending events. Especially if those events could undermine their power.
You write: "If you are as sure as you say, why not bet the farm"?
I have learned a great deal about conservative living. And I learned it from some world class wealthy people. It was put to me this way:
"If you have a nature to bet the farm and you win, the winning will not change your basic negative character of farm betting. In time, you will bet all of it again! Conversely, if you do very well with an appropriate investment decision (with your family in mind), the
winning will reinforce a positive character of prudent wealth building. This you will carry for all your days."
Dallas, trading some of your currency (yen? mark? dollars?) for another currency (gold)is not investing! It is the prudent use of playing the history of gold against the history of paper money. It has worked for others for thousands of years and will work for you.
Thanks for the consideration. May we will continue this as time allows? FOA
Friend of Another (10/14/98; 10:38:30MDT - Msg ID:570)
REPLY?
Tyler Rose and Bottom$, I will reply later during the Noon - Midnight section when I have more time . Thanks
---------------------------------------------------------
Also: correction to my last post: "I direct you to my last news post of Msg #556" should be #566! FOA
Friend of Another (10/14/98; 19:39:14MDT - Msg ID:576)
Tyler Rose (10/14/98; 10:17:22MDT - Msg ID:568)
Tyler Rose,
To answer your question we must travel a distance. -------------------------------------------------------
Some of the confusion with gold loans in general stems from the fact that there are thousands of them. They exist in every shape and fashion. The terms Gold Loan or Gold
Lease are generic. Just as when we speak of an automobile in public, it is of little use without knowing the make and model. The term Car covers a broad means of transportation.
Some gold deals are real in that the gold is sold and transported to a new owner. The borrower must literally pay back gold to the lender. However, as you may know, a
contract between parties can be written in any matter that is agreeable. In a gold deal, a lender may ask to be paid back in the cash equivalent of gold in any specified currency.---------------------------------------------
Some deals do not even involve central banks, as they are written by private holders of gold. In these transactions, currency profit may not be the purpose. My point is only to
show that there are many variables. ---------------------
Another has written before of the absurdity of Central Banks lending gold at a few percent. They stand on the roof tops to proclaim how smart they are to receive a return on
an otherwise sterile investment. Yet, any fool can see that it is not a true business transaction in the usual sense. The point of my post was to show that by using official
statistic on Central Bank gold holdings, the majority of the time they have not sold the gold involved in lending deals. If it was sold, it would have been removed or the title to it transferred. Therefore, the lending deals are only currency loans denominated in gold. The money actually generated in these deals is created by the Bullion Bank or another entity has supplied it. In this matter the CBs have used their gold as leverage many times over to create a massive new money supply. In reality, if the Hedge Fund / Leverage Community ever started to fall apart, a huge portion of the CB gold would be termed "deliverable"
from default. -----------------------------------------
Tyler, you know and I know that the world gold market would be shut down long before they ever, ever deliver that much gold. What will happen is that much of the current financial leverage, that is heading into it's last days, will be covered by delivering Euros as partial payment. When gold begins trading again at a new value (of perhaps
$6,000 US present buying power) in Euros, it will be easy for some of the defaulted holders of loans (oil and others) to be made whole in currency. With this in mind, some
entities with huge natural resource reserves have used them as collateral to originate the money used in a 1% CB gold loan. It is almost like selling oil for gold, don't you think?
With a gold valuation that high, the Euro will become The Hard Currency for the 21st century.
Now, to your question: A gold loan by a Central Bank to a "Financial Operator" (hedge fund and others) in indeed an unsecured loan! They have loaned their gold as "backing for
the deal" and must supply it if a default occurs. If they have loaned it to a Mine entity, they will have a right to claim the mine assets in a default. Therefore, a mine loan is not unsecured. Not a pleasant thought for the holders of gold stocks during a worldwide currency crisis!
Much more to it than this. I hope others will write their thoughts on the oil / gold /leasing markets. There is a lot of room and tremendous tolerance for diverse views.
Thanks FOA
Friend of Another (10/14/98; 19:47:44MDT - Msg ID:577)
Bottom$ (10/14/98; 10:34:11MDT - Msg ID:569)
Bottom$,
Hello! ------------------------------------------
Do you remember when gold jumped from $40+ to $800+ in a decade or so? Prior to that the world monetary authorities had enough gold in relation to circulating currencies that they could control it's price by actually selling it into the market. (why they didn't just revalue it's price to $1,000+ and continue on is another story we will cover
here some day)(it covers why they took the dollar off the gold standard to raise the price of oil). When they stopped selling gold's price jumped. Today, they don't have that much gold in relation to the incredible amount of money and leverage out there. In fact, as I just discussed with Tyler Rose, instead of selling they are using it to build onto the money supply. Few understand that the price of gold is dropping during this era for
several reasons. Besides being used to offer gold cheaply in dollar terms. it is being used to make the dollar strong by creating liquidity. A function the dollar stopped performing
five or six years ago. They can never sell gold into the market again as a means of controlling the price the way they did in the 70s. --------------------------
Another sent in a fine piece once explaining how the the currency inflation in dollars was already present. More than enough to drive gold sky high. Just because the goods
prices don't reflect currency printing doesn't mean it isn't already present. He said something to the effect, " your chickens have already rousted, only now you find they
have come home"! When the dollar is removed from reserve status, the American economy with all it's deficit problems will be subject to all the troubles other nations now
have. In this atmosphere gold will increase in real term value many times over. You may also add any amount to that figure for future price inflation. Thanks FOA
Friend of Another (10/14/98; 20:12:03MDT - Msg ID:579)
PH in LA (10/14/98; 12:23:00MDT - Msg ID:572)
Ph,
Please read my post to Tyler Rose and Bottom$. It may cover some of the things you bring up. I think, the term hard currency has been convoluted during this era of fiat
currencies. You are right in that many refer to any currency as hard if it can be traded in the open market. In the future the Euro / Dollar conversion rate may be so far from
today's reality that trying to price it now is out of the question. You mentioned in another post that real assets will always be worth something, somewhere. True for the USA but they have so much currency represented worldwide as debt that even without the adverse effects of Foreign Exchange Controls, evaluating real assets in dollars will be, at best a computer's job.
Did you see my News post about the interest by Japanese in the Euro. The times are indeed changing. Thanks FOA
Friend of Another (10/14/98; 20:50:40MDT - Msg ID:581)
bmacd (10/14/98; 20:11:03MDT - Msg ID:578)
BMACD,
Do you own ABX? I remember when they were nothing back in the 80s. Then they and NEM started the revolution of gold loans! In 1995 or so everybody loved ABX as they were hedged. You were protected if the gold price dropped, so they thought. Today, many investors use the notion that Barrick has fallen less than others as a good reason for
them to have bought the stock. Nice thoughts but that was not the original premise for buying it. ------------------------------------------------------------
Here we have the top gold mining company in the USA, with an operating cost at rock bottom in some of their holdings and hedged for years with high priced gold. All of this
and it's stock falls! What is going to happen to the regular mines when the gold price goes up only a few hundred dollars before the market is shut down and a full scale currency war
destroys all equity markets? Sure, OTC gold may trade, but will these mines be selling gold out into the public when the governments are shutting down for lack of treasury
funding? BMAC, I don't think brokers sell these securities as investments in the context of future times. Mines are sold today as regular business ventures with a view that the past 20 years offers a framework for the future. The true facts are that even the last 60 years doesn't offer a historical example for the gold finding business. It's present structure is but a new niche in an evolving financial landscape. A landscape that may cascade onto the
dreams of many mine investors that thought they were gold investors.
Having said all of this gold stocks will, no doubt go up 600% next week. My loss Bmacd, hopefully not yours! Thanks FOA
Friend of Another (10/14/98; 21:46:26MDT - Msg ID:585)
Tyler Rose (10/14/98; 20:19:54MDT - Msg ID:580)
Tyler Rose,
The "3rd party Who" that you refer to is indeed the billion marks question! Ever notice how all of the gold sales often state who sold the gold. The public statement deliberately poses the sell side of the equation because the seller can be known. If they printed it as a gold buy, then the buyer would be listed and the public left in the dark about the seller.------------------------------------
They do the same thing with the gold lending markets. -------Think about it.-------When the Dutch sell gold, we know it because their vaults have less gold to be reported. But when they lease gold, nothing ever leaves the vault?? Example: We know that in a gold lending deal, say, $300 million dollars are created and given to someone to play with. Party #1. We know that a Bullion Bank obtained $300m but don't know where? If no CB vault had $300m in gold (one million ounces) removed then the money didn't come from a
gold sale. Now the contract can still be called a gold loan because it requires one million ounces of gold to be repaid. It didn't require that one million ounces be sold to create the money! Now, don't you think that a bank , operating in a fractional reserve environment, would be willing to create capitol by holding any 3rd parties collateral (in this case even dirt would due) for 1/2% to 1% plus fees and no risk whatsoever? You see, the CB gold only backs the deal. It's not sold in the event of default, it's delivered! Using fractional reserve banking, I wonder how many loans could be made with the same million ounces of gold? As to who are the 3rd party investors that helping to expand liquidity by really buying gold with in-ground reserves at a cheap price? When the dollar starts to come off the oil reserve standard, we will all find out. I have to go now. Be back to read the
thoughts of others.
Thanks FOA
Friend of Another (10/15/98; 05:22:12MDT - Msg ID:588)
NEWS
NOTE: The last sentence shows that the Japanese view
Europe as a stable enviorment.
------------------------------------------------------
Japanese restructuring 'crucial to end Southeast Asian turmoil'
-------------------------------------------------------
MANAMA: The Japanese economy is likely to remain sluggish during the next year, although prospects of recovery look good after that, according to a leading Japanese economist.
The Asian financial crisis will widen the US trade deficit, causing lower growth over the next two years, said economic adviser to the president of the Bank of Tokyo-Mitsubishi Kazuteru Tanaka.
He was the speaker yesterday at a luncheon-talk organised by the Bankers Society of Bahrain.
The event was held at the Regency Inter-Continental Hotel.
"Most of the Asian countries have been struggling very hard to regain a growth path," said Mr Tanaka.
"This will depend on how quickly Japan is able to achieve a growth path and
Japanese recovery depends on stimulation of domestic de-mand."
However, the Japanese economy continues to remain sluggish, with
Government projections at a negative gro-wth rate of 1.8 per cent for the
current fiscal year, ending March 1999.
This would mean two consecutive years of negative growth, with the previous
fiscal year recording a negative growth of 0.7pc.
"It is apparent that the Japanese economy is still in recession," said Mr
Tanaka.
"The sentiment of consumers and corporates is defensive yet, so it is really
the government's responsibility to change that sentiment.
"This is not going to be easy because of two big burdens in the form of the
bad debt problem with the banking industry and the need for restructuring
industry, both of which are connected very closely."
Accumulated bad debts have eroded assets of individual banks and, despite
their setting aside 40 trillion yen to combat this, the economy remains
sluggish.
However, the current Japanese government had brought in new rules and
regulations to tackle systemic problems and these should bear result in the
future, said Mr Tanaka.
The policies, supported by continued fiscal help from the government could
mean a return to positive growth after the next fiscal year.
However, Japan would not need to go into the market to finance the banking
industry's problems.
"We are the biggest net asset holding country in the world, with $1 trillion in
assets," said Mr Tanaka.
"Our GDP totals $4 trillion a year, second only to the US which is $8 trillion."
On the effect of the Asian crisis on the world economy, Mr Tanaka said the
US economy would see lower growth rates for the next two years.
"Until recently, the US economy was the anchor of the world economy," he
said.
"The US has enjoyed several years of positive growth with low inflation, better
corporate profits and full employment.
"But something is changing and the US economy could have a soft landing."
The European economies would remain stable, despite the German exposure
to the Russian crisis.
By INDIRACHAND
Friend of Another (10/15/98; 05:29:04MDT - Msg ID:589)
NEWS
S African gold empire in £6bn London move
---------------------------------------------------
by PATRICK HOSKING
THE sprawling mining empire of South Africa's
super-rich Oppenheimer family is moving to the
London stock market with a planned £6 billion
listing early next year.
In a painful blow for the Johannesburg Stock
Exchange and a coup for London, Anglo American
Corporation said today it was taking over its sister
company Minorco and listing the combined group
in London, where it will immediately enter the
exclusive FT-SE 100 club of blue-chip companies.
Anglo American plc, as it will be called, is also
moving its head office from Johannesburg to
London.
It will be a mining colossus - the biggest producer
of gold in the world and a major force in diamonds,
platinum and coal, as well as holding a 21% stake
in FirstRand, South Africa's largest banking group.
In a dramatic bid to simplify its cat's cradle of
cross-shareholdings, AAC said it was taking
operational control of a host of subsidiaries where
it has only minority control, buying assets from
another Oppenheimer vehicle, the De Beers
diamonds business. The restructuring goes much
further than anticipated and gives the new AA full
access to the international capital markets as well
as the prospect of a flood of new shareholders,
who until now have shunned it as a South African
company.
"It's a huge step away from the old conglomerate
thinking," said one adviser on the deals.
AAC, which has been hit by the savage downturn in
the commodities market, said it hoped the deal
would narrow the discount to net asset value at
which its shares trade. However, in early trading in
Johannesburg, AAC shares were marked down
1.5% to 194 rand.
Under a scheme of arrangement, AAC
shareholders will be offered one new AA share for
every AAC share they own.
Shareholders in Minorco, the Luxembourg-based
AAC subsidiary which owns non-African mining
assets and industrial businesses, will be offered
one new AA share for every two Minorco shares.
There is also a cash alternative of $16 a share,
which compares with a price of around $13 before
the bid was tabled.
The Oppenheimer family, which owns 8% of AAC
and a controlling interest in De Beers, supports the
restructuring.
Cazenove and Warburg Dillon Read are advising
on the London listing and restructuring, while
Morgan Stanley is providing advice to the
independent directors of Minorco.
Although its primary listing will be in London, AA
will have secondary listings in Johannesburg and
other markets.
Many of its largest businesses will continue to be
run out of South Africa, but main board functions
will take place in London.
Advisers to AAC, which is chaired by Julian Ogilvie
Thompson, distanced the deal from the move to
London of another South African miner, Billiton,
whose share price has halved in the past year.
They stressed that unlike Billiton, AAC was raising
no new fresh capital."
"Dramatic political change in South Africa, together
with an easing of controls on capital, has led to this
major step in bringing together the assets and
resources of AAC and Minorco," the two
companies said.
Among the side deals, AAC is acquiring the 43%
of Amcoal it does not already own and is tabling an
offer for the 48% of industrial holding company
Amic it does not already own.
© Associated Newspapers Ltd., 15 October 1998
This Is London
Friend of Another (10/15/98; 05:40:44MDT - Msg ID:590)
NEWS
NOTE: This is old news but in light of the Hedge Fund problems I ask; "if these people start buying gold, how in the world will anyone else be able to cover at today's prices"?
-------------------------------------------------------
Liu Shanen, vice director of the
Gold Economic Development and Research
Institute of the State Metallurgical Industry Bureau,
recommended that the People's Republic should
increase its gold reserves from the current level of
397 tonnes or 3% of total foreign exchange
reserves of $140.5 billion to between 1,000 and
1,500 tonnes, between 6% and 8% of external
reserves, "to prevent financial risk." The reasoning
behind this recommendation is apparently the
belief that China should cut its holdings of
dollar-denominated foreign reserves to guard
against a possible fall in the dollar on the
introduction of the Euro, the single European
currency, at the beginning of next year. China
currently holds about 60% of its external reserves
in US dollar-denominated assets, including about
$60 billion in US Treasury bonds. "Compared with
cash, gold is stable and safe," Liu Shanen said.
He also recommended that the Chinese
government should ease controls on buying and
selling by individuals in a bid to boost what he
described as "non-governmental" reserves. Liu
Shanen pointed out that China ranks third in
global consumption of gold and fifth in mine
production, but only twelfth in terms of its official
reserves in gold.
Friend of Another (10/15/98; 05:54:29MDT - Msg ID:591)
NEWS
NOTE: A very good article that we should discuss! I thank the Fiend's Superbear site for this.
http://www.fiendbear.com/
U.S. News 10/19/98
Does the buck stop here?
A falling dollar signals new danger
for the U.S. economy
BY PHILLIP J. LONGMAN AND JACK EGAN
Whether you were a middle-class investor trying to
preserve the value of your 401(k) or the world's most
powerful central banker trying to forestall global
depression, reading the financial pages last week
was often a disorienting experience. "It's probably
wise to put your newspapers in your in-box and
leave them there for about a week," Federal
Reserve Board Chairman Alan Greenspan
suggested in a speech to a group of business
economists.
Yet Greenspan could hardly fault the press for the
worried headlines he himself was helping to write. In
the very same speech, he warned: "We are clearly
facing a set of forces that should dampen demand
to an unknown extent in the months ahead. We do
not know how far it will go or how much it will affect
consumer spending. It's a time for monetary policy
to be especially alert."
In times past, even a hint of pessimism from
Greenspan has often bolstered financial markets,
as investors surmised that a gloomy Fed chairman
would surely want to lower interest rates to
stimulate the economy. But adding to last week's
confusing headlines, this time Greenspan's gloom
created nothing but more gloom, as investors
focused on mysterious new forces that seem to be
undermining all conventional wisdom about how the
global economy works.
The yen also rises. The most dramatic case was
the news out of Japan. For more than a year, the
consensus view has been that the main culprit in
the worsening Asian crisis is Japan's banking
sector. In recent weeks, fears about the contagious
effects of Japan's banking mess became so acute
that American Embassy officials in Tokyo
characterized the problem as a national-security
threat to the United States.
Then last Wednesday, Japan's ruling Liberal
Democratic Party submitted long-awaited bills that
would provide 10 trillion yen ($85.5 billion) to
recapitalize the country's banks. The proposed
bailout would be hard on Japanese taxpayers, but
it's just what the doctor ordered. The Japanese
stock market skyrocketed 6 percent, and the value
of the yen appreciated by a stunning 17 percent
against the dollar. But within a day this tonic would
create weird and debilitating side effects on the
world economy's tattered nervous system.
It turns out the hedge fund boys, those secretive
tycoons of the new economic order whose bets on
currency fluctuations increasingly determine the
fate of nations, have been wagering big time on an
ever weaker yen, which until last week seemed like
a no-lose proposition. The idea was to borrow yen
at low interest rates (less than 1 percent) in Japan,
convert them into dollars, and then lend the
proceeds out at higher interest rates elsewhere. So
long as the Japanese economy kept faltering and
the yen kept falling, these "yen carry" deals were
immensely profitable, since the loans could be
repaid with ever cheaper yen. But when the yen
started to strengthen on the supposedly good news
that Japan was finally getting on top of its banking
crisis, these highly leveraged deals began to
unwind, creating widespread panic.
A bad bond bet? It remains to be seen whether
the sudden fall in the value of the dollar against the
yen will be enough to cause a hedge fund or two to
collapse the way Long-Term Capital Management
nearly did two weeks ago. Julian Robertson's Tiger
Management, which has one of the biggest bets
against Japan, has lost about $1.8 billion, or 9.2
percent of its value, so far this month. Meanwhile,
many banks and even some industrial companies
are vulnerable as a result of their own yen carry
deals. And because of the size of all these lost
wagers, even unsuspecting homebuyers and
conservative investors in Treasury bills will soon be
feeling the aftershocks.
Last week, long-term U.S. Treasury bonds started
to plunge in price as their yields climbed back to
over 5 percent from recent lows of around 4.69
percent. The weakening dollar was a major reason.
Until recently, the Japanese in particular had been
huge buyers of U.S. Treasury notes, and a good
thing, too: With the U.S. savings rate now a
microscopic 0.2 percent, the American economy
desperately needs such capital from abroad. But as
the dollar weakens against the yen, U.S. financial
assets suddenly are worth a lot less in yen and
therefore far less attractive to Japanese investors.
Before, the greatest threat posed to the United
States by the Asian crisis was thought to be lost
exports; now it's clear that the agent of contagion
can come directly through the world's deeply
intertwined financial system. Last week, the U.S.
dollar also reached a 21-month low against the
German mark. The modest drop in short-term U.S.
interest rates announced by the Fed on September
29 and the expectation that further reductions are
coming were the main reasons for the greenback's
decline. Lower U.S. interest rates tend to reduce
the appeal of U.S. bonds to foreigners, who are able
to earn higher returns elsewhere.
This reality highlights another assault to the
conventional wisdom that occurred last week. The
more volatile world markets have become, the
louder the cry has been for the Fed to cut
short-term interest rates to keep the U.S. economy
humming along. Yet a new dynamic now seems to
be appearing whereby a cut in short-term interest
rates, to the extent it leads to expectations of a
weakening dollar and a corresponding fall-off in
foreign investment, creates higher long-term interest
rates.
Cash is king. Reinforcing this trend was a huge
increase in risk aversion among investors.
Suddenly, even long-term Treasury notes no longer
seem a safe enough investment, and more and
more investors are moving into short-term notes or
even cash. "This wasn't just a flight but a fright into
cash," declares John Krey, senior currency analyst
for Standard & Poor's MMS unit. According to
Morgan Stanley Dean Witter economist Stephen
Roach, "Lenders across the board are risk averse,
more so than anytime in this decade. The change
in the last month, and especially in the last two
weeks, has been as dramatic a shift" as any he
can recall. In Roach's view, "A credit crunch is
where we're headed."
If this dynamic continues in coming weeks, it could
create the same vicious cycle in the United States
that has undone so many other nations since the
Asian crisis began. At the very least, mortgage
rates, which are pegged to long-term rates, might
not keep dropping if foreign investors continue to be
scared off by the prospect of a falling dollar.
Refinancings to take advantage of lower rates would
also dry up. "So far a silver lining for many
individuals has been the money put into their
pockets when they have refinanced their
mortgages," notes Henry Willmore, chief economist
for Barclays Capital in New York. "A continuing fall
in the dollar and a backup in long-term yields might
take the bloom off that source of prosperity."
To Robert Brusca, the chief economist for Nikko
Securities, the New York-based division of the
Japanese brokerage, the fall in the dollar presents
the Fed with a "two-edged sword," making it harder
to pursue a policy of lowering interest rates to
stimulate the U.S. economy because it risks driving
the dollar lower. And at a time when the United
States is faced with record trade imbalances (on
the order of $15 billion to $20 billion a month), a
lower dollar could scare off foreign investors,
making it harder to finance those trade deficits.
"The U.S. is not in a position to be savior to the
world," notes Brusca. "What we're seeing is that
the U.S. economy has its limits."
A cheaper dollar does have a bright side, to be
sure. As President Clinton pointed out last week, at
least it will give U.S. steelworkers some relief by
raising the price of imported steel. And a cheaper
dollar also makes the dollar-denominated debts of
hard-pressed countries like Thailand and South
Korea easier to repay and relieves pressure on
such troubled currencies as the Brazilian real. But
as the dollar weakens, foreign countries have a
harder time exporting to the United States, as their
goods becomes more expensive to Americans.
That's one reason Japan's Nikkei average closed at
another 13-year low last Thursday following a huge
surge earlier in the week, with the loses
concentrated now among such major exporters as
Toyota. And to the extent that the weaker dollar is
symptomatic of a weakening U.S. economy that
requires more and more easy money to keep
growing, the development is decidedly bearish.
All these trends were enough to prompt J. P.
Morgan to issue the first forecast by a major
financial institution of a U.S. recession in 1999. If
that proves true, Greenspan may want to put off
reading his newspapers for more than just a week
or so.
With Matthew Miller and Steven Butler in Tokyo
Friend of Another (10/15/98; 06:20:55MDT - Msg ID:593)
turbohawg (10/14/98; 22:41:02MDT - Msg ID:586)
turbohawg,-------------------------------------------------
I hope the Dow doesn't fall any further. At this moment there is a whole group of not
only Hedge Funds, but major international banks that are even or just under water. Look
at my News post #591 and see the part: -------------------------------------------------
"Yet a new dynamic now seems to be appearing whereby a cut in short-term interest
rates, to the extent it leads to expectations of a weakening dollar and a corresponding
fall-off in foreign investment, creates higher long-term interest rates."---------------------
This kind of unconventional market action is going to undo even the conservative
financial players. As I said before, it is going to drive a large contingent of the world
capitol into "Euro Assets". If the Dow does fall before the Euro launch, much of this
money will go into the EMU basket of eleven currencies regardless of the perceived risk. It will
be the lesser of the two evils. As the dollar falls, gold will unfold into it's new image as a
Euro proxy whereby the Euro becomes the transactional currency for gold settlement, not
the current dollar. It should be an unfolding event, not a crisis run into metal. However, if
the current leverage crisis forces the default of much of the gold carry trade, the spike in
gold that closes the market will ensue. That's the part of Another's Thoughts I don't like.
We will see. Thanks
Friend of Another (10/15/98; 14:00:45MDT - Msg ID:594)
This rate cut will mean a dollar cut also!
The Federal Reserve cut rates! I think we can now truly say goodbye to the dollar! This
move should begin an extended period of dollar weakness. After the initial positive shock
of this action passes, the world currency system will be faced with few alternatives for
safety. BMACD, your gold stocks must be going up. Good luck . FOA
ANOTHER (10/15/98; 22:06:54MDT - Msg ID:602)
Thoughts!
Mr. Kosares, The new day we begin from a dark long night. The Greenspan, he has seen the end of his dollar as king! See now, how the assets are removed from the back of this
weak beast. It was planned for this time, from years that have passed, how these last days will show a new direction. Your Federal Reserve does now see this new war as a "battle
fought while in retreat"! Indeed, this retreat will become evident as "rates that rise" over a dollar "that does fall"! Gold? You have seen the small sales from small countries? I have waited, with patients, for large sales as some say would surely come. From the time of the Belgium deal, this year early, gold is offered no more. A US dollar price below $280 held the BIS as "the bank with no teeth"! A "one tooth cat" they are not, as this bank does mate with the great tiger of the orient. The last meeting in Hong Kong did
change that world. Both now have the large hunger for gold and consume it as I write. In Europe, my friends the Swiss, they speak of selling yet buy with both hands and both feet!
This new day for gold, it be right indeed!----------- --------------------- " the world does float upon
the ocean of dreams, when the wind of our mind blows full with a truth redeemed" Another
Friend of Another (10/17/98; 07:13:18MDT - Msg ID:615)
Where is gold headed?
ALL: Gold looked as if it would drop last week, but it didn't! I think it even bounced off
it's 220 day moving average (a good sign for Technical Analysis) on Friday. Why is it
starting to move up now, at the end of this year? This night (MST) I will offer further
reasoning to go with my earlier posts. Those writings dealt with how the Central Banks
lent gold but never sold it! Now Another has opened the door (in his last post) for some
analysis as to where gold is going and how soon. It should be interesting. Thanks FOA
Friend of Another (10/17/98; 21:33:27MDT - Msg ID:632)
THINKING!
All: If we step back to review the gold market throughout this last year, it offers a
surprising glimpse into an orderly process few thought possible. We have read many times
how this market was in a supply and demand deficit and it was the Central Banks that
were filling the void of un-supplied gold. Some reasoned that if it wasn't for this new
supply the markets would have been much higher by now. No my friends, that just is not
correct! Granted, there is much more gold being consumed than is being mined, but it
wasn't the CB that were supplying most of it. Yes, last year (1997) all the CBs on average
did actually sell off some 400 tonnes +/-, and that was NET sales, not leases. But the
question remains, who supplied the other 700+/- tonnes that made up the total deficit? If
the CB vaults lost only 400 then how could their lending action be identified as the source
of the new supply?? The answer is, it didn't! But I have gone to far, let us back up.
By far, the largest amount of gold lending / leasing is a paper product made possible
through the LBMA. This group of Bullion Banks and brokers (perhaps the Bank of
England also) trades some 30 +/- million ounces of gold a day. A day! Some of it may be
physical and some of it paper, but all of it Very Liquid! With a ready Gold CURENCY
market of this size, there is simply no problem raising paper currency capitol by shorting
paper gold. If you have the correct backing. I am assuming the reader has read my posts
#556 and #585 and much of the Thoughts! of Another.
If an entity can produce some form of collateral along with a Central Banks agreement
to back the gold loan with gold, then a Bullion Bank has little problem supplying cash by
shorting paper gold. The CB does not have to move or sell his gold and receives 1% or
2% for a signature on the general agreement. The BB collects fees and any arbitrage that
may result. The "entity" ( for poster Tyler Rose, that's the 3rd party) obtains little in the
way of return on this investment except for one obvious point. That being, that they will
receive the benefit of any net gains on the repayment of the gold loan, in physical gold,
after the financing is paid. This works because all of the risk is upon the middleman, the
Bullion Bank. Now considering that the BB hedges it's part of any gold risk (increase in
price) in the derivatives market so that in the completion of the deal if gold rises in price
this increase is, as stated above, delivered! As one might reason, the 3rd parties in these
contracts (the buyers that are never reported by the media) are banking on but one thing, a
huge increase in the dollar price of gold! In the event that the BBs are defaulted by current
events or total market failure, it will then be the Central Banks (as ultimate signers of the
General Agreement) that will deliver Real Gold from their vaults!
Now, back to my original point: Much of the extra gold that has been supplied to the
physical markets to cover the supply deficit has come from private holdings. Truly, gold
doesn't come out of thin air and neither the CBs or the mines were offering enough of it to
satisfy demand. Yes, as much as that flies into the face of accepted analysis, these private
Western Holdings were being sold even as the total gold market, including CB holdings
was being cornered by a market that, as Another said long ago "is not as before!
Not all of these maneuverings are done by major 3rd parties. Lately, a good deal of it is
done by traders and financial operators that are naturally attracted to action. These people
will get cleaned out by defaults simply because they don't have anything to offer the world
as a means to force delivery. I think it's called "no ace in the hole". However, any financial
power that has reserves that the economy needs will be supplied or paid in an acceptable
currency if necessary. If we think long enough on this we can see that perhaps next year,
much of the derivatives carry trade will be forced into default. In this meaning, default is
having to pay, not in kind, but in Euros.
But what will trigger this major break in the action, so as to start the ball rolling? It has
already happened. When Asia started to fall many, many months ago, that was the signal
that the first domino was falling. With the Euro expected to arrive in1999, it was time to
break the Asian gold buying (this does not include China as they will be part of Euroland)
and at the same time begin a long term breakdown of the dollar. A destruction that would
carry on for several years. Most of those years have passed.
What of tomorrow? The gold loans will now become harder to repay as the money that
the loans created is destroyed. The Central Banks, that largely stopped backing new loans
earlier this year, have now completely stopped for fear of having to deliver their gold
before the Euro is available. This time period for them has been one of also having no ace
in the hole. From now till the end of the year, they will begin calling in loans (pulling their
signatures) that are now seen as unnecessary. As England is not part of the eleven EMU
nations, look for the LBMA to be seen as carrying heavy risk from default. If the
derivatives markets fail, they will lose what risk hedges they have. This risk should begin
showing itself in the dollar price of gold anytime. With China buying to rid themselves of
dollars preEuro and the Swiss now buying to cover a huge mistake, the market should be
bumping up to $350/$360 by year end! Remember, the Swiss are also a nonEMU
country! thanks FOA
ANOTHER (10/17/98; 22:03:52MDT - Msg ID:636)
Jayne (10/17/98; 20:13:41MDT - Msg ID:624)
Jayne,----------------------------------------------------------------------------
My wisdom? It is but a small part of a large life. One should not offer to lose so much for so little. Your words consider not that life is more the value than wealth! The thoughts of all persons come and go with the morning air. Yet, one must breath the wind to live a full life. I offer you the air of history that proves the corruption of men. A corruption you will partake in, with or without a bet of life. Thank You
ANOTHER (10/17/98; 22:37:26MDT - Msg ID:637)
PH in LA (10/17/98; 13:35:54MDT - Msg ID:622)
Mr. PH,--------------------------------------------------
The Greenspan is of the BIS in spirit by day and silent by night. For many days have passed from the time that this bank was of one mind! Two factions are they that hold for
control. The Euro Group is the stronger hold now. The Federal Reserve does fight "the preparations" you speak of. It is to no avail. It was said before, this money war is for the American world a "fight in retreat". In my time I have not seen the USA as on the "Level eye" with the BIS. Perhaps they worked together during the war (ww2), but that was
then. This dollar, it will not die the easy death for many a strong person does still stand for this country. This is as it should be. We watch this new gold market together, Yes?
Thank You
ANOTHER (10/17/98; 22:57:24MDT - Msg ID:638)
Unomas (10/17/98; 13:52:31MDT - Msg ID:623)
Mr. Unomas,
It is unfortunate for such persons to hold the "paper stocks" during this time of history! Always the "good investment" for "the good times" they are. The future before us will change this thought for many the children of children. Every season has the special feel to the skin and this winter will bring the sand storm as not before. It is not our place to change this weather, rather to wear the correct garments. I have always found the winter,
it does change much to quickly for the traveler with all clothes. These traders will not move with the speed of sand and will find no shelter in paper skins. If the gods be
gracious, these seasons will change slowly, yes? Thank You
ANOTHER (10/17/98; 23:20:56MDT - Msg ID:639)
Aragorn III (10/16/98; 15:40:56MDT - Msg ID:612)
Mr. Aragorn, I read your write and this you say: "The modern use redefined the value accordingly". I can add not a word to this post. Your age is 100+, yes? Perhaps I am wrong, your wisdom, it is to die for!
Are you of the world that will use the Euro soon? I think this dollar and Euro will also find the value "redefined"!
I will be gone for a time.
Thank You
Aragorn III (10/16/98; 15:40:56MDT - Msg ID:612)
A final thought for all...on the notion of gold value over time relative to all things--particularly a fine suit for a man equating with one ounce. Just let it go. While some things do correlate well for periods of time, history may bear false witness when looking toward things to come. This is a world not as before. I offer this simple, real-world example. There was a time, not long ago, when gold panners in Columbia were frustrated with the abundance of hard grey "pebbles" that would litter the final washings of their gold. They heavy nuisances were discarded with disdain. Today we value platinum a bit higher than they would have imagined. The modern use redefined the value accordingly.
So it will be with gold. It is very important to remember that these are not the days of the pharaohs, the kings, or the czars. There are more people ALIVE today than the sum total of all who have lived and died before us. Economies have grown geometrically while the supply of real money (gold) has failed to keep pace. The price of everything in terms of gold actually decline over time. This has been obscured during the modern geometric growth of economies because the world has been detatched from a gold standard for the casual observer. As the pendulum swings its return, many will indeed be surprised that all things priced in gold have become so very much cheaper. This is good. The excess production of your youth (measured in gold) will not abandon you in your old age as a fiat currency is want to do. To express this in dollar terms for those who cannot detach their view from this measuring standard--if the U.S. reacted intelligently, naturally, and did not cling tenaciously to the current structure, they would peg the dollar to gold. Under this arrangement an ounce of gold would be priced at many thousands of dollars while a gallon of milk would remain at only two dollars. If the U.S. does not peg to gold, and they fight the stubborn fight, the dollar would be worthless relative to all things. Gold would be priced at many thousands and food would be priced beyond your best guesses.
Friend of Another (10/19/98; 07:07:44MDT - Msg ID:655)
News!
Rate-cut uncertainty
undermines pound
by BEN LEAPMAN
THE Bank of England will wait two more weeks
before deciding whether to make a further cut in
interest rates despite feverish City speculation
about emergency measures.
The prospect of an unscheduled rate cut was today
continuing to undermine the pound, after weekend
Press reports suggested that the Bank's monetary
policy committee was about to go into emergency
session. However, the MPC is understood to be
sticking to its timetable on which the next rates
decision is due on 5 November. On Friday a Bank
spokesman denied that an emergency meeting
was taking place that day. The nine members of
the MPC are all in regular contact because they are
overseeing the creation of the Bank's quarterly
Inflation Report and forecasts, due to be published
on 11 November.
Sterling today fell half a pfennig to Dm2.757, barely
above its 18-month low, although it rose a third of a
cent to $1.705 versus a slumping dollar. Attention
was focused on the Bundesbank, which will decide
on Thursday whether to cut German interest rates
following cuts in America, Canada and Britain.
The Bundesbank is thought likely to resist pressure
to cut, but it could change its mind if the mark rises
sharply enough to hurt German exporters. Today
the dollar fell three-quarters of a pfennig to
Dm1.6165, threatening to fall below 1.60 for the
first time since January 1997.
© Associated Newspapers Ltd., 19 October 1998
This Is London
Friend of Another (10/19/98; 07:52:55MDT - Msg ID:656)
VERY GOOD SPEECH!
ALL: Prior to the USAGOLD Forum we had posted an excerpt from another meeting of
the American Enterprise Institute. They are located in Washington D.C. and are very
active in discussing world affairs, including a separate section devoted to New Atlantic
Initiative (NAI). This is a brief introduction to a meeting held in Istanbul, May 1-3, 1998.
Please read all of the preamble to this speech given by Mr. Michael Portillo. The speech
also follows and is extremely timely to your investments decisions if your thinking involves
politics. They are located at http://www.aei.org/start.htm
------------------------------------------------------------------------------------------------------------------------
• NAI holds annual congress in Istanbul, May 1-3, 1998.
-----------------------------------------------------------
On Thursday, April 30, 1998, the United States Senate voted 80 to 19 (with one
abstention) to ratify an amendment to the North Atlantic Treaty that will allow Poland,
Hungary, and the Czech Republic to join NATO. The following day, the European
Parliament met to decide which member-countries would qualify to join the European
Monetary Union on January 1, 1999.
The same weekend the New Atlantic Initiative, headquartered at the American
Enterprise Institute in Washington, D.C., in association with the Turkish American
Association in Ankara, held its annual congress in Istanbul. Turkey, a NATO member,
is a country of "vital interest and concern," NAI executive director Jeffrey Gedmin
remarked, "and we wanted to underscore Turkey's importance as a valuable member
of the Atlantic community."
More than 400 distinguished political, intellectual, and business leaders from more than
twenty countries participated in the Congress of Istanbul. In plenary and breakout
sessions, speakers and delegates tackled issues of democracy and Islam, European
Monetary Union, NATO enlargement, free trade and the transatlantic marketplace, and
security in the Balkans and the Middle East, among others. Delegates received written
greetings and words of support from British Prime Minister Tony Blair, U.S. Secretary
of State Madeleine Albright, former British prime minister Margaret Thatcher, Polish
Deputy Prime Minister and Minister of Finance Leszek Balcerowicz, former U.S.
secretary of state Henry Kissinger, U.S. Senate Majority Leader Trent Lott, and
Speaker of the U.S. House of Representatives Newt Gingrich.
------------------------------------------------------------
• NAI hosts Michael Portillo ------------------------------ Will European Monetary Union Fracture the
Atlantic Alliance?
----------------------------------------------------------
Former British defense minister Michael Portillo unwaveringly answered yes. In
keynote remarks delivered Wednesday, May 27, at the American Enterprise Institute,
Mr. Portillo argued that the single European currency has nothing to do with
economics. Rather, it is an essential part of a new European state–one that is
potentially less democratic, more hostile to the Anglo-Saxon economic model, and
decidedly at odds with America over matters of security and foreign policy. Speaking
at the NAI's annual congress in Istanbul, Mr. Portillo warned that "it would seem to me
foolhardy to abandon our very long-established alliance with America, in the visionary
hope that Europeans can find a satisfactory common outlook which has eluded them
until now." Jeane Kirkpatrick, director of foreign and defense policy studies at AEI and
former U.S. ambassador to the United Nations, and Richard Perle, a resident fellow at
AEI and former U.S. assistant secretary of defense, also spoke at the May 27 lecture.
-----------------------------------------------------------------------------------------------------------------------
Extract from remarks made by the Rt. Hon. Michael Portillo to the-----------------------------------------------------
---- New Atlantic Initiative Congress of Istanbul--
---------------------- May 2, 1998------------------------------------
Speaker Gingrich was not the first, but he is the most recent, to point out that Europe's
headlong rush to monetary union looks perilous. Processes that took more than a
century in the development of the United States are being squeezed into a few brief
years. In America a nation was created, with much discussion of what should be the
balance of powers between states and union. In Europe we have reversed the logical
order of nation building, and the visionaries are trying to create a European state by
creating first the attributes of a state, such as a single currency, long before the
balancing competences of Europe and its member states have been defined.
As Mr. Gingrich has pointed out, a single currency where we do not have a single labor
market brings particular dangers. Europe contains many different economies, with
different cycles and varying speeds. Any one of them is prone to recession, but in a
Europe where there are different currencies, any state can, by adjusting its currency and
interest rates, provide itself with a natural stabilizer. The idea of applying a single
exchange rate and a single interest rate to such diverse economies is economic
madness.
But there is a simple explanation. The justification for the single currency has almost
nothing to do with economics. It is the essential foundation for a new European state.
In fourteen member states that logic and ambition are openly avowed and applauded.
Only in Britain, where the idea of a single European state is viewed with widespread
public hostility, do politicians pretend that the single currency is about completing the
European single market, with virtually no political implications at all.
Fortunately, Dr. Helmut Hesse, a member of the directorate of the Bundesbank is more
honest and tells us straightforwardly that "monetary union is the last step in a process of
integration that began only a few years after the second world war in order to bring
peace and prosperity to Europe." Of course it is, and that is why any querying of the
pace of monetary union or the validity of the convergence process strikes Britain's
European partners as mere pedantry and obscurantism. Our partners are on their way
to their federal destiny and nothing can stop them.
You have to take seriously their visionary idealism. Nationalism, they argue, caused the
wars of the past in which millions of European and thousands of Americans have died.
Abolish the nation states and you have eradicated the cause of conflict. You have to
take it seriously, but you are not obliged to agree with it.
It is true that extremist nationalism has been a root cause of past wars. But there is no
reason to believe that abolishing the nation states, by creating a European state to
replace them, will do away with nationalism. Yugoslavia and the Soviet Union should
sufficiently tell us that. In any case, past wars had complex causes. They were started
by tyrants who capitalized upon a sense of national grievance – some piece of territory
or some population that yearned to be reunited with the motherland.
One of the worries about the single currency is precisely that it will lead to less
democracy and new causes of grievance. The central European Bank will make
decisions on interest rates for all countries participating in EMU. As Dr. Tietmeyer, the
Bundesbank President, has remarked candidly, it is an illusion to think that member
countries could then retain national autonomy over taxation and labor market issues.
So the political decisions most critical to the economic life of people in the member
states, decisions affecting their wealth and the rate of unemployment, will be in the
hands of the ECB. But of course that body is not democratically accountable. No one
will vote for it, and it will not be under governmental or parliamentary control in the way
that national central banks normally are.
Imagine what might be the impact, once we have a single currency, on people in a part
of Europe suffering from recession. The substantial barriers to free movement of labor
prevent them from seeking work elsewhere in Europe. They cannot vote to change the
policies that have made them jobless, because those policies are made above the
level of national government and beyond democratic control. They will be able to see
that other countries are faring better, and that whilst the single exchange rate and
interest rate may suit their neighbors, it is crippling job opportunities at home. That will
produce a sense of grievance, a source of bitterness between peoples in Europe, and
a sharp reduction in democracy.
Of course, in theory the democratic deficit can be filled by boosting the status and
power of the European parliament. In my view that will not do. Democracy has to
operate within a society of shared values and experience, otherwise people will not feel
that the parliament for which they vote is representative of their interests. The United
States, despite its size and ethnic diversity and thanks to its historical experience, has
such a shared set of values, and they are regularly articulated by politicians and by the
people. Europeans evidently do not share a set of values, and you will not be able
simultaneously to convince Greeks and Irish and Swedes that they are adequately
represented in a body drawn from such politically diverse places.
Some of the differences show up in the very dissimilar national approaches to foreign
policy. To the frustration of America, European nations have disagreed sharply on
most critical issues in recent years: the Falklands War, South African apartheid, the
Gulf War, subsequent policy towards Iraq, Bosnia and the Great Lakes area of Africa.
Now it is proposed that Europe should have a common foreign and security policy, and
one can imagine a cheer going up in Washington at the prospect of at last hearing
Europe speak with one voice.
That might be the wrong reaction. America needs to consider what such a common
policy might look like, and all the evidence so far is that is would not be pro-American,
and indeed might be anti.
For those intent on building the new European state, the creation of a common foreign
and security policy is essential. Along with EMU and a common border, it represents a
critical attribute of a sovereign state. Given the diversity of actual views in Europe,
common positions could only be arrived at by majority voting. So far only actions in
pursuit of positions already arrived at by consensus are to be subject to majority voting.
But it is the clear intention to move further.
Those European countries offering support to the United States in recent times, over
Libya or Iraq for example, have been in a small minority. Under a common foreign
policy decided by majority voting, they could be outvoted, and they would have
surrendered the option of adopting an independent national position.
For the United Kingdom, and maybe others, that is a dismal prospect. The UK has a
long history of joint work and action with the U.S. in diplomacy and military action. We
share many values in common and agree on foreign policy stances much more often
than not. Demonstrably, we have agreed rather less with our close European
neighbors. It would seem to me foolhardy to abandon our very long-established alliance
with America, in the visionary hope that Europeans can find a satisfactory common
outlook which has eluded them until now.
Frequently, the only policy position on which it might be possible to achieve a majority in
Europe, would be inaction. The policy paralysis that has gripped Europe in the past
would be institutionalized, and America would lose any European voice of support in its
global role of combating tyranny.
Bad though that seems, things could actually be worse. Those who look forward to
European political union tend to favor the prospect of a European political bloc which
follows policies which are distinctive from America's Some of those who promote the
idea of a common European foreign and security policy undoubtedly wish to see a
reduction in American influence in Europe. That has been a recurring theme in the
decades following the last war. There have been calls to replace NATO or reduce
American influence within it. The more America has been needed, the more that
dependency has been resented.
Those who dream of a Europe free from American influence and rid of U.S. forces also
look forward to the emergence of Europe as a new power in world affairs that can be a
counter-balance to America. For those reasons I would expect a common European
policy to veer between being un-American and anti-American.
I fear that there are those building the European state who hope also that it can offer an
alternative economic model to the Anglo-Saxon world. There is much talk of social
Europe. It is a code for maintaining much higher levels of public spending and a much
bigger role for the state than has become the norm in today's world. European
governments tend to be much more statist and corporatist, and they feel unable to
adjust to a competitive world which tends to place more emphasis on the
encouragement of enterprise and a reduced role for government in the economy. They
cherish the hope of building a Europe big enough to resist the competitive pressures of
the outside world.
In Britain, and a number of countries in Europe, large parts of public opinion are
unconvinced by the arguments for political union. But a lethargy is undermining them.
The most effective argument which is wearing down their resistance is that European
political integration is inevitable, and cannot and should not be resisted.
What is needed is an alternative. We must explain that countries need not travel down
the route to the extinction of the nation states of Europe. People in Europe are being
led to believe that the only alternative to political union is isolation. This is absurd in a
world where the nations of the world are increasingly united in their approaches, with an
ever-larger number of liberal democracies, an increasing acceptance of liberal
economics and with technology linking our peoples ever close together.
Friend of Another (10/19/98; 08:16:37MDT - Msg ID:657)
Hallmarking of gold shows big increase!
MANAMA: Gold hallmarking figures have dramatically increased this year, as
compared with the past two years, it was announced yesterday.
----------------------------------
Bahrain Assay Section head Abdul Khaliq Al Bosta said 1,018,493 individual
gold pieces, weighing 7,295,352gm, were hallmarked from January to
September this year.
----------------------------
This figure, he said, showed an increase of nearly 10 per cent when compared
with the same period in 1996.
"This March we recorded an all time high of hallmarking over a million grams
of 140,943 individual pieces, which is a growth of 31.3pc when compared with
the same period last year," said Mr Al Bosta.
"Over the last month, in preparation for the Wonders of Gold Exhibition, the
Assay Section has been busy, working extra hours to cope with the influx of
Bahraini gold. We anticipate figures for gold hallmarking this month to be the
highest yet," he said.
The Wonders of Gold '98 Exhibition, under the patronage of Prime Minister
Shaikh Khalifa bin Sulman Al Khalifa, is due to take place at the Le Royal
Meridien Hotel from October 28 to November 2.
It is being organised by the BPMB, in co-operation with Bahrain International
Exhibition Centre.
Bahrain Promotions and Marketing Board (BPMB) acting chief executive
Robin Marriott said the rise proved that jewellers were working very hard and
looking forward to booming sales during the upcoming exhibition.
"The increase in figures is largely due to the success of the gold exhibition
and the high standards of Bahrain's gold hallmarking legislation.
"Bahraini hallmarked gold serves as a guarantee to shoppers, that what they
are buying is genuine quality. All jewellery on display at the exhibition and
sold in Bahrain has to be hallmarked," he said.
-----------------------------------------------------------------
Copyright © Gulf Daily News, All Rights Reserved.
WWW by Arabian Net
Friend of Another (10/19/98; 08:18:58MDT - Msg ID:658)
Arabia and South Africa!
Bahrain studies pacts to bolster South Africa ties
MANAMA: Bahrain and other GCC states are exploring the possibility of
signing agreements with South Africa, to promote bilateral trade and
investment.
South Africa is keen to forge ties with new partners, in a bid to become a
major player in international trade and investment, said Counsellor, political, at
the South African Embassy in Riyadh Ashraf Suliman.
He was speaking on the sidelines of a seminar on South African-Gulf
Connection: Investing towards a new millennium, held yesterday at the
Bahrain Chamber of Commerce and Industry.
The event was organised by the South African Embassy in Riyadh, in
conjunction with the chamber.
Chamber president Ali bin Yousuf Fakhro said he hoped the event would be
the start of a series of similar events in Bahrain and South Africa, to promote
bilateral trade and investment.
"Our relations with the Gulf have been booming since 1994, when the African
National Congress (ANC) government came into power," said Mr Suliman.
Gulf states and South Africa recognise a need to enter into an equal
partnership, which would benefit all concerned.
"With Bahrain and Kuwait, we are discussing a treaty for avoidance of double
taxation and for investment protection," said Mr Suliman.
He said draft treaties had been exchanged with both countries and
negotiations were currently underway.
With Saudi Arabia, South Africa is set to sign several treaties later this year.
Two-way trade between South Africa and Saudi Arabia had reached one billion
Saudi riyal (BD10 million) and the country was South Africa's biggest trading
partner in the region.
The agreements to be signed, during a visit to Saudi Arabia by South African
deputy president Thabo Mbeki, will include an overall co-operation agreement,
a memorandum of understanding (MoU) on oil, a defence co-operation
agreement, a trade and investment agreement and a sports and culture
agreement.
In addition, the chambers of commerce of the two countries will also sign a
co-operation protocol.
Chief executive of the Government-owned promotion body Investment South
Africa Rafiq Bagus said South Africa was a member of the World Trade
Organisation (WTO) and was committed to international trade practices.
Objectives of the government's economic strategy was to achieve a growth
rate of six per cent and create 400,000 jobs per annum.
This would be done through deficit reduction, phasing out of exchange
controls, reducing inflation, rationalisation of tariffs, restructuring of state
assets, reduction of corporate and personal tax and enhancing global
competitiveness.
Inflation was currently hovering at 8pc to 10pc and the budgeratry deficit had
been reduced to 10pc of gross domestic product (GDP), said Mr Bagus.
He said the country's economy, which was in the past focused on import
substitution, was being re-oriented towards an export economy.
Mr Bagus said crime in South Africa was being adequately dealt with and the
Government was committed to eradicating crime.
The two areas in which crime has increased is crime against women and
crime against children, he said.
By INDIRACHAND
Friend of Another (10/19/98; 20:36:09MDT - Msg ID:672)
PH in LA (10/19/98; 11:02:04MDT - Msg ID:661)
PH, I'm glad you read the article from AEI presented in my #656 post. I like your last sentence "Pointing out the rigors of the journey is a coward's argument against embarking on the journey altogether."
------------------------------------------------------------------
That is so true! Has no one studied world history? It seems that every country has traveled
a difficult road during their creation. Need we use American History as an example? Also,
every one of them have experienced turmoil during their existence. Why then, do the
analysis see that the rocky road ahead for Europe as a prelude to failure? If every country
that experienced political, labor and financial troubles failed because of them, no nation
would exist! -----------------------------Some how, I feel that Mr. Portillo is trying to show
that the EMU will come about in spite of all of the obstacles, because it is more a
political / nationalist union than financial! I say nationalist in respect to the European
urge to go their own way and not be part of the United States as a monetary offspring. I
agree that it will fracture the Atlantic alliance. It is this fracture that so impacts the middle
east oil interest if only because Europe is closer and where America is an ocean away.
------------------ One can see that much of his speech is from an English vantage point
knowing full well that England may never enter the EMU / Euro world. However, reading
closely we see the very European notions being analyzed. Those notions are real and
projected outright in Europe today. If they produce a solid Euro it will pull in China, India
and the Middle East (oil). With Asia, South America, Canada and Mexico headed for
total breakdown, the impact of a new European Powerhouse upon the US dollar would be
colossal! While traders worry about a few dollar change in gold, they lose sight of the
financial missile coming straight at them. FOA
Friend of Another (10/20/98; 07:26:21MDT - Msg ID:677)
E- Mail question sent to USAGOLD!
Another,
You said on July 19,1998, "The US Federal Reserve will now have little
choice but to raise interest rates as the dollar currency inflation of past years moves from
"paper assets" into real things."
----------------------------------------
We hardly see this to be the case in recent weeks. Would you please care to comment.
---------------------------------------------------------
David L.B.
-----------------------------------------------------------
David,------------------ I would like to comment on this. You may already well know that
currency inflation and price inflation are two different things. If your statement of "We
hardly see this" is applied to price inflation in the USA today, then I totally agree. In years
past the great inflations that occurred in nations with dominant currencies were not subject
to markets that were worldwide in scope. Those inflations (currency inflation and the
resulting price rise) were played out in a more local arena. Even the most recent example,
the German inflation, did not have the moderating influence of a world economy
marketplace as today. In that time, large increases in money assets were quickly followed
by increases in the prices of goods and services. They had no real means of exporting their
money asset inflation to other countries (sending currency out of the nation to be held as
asset reserves or to buy goods for import) in order to negate a domestic price rise. Gold,
as part of the world monetary settlement system helped to block that path.
-------------------------Current examples of money inflation and the resulting price inflation
such as in Mexico, Brazil, Korea, etc., all have resulted because they too can not export
their money assets on par with other currencies. The exchange rates, almost like gold,
block their path. However, we must understand that these are not major currencies much
less world reserve currencies. The dollar of present operates in a world currency system
without gold, that allows this currency to be exported without restraint. Any attempted
exchange rate adjustments implemented to block this movement (dollar falls and the Mark,
Yen, etc. rise) runs head on into a loss of trade with the America. The result is a dirty float
of exchange rates in that most Central Banks artificially keep the dollar flowing out of the
US because they have on viable alternative vehicle to base trade values on.
------------------------------------------------ Using this line of reasoning, we can see how a
massive inflation of dollars over many years has built up. When something does come
along that blocks that outflow of dollars and even causes it to reverse, the dollar will
plunge on exchange rates and bring home all of the past buildup of price inflation. Indeed,
the dollar and it's price inflation will look much like Mexico and the lot. As you have seen
lately, they always raise interest rates in Mexico and Brazil in an effort just to keep the
currency in use. In like mind, so will the Federal Reserve raise rates as needed with little
regard for local economic conditions. If the Fed can lower rates, as they just did, for a
non-economic purpose (to kill off several Hedge Funds and save several banks) so to will
they raise rates to save the dollar!-----------------------David, it's important to understand
that Another must think with a view for the world financial framework, not just the USA.
I agree that US rates will be rising soon as the dollar is severally challenged by the Euro.
Thanks FOA
Friend of Another (10/20/98; 08:04:40MDT - Msg ID:678)
Buena Fe (10/19/98; 21:03:10MDT - Msg ID:673)
Buena FE,---------------------Hello! Yes, I agree that the Argentina gold sale announcement (see USAGOLD MK post) is no less than market posturing. The same thing happened with the Russian gold sale speculation. They did, by the way, sell some gold, but as soon as it hit the market it was picked up with ease. The media and short brokers made a big deal of it. After selling a small amount (one tonne) the Russians
stopped? --------------
It's the paper gold and derivative gold markets that make move on these normal events than needed. They are so leveraged that any news at all sends them off. But, notice over the last weeks and months how these sale stories have lost impact on the gold price. It comes right back after a few days. That's because the paper markets brace for an
onslaught of new paper supply that doesn't come. Lease rates are on rock bottom as only a few lenders are trying to manipulate a market that has even fewer "Qualified" players. I add that they are not Qualified because the Major CBs are not signing on anymore! Truth be told, they started slowing down the leasing game just as soon as the Euro had gained
the eye producers to become an oil settlement vehicle. And no doubt that was prompted by the use of gold in it's reserve mix! --------------------------------Look for these down drafts in gold to be shallow. I think it will trade up back into the range that the Euro Group CBs wanted it be in, $320 / $360 and no higher. At least until year end.
thanks FOA
Friend of Another (10/21/98; 07:25:50MDT - Msg ID:696)
Argentine coin sale??
David Linkley (10/20/98; 18:39:57MDT - Msg ID:686)
------------------------------------
Thanks for the post about the Argentine coin sale. Why would they offer to melt the coins
for sale? Everyone on the planet knows that gold in recognized coin form can be readily
used to pay off debts, even large ones. My observations are: They will do the same as
Russia and sell only 30 or 40 thousand ounces (perhaps 100,000 coins?) then stop the
sales. OR They will melt them down anyway (without offering them in coin form) because
someone is pressuring them to fill a physical void of bullion bars.
------------------------------------USAGOLD: It will be very interesting to see just how
many of these coins Do end up on inventory with precious metal dealers in the USA, or
anywhere. I have heard nothing about it being offered as a package to the investment
community? -----------------------------------------ALL: If this is a true sale (not just market
posturing) then it may be viewed as the most bullish conformation of an impending gold
crisis the world has had. It's one thing for a national Central Bank to sell gold bullion and
quite another to sell it's last pre-minted (old) coins in large amounts. We truly may be
entering the beginning of gold bull market brought about the relentless selling of gold that
hasn't been delivered to date. If the financial operators (hedge funds) are shut off from
borrowing gold (even with low rates) because of performance problems, the game is
winding down! When the flash point is reached, we should quickly move back to the $320
/ $360 area with an over run of, perhaps $50 above that. For investors that gamble, the
gamble today will be timing the purchase of gold. If the market runs far above accepted
levels, before the end of the year, massive default could occur. In that climate, no one will
buy or sell gold. Dynamic time lie just ahead! FOA
Friend of Another (10/21/98; 07:49:20MDT - Msg ID:698)
Japan's bank breakthrough!
THE Japanese government today made a
breakthrough in its drive to shore up the banking
sector as a major solvent bank stepped forward to
accept public funding.
Industrial Bank of Japan, the country's
seventh-biggest lender, stressed it was accepting
taxpayers' money for the good of the nation and the
financial system, not because it needed extra
capital.
Tokyo has defied international critics by finalising a
60 trillion yen (£303 billion) package of State
funding to tackle the bad-debt crisis.
However, analysts feared the rescue plan would
founder because no healthy bank would want to be
seen to accept public funding. the Nikkei 225
Average closed 408 points up at 14,216, led by
banking shares.
© Associated Newspapers Ltd., 21 October 1998
This Is London
Friend of Another (10/21/98; 15:11:43MDT - Msg ID:702)
Coin Auction?
USAGOLD: "Little effect on the price of gold"? I'm sure you expect no downside
pressure from this sale. Michael, I bet a gold auction is the last thing the US treasury
wants! It wouldn't surprise me if we hear them change this to an outright gold sale. I say
this because the last time open free market auctioning of gold took place was in the late
70s when the USA sold one million a month. These types of sales tend to raise public
attention about gold and usually increase the bidding! ------------------------------------ I
have to say again, for them to offer pre-1900 coins as an obvious type of bullion-for-debt-
retirement sale must be the absolute most bullish development in the gold market. When
this market does turn, it will be after every last possible ounce of physical has been
offered, leaving nothing but the trading of paper gold debt. Some replies, then more on
this later. I want to check on something. FOA
Friend of Another (10/21/98; 17:30:48MDT - Msg ID:703)
REPLY TO: Gandalf the White (10/21/98; 10:29:55MDT - Msg ID:699)
Gandalf, -------------- In your post you mention "us simple stupid folks". Well, there are
more than a few people that are "simple" and a number of them are even "folks". I have
known and do presently know these types of people. Many of them have a way of
expressing thoughts and aspirations about life and wealth with such logic that it usually
leaves me feeling "stupid"! ---------------------------------------------------Your question:
"Who sets the "accepted levels" ? The ECB's? ------------- Much of the large scale gold
leasing began with the same group of Central Banks that will be part of the EMU. The
leasing expanded with the idea that the dollar price of gold could be lowered without
having to put actual physical gold, from the vaults, on the market. As much as the world
financial analysis hate to say it, gold is still the measuring stick for currencies. Many paper
currencies are valued mostly by their exchange rates against the dollar, so the gold price in
their terms is not as important. However, in order to increase the prestige of the dollar, the
world reserve currency, gold (the currency) had to be devalued in dollar terms. This type
of nonphysical gold manipulation could only work during the end time for the dollar. With
the dollar reaching the end of it's paper currency life cycle, most nations and national
Central Banks do not actually hold enough physical gold (in amounts that are relative to
circulating currencies). They hold some gold, but mostly rely on the public gold markets
to judge how acceptable currencies are. ---------------------------- The post of :Aragorn III
(10/21/98; 11:10:08MDT - Msg ID:700) -- gives an excellent feel for the fiat money
cycle.--------------
The Euro was taking much longer to create than once thought, and the 90s were about to
see the dollar dropped from settlement standards. More on this in a minute. ------ In order
to retain the dollar as the leading currency, it's gold price was lowered by allowing certain
investors (3rd parties?) to use collateral to finance the purchase of leased gold from CBs.
The gold was left in the vaults as leased assets and the cash created by the sale was used
to add liquidity to the world financial structure. In return for this sale of gold, certain
commodities were supplied in such quantities as to keep their price low in dollar terms
(oil). Because oil is settled in dollars, and because it is a far larger and visible market than
gold, in this action. the dollar was also further enhanced as a reserve
currency.-------------------------This process alone, the falling prices of oil and gold, was
enough to set off a world liquidity expansion as never seen before. This was needed
because the dollar, in the early 90s had stopped expanding (read that as debt was
contracting) and threatened the world with a financial crisis. A crisis that would occur
without an alternative currency system. In many ways this seed was planted in the 1987
crash-----------see this as a partial reply to-- (scp (10/20/98; 11:24:55MDT - Msg
ID:679).---------------------------------------------As you may now see, the original purpose
of leasing gold was not to put the gold on the street, but to use it as a leverage to raise the
dollar value and in turn increase liquidity, they were buying time. Many of these loans
were indeed for the expansion of mining with the intention of physical gold being used for
repayment. Everyone always assumed that the gold from the mines was going to flow
back into the CB vaults. But, what no one questioned, was, if the gold never left the CB
vaults (see my other posts) why would it go back there? No, a good deal of this gold
repayment will flow through the Bullion Banks and arrive in Another account! But don't
look for a road map showing the world the path, it will not be discussed! ---------------
As for the gold loans that went to expand financial (paper) dealings (hedge funds and
countless others) they were to be self liquidating. If the loans blew up then the CB vault
gold would be delivered (again see my other posts). The escape route, in this
circumstance, for the CBs was to be the Euro. If it became strong and replaced the dollar
for oil settlement, among others, then the Euro could actually be printed and delivered for
oil, in affect, buying gold! An action that the new ECB will conduct with it's new EMCBs.
----------------------------------- Again, your other question: Who will default and why ?
------------- With the leasing market expanding, along with stock, bond, derivatives and
currencies markets, financial operators jumped into the game (LTCM) mostly because
they read it wrong. These people (Andy Smith??) are the ones that helped send the gold
market much lower than it's original simple purpose intended. No entity was ever
dumping enough gold onto the market to drive it that low (below $320??). The leverage
paper boys had figured out the game and were exploiting it. It was the Euro bickering that
delayed it's debut long enough for the Shorts to get a foothold into the market and drive
the paper price down. This is one of the major reasons that some CBs actually did SELL
some gold. To keep the market from exploding. (see my other posts) Add to this that the
Asians had started buying actual physical at these low prices and you had the makings of a
disaster. A disaster in that the CBs may have to deliver more gold than they had!
------------------------------- This is the flash point that Another has described as being "at
the door" today. If the Shorts ever have to start covering, the entire market, as we know it
will stop functioning. --------------------- As for the "anyone" in your question: "Why will
not anyone buy or sell gold ? please explain "anyone"------------- It's you my friend, and
me, and everyone that reads this post. Look back in history and you will see that when the
gold price, on and off the market, is soaring, NO ONE will SELL to ANYONE!!
Especially if the world reserve currency is being destroyed. --------------I think I have said
enough for now. More replies later.--- Thanks --- FOA
Friend of Another (10/21/98; 19:04:08MDT - Msg ID:705)
RSA STOCKS: Are they safe?
Note: Mr. TYoung, is this the start of a trend that changes the political direction in South Africa?
21 October 1998
Govt to take
unexploited mining
rights
Stephané Bothma and David McKay
PRETORIA - Government intends to nationalise
SA's unexploited mineral rights in the next 20
years to give black companies greater access to
them.
Releasing a policy white paper and draft
legislation for SA's new mining and minerals
policy yesterday, Minerals and Energy Minister
Penuell Maduna said it was unacceptable to
government that two-thirds of private ownership of
mineral rights was in white hands. However
Maduna said current mining operations and bona
fide intended operations would be allowed to
continue and would not be tampered with by
government.
This did little to ease the fears of SA's mining
industry which believes that government
proposals could lower the value of mining
companies' shares.
SA mining industry's umbrella organisation, the
Chamber of Mines, said that while the state must
be the custodian of SA's mineral resources, a
system of state regulation could not infringe on the
property rights of private mineral rights holders.
It said government's white paper was the most
significant indication of government policy
towards the mining industry since it came to office
in 1994.
Maduna expressed great concern about the
downscaling of the industry and said the white
paper was an important policy indicator for the
short and medium term.
"In a nutshell, the department will facilitate the
establishment of institutional support structures to
alleviate the devastating social costs of the
downscaling process," he said.
"While we want to prevent the hoarding of mineral
rights and the sterilisation of mineral resources,
there must be no doubt that security of tenure will
be guaranteed. We do not want the industry to
operate under a cloud of uncertainty," he said.
Government's long-term objective was for all
mineral rights to vest in the state, but as a
transitional measure, a new system for granting
access to mineral rights would apply.
The new system's main aspect would be that the
right to prospect for and to mine all minerals
would vest in the state without infringing on the
rights of existing mining rights holders. Maduna
said the white paper mentioned no specific
transition period, but he expected it to be about
20 years.
"Security of tenure will be ensured by granting
prospecting and mining rights for specific
periods, which are capable of cancellation or
revocation only for material breach of the terms
and conditions of the rights.
"The holder of a prospecting right will be entitled
to progress to a mining right on compliance with
prescribed criteria and commitments."
Maduna said the "use it and keep it" principle
would be introduced to discourage unproductive
holding of rights and also to ensure retention
where exploitation might not be economic or
might disrupt markets.
"Royalties will be payable by the holder of a
mining right to the registered holder of the mineral
rights."
He said the policy sought to ensure stability and
continuity of current prospecting and mining
operations through statutory provisions such as:
The "use it and keep it" principle;
A transitional period to allow the holders of
prospecting, mining and mineral rights to license
their operations in terms of the new system;
Allowing the holders of prospecting, mining and
mineral rights to license bona fide intended
prospecting and mining operations; and
Giving the holders of prospecting, mining and
mineral rights the opportunity to substantiate why
areas which were not utilised should not be
granted to another party.
Maduna said all information from prospecting
would be submitted to the state after completion
or abandonment of a particular prospecting
activity and unless the prospector retained a
prospecting or mining right, the data would be
released to the public. "The freeing of mineral
rights will facilitate greater investment in the
mineral industry, also by small-scale miners." Well
managed small-scale mining had the potential to
take over and mine economically where
large-scale mining was unable to operate
profitably.
Maduna said government was committed to
expedite the full implementation of the Mine
Health and Safety Act which placed the
responsibility for health and safety on the
shoulders of the employer.
With the release of the white paper and the
legislation which would follow, probably only after
next year's general elections, mining no longer
needed to be the domain of the rich and powerful.
"We as government, through the process outlined
in the paper, have made mining accessible to all."
http://www.bday.co.za/98/1021/news/news1.htm
Friend of Another (10/22/98; 05:59:57MDT - Msg ID:709)
NEWS!
BRUSSELS, Belgium (October 21, 1998 10:03 a.m. EDT http://www.nandotimes.com) -- The
European Union economy remains an "island of stability" in a turbulent financial world
but will nevertheless expand more slowly than expected next year, the EU said
Wednesday.
The predicted slowdown is likely to increase calls for European nations to boost their
economies by increasing investment or cutting interest rates, already at record lows.
EU leaders are expected to discuss their response at a weekend summit in the
Austrian lakeside resort of Poertschach.
The 15-nation bloc is enjoying its greatest economic growth in a decade, 2.9 percent,
and will continue to do so until the end of the year, the EU said.
But then the financial instability in other parts of the world, especially Russia and Asia,
will kick in, narrowing the EU expansion to 2.4 percent next year. That's down from the 3
percent predicted in March, the EU's last forecast.
"In 1999, the international crisis will take a toll, albeit limited," the EU said in a
statement. "With the renewed pickup of growth and trade at the world level in 2000,
there is again scope for a reacceleration of economic expansion in the EU."
Assuming the world economy bounces back in 2000, the EU said its economic growth
should then recover to 2.8 percent.
"The overall picture is favorable. Economic growth in the EU is expected to remain
strong ... driven essentially by internal consumption and investment," said the report
from the EU's executive body, the European Commission.
The forecast showed Europe's stubbornly high unemployment falling slightly faster than
predicted in March. The jobless rate is seen at 9.5 percent next year, dipping below 10
percent for the first time in the 1990s.
The EU said tough budgetary policies imposed in recent years to prepare for the launch
of the euro as the common currency of 11 EU nations helped protect the bloc from the
turmoil abroad.
"The euro zone forms an island of stability." Interest rates are already at record low
levels and inflation, at 1.6 percent this year and 1.7 percent next year, is "historically
low."
Among the 11 nations that plan to switch to the euro on New Year's Day, growth is seen
at 3 percent this year slowing to 2.6 percent in 1999.
In Germany, the EU's largest economy, growth is expected seen peaking at 2.8 percent
this year then dipping to 2.2 percent in 1999 and 2.6 percent in 2000.
Ireland is set to continue as the EU's fastest-expanding economy with growth at 11.4
percent this year, almost four-times the EU average, before slowing to 8.2 percent next
year.
By PAUL AMES, The Associated Press
Friend of Another (10/22/98; 06:43:03MDT - Msg ID:710)
The Birth of the Euro: by Peter Ludlow
THE AUTHOR
Peter Ludlow is Director of the Centre for European Policy Studies, Brussels. http://www.euro-emu.co.uk/aboutus/thinktanks.shtml#ceps
In T.S. Eliot's poem, The Journey of the Magi, the wise
men asked about the journey that they had undertaken
together:
were we led all that way for Birth or Death?
To judge by much of the comment that has appeared on
EMU in the last few weeks and more particularly over the
last weekend, many of those best placed to know seem
similarly confused about what it is that is happening.
The pessimists come in various shapes and colours. They include City of London
pundits, German professors and, by no means least, ardent Europeans. Despite the
very different motives of those involved, their message is remarkably similar. Unless
the European Union does not rapidly cobble together a Political Union, EMU can
only end in disaster.
Who then is to be believed- those who rejoice at a birth, or those who prophesy
death?
It would be tempting simply to dismiss the sceptics with the observation that those
who have been so often wrong about EMU in the past have little claim to credence
when they pronounce on the future. Contrary to their expectations EMU is being
launched on time and with a broad membership. Although, however, a little more
humility would not be inappropriate on the part of those who have been proved so
spectacularly wrong, it would be mistaken for those of us who always argued that
success was likelier than failure to crow too soon or too loudly. The fact is that EMU
is itself a journey into the unknown.
That said, there are important clues which point to what it might mean- and, with still
more strength, to what it does not mean. To begin with the latter. One of the more
obvious explanations of the errors of those who have said that EMU would not
happen - and who now say that it cannot last-is that they have looked at Europe with
eyes conditioned by the experience of mature nation states, and more particularly
the United States of America. Hence the dreary incantation time after time of the
phrase 'history shows'. The past that we need to look at as a guide to the future is
not however the history of America or even Germany, but the history of the EU itself.
The future will doubtless hold many surprises as EMU takes root, but the political
and economic parameters in which the experiment will be worked out are relatively
well defined.
In economic terms, the basic point of reference is the Single Market, which though
by no means perfect, is a reality of growing- and irreversible- significance to
governments, business and private individuals alike. Monetary Union may not be a
necessary corollary of the Single Market, but it is certainly a logical one. Almost
every sensible list of what EMU is likely to entail in economic terms turns out on
closer inspection to be made up of developments which the Single Market already
implies. The Monti initiative on the need for greater coordination and cooperation in
tax matters is a case in point, increased transparency in pricing another.
EMU will undoubtedly have an important economic impact in area after area, and
there may well be - indeed there certainly will be- important policy initiatives to meet
unexpected situations. The policies in question will however work with rather than
against the grain already established in decades of experience with a Customs
Union and, more recently, a Single Market.
A similar line of argument is germane when we try to assess the likely impact of
EMU on the EU's system of government. The first point to emphasise is of course
that it is a system of government, even if it is very different in character from
government systems at national level.For the purposes of the present discussion its
most important features are three. Firstly, it is highly decentralised. Most policies
and laws are implemented through national administrations,who are also the key
decisionmakers at the 'supranational' level.
Secondly, its central institutions dispose of a budget which is minute compared with
those of other 'central' governments, and of no significance in macroeconomic terms,
except for some of the smaller, poorer countries who are amongst its principal
beneficiaries. Thirdly, to achieve its ends European government relies principally on
rules, whether in the form of laws, which have primacy over national law, or
discretionary codes of conduct, which because they are jointly adopted and
supervised, bind member states to certain standards of behaviour.
The making of EMU is a striking example of the adaptation of a major new project to
the underlying realities of this well-established system.
Monetary policy is single and central. The key decisions will however be taken by a
Council in which the governors of the national central banks far outnumber members
of the permanent executive.
Fiscal policy remains firmly in the hands of the member states with the result that
with the exception of a relatively minor sop to Spain in the form of the Maastrict
created Cohesion Fund, the size of the EU's central budget has not been altered with
the approach of Monetary Union. The buck stops therefore with the member states,
which is where, by common consent, the member states want it to stop.
Rules, and more specifically the Stability Pact, will do for EMU what big government
does in the nation states.
If therefore we ask what the impact of EMU will be on the EU's political and
governmental system, the most reasonable expectation must be that the institutions
that we currently have will adapt to the new reality in ways that are consistent with
their present ways of operating. They have indeed already begun to do so.
Politically therefore, as economically, EMU seems likely to mean more of the same
rather than a revolution. All of which is highly relevant to the question concerning its
durability. EMU fits well into the overall political design of the new Europe .This is not
the creation of one, two or even three men. Political leaders played their part. But the
dynamics- and therefore the inherent strengths- of the enterprise are not dependent
on the survival of a few outstanding figures. Every participating state, and even those
that are not yet members, has an immense stake in its survival. The chances are
therefore that it will survive, even if, like every political arrangement, it has to be
adapted to unexpected developments.
Where then, finally, does this leave the British, the Danes and the Swedes who,
unlike the other outsiders, the Greeks, had not made any firm commitment on EMU
membership. The answer is more complex than is sometimes suggested. EMU is,
as this note has argued, so solidly grafted on to an economic and political system of
which the reluctant three are effective and valuable members, that the danger of a
major split in the EU in the short term should not be exaggerated. The outsiders will
not be part of the new EU-11 caucus. They will however be in ECOFIN. Still more to
the point, the insiders have absolutely no interest in pushing, or even allowing, them
to pursue policies that diverge from Euro-norms. In the short term, therefore, the
British and the others will probably suffer no more inconvenience than a small
interest rate premium and the uncomfortable awareness that if they do make
mistakes in macroeconomic management, they are now more directly exposed to
market discipline than any of their EU partners.
So far so good. More significant problems could emerge if entry was postponed
indefinitely. EMU is bound to change the way in which its members view each other
and the outside world. Once Euro coins circulate there will also be an important
psychological impact on the citizens of EMU states. Finally, and by no means least,
EMU is yet another stage in the transformation of power politics within Europe and
beyond. Over time, therefore, the dangers of remaining outsiders will grow rather than
diminish.
These dangers are particularly important for the British, who because of their size
and continuing importance in international relations, have always been more
vulnerable to the political revolution that started in Europe almost fifty years ago. The
events of this week-end demonstrated yet again how far even the pro-EU British
administration of Tony Blair is from understanding EU politics. President Chirac was,
needless to say, the chief culprit. The remark of the Austrian Chancellor that he had
just received a very useful lesson in how not to run a European Council is however an
indicator of how far Blair's own reputation suffered. His EU colleagues are still
fascinated by him. As the Prime Minister of the fourth poorest country in the Union
and an EMU outsider, however, he will have a hard task over the coming months and
years to transform admiration for his style into a willingness to regard him as any
more than an exotic and unreliable half-member of the club.
Friend of Another (10/22/98; 09:08:07MDT - Msg ID:713)
REPLY To: Goldfly (10/21/98; 21:46:21MDT - Msg ID:708)
Goldfly, Your Msg. #708 was a great theatrical read! All the components of a good
drama are revealed as the act unfolds in an opulent tent somewhere in the lost desert.
We need no tickets for this play as this road-show is free and coming to every
neighborhood, soon!---------------------------------------------- Your words:
"WHAT -other than supply and demand- MAKES GOLD VALUABLE? What is so great
about gold?"----------- Well, that question goes deep into a human need for wealth that
represents ones life long efforts. We could ask the same question about houses, cars,
clothes, art work and the like. Hell, people work, they produce and in exchange they want
items and things. These possessions, in a surreal way are part of your life experience.
Humans all die, but before that, we want to see our Stuff??!! They lord over it, protect it
and try to keep others from stealing it.-------------------------- Look at what happened in
Paris when in WW2 the Germans came marching in. You didn't see those boys grabbing
any French currency did you? They took art work in the form of paintings, gold,
diamonds, RARE COINS, collectors items of every nature. What made those Things so
valuable? Besides supply and demand. ------------------Around the same time the American
government was moving much of it's art work out of the White House and storing it in the
Biltmore Estate (the Vanderbilt castle) in North Carolina. Why? Just because they thought
that Washington may be attacked and these National Treasures night be lost? Why were
these Treasures in need of saving but the dollar cash that was used to denominate them
was not? ----------------------------------This takes us right to the heart of the question.
What do you, as a real person see as value, the items or the dollar price that represents
their value? Is it the dollar itself that has the value or is it the "Ability Of The Dollar To
Act AS The Denominator Of The Value Of An Item" that creates the need for this
currency? After thinking a while, most people would answer that it is the Denominator
Action that makes this currency Money! ---------------Moving further along this line of
reasoning: I now ask in another context of your question "What makes dollars so special"?
-----------------------If money derives it's value solely by being an asset denominator for
use in commerce and trade, then why not gold? Indeed, in it's purest form money is any
real thing. When individuals are able to trade with each other using actual items they grow
or produce, nothing is lost in the transaction. Commerce is complete and the trade is final.
Goldfly, you already know the reason gold was used for so many centuries as money. It
being a real thing that could be divided into manageable bits for trade. People came to this
conclusion, perhaps a thousand years ago. It's only the last sixty or so years of paper use,
that modern analysts proclaim as the history of money! They delude the public by not
including the fact that our current new form of paper money has precious little historical
precedent. The facts are that gold works as money and it works very well. Unfortunately,
the modern, high speed world we live and trade in requires ink on paper and digital bits to
extract the efficiency of the system. This is truly to everyone's benefit, for as the earth
becomes more crowded, we need to be efficient in commerce. Gold can and will work
very efficiently in the coming financial framework. It is a money function for the 21st
century that will exploit and expose the wasteful ways of the current financial system.
------------------------------ As I mentioned to someone else, I say to you: We will continue
with a paper money system, it's needed for efficiency and it's necessary in complicated
trade. So do the same as others, get past it and get over it. Many world leaders have come
to the same pragmatic conclusion. That does not mean that gold can not be integrated into
the financial landscape, it will. So, the next time you see gold going down in dollars,
remember, it's just a old currency from the past that will devalue any present money that
fails to properly denominate things. --------------- To answer your question: It is the
history of gold being used as money that makes it special, not the current supply and
demand. In the same way that rare paintings have a history of being useful in the life
experience of humans, so too do we hold a life passion for gold. thanks FOA
Friend of Another (10/22/98; 09:26:53MDT - Msg ID:714)
Reply to: Turtle
Sorry Turtle, my mistake. That web site takes you to another (also interesting)place. Go to http://www.euro-emu.co.uk/ then to "Soapbox archive" to find Mr.Ludlow. This site has a world of discussion about the Euro. USAGOLD: Michael, you may find this some very good reading, also.
Friend of Another (10/22/98; 18:28:40MDT - Msg ID:723)
Reply to: scp (10/20/98; 11:24:55MDT - Msg ID:679)
SCP, --------- Your question: "Also.... could you add any other thoughts as to why a
strategy that rekindled the boom in '87 will not work today? ---------------------- Plain and
simple, the dollar is very late in the time cycle of paper currencies. Don't confuse this with
some trading cycles you hear about. Throughout out the history of paper currencies (short
as it may be), the few that became world accepted major reserves (British pound?) all
headed downhill only after they reached the maximum in popularity and convertibility.
Once every nation began to issue debt, settle accounts, create reserves and in general, use
this major currency as a proxy for their own, it had reached it's limit of expansion. It is a
natural decline that occurs in fiat reserve currency monetary systems. As sure as the sun
rises in the East, the world moves on, into another money system. We have reached that
level today with the dollar. Everyone expects the dollar world to deflate this currency and
continue it's use in a depression racked world. No doubt, some of the bets placed today by
short sellers of gold involve a deflation read of the current situation. Indeed, we are seeing
the contraction effects of this in many countries. However, we now live in a much more
advanced economic world than in the past. The history of major currency destruction did
not have these factors to deal with. As Aragorn III wrote about platinum in his #612 post:
"The modern use redefined the value accordingly"! Another sent me a commit on it. "A
stunning statement that in this case can also be applied to the dollar of today." How true!
-------------------------- As the Federal Reserve lowers rates, it will, in time, crush the
dollar if an alternative currency is available. It will be and long bond dollar rates will rise
as the result. The world will move on because: " The modern use redefined the value
accordingly"! Thanks FOA
Friend of Another (10/22/98; 18:32:06MDT - Msg ID:724)
Reply to: Tyler Rose (10/20/98; 16:14:39MDT - Msg ID:683)
Tyler Rose, ---------------- I didn't forget about your post, it was a hard one. The URL
you gave me took us to a site that offered a book about: "Every statement made in this
185-page book references either a legal precedent, report or letter issued by a government
agency, trade publication or known entity in banking and finance. " ! I would not even
attempt to go into this area on a forum. -----------------Personally, I do not think anyone
has a true handle on the legal aspects of multinational interbank federal gold loans if they
default. If we place ourselves into context of the events that would accompany such a
period, it would be more likely that armies would be called up before all of the parties are
paid in gold. Some would be paid no matter what, while most would be left to twist in the
wind (I think that is a cowboy / western phrase). Let's wait and read about it in the
papers. Thanks FOA
Friend of Another (10/22/98; 18:57:17MDT - Msg ID:725)
Russia and Gold?
USAGOLD, ------------------- I also find that the Russian thinking on gold to be an
incredible coincidence. Just as you noted today (msg. #717) about the !970s US treasury
gold auctions creating an atmosphere of attention, so do we also have the Argentine gold
auction. I'm sure that the gold detractors are aware from past results that you don't
auction gold it you want it to go away quietly. If they do influence the Argentine treasury,
then why is this coin auction taking place? And doing so just as the Russians are about to
bring gold back as money! I wonder if the use of gold by the old USSR will bring them
closer to Bonn? Or is it Frankfurt or Berlin? No doubt Russia knows where the ECB and
it's Euros will be located? FOA
Friend of Another (10/22/98; 19:05:54MDT - Msg ID:726)
Item!
ALL: I read this somewhere: "The US is now considering printing the old $500 and
$1000 note of 1934 only using the new currency format." . ------------------ In another
interesting coincidence, the Euro will also be issued in ( I think) 600 Euro notes? It was
noted that these larger bills would make the Euro more useable. Is the US concerned
about this new currency? Just a thought?
Friend of Another (10/27/98; 17:26:42MDT - Msg ID:819)
RETURN
ALL: ----------- I have been reading some of the very interesting posts that were presented
these last few days. Tomorrow I hope to also offer some commits and replies. The world
has created a very active period for everyone's consideration! FOA
Friend of Another (10/27/98; 18:05:17MDT - Msg ID:820)
http://www.iht.com/IHT/TODAY/TUE/FPAGE/eu.html
FOA NOTE: as written below! ------------ "Britain's decision to drop its long-standing
opposition to giving Europe its own defense capability, so that it
could act independently of the United States in dealing with
security issues in its own area, opens up a whole new area for
debate."
------------------------------------------------------
Paris, Tuesday, October 27, 1998
-----------------------------------------------------
EU Leaders Taking The Activist Route At Summit, New Roles for Community -----------------------------------------
By Barry James International Herald Tribune -----------------------------------------------
BRUSSELS - European leaders had no ready answers on
Monday to the question of how they could bring the European
Union closer to its citizens.
That was supposed to have been the theme of a special summit
meeting in Austria over the weekend, but instead the global
economic crisis dominated the discussions.
Nevertheless, from a meeting that had no formal agenda and
promised no decisions, the conclusion emerged that citizens
expect the EU to do more in some fields, such as creating jobs,
but to interfere less in other areas best left to governments.
Thus a proposal from the president of the European Parliament,
Jose Maria Gil-Robles, for a Europe-wide income tax to pay for
EU institutions went nowhere. Mr. Gil-Robles argued that
Europeans would appreciate Europe more if they paid for it
directly instead of indirectly through their governments and if
they realized that the EU costs each citizen less than the price of
a cup of coffee each day.
But the government heads judged that this was precisely the
kind of idea that was most likely to drive citizens away from the
idea of a united Europe.
The summit meeting opened the way, however, toward closer
economic integration and a more active role for the EU in
common political and security problems, areas where the
leaders judged that Europeans were looking for more decisive
action rather than less. They also decided to work more closely
together in tackling organized crime and illegal immigration,
both issues that were judged of major common interest for
citizens in most European states.
The emergence of a social democrat as chancellor in Germany
and a former Communist as prime minister in Italy was
described by most commentators as a turn to the left. But Prime
Minister Jose Maria Aznar of Spain, one of only two
right-of-center leaders in the EU, saw it differently. He said the
conference had shown that the left had moved toward the
center, and that he did not feel in the least isolated.
Europe has until recently been divided between the demand for
strict fiscal austerity to underpin its imminent single currency and
the call by some other countries for a political counterweight to
the new European Central Bank.
The dogmatism appears to be evaporating now that Germany
has a finance minister, Oskar Lafontaine, who seems equally
attuned to the idea of economic government. Antonio Guterres,
the Portuguese prime minister, said Europe now had a "human
climate" that contrasted with "the experiences of the past."
Some analysts said this development was inevitable. Putting
monetary policy in the hands of the central bank and leaving
fiscal policy in the hands of the governments, they said, was
bound to lead to increasing coordination of economic planning
and perhaps eventually of taxation strategies as well. And the
recessionary wave in much of the world meant that all EU
governments were worried more about deflation than inflation,
they added.
But there are likely to be more questions in future about the
extent to which the bank should operate independently of the
economy. Officials pointed out that even an inflation-fighter like
Alan Greenspan, the chairman of the U.S. Federal Reserve,
took market and economic conditions into account when setting
interest rates.
The leaders also have started to give serious thought to the
question of why Europe is such an economic giant and such a
political pygmy. Britain's decision to drop its long-standing
opposition to giving Europe its own defense capability, so that it
could act independently of the United States in dealing with
security issues in its own area, opens up a whole new area for
debate.
While the Austrian summit issued no documents, it illustrated a
change in thinking that may lead to more specific action on
issues such as job creation, joint public works and the
appointment of a head of foreign and security policy when the
leaders next meet, in Vienna in December. Mr. Gil-Robles
philosophically accepted that it might be many years before his
idea saw the light of day.
Friend of Another (10/27/98; 18:10:39MDT - Msg ID:821)
http://www.iht.com/IHT/TODAY/WED/FIN/euro.html
Paris, Wednesday, October 28, 1998 -------------------------------------
2 Bundesbank Officials Reject Rate-Cut Calls
---------------------------------------------
By John Schmid International Herald Tribune
FRANKFURT - Escalating a feud that some German central
bankers fear could complicate the introduction of the euro, the
Bundesbank on Tuesday fired more salvos against the growing
political pressure for lower interest rates.
Two Bundesbank officials, one from each side of the political
spectrum, rejected calls to lower interest rates as a way to
stimulate economic growth. They added their weight to the
arguments of the Bundesbank vice president, Juergen Stark,
who Monday decried the developing "climate of conflict"
between politicans and the politically autonomous European
Central Bank, fearing it would damage the Jan. 1 introduction of
the common currency.
Significantly, one of the Bundesbank board members who
played down any chance of cheaper credit this year was
Hans-Juergen Koebnick, who is a member of the Social
Democratic Party. The Social Democrats, who took the oath of
office Tuesday to head the new leftist German government, have
led calls for lower rates as a way to tackle Europe's persistently
high unemployment.
From the other side of the political spectrum, another
Bundesbank board member, Franz-Christoph Zeitler, insisted
that Bonn's new leaders were misguided in advocating lower
interest rates as a painless economic remedy.
Political leaders "should not create the illusion of being able to
overcome and push aside structural problems with forced
interest rate cuts," Mr. Zeitler told a bankers' conference in
Munich. "A historically low rate level places on us the
responsibility of keeping our powder dry for any crisis-like
development, which is not foreseeable but at the same time
cannot be ruled out."
But a rate cut in response to political pressure "would be poor
use of our firearms," he added.
The latest calls for expansionary economic policies came over
the weekend at a summit meeting of European Union leaders,
where 11 member of the 15-nation bloc now have left-leaning
leaders.
Mr. Stark said on Monday, "Recent calls to loosen the reins of
monetary policy in order to promote employment are just like the
call for a more expansionary fiscal policy - neither is helpful nor
appropriate."
Friend of Another (10/27/98; 18:15:32MDT - Msg ID:822)
http://www.iht.com/IHT/TODAY/WED/FIN/gitic.html
Paris, Wednesday, October 28, 1998
---------------------------------------------------
GITIC Bond Default Shakes China Creditors
-------------------------------------------------
Foreign Banks Move to Reassess Exposure
-----------------------------------------------
By Philip Segal International Herald Tribune
----------------------------------------
HONG KONG - One of China's most prominent investment
companies has defaulted on an international bond payment,
banking officials said Tuesday, the first time such a Chinese
company had done so since the Communist revolution in 1949.
At the same time, a new report indicated that Chinese
corporate debt held by overseas banks - largely in Japan and
Europe - might stand at more than double the previous
estimates, even as doubts spread over how much of it would be
repaid.
The default by Guangdong International Trust & Investment
Corp., known as GITIC, immediately raised the question of
whether the Chinese government would stand behind the huge
debts of China's regional investment companies, including
Guangdong, as financial tremors continue to shake Asia and the
growth of China's economy slows.
Guangdong defaulted on an $8.75 million interest payment on a
$200 million bond, according to Joanne Shephard, a Chase
Manhattan Bank spokeswoman. In the past, China has always
repaid foreign loans from shuttered institutions, but Guangdong
is different, possibly heralding a new and much more risky
phase in the financing of China's development.
Since the bankruptcy of Guangdong on Oct. 6, information has
been slow to emerge about the exposure of foreign banks to
China's other international trust and investment companies,
known as ITICs, which are backed by the Chinese government
or by provincial governments to raise money abroad.
Potentially more worrying, however, is the debt of Chinese
companies known as "red chips," which are incorporated in
Hong Kong and quoted on the stock exchange here but
controlled by Beijing. According to a report by Goldman, Sachs
& Co., the red chips may have borrowed more than twice as
much money from overseas banks as was estimated earlier this
month.
"We estimate aggregate debts for major red-chip companies
amount to 100 billion Hong Kong dollars," or $13.35 billion, the
report says
Analysts say that, like the international trusts, red chips have
used a lot of their borrowed money to invest in speculative
real-estate deals and the stock market. Foreign banks have lent
to red chips "without examining credit risks carefully," Goldman
Sachs said. This, the U.S. firm said, was because of a "perhaps
mistaken assumption" that, in the event of cash flow problems,
the government-supported parent companies in China would
"eventually honor the payments."
Goldman added that leading bank lenders to ITICs represented
a "veritable 'who's who' of global banks, including CS First
Boston, Commerzbank, Dai-Ichi Kangyo Bank, Dresdner Bank,
Sakura Bank, Fuji Bank, Sumitomo Bank, SocGen,
Westdeustche Landesbank." It added that according to the
Hong Kong Monetary Authority, 80 percent of exposure to the
ITICs was on the part of foreign banks.
The backing of the Guangdong provincial government was once
thought to be enough to guarantee the survival of Guangdong,
but that has been proven wrong, a lesson that could extend to
other ITICs or red chips that run into major financial trouble.
Two clearing houses in Europe - Euroclear of Belgium and
Cedel Bank SA of Luxembourg - said Tuesday that they had
already credited some bondholders and may now revoke those
payments, Bloomberg News reported.
GITIC was famous for its frosty relations with the central
government, one reason analysts believe it was shut down
before any other large ITICs from other provinces. But lenders
who had hoped that Guangdong was a badly managed,
one-of-a-kind company might want to reconsider, analysts said.
After a series of company visits, Mehdee Reza, a Credit Suisse
First Boston banking analyst, said that among Hong Kong's
bankers, "GITIC was perceived as being the most financially
sound" of the ITICs.
Banks from Japan and Germany have been named so far as the
biggest lenders to the international trusts, although according to
Basis Point, a newsletter that monitors credit markets in Asia,
the single most exposed lender to Guangdong might have been
Union Bank of Switzerland AG, which has since merged with
Swiss Bank Corp.
In March 1997, UBS undertook a $205 million floating-rate note
for Guangdong Infrastructure Ltd., which is also controlled by the
government of the southern province of Guangdong.
GITIC acted as a guarantor for that deal, and GITIC itself gave
UBS a mandate in August 1997 to issue a $100 million
five-year note in its name, Basis Point said.
The newsletter's editor, Stewart Man, said Basis Point had
never heard anything further from UBS about the deals, and
UBS declined to comment.
Since GITIC was shut down, two more international trusts from
Guangdong Province have failed to meet interest payments.
One, a company backed by the municipal government of
Guangdong's capital, Guangzhou, failed to make a payment of a
$30 million loan arranged by Societe Generale SA of France.
Like many of the largest lenders to the international trusts,
Societe Generale also loaned a lot of money to red chips and,
according to Goldman Sachs, was one of the principal bankers
of Guangdong Investment.
Another major lender to international trusts is Commerzbank AG
of Germany, which a week ago failed to receive a payment from
another international trust on a $70 million loan
Friend of Another (10/28/98; 18:38:34MDT - Msg ID:831)
Platinum?
This is an interesting observation. Today, Wed. 28, the Dec. Platinum contract on the
Comex fell $4.50 US to $339.10. I bring this up because of the number of analysis that
use Platinum as the premier supply and demand vehicle. Many have urged it's purchase as
a stand-in for gold. The reason given is the overwhelming demand for commercial use and
it's investment appeal. Yet, with all of these factors firmly in place, it cannot override the
paper currencies markets. Some brokers, recently, cannot obtain the metal at all, let alone
coins and still no rise in price. -----------
What can we gain from this price action? The point is that Platinum and Silver, just like
gold, are also subject to the pressures of a paper money market. However, where gold is a
currency for THESE modern times, the white metals are an almost money created by a
commercial need IN these modern times. -------------------------------- We should
remember that the history of gold as money provides a use far deeper than any other metal
that offers a "good story" and a short past! If we intend to hold a metal for the security of
money, examine it's record of use as a medium of exchange to find it's demand in the
future. Perhaps Platinum will perform as a function of it's modern fundamental supply and
demand. Or, will it in the future, as in all commodities, find a new price in terms of gold?
------We shall see. -------------------------- FOA
Friend of Another (10/28/98; 19:27:48MDT - Msg ID:832)
Msg ID:826 ?
Junior (10/28/98; 03:47:11MDT - Msg ID:826)------------
The Currency War is Very REAL---------------------------
WEDNESDAY OCTOBER 28 1998 Financial Times - London
Columnists
--------------------------------------------------------
Junior, ------------- That was a good article! The most important concept to grasp from the
many thoughts about the Euro and the ECB is this:---------- The EMU is going to come
about during a time of a world disorder that heavily impacts the currencies. During this
time, if the USA is engulfed in this economic crisis, it's dollar will be under pressure unlike
anything seen before. With the loss of an anchor currency, gold will naturally receive a
huge influx of demand. However, gold is not a CIRCULATING currency and as such
cannot represent the wealth of nations in this format. Because a non-circulating currency is
held for security and as a reserve, during times of crisis, it's velocity becomes frozen.
------------ This nature was well understood and considered when building the Euro. In
modern times, a currency destruction that leaves only gold as a medium of exchange,
would drive it's real value to infinity, without any means of conducting commerce.
Somewhat the position of Russia today, but without any other world moneys in existence.
For this reason, gold was to be held fast (as much as possible) until the Euro is created.
Even in the heat of an impending currency war, gold does not move. In time, the Euro will
become the transactional currency for gold in a true free market. Gold will increase in
value and as such expand that currency to an extent as to allow it to represent all
commerce. Unlike the American dollar that limits gold as a basis for money expansion, a
rising gold price will expand the Euro for the benefit of all. The future drifting
(contracting) economies will find new life in a "lose" Euro. Lose in terms of a gold
structure, not the current debt structure. Low interest rates will go hand in hand with a
strong free market price of gold. ----------------------- As good money drives out bad, gold
will drive investors into the Euro and away from failing systems. I will expand on this
another day. Thanks FOA
Friend of Another (10/28/98; 19:45:24MDT - Msg ID:833)
ValuePro (10/26/98; 09:57:40MDT - Msg ID:804)
ValuePro, ------------ Hello!, Your partial post: ------ "Who's next? Argentina? Mexico
(again)? How many nations can be bailed out before cash and credit are stretched to the
max.? To sustain a continuing stream of such bailouts, the credit markets and monetary
printing presses will have to keep working overtime leading to the devaluation/demise (via
inflation) of all fiat currencies." -------------------- Yes, even my untrained eye can see that
we are approaching the end of a currency life cycle. When all of the debt can no longer be
rolled over, the world does not end. It moves on, into another fresh system! This current
contraction will not create a deflation as it did in the past. It will involve a rollover that
will balance the losses for some with the gains for others. Will your wealth balance in this
event? FOA
Friend of Another (10/28/98; 20:51:57MDT - Msg ID:838)
Discussion?
USAGOLD, Thanks for the welcome! Your post # 834 shows the world to be a very
busy place. It is indeed. -------------------------- Another had pointed out perhaps a year
ago that a storm approaches the American shore from across the Pacific! That cold air you
feel in Colorado may have arrived from Japan? The next financial weather storm (also
pointed out by "A") should arrive from the South. South America! ------------------------ It
seems that all of the major US trading partners that rely heavily on financial support from
Washington are in line to sink with the dollar economic system. Their financial support
comes in the form of a large American trade deficit. Even Japan, with it's major currency,
the Yen, must have a trade surplus in dollars to prevent a political and economic
breakdown. Everyone thinks the Japanese will just sell their dollar reserves and begin a
new reserve currency or buy gold. They may try, but Industrial Japan is built to sell! It is
not their culture to buy and consume. This same culture is prevalent in all of the major
third world economies that live to export to the USA. They will keep their currencies
below the dollar even if it means riding the ship down, so to speak. --------------------------
However, it is this very action of selling to the dollar that now so aggravates and speeds
the destruction of this currency. The world is close to the limit now as country after
country comes to Washington and asks for a larger share of the US market. A market that
may not exist soon? ---------------------------------------------- As in my other post, I will
expand on this later. Thanks Michael, FOA
Friend of Another (10/28/98; 21:22:10MDT - Msg ID:840)
Reply to #836!
Gandalf, -------------- Hello!------ Your Number two about #832? Not tight! Loose is
correct! Thanks for pointing that out. Did I lose the "o"? ---------------------------
Your number one about #831? ------------ I will add to this in the first post of M to Noon
29th.. Thanks FOA
Friend of Another (10/29/98; 08:15:54MDT - Msg ID:843)
REPLY TO: Gandalf the White (10/28/98; 20:11:32MDT - Msg ID:836)
Gandalf, ----------- Your words: ---- "could you please give us YOUR opinion on the
direction of the POP related to the POG, and WHY ?" --------------------------
Platinum, today, is a good investment. And, as a thinly traded, rare metal, it will always be
attractive as a portfolio holding. It will also rise in price in paper money terms. The
problem is that many people have been sold on the idea that it is a substitute for holding
gold. Much of this analysis comes from it's past price history in dollar terms. During this
short time, (twenty years?) Platinum sometimes held a premium to Gold. Some sharp
operators use this history, combined with a good story, to offer that Platinum will always
appreciate faster than gold and hold it's premium. ----------- I submit that that was
yesterday's news. The demand for this metal, as represented in today's offtake, is all there
is. No hidden demand, no coming change in use and no future demand as a function of
money. No entity is building a stock of Platinum because it will be used to back a currency
or be used as an official coinage (Russian Gold Coins? Islamic Dinar? Gold Euro?). It has
a commodity demand as a rare metal used in a modern application. In this limited use, if
it's value rises, more metal will be found to supply the industrial need. The total possible
forward demand is not that overwhelming when the commodity use is the only true
offtake. Yes, coin demand is part of offtake, but these coins in private hands must be
viewed as only another form of industrial supply storage in the event of greater need. Will
this function create a higher price? Of course, but a higher price in terms of a typical
investment in commodities. No More! With this in mind, I do own Platinum.
------------------ As for Gold, the same operators that push for a total commit in Platinum,
often make the mistaken point that the large stockpile of world Gold has no large
commercial demand basis. Therefore, as the holders of this metal realize that this Gold will
take fifty years for Jewelry demand to absorb, they are rushing to unload it before it goes
to $50 US or less! This is a good point if you are selling a leveraged idea to a customer
with a limited background of reference to the history of money. This offers a possible
client base encompassing the entire Western world (Except for those that have read Mr.
Kosares's ABCs). ----------------------- At present prices, the entire stock of world gold (I
said Entire Stock) could be sold to persons / nations that wish to remove themselves from
a collapsing dollar debt financial system. At lower prices still, even a smaller handful of
investors would take it all. The purpose of this buying would not be to take advantage of
the commodity / jewelry demand of gold. The advantage expressed in the buying of gold is
presented as: ------ transferring your wealth into a historic vehicle that has performed the
function of "a medium of exchange" and done so in time cycles that outlive civilizations!
Obviously, this forward type of thinking involves motives that take into consideration the
long-term transfer of wealth within a family. Not a daytrade! ------------Gandalf, this my
friend, is the kind of motivation that creates real demand for a substance. A type of human
need that is not presented on charts and cannot be explained in a leveraged brokers office.
This kind of historic demand for real money will reassert itself soon and will dwarf all
possible supply, in ground and above. It is possible that in the future, one ounce of Gold
equivalent will be commonly used to purchase twenty ounces of Platinum. ------------
Perhaps a good ratio for investment? Thanks FOA
Friend of Another (10/29/98; 09:00:41MDT - Msg ID:844)
Reply To: USAGOLD (10/28/98; 21:56:55MDT - Msg ID:841)
USAGOLD, ------------ Your words: "Unfortunately, we are witnessing the breakdown of
the international post World War II economic arrangement with the dollar at its epicenter.
The next question to be discussed? What will replace it?" ------------------- Michael, the
entire seed of human existence has sprouted from the rain of gloom and despair that so
clouds our vision concerning the future. Seldom do our kings and elected leaders plot a
true course that avoids the long-term destruction of wealth. One does never wish for their
assets to be denominated in the currency of a foreign nation. It is in this very fear that so
many investors find the reoccurring cycle of a common world currency, Gold. It belongs
to no national entity and yet it's value as an exchange medium is held endearing
throughout history. ------------------ Currencies come, are brought to their limits of debt,
lose (correct word Mr. G.?) the usefulness of exchange from the fraudulent imposition of
exchange intervention and are discarded by people. Look to Brazil, Mexico, Asia and we
see that no government can force fiat money to hold value. These people adjust there by
using dollars as the lesser of two evils. In America, you will also view the currency of gold
as the choice of necessity. -------------------------- As we make this journey through life,
the fading dollar will be but another financial obstacle the world must scramble around in
it's quest to move on. The Euro is the future, bungling bureaucrats and all, and gold will
be the anchor. No brand new currency reserve system has ever evolved without Gold and
the Euro will be no different. This colossal change in evaluating wealth will destroy so
many assets that gold will be forced into a center stage with this new paper currency.
Avoid it? We will not. Far too many conservative entities will not risk their children's /
nations future on the Old Europe Order without the Old World Order of Gold as
insurance. ----------- We play an old game in modern times, a game many have never
known? We shall see? thanks FOA
Friend of Another (10/29/98; 10:28:53MDT - Msg ID:845)
Reply to: PH in LA (10/17/98; 13:35:54MDT - Msg ID:622)
PH, -------------- Thank you for the compliment of my old post in your old post. I would
like to reply to your question also. ---- Your words: --- "Would you care to comment as
to why the worldwide debt as denominated in dollars was allowed to cease to expand at
this time (late 1980s)?" --------------Even in today's engineered society, it is the interaction
of human wants and desires that make the world turn. In the simplest of terms, modern fiat
currencies are created through borrowing (the creation of debts as assets) by individuals.
When enough debt is created that all assets have been borrowed against, the borrowing,
on a net basis, no longer expands the currency. With the currency no longer functioning as
an economic expansion tool, it's most useful reason for existence is lost. In this stage, the
federal treasuries and CBs no longer have the power to control their money. The
government response concerning local money, takes on the function of only lowering
interest rates to protect the economy / banking system. Later this function is transformed
by necessity to raising rates to protect whatever viability the money has in the open
market. ------------ As you made mention about Japan, we also see this. They lowered
rates to almost zero during the local economic protection stage, and will at some time
begin to raise rates to protect the Yen as their economic dependence on the dollar drags
them down. ------------------- In this light we can see that entities such as the US Federal
Reserve have little power to maneuver during the last days of their currencies time life.
This cycle that began during the late 1980s was not a "created" event, but rather an
inevitable transition. At first the local equities markets explode, only to be followed by an
even greater contraction that usually traps investors in bad positions. The final run into a
world class money, gold, usually leaves all paper investors with thoughts of "how could I
have been so blind"! It seems that young people grow into an new world of finance that
always returns to the lost world of simple sensibilities. thank you, PH FOA
Friend of Another (10/29/98; 17:54:42MDT - Msg ID:852)
ALL!
Aragorn III , -------------- Thanks for expanding these thoughts through the eyes of
others. Yourself, Kiwi and Gold Dancer offer a benefit to all readers. Perhaps they will post here also? ----------------------------------------
USAGOLD, ------------- Japan and Asia will have a tough time moving from the dollar. I'll
offer my thoughts on this later. thanks FOA
Friend of Another (10/30/98; 05:55:10MDT - Msg ID:859)
NEWS: http://www.iht.com/IHT/TODAY/FRI/FIN/real.html
Paris, Friday, October 30, 1998
Brasilia Sees Problem on Tax
BRASILIA - Brazil's Congress should approve the bulk of the
government's fiscal austerity plan, but there might be opposition
to a key tax increase on many financial transactions, the leader
of the lower house, Michel Temer, said Thursday.
Members of Congress were expecting an increase in the tax
rate to 0.3 percent from 0.2 percent, but the $84 billion fiscal
austerity plan unveiled Wednesday would push the rate up to
0.38 percent.
"There isn't resistance to an extension nor to an increase to 0.3
percent, but rather against the extra rise of 0.08 percent," Mr.
Temer said.
Financial markets in Brazil were downbeat on the prospects for
the austerity plan, which was introduced Wednesday and is a
prerequisite for an international rescue package. The
benchmark Bovespa stock index fell 288.11 points, or 4.22
percent, to 6,538.40.
Friend of Another (10/30/98; 07:33:54MDT - Msg ID:860)
Travel!
ALL: ------ Once again, on very short notice, I must leave for a few days. This should be
the last trip for several months. I know that Another has already returned and will be
having much to say soon (and give me some rest). Between now and the first months of the new year, we should
be given more to think about than wanted. Thank You and good night FOA
Friend of Another (11/11/98; 09:41:11MDT - Msg ID:951)
Returned.
ALL: I have returned from a long trip that came with short notice. As soon as possible, I will begin to post my replies and, more importantly, send in Another's Thoughts (several).
He will be joining this forum in a major way over the next few months. He has a lot to discuss, so I (FOA) will be posting only intermittently over the next few days and weeks.
thanks
Friend of Another (11/11/98; 19:12:56MDT - Msg ID:958)
From the FT Times!
Fund managers predict euro will rival dollar
The euro, its proponents claim, will change everything. Companies are starting to merge and reorganise on that premise or promise. Many of the changes so far have been tentative. But at least in one area, a radical reorganisation is underway. It could have a large impact on the character of the Europe's single capital market. Global fund managers now believe the euro will be a strong currency in relation to the US dollar and will soon rival the dollar as the preferred currency for debt issuance.
These findings, contained in a report issued by Deutsche Bank today, stem from the largest survey yet conducted on global investor views on Europe's future single currency.
Investors were worried that a broad European monetary union, which included Spain and Italy, would mean a weak euro," said Ifty Islam, a senior economist at Deutsche Bank. However, this view has altered sharply.
Economists say the change in attitude towards the euro has come with the realisation that the euro zone will have a large structural trade surplus - estimated at $100bn, or 1.5 per cent of the euro zone's gross domestic product.
The US, by contrast, is expected to record a trade deficit of about $140bn in 1998. Italy and Spain regularly post trade surpluses, indicating their membership of the first wave of Emu could help strengthen the exchange value of the future single currency.
In addition, the European Central Bank is expected to take a more hawkish stance on inflation than the US Federal Reserve, implying that monetary policy will be tighter in the euro zone than in the US, according to Deutsche Bank.
A total of 193 global funds, including a number of central banks, took part in the survey, representing $7,500bn worth of funds, or about 25 per cent of total worldwide funds.
A large majority of US fund managers, with collectively almost $2,000bn worth of funds under management, said the euro would have a strong exchange value the US dollar.
In addition, 73 per cent of the investors polled, including a majority of US fund managers, said the euro would rival the US dollar as the preferred currency for debt issuance within five years.
As central banks are among the main investors in bonds, this implies that the euro could also rival the US dollar as a reserve currency by 2003. At the moment, about 50 per cent of all international bonds are denominated in US dollars, compared with about 25 per cent in euro zone currencies.
The report suggests, however, that the growth of a broad, US-style corporate bond market in Europe could take longer than many have anticipated.
More than 50 per cent of the funds polled, of which about half were located within the euro zone, said regulations prevented them from buying securities rated below single A by Standard & Poor's and Moody's Investors Service, the rating agencies
http://www.ft.com/specials98/q507e.htm
Friend of Another (11/13/98; 06:38:04MDT - Msg ID:969)
THE ECONOMIST: "the euro mightdrive down the dollar by 40%"
EURO BRIEF
The international euro
The euro will, at a stroke, become the world's
second-biggest currency. But, as the fifth in our
series of briefs explains, it is less clear whether
and when it might challenge the dollar's
dominant role in the world financial system
UNTIL recently, few outside Europe paid any
attention to the euro. American policymakers
maintained a conspicuous silence, commenting only
that what was good for Europe was good for
America. Asians were too preoccupied with their
own crises to worry about a new currency half a
world away. And Europeans themselves were too
concerned with the mechanics of the single currency
to think about its international impact.
Partly as a result, there is remarkably little consensus
on what that impact will be—and even less on how to
respond to it. The one certainty is that the euro will
immediately be a major international currency, second
only to the dollar. It is striking that, in economic and
financial terms, the euro-11 countries are a close
match for the United States. Their combined GDP in
1997 was $6.5 trillion, compared with America's
$8.1 trillion. Their share of international trade outside
the euro area (19%) is a shade larger than that of the
United States (17%). Taken together, bond markets
in euro countries are somewhat smaller than
America's—although Europe's equity markets are
much smaller than Wall Street.
The dollar's role
in international
finance is,
however, far
bigger than
America's
relative weight
would suggest. It
is the main
currency used for
the world's trade
and investment. Roughly half of world trade is
invoiced in dollars. Almost all commodities are priced
in dollars. According to a recent survey by the Bank
for International Settlements, the dollar features in at
least one side of 87% of all foreign-exchange
transactions, the D-mark in 30%, and other
euro-member currencies in only 24%.
Although the dollar's share of international bond
issuance has fallen substantially since the early 1980s,
over 50% of international notes and bonds are still in
dollars, compared with 28% for the combined euro
countries. Bank lending shows the same dollar
preponderance: 45% of cross-border loans are
dollar-denominated (see chart 1).
Almost half the world's foreign-held bank deposits
are in dollars. The dollar's weight in private
international transactions also makes it the currency of
choice for countries’ official reserves. In 1997 some
57% of the world's reserves were in dollars, though
the greenback's share has fallen in the past two
decades (see chart 2).
America derives several benefits from the dollar's
dominant international role. There is, first of all, the
profits to the state from its monopoly issue of notes
and coins. Seignorage from dollars held abroad may
be worth some 0.1% of American GDP.
The dollar's predominance in bond markets also gives
America a "liquidity discount" on government debt.
The liquidity of the bond market allows the Treasury
to pay a lower premium to buyers. Richard Portes of
the London Business School and Helene Rey of the
London School of Economics have estimated that this
discount is worth between 25 and 50 basis points
(hundredths of a percentage point). Given that
non-residents hold about $2 trillion of American
government debt, that implies an annual saving of $5
billion-10 billion, similar to the gains from dollar
seignorage.
The third and perhaps biggest advantage that America
gains from the dollar's dominance is the ability to
finance its current-account deficits in its own currency.
Charles de Gaulle famously complained that the
exorbitant privilege of the dollar "enabled the United
States to be indebted to foreign countries free of
charge." In fact America pays interest on all the
government debt it issues. Yet de Gaulle had a point,
even so. America might have far more difficulty
running huge current-account deficits if the dollar were
not the international currency of choice.
Euro challenger
At the very least, the arrival of the euro might threaten
America's ability to continue reaping such benefits.
But is it also possible that Europe could start to take
them for itself? That depends in the first place on how
quickly the euro's international role will grow. And the
answer to that will also go a long way to answering a
related question: will the euro be a strong or weak
currency? In particular, will it appreciate or depreciate
against the dollar?
Economists considering these questions fall into two
camps. In one are the enthusiasts, who reckon that
the euro will be a strong and stable currency that will
rapidly challenge the dollar's predominance, largely
because investors will diversify their portfolios into
euros. They also think this will happen quickly—in line
with the speed of today's international capital
markets.
In the other camp are the sceptics, who think the euro
will need to establish a track record before investors
move into it. They also reckon that inertia, for instance
in reserve diversification, could benefit the dollar for
several decades. They point to the lessons of history:
sterling maintained its status as a globally dominant
currency long after Britain's economic hegemony was
over.
Fred Bergsten, director of the Institute for
International Economics, is the most prominent
American enthusiast for the euro. He expects the
European Central Bank to pursue a tight monetary
policy. He also expects investors, and central banks,
to shift a substantial part of their assets out of dollars
and into euros, commensurate with the euro area's
relative economic weight.
Ultimately, Mr Bergsten thinks that around 30-40%
of world financial assets will be denominated in euros,
with 40-50% denominated in dollars, and the rest in
yen and smaller currencies such as the Swiss franc
and sterling. Such a portfolio shift could imply a
one-off transfer of between $500 billion and $1 trillion
into euros. And if that happens as fast as Mr Bergsten
expects, it will push the euro up against the dollar.
Mr Portes and Ms Rey are also enthusiasts, though
their analysis differs from Mr Bergsten's. They argue
that a key determinant of the euro's future significance
will be the transaction costs of using the euro in
foreign-exchange and securities markets. As Europe's
capital and securities markets integrate, becoming
deeper and more liquid, these transaction costs will
fall. Lower costs will make investment in the euro
more attractive, in turn increasing volume, further
reducing costs, and so on.
Lower transaction costs in foreign-exchange markets
will also increase the euro's attraction as a currency
for denominating trade. If there are further institutional
changes in Europe's financial markets, and if Britain,
which has better developed capital markets than the
continent, joins the euro, the two economists reckon
that the euro could easily challenge the dollar—and
again, that the challenge could come quite fast.
The sceptics’ case
How realistic are these claims? Many economists,
particularly in central banks, are sceptical. They point
out that the euro is still untried, and that markets will
need time before they trust it as a stable store of
value. More important, investors have historically
shown a "home bias" in their portfolio allocation. For
a net portfolio shift towards the euro to occur, foreign
investors must hold more assets in euros than they did
in its constituent currencies.
Nor is a single capital market entirely guaranteed. As
Peter Kenen of Princeton University points out, a
single currency does not mean that Europe's bond
markets will become completely unified. Although the
euro will eliminate intra-European exchange-rate risk,
it does not mean that German and Italian bonds
become perfect substitutes. Differences in default risk
and tax treatment will mean that individual bond
markets remain segmented—though to the extent that
they are less so than now, the euro may still gain.
Sudden shifts in official reserve holdings are also
unlikely, despite the disproportionate size of the euro
area's own reserves. Once the euro is introduced, the
national central banks of the euro area will hold
relatively high stocks of foreign reserves that they will
no longer need because much of what is now
"external" trade will become intra-euro trade.
Estimates of these "excess" reserves range from $50
billion to $230 billion. Central banks will at some
point want to reduce these.
Other non-euro central banks (which hold a total of
some $775 billion of dollar reserves) might also want
to hold more euros and fewer dollars. If official dollar
reserves were sold suddenly, there would clearly be
downward pressure on the dollar; but central bankers
will surely want to avoid doing anything to destabilise
currency markets, so they are likely to move slowly.
In any case, official dollar holdings are small
compared with America's overall international assets
and liabilities, which, according to the IMF, are of the
order of $3.5 trillion and $4 trillion respectively. What
really matters, therefore, is the behaviour of private
investors.
The relationship between portfolio adjustment and the
euro's exchange rate is complicated. In theory, if
private demand for new euro assets matched the
supply from governments and firms that will borrow in
euros, there might be no effect at all. In practice,
however, a substantial exchange-rate effect can be
expected—mainly thanks to the pattern of
current-account deficits and surpluses between
America and Europe.
If demand for euro assets comes from outside
Europe, the resulting inflow of capital to the region
means that it would have to shift from today's huge
current-account surplus (1.8% of euro area GDP in
1997) to a big deficit to accommodate it. America, in
turn, would be forced to trim radically its
current-account deficit of 2.1% of GDP in 1997. Such
a swing would probably be engineered by a huge
change in exchange rates, with the euro rising sharply
against the dollar. Moreover, if the demand for euro
assets then rose faster than their supply, the euro
would continue to appreciate. To give some idea of
magnitudes, Mr Portes and Ms Rey have suggested
that a portfolio shift of $700 billion into the euro might
drive down the dollar by 40%. Such a change would,
to put it mildly, have a big impact on the global
economy.
The European Central Bank's monetary policy (and
also the fiscal policies of euro member governments)
will, of course, influence both the demand for the euro
and its price. So the biggest question of all is: will the
ECB, which has a treaty obligation only to pursue price
stability, take much notice of the euro's exchange
rate? Like America and Japan, the euro area will be a
relatively closed economy: external trade will account
for a mere 10% of GDP. It may be tempting for the
Europeans to mimic the "benign neglect" that they
have often accused the Americans of following for the
dollar. Indeed, some economists think that, with the
world's two major currencies concentrating
exclusively on domestic goals, currency instability
might increase.
Hence, perhaps, the renewed calls for more formal
international co-ordination. At its simplest, this might
mean no more than closer co-operation among the
main currency blocks—the dollar, the euro and the
yen. But there have also been calls for "target zones"
for the euro and other currencies—most recently
suggested by Germany's new finance minister, Oskar
Lafontaine, in talks with his French opposite number,
Dominique Strauss-Kahn, though the motivation of
both men seems to be to ensure that the euro does
not appreciate too far rather than a sudden conversion
to the notion of target zones for the good of the world
economy.
Formal exchange-rate targets seem infeasible, even if
some co-ordination between the world's major
currencies might be desirable. For one thing, it is hard
to see them working for the euro, given the confusion
over responsibility for it in international arenas (see
article). Nonetheless, a lesson of the 1930s is that the
existence of two semi-dominant currencies (in that
case, the pound and the dollar) can be destabilising.
Third countries, in particular, can suffer from large
currency swings. The challenge facing the Europeans
(and others) will be to harness the benefits of their
increasingly important new currency, while at the
same time minimising the risk of any such negative
global consequences.
http://www.economist.com/editorial/freeforall/current/index_bb0227.html
ANOTHER (11/13/98; 09:00:41MDT - Msg ID:970)
Thoughts!
All:-------------------------------------- I received this E-mail from USAGOLD with thoughts and questions. To this I will
reply and more. -------------------------------------
Mr. PH in LA, you write: "I find myself wondering how much of your understanding is
based on hard knowledge and/or how much on supposition"?--------------------------------------------
Sir, in the course of human
affairs, it is a mistake to accept "intentions to act" as "hard fact or hard knowledge". The books of history are well written of our society as they make plans to travel in one
direction only to find a better path as time progresses. No leader or king has ever made a
decision that is not questioned or perhaps changed after enacted. Your own congress does
make the laws, only to change them for the better as thoughts intertwine!
In matters of finance, law and defense, orderly conduct requires a plan of action weather it be correct or
not. This is the social way our peoples require, yes? Government without a plan that is
accepted as "hard knowledge" by all does lead to chaos. As you consider this, I continue:
My "Thoughts" make supposition of the "hard knowledge" I possess, for with many years I know well the plans that are made! But, as written here, "as the course is set, it remains
for the captains of state to sail the ship through stormy seas, even as the port of call
remains the same". My years also know well how far from plan we (governments) do
often blow.
Even the Mr. Duisenberg does plan the straight path for what will become our world money. It is a good path, with order, yet he knows and I know how hard the winds of war can blow! I ask you Mr. PH, when you build your financial house at the waters
edge, do you accept as "hard fact" from a human builder his knowledge of the "true tide height"? Is it not the better choice to add "supposition" to this "hard knowledge" and build higher and stronger, with gold?
A currency war does approach that will bring wind and water into any house built on the dollar shore. The "captains of state" know this storm
is coming, but to present it as "hard knowledge" to those with a wealth foundation that may not be moved, is of little purpose.
Much of Western wealth is built this way. It will belost, without contest!
My Thoughts are for those of simple ways and worth, for their homes are small and easy to move. These persons are, and always have been "the wealth
of nations". This new Economic Ship will survive the storm, and indeed sail into it's finalport.
In that day the wealth of nations will remain intact by the actions of governments and people that trusted only gold!
more to come Thank You.
ANOTHER (11/13/98; 10:30:01MDT - Msg ID:972)
THOUGHTS!
Mr. PH, your writing continues: ------------------------
"It has often struck me that a very important linchpin to your
scenario of a Euro poised to take over the dollar's reserve
currency status is the certainty that the major Middle Eastern oil
producers are committed to exporting to full capacity at real prices (in
Euros) in direct competition with the United States' insistence on
higher prices for protection of their strategic oil production capacity."
Sir, you may research for all of your days and never find a paper currency
that lasted without the commodity backing. During most of the past,
currencies were backed with gold. It was during your 1970s that a new
backing was found, oil! The removal of gold as backing for the US dollar
brought about the unified acceptance of pricing crude oil in dollars only. It
was considered, in that time, that the "free market" pricing of gold would
allow the dollar to be devalued in gold terms so as to represent a fair formula
(in percentage) to exchange dollars for oil. In this way, the commerce of oil
would create a demand for dollar use and as such the store of value as
contained in crude would represent the backing. As gold would replace any
lost resource of pumped reserves, the currency could be exchanged for metal
if new replacement reserves were not found. A plan, as such. However, other
motives lie behind the removal of gold from the dollar. Had oil been allowed
to stay at the low "gold backed dollar" price, all production would eventually
come from the large middle eastern reserves. Not the good strategic plan for
the US for reserves in that land required the much higher dollar price for
production. Thus the plan above was formulated and the OPEC Cartel
worked much to the surprise of many! It allowed a high dollar price for world
crude while retaining a commodity backing for the currency. Producers could,
if they wish, use dollars created from positive balance of payments to buy
gold at fair rates of exchange. The late 1980s show how the gold market was
allowed to run wild, without order. As you say, the trap door was shut! The
days of the dollar were now numbered as the European market worked to
begin a new currency. They were hurt badly by the run up in oil prices that
was not of their making. If a new Euro could be created that retained the
backing of gold in another format, oil prices could be lowered back into
Middle Eastern reserve production requirements. (I have written of this
before, please see my Thoughts!) These reserves are much larger than
discussed and can easily supply the world at lower prices. As you consider
this I add: The formation of the Euro is a return to the Old European World
Order with gold as the currency backing. And cheap oil is the agent that will
allow the shift to complete. It could never be presented as such for it would
break the financial system before a replacement was ready. The "hard
Knowledge" of lost oil production in the US due to low Euro prices will
destroy the American economy and wealth system as you know it. Also, the
loss of the ability for the US to sell debt in a native currency at low rates will
bring a credit destruction much the same as visited upon Asia. My friend, the
intent of producers is not to flood the world with oil, rather to change the way
it be priced. The natural effect will see the oil advantage for Europe and every
nation that does embraces that currency as a reserve. You will not see this
written but will feel the effects as they unfold. It will impact every equity and
currency market, worldwide. I have more to discuss of this. Thank You!
ANOTHER (11/13/98; 10:46:59MDT - Msg ID:973)
THOUGHTS!
Aragorn III (11/13/98; 10:23:00MDT - Msg ID:971) ---------------------------------
Mr. Aragorn,---------- we will discuss much in the near time of many
days. I am reading your thoughts and the thoughts of others. Mr.
Kosares has offered this forum for the use of all mouths and ears.
As events progress, it will receive the full measure of deep thinking by a world "not fully prepared" for what is to come!
Friend of Another (11/14/98; 06:55:49MDT - Msg ID:980)
REPLY.
Gandalf, --------------- Often I find post's from Another on my
system after returning from a long trip. I try not to send them all in
at once. As I am reading this forum now, so may Another also be
reading it through my private link. I never know when, it's
random. Just as Yellowbird just posted, it is sent to Another for
reading (hello Yellowbird!). When indicating he will post often
(real time discussion), I try to stay on or link often. I'm only the
conduit that acts like a firewall. Am expecting real time talk later
today (11/14/98), or if it's a no show, I'll post his last Thoughts
Msg.. That's it my friend, I can add no more. Thanks
Friend of Another (11/14/98; 16:00:24MDT - Msg ID:983)
January?
FOA NOTE: Reuters and Associated Press did not offer this portion of Mr. Duisenberg's speach at the Economic Club! I think that January could be the flash point?
----------------------------------------------------------
DUISENBERG: EURO MAY ACCELERATE CUT IN DLR SHARE IN
PORTFOLIOS
FRANKFURT (MktNews) - European Central Bank President Wim Duisenberg
said again Thursday that the introduction of the euro in January could potentially
accelerate the on-going shift out of dollar-denominated assets held in private
portfolios.
Duisenberg, in a speech a month ago, said that one could not rule out a sharp
rise of the euro's value against the dollar in January as investors diversified their
holdings into assets valued in the new single European currency.
In the text of a speech to the Economics Club of New York made available here
ahead of delivery, Duisenberg noted that EMU was likely to eliminate the
segmentation of the European bond markets caused by use of differing currencies
and thus produce a broader range of bonds that meet uniform market standards.
"In this context, it is interesting to note that between 1981 and 1995 the share of
EU currencies in worldwide private portfolios is estimated to have risen from 13%
to 37%, while the U.S. dollar's share fell from 67% to 40%," he continued.
"Although this process has slowed down somewhat in the 1990s, I would
expect the introduction of the euro to lead to a continuation of this trend and,
potentially, to accelerate it again," he said.
Duisenberg did not say how this shift would affect the euro-dollar exchange
rate.
[TOPICS: MNSEMU]
12:31 EST 11/12
http://www.economeister.com/emu/19981112_123100eu.htm
ANOTHER (11/14/98; 18:20:55MDT - Msg ID:984)
THOUGHTS!
Mr. Kosares, thank you for your words. From your post of ( USAGOLD
(10/31/98; 21:07:54MDT - Msg ID:870)), I will reply. Always, it was the
intentions of the BIS for China to join the Euro world. That country is the
"key of Asia", for it does "lock or unlock" all economies on the Pacific.
America did make the great wager that the little nations of this region would
grow large and the Japan would rule this commerce. All of this for the benefit
of keeping the dollar in trade, yes? Now "The Bank" has broken Japan as
they laid upon them rules of adequate financial dealings! These new rules of
engagement find that "noble house" as a ship that sinks with a dollar cargo.
This one ship will remove the entity of the "American Pacific Order".
---------------------------------------------------------------------------------
Please consider this meeting: "11th July 1998 The Bank for International
Settlements (BIS) today opened its Representative Office for Asia and the
Pacific in the Hong Kong
Special Administrative Region (HKSAR) of the People's Republic of China.
The office will serve as a regional center for the activities of the BIS in Asia.
Through the establishment of its first representative office, the BIS aims to
strengthen further the relations between the BIS and central banks and
monetary authorities in the
region, to improve the exchange of information and data, to facilitate the
organization of meetings and seminars and to contribute generally to
cooperation among central banks and
monetary authorities. The BIS has previously operated only from its
headquarters in Basle, Switzerland."
---------------------------------------------------------------------------------------
Now the Euro makers offer the China a path to travel that does not bring the
curse of dollar holdings. This day we see the beginnings of the "orient
express" on modern tracks. It will carry the cargo of trade that creates the
"independent economy" of Europe! Combine the oil of Babylon with the
peoples of China, then add the finance of the "Old World" and we perceive a
"New Order" of world commerce. Yes, we the China to the Euro "WITH
GOLD"!
-------------------------------------------------------------------------------------
Please consider as this was written after the BIS meeting : " Wednesday
brought some renewed strength on recommendations that China should
increase its
gold reserves. Liu Shanen, vice director of the
Gold Economic Development and Research
Institute of the State Metallurgical Industry Bureau,
recommended that the People's Republic should
increase its gold reserves from the current level of
397 tonnes or 3% of total foreign exchange
reserves of $140.5 billion to between 1,000 and
1,500 tonnes, between 6% and 8% of external
reserves, "to prevent financial risk." The reasoning
behind this recommendation is apparently the
belief that China should cut its holdings of
dollar-denominated foreign reserves to guard
against a possible fall in the dollar on the
introduction of the Euro, the single European
currency, at the beginning of next year. China
currently holds about 60% of its external reserves
in US dollar-denominated assets, including about
$60 billion in US Treasury bonds. "Compared with
cash, gold is stable and safe," Liu Shanen said.
He also recommended that the Chinese
government should ease controls on buying and
selling by individuals in a bid to boost what he
described as "non-governmental" reserves. Liu
Shanen pointed out that China ranks third in
global consumption of gold and fifth in mine
production, but only twelfth in terms of its official
reserves in gold."
------------------------------------------------------------------------------------
Some still say that the new Europe will sell gold. I say, these are words that
many wish for! Even the Poland does buy gold that will soon sell at $200US?
I have known these people well, they be no fools for London stories.
---------------------------------------------------------------------------------
Please consider these words of Mr. Milling Stanley: "
"Moreover, member countries of the ECB have been firm in telling
the world that they intend to go on holding gold in their individual
central banks too. Germany, France and Italy - three of the largest
holders of gold in the world - have made it clear they have no
intention of selling."
"Europe's politicians and central bankers are convinced that
Europe's gold will be a vital factor in underpinning the
credibility of the ECB's new monetary unit, the euro, which
they envisage as a reserve currency strong enough to stand alongside
the dollar."
Sir, we will address this further at another time, yes? Thank You
ANOTHER (11/15/98; 08:03:18MDT - Msg ID:986)
Correction.
ALL: A correction for my speech in #984! This " Yes, we the
China to the Euro "WITH GOLD"!" should say " Yes, WED the
China to the Euro "WITH GOLD"! Thank You
ANOTHER (11/15/98; 08:32:36MDT - Msg ID:987)
THOUGHTS!
Mr. jinx44,
it has always been the battle fought by many, this keeping of
one's money! It takes on many forms of confiscation over many
years. I submit to you that "all forms of wealth" are the "large
target" for theft. Some hold the gold equity shares with little worry
for "the tax" that will surely come. The trading of paper shares will
find "no market" when the "currencies war". After this battle is
settled, all paper will struggle to find a new value in a new world
money. Before this new value is found, the governments will reach
for the "greatest vault of gold", as such, it is "the great vault in the
ground"!
I think, you know not the modern mind of your leaders. They will
wish for you to hold not the Euro and will encourage their citizens
for gold. To these young officials of Western thought, gold is the
smaller of the two evils that does soon war with the dollar! See
even the "new Euro gold coin", as they make ready for a hard
currency. The dollar makers will rush to offer your "gold dollar
eagle" to present dollar holders as events progress. I tell you now,
silver, platinum and gold shares are not the tools of this new war.
All simple persons do know strategy for conflict, we hold the
weapons of our enemies. We hold gold! Thank You
Friend of Another (11/16/98; 06:20:21MDT - Msg ID:993)
Will Asia drag down USA?
EMU Top Stories: Mon, 16 Nov 1998, 8:01am EST
11/16 Tietmeyer Says Dollar-Japanese Yen Exchange Rate `Acceptable'
"The U.S. currency has lost about 7 percent of its value against the deutsche
mark so far this year on expectations recession in Asia will slow the U.S.
more than the European economy, prompting the Federal
Reserve to cut interest rats"
http://www.bloomberg.com/markets/emu/emu1_01.html
Friend of Another (11/16/98; 06:40:44MDT - Msg ID:994)
NEWS
MONDAY NOVEMBER 16 1998 FT.COM
Morgan Stanley arm to launch euro index
By Edward Luce and Vincent Boland
Morgan Stanley Capital International, the
global index provider, today launches a
bond index for Europe's future single
currency.
It joins a growing number of big US
investment banks hoping to establish the
benchmark index for bond investment in
the euro.
Salomon Smith Barney, which provides the
leading global bond index, has also
recently launched a euro-denominated
index. Other competitors are J.P. Morgan,
Lehman Brothers and Merrill Lynch.
Barclays Capital is the only European
bank to offer an index for the future
euro-denominated bond market.
Bankers say Europe's traditionally
conservative investor base is gradually
attuning itself to tracking broad
benchmark indices in bond markets. The
idea is more firmly rooted in equity
markets.
"The big fund managers have increasingly
to justify their performance to
investors," said Peter Harlow, director
of fixed income at Barclays Capital.
"Tracking an index is an obvious way of
doing so."
The big banks hope to mirror US markets
where investors closely follow bond
indices, including benchmarks for
high-yield bonds and for the mainstream
investment grade market.
MSCI hopes its euro credit index will
generate business in over-the-counter
derivatives.
Investors often enter into total return
swaps on indices. They pay a floating
rate of interest plus a spread to cover
administration fees in exchange for
receiving the equivalent return generated
from an index over a given period. This
saves investors directly investing in
bonds covered by the index.
However, some investors say investment
banks have overstated the growth
potential of the bond market in euros.
Although with an estimated capitalisation
of E3,000bn ($3,500bn) Europe's bond
market is almost as large as the US
market, it is considerably less liquid.
Unlike the US market, which has a strong
corporate presence, the European market
will be heavily skewed towards government
bonds. Some banks, such as Barclays, have
confined their indices to these.
There is also intense competition to
provide the benchmark equity market
index. Surveys of fund managers and
pension funds suggest MSCI is the most
widely-used pan-European benchmark
provider, but indices provided by Dow
Jones and FTSE International, partly
owned by the Financial Times, are also
gaining ground.
http://www.ft.com/hippocampus/qcaa1a.htm
Friend of Another (11/16/98; 06:49:12MDT - Msg ID:995)
NEWS
[FT.com]
FRIDAY NOVEMBER 13 1998 Commodities
METALS: Market volatility forecast
By Kenneth Gooding, Mining Correspondent
Demand and prices for metals will be
volatile towards the end of next year as
consumers attempt to head off millennium
bomb problems, according to Rudolf Wolff,
the commodity trading subsidiary of
Noranda, Canada's biggest natural
resources group.
Industry worldwide will build stocks
before 2000, "switching from just-in-time
to just-in-case inventory", Martin
Squires, a Wolff analyst suggests.
The millennium bomb refers to problems
that are already beginning to arise
because older computers are unable to
recognise the date change from 1999 to
2000.
Mr Squires says a mining company not
completely certain that its mine - or
power supplier - is year 2000 compliant
would be unlikely to allow employees into
potentially dangerous areas.
MORE: http://www.ft.com/hippocampus/qc8522.htm
ANOTHER (11/16/98; 07:58:14MDT - Msg ID:996)
THOUGHTS!
Mr. Young,
In the 1990s many investors did lose site of the reality of gold. These
persons heard the call of "stock brokers and leveraged metal sellers" as they
offered gold as "the investment" not "gold the world currency". Western
citizens purchased small amount of real metal, then proceeded to expand
return with paper gold. As such, they rode the back of an "unbroken
Arabian"! This "investment" represented the "wild side" of gold in the form
of paper money. Paper gold was offered as real gold in the modern day
perspective. Perhaps, it be the sophisticated way to impress ones piers,
socially. These same did make the great gains, only to return these same into
the fire of "trading". Your mind, it does also record these moves, yes?
I submit, that real gold, held as a currency, has acted no more or less than
many other paper moneys, both major and minor. Open your charts of past
fluctuations in currency markets, view them all. Behold how the currencies
are "volatile" with some movements of greater scope than gold. Some traders
debate with the ears of clients that gold is not used as money "anywhere"!
And therefore, it is not money, but a commodity for the trading. In this aspect,
investors have lost much wealth to the commission of brokers that trade only
metal and have no understanding of world banking of currencies. For the gold
is a currency that, today, is used to buy and sell other currency, not goods and
services! As such it be the "money of moneys". Small investors of simple
means will do well indeed to hold the gold, in good measure, next to the
native currency they possess. In time, this gold will far exceed any other
wealth held by their family.
The "Yellowbird, Truthseeker and others that "think thru these Thoughts"
will find no "claws of other motives" in this mind.
Mr. Young, with respect, if you find me crazy: I offer " bring before me the
lion that so devours my house, for this beast produces more than it destroys
------ strange pronouncements are these as the lamb in our garden has eaten
our only food"
Sir, continue on with you present flock and do count your wealth today, for
the ones with THESE crazy thoughts will compare wealth with you
tomorrow. Your days be well, Thank You
ANOTHER (11/16/98; 10:30:03MDT - Msg ID:999)
THOUGHTS!
Mr. Truthseeker (#988),
In the past, the US government did take in gold for the purpose to "restore
the dollar banking system". The laws were changed for this purpose. Today,
the US will "defend the dollar system" from "change"! This is the large
difference, yes? Understand, that the present dollar world would continue if
no "alternative currency was presented". In this circumstance, a move to
"price all international trade in partial payment with gold" would ensue. Such
would not be good for the world economy or Europe.
To this end, a Euro is created that will allow the "freemarket price of gold"
to destroy the dollar once this alternative is in place. In time, in actual buying
power, gold will rise in Euros but will soar in dollars!
Do consider that for the defense of dollar reserve system, the US political
motives will develop as such: "For citizens to change savings reserves from
dollars to Euro will be the "un-American thing" and "It will be better to hold
dollars or even gold than Euros".
Sir, for a time gold will increase in value faster that the Euro will appreciate
against the dollar. In this way many will move to gold thereby blocking the
escape of foreign dollar holders into metal. It is the "tradeoff" of
"encouraging gold buying domestically" against the "blocking of movement
in foreign dollars". Many dollar reserve banks will "freeze from buying" gold
in the false thought that it will return to lower prices. The dollar will slowly
plunge against any "Euro reserve currency economy".
With this I continue for Mr. SIOP (#989),
In time all native American oil production will become "uneconomic" even
as the dollar price of oil does proceed into the hundreds! This be seen as the
simple understanding because the coming dollar cost inflation does render
even this price as "too low"! However, oil in the hard Euro nations will
become even cheaper, creating much lower costs of production for goods and
services. It is the action of "backing the Euro with oil" by "requirement of
settlement in that currency" that will allow Europe to live as the "American
Life"!
Perhaps, had the US allowed the dollar price of gold to increase in the early
70s and accepted Middle Eastern oil production as Europe does today, none
of this would have happened. However, the America would have received
much of the hardship that Japan receives today as the result. Still, seldom do
we find the voluntary destruction of over extended industry in today's world.
Always, it is in the "end of currency system" that loss is inflicted. A different
time we journey thru, yes? A history lived by your parents parents. We relive
old history with new eyes, as gold is held in a different light. Thank You
Friend of Another (11/17/98; 05:12:57MDT - Msg ID:1003)
NEWS -
Tuesday, November 17,1998
Bahrain Local Time
3:06:09 PM
Euro defence firms aim at integration---------------------
Europe's leading aerospace firms have agreed in
a report submitted to their Governments yesterday
to try to consolidate the industry by forming an
integrated European defence group, France's
Aerospatiale said.
The confidential report by Aerospatiale, British
Aerospace, Daimler-Benz Aerospace (Dasa),
Italy's Alenia, Casa of Spain and Sweden's Saab
pushes the European industrial project forward
amid speculation that BAe and Dasa were planning
to go ahead with a two-way deal.
Europe's fragmented defence industry is under
pressure to consolidate rapidly to compete with the
US sector, which began the process years ago and
has created such giants as Boeing-McDonnell
Douglas and Lockheed-Martin.
But the process has been slowed by
disagreements – notably a reluctance by the British
and German groups to merge with state-owned
Aerospatiale and end up as part of a big outfit in
which the French state would have a major holding.
The European companies said in a joint statement,
released by Aerospatiale, that they had reached "a
wide measure of agreement" on several issues.
"They all have confirmed that a unified, integrated
European Aerospace and Defence Company
(EADC) is the right target structure, as already
proposed by the Airbus Partners," it said.
Aerospatiale, Casa (Construcciones
Aeronauticas), Dasa and BAe are members of the
Toulouse-based Airbus commercial plane
consortium. It is scheduled to become a joint stock
company next year and would serve as the
foundation for an integrated civil and defence
aeronautics group.
The companies said the report also addressed "the
question of government rights and safeguards in
EADC" but did not elaborate.
A spokeswoman for Aerospatiale declined to say
more.
A spokesman for the French Defence Ministry said
the Minister, Alain Richard, would explain the
Government's view on the proposed merger at a
Western European Union (WEU) symposium on
defence industries to be held in Rome today.
Defence sources said the joint announcement by
the six companies seemed to back Richard's
oft-stated view that, despite international press
reports to the contrary, British and German
aerospace giants would not forge an alliance
without France.
France has moved to consolidate its large
domestic industry, announcing a merger of
Aerospatiale with Matra High Technology, the
aeronautics business of the Lagardere group,
which has links with other European defence firms,
including a missiles venture with British Aerospace.
The domestic consolidation, expected to be
completed next year, will fold in combat plane
manufacturer Dassault Aviation, clearing the way
for the establishment of a pan-European group, the
French Government said last week. – Reuters
http://www.bahraintribune.com/busi.asp?Art_No=185
Friend of Another (11/17/98; 05:24:19MDT - Msg ID:1004)
CyclePro - Bank Derivative Exposure Report
"The top 8 U.S. banks hold 95% ($26.6 Trillion) of all reported derivatives. These top
banks include the following (with stock symbol): Chase (CMB) includes Chemical from
merger, J.P.Morgan (JPM), Citibank (CCI), NationsBank (NB), Bankers Trust (BT),
Bank of America (BAC), First Chicago (FCN), and Bank of New York (BNY)."
----------------------------------------------------------
http://www.geocities.com/~CyclePro/Charts/SP500/DerivExpo.htm
Friend of Another (11/17/98; 18:02:54MDT - Msg ID:1014)
Pete, Aragorn, Siop and others,
I'm waiting for some replies to your posts. When Another sends them in I'll
have some thinking to add also. I want to wait before I post. Good writing,
people! USAGOLD, nice post! Thanks FOA
Friend of Another (11/18/98; 05:25:17MDT - Msg ID:1020)
"reserves of 260 billion barrels of crude" !
NOTE: The offering of rights in some "form of involvement" in"Saudi's
reserves of 260 billion barrels of crude" is subject to Mr. Richardson's idea
of what "he understood"!
This item "despite Saudi signals to the contrary", leaves the door open to
Europe. So does this statement, "Prince Abdullah has not held a similar
meeting with European companies but Saudi insiders have said neither they
nor Asian oil companies are necessarily excluded from submitting
ideas."
Wednesday, November 18, 1998
Bahrain Local Time 3:02:44 PM
US backs oil firms’ Saudi investment
THE US Energy Secretary, Bill Richardson,
yesterday supported an expansion of US energy
investment in Saudi Arabia, the biggest prize in
world energy with the largest oil production, exports
and reserves.
Announcing a visit to the kingdom in January to
encourage US investment contacts, Richardson
suggested – despite Saudi signals to the contrary –
that this might involve the country's prized upstream
exploration and production sector.
Richardson said in London he understood some
form of involvement in Saudi Arabia's upstream
was on the cards, a development that would raise
the prospect of US access to Saudi's reserves of
260 billion barrels of crude.
"My understanding is that Saudi leaders want to
see upstream investment and joint projects. They
haven't been specific entirely yet. I think there are
discussions going on with the companies," he said.
"The US Government views this as a healthy
development. We will encourage it and that will be
one of the main purposes of my trip, to encourage
this joint upstream investment in both Saudi Arabia
and Kuwait."
Saudi Arabia's neighbor Kuwait is openly seeking
Western help in developing its large oil reserves
through operating service agreements that would
give western partners a share in the proceeds of
new oil produced with their help.
Richardson, who spoke to reporters on the
sidelines of the annual Oil and Money conference in
London, said he had discussed Kuwait's plans in a
meeting in the United States last week with Kuwaiti
Oil Minister, Shaikh Saud Nasser Al Sabah. "Saudi
Arabia's interest in opening its upstream market
has been widely repoted – hailed by industry as a
potential major breakthrough," Richardson said.
Prince Abdullah has not held a similar meeting with
European companies but Saudi insiders have said
neither they nor Asian oil companies are
necessarily excluded from submitting ideas.
Oil majors seeking big Gulf upstream roles could
lose some of the skills and assets necessary for the
job if a price-led wave of downsizing and
consolidation continues, the conference said.
Pressure from investors for better returns and
cost-cutting could result in "anorexic" oil companies
lacking the depth of skills or access to capital to
provide attractive partners for oil-dependent Gulf
states, oil executives and bankers said.
"The opportunities are likely to be more numerous
than the ability of the industry to pay for them at
current cash flows," Pierre Jungels, Chief Executive
of British independent Enterprise Oil, told the Oil
and Money conference.
"The industry will also find it can't get the people
with the ability to do these projects if the current
bout of downsizing continues," he said. – Reuters
http://www.bahraintribune.com/busi.asp?Art_No=185
Friend of Another (11/18/98; 05:46:15MDT - Msg ID:1021)
Toru Kusukawa, said Asian countries should peg their currencies not primarily against the dollar
Paris, Wednesday, November 18, 1998
Euro Could Dethrone the Dollar in
Asia
By Philip Segal International Herald Tribune
HONG KONG - Although the economies of Asia remain
shell-shocked, Asian countries still hold hundreds of billions of
dollars in cash and could play a key role in determining the
success of next year's major economic event: the creation of
Europe's single currency, the euro, Jan. 1.
Europe's money also promises to play a much greater role in
Asian finance.
While Indonesia, South Korea and Thailand have had to resort
to International Monetary Fund bailouts, Asia remains the
world's dominant lender, with well over $500 billion in
foreign-currency reserves, most of them in U.S. dollars.
Japan, China, Hong Kong, Taiwan and other economies in
Southeast Asia are financing America's continuous and growing
current-account deficits.
That means Asia buys a lot of American bonds, but that could
change. Asia holds a combined 40.5 percent of the world's
foreign-currency reserves, and it is the possible movement of
some of those reserves from dollars to euros next year that
could have the biggest individual effect on how strong the euro
turns out to be, analysts said. "The decision by Asian central
banks is crucial - it's key," said Lorenzo Codogno, economist at
the Bank of America in London.
The United States has a 21 percent share of the world's
economy. But the U.S. dollar made up 56.4 percent of
international reserves at the end of last year, according to the
IMF. Reserves in European currencies - including four that will
not convert to the euro on Jan. 1 - made up just 26 percent, even
though Europe's contribution to the world economy is about
equal to America's.
Should some of these imbalances get redressed after January,
there is plenty at stake.
If the euro gains in value against the dollar, central banks would
prove to be big buyers of bonds denominated in euros, analysts
said. That could put serious pressure on the value of the dollar,
because there would be lower demand for U.S. Treasury bonds
and therefore less demand for buying dollars.
The dollar could then fall, bringing renewed inflationary pressure,
which itself could reduce the likelihood of further cuts in U.S.
interest rates next year. Of course, there would also be benefits
to a cheaper dollar, which would tend to make American
products more competitive on foreign markets and thus be likely
to increase exports.
While they see it as a possibility, though, many analysts say they
do not expect an overnight movement into euros in the weeks
after the debut of the euro Jan. 1, when individuals and
businesses will be able to start using the euro for check,
credit-card and financial transactions. The introduction of the
physical currency will come two years later.
"Central banks in Asia tend to be much more conservative" than
their counterparts in Europe, said Ma Guonan, an economist at
Salomon Smith Barney in Hong Kong. As a result, he said, they
might decide to wait a few months to see how the euro fares
before undertaking major shifts in their reserve currencies.
On Nov. 1, Leon Brittan, vice president of the EU Commission
and one of a series of EU officials recently in China to help talk
up the euro, said Beijing would convert a "serious amount" of its
$141 billion in foreign-exchange reserves in 1999 from dollars
to euros.
It is clear that in 1999 and beyond, Europe's money will play a
greater role in Asian finance, as the European bloc begins
trading in a currency that will be far more liquid than the
individual European currencies are today. Governments in Asia,
which today might not look closely at lending in Irish punts or
Spanish pesetas, may well decide to buy Irish or Spanish bonds
denominated in the same euros used by France and Germany.
As for companies and governments in Asia looking to issue
new debt, "everybody's going to be looking to fund in the euro,"
said the head of origination at a European bank in Tokyo.
"The Japanese want to issue into the euro," he said. "People
want to make use of this new megamarket."
The euro may start slowly, he said, but a few large issues from
supranational agencies such as the World Bank could give a
major lift to confidence in the currency.
In fact, it is the bond market that could lead the way for a shift of
central bank reserves. The changeover may not come so much
in the shift of cash but rather in purchases of euro-denominated
bonds with the proceeds of maturing dollar bonds, as well as
with cash that is continuing to roll into central banks of Asian
countries that are running current-account surpluses.
The United States is not the only country at risk in the event of a
strong euro, however. Should the euro really take off, there is a
danger that the much larger, more liquid capital market that
results could suck investment into Europe at the expense of
Asia, according to David Carse, deputy chief executive of the
Hong Kong Monetary Authority.
"There must also be at least a possibility that closer integration
of the EU could make it more self-contained and
inward-looking," Mr. Carse said in a speech in Hong Kong last
week. "Intra-EU trade could increase, while that with the rest of
the world and Hong Kong could diminish."
In the first four months of this year, he said, Japan sold a net
$2.1 billion in stocks and bonds in Asia but bought $9.9 billion in
European securities. If this trend continues, he said, "extended
diversion of capital to Europe would undermine Asia's growth
prospects as well as Hong Kong's position as an international
financial center."
Japan has also been aware of the problems linked to a strong
euro. On Sunday, the chairman of the Fuji Research Institute,
Toru Kusukawa, said Asian countries should peg their
currencies not primarily against the dollar, as has been the case
for years, but to a three-tier basket of currencies made up of the
dollar, the euro and the yen, according to Agence
France-Presse.
Japan may also be waking up to the fact that a move away from
dollar funding in the bond markets would give it an opportunity to
increase the disproportionately tiny amount of yen-denominated
debt in the world's reserves.
A government task force that advises the Japanese finance
minister said recently that the government should consider
eliminating a series of withholding taxes on Japanese
government paper.
http://www.iht.com/IHT/TODAY/WED/FPAGE/euro.html
Friend of Another (11/19/98; 05:20:20MDT - Msg ID:1029)
E100
FOA NOTE: What most analysts fail to grasp is that gold may well sell for
100 Euros per ounce by 2002! Of course, the exchange rate between the Euro
and the dollar may show gold trading at $1,000US or much, much higher! In
this event, "content of chocolate" as seen below, will be the least of anyone's
problems?
EURO COINS: Speculation supports gold
Gold fell marginally in London yesterday but found support at $293.50 an
ounce as news there might be gold Euro coins provided some support.
Andy Smith, analyst at Mitsui Bussan Commodities, said: On undemanding
assumptions, the bullion embodied in a gold E100 would exceed that in all
commemorative Japanese coins [700 tonnes], the entire issue of krugerrands
[more than 1,400 tonnes] and even that in all the Napoleons [French gold
coins] issued between 1865 and the first world war [13,000 tonnes].
He pointed out, however, that the proposal had previously been considered,
and rejected, by the European parliament. For the past 25 years European
politicians have been haggling over an acceptable compromise for the content
of chocolate. If the definition of a single European bar proves so sticky, what
chance quick progress on a gold Euro coin?
(MORE)
http://www.ft.com/hippocampus/qcd69e.htm
ANOTHER (11/19/98; 06:43:15MDT - Msg ID:1031)
THOUGHTS!
Pete (11/17/98; 16:29:31MDT - Msg ID:1012)
Mr. Pete,
World based currencies that are not tied to gold do come and go. It is a
natural part of the economic social order. This is expected and planned for.
As gold has been money for the extent of civilization, paper money may be
used as "world based" as long as it uses gold for backing.
When dollar went off official gold standard, it was hoped to return to gold at
later stage. This period of hope lasted some 15 years until 1985! The events
have progressed toward a new currency from that time. The European
Economic Unit (ECU) was created in early 80s and became the accepted
format for beginning a new day. Today, we approach this change!
It is the "practical understanding" that our modern world must use a "digital
paper money" for commerce. All accept this. However, without a "gold
currency" priced daily in the "free market", and used as real reserves for
backing, any "world currency reserve" would expand using "debt only" as the
tool. This result brings the eventual reckoning for all users. The "host
country" finds all other nations supporting it's "lifestyle", even as those
country's private financial infrastructure is destroyed. It is the rising US
equity markets and falling inflation that so indicates the last days of the
dollar! Many say this is a sign of strength for America, yet they know not
what time of life the dollar has attained. The "old man" has he become even
as persons place their financial horse upon his shoulders. The world debt
structure of this "old man" is such that the true pricing of gold in a new
currency, will bring such a weight as it will end his life!
The purpose of the evolution in "paper gold trade" is offered in many
reasons. At first, it was the "deception" to hide the "life age" of the dollar.
Much as your Hollywood actors obtain the "facelift", yes? This
"deception"(low gold price in US$), to surprise of many, was created by the
"Euro makers" not the "dollar makers". To their advantage, world traders and
dollar investors were greatly fooled and, as you say, "jumped on band
wagon" to help sell paper gold down! This action did prolong life of dollar as
was needed, for the Euro was taking much time to complete.
The intent of "large long paper positions" was to create future leverage
against "dollar gold price". The cost of positions is of little concern, as any
present or historical dollar gold price will be "of little meaning"! These
positions will not be "physically covered" in any great way as this will never
be needed. The final conclusion of this action will lock the Euro into a gold
price, always moving less higher than dollar. The world gold swap market
will complete the rest (LBMA volume)! In time, the favor of oil settled in
Euros will force unwinding of dollar/gold (dollars used to buy gold in open
market). Gold will be purchased, delivering metal for Euros to settle old
leased contracts.
It has always been the desire for the "hard currency" to settle old dollar
debts. Dollar debts made "unreasonable" by the loss of "honest commerce"
by "dishonest exchange rates". As has been from the past, and will be in the
future, Gold does always settle the score! Thank You
Friend of Another (11/19/98; 07:33:52MDT - Msg ID:1032)
E100
Aragorn III (11/19/98; 06:25:03MDT - Msg ID:1030)
Aragorn III ,
The E100 is just part of "the master plan", as Another calls it. Think about
it? For the present, political posturing will not allow the issuing of a true
circulating gold coin. Besides, why get to specific about it's use now when it
won't be needed until 2002. At that time the entire gold, Euro and dollar
markets will be viewed in a far different light. Perhaps the E100 will be used
to settle outstanding or defaulted gold loans? I never thought about it until
now, but Another never said the CB gold IOUs would be settled for paper
Euros, just Euros?? If the E100 is created as legal tender with no limits on
production ( not unlike the American Gold Eagle) and the exchange rates
bring the gold content value to within a then existing 100 paper Euro rate, the
Gold Euro would become the defacto world standard for money?? If you
really want to get your currency circulating, just allow the gold price as
denominated in all other nonEuro currencies (dollars included), explode in
price. The paper Euro (100 of them) and the E100 would come into parity!
Think about it for a while? I'll be back later to discuss this more. Thanks
FOA
Friend of Another (11/19/98; 08:09:35MDT - Msg ID:1034)
100E
Aragorn III (11/19/98; 06:25:03MDT - Msg ID:1030)
Aragorn III,
One more thing. When I look back in past posts, Another often mentioned
$6000 gold in Euros. It wasn't intended to mean that gold would trade at
6,000 Euros. One thing I missed was that he said was that Euro gold would
eventually trade at the $6,000US value "IN PRESENT DOLLAR TERMS"!!
It now makes sense. In 2002, 100 Euros could represent a dollar exchange
rate of $6,000 gold. Perhaps 60US to 1Euro! $30,000+ gold was mentioned
if the entire currency system blew up prior to Euro launch! Looks like we will
get past that possible problem. Consider it! FOA
ANOTHER (11/19/98; 18:18:40MDT - Msg ID:1043)
TYoung (11/17/98; 11:47:58MDT - Msg ID:1009)
Mr. TYoung,
Your speech: " Apparently Another took offense at my prior post. Such was
not my intent"
Sir, I find no offense in your words. My reply to you, it was as your words to
me in past "a high fast ball offered to the high fast ball hitter", Yes? I say,
the thoughts a person holds is as their wealth. To share them is as sharing
your private possessions. We have conversed before, therefore, please continue
to share all opinions! Thank You
ANOTHER (11/19/98; 18:20:28MDT - Msg ID:1044)
Pete (11/18/98; 01:33:24MDT - Msg ID:1019)
Mr. Pete,
I do not think this Y2K problem will impact the Euro for the extended time.
Perhaps for a time it will disrupt. For the short time, I do plan for this.
However, if a great crisis develops from operations not completed as
scheduled, the heads, they will roll, yes?
Yes! Thank You
ANOTHER (11/19/98; 18:25:02MDT - Msg ID:1045)
Thoughts!
Aragorn III (11/17/98; 16:57:17MDT - Msg ID:1013)
Mr. Aragorn,
I have read your thinking as it was posted. A good consideration, indeed!
May I add this:
Thoughts of personal wealth are but the "little thing" for "nation states". It
is rightly so, for they must deal with the world in a "worldly manor". This
"dealing", it does require the shifting from one side to the other for
obtainment of end result. In all of human existence, politics has existed and it
does function today as "new money" is negotiated. The "good understanding"
at the BIS holds that "no new world class currency was ever brought forth
without attachment to gold". Our history books show this to be true, yes?
The modern politics of Western money has leveraged the world assets with
debt that offers little recourse if commerce slows. These debts, held as
reserves, become as paper in a world of slow business. My friend, your
private savings should not be at "the risk" with need of "the government
guarantee" if a recession or depression arrives. This be not the way to run a
"world reserve currency". Many modern leaders know this, but the politics
prevent the rapid change. However, slowly, the change does come. Often it is
offered in the way that allows forward progress, with options to "reconsider
rational" at later date.
As such we find ourselves today. The Euro was considered some time ago
as a new "western like" currency, with little gold. It did not receive the
backing of "oil settlement in Euros". From the early 1970s, oil became the
backing for the dollar in place of gold(see my other posts, also those of my good friend). That
mistake would not happen again.
It is, indeed well understood that introduction of a new gold related currency
into the Western "no gold" world would destroy many assets and greatly
slow business. Therefore, one "escape route" was created for "nation states"
and another for the private citizen.
When the commerce does slow, most metals will lose the demand of
business. This will be true for gold, also. However, physical gold will receive
the currency demand, a demand such as never seen before. It is in this
demand that the "escape route" for private assets be found. Plan journey well,
sir, we will not travel this path again in our time. Thank You
Friend of Another (11/20/98; 06:15:42MDT - Msg ID:1048)
NEWS
Friday, November 20,1998
Bahrain Local Time
4:08:40 PM
Euro nine plan unified stock market
The heads of nine European stock markets will
meet in Paris next week to create a Europe-wide
bourse after the launch of the euro single currency
in January, the Paris market authorities said
yesterday.
The announcement came after Madrid, Milan and
Brussels had said they would be interested in
joining a pan-European stock market proposed by
London and Frankfurt in July.
The SBF has invited the presidents of the
Amsterdam, Brussels, Frankfurt, London, Madrid,
Milan, Stockholm and Zurich bourses to Paris on
27 November to discuss setting up a "federal-type
and competitive pan-European stock market," the
statement said.
Paris, which had initially hoped to set up its own
Europe-wide stock market system, appeared finally
to bow to the inevitable and accept that if London
and Frankfurt were already linked there was little
chance of attracting partners to a rival system.
French Finance Minister Dominique Strauss-Kahn
said yesterday that it was perfectly "logical" for
Paris to join the alliance.
He said the idea was to set up a joint company to
run a single stock market from January.
"The stock exchanges in Frankfurt and London are
very happy with the decision by Paris," said
Deutsche Boerse spokesman Norbert Essing.
"We've wanted a pan-European solution from the
very beginning and it is in the interests of both the
clients and the markets."
After the launch of the euro, stocks on many
European markets will be quoted in euros, and the
Anglo-German plan was to set up a single market,
enabling members to deal in leading stocks on
either market. This will be made much easier by the
fact that there will be no currency conversion
problems, and allowing dealers to trade easily in
shares in several countries should also boost trade,
analysts say.
When Frankfurt and London announced their tie-up
in July, they invited other leading European stock
markets, including the market in Paris, to join but
had received no positive responses until Madrid
agreed to join on Wednesday.
The L’Agefi newspaper said yesterday that the
Paris stock exchange had signed a letter of intent
to join a three-way market allowing for
cross-membership of all three markets, and trading
in stocks on all three markets, from January 4.
Madrid agreed to join the alliance on Wednesday,
and the head of the Milan exchange, Stefano
Preda, said yesterday that he hoped "an
agreement will be reached rapidly" on such a
market, although he said he thought the tie-up
would involve only six countries.
Brussels stock market President Olivier Lefebvre
meanwhile told Europe 1 radio that he was "very
interested" in such a tie-up.
"We immediately expressed an interest" after
London and Frankfurt announced they had agreed
on an alliance in July, "because stock markets
cannot remain isolated in a European context," he
added.
The nine markets involved had a total capitalisation
of $5.58 trillion at the end of 1997, or half the value
of the US stock markets, according to figures from
the international stock market federation.
The New York stock exchange alone had a total
capitalisation of $8.88 trillion at the end of 1997. –
AFP
http://www.bahraintribune.com/busi.asp?Art_No=186
Friend of Another (11/22/98; 08:43:59MDT - Msg ID:1055)
NEWS
Paris, Saturday, November 21, 1998
Central Bankers Rebuff Lafontaine
Led by Greenspan, They Reject Exchange-Rate
Trading Bands
By John Schmid International Herald Tribune
FRANKFURT - Some of the world's most powerful central
bankers rejected calls for currency exchange target rates Friday
and warned European governments that political pressure on
the new European Central Bank could damage trust in the
single currency.
The notion that exchange-rate trading bands should be imposed
to curb the sort of destructive flows of speculative "hot money"
that triggered the Asian economic crisis is an "illusion," said
Alan Greenspan, chairman of the U.S. Federal Reserve Board,
at a central bankers' meeting in Frankfurt.
A volley of unvarnished comments by typically cautious central
bankers suggested that the proposal, which has been a
cornerstone of economic policy by the new German finance
minister, Oskar Lafontaine, can now be called dead, said Adolf
Rosenstock, international economist for Nomura International
PLC.
"That is a first-class confirmation that this initiative is coming to
an end," he said.
In recent days, Mr. Lafontaine has begun to back away from his
initiative, which his administration initially vowed to put on the
international agenda when Germany assumes the rotating
chairmanship of the Group of Seven leading industrial nations
next year.
For Mr. Lafontaine, the bankers' convention amounted to
another setback in his hopes to assert his authority over policy
in Bonn's new Social Democratic government. This week, Mr.
Lafontaine's undersecretary at the Finance Ministry, Heiner
Flassbeck, was denied the powerful post of representing
Germany at international economic summit meetings - a role
that traditionally would go to him.
Political pressure for looser lending rates after the German
elections in September gave the European Central Bank, which
will manage monetary policy for the 11 nations adopting the
euro Jan. 1, the first test of its autonomy.
Central bankers have consistently asserted the need for the new
bank to be independent, a message they reiterated Friday in
Frankfurt, home of the European Central Bank.
Mr. Greenspan called Mr. Lafontaine's call for regulation of
exchange rates flawed, saying it "is just not feasible or
credible."
Markets would view foreign-exchange bands "with great
skepticism, with good reason," he said.
Mr. Greenspan's criticism of Mr. Lafontaine was poignant, for
the German has taken pains to laud Mr. Greenspan for his
recent reductions of U.S. lending rates.
Wim Duisenberg, president of the European Central Bank,
agreed with Mr. Greenspan, saying that exchange rate target
zones were "not sustainable." Mr. Duisenberg pledged that the
European Central Bank would consider exchange-rate targets
"only in exceptional circumstances," if the euro showed a "clear
and persistent misalignment."
Eddie George, the Bank of England governor, also said it would
be impossible to fix exchange rates. Trading bands that are too
wide are "meaningless" and tighter bands are "impossible," Mr.
George said.
Hans Tietmeyer, the Bundesbank president, warned that calls
for lower interest rates - which he likened to a "political siege"
on the new central bank's autonomy - threatened to undermine
the single currency.
"The international role of the euro and global interdependence
increase the damage that such conflicts can potentially cause,"
Mr. Tietmeyer said.
The euro, which is sure to gain "international importance,"
cannot afford to be weak, Mr. Tietmeyer continued. "It cannot be
in the interests of either the United States or of Europe for each
other's currency to be weak."
The success of the euro will depend on how credibly the
European Central Bank plays its role, Mr. Tietmeyer said.
"Damage in situations of conflict is limited as long as the
markets remain convinced that the European Central Bank and
its decision makers are independent," he said.
That the euro will become a major international force after its
introduction was not questioned Friday.
"It would be completely inconceivable, not to say disastrous, if
the euro were unable to gain international importance," Mr.
Tietmeyer said.
http://www.iht.com/IHT/TODAY/SAT/FIN/bank.html
Friend of Another (11/23/98; 05:40:47MDT - Msg ID:1062)
"Only 10% of gold trade is conducted on officialexchanges such as Comex or Nymex"
23 November 1998
New focus on gold
traders
Producers band together in bid to increase
transparency in derivatives and futures
markets
David McKay
THE world's leading gold producers, including
Anglogold and North American rival Barrick Gold,
have banded together in an attempt to increase
transparency in the speculative gold trading
market which has been blamed for the drastic
decline in the metal's price since 1996.
Bobby Godsell, the CE of the world's largest gold
producer, Anglogold, said yesterday producers of
more than half of the world's gold output, about
36-million ounces a year, were represented at a
brainstorming session in London on Saturday.
The intention was to "turn the spotlight on" gold
trading, particularly in the derivatives and futures
markets.
This is the first time major gold producers have
assembled to discuss strategies on commonly
held market concerns. The meeting comes
against the background of a poor gold price,
which fell performance which has seen bullion
slide from more than $400/oz in early 1996 to
about $260 earlier this year. It is now about $295.
A report back on progress made at the meeting is
planned for February or March. The proposals will
also be taken to the World Gold Council whose
responsibilities the producers hope to broaden
rather than replace.
"The aim of the meeting was to broaden and
deepen the pattern of co-operation between the
world's gold producers and initiate dialogue with
market makers. We want to find out who the
market players are," Godsell said. The producers
hoped to introduce smaller and medium-sized
companies to continual dialogue.
Harmony MD Bernard Swanepoel, whose
company is not a member of the World Gold
Council, said he backed the initiative. It would be
useful if it could help producers to understand the
gold market.
Only 10% of gold trade is conducted on official
exchanges such as Comex or Nymex. The
remaining 90% is conducted over the counter.
There is a body called the Commitment of
Traders which attempts to monitor these
transactions, but market traders are not bound to
report to it and its findings are not regarded as
being representative.
BOE Securities Gerard Kemp said traders
closely guarded their positions on gold, but the
producers believed they could change the
sentiment about gold. He believed this might be
difficult to do.
One of the major depressants of the gold price
recently has been sales by central banks of
portions of their gold reserves, contributing to the
common perception that the metal is no longer a
store of wealth. However, Godsell said "the fear of
disruption" caused by central bank sales
appeared to have gone away.
Friend of Another (11/23/98; 16:32:56MDT - Msg ID:1064)
FAMILY!
ALL: I will have to be gone for an extended period of time. Must take care of personal family problems. Thank you all for all of your thoughts. FOA
FOA (03/12/99; 09:37:40MDT - Msg ID:3268)
TEST
This is a USAGOLD test.
ANOTHER (03/12/99; 13:41:45MDT - Msg ID:3278)
Test
This is a USAGOLD test.
FOA (03/12/99; 13:46:50MDT - Msg ID:3279)
Hello again!
Mr. Michael Kosares and ALL,
Hello again! I trust all is well with you? As you know, my absence was brought about by a personal family loss that has expanded my duties. Perhaps, in a month or two I will be able to again add to your Forum! I have several communications in need of sending, but little time to forward them. The Forum has been followed by myself and others. It has truly grown!
If able I will offer a rather long discussion from myself, containing bits of Another's private Thoughts. I hope THEY will be as interesting to others as it was for me? The markets are on a designed course, indeed!
It will be sent directly to you or posted, hopefully in the next week or two? Then I will be away for several weeks.
Thanks,
FOA
FOA (3/12/99; 20:21:32MDT - Msg ID:3299)
Will Return!
To All:
I thank everyone for the warm welcome. Unfortunately, there is very little time to communicate.
As written earlier, I will be offering a discussion and consideration of views, along with some of
Another's recent "private Thoughts". My participation with the Forum will be of a limited nature
for, yet, many more weeks. During this period I will continue to learn from those that truly create
the real market of Gold, the writers of the USAGOLD FORUM! Thanks FOA
FOA (3/14/99; 11:17:14MDT - Msg ID:3351)
REALITY?
Good day to all! I offer this as a means to consider the world, in perhaps a way not seen before. It makes use of private discussions with Another, taken place during my absence from world affairs. His words are clearly separate from mine. Will anyone recognize from where the title
came? Please do interpret these words as indeed, I do also interpret yours!
"ON THE FRINGE OF REALITY"
We travel through this world with our own notions of value and worth. Often giving little thought as to what part external forces play to impact our final conclusions upon these ideals. Nor do we fully understand the concepts that shape these same ideals in the minds of others.
"Another: My friend, "this game of chess" you play it well, yes? As do I. Truly, we understand the "rules of contact" concerning gold. If one player does touch his "most valuable piece", he must move it! But, in what direction will the "king of gold" or the "queen of Euros" be moved?
Each positioning, it does create different perception of "value" for opponent."
Truly, in this light we can see that our concepts of value and worth are clearly governed through the positioning of assets by political players. They move a strategic asset to the right and all other things on the board are reevaluated. To the left, a different worth is considered. Consider now, that all pieces, in this chess game of worth, hold a changing value in the minds of people in all world economies. Oil, copper, steel, currencies, they are, everyday, priced as to their usefulness not only to the owners, but also in the strategic value they hold in the eyes of our opponents. Those with whom we wish to trade! Only the King is held as the final player. When an opposing political entity posses your king in checkmate, we lose the strategic advantage to play the game. A king of gold gives the government the ability to declare this money game void
and start completely over. A move not taken lightly by the opponents.
Now consider the currencies ONLY, their daily changing worth, the value they hold in daily world trade and their value to us in our business of living life? A clear thinking person must agree with the conclusion that this is only a game. Do these paper security contracts really hold any
value for your life, except in their acceptance by others in trade? If our government moved an important chess player only one space, our native currency could lose all value to others! In such an event would this item still hold value for you?
Because the trading of paper securities (stocks, bonds, currencies, etc.) have become the only avenue for world economic activity, we are all compelled to play this game of chess. Like it or not, your very net worth is every day, in play! And, as such, we all watch for the next move on the board. Each, in his own quiet way, ready to act quickly and purchase the "next paper asset" that appears to hold value in trade. That is, before our neighbor beats us to it. Think now, is this the way of the free market and the democratic order that one was brought up to expect? Your life savings, not at risk of being lost, just at risk of being reevaluated to a lower level of importance in commerce.
But people, what if? What if this game of Dollar chess was quietly, out of sight, being lost? How will you know to move before others do if you cannot see the entire board? Confidence is a strange human emotion. It is fragile beyond compare. Many confuse "confidence in ones holdings" with "confidence in our judgment of others confidence"! There is a big difference. In other words, we depend on the judgment of others to protect the maintain the value of our assets. In seeking real security, our position of wealth is safe and fair as long as we can grasp how others are valuing our holdings! Openly, in the interaction of daily markets that we see "how others value what we have", thereby instilling our own confidence. But, In doing such, we take for granted one major premise, "we can see the entire playing field and all of it's players in the same light as others see it"! It is here that we approach a truth that, paper wealth today does occupy "the very edge of reality"!
"Another: It is asked that a dollar be strong in gold? It is done. These many years gold price is lowered. Brokers stand tall and say "we bring gold down" and "our judgment be correct". They hold the mind of "young boys" in early years, yes? Know them not their work was a biding for the central banks. They will come to know "good judgment" in short time. It is asked for another knight in the game? It is done better. A powerful queen comes for our use, this new Euro. Now they ask this Euro be strong in Oil. It will be done! Need dollar continue be held strong in gold? "my friend, old trees die long deaths, but die they will if water comes not" " this rain of oil will no
longer find your Washington Oak"
Today, we have come to the "edge of reality" in believing that our paper contracts (cash included) are actually more valuable than the the THINGS we buy with them! For most individuals and national governments, our net worth is denominated in contracts of Delivery. The cash in your pocket is a receipt for the delivery of one dollar. Your stocks are contracts for a share of the profits in a company. Bonds, cash in the bank (CDs included) are contracts for delivery of future cash. The only value found in all of these securities comes from selling them to
someone else. A game that is played using the value judgment of another. Take your time and think slowly through this. The laws of supply and demand are muted by the accepted concept that "paper securities can all be converted into real things at the present price of real things". In the
end, this is the value judgment that everyone basis their holdings of paper wealth on. The Thought that, "someone else wants my paper assets because THEY can convert them into the things THEY need at today's prices". How easily would this fragile confidence be shattered if suddenly the payment for these Things required "Things in payment"? Would this not create a realignment of the value judgment of paper, worldwide?
Consider oil? Supply and demand rules the price, you say? I say, that is your value judgment based on the supply and demand of oil as seen in dollar payment. Now, see the settlement of oil trades denominated in Euros only and require a payment of things to augment dollar settlements.
Suddenly, the price of oil changes radically even as the supply and demand stays the same! Because of this and at the same time, worldwide, the judgment of the value of Things as
expressed in paper contracts will changes! In this light we find that the excess capacity of our life's work, as stored in the value of paper assets is no longer worth the Real Things it could be traded for.
Here, one confronts the Reality that during our long life, we did not create as much excess worth from our endeavors as we thought. Truly, all these years the Western economies produced no more assets than many Third World Countries! I ask you, for the future, in what world class
money will you hold the savings of a lifetime? And more importantly, will others judge it to have value? Will you continue to "trade gold to make more paper currency" or "will you trade paper assets to acquire more gold"? Most will agree, the choice will impact one's net worth for the rest of their life!
"Another: It is to say, "these westerners are not as rich as there currency say they are"!"
Some day you will read in the financial pages: "It is in the value judgment of paper assets that
people found the lies."
"Gold, yesterday, today and tomorrow"
Thank You for reading, FOA
FOA (3/14/99; 14:36:15MDT - Msg ID:3355)
Alchemist - Msg ID:3352)
Thanks for reading! More of your thoughts will, in turn, help to broaden my perspective.
FOA (3/14/99; 14:38:29MDT - Msg ID:3356)
jinx44 - Msg ID:3353)
I do have a reply for you. Will send it shortly. Thanks
FOA (3/14/99; 16:17:55MDT - Msg ID:3362)
jinx44
jinx44,
Hello! Thank you also for your consideration. Your question: What keeps the euro so strong?
The Euro has not been strong, yet. The greatest hurdle for this new currency was just crossed, it was born! Every known Western power in the dollar economic world hurled against this new competitor for the reserve currency spot. Indeed, it is alive today and will impact the future
economic landscape for the next fifty years, at least.
jinx44, we have to understand that in today's modern world, currencies are not strong on their own. They are made week or made strong through usage. All of the same questions you asked about the Euro could also be asked of the dollar? I state them again in a dollar context: no statement or rule that ties the United States gold reserves to any mechanism of convertibility except the current manipulated commercial markets. ---- it is only the good intentions of
America's largest socialist states that back the dollar. --- The fact that the US possess 0% (how will we know???) of reserves in dedicated gold is not necessarily proof that they will give me any of that upon demand. --- California and Michigan have moved further left. Democratic socialism
and its' dollar isn't a dream date for my precious daughter gold --- !!! You see, all of these apply, yet the dollar has been very strong these many years.
For a modern currency to be strong, it must be used extensively to denominate trade. Truly, that is the only value of a digital currency. But why promote a digital currency such as the dollar or the Euro? The answer lies with the modern world, it's the only way we can trade globally in an efficient manner. Then we further ask, why promote the Euro over the dollar. Ironically, the very
prospect of free world trade, so fought for by the American Administration, is the condition that the IMF/dollar system cannot handle! The debt built up from all of the past, unfree, projectionist old world trade is killing the transition. The policy is to sell free trade and the narrow margins it produces as they shut down entire economies because the low profits cannot service the old debt. Do you follow the logic and the problem? This brilliant, modern free trade system and all of it's benefits cannot be implemented using the US dollar as a reserve currency. It shuts off commerce that in turn limits the use of commodities such as oil, metals, food and the like. Many hail the low price inflation in the US as a victory and ignore the intent other nations had in following "free
trade". That being to promote a world economy, not just a US economy.
Enter the Euro! Understand that the increased use of commodities is a good thing. It's not just for the purpose of making rising chart pattern so speculators can sell their calls! Commodity usage creates real things and helps the lives of real people. When citizens gain real productive
mechanisms, they hold real wealth. Some would have you believe that third world people are enriched by saving US treasury bonds, not true! The only way to increase world trade, with an eye on building new consumers in all countries, is to remove the overhang of "dollar settlement".
The US started the free trade movement but quickly backed away when it was realized that the US currency, backed by debt through the fractional reserve system, would suffer sever inflation in the transition. Government guarantees would require the treasury (and Fed) to print unbelievable
amounts of new currency to cover the unserviceable debt that Free Trade would create! Now, Europe is going to finish the job using a new currency to supplant "dollar settlement". The ECB has agreed to allow their gold to be "marked to the market" quarterly. IN doing so, oil will slowly be transitioned to settle in Euros as the dollar is lowered in value against gold. The benefit to oil will be the increased world demand that a Euro settlement Free Trade will create. Once this train begins, everyone will jump on it. Why? Because it will benefit the largest part of the world
population. The dollar will implode and gold will soar in dollar terms.
So you see, my friend, the world is changing! The evolving gold market isn't about shorts being squeezed, or manipulation by banks or lawsuits. It's much, much bigger than that! As Another so often puts it "we watch this new gold market together, Yes?" Yes! FOA
FOA (3/14/99; 16:22:33MDT - Msg ID:3363)
USAGOLD!
Michael,
Thanks for the welcome. I see many Thoughts and little time. Much to read here. Will try to reply, learn and commit to others as this free time allows. FOA
FOA (3/14/99; 17:33:37MDT - Msg ID:3369)
Aragorn III, Gandalf the White
Aragorn III, Gandalf the White
Again, thank you both for your welcome. This reply may also be addressed to SteveH! Yes, in both your lifetime! And do consider that I do not even know your age!
It should be obvious to all that I am not a trader. I do not think Another is either. Most of the observations given are offered to instill a path to follow for research, not to direct. Most gamblers (traders) try to find private information and act on it before it is common knowledge. Greed is the main motivation, certainly not the expansion of ones knowledge or protection of wealth. We often see people blindly follow the words of others without creating their own logical conclusions. No one will ever successfully manage their family wealth in this manner. Indeed, many have used the leverage of paper precious metals (including the white metals) to create great losses of wealth. Yet, Another has always striven to put the average citizen into physical gold as a percentage of their net worth. If you follow in the footsteps of giants, you gain proportionately as do these conservative people. My agenda is found in offering others an agenda that will hold true in a changing world.
Follow the news, think for yourself, observe the outcome of events in a different light. I think you will find this an interesting story as it unfolds. Yes, it is slow, but it holds true! The game of chess has many outcomes, but the objective is always to complete the journey with all of your
pieces (wealth) intact! FOA
FOA (3/14/99; 17:45:24MDT - Msg ID:3370)
Thank You all!
I hope to return in a few days.
FOA (3/16/99; 18:36:54MDT - Msg ID:3466)
EURO!
I will be back in a few days to spend some time and discuss several of the views written here. PH-in-LA, you should, perhaps, stab the Euro again, it isn't dead yet! However, I do understand the skepticism.
NEW YORK, March 16 (Reuters) - (PARTIAL PRINTOUT)
The euro, which had fallen as low as $1.0816, recovered to end above $1.09 in New York as traders began to take a generally positive view about the crisis in the EU.
FOA (03/19/99; 05:15:28MDT - Msg ID:3569)
Turbohawg and ALL
I hope to be here all day March the 20. Another should send in for discussion around 6:00 Atlantic Time. WE can ALL talk about Gold, Euro and OIL! Good post Turbohawg!
FOA (3/20/99; 7:41:52MDT - Msg ID:3603)
GOLD: YESTERDAY, TODAY AND TOMORROW!
Hello!
In a very broad view, the governments have never stopped trading gold. For many years it has been treated just like any other world currency. Why? Because it is one! Yes, just like the Yen, Dollar, Mark, etc., Gold the currency is manipulated for it's Ability to affect the "value Judgment"
people place on all paper currencies. Jump back to: FOA (3/14/99; 11:17:14MDT - Msg ID:3351), with this line of thinking we can see that digital currencies are truly a State of Mind!
And, among Central Bankers, (BIS in particular) gold is the key in this world game of money chess. Forget all the visual physical sales and leasing of gold as a negative for the market. This metal is brought and sold no different than the foreign currencies the CBs hold. Investors keep
complaining about the "War on Gold" and the "Manipulation of Gold", yet these very actions Prove that gold has an important currency/reserve function!
So why are investors so unhappy and applying lawsuits? Because they are on the wrong Long side of the Gold market. The ones that have lost the most have applied the wrong value judgment to gold. They have invested in Gold the Commodity not Gold the currency! If there has been any
manipulation of the public mind set, it was here. Somewhere, in the last twenty years, people were sold on the idea that, unlike paper money that cannot be mined from the ground, gold can and everyone should play it like a commodity! Buy shares, futures, options and the like. Yet, all the
while pushing the money value of gold as the reason to justify it as a commodity trade! However, somewhere in the sales pitch, no one mentioned that this world currency had an important part to play in stabilizing dying paper currencies like the dollar!
You see, contrary to what some Western investors think, a large contingent of world reserve currency holders wanted to see the dollar made strong in gold. These people reap the real benefits of buying More Gold with less dollars! They even secure long term commitments (using proven reserves not current cash flow) to take delivery of far future physical gold while the price is low in dollar terms. It is in no small way that this function has improved, not only the demand for dollar based trade settlement worldwide, but the concept that it has gold value. Sure the process is
unsustainable if everyone tries to convert, but most trading of digital currencies is for commerce, not conversion. The process of enhancing the value of the dollar in Gold is a short term fix in a much larger scope of change!
I find it curious that some world investors are on the correct long side of gold investing while so many others are on the wrong side and losing money?? Perhaps it is after all, our concept of money is just the value judgment of others. One day oil is 10 a barrel $US and gold is 300 $US,
the next day oil is 50 and gold is 3000! Yet the only thing that has changed is the Value Of Gold As A Currency and the Dollar State Of Mind.
I will build on this throughout the day and discuss with anyone interested. Turbohawg, let's talk about this oil supply and demand? I sent your post to Another. I think he will write something for you around 6:00PM Atlantic Time (I think) FOA
FOA (3/20/99; 7:48:56MDT - Msg ID:3604)
Return?
I should return in appx. one hour. Thanks
FOA (3/20/99; 10:02:00MDT - Msg ID:3611)
REPLY?
PH in LA: I am working on a reply.
Goldfly: I am sure he will discuss this.
thanks
FOA (03/20/99; 11:34:12MDT - Msg ID:3615)
REPLY TO PHinLA
PHinLA:
Hello! If we look back at my "FOA (3/14/99; 16:17:55MDT - Msg ID:3362)" a broad outline begins to take shape with respect to the Euro. But, when searching for the end result of this world money chess game we have to apply all of the players in the contest. Let me expand:
If we can agree that oil is the most important world commodity then we can conclude that the "reserves of inground oil" constitute the real foundation for all future commerce. The owners of these reserves are very aware that any mispricing of oil (in real terms) can and does lead to
disruptions in the world trade. However, mispricing is not just a function of "the price" of oil but also how oil is priced, as in; What medium of exchange is it denominated? It was understood some time ago that the $US would indeed become "debted out" as digital currencies go. It was the logical conclusion to the world reserve money being removed from the gold exchange standard. If you have read Another, then you understand that the dollar was moved off gold, in 71 as a US strategic play to force the Middle eastern oil up in dollar price. This would allow the marginal reserves occupying friendly US nations to produce without competing against the "low cost" reserves that were soon to dominate world production. Thus giving the Western economic
structure breathing room to continue functioning on an IMF/dollar based settlement system, even while off the gold standard. We arrive at the final result today, with the dollar so expanded that it is failing the "free trade conversion" the world so craves. Entire countries are economically impaired in an effort to maintain the fictional valuations of "US assets"! (again please read FOA #3362)
The strategy to counter this outcome started with the formation of the ECU (European Economic Unit). It was started in the early eighties as a precursor to the now existing EURO. As Another said before, it took at least ten years longer than anyone thought, but it's here. In no small
way has this been responsible for the 18 year (gold bear market, as some would call it) upward revaluation of the dollar by the BIS. It was the longest "stop gap measure" I have ever known to exist! A tremendous success by any standard, to keep the dollar stable for such a time. Many
think it was "good old American know how" that did it. Well, now we will see "who knows how" as the world unwinds all of this dollar debt!
The Euro, in and of itself will never be a true reflection of the social and economic functions in the Pan European Arena. Much the same way as the global use and valuation of the dollar was truly never a reflection of the Real America! A true world reserve digital currency is maintained by usage in trade settlement and Gold Currency Valuations. As it is, this is created through BIS
manipulations of foreign exchange (dirty float) and "official money flows out of all non reserve currencies into gold (CB deals)". You have but to look at most native currency gold price charts to see how the dollar is benefited. The converse of this will show the Euro as the future stable gold pricing mechanism. However, we have never, in modern world affairs, had a world reserve currency of the current dollar scope removed from a supported gold valuation. The chart of the dollar in gold will be incredible for the short time that it is allowed to express the obvious. Then the controls will begin!
To answer your question: "Why has the Euro been so weak? One might have expected that others (as in the markets) would already be deducing the "secret moves" and re-evaluating the value of the dollar accordingly."
PH, please allow that this is not a "New York day trade", but rather a world money transformation that will affect you "down to the shoes on your feet". The current change in the
nature of Arabia should be telling! I'll let Another describe, later. Also, history usually documents that the most earth moving events were obvious, all along, but no one believed them!
And, Yes, I do think that the oil markets are going for the Euro, at least in Pan European trade for now!
I will offer more a little later, thanks for reading FOA
FOA (03/20/99; 14:18:54MDT - Msg ID:3622)
REPLY
Phantom,
Hello! I enjoyed the commits in your post (#3616). Your statement, "This manipulation of keeping the gold price down is politically one of the most important events which we can observe on the financial markets." is so very true! I am taken by how many investors completely underestimate the time cycle that the dollar is entering. It is truly old when considered in unbacked paper currency history. Many of the games being played today, in financial markets, would not be
considered if the players really grasped the enormity of the problem.
Your analysis of the international banking community should conclude, that bankers have also played fast and loose in a changing currency exchange environment. Many of the thinkers that dominate the US Federal Reserve may indeed lose the very game they created.
You say; "extremely exciting times in which we are living"! Indeed! FOA
FOA (03/20/99; 14:38:56MDT - Msg ID:3624)
REPLY
Gandalf,
We meet again! In your post ( #3617), I would add to your brackets to read [Middle East and many others]. Perhaps the Central Bank Of China, a BIG TRADER that has had a lot to do with the evolution of the present gold market. I think, after a long absence (year or so) that BIG TRADER is about to reenter the gold market with a concerted effort, now that the Euro question has finally been resolved.
In your bracket, [FORWARD SELLING OF OIL FOR FUTURE GOLD DELIVERY TO EUROPEAN PARTIES ], let's say that one option may be the selling of gold to the ECB for Euros! We shall see! thanks FOA
FOA (03/20/99; 14:57:22MDT - Msg ID:3625)
REPLY
Jade,
Hello! It is so very simple. Yet people stumble over the concept because most western investors don't value gold as a currency. They play it as a commodity and cannot grasp the importance of holding it as long term money. In reality, if you follow my earlier post that oil is the present value
foundation for this modern industrialized world, one must agree that it is the ultimate currency! In the context of real human things that we can touch and feel, oil is worth perhaps $200 a barrel.
Your present 19 barrels of oil now represent a 3,800 $US dollar value, a value we will return to soon! Thanks for reading FOA
FOA (03/20/99; 15:26:57MDT - Msg ID:3627)
USAGOLD--TEXAS OIL?
Texas Oil Patch,
Well, I have been in Houston and I can tell you that Oil Rumors are as numerous as rifles in the back of Pick-up-trucks! Weather they are doing in-fill drilling or opening up new proven reserves, the remake of Aramco underscores one point. The Arabian reserves are still the most important in the world! With Saudi overproduction at 8 mills/day, they were able to virtually shut down all new
potentials. The Caspian basin, as big as it is, was almost written off! The same applies to many other finds, so called "middle east killers". I might add that the offer to develop was also extended to European firms. I bet, that in the future the cost of drilling will be much cheaper in Euros than dollars? We shall see.
The middle eastern reserves, as currently priced in dollars, leaves them unable to service debt and even gives the appearance of going under! In reply I add; Why do we think the price of gold needed to be lowered in dollars, if not to appease this inoperable situation. The finances of this region are but in a transitory state. Reprice oil in Euros and watch the dollar collapse, then reexamine the balance sheet. The value of those massive reserves will overwhelm all debt!
As Euro oil settlement proceeds, watch for all producers, worldwide, to join OPEC! The US congress will no doubt have to pass laws (again) to prevent their native reserves from being sold at Euro rates. The chess game continues! thanks FOA
FOA (03/20/99; 15:49:15MDT - Msg ID:3628)
My thinking.
The Stranger,
I have an observation. I covered some of your items (#3623) in my post to Texas OIL. My question is, Who in their right mind would lend gold using high priced production reserves as collateral? Reserves such as Mexico, that can be made immobile with the turn of a desert valve?? Is this a super secret conspiracy? No, just the inner workings of free trade. All we have to do is open the books at the LBMA and see where all the gold commitments are assigned. They trade more gold than exists. Some entities are on the long side and they are not committed to it because it's a commodity used for watches and rings! Keep your eye on this as it unfolds, Mr. Stranger.
We will get back to reality!
Thanks for the Forum commit, FOA
FOA (03/20/99; 15:57:52MDT - Msg ID:3630)
WAITING?
ALL, I am waiting for Another's items, but nothing yet? I will continue to reply in a short while. Goibniu, in an hour or so. Thanks
FOA (03/20/99; 18:02:27MDT - Msg ID:3636)
REPLY
To: "little guy", from Alaska, USAGOLD(3/16/99; 16:49:03MDT - Msg ID:3461) and Goibniu (#3626)
Hello, both of you! "little guy", Your question is to Another, but it ties in with my reply to Goibniu, so here are both in one.
Gold mining is a business like any other. You mine it as cheap as possible for the express purpose of Selling It for Paper currency. The small miner does it to earn a living and the major miner does it for the shareholders. No one is in the business to mint legal coins, influence foreign
exchange rates or save the financial system. To the miner, gold is a commodity business not a currency business. The risks are obvious and the same as, say an oil company. That being that someone may unload, physical product or future product securities onto the market and drive the price below production. The problem with gold mining is that many, many publicly traded companies bandwagoned on the idea / trend of offering investors mining stock as a substitute for gold currency (physical bullion and coins). This has had the multiyear effect of driving the perceived value of everything from IPOs to seasoned companies, through the roof! That is, with respect to their value based on profits. (see my earlier post today).
The world currencies tumble in value because of manipulation, yet no one is filing lawsuits because of it. So When the gold currency falls against the dollar, every one that brought a gold stock on the perceived notion that it was a substitute for gold wants their money back? If it is manipulation that is unjust, what about all of the millions of people that are buying gold at a huge discount? Did not this "great manipulation" benefit them? So what if the scheme went the other way and gold rose tremendously, thereby forcing the dollar holders (big investor and small
investor alike) to pay a much higher price for physical, and the miners making great gains? Will the lawsuits still be filed? You see, the problem stems from leverage players making a commodity bet using the mines as a vehicle, while hoping the play piggybacks on the currency play in gold! It
didn't happen.
Truly, the sad fact is that most of the major miners are not gold bugs, they are mine bugs with only the intention of raising the PE ratio through a good story that will, in fact eventually leave them out of the game. The coming change in the world financial structure will value gold as such that any in ground reserves will be confiscated through taxes! We will not lose a world reserve currency system, without all the heart ache that implies and still allow the reserves of GOLD the MONEY to go untaxed. Unjust, perhaps. But no more so than closing the gold window in the early seventies.
In this modern day, we cannot go into the gold mining business and declare the dollar will fall because of a lack of GOLD backing, and then expect everyone to just eat their loses on US government issued debt! Be wary of the precedent you create, it may come back at you.
thanks for reading FOA
ANOTHER (03/20/99; 20:55:38MDT - Msg ID:3647)
REPLY TO: turbohawg (3/18/99; 22:30:26MDT - Msg ID:3564)
Mr. Turbohawg,
I read with interest, this thinking of oil demand! It is, as you say "the outcome of least desire"! Search the world, my friend and find me the result of present economic downturn? Is it not the dollar structure and debt it be built high upon? Oil demand is broken from dollar default, not less requirement of oil for manufacturing need. Future true valuation of all US dollar assets does show the equity lies low from present expressions of value. We see this froth in Dow Jones, yes? It is as the foam upon the ocean after the wind of much churning. Soon to become the calm sea of major loses for investors in this storm! The loss of this value, thru currency settlement change would indeed benefit world and harm only excess in America. Other nations would find much demand for products of local production, if priced in new currency that brings no default.
My friend, the drive to save oil demand does also save world commerce! This move to Euro, it is done for benefit of all and the one world we share! The devaluation of present reserve currency does bring loss of IMF environment and asset impairment for some, however, it finds freedom for
production expansion in the home of many, many more!
"the demand for oil is as the demand of humans for things, define this demand and you will number the need for oil"
Thank You
Another
ANOTHER (03/20/99; 21:27:54MDT - Msg ID:3651)
rEPLY TO: Goldfly (3/20/99; 9:42:02MDT - Msg ID:3609)
Mr. Goldfly,
In the past, this computer problem did bring "no concern". This day, it is now "the concern" for all! Perhaps, it does bring "the slow day" for "the tired family", a benefit for some, yes? For others, great loss.
"such is the life we live, on this modern road, untraveled and undefined"
Thank You
Another
FOA (03/20/99; 22:07:09MDT - Msg ID:3655)
LAST REPLY!
Aristotle (03/20/99; 21:07:40MDT - Msg ID:3648)
Aristotle,
I am at a disadvantage because Another is (I believe) off-line. I will reply to your #3648 and bid good day for several weeks. Upon return, I will make an effort to regularly check in and post on this forum.
The IMF gold sales are only talk. They would sell it in a second if it were theirs to sell. The real problem comes from the fact that the "laundry boys" (international gold dealers and brokers) over did the selling and leasing. For a long time they were doing the work of the CBs, then they just kept at it until completely underwater. It was Another, some long time ago that first said the gold short position was around 13,000 to 14,000 ton. This was when 3,000 was first being discussed. Now I read more estimates in the 13 to 14 range. Don't worry, it will never, ever be covered in
any way except cash settlement. Mostly in Euros? They will most likely receive loans, but it will financially destroy them. Last year, right after the Belgian announcement bringing to light the last of the CB leasing, it was expected that the loss of physical supply would create a rush to settle and drive the gold price back into the mid $300 in the first wave of defaults. It didn't happen! Even
with the birth of the Euro, and the possibility of cash Euro settlement, they didn't cover. It has become so large that the paper just keeps getting shuffled from one entity to another. We will know when it starts, as the Euro will spike first, then gold will begin it's climb.
All of this may have been slowed, waiting for the EU clean up. With the old guard out, the official money will begin to roll in. This year? I think this summer. Either way, it's going to be something to observe. thank you all for this discussion. FOA
FOA (4/17/99; 13:26:04MDT - Msg ID:4815)
RETURN
Hello to all!
I have returned and will now remain involved with this forum for many, many months. The period of time immediately before us will offer the most exciting developments to world financial assets ever experienced. For all of us, "Change" is the lifeblood of human experience. Our written
history is the very record of the most important changes that impact current events. Towards this end, many books will be filled with interpretation of how the financial landscape so quickly evolved! Together, at this site, we will discuss these dynamic events and their true meaning, as
they unfold. I can tell you, today, the stage is set and the actors are ready to assume their positions. The drama of the century is about to begin!
I must take time to read the past discussions. Will return a bit later.
FOA
FOA (4/17/99; 19:41:59MDT - Msg ID:4828)
OIL!
ALL:
I have been reading many of the fine articles written here over the last several weeks. This forum has grown and many thanks are given to Mr. Michael Kosares for providing it. Rather than commit on the older posts, today, I will just jump in here with what Christine has offered.
Christine, hello! I read the "Missing barrels, paper barrels, illusion of oil glut" article linked to your post. It was an excellent piece by Mr. Mathew Simmons. It certainly does offer hard evidence that many of the conclusions reached by public thinkers are incorrect. How many times have we heard that oil is just a commodity, subject to the same supply and demand pressures as
other items used in everyday life? I think much of the blame can be laid at the feet of high level financial analysis that control much of the mainstream media highlight. These well educated figures are often dominated by "technical analysis" analysis and consider that the price of anything at the close is the correct conclusion. As it is, if oil trades at $2.00 then that must represent all the factors that come to bear and therefore, crude oil is indeed worth only $2.00 a barrel. This is true enough, except that "political encouragement" is never accepted as a component in these "factors", rendering their analysis to be out of context. Therefore, in real life, one of the real forces that would create this fictional $2.00 value are considered something irrelevant or impossible in modern society! These "Missing barrels" and "paper barrels" are indeed part of the western economic equation. Why would a society that accepts digital paper currency as money find paper oil a problem? I think that anyone that reads this forum would agree that cheaper oil has given them a higher living standard today than they would have had if oil was $100. How would you
stand today if oil had continued upwards right after the Gulf War in the early 90s? Yet, the realities of Real supply and demand have not changed from the time of that event. Even thought Mr. Simmons article deals with the latest several year history, it can be used as an example of
how oil is politically priced. "Another" pointed out some time ago that the over production by Arabia (8 million+) did not occur because demand required it, rather it was "politically purchased". This was the bane of failure for many investors in the oil and gold mining industry. Their financial loss was truly used to purchase time! A purchase that benefited many more than it hurt. Today, we come to the end of this international currency chess game. Again, I make this conclusion from Another's Thoughts. In the spring of last year, the world economic system could purchase no more time. When the European Central Banks decided to cycle down the assignment of gold as an inducement for low priced oil in dollar terms, the world was going to change. In the
process of building a fort of refuge around Europe, the BIS has locked the Euro to gold by not allowing any more sales. Nor will they allow it to fall below $280US! When the dollar debt, worldwide, begins it's crash, all commodity settlement will rush to the Euro. What will make the dollar fall? A worldwide dollar inflation, induced by a soaring oil price, created by the non settlement of oil in dollars! Yes, just as Mr. Simmons showed you that the oil glut is not real, but a paper game, so will the price of gold show:
"you westerners are not as rich as your currency say
you are".
Christine and all, perhaps we can discuss this further? Then I would like to offer some thoughts such as " An Economy Biased On Paper Currency Inflation And Commodity Price Deflation Will Lead To Financial Disaster". Thanks
ANOTHER (4/18/99; 17:22:26MDT - Msg ID:4846)
THOUGHTS!
ALL,
Today my friends, this game of money, it does move to the center of focus? Many do bet the fortunes of life that this outcome will pass as "a quiet night"! It will not.
For weeks, months, days and years we have spoken of changes that come. It is of the future we have thought and forward in the many miles we have seen. Together, this new gold market was observed, by us, indeed, as a people. A strange beast it be, for many the thinker looked
backwards to see forwards as was their custom. Devoured they were as this new market did arrive, without warning, from the future!
Other thinkers, they were short and make much profits as they did ride on the "coattails" of a much larger monetary transition. The early gold was real, as a grand purpose it did have and that purpose is complete. To this day these bullion houses and traders have not the idea why their
profits were of great size. A great show is made of their analysis and reason, as supply and demand is still on the side of selling say they! Little is seen, for they have completed the task of major rulers and the "coattails" offer "ride" no more. Today, their short gold paper is supported by governments and does move from coast to coast to retain value. It seems fools beget fools and this lineage is without end! For these, the old thoughts of out fathers will be as a new truth is to be learned. Now oil will rise and the world oil currency will rise by 100 times. How so will they now explain this new supply and demand, a demand so great, it must also, have come from the future, not the past! Think they this Swiss gold be for pawns? Not this modern gold. It be bid for by kings and queens as the ECB and BIS will be first and last.
For one year this paper gold residue is held, even as the lenders make good no more. This residue of 10,000 to 14,000 tonne will never see physical gold! Settle they be forced to do as BIS always clears it's name. Perhaps a loan of Euros at six dollarsUS to one Euro will help? With
gold at $3,000+ it be the smaller write-off, no?
Gold is held in many lands in pockets of wealthy men. In the future, only the poor sole will count his gold in paper terms, terms and dreams that blew into the wind.
"some hold the very sun and know little pain, for in true life, strong hands never burn"
We watch this new gold market together, yes?
thank you
Another
FOA (4/19/99; 19:33:56MDT - Msg ID:4895)
THE NEW BULL MARKET!
Aristotle Hello!
Your post (4/19/99; 5:16:35MDT - Msg ID:4869) pointed out the most compelling part of his speech. As he said:
" Whatever the paper barrel prices end up each day becomes the de facto cash price for oil almost every day."
It brings to light a key component of how modern commodity values are set. No, not all items, just the most important ones. Paper oil, paper copper, paper gold, they all are manipulated much the way currencies are. Just understanding this to be true brings us closer to grasping how our new economic world works! Most young investors today, follow "technical analysis" and supply/demand" factors when studying the merits of commodity based companies (be they gold/silver stocks or oil stocks). Yet they become shocked to see these enterprises stumble as their product is manipulated, in the face of, what should be positive trends.
The old story always told us that real things rise in price as the currency is inflated. Yet, today the dollar has been inflated off the map and commodities fall in price. The old structure was changed not when the dollar became the chief reserve currency, but when it became the only
money that settled MAJOR commodities, worldwide. This trend began in the early 70s and has accelerated to the end time of today. In doing so, futures no longer responded to the underlying supply/demand of product, but reacted more so to the supply and demand for dollars!
I repeat. It has been the norm for world currency markets to be manipulated for many years. What we have come to today, is that major commodity futures are held and sold as a proxy for the underlying currency of the country of origin, not the actual product! This is abstract reasoning
for a modern world, I know. However, it is the only way you can inflate a world currency during a bull economic run without the citizens dumping it. In no small way gold and oil are very much part of this. They are so economized by the currency markets that the economy could shrink 50% and
their real value still must rise by a large multiple. Truly, we must understand that the demand for gold was off the charts years ago! Long before US citizens started their current coin buying spree. Oil and gold prices in US$ have fallen as investors have increasingly opted to carry the forward loans of these products instead of the actual item in storage. Again, this is how a government "economizes" a commodity by contracting it in "inflated currency" securities.
Now, today, we see the start of the greatest financial transition in history! That being, the collapse of a Global world currency reserve in terms of real things! Do not confuse this with the dollar strength against other money as all other world currency must by design be based on dollar
reserve and settlement. No, this downfall will come about as investors attempt to redenominate their commodity holdings into another reserve, the Euro! Why? Because the real value (and dollar price) of oil is about to be shown, worldwide as the Euro is given a major percentage of oil contract settlement! When events show how week the dollar truly is in oil terms, all other commodities will follow. Gold, the only true oil currency, will rise as never before! Many will
argue that this metal has no value for use at these new prices! True, for jewelry use it will be useless, but as the currency of Kings and wealthy citizens, it will be Priceless! The drama is about to begin!
Good Luck, my friend FOA
FOA (4/20/99; 10:40:49MDT - Msg ID:4928)
Modern Gold Standard!
Christine (4/20/99; 6:58:12MDT - Msg ID:4917)
Christine, hello again,
I don't think we will ever return to any form of the old gold standard, as it was constructed previously. Our financial world has grown far to complicated. Trade and commerce require a fast moving, self balancing system to retain the efficient use of labor and materials. Present digital currencies work very well in this new environment, except that they have evolved from and are based upon a dollar reserve standard. That reserve standard carries with it all of the past baggage of the old fixed rate exchange system (debts denominated in dollars world wide?). Only a general washout, with all that implies, will retrofit our present currency money system to match the class
act that free world trade is evolving into. Currently, the money war exists because the US/IMF wants everyone (trading partners) to lower trade margins (profits) to reflect the new economics of high speed free trade, while still maintaining payments on the old international dollar debts built up during protected trade. This has the effect of imploding native currencies and economic structures of countries trying to play the game in dollars but maintaining a local currency. We cannot have it both ways and something must give. Because all IMF/dollars are created with debt, all dollar denominated debt assets, worldwide, must be kept whole to maintain it's status as the world reserve currency. Therefore, retaining the dollar standard requires constant unbacked government to government dollar based loans so countries may make good on foreign debts. The IMF /
Federal reserve doesn't push of this just to maintain our trading partners, it's done to support the dollar reserve system.
Christine, any movement or perception that the world trading environment is moving away from dollar based trade settlement will begin a nuclear chain reaction of abandonment and repudiation of old dollar treasury debt that is held as a currency reserve! This is where this end
time political game becomes so intriguing. Many financial analysis have pegged the current international commodity deflation with the wrong identity. Falling prices in dollar terms are a direct result of a slow trend of abandonment of dollar reserve debt. Prices fall because the weight of
maintaining that reserve debt and it's part in the cost structure, is slipping away. If it was being serviced from profits, commodity production would be shutting down and product prices rising. The US/IMF rushes to lend money and the debt is being paid from the proceeds of these new
loans, not working capitol. Through this process the dollar is crashing, behind the seans, as we speak!
This is why the introduction (not it's current exchange rate) of the Euro was so important. It holds the position of a "backup" digital currency and will keep the world economic system on track when the dollar fails. Back to your original point; neither gold or the old gold standard could work as or with our present digital trading universe. What has and is evolving is a new gold currency that trades worldwide. It is manipulated just like all currencies. What we are
experiencing with gold is the building of "open gold currency trade" not "unmanipulated free gold trade" and it has taken twenty years to create. This open trade will be vital in supporting (read that backing) the massive capitol extensions the Euro will be required to service. When the dollar is replaced by the Euro, gold will be open traded (manipulated) into many thousands of Euros per ounce. That pricing will create the largest major currency reserve for the Euro System Central Banks. They will need it as their old dollar reserves will be destroyed. The present lawsuits against gold manipulation will truly fade away and be replaced with lawsuits against the huge taxes placed
on gold reserves worldwide. They will tax away 90% of these new profits just as they did the American oil companies.
Also:
At one point, a while back when the Euro looked like it would not be born, the possibility of gold being used as a partial payment (along with the dollar) in settlement of trade was very real. In this day and age, had the oil producers selected that option, world trade as we know it would have moved back 50 years as the currency system would never have kept up! World economic trade would have continued but the efficiencies of free trade using digital currencies would have been lost. Not to mention gold would have skyrocketed! Today, the low price of gold has enticed
many dollar holders to maintain their dollar reserve while buying gold to offset a potential dollars reserve status change. It is true that the cost of maintaining the dollar was very high as your paper barrel oil story has shown. However, gold was never purchased with current cash flow because (as so many people pointed out) they didn't have any. Oil reserves are easily used to purchase future delivery through the complicated world of "open manipulated gold trading". No doubt, much of that paper gold will be converted into a Euro package at the major expense and possible bankruptcy of modern gold traders.
Also:
CoBra(too)ID:4919).
Very good point!
Thanks for reading, FOA
FOA (4/25/99; 7:53:08MDT - Msg ID:5131)
Gold Talk, later today!
Michael and ALL:
Have been wanting to write here sooner, but knew today would be open so I waited.
MK, I have a reply post from Another making comments to your Swiss question. That along with an extremely bullish (time frame also included??) post on gold! This could be the call? I will return later to send them in and make some commits of my own. I also have some questions for the fine writers now briefing this site! thanks all FOA
ANOTHER (4/25/99; 13:59:43MDT - Msg ID:5139)
REPLY!
Mr. Kosares,
Good evening. I see by this post (USAGOLD (4/23/99; 18:00:42MDT - Msg ID:5109) that you agree the Swiss still play all sides to their "shrewd advantage". Good minds have they. Nothing changes for them. A Swiss currency, heavily backed with gold would bankrupt their trade when that metal imparts strength to the Euro. They could not exist in a "new Euro dominated world" with their local currency much stronger than the Euro. They wished, from the beginning, to be part of the EMU when it takes hold of world commerce. Yet, they were locked from selling by the BIS as it stopped gold sales last year. Wait they must until the Euro was born, now sales proceed to ECB, in the open I suspect. If they do sell small portion into public market for political agenda, these sales will be neutralized with purchases by BIS at same time. You see, my friend, these sales are truly transfers of assets and will occur during a much rising gold price in dollar terms.
I do not think the Swiss think of the EMU as a swirl, much as do the Americans. Even Michael Kosares, perhaps? The new economic future of Switzerland will be tied directly with all of Europe. Please remember the Bank For International Settlements is very influenced by local
concerns, even the ground beneath their building is Swiss, no? Many traders in the West see the Euro as the failure after it's long life of four months. The BIS see it as a tremendous success that was to be created as only one to one against the dollar. The fact of initial opening months brought higher rate came about from other countries, as you say, "jumping the gun" with bids! Please consider what I have said long before, "the new gold market will begin after the dollar has increased against other currencies". This has now happened and process is complete and the gold price will fall no more. You will soon see gold begin to strengthen the Euro as the dollar continues into a mighty fall.
Many local citizens in Europe, including the Swiss, do not fully understand the Euro or the future benefits it will impart upon them. They do, as westerners also do, "vote pocketbook" with respect to current financial affairs. Only in times of change do ordinary persons take the time for
observing conditions. In that time, real changes they do make, these usually bring the disruption of currency markets. We must understand and consider that the EMU was done for Europe as a community, not for the World. The order of events will show that the dollar will now fail, first,
then all will race for Euro. During this race, that now begins, gold will rise in dollars and Euros for a short time. Then continue rise in dollars and fall in Euros. This action will influence Swiss voters in the positive way and allow for smooth sale of gold to ECB. It be their trade advantage to sell gold reserve for Euro reserves, all done in rising dollar gold market.
In many ways we did wish to see gold fall below $280us. It would have forced the BIS to openly buy to support price so as not to destroy the Euro package and drive producers into physical gold. Today, gold will actively rise as events expose it as the "new currency of reserve". This thought is much opposed to actions of private bullion traders and western public money creators. In the end, all is good, for this world does balance life and wealth. Every item of worth
lost from paper gold traders will add ten times to the assets of private citizens. Persons of real wealth, persons of gold!
thank you, Mr. Kosares
Another
FOA (4/25/99; 15:28:00MDT - Msg ID:5140)
NEW CURRENCY?
Hello Stranger,
I have read some of your thoughts (and many others here) and would like to commit on part of one.
"(4/23/99; 23:07:47MDT - Msg ID:5111)- Bullion banks normally arrange CBs to lend the gold and for mining companies to sell it. The gold is actually delivered to the buyer for ultimate fabrication into jewelry, coins,what-have-you. The mining company gets payment in full at settlement."
This is the basic concept most investors have about gold lending. It's not what is said but the perception that it creates that I must argue with!
During the last twenty or thirty years, the public has been conditioned to think of gold as a commodity only, not a currency or money. This conditioning was so well done that when people even consider gold as a financial refuge they view it as a "useful item" that can be traded for it's
commodity roll ( jewelry, coins,what-have-you) in tough times. The majority don't look at it as real exchangeable money, rather it's put into the same category as liquor or guns or soap. Something someone else needs for daily living. We never consider that gold may be wanted by the other person to use exclusively as money during hard times! Even the World Gold Council and the mining industry was taken to task for promoting this. See:
http://www.fame.org/fedwatch/fedwatch.htm
http://www.fame.org/famennews/ART-007.HTM
The Gold Mining Industry Shoots Itself in the Foot
"Because of an accident of fate, a large part of the gold mining industry has mistakenly spent almost a billion dollars over the past fifteen years promoting jewelry in an effort to stimulate gold demand."
" In the worst case, because it helped subvert the only use of gold that can possibly drive and
maintain its value —its monetary use"
The people at FAME saw the promotion for what it was, part of a broad based public disservice that helped create the misinformation printed today that is taken for fact! In the Stranger post above, we instantly see the gold leaving a CBs vault and heading for the Italian jewelry factories. If gold wasn't being traded as a currency / financial asset, we could accept this. However, one has only to understand that the commodity use for gold (jewelry and such) is easily
supplied by the yearly mine production! Yes, much of the mine gold is indeed sent to the fabrication yard. But, 99%++ of the financial gold never leaves the major vaults! Why should it? If a CB lends it's gold, it is indeed sold. A receipt is issued for it and a new owner holds that receipt. We have to understand that most of the financial gold is held in major depositories in NY, London, etc., even various nations reserves. If an investor buys 10 tonnes of gold from a CB lend / sale, why would he remove it? By far, most of the trading of gold today is done using deposit receipts. These receipts are indeed leveraged many times over by selling derivatives on the OTC markets. It's not a conspiracy, JA! By the way thanks for the definition. See:
((4/21/99; 18:23:47MDT - Msg ID:4988) Conspiracy theories).
What we are seeing is a new currency being managed as any other currency is. Listen to Greenspan:
http://www.bog.frb.fed.us/BOARDDOCS/TESTIMONY/19980730.htm
"Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."
I will quote that same item in another way. I say: Central banks stand ready to lease gold, using paper derivatives, issued by bullion banks, should the price rise. This action will stop private counterparties from managing gold.
Creates a different perception doesn't it? Truly, the fact that gold is traded worldwide, in such huge quantities, completely negates the current dogma that it is just a commodity. As the Privateer web site has said often, gold is barely even moving in price. I ask you, why would any investor be buying or trading gold in these huge amounts if it wasn't part of a currency financial asset? They
certainly are not buying it to sell to the jewelry shops, are are they? Let's review how much is traded daily:
http://www.usagold.com/wgc.html
"The latest net clearing statistics released by the London Bullion Market Association showed a 6% recovery in activity in March from the depressed levels of the previous month, with an average 28.5 million ounces (886 tonnes) of gold being transferred each day."
Notice they said "transferred". Now, any rational person will conclude that they are not placing 886 tonnes on ships and planes. Obviously they are talking about warehouse receipts for physical. Again, the world is not producing this much gold chain to justify 28 million ounces, a day in sales!
So why are they trading it in these amounts? Can we consider / commit on this for a while? I'll be back a little later. Thanks for reading, FOA
FOA (4/25/99; 17:40:44MDT - Msg ID:5145)
GOLD?
CoBra(too) (4/25/99; 16:45:06MDT - Msg ID:5141)
Hello CoBra,
You are right about this: "The gold lease game is just another over leveraged or pyramid scheme or scam feeding the paper casino bubble"! That is exactly what some of it became. But not all of this trading is by gamblers / traders. A very good portion of it is government CB money
management used to balance reserves against paper currency. Just as the days are gone when governments print paper currency outright to manage monetary policy, gone also are the days of outright public sales of gold. Even with all the discussion of CB gold sales these past few years, one has only to check the World Gold Council site and see that not that much gold was taken out of CB procession. Most of the sales were just redistributed between governments. And who is to know how much of the actual sales were purchased by other major entities as a currency wash?
Now, gold is going to be forced up by the same players that needed it down. Yes, the shorts will most likely create a major market problem as they are liquidated with Euro loans to pay off gold loans, but that is not the major economic play here! Gold will rise as the dollar gets
imploded, setting the stage for a reserve currency transition. It is starting now, today, this hour, as we speak. As I mentioned in an earlier post a few days ago, the IMF / dollar engine is shutting down. Just look at M3 money supply GROWTH, straight down! The IMF must quickly find
liquidity through government gold sales to support dollar debt reserves held in other countries. If not, the dollar will be destroyed in a nuclear currency event. By selling gold receipts, they can leverage the those assets ten times plus, using derivatives. That money will be used as loan
collateral. Ever wonder why we never see the physical trail of the real gold assets? It's because they never move the gold, just free it up to write derivatives against it in the OTC market.
Who will gain from this? Anyone that has leveraged dollar reserves into gold derivatives reserves that will be bailed out using Euros! Not to mention that gold will soar into the thousands. I wonder what entities would have purchased so much gold?
FOA
FOA (4/25/99; 17:50:44MDT - Msg ID:5146)
reply
The Stranger,
I used your elephant tail to make a point. I know it was a very small part of your overall thoughts. Many of which I agree with! thanks FOA
FOA (4/25/99; 18:30:19MDT - Msg ID:5147)
Christine (4/24/99; 19:46:49MDT - Msg ID:5125)
Christine,
Your statement: " Is the currency war really about how many of the oil states are going to switch to the euro for oil settlements. The oil states understandably want higher profit margins. Perhaps the euro/BIS is willing to provide that. Of course the IMF/US dollar wants the oil
settlements and the profits. "
No, it's not just "profit margins" that will drive the switch. It's total worldwide demand. If the IMF / dollar group continued with past currency policies, we would be looking at a financial depression that would destroy oil demand for years to come. In order to maintain dollar reserve credibility, every other country in the world would have to slowly convert into a dollar standard.
That was the only outcome from a policy of saving all debt denominated in dollars! As anyone should realize, the end of that trail would be dark, indeed!
In order to maintain some form of world economic function, the BIS and Europe embarked upon a plan to build not only an alternative currency, but an alternative "economy". Not much different than the US enjoys presently in the mist of financial turmoil. It was long ago known that
the only way a financial system could be build opposing the dollar would be to base it upon gold, as traded in an open market. Not a gold standard or a gold reserve system, but upon a reserve asset valued in a open world trading concept. This would allow any country to add reserves without draining the money supply from it's trading partners, as the "gold exchange standard" did.
True, the dollar does hold gold in national form, but, it's corresponding debt overhang will never allow that gold reserve to balance currency in circulation. As the dollar falls, hyperinflation will most definitely be required by the US treasury as a last gasp attempt at survival. More likely than not, the US will be selling it's gold to the ECB for Euros before this is over.
Back on the subject of oil demand, what good is economic demand for oil if the payment settlement is worthless? Better to support a low gold price to create a new currency than risk a total loss of oil usage. A complicated game involving many players. It always does when largest trading reserve currency in the world is about to be replaced.
FOA
FOA (4/25/99; 19:13:28MDT - Msg ID:5149)
OIL!
http://www.iht.com/IHT/TODAY/MON/FPAGE/embargo.2.html
Paris, Monday, April 26, 1999
Allies Order Military To Plan Oil Embargo Russia Refuses to Stop Shipments; France Backs Off Its Objections
By Joseph Fitchett International Herald Tribune
WASHINGTON - The NATO summit meeting, apparently united in its determination to cut oil supplies reaching Serbia, told the alliance's military commander to work out plans to interdict ships carrying oil to Serbia via the Adriatic sea, U.S. officials said Sunday.
The officials, who asked not to be identified, said that this new action to isolate Belgrade had enough backing in the alliance to ensure that effective steps would be taken, using the U.S. and European warships patrolling the region.
Objections to an embargo, spearheaded by France, reflected fears of a clash with Moscow if NATO sought to halt and search Russian ships at sea, but U.S. and British officials played down the risk of a major confrontation.
The British defense secretary, George Robertson, said: ''The idea of refueling the Serb machine is not really on the Russian agenda at the moment.'' Privately, British and U.S. officials at the summit meeting said that Moscow seemed to be tiring of public challenges to NATO exposing Russian weakness in the crisis.
President Boris Yeltsin spoke at length about the Kosovo conflict withPresident Bill Clinton in a telephone conversation Sunday, apparently without signaling any intention to defy NATO over the oil issue, said Samuel
(Sandy) Berger, the national security adviser.
Before that conversation, the Russian foreign minister, Igor Ivanov, said on Russian television: ''There are only 19 member countries in NATO, and NATO's decisions extend only to those countries that are a part of the alliance. According to international law, sanctions or embargoes can be imposed only by the UN Security Council.''
Speaking to reporters in Cairo, where he was visiting, Mr. Ivanov added: ''We will continue delivering oil in keeping with our international commitments.''
Although the French reportedly agreed to the plan to tighten the economic noose on Belgrade when it was discussed at the start of the summit meeting, President Jacques Chirac later warned publicly that a blockade would bean ''act of war'' - apparently a reference to Russia, where officials threatened publicly to continue supplying Serbia with oil. Russia has been the main supplier for Serbia, and U.S. officials said that they thought Moscow might try to continue getting some oil to Belgrade along the Danube River route.
Later, at a news conference at the French Embassy in Washington, Mr.Chirac said that there were ''no divergences among the allies'' about action to halt deliveries of oil products to Yugoslavia. His remarks appeared to indicate that he was satisfied that his concerns had been allayed in the closing hours of the summit meeting.
When asked about French and other reservations on the embargo, Mr. Clinton defended the plan energetically. ''How can we justify risking the lives of the pilots,'' he said, and ''then say, 'But it's O.K. with us if people want to continue to supply this nation and its outlaw actions in Kosovo in another way?'''
FOA (4/25/99; 19:20:21MDT - Msg ID:5150)
Swiss Franc?
http://www.grantspub.com/GIRO/index.html
THE COMING SHORTAGE OF HARD CURRENCIES
"'I just came back from Switzerland,' relates Yves Mojonnet, a San Francisco investor and paid-up subscriber, 'and I have witnessed a shift in public perception about the long-term benefits in joining the [European Union]. And I
would put some money on it that, sooner or later, the Swiss will be in favor of this.' The Swisss joining Europe? Without their precious franc? In exchange for the sinking euro? Whether or not you would take Mojonnet's bet (be advised that he's Swiss-French by birth), prudence in the monetary-policy context continues to be redefined. The keepers of the world's strongest currency are bending over backwards to protect their franc against excessive strength. In this deflationary time, the Swiss are becoming less and less like themselves and more and more like everybody else."
FOA (4/25/99; 20:07:24MDT - Msg ID:5154)
Christine (4/25/99; 19:29:18MDT - Msg ID:5151)
Christine,
I believe this entire scenario was the work of very sharp people. As Another once put it, "it is the master plan"! They launched this fully, during the present administration in washington which has lasted almost two terms. Think about it, the present US political factions wanted the dollar to be strong at all cost in order to push through their economic plans. What better bait than to lay
down a dollar strengthening decline in gold? The US went for it with both feet and encouraged it from the beginning! Perhaps you are right, in that they even helped the process. Truly, they never thought the Euro would fly and even considered that this dollar building scheme, would help kill
the new currency before it launched. It must have been the biggest shock when it was realized what a trap was laid. Maybe you are also right that this brought on the war?
I think the US thought most of the European CBs would be on the hook for all the gold derivatives once the Euro failed. Now the whole thing is reversed. The US must figure out how to negate all of the gold paper without lowering the dollar in the world's eyes with a soaring gold price!
Oh yes, they knew about oil. But, so what? If the LBMA assignments were lost because of a failing Euro, who was going to suffer a loss of confidence? Europe of course, but the Euro succeeded! The game continues! FOA
FOA (4/25/99; 20:15:46MDT - Msg ID:5155)
Gandalf the White
Hello Gandalf the White,
Timing? Now! We should not see the gold price falling again (five or six dollars up or down is no more than fluctuation). Pressure is coming to bear that should see it climbing through the rest of the year and on. Another did not predicate this on a possible short covering rally caused by the loss of CB sales ( as stated a while back). This time the major governments will be behind the move. FOA
FOA (4/25/99; 20:28:19MDT - Msg ID:5157)
reply
Hello again beesting,
We have only just begun to read and hear about gold. The coming action in this arena is going to wear out many traders accustom to a dead market. Physical gold will be the only way to participate in the harsh moves of the future. I look for the US to attack this rising market with all the accumulated wealth their citizens own! thanks FOA
FOA (4/25/99; 20:41:25MDT - Msg ID:5159)
reply
Christine,
I an sure you will agree that we must watch how this unfolds. As Another said, events will mark the trail. Also, I never said Clinton, only the US political factions! There is a big difference.
I will be leaving now. Will return tomorrow.
Thanks for the discussion FOA
FOA (4/26/99; 7:04:58MDT - Msg ID:5171)
Aragorn
Aragorn III,
Exceptional post, sir! I will send it to several other people that will certainly enjoy it. If you will allow, I will use it as a reference for several further posts. Thank you for your thoughts, FOA
Aragorn III (4/26/99; 6:49:34MDT - Msg ID:5170)
My thoughts for a new day, complete with plenty of typos and poor grammar!
Canamami asks the good question "The US possesses massive (I believe over 50% of the world's) gold reserves. What country or group in its right mind would start an economic war against the US, using gold as a significant weapon, in the face of such awesome US reserves? [...]to me it implies the equivalent of an economic war against the US[...]"
Perhaps, do not try to think in terms of an act of war, but instead in terms of an act of liberation. When the money has gone bad, the "committee to save the world" grew out of the efforts of self-preservation. Why does efforts toward the return to a clear monetary role for gold gain scorn and scepticism as an economic aggression leveled at the body of the U.S., when it is only the dead U.S. currency (along with all others) that is being replaced in favor of a live one. Should we not rather place our focus on the "act of war" the U.S. Govt declared, waged, and has won since it first ceased domestic convertibility in 1933, followed by the blitzkrieg in 1971 to end its obligations to international settlements of trade in real money?
True, the U.S. does report to hold over 8,000 tonnes of the world's 33,000 found in the official sector. But as all nations must look to their gold to "square the books" against outstanding issue of currency and debt, the U.S. is seen to hold much, much more than is easily covered even by so much gold. A single pat of butter for a large loaf indeed! Again, this need not be viewed as a personal attack against the U.S., as all nations will be under the same prospect whereby gold will "prove" their currency. But the focus naturally goes to the U.S., for it has been left in poorest position through the very same actions by which it reaped such great rewards for nearly three decades--buying the world's goods with numbers written on paper.
Please consider excerpts from this only days ago: Aragorn III (4/24/99; 17:14:16MDT - Msg ID:5123)
"As the framework for world economics was deteriorating by a failing [reserve] currency, it was in the interest of those having the most to lose to circumvent the problem--that the real supply of dollars was outpacing real supply of goods. This fed upon itself as ever more dollars were created, borrowed into existance for purchase of goods today by those who saw that their future production would easily repay these loans. (It was not to be, as we can see how many nations now struggle under a debt despite the hard work and good production of commodities valued by life the world-over.)
The solution was found for the dollar's problem through the alteration ... supply and demand pricing of key commodities was moved to the futures markets where the goods are but promises also.
This past vicious circle: borrowing many dollars with the prospect of easy repayment with future production, was now effectively replaced with an equally vicious circle: selling much future production (on paper) with the prospect of easy replacement (on paper) with future dollars in an "oversupplied" market!
In consequence, all those that borrowed easily have found that repayment has been hard, even as real demand for their products have grown! And further development takes a back seat to debt service."
Also, consider an excerpt from this post: Aragorn III (3/25/99; 3:23:55MDT - Msg ID:3827)
"What folly is it to suggest that a body [OPEC] is impoverished that commands a position atop a commodity [oil] needed the world over? Impoverished, no. In dire need of contract renegotiation to undo past [currency] mismanagement? Yes. Much like the United States renegotiated its debts in 1971 by saying "no more gold shall be paid to settle accumulated dollar-denominated debts". Dollars at that point became very cheap and easy to come by. OPEC is in the position to do likewise, though they will say "no more OIL will be paid to settle accumulated dollar-denominated debts". By pricing oil in euros, the U.S. will find that euros are not easy to obtain as the U.S. is a net importing nation. And what more need will any net exporting nation have for U.S. Dollars as balance of trade when oil requires euros? Suddenly, the outside world is not eager to accept any few dollars for its real products. Exchange rate of the dollar falls, and all countries use these newly cheap dollars to settle all accumulated dollar-denominated debts. That is the exit strategy of nations. The U.S. will be at a disadvantage until it achieves meaningful balance of trade. It cannot continue to print its primary export value. This will not kill the future demand for oil. The world is a much larger place than 50 united States, and any group of nations would be equally happy to rise to the occasion to be the fat consumer of of last resort.
These are the few remaining days of easy money. I suggest you use them wisely. Here's a hint...gold is the universal currency."
We can see that the struggle for a fair and viable currency walks hand in hand with the effort to revitalize global trade and economic development.
Further, I have read the various comments attempting to represent this as a battle of wits and wills of the "evil" IMF/dollar powers against the "evil" BIS/euro powers. This is not to be, as we see many players to be on both teams!
Think instead of the monetary structures being pitted against each other, as only one will win, while the men behind the scenes work both sides. Let us take a look...
The IMF sprang to life in 1947 out of the Bretton Woods conference in 1944. The purpose of the IMF was to RETURN the international settlements to a GOLD STANDARD! When this was ended by the U.S. in 1971, the IMF evolved to oversee and facilitate the wayward system of currency exchanges in a global fiat system of currencies. Of its 182 member nations today, the EMU 11 represent 22.4% of the voting shares, while notably the U.K. has 5%, the U.S. has 17.5%, Switzerland has 1.6% and Saudi Arabia has 3.3%. The IMF currently has eight of its 24 Executive Directors representing individual countries: China, France, Germany, Japan, Russia, Saudi Arabia, the United Kingdom, and the United States. The other 16 represent regions. Its Board consists of such notable Governors and Alternates as Hans Tietmeyer and Hans Eichel of Germany, Dominique Strauss-Kahn and Jean-Claude Trichet of France, Robert E. Rubin and Alan Greenspan, Gordon Brown and Edward A.J. George of United Kingdom, Hans Meyer of Switzerland, Paul Martin of Canada, etc... and its managing director is a Frenchman. The IMF Accounting Unit, the Special Drawing Right (SDR) as of April 23, 1999, SDR 1 equaled US$1.35327 and is calculated from this basket of currency: USDollar 39%, Deutsche Mark 21%, Japanese Yen 18%, Pound Sterling 11%, French Franc 11% (Since the launch of EMU, the euro has replaced the currency amounts of the deutsche mark and the French franc in the SDR valuation basket.) Clearly, the euro world is well represented in the IMF.
Let us take a briefer look at the BIS. As excerpted from their documents, "The Board of Directors comprises the Governors of the central banks of Belgium, France, Germany, Italy and the United Kingdom and the Chairman of the Board of Governors of the US Federal Reserve System, as ex officio members, each of whom appoints another member of the same nationality. The Statutes also provide for the election to the Board of not more than nine Governors of other member central banks. The Governors of the central banks of Canada, Japan, the Netherlands, Sweden and Switzerland are currently elected members of the Board."
I hope this proves helpful for further discussions, as much time can be spared from the speculation why IMF does not "fight the good fight" against the BIS. They once had much in common managing gold currency, but of necessity the IMF's role grew apart, even as the governors remained the same.
This "battle" may be oversimplified as a selection of monetary systems...of gold assets versus fiat currencies. Gold wins this one. No more. No less.
got victory?
FOA (4/26/99; 10:10:31MDT - Msg ID:5183)
M3 money supply!
http://www.kitcomm.com/pub/discussion/M3.gif
All,
This is why they want to free up and leverage the IMF gold. The other world CBs are not selling so the only way to force it out, for paper liquidity creation is through an existing IMF structure! The game continues. FOA
FOA (4/26/99; 10:21:09MDT - Msg ID:5187)
The Stranger (4/26/99; 8:54:30MDT - Msg ID:5178)
Mr. Stranger,
Don't forget to include the rest of the elephant along with the tail! Yes, today and for the next several weeks I, myself, will be buying! thanks
FOA (4/25/99; 20:15:46MDT - Msg ID:5155)
Gandalf the White
Hello Gandalf the White,
Timing? Now! We should not see the gold price falling again (five or six dollars up or down is no
more than fluctuation). Pressure is coming to bear that should see it climbing through the rest of
the year and on. Another did not predicate this on a possible short covering rally caused by the
loss of CB sales ( as stated a while back). This time the major governments will be behind the
move. FOA
ANOTHER (4/26/99; 20:37:39MDT - Msg ID:5208)
THOUGHTS!
Christine (4/26/99; 18:43:40MDT - Msg ID:5207)
Christine,
You see this world with eyes much stronger than mine. I think the years of time does wear the truth from ones vision. My thoughts once were strong for things that benefit all people. Now I view only with the logic of what is "feasible" under current conditions. It is the sad conclusion of a life brought to reality, yes?
The interaction of productive peoples, of many cultures, does require an economic function of
"broad scale". The choice for this day in time does not include the best solution for monetary ills, rather it be the selection that offers most economic production for all nations. The irony does prove that the currency platform I support be also the structure upon which we all will stand.
Most will seek out this position as the "free choice" not "forced choice".
You say, " I believe it will be detrimental to us all here". Perhaps, some will walk "the lower road", but many will rise from the shallows of economic despair. For most of this world, life itself is the "detrimental" journey that brings a yearning to walk "the higher road" that some consider low. Truly, our eyes will join to view this change that must come.
"in every life, time will prove all things"
Another
FOA (4/27/99; 6:03:27MDT - Msg ID:5222)
(No Subject)
http://www.digisys.net/futures/chart/ts_cha70.gif
The end of a long politically inspired downtrend. This is the last opportunity to exchange dollars for gold at this level. Forget the IMF sales and all others because they will be selling into a rising market! None of that gold will be sold anywhere near current prices. Yes, the failure of the dollar, masquerading as "a simple return of inflation" will mark the end of gold values as we currently understand them.
FOA
FOA (4/27/99; 6:11:35MDT - Msg ID:5223)
20 year chart of gold!
http://members.home.net/rjgold/metals/ghist.htm
This period will be seen as a base for an explosion in dollar gold prices. A time that many investors learned what they thought money was all about! The next generation will learn something "very different". FOA
FOA (4/27/99; 6:46:19MDT - Msg ID:5224)
Same body with a new look?
Christine'
I also understand your response to Another. But, I understand his stance in a different light. In
your #5212, I read "solutions rest in greater individual responsibility and freedom". Most certainly
people have reached for these ideals sense time began. A search through history will find that they
were never fully achieved, as reality always dictated the final agreements. Yes, the US was
founded "upon principles of freedom, not principles of prosperity", but these components are truly
convoluted in that country today! I believe that people evolve and resolve there highest goals as
reality dictates. Where paper money today is, at best, only a receipt for your life efforts savings,
surely society will reach for the something different. Sometimes, even something a little different is
a major change.
The dollar will fall from it's own weight of unpayable debt. That fall will occur because people
will exercise their "individual responsibility and freedom" and grasp for the next best "existing"
system. Hopefully, that system will continue to allow for a world wide "open trading" gold market.
Will it's price still be manipulated in Euros? Personally, I don't care, as long as I may buy physical
gold, the history of wealth retention is on my side. Thanks for your thoughts FOA
FOA (4/27/99; 15:09:04MDT - Msg ID:5251)
THE END OF A GOLDEN AGE?
http://www.aei.org/eo/eo10301.htm
The End of the Golden Age
By John H. Makin
-------"The major obstacle to a continuation of the U.S. golden age with rising stock prices and a growing U.S. economy is a global shortage of savings at current interest rates, especially if Japan recovers." -----------
FOA (4/28/99; 7:04:43MDT - Msg ID:5261)
IMF
Arizona Hiker,
I had to laugh when reading that post. Someone has to have a really good brain for humor to put that together. thanks
Aristotle (4/28/99; 0:05:40MDT - Msg ID:525)
Aristotle,
I think the IMF gold sale has been worked out already. Any further public statements are just political posturing. The term "sales" is indeed misleading and true words like "leveraging assets to provide further loan guarantees" will never be used. Aristotle, gold is now the last asset and the
US / IMF factions are going to have to make it rise to provide liquidity. As I said before, the BIS and it's European / other allies have (for the past year or so) blocked any further lowering of the gold price. If the US wants to protect it's remaining dollar reserve viability, (by maintaining all foreign dollar reserve debt) it now must allow it to depreciate against gold to provide liquidity.
That, my friend is the only avenue left for them! This will, as Another has pointed out, drive assets to the other new reserve system. As I mentioned to Christine, national entities will have a choice as will you and I and Christine. That being, stay with a falling dollar or move into Euros and gold.
Free choice is what it's all about, not conspiracy. FOA
FOA (4/28/99; 7:38:47MDT - Msg ID:5263)
More on Gold
Aristotle (4/28/99; 0:56:40MDT - Msg ID:5259)
Aristotle,
When the BIS stopped gold sales and leasing (that largely benefited major dollar reserve holders, such as oil) a year or so ago, many of the CB heads thought the public gold shorts would cover and create a minor liquidity crunch in the gold market. That action could have driven physical upwards into $340, $360, $370?? Many gambler investors "coat tailed" that private information and went paper long. However, the dollar supporters managed to roll over all of the paper shorts and leveraged even more shorts on top of that. In essence, as Another said, the paper moved from coast to coast, just turning over! Actually, this has played even further into the hands of the BIS as this turnover has created much more fuel to unwind the dollar through gold strength! As I said in my last post, the US now must accept a "diminished" reserve status for the dollar, if it is to maintain any reserve competition against the Euro. This "new acceptance" comes in the form of throwing the paper gold shorts to the dogs and actively pushing up gold!
Watch the open interest on comex, over the next monthS, it should start a rise that will blow people away!
400,000 OI+ will be the result of small shorts trying to hedge by going long. Notice I said hedge, not cover, as covering is out of the question as the IMF and Swiss gold will never hit the streets! Also notice I said "small shorts", as the big players are now "politically shut out" and will eventually be liquidated with cash settlement in a "going out of business sale"!
Yes, inflation will roar as gold rises perhaps 30 times or more. It's going to be a dynamic process that will make investing in the stock market look "small time'.
good luck FOA
FOA (4/28/99; 8:12:04MDT - Msg ID:5265)
Y2K
Tomcat (4/28/99; 7:13:58MDT - Msg ID:5262)
Tomcat,
Hello! I just read your post and have a question. The dollar is a function of digital creation just as all other national currencies are. 90%+ of all currencies are digital blips. If a foreign national finds his local banks / economy shut down or failing because of Y2K, how will he exchange /
transfer his money into an operating US bank? Conversely, if that person has saved himself by placing their assets into a dollar account at a US bank, beforehand, how will he bring this money home for self sustaining purchases / investing if Y2K has destroyed the local digital banking system?
Also! Please understand that the dollar exists as a world reserve currency because all dollar denominated reserve debt (treasury and others included) is maintained through timely interest and principal payments. This servicing of reserve debt requires a "functioning" foreign exchange system, whereby foreign currencies can be converted into dollars for payment. No payment
brings debt default and dollar reserve destruction. Exactly why the IMF never writes off foreign dollar debt! Big time Y2K will bring big time dollar destruction! Physical gold will be much better as history and recent world events have shown that real gold can and does trade worldwide
"without" a functioning exchange market or banking system! Also, the tremendous increase in gold values that Y2K would bring would more than offset any loses of paper reserves that currently makeup the ECB system. Their debt is not held worldwide as a reserve function for the Euro. The ECB "System Banks" could eventually reopen with a manual gold based Euro currency. So could the dollar, but at a greatly reduced function as the ratio of dollar destruction as a factor of gold reserves is far out of balance!
What do you think Tomcat? Anyone? FOA
FOA (4/29/99; 6:05:32MDT - Msg ID:5305)
Oil
http://www.usagold.com/FifthHorseman.html
Michael Kosares (Usagold),
I just read your "The Fifth Horseman" piece on the Gilded Opinion page. Very nice write-up, indeed! With crude rising some $.60 yesterday, it looks as though we are beginning a new era of commodity pricing. I think that most people have completely forgotten just what an impact oil
prices can have on inflation. Just as you write,
" This Fifth Horseman could very well be the most
intimidating of them all", also I add, so will it be an intimidation on the dollar! Another fine point is
also made with
" What makes the current situation more dangerous than the 1970s, as shown in Chart 2, is that during the 1970s the United States imported roughly 20% of its oil. We now import nearly 60%".
The pricing changes, that such a percentage disparity suggests, will deflate many portfolios. When the asset shift begins it will be of a "historic proportion" and require long hours of discussion on this forum.
FOA
FOA (04/30/99; 06:45:35MDT - Msg ID:5374)
The $1.5 trillion gamble
http://news.bbc.co.uk/low/english/business/the_economy/newsid_331000/331877.stm
ALL: This item was the short killer!
"disclosure by financial institutions of any material exposure to hedge funds "
AND: These are the BIG GUNS behind it! All of this started many months ago.
"the President's Working Group on Financial Markets, which brought together officials from the US Treasury, the Federal
Reserve Bank, and the Securities and Exchange Commission, which regulates the stock market."
FOA (04/30/99; 06:52:21MDT - Msg ID:5377)
Saudi Arabia, the world's biggest oil producer and exporter, spearheaded the March agreement.
http://biz.yahoo.com/rf/990429/62.html
ALL: "only one oil producer counts, only one" The political picture is changing and it will impact gold!
Thursday April 29, 12:31 pm Eastern Time
By Michael Georgy
DUBAI, April 29 (Reuters) - Saudi Arabia is certain that OPEC and oil producers outside the group will fully comply with output cut pledges made under a March agreement to rescue petroleum prices, a Gulf source said on Thursday.
``Saudi Arabia is sure that there will be a 100 percent compliance in May, and for the rest of the year,'' the Gulf source told Reuters.
``What has to be taken into account is that there is a new spirit of cooperation among all of the countries (OPEC and non-OPEC), like Oman, Mexico and Norway. Anything that is done will be done collectively,'' added the source, who is familiar with Saudi thinking.
He said Saudi Arabia did not expect any violations of the agreement, even if prices, which have shown recovery since the deal was signed, rose further.
``Saudi Arabia is not very worried,'' he said, when asked if there was danger if prices rose too quickly.
``We are trying to bring balance back to the market, to bring stock levels to normal levels of 1996 and 1997. We are dealing more with fundamentals,'' said the Gulf source of oil producers.
June international benchmark Brent traded at $16.35 by 1300 GMT on Thursday, down five cents from Wednesday's close.
The Gulf source said Saudi Arabia believes compliance in April was ``high'' but declined to give a figure, saying accurate judgment of implementation of the pact could only be made one week or so after the month ended.
``Maybe there was not full compliance because of contract problems. But Saudi Arabia thinks compliance was high. There is no point in guessing now,'' he said.
OPEC and other producers in March agreed to remove 2.1 million barrels per day (bpd) from glutted world oil markets in a third bid to prop up prices since last year.
Saudi Arabia, the world's biggest oil producer and exporter, spearheaded the March agreement.
Violations of previous pacts undermined efforts to rescue prices, which hit 12-year lows in the months before the March agreement.
Analysts have said the Organisation of the Petroleum Exporting Countries (OPEC) seemed to have complied with the cuts so far and would continue to do so for the short term.
According to preliminary data from consultants, OPEC cut oil production by 1.35 million bpd in April after agreeing to the new limits that took effect at the start of the month. That translates into 81 percent compliance.
The Gulf source rejected those assessments, saying it was impossible to accurately track all loadings from ports and make a judgment before the month in question ended.
``Some people like to create doubts whatever OPEC does. They are negative. If we talk about guessing, I can guess what oil production will be two years from now,'' he said.
FOA (04/30/99; 07:11:28MDT - Msg ID:5378)
Gold discussion?
USAGOLD #5339
Michael,
Something is in the works and I only hope these "maneuverings" are forced to become more transparent. Then everyone will be able to interpret these events in their own way. This is a "new gold market" with far reaching implications. I hope to be here much later ( late Atlantic Time) for some discussion and reply's to recent posts! thanks FOA
FOA (04/30/99; 07:33:13MDT - Msg ID:5380)
OI on Comex!
Michael,
I think the Open Interest gained some 4,000+ again. Some entities may be trying to lay off their exposure, quickly?
Also, we must remember, the ECB now "marks to the market" their gold reserves (every three months or so?) and the US cannot because it belongs to the treasury (not the Federal Reserve).
This points to the odd circumstances that require America to free up gold through the IMF so they can benefit. Whereas, the ECB has but to only let the price rise! Another pointed this out to me and it does make the situation more clear. I must go now,, FOA
FOA (4/30/99; 21:57:13MDT - Msg ID:5417)
Reply
The Stranger (04/30/99; 07:20:53MDT - Msg ID:5379)
FOA
I confess, I was originally put off by your posts. I thought your and Another's writing style was unnecessarily cryptic and even pseudo-mystical. I am quickly coming to recognize your insight and appreciate your contributions to the dialogue.
If misery loves company, so does delight. Yes, we do watch this market together....as friends.
Stranger,
Another writes the way he does because he is not interested in teaching. He wants others to think, consider and conclude (right or wrong) for themselves. We will never be allowed to prove him right or wrong, rather "time will prove all things" as "events" will be your teacher! That
concept, my friend is a favorite of his. When we consider it, which is better, to "follow in the footsteps of giants" or " learn to leave your own impressions upon the ground we walk"?
Indeed, .....as friends, we watch this new gold market together" FOA
FOA (4/30/99; 21:59:59MDT - Msg ID:5418)
Gold
ALL,
I am watching Comex gold trading now, because this should be the place where local (US based) funds attempt to reduce their exposure to any future rise in gold (perceived or other wise).
Private investment funds, that have raised capitol through any form of gold short securities, may be asked to expose their "risk". The full group of investment entities may also be expanded to include "any" other parties that have dealings or actual exposure to these funds that are short. In essence, every major player in the gold market could be looking for a way to "neutralize" their books to scrutiny. Even though your exposure may have come from the unregulated part of the OTC world gold market, if one is "hedged long" on a "politically acceptable" exchange, then your
position is "politically not at risk"! The books stay closed.
So why watch Comex, open interest? If a certain political faction suddenly changed direction and wanted to revalue gold as an asset to lend money against, the fasted way to do it is to drive currency traders into the paper gold traded on comex. When looked at in this light, gold takes on a very different appearance than the commodity we thought it was. Think about it and perhaps we can discuss this further.
If you notice, on Thursday, Comex gold traded app.. 45,000 contracts and rose $3.00+. Yet the OI dropped 11,000+. Today, a friday, some 60,000 (estimated) contracts were traded and it rose $.50. This general trend should continue, in that every time there is a major closing of
speculative positions, the next day should show high volume. The major players are taking advantage of shorts closing and buying "insurance". Over the next months, OI should increase
greatly! We will watch and learn. FOA
FOA (4/30/99; 22:10:57MDT - Msg ID:5419)
"to your safe return"!
High Density (04/30/99; 11:22:37MDT - Msg ID:5393)
"Soon I must depart this table and continue the age old toil I have committed myself to: liberating the yellow metal from its entombment. But I will do so now with a zest!"
Hello HD,
While digging for metal, do not forget to mine the USAGOLD forum for knowledge. Let us know where you go, the trail traveled and what was learned? Thank You FOA
FOA (4/30/99; 22:33:18MDT - Msg ID:5420)
Reply
USAGOLD (04/30/99; 10:08:12MDT - Msg ID:5389)
Insights.. FOA
Michael,
Hello again! I'll reprint the item you committed on:
"This points to the odd circumstances that require America to free up gold through the IMF so they can benefit. Whereas, the ECB has but to only let the price rise!
When one puts on a political thinking cap, that statement does say a lot! Why else would the ECB establish a precedent of routinely "marking to the market" their gold (and the gold of the Euro System banks also). Then add to that your remark of:
"becomes clear that this is a very risky business and that they are being asked to sacrifice their
gold to defend another country's currency."
Suddenly, we see who's gold was really at risk, all along! Are we in the last days of the dollar, as the US agrees to politically drive gold higher to benefit the IMF? And by extention, world dollar reserves as expressed in dollar debt! Will the US be forced to drive it's own dollar down against gold in an attempt to save it's reserve status? Dynamic times, indeed! FOA
FOA (4/30/99; 23:30:04MDT - Msg ID:5426)
Reply
JA (4/30/99; 0:02:50MDT - Msg ID:5365)
FOA
Hello JA,
I see your point. Much of what I have said is in the context of a much larger point. That is, that gold never did become a commodity just because the dollar was taken off the gold standard. It's used as a currency to buy "credibility", influence events and provide financing for speculative
investments. Much in the same way as companies use their stock as currency, so do governments use gold! Say a company knew of a major break thru that would eventually increase it's stock value many times. Then, say they offered you that stock to purchase your natural resources at what appears to be a ridiculous price. All of your piers think you are nuts to take the offer, until the company stock explodes in price. Then it looks as if your sale was appropriate! This scenario happens every day, yet, the stock isn't called a currency and the deal isn't looked upon as a conspiracy.
My point is that some people still look at gold as a currency that is so undervalued it's ridiculous. They accept it with the (inside?) knowledge that the dollar is going to plunge. Not because politicians will force it down, but because politicians have forced it up for so long. The
true conspiracy was in the dollar reserve standard, not gold.
The world often values things wrongly, because people as a group invest using their present life experiences as a guide. They learn using a continuation of "present trends" established during their short existence, instead of allowing the real results of history to teach them. The present lawsuit by mine stock owners is a good example. It's not about gold, but about getting their money back
because they invested using the wrong "interpretation" about gold. They did not think it would be managed as a currency, because they thought it was a commodity! Now, as the gold currency is sought after by many, as a replacement for a failing dollar, they will find themselves wrong again.
Will they then bring legal powers to bear as gold soars from manipulation by the buying public?
thanks FOA
FOA (5/1/99; 15:39:10MDT - Msg ID:5439)
canamami
canamami (5/1/99; 9:39:41MDT - Msg ID:5431)
All: please reread #5431 as my reply is for this post.
Hello canamami,
I am happy that your reading here has prompted a further break in said "posting moratorium"!The thoughts and reflections of others help everyone to view the world in a different light. Our bodies are not engineered to see 360 degrees at once. Therefore, at any moment in time,
someone else will always see something hidden by our lack of complete visual perception.
For, myself, Mr. Donald Coxe displays the same style of thinking that has cost many investors dearly during the 90s. He correctly states "gold has been a reliable inflation indicator for at least four millennia" but then associates the correct investment plan to play this "historical precedent" was to hold "precious metal stocks"! Search the western world of investment professionals and we will find the exact same thinking in almost every case. Billions of dollars have been lost using this very style of "association", yet even in the face of these loses, they will still buy shares instead of gold bullion. Why? Because every holder of modern currency is using their present "life trend experiences" to dictate the possible future value of gold! Even the well written history of paper
money, with all of it's chronicled destruction, cannot convince modern man that Gold can and will fully demoney paper! In our present lifetime! Yes, these shrewd trust managers can only accept that the value of gold will only increase to it's commodity value plus a premium for inflation. Hence they buy into the commodity story of gold and hold shares.
Standing upon a hill and looking in the same direction, none of them will view the other 180 degrees of history that is quickly approaching them. Today, the IMF appeals to the governments to use gold as a currency. It will be sold, yet no buyers will be listed! The books will be squared and show 10 million less gold, yet none of it has left the vaults. The bullion is "securitized" and multiplied into billions of loan guarantees, yet we only hear that it was sold to feed hungry people. During the past few years, millions and millions of ounces are leased, loaned and borrowed with
only four or five hundred tonnes shown as deleted from total worldwide CB books, yet we are told they are selling it completely.
Yes, my friend, gold is returning to it's centuries old roots, as it is used as the last resort for financing in a failing debt ravaged, outdated currency reserve system. I submit, that managing the price of gold lower has helped create, what the gentleman has pointed out, as the "rapid money supply growth and some of the lowest interest rates the world has seen". That effort has got us this far today without a currency collapse. The "influence" of low gold created the energy to effect this present state of affairs. Now, that energy has been used up. Now, gold will be managed UP in a final washout of the dollar. Holding physical gold, now will provide a return in proportion to it's past position as "the asset class".
This act will play out again today, just as history dictates. In reference to your post, I add:
The "Good Guy" will "get the girl", "win the lottery" and "never have to make a profit doing it! All because he (she) was dumb enough to hold gold!
thanks for reading FOA
FOA (5/1/99; 16:19:03MDT - Msg ID:5440)
Christine
Christine (5/1/99; 7:30:46MDT - Msg ID:5429)
You give these world leaders a lot of credit for knowing all about gold! My problem is that your credit to them is out of context. Any smart politician will never act to build on a system that denies "money creation". That is the mind set they apply to gold, and for them, the only one that counts. It, by nature, works against their agenda. Just as in my post to canamami (#5439), I again submit that most major western leaders want to use "gold the commodity" as an "asset creation" mechanism for their constituency benefit, not for the creation of a stable financial reserve. Always, when a politician is under pressure, they think of gold in the "present trend", it's a commodity that we can borrow from. Just don't let it into our house to control us.
This is where we are, today. The demand for gold from entities that want to remove dollars from reserves is creating a "piggy bank" for dollar / IMF countries to borrow from. Your supposedly, knowledgeable leaders don't understand that they are using the last asset in line.
Truly, they will be very surprised to learn when the gold they "sold", so to speak, was loaned out so very cheaply. But, fear not, it will be the other gold "in the ground" that they will not be so dumb not to attach! FOA
FOA (5/1/99; 19:58:11MDT - Msg ID:5459)
Reply
Chicken man (5/1/99; 8:44:42MDT - Msg ID:5430)
Hello Chicken Man,
Your post is written from a standpoint of "a battle for world power". Well, I don't think it's as much a battle, but rather a sliding of assets from one place to another. More like untied cargo in a ships hole during a storm. The task (battle) is to lash the "assets" down in one place before they sink the ship! Please go to Aragorn III (4/26/99; 6:49:34MDT - Msg ID:5170), as it gives an excellent description, using most appropriate language (he said what I could not).
I would think your "grain robbery" scenario will come about. However, it will be but one part of the "cargo" sliding around the ship. America can expect to receive a "sudden impact" from all of these overseas dollars once it is realized they will lose most of their value. Local US investors will do well investing in almost any useful, needed, exportable basic product. Many an investment
advisor, with commodity tunnel vision, will tout their "single idea" as proof of how good they are. I say, money into commodities will be the same as ".com" stocks. No brainer?
Also, Michael (UsaGold),
Thanks for the mention about my post. It is hard to describe the other 180 degrees. How was Titanic? FOA
FOA (5/1/99; 21:04:42MDT - Msg ID:5465)
Reply
SteveH (5/1/99; 18:10:10MDT - Msg ID:5449)
Hello SteveH,
Yes, Steve, you have it about right. I have to admit that money will be made in gold stocks. They will move until action is taken against them. The problem is that anyone that would truly understand and agree that physical gold will return much more, would have to say, why bother with stocks? I offer these guideline problems (Tomcat!) to watch in a functional way.
We are dealing with two phases that will impact gold stocks. The first will be the falling world stock markets in general, particularly the US. The decline, this time, will not be like in the 70s when gold and metal stocks went up as the markets fell. This downturn will be the result of a
"collapse" of the reserve currency system and the resulting "strategic repositioning of assets" worldwide. Indeed, a big difference from a (70s) falling equity market as a result of relatively minor inflation (13%). This new downturn will slam all equity investments, no matter WHAT they are earning! It will not matter if a gold stock is earning $10 a share and selling for $10, no one will hang around for the story, or the return, or the perceived ownership of gold. History shows that in such conditions people grab what they have and take it home, for a long time! The problem for
gold stock investors, this time, is that they are waiting for the very event that will impact the markets the most! That being the driving of gold prices higher in a gasping attempt to save the last of the dollar system! That act will crater the DOW from these levels. With Gold stocks, so
depressed, the higher gold prices will take at least six months to filter through into earnings in a meaningful way. If you were a big player in gold equities would you hold on for months with rumors of: foreign exchange controls, state of emergency, new banking regulations. a 50% drop in the dow, a currency crisis and gold flying through $3,000+?
Steve, watch the xau for a small rise, then a stall as things unfold. If it stalls for several weeks as matters worsen, you know what to do!
The next phase of problems for gold equities will come after gold crosses it's old high of $800! No doubt, foreign exchange controls will lock gold into the local market. The country of origin. Yes, the commodity every gold equity investor has followed supply and demand for will now
suddenly become classified as a "currency" and subject to all emergency measures. Remember, the governments will not coin it because it's a commodity, but during an emergency, it's much to valuable a currency asset to allow it to leave the country. Now, locked into a domestic market it's
sources will be subject to "windfall profits taxes" of sufficient amounts as to match the scale of the financial crisis. Steve, at this point there is nothing to watch because, if you still hold gold stocks, it's to late. Sorry for this very real discussion. Now you may consider your moves. FOA
FOA (5/1/99; 21:17:32MDT - Msg ID:5468)
Time to go!
Thank you everyone. Aristotle, a fine M3 report. Yes, "I got me some" and will "get some more"!
Gold, Yesterday, Today and Tomorrow!
FOA
FOA (5/2/99; 11:54:54MDT - Msg ID:5489)
OIL
http://www.nandotimes.com/noframes/story/0,2107,44496-71801-518849-0,00.html
Canamami,
Earlier, you had stared many items that would conflict with the outcome that Another and myself see ahead. One of them was this:
canamami (4/25/99; 22:10:30MDT - Msg ID:5165)
"However, and first, many of the Middle-Eastern countries are dependent on the US for military protection. No country or alliance in the world can match the US with respect to military technology. Only the US maintains a military of the size and mobility to assist those Middle-Eastern countries if they are threatened. The bottom line: only the US can protect these traditional regimes (The US being the successor to Britain and its Empire in this as in many other
roles)."
Please note that times and circunstances change quickly in the fluid world of politicts. Even today, Arabia takes a further move. First oil, now defence! Next, finance! This world is changing and we are part of it. Read below or see above link:
"Saudi defense minister makes 1st visit to Iran in 20 years
Copyright © 1999 Nando Media
Copyright © 1999 Associated Press
DUBAI, United Arab Emirates (May 2, 1999 10:04 a.m. EDT http://www.nandotimes.com) -
Saudi Defense Minister Prince Sultan arrived Saturday in Iran on a groundbreaking visit that could bring the two Gulf heavyweights closer to a defense agreement.
Sultan, who arrived in Tehran late Saturday, is making the first visit to Iran by a Saudi defense minister since the country's 1979 Islamic revolution.
Iranian Defense Minister Ali Shamkhani said Sultan's visit was "a turning point in relations" between the two countries and called for a military pact with Saudi Arabia to defend the Gulf, the official Islamic Republic News Agency reported.
The defense ministers will discuss "the general outline of a security plan for the region," said Iran's ambassador to Riyadh, Mohammad Reza Nouri Shahroudi.
A Saudi diplomat, speaking on condition of anonymity, said there was a possibility the two sides would draw up a defense agreement. "
(more)
FOA (5/2/99; 12:07:50MDT - Msg ID:5492)
In poor form.
All:
Sorry for the poor spelling in my #5489 as I am in a rush and wanted to send this quickly. Will return much later. FOA
FOA (5/2/99; 18:44:55MDT - Msg ID:5505)
Reply
canamami (5/2/99; 15:44:49MDT - Msg ID:5500
Canamami,
I went back and read both your post and my reply / analysis to it. You are right and I see your point. My intent was to show the "mind style" used by many manager / strategist for the evaluation of gold market investments. In doing so I walked on your major purpose for offering the piece in the first place. I made my point, but took your work out of context to do so. A very sad mistake, for me, my friend as I lost much more than I gained. My apologies.
The fact that he made this statement was indeed a confirmation of the "changing analysis" of the gold market:
"Since gold has been a reliable inflation indicator for at least four millennia, weakening its price at a time of soaring oil prices is politically smart. It will help convince economists and central bankers that disinflation or even deflation is still at work, despite rapid money supply growth and some of the lowest interest rates the world has seen."
Your story by Somerset Maugham brings out many of the feelings honest, hardworking people have when hearing of the "easy riches" they have missed. It seems, these days, a conservative person exists to service the needs of those who gamble and live on the edge! But life is dynamic and trends always change. Perhaps the justice, so due for your "Good Guy" will return as the exciting history of gold is played again in a modern world. Thank You FOA
P.S. I would offer a further analysis to your #5500, but courtesy will require permission.
FOA (5/4/99; 20:57:32MDT - Msg ID:5591)
Muslim defence force with Saudi Arabia!!
http://www.khaleejtimes.com/
Khatami for military alliance with Riyadh
"TEHERAN - Iranian President Mohammad Khatami
yesterday stepped up calls for the creation of ajoint Muslim defence force with Saudi Arabia, saying a powerful alliance with Riyadh would make their enemies "fearful."
"The security of Saudi Arabia and other countries in the region is our security. We don't need foreign forces for that," the Iranian president told visiting Saudi Defence Minister Prince Sultan bin Abdulaziz."
ALL: I think the region needs a new gold coin to start things off correctly! Perhaps one is in the works?
Will have more to say on this defense pact in a few days.
FOA
FOA (5/7/99; 8:09:11MDT - Msg ID:5699)
BOE gold sale!!
ALL:
A quick post, then I must go.
The decision by the UK Treasury to sell gold, points strongly towards the severe political pressures upon the IMF / Dollar Reserve factions! The "dollar reserve system" is truly in trouble. With the IMF gold sales in doubt, or delayed. And the EURO / BIS factions blocking any new gold. New gold cannot be found to maintain the backing of collateral for existing paper shorts and the massive liquidity they provide. The UK is directly in the middle of this as the LBMA would all but "disappear" if world dollar liquidity were to shrink from a higher gold price!
Notice what the Bank Of England said: "It also said that eligible bidders will be limited to members of the London Bullion Market Association and central banks and monetary institutions holding gold accounts with the Bank of England." Truly, the IMF / Dollar faction alliance is
failing, with each now about to support it's own entities! The BOE will most definitely back the LBMA first and foremost with fresh collateral!
The beginning of this new bull market in gold will be mired with "extreme" volatility! We never expected anything different. With the ending of the largest circulating reserve currency system about to ensue, nothing less than an investment in "actual gold bullion" will work. For some time, Another (and myself) have pointed out that no one will be able to play this change using any form of leverage!!! Major gold buyers and investors know this, especially oil producers and holders of "paper gold backed by the Euro CBs"! . Today's action, will be nothing compared to the swings to come, as these moves will be "political" attacks of a timed nature. There purpose is "NOT" to destroy private "paper gold" investors", rather "to respond to an ongoing currency crisis"!
This is perhaps the "Third" reason for not holding gold stocks (see my first two in FOA (5/1/99; 21:04:42MDT - Msg ID:5465)). Each 20% gain in the XAU will be given back with the swings in the physical market. Again, during a currency crisis, hold currency, but, in a gold currency crisis, hold gold!
I will have much more on this dynamic market in a day or so! FOA
FOA (5/7/99; 8:33:38MDT - Msg ID:5704)
Today USAGOLD report!
Good Day MIchael,
Nice report about today's market. Bullion is back to where I started adding to my position from a week or so ago. As stated, I will be buying over several weeks. This "suprise" is welcome and buying by many physical entities is ongoing! Gold may, indeed rebound before the close. We will watch this crisis develope! FOA
FOA (5/8/99; 11:24:28MDT - Msg ID:5755)
Gold Talk!
Canamami, Michael and ALL,
I hope to post here about 8:00 MDT. Many very good posts written here these last few days. They need discussion!
FOA
FOA (5/8/99; 20:16:12MDT - Msg ID:5772)
BOE!
ALL,
Well, by now everyone must be aware of the "open management" of the gold price. "Another" had been bringing this picture to light long ago. In puzzle form, he offered ideas, Thoughts and directions for consideration. Only a short time ago most analysts completely wrote off such
"thinking" as being absolutely "on the fringe of reality"! Today, the "absolute fact" is that gold is used and managed as a "world currency" of major importance. After the BOE announcement on Friday, currency traders are grasping the concept that gold is, as never before "at the center of
reality"!
Many different factions are maneuvering gold these days, and each has their own agenda. The IMF / dollar faction, many years ago, went along with Europe in lowering the gold price in dollar terms. It made the dollar look stable and enforced it's continued use as the "currency of settlement" for strategic commodities. Any country running a balance of trade surplus of dollars, was free to buy gold at a stable to lower price, and partially replace the paper dollar reserves. Because the dollar is the "world reserve currency" many countries ran dollar surpluses with trading partners outside of the US. In this light we can see how the integrity of the dollar was expanded, even in countries of nonnative dollar origin!
Not only was physical gold purchased, but paper gold with distant CB backing was also accepted. Ever wonder how all of this gold was placed? You see, over the last many years, there has been a quiet boom going on in gold ownership. The sheer number of world gold buyers has
more than doubled, along with the amount of gold owned! The problem is that the amount of physical gold in existence has not doubled, only the warehouse receipts.
Most of it never, ever left the vaults, as the true placement was done in receipt form. Yes, slowly, over the years, even major private bullion holders offered up their physical for "convoluted, future delivered, leased and released gold". Much of what is now held is little more
than a form of gold options for "future deposit". Not unlike the "cash dollar that is supposed to be in your bank", but really isn't? As the bank only holds your deposit as a "credit" to your account, so is much of the world traded gold "only a credit of account"!
When Central Banks (mostly the European, at first) began to lease / lend gold, they were beginning what was to become "the master plan". The creation of a broad, liquid paper gold market that would ulltementally undermine the dollar, in time. As I said above, initially it was offered as an "appeasement" for continued dollar use. However, even the IMF / dollar faction never expected the successful creation of another competing reserve currency, the Euro! Right up
to it's offering, the political money was on the side of a complete failure, 100% with ten to one odds.
Not only did they lose, the Euro even accepted a percentage of gold as Euro reserves. If that wasn't enough, the ECB also instituted a policy of "marking to the market" it's gold reserves and effectively blocking any new sales or leases. These actions, as subtle and misunderstood as they
were have had the effect of officially making gold money again. Yes, this new broadly traded paper gold market, standing side by side with the physical market has become a world currency.
The problem this creates for the IMF / dollar is that most, if not all of this new gold market is settled in dollars! Dollars that broke a contract with the world in 1971 and went off the "gold exchange standard" at $41 to the ounce. The same dollar reserve currency that is not supported when the gold price rises. If the ECB does nothing but stand firm by not allowing physical out of it's vaults, the dollar will be trapped by gold. The US treasury cannot use gold as a backing reserve as the ECB does, because the BIS would claim it at $41 to settle trade imbalances. They
have that authority and as such it leaves the US the only option of outright gold sales. However, with the dollar as "the" reserve currency, we can expect many nations to bid "aggressively" for any US gold. China, among others comes to mind! That is what America found when they tried to auction it's gold in 1978. The Euro carries no such baggage.
This all leaves us in the present political situation, where the IMF entity, that was formed to replace the gold standard, is now trying to back the present paper gold with physical to prevent a run on the dollar. It is a futile effort as the ECB / BIS have grown the gold market into massive proportions by encouraging the many year expansion of holders through paper securities. All denominated, ultimately, in dollars. We will see $10,000 gold, count on it! It's the only way this can be resolved. That same figure will create massive backing for the Euro and hasten it's journey into world reserve currency status. Expect most of the ECB liability for gold to be easily converted into Euros at the dollars expense.
Now, the BOE action clearly shows the split between them and the IMF / Dollar faction. They have given up on freeing up IMF gold to support the dollar and are actively trying to help their LBMA. England will be forced into the EURO as they abandon ship. I expect an explosion in open interest on Comex as major players try to hedge themselves against short gold. The US now has no choice but to encourage gold to rise and use that action as a political ploy. They will no doubt try to gain much mileage out of the fact that the treasury has 8,000 tonnes of gold for dollar backing or outright sales. It will be a political discussion, only. As the gold market becomes more dynamic and gains media attention, many congressional investigations will target the short funds. After all, with gold killing the dollar, something must be done.
I have some other commits and replies to other posts. Be back in a minute.
FOA
FOA (5/8/99; 20:35:41MDT - Msg ID:5774)
Reply
Richard, Oregon (5/8/99; 12:09:55MDT - Msg ID:5756)
Hello Richard,
First I want to say I'm sorry I posted 8:00MDT without a PM after the date. Not only that I am very late!
Your questions: " It would seem that your preference of precious metal ownership would be gold and in the form of bullion only. Correct?"
Yes, Richard. It should be viewed as an appreciating cash currency, not an investment.
"Any particular choice of one bullion coin or another? I've observed numismatic precious metal ownership is for more subjective than straight bullion. Do you agree?"
In a way, I agree. However, major investors do look at "numismatic" coins as an "Art Form" not unlike paintings. And, just as paintings were carried off by invading armies, rare coins will also hold their higher value during a currency war. Note: I didn't always feel this way. Another guided me into this style of thinking.
"I too see the news of recent days leading us to very "opportune buying moments in history", the likes of which we may not see again for a long time. Any further thoughts or things I may of missed?"
Please read my last post #5772. thanks FOA
FOA (5/8/99; 20:46:16MDT - Msg ID:5776)
Reply
THX-1138 (5/7/99; 17:14:19MDT - Msg ID:5739)
Hello THX-1138,
I think you are on the correct trail. Please read my #5772 post as it may add dimension / expansion to your considerations. It is complicated, but then so is currency trading!
FOA
FOA (5/8/99; 20:51:18MDT - Msg ID:5777)
Reply
PH in LA (5/7/99; 15:47:31MDT - Msg ID:5729)
Things are getting clearer now!
Hello PH,
I'm happy this is opening up. The BOE action should bring some high powered analysis from the public investment sector. You mentioned Mosel, I think Another had some discussion with him before. If he post here, they would talk again, I'm sure. FOA
FOA (5/8/99; 20:58:58MDT - Msg ID:5778)
Comment!
canamami (5/7/99; 7:27:41MDT - Msg ID:5697)
Gold Manipulation - Popular Frustration
I found this on a stock investment Board. There's a lot of anger out there:
Hello again canamami,
Yes, many who invest in the gold "industry" are upset with this current state of affairs. However, investors that buy gold as a dollar replacement find this action much to their liking. For them gold is a currency that can not be purchased too cheaply. You see, it all depends how you view gold?
Is it a commodity or is it money? FOA
FOA (5/8/99; 21:10:56MDT - Msg ID:5780)
comment
Chicken man (5/6/99; 18:32:10MDT - Msg ID:5671)
Christine
A very productive walk!.....why not another virtual currency like the EURO....? keep everybody in a state of total confusion.....If FOA or ANOTHER would like to comment as to "Will the Brits (LBMA) rescue the EURO ?
If gold goes to $1000 ,then the Euro would have reserves backed with 45-50% gold instead of 15%....right...?
Hello Chicken man,
No the Brits will not rescue the Euro, but the Euro may well rescue them from going down with the dollar! The BOE sale is but a small drop in the bucket, attempting a political statement that supports the LBMA with gold.
If I remember right, Another never thought that England would survive the currency change. It now looks like they will, at least, go down fighting!
Yes, the ECB system banks will be well backed with reserves, even if their dollar holdings crash! I expect they will be buying gold with dollars, in the open if the US congress does sell any IMF gold reserves.
FOA
FOA (5/8/99; 21:29:28MDT - Msg ID:5782)
comment
St. George (5/8/99; 21:08:00MDT - Msg ID:5779)
THIS IS WAR
Hello St. George,
Good Idea! What really allowed this "master plan" of gold manipulation to work was investors putting their money into the gold industry, not physical gold. Far to many entities purchased paper gold in one form or another (most mutual funds included). This action became an accelerating
trend that the BIS acted upon. They played the gold market for their own purpose. In the process they did give many people an avenue of escape in physical gold. Let's face it, buying gold in the $380 to $280 range was and still is an incredible deal, considering it's history. Now, for reasons I have laid out in the past, any paper gold may have a problem of "perceived value". If the crisis is as bad as the BOE action indicates, the very world currency system will need real gold to survive.
Holders of "gold in the growing" will be fighting an accelerating public outcry for the government to do something! Know what I mean? FOA
FOA (5/8/99; 21:32:20MDT - Msg ID:5783)
My last post???
"correction" My mistake!
Holders of "gold in the ground"
FOA
FOA (5/8/99; 21:48:31MDT - Msg ID:5786)
Reply
Golden Truth (5/8/99; 21:23:33MDT - Msg ID:5781)
Hello Golden Truth,
Thanks for reading and participating in this discussion. We can also thank USAGOLD for creating a "civil" forum on the net. I know some very high powered people read this and will some day sign on. They do enjoy ALL the fine thoughts presented here.
Please understand that Another writes when he wants to offer Thoughts to the minds of others. He does read much of this and gets a "world perception" much the same way we do by talking to others. When someone says, "Up yours Pal", they have no input for consideration. And consideration of each others thoughts is more valuable than wealth. You would be surprised at how many wealthy people hold that opinion. FOA
FOA (5/8/99; 22:07:00MDT - Msg ID:5789)
Reply
USAGOLD (5/4/99; 11:18:50MDT - Msg ID:5564)
E-Mail Question for Another and/or FOA from Steve
Michael,
I'm at work and don't have my password, but I don't want to forget these thoughts. The Saudi/Iran talks seem to have
vast implications, not only on possible oil prices, but with
regards to reliance on the US military. Could it be that
Saudi doesn't have the same faith in the US, could it be thata Saudi repudiation of the dollar might anger the US? An alliance with Iran would lessen the need for US military presence, thus opening the way for pricing oil in Euros or, perhaps, a basket of currencies, ie dollar/euro/yen.
Could you post this for opinions. I'd be interested to what
you, Another and FOA think.
Reply,
I think the political aspects of that sector of the world is evolving, and doing so in a way most analysts did not consider. Often, I would make a statement of possible alliance changes and would receive the typical "they would never do that because the US has the military for their
protection"! Well, does anyone ever consider that the US would defend that oil supply no matter what currency or price is used to purchase it. There is no possible political or strategic purpose to simply walk away from the middle east if Euros, gold or a basket of currencies were used to
price oil. To do otherwise, would allow the possible complete destruction of the oil fields, and that is a misplaced logic promoted by dollar advocates.
No, in time, oil will be revalued by it's true value for world commerce and that value will be denominated in the strongest currencies. Euros and gold!
Thanks FOA
FOA (5/8/99; 22:24:54MDT - Msg ID:5790)
Reply
Goldfly (5/8/99; 22:04:55MDT - Msg ID:5787)
FOA - 15% backing?
Goldfly,
Hello again. Truly the ECB percentage as a number does not mean much at this time. It's the concept that is 180 degrees against the IMF / dollar system. For anyone to measure the value of Euro backing at present, is like looking at gold at today's price. It's out of context.
The beauty of the ECB ploy, is that it doesn't lock them into a rigid gold exchange standard. With gold trading in the open, all currencies are free to be exchanged for gold at any given point in time. The old IMF / dollar manipulation of gold, used from the early 70s gained nothing and cost the world dearly for the benefit of the fictional US living standard it created. Had they just allowed gold to rise from the beginning, commerce would have been much more balanced, nation to nation.
Prior to the Euro, Europe had to play the IMF game. The same game that has now backfired on the US today. They truly don't need the IMF and may pull out later. FOA
FOA (5/8/99; 22:47:46MDT - Msg ID:5791)
Time to go.
I hope to return early tomorrow.
Thank you FOA
FOA (5/9/99; 15:40:38MDT - Msg ID:5814)
oil
el St.One (5/9/99; 3:31:32MDT - Msg ID:5795)
FOA
I know well your thought on Gold stocks, do you hold the same opinion about stocks of USA oil producers?
el St.One,
That is a good question. I have thought about this for some time. Of all the world corporate citizens, oil companies will have the worst time of it. The 1970s oil shock was induced by the US taking the dollar off the gold standard. It had nothing to do with supply and demand or the world running out of oil. Plainly, it was a shock of "pricing" oil to allow for the depreciation of the
currency. Some said oil rose far to much to have represented the resulting depreciation. Nonsense! Oil was priced far to low, at the time, because it was expected that the dollar would honor gold conversion at $41+/- and then slowly depreciate by changing the rate to $500+ over time. A form of official, sliding devaluation against gold, while maintaining international convertibility. It was then, just as today, that the "expectation" of receiving gold at a bargain rate that allowed for cheap oil. When the dollar broke from gold, it's oil conversion rate (oil price) had
to make for "past lost value" first, then rise to equate "current value". Nothing has changed, as oil has come down over these past years because official gold was made liquid through a paper exchange. The only difference is that gold is off the official exchange standard and trades in an
open, highly liquid market, LBMA. No one has to set a rate, you just buy it. Of course, all of this is yesterdays news, as the entire system is in evolution.
What does this have to do with oil stocks? The second oil shock is coming, and this one will not be about the dollar going off the gold standard. The shock will arrive in the form of world oil no longer being traded in dollars as the major settlement. If you think nations will run to grab "gold in the ground" during a currency crisis, wait till we see how they grab "oil in the ground" during a
"REAL" oil crisis.
A country can operate without gold during a hyperinflation for some time, but they cannot even defend themselves without oil. Think about it? FOA
FOA (5/9/99; 19:11:04MDT - Msg ID:5826)
Reply
BC (5/9/99; 16:15:20MDT - Msg ID:5817)
$10,000 gold
Michael and FOA,
Michael, Thank you for your quick response re: selling gold during/after US$/Euro currency switch. I've been following the recommendations and news in News & Views as well.
When FOA and Another were talking about $3000 and $6000 gold, I thought: "What a great potential for profit." But with the mention of $10,000 gold, I got a gut feeling that this kind of huge appreciation would have to be just too big a temptation to the US Government as a source of tax
revenue or confiscation.
I do remember FOA mentioning (10/10/98; 18:51:39MDT - Msg ID:494): "Physical gold purchase, contrary to most analysis, will be encouraged in America as an alternate form of wealth
(401-K or retirement savings) because it will redirect money from going into the Euro."
FOA, from the perspective of seven months later, do you still think that the US government will encourage private gold ownership as an alternate form of wealth to keep money from going into the Euro. Especially with gold going to such an astronomical price of $10,000? Or has something
happened to modify your viewpoint?
Thanks. BC
Hello BC,
My post of #494 is taken from Another's Thoughts of some time ago. I am forced to agree, in that there will be no other political strategy. Indeed, that concept must be looking across the "valley of doom" and observing life in a changed economic environment. History demonstrates the
precedent of gold often taking the drivers seat as "the asset class of choice" when paper money is destroyed. Most likely, the leaders are forced to go along because politicians cannot govern when no one will use their money! Yes, I am aware that many inflations find the citizens still using the hyper inflated currencies, long after it's value has become nothing. Many South American countries come to mind in their present state. But, that action is just the force of "legal tender laws" expending their last inertia energies.
As for $10,000 gold, does this sound strange? If it does you have probably been listening to the advocates of "gold the commodity". This group of educated investors usually "voice" their beliefs in an endearing, logical light that shines from the "pocketbook". How else can one view gold when all of their money is in the mining industry? As present events demonstrate, the use of gold as a currency subjects it to wide value swings, outside the it's most recent history. Truly, "gold the money" is bad business for industry investors. Gold's downside bankrupts them and it's
upside negates them to mining taxes for the state! BC, all present gold operations have bet on gold maintaining a stable value, ($500??) in the realm of it's commodity function. That is why they cannot and do not want to discuss gold in a currency mode. None of them are prepared for that
occurrence. However, history shows that gold is valued far higher as a currency medium than a jewelry item.
Please read my FOA (5/9/99; 15:40:38MDT - Msg ID:5814). There you will find the same relationship of oil to gold as we find gold to currencies today.
Gold does not presently register it's true value in terms of things. That is because it still valued as a "backup / insurance" currency against the world paper reserve system. Yes, most of the wealth holders, today would like to see the dollar system operate, as is. For them it still offers the best of all worlds. In that environment, three fourths of humanity work to service the one fourth.
Were gold allowed to trade in the open as a currency value regulator, it's benefit to the vast majority of working people would create a "human" premium. That premium would price gold out of it's "store it in the back room insurance" value and into it's historic place as "the asset that
represents my life's work and dreams". A premium that says, "My families efforts are worth more than a paper account in the bank that is lent out for the use of entities I do not know"!
Yes, BC, the change from this present system of debtors will bring $10,000 gold, at the least.
thanks for reading FOA
FOA (5/9/99; 19:16:30MDT - Msg ID:5828)
Comment
Richard, Oregon (5/9/99; 16:46:45MDT - Msg ID:5818)
FOA - You're still here!
Richard,
Thank you for reading. Yes, I'm in and out for short reads. The world is offering a large plate of "political maneuvering" for us to digest! FOA
FOA (5/9/99; 19:46:45MDT - Msg ID:5829)
Another's past Thoughts!
TYoung (5/9/99; 19:16:03MDT - Msg ID:5827)
Hello TYoung,
As one reads those Thoughts from a little over a year ago, can it now be explained "Why" the ECB and the BIS forced the agreement of gold into the Euro? Western political factions never thought the Euro would trade one to one against the dollar, much less higher than that ratio. Has some entity outside the European arena now given backing to the Euro? Who does hold so much of that gold paper? In time, my friend, we will all know not only where our wealth sits, but how well it sits. FOA
FOA (5/9/99; 21:15:44MDT - Msg ID:5832)
Reply
Aragorn III (5/9/99; 20:21:23MDT - Msg ID:5830)
FOA (5/8/99;--Msg ID:5772)...thank you for this remarkable post
Aragorn III,
The BOE does want to help the LBMA to some extent. Politically the Central Bank must attempt to support them, after all look at who the Bullion banks are! I think it would be understood between these entities, that if England does run for the Euro at the expense of the dollar, these gold merchants are dead in the water. Yes, political favors will require BOE to offer gold, even if it is a drop in the bucket, but as a soldier will fire his last round in a lost battle, so will "The Bank" ship it's last ounce of gold. This is serious stuff and the Friday news shows just where
they are going.
True, the merchants are only the middle man in this "war of giants", but the US and it's dollar also need this market to function if they are to keep the paper gold longs from "wholesale" jumping ship also. Right now the big longs are balanced, if they lose contract delivery from a failing LBMA, it's made up in a soaring oil and gold price held through secure ECB commitments. They "called the tune" a long time ago when big money started supporting paper gold in dollar settlement. The gold market is now locked and has but to react to the shortage of physical gold priced in dollars. As we run out of major CBs that offer to unload gold, so does the dollar run out of time. The BOE may have been the last?
However, this ship is going to sink slowly if for no other reason than the IMF / dollar factions are still trying to save it. In this environment, investors (TYoung?) need patience and an un-leveraged position as this major act unfolds.
FOA
FOA (5/9/99; 21:53:19MDT - Msg ID:5834)
Reply
Christine (5/9/99; 20:30:48MDT - Msg ID:5831)
Christine,
Thank you for reading and thinking out loud. This forum would be blank if we all saw the world through the same camera. No offense taken.
By your numbers:
1. It does appear that the Saudi's may be re-aligning with Iran for defense, and moving away from the US. This would support a Middle-East re-alignment with the euro.
2. The price of oil was held down for 2 1/2 years, doing much damage to the US oil industry, and reducing our ability to respond to oil cartel pressures on price or supply. Also, with all the refinery fires, I feel that a US gasoline shortage is being currently set up. The US power structure appears to be orchestrating this component of what is unfolding. ie. US gasoline price hikes and potential shortages now unfolding appear to be orchestrated from the inside, not by the euro/BIS or the Middle East.
3. It appears that US/IMF/BIS/Euroland are all complicit together at the moment in holding the euro down and the US dollar up so as to make their currency exchanges from dollar to euro at best rates.
4. As far as I know, Euroland is a block of countries without much natural energy or gold in the ground.
5. The countries not in Euroland have a wealth of energy and gold in the ground.
6. I do agree it is logical that some oil nations are unhappy with US dollars and have insisted upon a gold payment, and this is a factor in what is going on.
1. Agree!
2. Partial agreement. At first, the falling oil prices (over many years during the 90s) was a shared goal by all. This included the US, Europe and most of the dollar world. I don't think the powers that drove this think like James Bond, but it could have been a dollar trap from the beginning. That is the current perception. Yes, the long effect was to damage the viability of the local US oil
industry, but again, they didn't intend to drive gold (and therefore oil) that low in the beginning. It was only after the dollar was trapped by paper gold that it needed ever lower physical prices to keep a chain reaction from spiking gold. This in turn drove the dollar higher in world markets
creating the asset bubble in America today. True, I do think the US players are sending out "readings" to the public to get them ready for higher oil prices and the price inflation that will create. However, they are being pushed in this direction by the reality of a changing dollar reserve system. The same reality created by the Euro
faction. NO, the refinery fires are a sad loss of accidental consequence.
3. Disagree! Recent history will dictate the animosity between the BIS and the US! Please don't take my word for it. Mr. Mosel (kitco) is well educated on this, ask him? Or, read up some of the 1960 / early 1970s money wars that were fought. Old bankers never forget!
4. True, and they have outlived America for how long? Great nations are made from great people, not resources. The US did not get where it's at because it had gold. Gold was delivered to this country (far more than was mined) to buy it's economic productivity.
5. Same answer.
6. Yes.
As Mr. Another would say " We watch this new gold market together, Yes?"! Christine, more will come to light and prove us not right or wrong, but observant.
FOA
FOA (5/9/99; 21:58:29MDT - Msg ID:5835)
Time to go.
Thanks All!
FOA (5/11/99; 7:00:32MDT - Msg ID:5905)
BOE
ALL:
Back on (FOA (4/30/99; 22:33:18MDT - Msg ID:5420) I offered this:
"I am watching Comex gold trading now, because this should be the place where local (US based) funds attempt to reduce their exposure to any future rise in gold (perceived or otherwise)."
In that post and several others, prior, it was shown how and why major short hedge funds would cover their positions from political scrutiny. They are doing this, but, as yet, not by going long "actual comex" contracts. The action is taking place in the "Comex Options" market. This
area is usually used by gamblers that bet on gold. Few, if any of these players actually take delivery of the "comex gold future's". Now, a different operator (s) is buying in, the above mentioned Funds. These people have the "real" short exposure necessary to hedge long, buy taking delivery of the contracts.
As stated before, over the coming months, expect the "comex futures OI" to expand tremendously as long positions are taken "outright" or established from exercising "gold futures options". This "play" has begun on the world OTC gold market, often used by LBMA traders. The amount of gold offered by the BOE sales will be a "drop in the bucket", it is creating an avenue for hedging (perhaps it's real intent?). Local investors cannot watch the OTC figures, but
that trading is spilling over into the "comex gold options floor".
This recent fall in price was but a "trading range move" to allow for an "ongoing" repriceing of gold. They will not dare to keep it below $280 for long. A warning shot may be fired by the BIS controlled ECB this week! We shall see! FOA
FOA (5/11/99; 7:19:10MDT - Msg ID:5906)
comment
Hello Cavan Man'
I agree with your assessment. Also, I add, that stocks, bonds, currencies, real estate and "water use" are all manipulated daily! It is a built in component of the "Western" 'Politically Free" society! The only time people become outraged at this "obviously unmoral" practice, is when it effects a large vocal group "negatively in their pocketbook". I don't see gold stock owners suing the
Federal reserve board because the dollar is "too strong"! Yet, millions of third world citizens are impoverished by this move. Most novice investors accept the notion that the currencies are "priced and balanced" fairly by market forces.
I off a past post thought: (FOA (4/30/99; 23:30:04MDT - Msg ID:5426) "The world often values things wrongly, because people as a group invest using their present life
experiences as a guide. They learn using a continuation of "present trends" established during their short existence, instead of allowing the real results of history to teach them."
Christine, I know you agree? FOA
FOA (5/11/99; 8:34:18MDT - Msg ID:5911)
Reply
Christine (5/11/99; 7:37:42MDT - Msg ID:5908)
@FOA--puzzles and missing pieces
"Once, FOA, I remember reading that you or Another had said this plan you speak of by the BIS has been in the works since the 70's. Clearly any plan like my version of a much larger coordinated scheme would require the cooperation of the BIS and the oil states. Is it possible thethe Middle East oil states have been mislead as to the bigger picture from the very beginning? Could the Middle East believe the BIS plan is the plan, when a much broader plan is in effect. "
Christine,
A very good observation / question!
" Is it possible the the Middle East oil states have been mislead as to the bigger picture from the very beginning?"
I, personally, think they were for a while. After all, the Euro group will, just as the US group, take all the power they can get! But, world power struggles are always a funny thing, in that no one entity is as great at maneuvering politics as they think they are. Each group has it's own strengths the other cannot counter.
Look at Russia, a full blown nuclear power that rivaled the US, yet, all of that military might went out the door when the "money war" broke them! Then there is Japan? One of the biggest economic, financial powers in the world, and they went bust for lack of "political agreement"!
China has none (relatively) of the above, yet they are the major desire of the US and Europe for all of their ability to produce economically. And they play that card with incredible ability.
However, all of it pales in comparison to oil. If they did suspect that the BIS was playing them into a "new World Order" then that explains their use of the "gold card". It was allowed to be known that the failure of the Euro to replace the dollar would bring on the reprice of oil using
partial payment of a tiny fractional gold amounts per barrel in the settlement mix. Real gold, not paper! It would have forced every oil producer in the world to follow as the gold price would have blew past $30,000 as the new oil currency. Quickly, at the last minute, the ECB and the BIS announced that Euro system Central Banks would stop all selling and wind down leasing. Then gold was brought into the reserve mix for the Euro. Perhaps a counter play? You bet!
The game goes on. FOA
FOA (5/11/99; 11:37:56MDT - Msg ID:5928)
Reply
Gandalf the White (5/11/99; 9:07:31MDT - Msg ID:5913)
Keep Talking Folks --- Very informative Today !
"FOA -- a Question Please expand on the Comex options trading and where this is to be seen. Is it quoted
somewhere also. Thanks. GW"
Gandalf,
Check your WSJ commodity options page. It will give you a quick idea of what is happening. The total OI in the call side is, I think, over 400,000 already. Of course, that would grow much higher if I'm correct.
ALL: I will be out for a while and return to comment on the many interesting thoughts here today. FOA
FOA (5/11/99; 17:37:51MDT - Msg ID:5948)
The OI thread:
Gandalf the White (5/11/99; 9:07:31MDT - Msg ID:5913)
BC (5/11/99; 10:39:35MDT - Msg ID:5923)
Peter Asher (5/11/99; 13:53:47MDT - Msg ID:5935)
Peter Asher (5/11/99; 14:18:42MDT - Msg ID:5937)
Gandalf and All,
I want to expand (or repeat) about the Open Interest Posts. First, I quoted from the wrong post. It should have been #5418 as it gives a better background. Here is part of it:
"""""FOA (4/30/99; 21:59:59MDT - Msg ID:5418)
I am watching Comex gold trading now, because this should be the place where local (US based) funds attempt to reduce their exposure to any future rise in gold (perceived or other wise).
Private investment funds, that have raised capitol through any form of gold short securities, may be asked to expose their "risk". The full group of investment entities may also be expanded to include "any" other parties that have dealings or actual exposure to these funds that are short. In essence, every major player in the gold market could be looking for a way to "neutralize" their books to scrutiny. Even though your exposure may have come from the unregulated part of the OTC world gold market, if one is "hedged long" on a "politically acceptable" exchange, then your position is "politically not at risk"! The books stay closed.
So why watch Comex, open interest? If a certain political faction suddenly changed direction and wanted to revalue gold as an asset to lend money against, the fasted way to do it is to drive currency traders into the paper gold traded on comex. When looked at in this light, gold takes on
a very different appearance than the commodity we thought it was.""""
I went on to talk about volume. The point of this post and my one earlier #5905 was to prepare a background for the coming major trading that will take place on Comex. It will not be about trying to take delivery of comex gold, rather to match paper longs against "uncoverable" paper shorts". As the gold market becomes more dynamic and media attention increases, most major traders that are short will need coverage on their "books" not actual delivery. In a way,
what I said above.
Peter, a few dollars out of line will be nothing compared to the financial and political liability about to be heaped upon the world "gold shorts". As I told Gandalf, it is already spilling over out of the OTC trading and showing up on the gold options open interest. Small as it is at 400,000+, it will grow until that arena becomes frozen from use (read that the premiums will explode)! Then
the real Comex OI will start growing. They will exercise some options for future contracts, if only to roll them (Futures contracts) over to further out delivery.
BC, hello! There is most certainly a correlation between the BOE sales and the expiration of comex futures. It points to the whole reason for the BOE sales in the first place. An announcement that this is the end of the game! They are going to take out as much of the "most favored" Bullion merchants as possible and let the rest burn.
I know that Michael (USAGOLD) does not think that England will go for the Euro, but some line has been crossed. The US is now about to drive gold UP! Please read this partial post:
---------------FOA (4/30/99; 22:33:18MDT - Msg ID:5420)
Michael,
Hello again! I'll reprint the item you committed on:
"This points to the odd circumstances that require America to free up gold through the IMF so they can benefit. Whereas, the ECB has but to only let the price rise!"
When one puts on a political thinking cap, that statement does say a lot! Why else would the ECB establish a precedent of routinely "marking to the market" their gold (and the gold of the Euro System banks also). Then add to that your remark of:
"becomes clear that this is a very risky business and that they are being asked to sacrifice their gold to defend another country's currency."
Suddenly, we see who's gold was really at risk, all along! Are we in the last days of the dollar, as the US agrees to politically drive gold higher to benefit the IMF? And by extention, world dollar reserves as expressed in dollar debt! Will the US be forced to drive it's own dollar down against gold in an attempt to save it's reserve status? Dynamic times, indeed! FOA-----------
As opposite as it seems, the BOE is selling gold to soften the dollar exit for their members, not to bring their gold ratio in line for entry! They are spliting fron the US because the gold / dollar game is lost. Now from #5699:
-----------The "dollar reserve system" is truly in trouble.
With the IMF gold sales in doubt, or delayed. And the EURO / BIS factions blocking any new gold. New gold cannot be found to maintain the backing of collateral for existing paper shorts and the massive liquidity they provide. The UK is directly in the middle of this as the LBMA would all
but "disappear" if world dollar liquidity were to shrink from a higher gold price!
Notice what the Bank Of England said: "It also said that eligible bidders will be limited to members of the London Bullion Market Association and central banks and monetary institutions holding gold accounts with the Bank of England." Truly, the IMF / Dollar faction alliance is
failing, with each now about to support it's own entities! The BOE will most definitely back the LBMA first and foremost with fresh collateral!---------------------
I an going to post this then continue with PH in LA as it all ties in. thanks FOA
FOA (5/11/99; 18:47:49MDT - Msg ID:5952)
PH in LA (5/11/99; 9:59:21MDT - Msg ID:5920)
Hello PH,
Thanks for your consideration.
I'll start with one very important statement, "the gold market is cornered"! When one reads your Clarification post it becomes evident that the "gold card" was never played. Or was it?
During the last number of years, possibly most of the 90s, the gold market was expanded tremendously. The result was that the holders of "paper gold" and "physical gold", as a group, now own more gold than exists! Is no wonder that the "technical analysis" and "supply / demand" "investment managers" are in a shambles to explain the workings of this new market. Truly, as said before, they are commodity analysis, not political currency analysis. For them, a cornered market must be soaring to reflect the imbalance of longs and shorts. Now can one understand that gold, the political money, is managed on a world scale for the purpose of control of currencies.
From the beginning, the BIS knew that if gold ownership was spread far and wide by leasing from a few European banks, one day, gold would control the value of the dollar. Today, the major longs, that are the recipients of all of that expanded gold, now control the bullion banks, and quite possibly, the CBs. All of this through the threat of delivery that the act of playing the "oil gold card" would "demand"!
Is it then, any wonder, that the quite, cool, suffering longs, watch as the Swiss, the IMF the BOE, all struggle to sell gold in an effort to only "maintain" the credibility of the shorts? All done in a desperate act to save the IMF and by design, the dollar! In this light, was there really a problem if gold falls?
A fine gentleman I know has said, "the Euro, it be a success, for I do see it written in the wind"
FOA
FOA (5/12/99; 8:54:40MDT - Msg ID:5984)
WASHINGTON — U.S. Treasury Secretary Robert Rubin is to resign
ALL:
Will the gold market see changes in the future because of this? You bet!!
FOA (5/12/99; 9:07:33MDT - Msg ID:5988)
USAGOLD report
Michael,
-----------Joining the growing Congressional chorus opposed to official gold sales, four U.S. senators, including prominent Democrat Tom Daschle, wrote Treasury Secretary Robert Rubin voicing their disapproval of the British proposal, backed by the Clinton administration, to sell
some of the International Monetary Fund's gold.----------
I wonder if he quit after they sent him this letter? Now that Britain is closing the books for some of their "preferred" bullion banks, the whole game is washing out! Now we must look at the timing of his resignation (BC, your BOE sales and comex contract correlation) for the fireworks to start!
Also,
Thanks for the reprint of Another's discussion. You are right, in that context, Britain is in the middle of a bad situation. FOA
FOA (5/15/99; 10:33:20MDT - Msg ID:6173)
Gold Talk!
I will also have some words to add to this Forum a little later in the day. Good posts from everyone, much to read and consider. thanks FOA
FOA (5/15/99; 20:44:11MDT - Msg ID:6207)
Gold!
Hello Everyone,
There are so many posters now, I no longer have the ability to reply / comment using each name. Because of my circumstance, I must read several days writings and then post! It is still very interesting to grasp the minds of so many thinkers. A true joy.
How many times have we seen this comment: "If gold went to $10,000 or $30,000 do you know what the price of hamburgers would be?" That is a good observation, but still, one taken out of context. I ask, what is the point of his statement? Does it say that it is no use to own gold if
common items are priced so high as to make the holding of gold a neutral action?
Usually, these side remarks are made with a "currency frame of mind". In other words, the person fully expects the present financial / currency system to continue to function for the duration and plans to profit from any ongoing crisis. The catch word is "profit", because this investor will "trade" the gold market, using leverage to multiply his currency holdings as the profit. Again, that mind holds that their is nothing to gain, if physical gold only maintains the loss of purchasing power during an inflation. It is at this juncture that I differ from most gold investors!
But first, a few questions / statements of mine to counter: " If hamburgers went to $100 each, for god sake, what would the price of gold be?". Or: If hyperinflation was 50%, and foreign exchange controls blocked me from buying other currencies, how would anyone possibly "afford" gold?" Or: "Gasoline just went up $.50 a gallon last month, now it's $8.00. My salary has not kept pace with this inflation, because it only doubled last year to $215,000. After taxes, I'm behind and now my broker says I should buy some gold at $6,346.00 an ounce. It's up a thousand in six months, totally unaffordable for me, an "average utility worker"!!" Or: "There is talk of rationing and bank withdrawals on a percentage basis, how can my neighbor still buy gold
with what is available, what a fool"!
The above train of thought paints a strange picture of a currency going bad, along with the human perception of that event. It is under these circumstances that our original "hamburger man" thinks he will "outsmart" the brightest paper traders on wall street. He will not have a chance! Not
to mention, he doesn't even think the system will fail in this manner. Perhaps, everyone will be getting killed while he outmaneuvers the government's new laws and regulations! Yes, they may try to seize gold and / or tax it's transactions. Or they may encourage it's use as an asset saving account However, these actions will be the "Result" of gold soaring in price, not because it's returning to $40 an ounce! Yes, the very regulatory actions most analysts exclaim as reasons not to invest in gold are truly the result of a world trying to grasp the yellow metal.
Search your own feelings and consider, If our "burger man" "REALLY" understood that physical gold could go into the thousands, would he not be buying it with both hands, regardless of any government action or price inflation offset. Killer investor traders do not walk away from
real things with a huge price dynamic on the horizon, they buy and hold forever, if necessary. But, only if they "believe in" the "dynamic" and the "real wealth payoff".
One of the strangest comments Another ever made was something to the effect of "gold is falling because so many people are buying it"! Some of you, no doubt remember it. What a ridiculous statement to consider,,,, if you are a "burger man" (or woman). He made this point some time ago without explaining clearly. Today, if you have read some of my other posts, it is becoming clear!
Truly, the reason people think gold is being manipulated in a conspiracy, is because it's price is falling while it's ownership is expanding. Usual supply and demand factors don't allow markets to react that way. "Burger people" resent this because it cuts them off from participating in this market, on the long side, using their favorite vehicle, paper leverage. They do not use leverage to short because the fundamentals say it should be going up. Indeed, today, the more the world gold market is expanded, the lower it's price. Yes, the only way to walk in these footsteps, is to buy physical gold.
The buying is not conspiratorial, and has been evident for some time. We have but to look at the massive volume on LBMA to see it. That is a fact, not something hidden away. A gentleman named "Big Trader" pointed out some time ago, that the buying would start as soon as gold fell below $360! It did and it did! Right after that, LBMA had to start announcing it's volume because it became so large. Most of you remember that day. Also, the fact that many brokers (GS) and bullion banks now guarantee the delivery of this massive new area of gold ownership (they are short), does not mean they are shrewd or smart. Or that they are "controlling" the market, it just means they are selling lower and lower. Nor does it mean that they are "profiting" from these
transactions as, to date, most of them are marked to the market, not completed or closed. Yes, some of them are concluded, but, you know and I know that these are but a tiny percentage of outstanding transactions.
If all of the "burger people" truly believe that the gold market is this short, then common reason must dictate that "the someone" is massively long?? An open fact for all to see. It is not hidden! Again, the problem with this state of affairs arises because gold is being massively brought at
lower prices, and expanding it's ownership, all the while, leverage players cannot make a dime from it! Manipulation?? NO!! Investment, done in the open by savvy, smart investors? You bet!
Now, why would major entities buy physical or buy the "short paper" of gold in a world of falling prices? It makes no sense to "burger people" because they expect gold to return to it's natural "commodity value" of say $500/ oz with the world financial system in tact. Just as soon as
the manipulation stops, that is.
My friends, what we are witnessing here is history in the making. Western investors, analysts and gold fund managers are asleep, holding gold industry securities with loses. They are waiting for "gold the commodity" to return to it's "deemed correct price", while major world entities are planning for the end of the dollar as a reserve asset. While local economist use the recent twenty eight years as a "precedent" to price gold in dollars, others use the "total history of currency failure" as the reason to buy real gold at ever lower prices. European lending of gold started as an
"inducement" for one oil producer to lower the price of oil and expand the use and value of a failing dollar. This began in earnest in the early 90s as a straight forward way to "buy" cheap oil. Then it expanded into a method of selling gold to anyone that wanted to trade dollars for it "And
Not Gun The Price"! It is painfully obvious for anyone to see, if they look closely. Gold was frozen from use when the IMF was formed and subjected the BIS into a locked dollar world. The late 1980s clearly demonstrated that no one would be allowed to exchange dollars for gold at a reasonable price. The world would use the dollar or the entire financial system would fall. Today, by effectively returning gold to currency status through multiple "gold carry" transactions, under the guise of mine forward sales and lending, the BIS has created a reserve asset base. A base that competes directly with the dollar and benefits the Euro when the dollar is "unreserved".
"Burger People" will and do find this offensive, mostly because they are not positioned for this event, nor do they believe this is happening. Events will prove that the next rise in the dollar price of gold will be from the beginning of a complete meltdown in the IMF / dollar asset world. That
rise, will most certainly not represent the "commodity value of gold", however, it will represent the "commodity value of the dollar"!
Now my friends, you know why I stand entirely in the center of the "footsteps of giants" and by reason, "what gold means to me".
Thank You FOA
beesting (5/15/99; 20:21:44MDT - Msg ID:6206)
@Christine msg 6176-Subject $10,000 GOLD!
GOLD IS NICE!
From msg.6176: If price of Gold went to $10,000 as FOA suggests would it not become virtually out of reach of most citizens?
Since a question was asked,here is my humble personal response.
Up until the late 1970's I always felt physical ownership of Gold was for very wealthy people only,Kings, Queens,Governments Central Banks etc.
In the 1959 or there abouts time period when Gold was fixed(in the U.S.)at $35 per ounce,I was in the military,they had the draft in those days.Take home pay for me was $80 dollars per MONTH,I also got $8 dollars overseas pay. Even if Gold ownership in the U.S. was legal in those days I didn't make enough after bills to own any.
Things have changed,in the world, and in my personal financial situation.
Private ownership of Gold coins is encouraged by most,if not all,countries of the world.
Lets examine $10,000 per ounce price of Gold with current choice of coins:
1 ounce pure Gold coin-cost $10,000 plus premium.
1/2 ounce pure Gold coin-cost $5,000 plus premium.
1/4 ounce pure Gold coin-cost $2,500 plus premium.
1/10 ounce pure Gold coin-cost $1,000 plus premium.
1/20 ounce pure Gold coin-cost $500 plus premium.
If Gold goes to $10,000 per ounce, coins with more alloy and less Gold(although it would be pure Gold.)would probably be minted.Gold is also measured in grams and grains:
1 troy ounce=31.103 grams.
1 troy ounce=480 grains.
So if my math is correct:
1/20 of an ounce=1.55515 grams or 24 grains.So lets make a coin using grains of Gold.
A coin with 2.4 grains of Gold(with Gold at $10,000)would be worth-$50 dollars plus premium.
A coin containing .24 grains(a little less than 1/4 grain)would cost(with Gold at $10,000) get this--$5 DOLLARS plus premium.To make another comparison:
Gold is about $280 dollars per ounce right now The *#*~^@* Bank of England just announced possible sale of 400 ounce bars of Gold they would cost $112,000 per bar at current prices.How many reading this are buying bars this size?FWIW........beesting
FOA (5/15/99; 20:59:43MDT - Msg ID:6209)
Comment!
beesting (5/15/99; 20:21:44MDT - Msg ID:6206)
Beesting, Excellent point!
FOA (5/15/99; 21:03:47MDT - Msg ID:6211)
Question?
Richard, Oregon (5/15/99; 20:19:40MDT - Msg ID:6205)
Richard,
Why didn't the USG just revalue gold to, say $200 and allow everyone to keep their money? Your comments?? Anyone??
FOA (5/15/99; 21:38:42MDT - Msg ID:6212)
Comment on earlier discussion!
Barrick - hedges
One of the first signs that a new gold market was being created was when bullion banks were allowed to sell Central Bank gold "ownership invoices", for cash to the benefit of Barrick. The CBs got only a very small rate of return for this risk. The money set in a bank account and interest
was made. The new owners of the gold paid cash but let the gold set in the CB vault. All that happened was that Barrick could earn interest on it's unmined reserves and call it "the higher price they were getting for gold"! In addition, the CBs said they could roll it forward for ten years +/-,
if the price of gold rose!
Really clear eyes could see that the CBs were paying mines interest on unmined reserves if they would replace the CB real gold with mine collateral. Because the gold didn't really leave the vault, the new securities were used to match the mine future assets against the new owners of the gold!
Neat trick. After the public bought it as "the CBs earning interest on a nonpaying asset", the gates were opened. It wasn't long before gold was lent without any gold at all! No different than "fractional reserve" banking. The mines were (are) being used to expand the gold trading arena
and they don't even know what is happening. Now, as the price has fallen, all mines must earn interest on reserves, just to survive. The dollar bears are, in effect, nationalizing the mines gold reserves at ever lower prices. Tell me the CBs are dumb? ??
FOA (5/15/99; 21:51:45MDT - Msg ID:6213)
Comment!
USAGOLD (5/15/99; 8:41:59MDT - Msg ID:6161)
"Beesting: Thanks for interesting link. I think alot of water is going to go under the bridge beforeLondoners fold euros and stick them in their pocket. (Sorry FOA)"
Michael,
I bet you one "Paper American Dollar" that England will "pound" the door of Europe in a desperate attempt to enter! The BOE would have never bailed out some of their Bullion Banks in such an "open" action, unless they were about to split from the USA money team. Watch for the US to push for higher gold prices because the game is lost. That's why RR quit, no? GS and the LBMA are in it now! I'll bet you will refer to me as a "hamburger person" after this! We will see. Thanks
FOA (5/15/99; 22:23:29MDT - Msg ID:6216)
Comment!
canamami (5/15/99; 21:54:44MDT - Msg ID:6214)
Hello canamami,
------------ "If "yes", will this disestablishment pertain to the $US solely as an international reserve currency, or also as the domestic US currency, leading to the introduction of a new American currency even for domestic transactions and savings?"--------------
If the reserve function of the dollar is degraded, that action will most certainly affect it's internal trading value. Inflation will rule the day as the local (internal) money is locked within it's borders with "foreign exchange controls"! Most external dollars exist in the form of interest bearing securities (US debt) and they will be handled just as the Russian debt is. No one will declare it
worthless. It will still trade on foreign markets at a discount.
-------------"Do you anticipate "Weimar Republic"-type hyperinflation? What are your time frames?----------
It has to! There is no practical use for the excess amounts or valuations of a reserve currency that has been replaced (unreserved). As I said several weeks ago, the change is starting. Yes the price of gold has fallen, but still within it's framework. Someone, here asked if the BIS would still buy in the open below $280? I think they will to protect the scale of the market. However, if the US is now actively, about to gun gold, the BIS may wait a bit. Also, If Bill Murphy of GATTA (??) really wants to get action, they should go to Switzerland and present a public appeal to the BIS. That could be all they need for a "precedent", especially if it coincides with a new US policy push!
----------An interesting tidbit. There is a program called "Cities at War" on a Canadian cable network called the History Channel. In the episode on Berlin, the narrator stated that the restaurants which had anything left to sell continued to do a brisk business, even with the Russians
within 35 miles. Can you imagine: Some restaurant owner hustling like crazy amid the destruction and mayhem of March 1945, for payment in Nazi Currency! I think payment in gold would have been a much better bet!!!-------
Good point! Add to that the present day action of citizens still using currencies like the Mexican Peso and we see how old habits lead to wealth destruction. FOA
FOA (5/15/99; 22:39:56MDT - Msg ID:6220)
Comment!
Aragorn III (5/15/99; 21:58:18MDT - Msg ID:6215)
Hello Aragorn III,
Nice answer. I hope everyone enjoyed it as I did. I know you have little time, but your responce demands a further question. Gold was money then, and the gold weight created a
problem. Then, why did the US close the gold window in 71 instead of just raising the gold price? Again, even $200 may have worked? Anyone?
FOA (5/15/99; 22:55:38MDT - Msg ID:6221)
Comment!
Peter Asher (5/15/99; 22:33:24MDT - Msg ID:6219)
Hello Peter,
Thanks for the consideration! No, my posts are, at best, food for thought in this changing world. As events turn, the fine writers that make this forum will grasp hold of world affairs with a writing style that shapes public opinion. This they will do using newfound "hindsight" that fresh readers will call "wisdom". I look forward to this as do all. Peter, what does gold mean to you?
FOA (5/16/99; 13:50:14MDT - Msg ID:6244)
Comments!
Christine (5/16/99; 0:50:52MDT - Msg ID:6227)
@FOA--It is unlikely that Barrick Gold is some passive foil of the BIS in this currency change. With board of directors like George Bush and Brian Mulrooney, Barrick has been a key tool manipulated by US. Cover your ears, conspiracy dislikers, but my guess is that at some point as gold soars, the US will come out with a new gold-linked currency similar to the euro. Still keep you ears covered--I also suspect that Britain is lowering the pound value to join the dollar, not the euro.
Christine,
Why would anyone conclude that Barrick was a "passive foil" of the BIS? At the time, they made a smart, innovative move that allowed them to earn interest in unmined reserves. Why would they want to be part of a grand expansion of gold ownership that drives gold lower to achieve that end? These people are miners, not goldbugs. The bottom line is all that counts, no matter who is on the board of directors. Gandalf the White is correct, in that the big names are on the "international" Advisory Board. That position is used to open locked doors for new projects, not plan strategy to counter declines in gold prices.
Barrick is only interested in the broad ownership of gold if it increases it's price. Had they understood the process, as you point out that they must have, leasing gold would never been part of the plan. They didn't need to, for their mines operate at a very low cost. The stock price fell, anyway, so what good did the return do for the shareholders? The precarious position of their portfolio, along with it's risk is now well understood! They, like everyone else, planed for gold to fluctuate in a range of "appropriate commodity value" and saw an opportunity to earn interest on ore reserves during what was perceived as a "lower price period". We are out of that range now and on the verge of blasting through to the other limit.
What of their exposure? It was never done before on this scale, but that is only because the CBs never had a reason to lend gold for almost zero return. I am taken by the naivety of the public and the boards of these companies. It shows the extent that greed holds when no one asked why the CBs were suddenly giving away gold to lend. Remember that interest rates were much higher when all of this lending started. That comparison makes the return discrepancy even
more obvious.
As far as your new gold backed currency for the US? Just how do you expect it to trade along side it's current unbacked unit? As much as the world has power struggles, there are "rules of engagement" that every must deploy under. For the US to issue a new currency, the old one
would have become completely worthless! NO? Comments?
FOA (5/16/99; 13:57:47MDT - Msg ID:6245)
Reply!
Tomcat (5/15/99; 23:42:09MDT - Msg ID:6226)
Sir, I thank you for your thoughts and consideration. Just as the new US movie Star Wars is about to play, the "Gold Story" is about to play out in "real life" fashion. It will contain more interesting "special effects" than the film. The game goes on! FOA
FOA (5/16/99; 14:05:58MDT - Msg ID:6246)
Comment
Xavier (5/16/99; 12:44:48MDT - Msg ID:6243)
Gold and the Chinese Language
Hello Xavier,
Thanks for the details. We should all learn about gold through Chinese eyes. They will be major players in the Euro transition. For then, trade with the US is a problem necessity, because the IMF / dollar does not allow for gold as an "ASSET IN TRADE". To this end, Europe is doing a fine job of playing the "China Card".
Are you sir, Chinese in mind?
FOA (5/16/99; 14:19:27MDT - Msg ID:6248)
Reply
USAGOLD (5/16/99; 10:58:08MDT - Msg ID:6240)
Comments/Responses
FOA....I take the bet, my good friend. Do I get odds? I've got another one for you, FOA. I think that Chancellor of the Exchequer Brown may have exposed the British pound to a speculative attack much like what Malaysia experienced a few years ago. The Asian contagion in Britain? Too far out to comtemplate? Maybe not. Remember Soros.
Hello USAGOLD,
No odds in this major bet! Seriously, the odds of this event will be exposed in a possible lifestyle change in the US. As Christine would say, "they are much too smart not to have known the outcome". I think Mr. Brown has placed the pound "in play" and that course of action will culminate with the British public reaching for the Euro! Politics requires the voters to voice a popular opinion, before action is taken. A pound, severed from the dollar union will crash resistance to a currency change. I believe oil money has been pulling out of London for over a year, now! The game continues!
Christine (5/16/99; 14:26:51MDT - Msg ID:6249)
@FOA--I propose another wager
How about Britain will be joining up with US in new US gold-linked currency. Do you know who has been buying all the gold at firesale prices these last few years. You have wisely pointed out that with all the selling, there has to be buyers.
FOA (5/16/99; 14:34:18MDT - Msg ID:6251)
(No Subject)
Christine (5/16/99; 14:26:51MDT - Msg ID:6249)
@FOA--I propose another wager
Indeed, please explain what would be the gain in such a combination?
FOA (5/16/99; 18:37:40MDT - Msg ID:6261)
Fahd Foresees Good Outlook For Iran Ties!
http://www.iht.com/IHT/TODAY/MON/IN/iran.2.html
------''The door is wide open to develop and strengthen relations between the two countries in the interests of the two peoples and the Muslim world,'' --------
FOA (5/16/99; 18:47:58MDT - Msg ID:6262)
Asia Hails Japan Plan To Guarantee Bonds
http://www.iht.com/IHT/TODAY/MON/FIN/apec.2.html
------Tokyo is eager to develop its yen-denominated bond market, which has withered since the financial crisis struck. But Mr. Miyazawa did not go as far as to say that all the bonds guaranteed would be issued in yen. He suggested bonds ''denominated in a basket of currencies'' including the dollar, euro and yen.------------
FOA (5/16/99; 19:18:34MDT - Msg ID:6264)
(No Subject)
Exceptional writing today. I have read each one and hope they continue!
FOA (5/17/99; 8:17:43MDT - Msg ID:6307)
Comment!
canamami (5/17/99; 7:38:58MDT - Msg ID:6303)
Canamami,
Most of the recent history of the world was written to record the human struggles for power and dominance. These efforts were compensated for, using the value inherent in real money, gold. Practically all of the activity in our past stands as the proof that "gold" represents the goals and aspirations of mankind.
The difference between "conspiracy" and "strategy" blur in the context of "the lust and greed to control political events" and "right planning for the nations future"! Only a sharp mind can separate the two and understand their implications. Often, a group of minds, as we have here, can find the truth.
Please continue.
FOA (5/17/99; 9:01:11MDT - Msg ID:6311)
Comments!
Christine (5/17/99; 7:55:29MDT - Msg ID:6305)
Christine,
Your position holds that the world is coming together. The "power leaders" are working together to create a "one world" "all controlling" currency /economic system. If true, your thinking will rewrite history as the actions of the past are not supportive in this aspect.
Nowhere in the recorded history of mankind have world leaders "colluded" successfully without opposition!. Always, our earth has been broken into power groups that have fought each other. You will find on agreement from scholars, that our "human nature" supports the actions you present.
What you ascribe to would represent a true international "conspiracy" of a strange nature, as the political elements would all be on the same side of the "gold position". They would "in effect" be buying gold from themselves. Nor do capitol flows indicate the US as the buyer. The vast pool
of dollars that support the purchase of gold, all reside outside that country. Indeed, the very concept of linking gold to the dollar, by the US would hasten it's demise under the current reserve system. You will have to resolve that conflict of political wills, for your thoughts to be
constructive. Also, you stated that the US could issue a new currency in the same format as the Euro. Again, you will have to resolve the debt / international currency reserve issue, residing with the dollar that is not present with the Euro.
Please do address these in depth, we look forward to your thoughts.
FOA
FOA (5/17/99; 9:03:42MDT - Msg ID:6312)
Correction!
You will find --NO-- agreement from scholars, that our "human nature" supports the actions you present.
FOA (5/17/99; 9:41:53MDT - Msg ID:6314)
Comment
canamami (5/17/99; 1:01:35MDT - Msg ID:6294)
A Troubling and Perhaps Insane Theory
Canamami,
Perhaps, the English definition of "conspiracy" will have to be rewritten! It is now often applied "out of context" as the definition of natural political maneuvers. I ask you, how can a country plan it's direction without establishing a protocol for responses to international assaults? Be they attracts of physical nature or economic in form. The average citizen goes about their affairs and
views these actions as "highly controversial", yet given the same set of attacks in private life, they would peruse the same course of action. We are governments of "organic" people with common wants , desires and responses not "machine like"!
Would the USA attempt to control events in the Middle East? Of course. The record shows this as an ongoing operation for many, many years. Why would it change now if oil was repriced to the degradation of American economic strength. Myself, and most of Washington would not label this "conspiracy" or even "theory", as it would be a just counter play on the world arena. It is a "given" and "accepted" action, not a "contemplation" of shadow groups. The question to be explored is: "What would the response be and how would it effect the flow of oil"?
I have a reply to this, does anyone else? FOA
FOA (5/17/99; 9:56:08MDT - Msg ID:6316)
Must go!
SteveH (5/16/99; 20:30:06MDT - Msg ID:6270)
FOA
Seems like this person had a few comments for you. I would be curious of your response:
Christine (5/17/99; 9:33:08MDT - Msg ID:6313)
@FOA--Please help check my logic
All,
I will return to discuss / reply to both of these later. Also the question of oil?
Thank you, FOA
FOA (5/17/99; 19:44:28MDT - Msg ID:6353)
Discussion
Christine,
Before we pursue this discussion further, I would ask you to please define your use of the word "conspiracies"? Because this forum is read by hundreds (or thousands) of lurkers, in all fairness, that term must be put in "context" as it's use is applied by the author. Your understanding of the term could be different from others. As an example, PHinLA offered a partial view of his "context", even though it was only a small application of his broad views.
(thanks PH)
Msg ID:6317)
"As far as the topic of the "conspiratorial nature of international power plays" is concerned, I would suggest that such labels tend to betray a shallow understanding of human endeavor on the part of the commentator. It is all too easy to dream up conspiracies based on what COULD happen without regard for what actually IS happening (either behind or in front of the scene). Such thoughts usually fall more easily into the realm of entertainment than into that of
understanding: Imagination unfettered by reality onstraints; certainly a valuable commodity in today's Hollywood-influenced mental processes, but hardly the way things work in the "real" world."
You have often referred to my views as if I was offering them in a "conspirator" format. I respectfully submit that , I do not offer them as such. At least in my definition of the term. As examples of your writing:
Msg ID:6331 " I do not think FOA has spent innumerable hours here and elsewhere posting of economic upheavals coming for no reason. However, all interpretations nvolvingconspiracies must be questioned and challenged, and none accepted on blind faith. "
Msg ID:6320 "Do you not think FOA is proposing a conspiracy for his view of why things are the way they are?"
There are many more. Therefore, as public discussion always demands, please define how you view my writing in your "conspiracy context", so as to allow me to agree or reject your conclusions. This is, of course, for the benefit of others understanding. Thank You FOA
canamami (5/18/99; 10:43:52MDT - Msg ID:6393)
Everyone - Thank You - A Courteous Forum
…To clarify my conclusion and beliefs, I agree with PH in LA that it is unlikely that the US would invade Saudi Arabia, because of the huge multiple risks involved and because the US populace and the world community would be suspicious of any human rights pretext, given the palpable possible economic motivations for such an action…
FOA (5/18/99; 15:05:10MDT - Msg ID:6403)
Comment
All:
I thank everyone for offering their conclusions to "A Troubling and Perhaps Insane Theory #6294".
The duscussion that followed this post offered a great example of "making ones point". Often thinkers discuss topics by stating what they think, without adding "why they think it". The "why" is always the most interesting part and the one that others learn from or challenge using respect.
In the world of international politics observers and analyst must often draw conclusions from historical precedent, natural human tendencies and sometimes just "feelings". Many times, just the "sequence of events" can create "a chain of thought" that leads to a "logical" conclusion. As much as the world investment community demands "facts" before investing, it is rare, indeed if that
luxury is offered. I submit that many generals have won wars using little more than "anticipated human reaction" to create a battlefield strategy.
Mr. canamami, in your excellent piece it was stated "Invade" can include a sponsored coup to set up a compliant regime". I do agree and believe that such an action may even be on the books. It is most certainly consistent with past / present US actions. Would it be accepted in today's
world? Let's see.
Whenever I read of a new US adventure, I always get the "feeling" that they are "fighting the devil" as you have stated. You continue with examples from the " Spanish-American War" on into the present. In each instance, America accomplished more good than harm. Standing in the
context of each event, using "sequence of events" for logic, most would agree that each conflict would have degenerated had the US not intervened.
Further, you use the term "US Elite" as the driving force behind an active "forcible seizure" (as Ann Ryan details it). I ask, why not the "public" as the driving force? Would a need to control oil not originate from citizens, caught in an economic turmoil? This would be a real event, brought on by a newly uncompetitive industrial base. A manufactured event would prove unnecessary as
every unemployed worker would know who the "devil" was.
I bring this up because in many instances, there is always a "background presence" in American thought. That being, "if the driving force behind our economy (oil) becomes so expensive, our leaders (elite?) would initiate the seizure of the oil fields". Do you see the conflict I observe?
Always, the corrupt power broker elite will do the job, yet, in the minds of the people, they demand a response!
While the use of a cause, Susan B. Anthony feminism, human rights or Christianity v. Islam could work, I question if it would be necessary, this time. Your point, " The American people won't support a war for such mercenary purposes" is well taken, in the context of the present
economy! But, would that view hold in the different economic world that would exist at that time?
Let's continue:
canamami asks, "Can the world continue to bank on US virtue?" And Cavan Man (6298) replies:
"do you mean all of us in the collective or are you referring to the government? If you are referring to the collective than you are implying that there are more virtuous citizens than not. In that case I hope you are right. If you are referring to the government than I submit that "US virtue" in that context is an oxymoron."
Mr. Cavan Man, thank You! My observation is that your statement does, indeed reflect the current US economy more so than actual held beliefs! I also extend my "hope" for the virtuous citizen when the times change. Perhaps, the government will be the moderating force in the future?
I offered my thoughts in: FOA 6314: "I ask you, how can a country planit's direction without establishing a protocol for responses to international assaults? Be they attacks of physical nature or economic in form. The average citizen goes about their affairs and views these actions as "highly controversial", yet given the same set of attacks in private life, they would peruse the same course of action. We are governments of "organic" people with common wants , desires and responses not "machine like"!"
Again, we view our leaders as "controlling elite" during the fat years, yet all of us hold the same human values in times of stress. That being, "not only protect what is ours, but grasp what is our given right to control"! The given prosperity of oil, of course.
In #6303, canamami states, "As great powers go, the US is positively saintly, at least most of the time." I add that saintly actions will be a "steep hill to climb" if the US dollar is threatened in a fashion that generated the German inflation leading up to the World war.
In PHinLA #6317, he writes,
"Such a military adventure would negate every historical trend in international politics of the 20th-century. The US does not pursue such naked political and military adventures; it prefers more subtle measures such as the cultivation and maintenance of a reserve currency to bring
about the desired results."
That, my friend is a very true fact! It is also the very "chain of thought" that leads me to ask: will the trend in politics be negated by the loss of a "reserve currency"?
PH, I should just print your entire article, as it says much about western concepts. Here is more:
"Any contemplation of such a military course of action, even if it were labeled a civil rights campaign in favor of women's liberation (a concept I doubt could be seriously entertained by any sane and/or thinking person in 20th-century America) would imply so many philosophical changes in US policy that the natural evolution of this idea would change the world as we know it beyond recognition. It would bring about enormous and radical changes in the global balances of power it would seek to prevent; an obvious contradiction! The flow of oil and today's economic system
would be vastly and unrecognizably different."
The next paragraph in your post was (I believe) directed towards another discussion about "conspiratorial nature of international power plays" and did not apply (completely) to this subject.
And this fabulous discussion continues with:
canamami 6367:
"I submit the main change in the international order is the abandonment of the theory that what goes on within a country is that country's sole business (let's call it the "Westphalia principle"), replaced by the new notion that the international community can intervene to protect "human
rights". The current actions of NATO (unapproved by the UN) in Kosovo are conducted in the name of "human rights", to prevent ethnic cleansing. When the Soviets "cleansed" eastern Europe of ethnic Germans, when India and Pakistan religiously cleansed themselves, when the Turks cleansed eastern Cyprus of Greek-Cypriots, where was the international intervention in the name of "human rights". I submit that something new now exists - countries will now go to war in the name of "human rights".
And he add the question of: "The problem is: what are "human rights"?
I would add that this answer will be in context in the future, to repeat myself, "the human right to a sound reserve currency and a stable economy brought about by cheap oil"!
Mr. PH writes again in 6373,
"No, it is one thing to topple a dictator here or there in a marginal country with little clout. It is quite another to take on a behemoth like China or Saudi Arabia. I take the liberty of putting those two countries in the same category because an attack on the Saudis would be taken as one on all
countries in the region by local inhabitants."
PH, I think the recent move by Arabia to bind with Iran is telling in that they may have read our minds. However, their conclusions were directed towards a future era. Not the present atmosphere that produced this excellent discussion. With the US unable to complete it's goals in
Iraq and now other parts of the world, a charge into the oil fields brought on by the repricing of oil would be a disaster. The precedent (and soon the troops) are now in place. All that would be required to triger an event, is an incident, financial and far reaching in nature. When, as
USAGOLD #6386 noted, "Britain's Tony Blair is about to step up pressure on the Clinton administration to use "American" ground troops in the Balkans." it becomes evident that the
financial system is at risk today, more than ever in history. And the only currency that can survive "risk" will move to the forefront of attention. I believe that in the future, this discussion will take the lead in world media, if no other reason than "this cannot be happening"!
Gentlemen (and ladies) please continue. FOA
FOA (5/18/99; 19:43:43MDT - Msg ID:6421)
Britain was the only European Union country without an ambassador in Tehran.
http://www.iht.com/IHT/TODAY/WED/IN/iran.2.html
Paris, Wednesday, May 19, 1999
"Britain and Iran Move to Restore Full Ties"
Compiled by Our Staff From Dispatches
LONDON - Britain and Iran, whose relations plummeted 10 years ago after Tehran issued an Islamic death edict against the writer Salman Rushdie, announced Tuesday that they had agreed to restore diplomatic relations to the level of ambassador.
Britain was the only European Union country without an ambassador in Tehran.
''This step marks the end of years of dispute,'' Foreign Secretary Robin Cook said. ''It fulfills the agreement we secured with the Iranian government in New York in September 1998.''
Note: A very European action! Why Iran now? Why Britian now?
FOA (5/18/99; 20:06:59MDT - Msg ID:6423)
comment
Aristotle (5/18/99; 15:54:52MDT - Msg ID:6407)
FOA, here is a reminder of our ideological roots. I wonder how far our wisdom has strayed?
Hello Aristotle,
I don't reply to your posts very often, because so much time is spent studying them for reference! I understand that the life of Mr. Madison was one of inner conflict and turmoil. Strange how such stress can create one of fine qualities.
If I may shrink his last sentence to, " the presumed opinion of the impartial world may be the best guide that can be followed.". Have we strayed?
"the appearance of honor becomes the mask of deceit as the tempest does rage"
author? I do not know. FOA
FOA (5/18/99; 20:19:32MDT - Msg ID:6427)
comments
Atahualpa,
Good day and welcome to you.
TownCrier,
Perhaps your added thoughts will also create a montage of ideas for everyone to consider. thank you
FOA (5/18/99; 20:35:31MDT - Msg ID:6428)
Reply
Christine,
Thank you for reading and offering your interpretation. I have some discussion for you that dates back several posts. I hope to offer it tomorrow, USAGOLD time. FOA
FOA (5/19/99; 6:39:26MDT - Msg ID:6438)
Reply / Comments
These are my replies / comments to several of your posts:
Christine (5/18/99; 20:51:07MDT - Msg ID:6429)
@FOA--Timing of oil rise
------"It appears that every manipulation possible is being done right now to hold the price of gold down, the dollar up, and the euro down."------- I agree, it does appear that way. But manipulation is not the best word. "Manage" would work much better because this is done in the spirit on national politics, not "internationalist control" as you often state!
------"Consider my hypothesis (I know you don't like this)"------ I "like" all discussion that offers
a "chain of thought" and / or the "sequence of events" that brings one to make their "logical" conclusion". These may be offered in many posts, over time, or all in one. If able, please state your "historical precedent, natural human tendencies or "feelings" that brought you to make a
statement. Facts are always good, but often unavailable.
------"Consider my hypothesis that all this manipulation is going on right now to facilitate the internationalists in exchanging dollars for euros. I know your thought is, like most others, that we are simply seeing the last gasp of the dollar as the US struggles to maintain the stock market,
etc."---------- Christine, many have read "my thoughts" many times and drawn their conclusions, good or bad. What are your thoughts? How did you conclude "internationalists are exchanging dollars for euros" not necessarily why? What do they gain?
-----------"Price of oil was raised firmly by OPEC in March. This was likely orchestrated in response to the euro being "ready to go."-------- Did you infer this from my thinking? Or do you have another "chain of thought" that makes this clear?
----------"Recently we have seen the tone of OPEC as well as the price of oil soften again some. Do you think it is possible that OPEC has been maneuvering for some additional advantage via controlling how rapid the price rise in oil is."--------- No. Reading through my posts should
suggest that their moves are much more slow and long term. The price rise in March, was because the Euro was "ready to go". However, is was a long term change. Again, I use the the thought of "management of price" in a political format, not "conspiracy" as you often infer that I do.
------------"My thought is that OPEC knows that the process of dollars to euros is underway, and they would have some leverage to gain advantage during this time" -----------This is very different from mine and Anothers thinking, as their "advantage" and "leverage" was established some time ago. Please read my posts and his Thoughts. What is the advantage and leverage you speak of? Are they buying dollars, or silver, farm land? Why do you think they would do this, your thoughts?
----------"A too rapid rise in price of oil would hurt the dollar and interfere with dollar to euro exchanges at a bargain rate. Just a thought."------------ How would the dollar to Euro exchange be interfered with by a rise of oil? And, what brought you to conclude this?
Christine (5/18/99; 20:07:09MDT - Msg ID:6424)
@FOA--I can only say bravo for your post today
----------" canamami states, 'As great powers go, the US is positively saintly, at least most of the time.'---------- (FOA note to Christine: I stated the next line ) I add that saintly actions will be a 'steep hill to climb' if the US dollar is threatened in a fashion that generated the German inflation leading up to the World war."
-----------"You have verbalized what I am very fearful of in a very different way than I have been able to. I feel the US has lost its way."--------------------I agree with this!
----------"Those that control our country are out of control. I don't know what can be done to stop them. And I don't know if we the people have the will to stop them. They will mislead us with many lies and false blame for what is going on. Will we the people be able to see what they are doing and the wrong of it."--------------- I did not say or imply this. This is your interpretation of my post. I concluded that it was the "people / citizens" , "NOT THE Leaders" that would demand action. Please read it #6403 again! Please explain "your theory" about "out of control
leaders" and how you came to that conclusion?
------------"And FOA, the only point we now disagree on, I realize, is that I do not think those who are running the US are going to be defeated by these currency events." ------------- What historical precedent, human tendency or sequence of events brought you to the idea that "currency events will not defeat them? In review of my many posts, one may conclude that the US / IMF factions will be defeated. Please read them.
----------"I do not think "they" have been outwitted or outmaneuvered."-------- Why?
----------"I believe that they have engineered this for their further gain and control." --------- How did they engineer this? Thoughts?
--------------- Christine (5/17/99; 23:37:04MDT - Msg ID:6374)@OverHerd If I understand you correctly, you are offering a similar argument as FOA. And certainly not implausible. But you raise one of the core issues that has made me a "conspiracy theorist" I do not think the BIS has some great wisdom or vision that the IMF does not. What I
mean is, IMHO, the IMF/dollar has been well aware of the eventual outcome of what it was doing all along, as has been the BIS. After all, someone else commented that there is much overlap in who are key players with BIS and IMF. The fact that the IMF must have anticipated the present situation just as the BIS must also, forces me to look for another explanation. I have concluded that this is a designed outcome by the IMF/dollar. ----------------
What actions has the BIS taken that leads you to this? If not actions, then what is the "sequence of events" or what "political advantage" would they gain. Their written history has always been one of "adversity" with the IMF. What actions have they recently taken that change this "feeling"?
----------Why would the IMF/dollar deliberately set the dollar up for a huge crash. For one thing, I think it will create the kind of economic disruption to convince the US citizens and Congress to start entering a global currency, as Martin Armstrong of the Princeton Economic Institute suggests is the goal.----------- I agree that this may be the outcome, but the only other currency to replace the current system would be the Euro. Unless the trend is changed, it will inherit the global currency system. The BIS is much more politically and financially aligned with the Euro. A review their many written articles will confirm this. You must offer how the IMF / dollar faction will benefit by crashing their system. Trillions of assets will be lost, long before they are exchanged for Euros. If your theory is that they are holding the Euro down to facilitate an exchange, then how will the lost assets be moved without spiking the Euro? The dollar faction would be wiped out , as I have stated in many posts. Please address these issues.
As OverHerd 6372 states: -------"The BIS is merely getting out of their way and letting them fall on their own." ---------
I absolutely agree with this assessment and do not offer that the BIS is in a "secrets deal" to bring down the dollar. Christine, that is your interpretation of my posts. The ECB, BIS and the Euro faction are only filling a void. Indeed, it is to their liking and have done nothing to support the dollar, rather it is a political / management operation, in place from the early 70s. The actions of
the private citizens and companies of this world will strengthen the Euro, as they leave the dollar. Not, the "industrial controllers theory" you subscribe to. We are very, very different in this aspect.
----Christine (5/17/99; 20:50:22MDT - Msg ID:6360)------------- "FOA, I do not use the term conspiracy in a derogatory way, although others may view conspiracy in that manner. I believe your hypothesis that there is a covert attack on the US dollar by the BIS is a conspiracy theory.-------------
My hypothesis does not and never has concluded that the BIS is operating a "covert attack". That is your interpretation. Just as stated above, they are working in the open as events reveal this.
---------"One of your main arguments is that in your opinion such a secret maneuver by the BIS would be both justified and necessary on the BIS's part, to save the world from dollar fiat currency" ----------- Wrong again!
------- I do agree that the world is in a mess now because of US dollar expansion/inflation. I do agree that we are going to see some dramatic economic events.------------- Agree.
----------"But your statements that the BIS has planned a secret attack on the US dollar to save the world from the dollar problem is strictly a theory" ----------- Your thoughts!
------------" I believe there are likely a number of equally plausible theories to explain events going forward. What is a theory versus a conspiracy theory. There really is not a difference in my mind" ------------- In my mind and many others there is a large difference.
-----------------You or others may say the BIS/euro motives for the hypothesized attack on the dollar are logical economic policy and high-minded, so therefore it is not a conspiracy theory. ----------- High-minded, no! Logical, yes, because they follow a historical political
precedent that continues, unbroken through this day. One must use a thinking process of evaluating past events to gain future perspective that is used successfully to guide national leaders today. You have not offered this to support your ideas, therefore they do remain in a "more theory" form.
--------"The BIS is doing this to save the world from the dollar. My opinion is the world needs to be saved from the BIS and the IMF, the euro and the dollar. What if I am correct that the US is the country that has been buying the gold, and is also planning a new euro-like currency, and the
game just goes on and on, only with further loss of freedom." ----------- Is this your "feeling" or can you offer "political analysis and history" for support?
-----------"I do not think there is only one interpretation of what is unfolding. It may be logical to assume the world needs a new reserve currency, but I would not be sure the US dollar can be simply overthrown."----------- History has shown that currencies are "overthrown" by citizens
failing to respect them. When people no longer want to hold or use a currency, it is thrown down from lack of value. "Internationalist" must conform with the medium of exchange and can only control a failing currencies use, not value. Therefore, they gain nothing from it. Christine, this is
not logic, it is the history of your past!
--------(But overthrow might be the best thing that ever happened to the US in terms ofstrengthening ourselves, our economy, and our freedom.) We are all either proposing theories, or we are all proposing conspiracy theories, but IMHO, I am not proposing a conspiracy theorywhile you are just reporting the inevitable logical valid scenario of what is going on. That does not mean that in the end you may not be 100% correct, FOA, but at this time we are all
unproven.--------------
As Another has said, "time will prove all things" and "the history of your past is before you"! My money is on the "never" changing history of human interactions with
paper currencies. A theory for some, real life for many.
-----------"I would be curious as to why you worry as to what those lurking will think"--------- I deplore the callous nature of that remark. We all search for understanding of current events in the context of how they impact our lives. I do not worry "as to what those lurking will think", rather, I am considerate of what they (and myself) understand"
I repeat my earlier post.
FOA (5/17/99; 9:01:11MDT - Msg ID:6311)
Comments!
Christine,
Your position holds (#6305) that the world is coming together. The "power leaders" are working together to create a "one world" "all controlling" currency /economic system. If true, your thinking will rewrite history as the actions of the past are not supportive in this aspect.
Nowhere in the recorded history of mankind have world leaders "colluded" successfully without opposition!. Always, our earth has been broken into power groups that have fought each other. You will find no agreement from scholars, that our "human nature" supports the actions you
present.
What you ascribe to would represent a true international "conspiracy" of a strange nature, as thepolitical elements would all be on the same side of the "gold position". They would "in effect" be buying gold from themselves. Nor do capitol flows indicate the US as the buyer. The vast pool
of dollars that support the purchase of gold, all reside outside that country. Indeed, the very concept of linking gold to the dollar, by the US would hasten it's demise under the current reserve system. You will have to resolve that conflict of political wills, for your thoughts to be
constructive. Also, you stated that the US could issue a new currency in the same format as the Euro. Again, you will have to resolve the debt / international currency reserve issue, residing with the dollar that is not present with the Euro.
Please do address these in depth, we look forward to your thoughts.
FOA
Your reply came as follows:
Christine (5/17/99; 9:33:08MDT - Msg ID:6313)
@FOA--Please help check my logic
------------------------------FOA, even though I have some economic education, it is not even in the ballpark of yours. In response to how the US would liquidate debt, I will have to rely on Mozel--
Date: Tue May 11 1999 05:04
mozel (@If I have this wrong, tell me.) ID#153110:
Gold is at about $300 in round numbers. If the greenback falls to 10,000 per ounce of gold, then Euro denominated debt will have an improved exchange value ratio against greenback denominated debt. The advantage will be a function of the ratio of gold as reserve and is
theoretically unlimited. The more greenbacks required per ounce of gold, the greater will be the improvement in the exchange value ratio. This circumstance has the potential to liquidate greenback denominated debt from the international monetary system pretty quick, I should think." -----------
------FOA, please give me your thoughts on this. After the dollar was devalued, assuming that the US has been accumulating much of the gold involved, then wouldn't it be
feasible to establish a new currency at the point, converting the old inflated dollars into new
dollars at some rate"----------
Christine, Mr. Mozel is an excellent thinker and uses his sharp mind to "make his point". The above is a fine example of the dynamics that support my statements. Among other things, it outlines the "impossible nature" of the US buying gold to back it's money or further create a new reserve currency. Long before this action was concluded "greenback denominated debt", the very assets that would be used to conduct the transaction, would be destroyed or immobilized!
------------"I have always contended that everybody who is anybody is busy right now exchanging their US dollars into euros-- those who have power will not suffer the devaluation. ----------------- True!
--------------"Once the devaluation is over, then they can move back into the new US dollar".------------
"Human emotions" and "historical logic" do not suggest that this would happen, even if a new dollar was offered, it would be "politically scarred". Besides, why move back? Just stay in Euros and or gold as they will perform the "one world currency" function you subscribe to.
-----------------"Regarding your second question/critique--I can only surmise that Western nations are hardly separate nations any longer. Whoever runs things(internationalists) already is esentially running things.----------------- OK
--------I would repeat my reference to Martin Armstrong of PEI's comments. Global currency implies a single global power. I have heard recited that historically a currency does not survive if the entities that use the currency are not politically as well as economically integrated. The
euroland countries are moving toward political union--that right there would go against what you suggest. How is it possible that euroland is cooperating and moving toward unity. -------------
It is not only possible, it is happening! Current events as reported daily point in the direction of unity. Even the American Enterprise Institute has commented on how the European family is finding happiness with the Euro system. If Martin has erred, it is in that the Euro will become the
very global currency he is looking for.
Christine, I offer this montage of comments (as TownCrier called it) out of respect to everyone's interpretation. Your thoughts / theories are interesting / enjoyable and I wish to read more of them. As events change the landscape, so does public opinion change political outcomes. More
analysis will be needed. Thank You FOA
FOA (5/19/99; 12:20:49MDT - Msg ID:6454)
Comment
Peter Asher (5/19/99; 11:26:11MDT - Msg ID:6452)
FOA's morning course in Logic #101
Peter,
No one, including myself, always follows these protocols. Sometimes, I try to make a point over several posts using ongoing news events. Even the logic and knowledge of Another is still in the process of playing out over time (perhaps years?). My purpose was to address the many items Christine had applied to my writing, but I was never able to respond to. Even now there are several posts from others I want to discuss, but have no time.
Also: I have now completed another addition of bullion to my portfolio, as have many others. We shall see if I have the chance to "make more gold" if prices drop further. Several weeks ago I offered that "NOW" was the time to buy bullion, as it's price was in a stable range due to political changes. Even with the BOE "emergency" shuffle, gold has only dropped about $10US from the $283 range at that time. It would be "our loss" if the BIS does clamp down on the market, as this opportunity to "make gold" would be lost in a spectacular flash. It seems that most people still do not grasp how the currencies will react to a major spike in gold. I read where they are trying to find an entry point to buy gold stocks or futures, so as to sell (trade) for more paper on the upside. As Another says, the move in this market will be "as none before". Indeed, the dynamic
selloffs and runs will lock 90% of the traders out, and they will never ever, in their lifetime catch it again.
I don't know about everyone, but some people are "making gold" on this move! FOA
FOA (5/19/99; 20:36:30MDT - Msg ID:6486)
Comment
TownCrier,
Looks like the WGC knows who controls the gold in the US! Your link to them through the USAGOLD site offered this: -----"Reports that the Bundesbank, the Bank of Italy, the US
Treasury, the Japanese Finance Ministry and the Australian central bank had denied any intention to sell gold then appeared to lend a measure of stability to the market, and gold firmed to a fixing of $279.45 on Tuesday afternoon."--------- Sharp eye, "Professor Gandalf"!
FOA (5/19/99; 20:39:31MDT - Msg ID:6487)
Reply
canamami (5/19/99; 12:40:59MDT - Msg ID:6455)
How long before the BIS intervenes?
Canamami,
I have to ask the same question, how long?
When one looks at the total exposure of longs in the physical gold market, it amounts to major money! It's major if for no other reason than the total amount of gold in existence is owned by "someone". Add to that the longs that have taken the opposite side of all of the short paper, and we have a huge block of real investors, many of whom are influential! Viewed in this light we can grasp that it isn't just gold miner stock holders that have a stake in the value of gold.
There is another class of gold owners that are the most influential of all, the Central Banks. Yes they are portrayed as the villains, but, "as a group" they have actually sold very little of their reserves as a percentage of holdings. A look through the WGC site will give details to confirm this. Most of the industry is consumed by the short side of the story and their connections to CBs.
However, the long side faction also represents some "big time connections" to the CBs and they share a common interest of not allowing gold to fall too far! The difference between the two groups is that the shorts utilize louder mouthpieces. I think Mr. R was talking again today! The longs are more quiet but are truly the larger guns. People in the background (Another?) already know where these players want the price of gold to stop. The public gets to hear it when the price passes a certain "no fly zone". TownCrier #6458 posted: "Market players today paid little
heed to statements by Bank of France governor Jean-Claude Trichet, saying that France, US Federal Reserve, Bank of Italy and Germany's Bundesbank were not planning to sell their gold reserves."
All of these entities are major "ticket holders" on the BIS! Even the US is talking now, in obvious conflict with Mr. R..
Canamami, when I offered several weeks ago that now (then) was the time to buy, I said that the US was throwing in the towel on resisting an upmove in gold! They now want it higher, because all of the major benefits of having gold fall against the dollar (making it look strong) have
dissipated with the advent of the Euro. I offer this because the Euro is now the competition, not gold! The ECB stopped all gold sales / leasing this year because big money (oil) doesn't need to take gold any longer. It's a political "sea change" of huge proportions. That's also why I feel the
BOE made a sudden "emergency" turnaround and sold gold. They were not trying to force it down, they were wise to the "new currency competition" for the dollar, and what that implied for gold! As I said, they are only partially bailing out some of their favorite Bullion Banks (not Goldman S.) because the gold carry game is over. The US is now going to try and make some "political hay" out of the fact that it has a lot of gold, just like the Euro! Even though, it belongs to the US Treasury and is not treated the same as the ECB gold. It's will be seen as a ploy to attract
further settlement of international trade in dollars, if it has high priced gold in the background.
With Arabs tying with Iran, it's obvious they are about to "disinfluence" themselves to a small degree with the US. For them, a loud political statement like, "we will now settle oil sold to Europe in Euros" will be the beginning of the change. We have but to only look at how much oil
Europe gets from the Middle East to see how they are tied, trade balance wise. Note that England has now sent ambassadors to Iran. I posted this the other day, TownCrier, did you see it? All of these factors, lead me to see that Britain is going to drop dollar ties and head for Europe.
To answer the BIS timing question, I think JCTex may have hit it:
JCTex (5/19/99; 14:05:14MDT - Msg ID:6459)
FOA and Canamami: BIS
Could it be that BIS is following the old adage, "when your enemy is destroying himself, let him alone."?
Thanks and welcome JC! My thought is that the BIS may wait for the US to privately push for gold through the contention that the LBMA has created a monster and let's do something. That would most certainly work politically for the US if England has "cut and run"! After all, London is the one on the hook if gold takes off. I can add more if this is not clear. Am open for interpretation or critique. Discussion? Anyone? FOA
FOA (5/19/99; 21:05:41MDT - Msg ID:6489)
Euro Is Emerging Again As a Key British Issue!
http://www.iht.com/IHT/TODAY/THU/IN/brit.2.html
By Tom Buerkle International Herald Tribune
LONDON - The euro moved back to center stage of Britain's political and economic debate"--------
Michael, they are at it again!
FOA (5/19/99; 21:13:33MDT - Msg ID:6490)
Time to go.
Aristotle,
Thank You. The "make gold" item is not mine. I took it from Another. It does give a different slant as opposed to "make money". Yes, Gold. "Make" you some! That's good.
HB Mitchell, Hello! You are one of many new faces here. Welcome!
FOA (5/20/99; 6:57:55MDT - Msg ID:6513)
Comment
Christine (5/20/99; 6:01:24MDT - Msg ID:6507)
@Aristotle
Don't you find FOA's words unusual--"If the trend is not reversed".
Christine,
You took my meaning as I intended. Thanks. I do believe that the ECB issued Euro will become the dominate currency system. Much as the dollar has to date. The largest difference between the two (Euro / Dollar) is found in how the exchange rate value of each is "Managed" for political
purposes.
The dollar is ruled by one country and one country only. This implies that only one Economy is taken into consideration when policy is discussed, the USA. The management of interest rates, inflation, dollar value and crisis intervention, are therefore politically motivated to benefit one world group, again, Americans. We have seen the news events of how this tramples upon the needs of other geopolitical groups (countries).
On the other hand, the Euro will utilize a totally different structure of consensus management. It
will be governed by many nations of obvious conflicting needs. This very weakness, that is so well documented by analysts, is the "major" strength that will contribute to the popularity of the Euro. In time, it will be governed by many cultures, including an "open market" valuation of gold.
Your observation of it becoming a "all controlling" system may come about. However, I submit that people will be drawn to it more so than the current "America only controlled" dollar system. I "feel" (my interpretation) that you are looking far across the valley of plenty, to observe the mountain of fear. Let's see how it works out as we (Another says) "walk this trail together".
Thanks FOA
FOA (5/20/99; 7:11:37MDT - Msg ID:6514)
Comment
The Flying Scotsman (5/20/99; 6:29:20MDT - Msg ID:6512)
The Euro and Gold
Hello Scotsman,
I don't know if gold will follow the Euro. It may at first, but I believe that all currencies will fall
dramatically against gold in the crisis atmosphere that is coming. Then, because the BIS and the ECB saw fit to isolate the Euro in, what is currently perceived as a private trading block, the Euro will be seen almost as the only alternative after gold. This perception of "geopolitical isolation" of Europe's money is working against it now, but will be an inspiring attribute later.
The countries that "make gold" from the ground will get a good run in their currencies, even as the authorities "try like hell" to keep them down. The Aussies will no doubt sell gold again, but this time in a rising market. Will the All Ords. follow gold later? Your call!
FOA (5/20/99; 7:16:19MDT - Msg ID:6515)
Comment
SteveH (5/20/99; 5:09:00MDT - Msg ID:6506)
Steve,
Excellent point on investor / public perception! thanks
Also, did you ask me something using Ted B.? I lost it.
FOA (5/20/99; 7:37:20MDT - Msg ID:6517)
Comment
Chicken man (5/19/99; 22:17:02MDT - Msg ID:6497)
FOA-msg 6487
US treasury owns gold?.....the 260 million ounces the treasury is "suppose" to own is listed under "assets" on the weekly Fed data....260 mil.oz @ $42.50 = 11 bil...same number Fed uses.....so the citizens might not own anything...the shareholders of the Fed have OUR gold!
Chicken Man,
Have you ever tried to sell American Real Estate with a Deed full of attachments? If yes, then you know how it will be for the Federal Reserve to sell gold. Just because they say they own it doesn't mean they can sell it. It's held "for the benefit of the treasury" as an "asset of the Fed". Right now, the Fed would like to sell it privately "for the benefit of GS and LTCM and the like", but that would conflict with the treasury's rights. Don't you think Mr. R. would have sold it by now if it was available? As vocal as he is, it would have been published in the WSJ as each ounce was sold.
No, between the old BIS attachments (perhaps judgments is the better term) and Congress, the US gold is available only as a "talking tool". Besides, the BIS would only allow it to be "auctioned" off in the true meaning of the word. Just the way it was sold in the late 70s. That way they could buy some of it through 2nd parties. thanks FOA
FOA (5/20/99; 7:46:44MDT - Msg ID:6520)
Comment
Christine,
Your grasp of this English language should allow for "concepts and context" to create the interpretation. Or, at least those latitudes are needed when one reads my posts.
How about this: "If the trend is not reversed", as in "a train coming down the Swiss mountain with burned out brakes and the engineer just jumped out". Yes, it could be reversed, but, "Oh Lord"!
Smile please, because, I am!
FOA (5/20/99; 7:51:43MDT - Msg ID:6521)
Reply
canamami (5/20/99; 7:46:08MDT - Msg ID:6519)
Reply to FOA's post# 6487
Canamami,
Very good conclusion. It adds even more! I keep trying to drag USAGOLD into this British
thing and your #2 may do it.
Please continue!
FOA (5/20/99; 7:58:57MDT - Msg ID:6522)
Reply
Christine (5/20/99; 7:38:31MDT - Msg ID:6518)
Christine,
Ask Mr. Mozel? He will tell you that most people (especially Americans) have lost their freedom a long time ago.
FOA
"fear is held low by the weight of gold"
Another
FOA (5/20/99; 14:25:20MDT - Msg ID:6535)
http://biz.yahoo.com/rf/990520/1q.html
WASHINGTON, May 20 (Reuters)
"Rubin says U.S. should not sell gold from reserves"
"Rubin told the House Banking Committee:
``I do not think the United States should sell its gold for a whole host of reasons.''
"Federal Reserve Chairman Alan Greenspan noted that the issue of U.S. gold sales had been debated in 1976 and the authorities had decided not to sell."
``The reason is that gold still represents the ultimate form of payment in the world,'' he said.
``Gold is always accepted ... and is perceived to be an element of stability in the currency and in
the ultimate value of a currency.''
ALL: With statements like these, do we suspect there has been a policy change in Washington?
Greenspan saying in public that gold is the " ultimate value of a currency"! Remember, gold is no longer the competition, the Euro is!
I will be back later to discuss! FOA
FOA (5/20/99; 14:29:38MDT - Msg ID:6536)
(No Subject)
Usagold,
That sounds like a derivative contract, or something! OK, because I am new at this, let's start
with just one. FOA
FOA (5/21/99; 10:39:11MDT - Msg ID:6567)
Comment
koan (5/20/99; 9:44:31MDT - Msg ID:6525)
future of US economy
I would maintain that the US has never been in better economic condition, except for the trade deficit. The US has low inflation, low interest rates, control of an emerging world economy where it holds all the cards: the computer hardware, software, internet, markets, money, language
(english future world language), management organization, accounting systems, laws, computer literate populace, best farmland, best factories, best transportation systems and best political system. We are a full blown democracy!. These are the reasons the $ stays strong and probably will continue to do so. For all the US's faults we are like democracy: "a terrible system except for all others" (sic). I wouldn't bet against the US economy.
Hello Koan,
I would like to comment on the above, and also an old post I think you produced some time ago. It was offered that the new currency of the world is now "knowledge"! A most interesting thought and one that has been considered by many of the "new age" investors of this era.
I agree, in that investors often hold their assets as the value (quoted on an exchange) of ideas and how that knowledge is used to create a better world. It has most certainly promoted a new "medium of exchange" that can, in this new day, be used as a currency.
The problem is that this is not a new concept! It is only new to those that suddenly grasp it as it pertains to this modern economic system. Truly, a search of history will produce many examples of people using "productivity enhancements" and "inventions" as wealth for centuries. It's only, the "meager form" of these old thoughts, as compared to modern advancements, that render them "different in concept to modern minds".
What this generation of "modern thinkers" is about to experience, is the "ages old" human emotions of greed, robbery, cheating and distrust. This old "mental baggage" comes back to haunt every "new era". It's only when people start cheating each other as economic conditions
deteriorate, that the "new currency of ideas" becomes fraudulent. This is the reason that, in the old days, the "medium of exchange" needed gold as the "medium"! When hard times force humans to steel, "knowledge" becomes a currency of "unknown" value because people always "hold back some of it" for insurance. Suddenly, the "trading of knowledge" as money, also needs a "medium" or "something in between the transaction" that has a long standing, trusted, historical value that completes the trade, "up front". Gold.
All that I have offered above also applies to the new concept of "paper money"! Yes, No?
In discussion of your above post: I submit that all of the favorable attributes, you subscribe to the American economy, were purchased using a "fraudulent" dollar reserve system. That system has cheated many world citizens into selling goods and "knowledge" to the US for far less than it
was worth! All of this to the benefit of the American consumer, yet cheating honest workers of a fair exchange. Truly, a new "medium" is needed. As for your "I wouldn't bet against the US economy", neither would I. My bet is for a replacement of the dollar in world trade. Yes, no?
Thanks for your thoughts, please continue! FOA
FOA (5/21/99; 11:27:15MDT - Msg ID:6570)
Reply
------SteveH (5/20/99; 14:55:10MDT - Msg ID:6538)
FOA Question
What hold does the BIS have over USA gold?
What would happen if USA ignored hold or whatever claim has to USA gold?-------------
-------------canamami (5/20/99; 15:03:38MDT - Msg ID:6540)
Further to SteveH's Question re US and BIS FOA,
Further to SteveH's question, at one point you said that the Europeans could pull out of the IMF once the new financial/currency order is established. What if the US simply pulled out of the BIS?
Then the right of the BIS to US gold at about $42.00 (which you once mentioned) no longer exists. One negative result of the negative balance of trade is thus eliminated. (Excuse me if my grasp of the currency settlement rules is shaky, but this field of knowledge is new to me.)-----
Steve, Canamami,
I want to discuss both of your questions, but first read what someone sent me from Mozel:
--------Date: Fri May 21 1999 04:35
mozel (@JP @What would your scenario be if you found out that USG has no gold) ID#153110:
to which to connect its paper legal tender ? Gold it has in possession, but how much of it has clear title ? How much is due BIS for claims ? How much is due other creditors that were seized from in 1933 without due process of law ? Claims of perpetual entities never go away. If USG exposes gold in its possession to settlement via its currency, it exposes the gold to claims and process. International Law outlaws 'R US ? Financial armageddon 'R our fate ?------------------
Right on target! It's the same reason we cannot go back to a gold backed dollar, the old dollar never lost it's international contract as an "exchange contract for gold" as in "the gold exchange standard". Read up on the history of how the dollar came out of this.
Just because the US said, in 71 that it would not ship gold any more does not mean the dollar isn't still a contract to represent it's old international obligations. Every analysts makes comments like, "let them sent their army if they want it", but that is simply not the way the world works. It's cheating, fair and simple! Why didn't the US send out all of it's gold at $41 to the ounce, then go
off the system? As Another say's, "think long and hard on that one"!
The entire international financial structure is based on procedure protocols that are not binding, repeat, not binding, but without them, the system will not work. If the BIS did not coordinate inter bank (CBs) transfers the whole system would stop. Using the same "line of reasoning", the US cannot just back it's currency with gold at say, $10,000 and start all over again. What manner of "rules of engagement" would prevent them from halting gold shipments again? "Come on", people of the world are not that stupid!
No, the dollar would have to be totally destroyed, and a new currency, sanctioned by the BIS, and most likely controlled by them, would have to be created. The US will go down to the wire before that happens, therefore, the Euro was created!
Canamami, The IMF is a function of the dollar reserve dynamic. If the IMF did not the guarantee dollar debt of countries that could not pay, it would start a chain reaction of dollar reserve destruction. When dollar assets (debt) is no longer serviced (interest paid and debt rolled
over) it no longer can be carried on the books as the backing for local currencies. Hence forth, all currencies that are based on this system are "imploded". Now you see why the IMF does such "perceived dumb" maneuvers, it's to maintain the dollar, not rebuild the foreign economies.
When the BIS, ECB and the other major world economies are ready to drop the dollar, they will stop supporting the IMF and pull out. The IMF "needs" their support, they do not need the IMF. Likewise, if the US ever disassociated itself with the BIS, they would simply stop all transfers of dollars and most likely buy gold in the open market with them! At that point the Euro would become the only tradable currency. Simple political blackmail, or should I say
"international protocols". It's nothing new, but some call it a new "world order conspiracy". They just haven't liven through enough years, as Another has. By the way, he is back from travels. I don't know if that means he will write? Thanks FOA
FOA (5/21/99; 11:50:51MDT - Msg ID:6572)
Further Comment
ALL: If you follow my logic in #6570, then you can also under stand why the US can never call in gold from it's citizens again! As long as they are using "dollars", the same dollars that were exchangeable into gold in the 30s, they cannot Rebecca it with gold. To reverse that decision
would open the American government up to lawsuits from local dollar holders to return gold at 41 (or whatever price). If they again, called in local gold, prior to re-backing the dollar, Everyone would demand, first the exchange of gold at the old price, then they would send in that gold! The
Government would "Never" risk it!
Yes, they could call the dollar "dead" and issue a new gold backed currency for "internal use". See my last post to understand why a new currency would be unacceptable "externally". But, that money would not function, as it could have no ties to outside transactions. Nothing would be
gained. As noted before, they would most likely encourage gold holding by citizens while taxing the local gold industry and private transactions. Still, a dyeing dollar will spell massive gold increases in value for private bullion holders as this proceeds. FOA
FOA (5/21/99; 11:54:42MDT - Msg ID:6573)
Correction
Please change this:
"cannot Rebecca it with gold" to "cannot Replace it with gold"!
Where did that come from? Time to go!
FOA (05/21/99; 18:09:04MDT - Msg ID:6587)
Re-Correct?
ALL:
I hope anyone was able to understand my #6572. This is what happens when you are half out the door and trying to make an additional point, quickly. I corrected it once and even the correction was wrong?????? Oh well! The word "Rebecca" should have been "re-back" . Actually, Rebecca is someone I know. Word association, I guess?
Julia, I get your point and will try to offer what you ask. Keep in mind that this is all like a chess game, with each player holding a different motive for their course of action. Just as has happened with Britain and the BOE thing. Their purpose differs greatly from the wants of the USA. Even the US was walking one direction and may now have changed that!
As for the citizen / investor, their perception of most modern political maneuvers is difficult at best because most Westerners have no formal education of real money and how the recent (20 years) events have been an anomaly.
We will talk at length about this. thanks FOA
FOA (05/21/99; 19:44:31MDT - Msg ID:6591)
Comment
Peter Asher (05/21/99; 17:53:56MDT - Msg ID:6586)
Peter,
I read several articles / opinions about how the fed has talked "raising rates" while doing "coupon pass" operations (adding money). What a mess they are in! M3 (broad scale of percentage of money creation) has been falling for some time, even with the massive money creation (by the fed)
during this same period. The group view, from where I sit is that the world dollar expansion during the 90s has hit the end of it's mathematical ability. All of the various "carry trades", weather using currencies or metals, no longer add liquidity. They are being neutralized by an reserve asset
shift away from the dollar. This is not to say investors are buying Euros, but all it takes is a "pause for thinking" to change perceptions. That pause is slowing world money growth and it is being reflected in the local (US) money supply. What does this mean? The system is shutting down, stopping the fed from raising rates. We are at the very edge of a major world reaction to the loss of dollar liquidity.
Did you read the article in the WSJ on May 20 " The Dangers Of Derivatives, by Martin Mayer. What a fine piece! Many of the areas covered could easily be applied to the gold market. We are very happy that so much of this is coming out and more is to come.
Smoke and Mirrors, you say / ask? I find it interesting that so many of the world investors see these actions as new (not necessarily yourself). It has been going on so long, I forgot when it started. I guess, with so many fresh investors entering this arena, with "new era thinking" that they are shocked when finding out that things work this way. Yes, the derivatives action has taken on a "higher level" of respectability and use, but they are just a substitute for "ego insurance" by managers. It used to be if a maneuver went against your company, you lost a lot of money, the
business and your job! Now you lose all of that plus some other persons hedge. When they reapply for a job, they state that they had "insurance" but it didn't hold! Things never change.
FOA (05/21/99; 19:54:21MDT - Msg ID:6592)
(No Subject)
Mike55,
Thanks for sharing that. Very open evaluation. Now I must go back and read Crossroads and several others. I have the time now.
FOA (05/21/99; 20:30:26MDT - Msg ID:6596)
(No Subject)
Crossroads (05/21/99; 14:28:21MDT - Msg ID:6576)
Hello crossroads,
It's hard to stay on the trail when people around you are being picked off. I have seen the exact thing you describe, happening in other countries also. The best advice is to get liquid and out of debt. Such a drastic change from what life was suppose to be like in America. A taller
order, indeed when we see "gamblers" and "major risk takers" offering up their lifestyle as something "everyone" can do if they just "apply themselves"! What isn't seen behind their success is the complete "immoral" business ethic that is applied in the process of "applying themselves"!
This kind of "dynamic" can infect an entire economic structure, as every person tries to grab a piece of a smaller pie. An education in reality, that teaches what the impact of false economic values can have on people that have trusted a paper prosperity. Holding gold through such an
upheaval will not be fun, and humor will come at a premium. However, as "Aristotle" says, "He who has the Gold, has the last laugh." Please
FOA (05/22/99; 08:32:57MDT - Msg ID:6609)
Comment
SteveH (05/22/99; 04:44:22MDT - Msg ID:6607)
SteveH,
Would it work? You tell me? What is your opinion? Given a choice between two competing currencies backed with gold or silver and not considering political stance, where would you go? Everyone??
other thoughts:
Also, considering the current framework of economic conditions in Britain, I don't think they would want into the Euro either. However, would a floundering industrial base, soaring inflation and high unemployment, brought on by a failing dollar change their minds? Perhaps Another was
right, in that they will remain a "lost country", caught between a future prosperous Europe and a sliding America? It has happened before and may happen again.
The outcome of England is important to gold holders, if for no other reason than that is where LBMA is. The changing of London, from the "financial center" to the outskirts of a new geopolitical block would also rework the denominations of much of the worlds gold trading. I think this was considered when the BOE decided to close out some of it's bullion house loans.
The considerations of this are many and may require the support of a "star trek" computer, if it were not so busy. Michael, would the citizens change their minds? FOA
FOA (05/22/99; 08:45:14MDT - Msg ID:6610)
On the topic of England--- Did you know?
http://www.khaleejtimes.com/
BRITONS' love of fast food and curries received unusual affirmation this week after burger giants Burger King's launch of the world's first fast-food curry hamburger. Burger King unveiled its latest creation this week claiming the BK Masala Burger created a mix of two of the UK's most popular take-away food - hamburgers and curry. The Masala Burger features Burger King's usual flame-grilled beef patty topped with two onion bhaji rings and a spicy Masala sauce. The burger goes on sale today priced 99p.
A Burger King spokesman said the company had enlisted the help of curry experts from among its Asian franchisees to develop the new burger and that it had been given the thumbs up in taste tests among curry lovers. The burger will be launched with a television advert featuring at Bhangra band.
Curry is the most popular take-away meal in the UK with around £1.6 billion spent on Indian cuisine every year. A Burger King spokesman said: "By tapping into this trend Burger King is offering its customers the very best of the East-meets-West eating phenomenon."
The Masala Burger is the latest in a long line of ethnic variations from the two burger giants. McDonald's recently held an Italian themed season and previously ran a Chinese promotion.
FOA (05/24/99; 11:30:02MDT - Msg ID:6665)
(No Subject)
ALL:
From a psychological viewpoint, I am always amassed when hearing people discuss the aspects of using common gold coins as currency. Usually it contains the phrase "how could the average citizen ever use gold, no one would know if it was real. Nor could anyone afford it when the time comes to use it, it would cost to much!"
Boy, these real life comments do indicate just how far western thought has traveled from a true understanding of commerce and the money that makes it possible. The people that made these statements (and many more similar posts, mentioned in text) are mostly, well educated, entrepreneurs with successful backgrounds in business management. All of them have a firm grasp of economic theory as it applies to their field. The basic concept is that you provide a "real"
product in "exchange" for so many units of another real product. In this case "product" represents, services, concepts, thoughts, entertainment, items or resources, etc.. The business of "exchanging" these "products" is what the world economy and life in general is all about. The human factor in all of this that the "worker"/ "creator" of these "products of exchange" operate in an even tradeoff. Nothing is gained or loss. Even the difference in human productive capacity allows for a "time / energy" balance.
It is only in the realm of "business" that a profit is made to coordinate the "exchange" of these "units of production". The profit is the difference in the value of the "exchangeable products" and by definition cannot be anything different. We all know that in today's world, a "medium of exchange" is used to compare the diverse values of "products in exchange" so one may fairly determine the "business profit". We also understand that this profit is not the "medium of exchange itself", rather it is the value of the "excess products from the exchange" that this "medium" may purchase.
From this point on, it seems that most people have lost the concept that the "medium" truly has no value, and never has. It is only a "subjective evaluation" in the human concept of product trade. The medium has "use", not value, and the "need" for that use is manifest by the value of billions of transactions of products done daily.
This brings us back to the original comments above. If we hold a dollar in one hand and a gold coin in the other, everyone will agree that the gold has value. This is obvious, however, the dollar is used daily for trillions of transactions and it has no value what-so-ever! So why the concern as to "is the gold real", yet no oponion of the dollar? It is it's "use" as the "medium" that generates the
human "need" to poses it. Not it's value as a commodity. Therefore, when one "needs" the use of a new "medium" to exchange products, we have but to look for it's "use" among people to affirm it's "authenticity" as a currency. In other words, when you see many others around you using gold
as money, just as using the dollar, don't worry if it's real money, it's use say's it is!
To conclude: Don't expect the commodity value of gold to generate it's use as a "medium of exchange". The commonly used phrase "it has value as a commodity, therefore it's money" was never the reason gold has maintained it's demand as money. That may have been the reason it "evolved" into money (read it's history at WGC site), but it's not the modern reason it's needed. Gold in your hand need not represent any more value than a paper currency for it to gain the "need" for use. Paper currencies will destroy their own ability to be useful "mediums", as the weight of the very debt that created them becomes "overwhelming". People will grasp and "use" gold as a replacement, because history has proven it to be the only money that the weight of
billions of daily transactions cannot corrupt. Unlike government controlled "paper debt currencies", gold can and will increase in "it's unit of product exchange value" to accommodate it's "need" for "use" as a "medium". It's use and need will, no doubt, be reflected in it' new paper
currency price.
As this transition occurs, remember, in this new roll, it's not something you "afford"! Just like the present dollar, "it's something you earn for it's use". FOA
FOA (05/24/99; 13:39:22MDT - Msg ID:6671)
Comment
Gandalf the White (05/24/99; 13:03:56MDT - Msg ID:6667)
Gandalf,
I may have "dove deep and came up dry" with that last post. Hope it offered some consideration for everyone. You state; "most people are not able to determine if an gold coin is real or fake" and "they may be scammed and endup with nothing". I ask, have you rver gone to a country
outside your oun and not only couldn't talk the language, but had no idea what the currency was all about? Truly, for yourself, that money was "worthless", except that everyone around you used it efficiently. Even the actual paper in your hands could have been "fake" or "counterfeit" but you
used it and learned. We take the risk because the commerce around us determines our position!
So is the case for gold!
I will return to discuss more and consider Mr. Dorchester. Also, the issues USAGOLD brings to this table. thanks FOA
FOA (5/24/99; 21:13:38MDT - Msg ID:6688)
(No Subject)
I must return at another time. Tomorrow for some.
Pioneers:
"the first step is taken and thus defines the trail,
a second step brings others and upon this journey we do now make sail"
"pioneers bring light, for directions long unknown,
new spirits shine like stars, so bright the seeds are now all grown"
"quickly to the heights we climb, even the top of the mast,
for there I see the the end of knowledge, as it was written in the past"
FOA (5/25/99; 7:01:54MDT - Msg ID:6708)
(No Subject)
Dorchester (05/24/99; 13:06:07MDT - Msg ID:6668)
Dorchester,
I think it would be imprudent or harsh for me to just comment or reply to your post. Or to clarify what you suggest of our origin. Therefore, I will offer what I feel and what I see. Much of it learned from Another.
What you have said, not only strikes at the heart of who we are, but where all of us are traveling. It could be said that it is a snapshot in time. For you, I know that picture represents the moment of the entire journey. Truly, it is not.
The worldly knowledge we have gained during our travels in life does represent part of our wealth. Sometimes a price is paid in real things so that people gain in experience equal to the history they never lived. The scale of such wealth is measured by the loss one takes to gain that
moment in time. For many, this moment pays a lifetime of return!
Some become lost in this moment and never find the path that leads from this forest of emotions. Trapped are they by knowledge because fear rules the heart. The mind is indeed willing but the feet will not move. So, as it is in the poem "Pioneers", so must it be for you, the first step taken will thus define the trail.
Dorchester, others would divide the assets, they wish to redirect into ten parts. Sell the first ten percent and convert it to the wealth of the ages. With this move, mentally, the path becomes clear. As gold rises each five percent, sell the next ten percent and so on.
"Good fortune follows a determined path". Therefore, make your trail clear, for yourself first, and you will not walk this journey alone. FOA
FOA (5/25/99; 10:05:24MDT - Msg ID:6718)
Reply
Dorchester (5/25/99; 9:11:21MDT - Msg ID:6715)
No! No, Dorchester,
I did not mean my post to you in such a light. You have read outside the spirit it was offered in. If others have done the same, it is withdrawn. All of the terms were in a general sense, as applied to everyone. Trust, me, Another and myself have received serious public criticism with little impact to us. Your words were constructive and analytic. Please continue. FOA
FOA (5/26/99; 20:00:20MDT - Msg ID:6766)
Gold
USAGOLD, and all,
Now it should be easy for everyone to see that the gold market has become two separate operations. One is the physical and the other as a paper market. This new paper market was created and encouraged so as to increase the base of gold owners world wide. This increase could not have been accomplished prior to the 1990s because, basically only physical gold was traded in size, worldwide (comex futures were much too small then) and the dollar price of gold
would have exploded, thereby shutting down any expansion of ownership. As gold was the only competition for the dollar at that time, the BIS embarked upon this "encouraged" expansion as a means of offloading dollar reserves into gold at a decreasing price. It was known then and now that much in the same way the US / IMF controls the dollar market, the BIS manages the gold market. In this light, one can understand why certain entities would willingly buy gold , at a decreasing price, as a means of adjunction the settlement of trade in dollars. With the confident
knowledge that each dollar of paper gold purchased, during an extended time would eventually represent ten, twenty, or thirty times the present reserves.
At some point in time, the BIS would help deploy a new reserve currency that could be used to "settle" all paper gold trades that could not be closed, to the benefit of the paper gold holders. To further encourage / guarantee this "new market" the BIS would not allow gold to fall under
$280. With the successful launch of the Euro, the BIS / ECB will now allow the paper gold market to "implode" from it's own weight! As such, we arrive at today's point with gold
ownership, some ten times what it was during the 1980s. Most of this "dollar contract" gold cannot and will not be delivered, because "there was never enough gold to satisfy these contracts at present dollar prices"!
My friends, the choice is now "clean" and "clear"! The writers of paper gold "outside" the Euro realm are cornered with the lack of available gold! Completely! Presently, from inertia, they still control the "paper price" in the dollar / IMF arena, but they can never convert. They must do what
any cornered being will, continue to create (short) contracts of worthless nature. At some point, their market will suffer a total collapse and cease to function. It will happen no other way. Now we understand why England must enter the Euro world, if they are to have any hope of saving
some part of LBMA. One can also see why the US will encourage a higher "world" price for gold, even as it's native market is destroyed! Politics will always make good use of a unretractable situation. That being, the US has a gold reserve it can "talk about" but can do nothing with, on a large scale. Perhaps, a western reason to buy gold for cash "now", as it's local market may soon end?
Perhaps, this is why Another (long ago, in the $350 range) pointed only to the physical gold, for ownership. Much of what was said, makes sense now. The call for $280 gold was made some time before the Euro was born, and no one even knew if it would happen (BIS either???). The point that this was a "New Gold Market", "unlike none before", in that the dollar market of gold would totally disappear in a blaze of paper fire! Not to mention that the entire world gold industry is on a "dollar gold contract" standard. Is it no wonder that no analysts of the gold industry can afford to see the outcome of Another! Conversely, every free citizen, worldwide, that holds and continues to buy physical gold will welcome this change. Dynamic times, indeed! We speed
quickly to the conclusion of one of the greatest changes in currency values ever seen. thank you FOA
FOA (5/27/99; 6:44:13MDT - Msg ID:6783)
More on Gold.
SteveH (5/26/99; 20:15:31MDT - Msg ID:6767)
An addition to my #6766.
SteveH,
I missed your earlier question. The physical buying of gold, in coin and small bullion form is the smallest portion of real demand. As such it is the easiest to supply. "Big money", of world proportions does not travel into these areas. I have written of this in other posts. Over the years, the large private and almost private holders of gold physical have slowly sold it to purchase paper gold. This trend is the very action that multiplies gold ownership and supplies the demand deficit. Large holders still consider their new paper as gold. A good deal of that paper is as good as the real thing, but some of it will have to be converted into a Euro currency in the future. That trade
will be to the benefit of the holder, if it has ECB genealogy.
One of the reasons this trend worked so well is because the US went for it, early on. A falling gold price encouraged a strong dollar and offered Western dollar holders an avenue to hold gold in leverage form. An action they will, no doubt regret, later, as it has taken the form of stripping gold from western hands. For them, this new allocation allowed for free dollars to earn a return. Do not confuse these entities with non-western dollar reserve holders, as they (mostly) purchased straight gold future certificates (with BC backing) using resources as the leverage, not gold. Usually, this was the actual gold in the CB vaults as it was leased out, but never moved. Truly,
this was the source of the same money that went into mine forward sales (barrick?). The gold and the money stayed in the CB house and control. The entire above outline is why some analysts (Ted Butler?) cannot understand why the gold doesn't physically move, yet physical demand is being supplied. This conversion process was accounted for in the LBMA volume, as it became evident after gold fell below $360US. It was then, and only then that LBMA announced these
huge monthly transactions. Truly, it was here that one could witness the dollar being removed from it's reserve status. For many, it was the only public conformation they would ever get.
I think this view of "one world electronic currency" is a "joke" on investors. The entities that are now locked into standing behind short positions are trapped and will be saying anything to get investors to sell physical into the market. The black hole they are sinking into will crush them from the weight of all the further paper sales they must now make.
As the ECB faction has aligned itself with physical gold and cut off any new supply, the mines found themselves in the only position of having to continue to sell forward because they are part of the dollar gold market (see my #6766). A process of taking in ground gold reserves from the
stock holders. The entire industry of mining and trading dollar future gold is failing. Even now their paper has value only if the fabricated dollar gold price continues to fall. The time has arrived to witness the final destruction of the US market for gold. As the authorities have taken the stance of allowing this action to play out, it will later create a phenomenal spike in the "real" physical gold
market as all futures "lock up "from lack of backing. They will become worthless because the only way to support them is by selling more paper short, an action that will be stopped when it can but political votes (by you're SEC?). It's an obvious contradiction, that is becoming visible to
everyone. In such an atmosphere, I expect the US to state that the futures gold market is a threat to the public good and allow only physical sales (at huge increases in dollar price). I would also not be startled to see the BIS take this moment to buy gold. The dollar would "implode"
worldwide! Now you can see why many of the local US Bullion Banks are now truly trading for their lives.
I believe many investors ( myself included) are executing "final" transitions into physical gold. As events play out, this course of action should be a rewarding one.
I will be busy for several days. FOA
SteveH (5/28/99; 12:22:00MDT - Msg ID:6820)
I think I have this figured out!
Permission granted to repost the heck out of this.
Major Currency Battle Now Underway Masked by Equity Bubble
by
SteveH
Current economic events boil down to a two economic forces at work that
essentially divide the world into two camps: debt holding countries of
the US dollar and countries who are distancing themselves from US debt
by way of physical gold possession and the Euro. All current world
events seem to be explainable when viewed in this manner. The two camps
are the US/IMF faction and the Euro/BIS faction. The US/IMF camp is
dollar based paper and debt; the Euro/Bis camp is gold-based currency
and gold bullion and oil.
The current run up in the US dollar and equities market is a result of
the skewed influence of the US dollar in world economic events and shows
its strength when viewed from its holding the existing role of the world
reserve currency. It is this role of 'reserve currency' that is the
center focal point of a currency war currently in progress. This war is
masked by the power and control of the media of the US/IMF faction and
by the apparent strength of the dollar and the dollar stock markets. It
is this apparent strength that blinds all of us to the hidden currency
war now playing in the world's markets. But it is this media influence
that hides the battle from our view. Yet knowing that the battle is
progress does provide a perspective from which current economic events
become crystal clear.
The strength of the dollar might be its aquilles heel, though. The
equities market in the US has been fueled apparently by two major
sources of funds: baby boomer 401K mutual funds and Yen and Gold-carry
money. It is this latter source of money that has just now come into
question as legitimate and healthy -- just look at Japan's economy and
what the YEN carry trade has done there. It is the gold-carry trade that
maybe the David of the dollar Goliath or the hair of Samson, the dollar.
Carry trading in Yen and Gold is simple to understand. It is borrowing
Yen or gold at a low interest rate, selling it into the market -- which
drives the price down and the dollar up -- then buying US bonds or
equities at a higher interest rate. The loan is repaid and the
differential interest is pocketed, and the process is repeated for as
long as the price of the YEN and gold drop. Not long ago, the YEN carry
trade was essentially stopped. More recently the gold carry trade has
been slowed or stopped to, but in the case of gold-carry, many of the
many borrowers of gold rolled over their loans and NEVER paid them back.
This is because they didn't have to until NOW. Now the gold price is at
or below production cost for most mines. Once the Central Banks (mostly
Europe) stopped leasing gold a short while ago, the estimated 14,000
tons of gold that has been involved in the gold-carry trade needs to be
paid back. It is impossible to pay it back in gold as most of the
Central Bank loans demanded so now it would seem that the financial
parties in the gold-carry business need a source of gold to pay back
these loans. It appears that only two escape hatches exist for the
gold-carry players. Keeping the price of gold down by shorting it on
COMEX (this is akin to naked shorting as insufficient gold bullion
doesn't appear to exist to cover the 200,000 open interest contracts) or
repaying the loans in a medium acceptable to the banks who loaned the
gold in the first place. It seems as though the Euro may become the only
accepted means of repayment.
One can see that the carry trades have driven the Yen and gold to all
time recent lows. In the case of the YEN more can be printed or made
available for repayment. In the case of gold, only 2500 tons of gold are
mined each year. To cover the 14,000 (alleged) shortage of gold would
take over five years at current production levels.
The remarkable thing about the carry trades is the shear number of
financial institutions who have participated in it. In other words, the
carry trade is pervasive and to unwind it will affect major world
financial institutions.
So back to the war of the Euro/BIS and the dollar/IMF. Two anonymous
representatives of the Euro/Bis camp have for the past two years come
forward with their interpretation of events. They have used the Internet
as their medium of discussion and have provided a tome of information
and opinion on this hidden war now unfolding. I believe they believe
they came forward after the cards, have been played that will ensure the
outcome of the currency war for title of world reserve currency ends up
in the Euro/Bis camp.
Let me explain. They claim that the BIS and the European Central banks
allowed the gold-carry trade to go on for years to proliferate
gold-based debt and ownership worldwide, using leasing as gold leverage.
Now it has become so pervasive that much of modern financial
institutional debt is a direct result of the carry trades, especially
gold-carry. Simply put, gold is the payment due in short order.
Insufficient physical gold stock exists free and clear of central bank
vaults and mining production of many major mining companies is hedge up
to 10 years hence that the only way to pay back without gold appears
destined to be Euros.
In other words, somebodies were suckered. Nearly risk-free (or so they
thought) interest money was available through the carry trades that
everyone got on board that knew about and cashed in. The result? The
Central Banks are owed an alleged 14,000 tons of gold with interest by a
wide-variety of institutions. Now you can see why they believe that the
dollar/IMF faction has lots. They can't pay back their debts without
converting to gold or Euro's and that means converting US bonds and
equities into Euros or gold. Since their is virtually no physical gold
to be had, we see gold continuing to be held back in price and kept away
from the $300 number that could trigger a failure of the COMEX exchange.
Now, light has been shed on the hidden battle for reserve currency. Up
until the Euro was introduced the only possible competitor for world
reserve currency status was gold. Gold doesn't lend itself freely for
exchange. (hard to email it) But with the introduction of the Euro with
nothing near the debt load of the US dollar and 15% in reserve
currencies being that of gold bullion, a proxy for gold was born that
can now compete with the dollar for the reserve currency status.
So, look now at recent world-wide financial events using the above as a
filter:
--Gold approaches $292. Bank of England announces a sale only available
to members of the LBMA (London Bullion Market Association). Price of
gold drops to a 20 year low.
--IMF announce a sale of gold to help poor countries (who would have
benefited more if the price of gold was higher as most them were
countries with producing gold mines.
--Swiss vote on a national referendum to delink gold from the Swiss
Franc and it passes.
--Major TV and printed press publish countless stories about gold is
dead, gold is no longer a modern requirement for currency. People become
confused by this. Gold's popularity falls to an all time low. Gold no
longer acts normally during major world crisis. Normally it would rally
in the event of war or inflation.
--Major rumors of Goldman Sachs and other investment banks heavily
shorting gold on Comex further holds gold down during these major
world-crisis.
--Formation of GATA (Gold Anti-Trust Action) committee to investigate
the apparent manipulation in gold markets. --Recent announcements of
copper and drug company price fixing.
The list goes on and on.
Where are we today? If you asked the two anonymous person called ANOTHER
and Friend of Another who post at the www.usagold.com web site and who
used to post on the www.kitco.com web site, they would tell you that in
their opinion, we are seeing the last leg of the dollar as the world
reserve currency and that the Euro will soon replace it in that
capacity. The would further tell you that when that happens, in their
opinion, that the COMEX gold exchange that trades in gold futures will
cease to function or become totally ineffective in establishing the true
value of gold in US dollars as the open interest contracts that trade
their can not be satisfied by physical gold as it is all spoken for.
Because of that, they would say that gold will rise to over $10,000US
per ounce. They have said that owing physical gold is the only true
measure of secure safety for ones wealth.
As extreme as that opinion is, recent events behind the scenes seems to
point to their theory of current gold markets events as the only one
that plausibly explains why gold and the dollar are behaving as they
are, why it seems that gold is being held back no matter what the cost.
I for one am open to any suggestion as to what else could really be
happening. But for now, I think Mr. ANOTHER and Friend of ANOTHER have a
message worth understanding.
Some of discredited Another and FOA (Friend of Another) because they
made a few predictions based on a timeline that in hindsight wasn't
entirely under their control. Because humans can't predict the future
rather only report it when the future is past, we shouldn't really
discredit the A and FOA message because a timeline is tampered with or
changed due to events beyond their control. If we remove the predictive
or human element of prediction or surmise from the A and FOA message
what remains?
I believe that what the A and FOA message represents is the inside track
of a powerful group of nations that have difficulty with the debt load
of the US/IMF faction and the negative influence this debt will
ultimately play upon them. The A and FOA thread then becomes one of
viewpoint within the larger realm of world economies that essential have
two major influences: the US/IMF faction with the dollar as the reserve
currency (major players are US/England/Japan) and the Euro/Bank of
International Settlement (BIS) with the European Union Countries and the
Bank of International Settlements. From their standpoint, they believe
the Euro has already won because gold is owed by so many institutions in
the US/IMF camp that it is too late for the dollar not to succumb to its
own debt load. They believe that what we are witnessing now is the last
act of the dollar as a reserve currency. Like it or not, their opinion
deserves to be heard if not for the sole purpose of the US/IMF faction
to gracefully deal with its current situation with the full
understanding of what exactly might just be going on.
SteveH
The following is an actual exerpt from Friend of Another. You can see
within this text much of the substance I address above. The introduction
is by the Michael Kosares who was the editor of the "In the Footsteps of
Giants" and the system operator of the Gold discussion group at the
www.usagold.com web site.
8/10/98 Friend of ANOTHER
(Editor's Note: Please read what's below carefully. This is an
extraordinary analysis from the Friend of ANOTHER at a time of much
confusion and uncertaintly in investment/currency markets. We are told
at the outset that the largest pro-gold groups -- the Europeans and the
Gulf states -- want a world currency "not subject to the performance of
the American economy." In other words, a currency not tied to American
treasury obligations, or the percpicacity of any other nation for that
matter. That currency for those of us who have reached for the deeper
truths of economy is called gold. As an American, I must say that I have
never seen the concept of American hegemony explained in quite the same
way before. Perhaps, my eyes were closed. I keep getting this feeling
that Americans must necessarily begin to understand a new role for this
country in a rapidly changing international political and economic
environment -- a role for which our political and economic institutions
appear ill-prepared. I will not be so presumptuous as to explain what
the Friend of ANOTHER is saying, I will let you read for yourself. I do
not think it could be said any better than Friend of ANOTHER says it.
The fact that his analysis implies how one should design one's portfolio
is a happy side benefit.)
Michael Kosares,
It has taken some time to send this, but now I can also offer my
thoughts to your questions.
Your statement: "As a matter of long term policy, do you believe that
ECB will "sell" gold to defend the Euro or "buy" gold to defend the
Euro? Each of course would entail a different course of action with
respect to reserves of the new national bank. Along these lines,will ECB
buy gold from its member treasuries, or will it simply force them to
transfer it to ECB coffers if needed to defend the Euro? I am prompted
to ask this question in view of your assertion that there will be much
selling of Euros to defend the dollar. If the Euro, as you suggested, is
being printed to buy dollars isn't this just another manifestation of
the U.S. exporting its inflation? It appears to me that the Euro will
need to be defended -- and not with dollars -- but with gold! "
Michael, I believe the most difficult part in understanding the modern
gold market is overcome by seeing all the various political factions
involved. Essentially and basically, the largest pro gold groups are
those who want a world currency that is not subject to the performance
of the American economy. At this moment and in this period of economic
history, all currency reserves held by foreigners (non-Americans) is a
debt of the US Government and by extenuation through tax collection, a
debt based on the ability of the American economy to function
profitability!
In essence, America has told the world that as long as the business of
this country is functioning, your wealth, as represented in Marks, Yen,
Pesos, etc. is backed with performing US debt. It's like saying, "as
long as your neighbor, next door, does not loses his job, you will not
lose all your money! Most people would be surprised at how clear this
is, outside the USA sphere of influence. This, the largest of the pro
gold group, is largely made up of countries with economies that have no
need to sell most of their production to the US. The business of these
communities would not totally fail without the American engine. Yes,
they would slow down, but not collapse, as trade with other countries
would continue. To add what was said before: If your neighbor loses his
job, you can still trade with the other people in the town, as long as
the currency system is not based on your neighbors debts!
This group, made up of much of Europe and the Middle East, is not
looking for a return to the old Gold Standard, but perhaps something far
better. They do not see any advantage in holding the currency bonds of
one country, as a reserve asset of future payment, over holding physical
gold as a reserve asset in full payment. The fact that the debt reserve
asset pays interest is little more than a joke in these banking circles.
Any paper currency, the dollar included, can fall in exchange value
against your local currency far more than the interest received! In
today's paper markets, the only true value in exchange reserves, held by
a government as currency backing, is found in it's effectiveness for
defending the local currency from falling against other currencies. In
other words, use the reserves to buy your countries money. But, this is
a self defeating action as sooner or later the reserves are used up!
This fact is not lost on many, many countries around the world, as they
watch their currencies plunge, lacking reserves as defense. Ask them how
important the factor of earning interest on reserves is under these
conditions.
On the other hand, buying gold on the open market, using your local
currency, works as a far different dynamic from selling foreign
bond\reserves. This action takes physical gold off the market, and in
doing so increases it's value in dollar terms. Gold is and always has
been the chief competitor with the dollar for exchange reserve status.
The advantage here comes from the fact that governments do not run out
of local currencies to use in buying gold, as opposed to selling foreign
currency reserves to buy the local currency on the open market. Of
course, the local price of gold goes sky high, however, in this action
you are seen as taking in reserves, not selling them off.
Also, as gold begins to rise against the dollar, the local gold reserves
are seen as assets of increasing value, backing the local currency.
Under these conditions, with a stable currency, citizens will purchase
more gold as it is seen as a positive asset. Not unlike a rising stock,
everyone wants an increasing investment. Contrast this action against
that in Korea, where everyone sold gold as it increased in an unstable
currency!
Basically, this is the direction the Euro group is taking us. This
concept was born with little regard for the economic health of Europe.
In the future, any countries money or economy can totally fail and the
world currency operation will continue. What is being built is a new
currency system, built on a world market price for gold. Michael, you
are absolutely correct in that the USA will see a hyper inflation of
it's currency and a gold price in dollars that reflects it.
Unfortunately, for most investors, the gold price rise will be sudden
and also hyper fast. as it will occur just after a rapid plunge in
dollar based assets including, stocks, debt and the entire banking
system. This action will destroy virtually all gold based paper assets
as they are also dependent on a functioning economic system. A local
gold mine, in any country, must sell production to realize a profit. The
contract system they deal with will not be functioning during this time.
Contrary to many hopeful investor, local treasury officials will not
allow miners to pay employees or buy equipment with physical gold. When
the dust does clear for mining to continue, gold will be recognized
worldwide as real money, and the mining of money will, no doubt, carry
Extreme taxation. Stock prices of these operations, after being priced
to zero, will then double or triple in price. Zero times three equals?
Back to your original question. The Euro will not replace gold, it will
evolve into a gold transactional currency. It will also price Euro gold
very high, perhaps $6,000 in current dollar terms buying power. However,
in actual dollar terms of the future, $30,000 US will reflect the
American debt as the negative reserve asset it truly is. The ECB will
have an easy time issuing Euros to buy gold from the member banks. The
real political warfare will be in trying to force them to sell the gold
at all, once this ball starts rolling. The Euro has, in effect already
been dispersed in the form of Gold Leases not gold sales. One has only
to look at the official gold holdings of most central banks to see that
physical gold sales are little more than the average, with a good amount
of that coming from nonEuro countries. Gold is a funny thing, it can be
sold many times and pass through many countries and still remain in a CB
vault. Truth Be told, some 14,000 metric/ton have been sold this way.
Far more than the street thinks. Using this amount it's easy to see how
certain entities have moved off the dollar standard in the last few
years. If we use a future price of $6,000+US, the move is about
complete.
The process: An oil country (or others) goes to London and purchases one
tonn of gold from a Bullion Bank. The BB borrowed this gold from the CB
(leased). The one tonn gold certificate is transferred to the new owner.
The gold stays in the CB vault and the owner goes home. The CB leased
this gold to the BB and expects it to be returned plus interest. The BB
financed the Actual Purchase of this gold mortgaging assets of the
buyer. The BB, who created the loan, then uses the cash arranged in this
venture to contract with a mining company (or anyone wanting a
gold/cross financing deal) to purchase production gold, using this cash
to pay for it. In the eyes of the mining company, the BB just sold gold
on the open market, for cash, and will purchase future production at the
contracted price. The mine does not know where the gold came from, only
that it was sold and a fixed cash price is waiting. Of course, most of
this made more sense when gold was higher. There were thousands of these
deals, structured in every possible fashion. Look to the volume on LBMA
and you see where the future reserve currency is traded today!
Now when we look at this picture, who is at risk here? The Euro CB Group
still holds the physical gold and will buy it back from the new owners,
if asked, using printed Euros. The new gold owner has just replaced his
dollar reserves with either bargain priced gold, or Euros at an exchange
rate never to be seen again! Some of this was done to buy the pricing of
oil in Euros. The BB owe the CBs 14,000 tons of gold that they must
collect inthe future from producers or currency speculators. And they
must collect it by paying what will be a, then, ridiculous price of
$300/$400US, while the world market price will be, well, a little
higher.
With Canada, Australia, and perhaps England having sold much gold to
hold US$, much of the English speaking, IMF/dollar world is about to
change. Any country, Japan, Mexico, etc., that has locked their future
by selling most of their production to the American economy , is headed
for a depression. Another is answering some of your mail questions and
is also sending a letter. Will send it on arrival.
Thanks Michael,
FOA
FOA (5/29/99; 15:12:37MDT - Msg ID:6828)
Comment
Steve,
I want to thank you very much for your clarifying post (#6820). There is little I can say that would change any aspect of it. You have presented these views in a manner that reflects a "local" style of thinking. For many, it will now be much more clear to understand.
I am not and never could be Another. My writing is an effort to further his thoughts to conservative people that wish to grasp future events in their true light. Not the illogical, often conflicting reasoning presented by "money traders in need of clients", "the media in need of viewer
ratings" or "political leaders holding debts that control their public pronouncements".
Another's reasoning and writing can be summed up as such (my writing / editing of his words):
"If someone knows who you are, they will first look to your status as confirmation for your Thoughts. The message receives not true consideration. Indeed, why betray your close friends and associates by divulging "privileged and private information", what means of honor have you
gained by presenting this same into public view? Nor does it build the character and reputation for someone that acts upon this new knowledge by making the unfair deal ahead of their friends. No, it is better for people to "travel their path" using the signposts of "human nature", so readily
displayed along the trail. If we state that a bolder is about to roll down a hill, most would not hear it. So let us show why the rock occupies the hill for the wrong reasons. Some will openly berate others for considering such nonsense. But, truly, behind the quiet mind, the fair person with an ear for such pronouncements will keep the most private eye upon the hill.
"the profit in life is paid in the honor never received, for respect has no price higher than when truth is displayed for free"
I am very busy, but may have some time later, and will reply to some recent posts. Also some ideas about recent events. thanks FOA
FOA (5/31/99; 17:13:48MDT - Msg ID:6928)
Gold talk
ALL:
I am again able to share time with everyone here. What a tremendous outpouring of discussion on this forum! I will go back a day or so in time to offer some discussion on comments made then. Hopefully, catching up into today's recent posts by Town Crier (good effort TC!). Will return and post shortly.
FOA (5/31/99; 18:43:56MDT - Msg ID:6930)
Comment!
-------TownCrier (5/25/99; 9:30:58MDT - Msg ID:6717)----
Eddie Georte: British Gold Sale "A Very Sensible Portfolio Decision" http://finance.uk.yahoo.com/news/19990525/businessday/busstory142283.html
"He (Eddie George) dismissed accusations that the policy was a device to prop up the ailing euroas 'conspiracy theory gone to extreme'.
Towncrier asks: "What happened to the days when central bank reserves existed to defend one's currencies, not garner the best returns?"-------------------
TownCrier,
The above is only part of your post, but still an important part. Most of the public discussion concerning the BOE gold sales revolves around the obvious. Such as "they sold gold to bring reserves in line to join the Euro" or "they leased gold earlier and now this move is just to cover
those leases gone bad" or it was "open manipulation because they announced it first in order to push down the gold price".
My point all along was that they did none of the above. Your statement, TC, is the closest to the truth. Let me explain:
If they (BOE) were selling gold as a direct course to join the Euro, they would have handled it exactly in the same manner as the Dutch and other EMU nations did. Sell the gold quietly and direct it towards contract completion. This was done quietly to bring the best trade and to deliver
the gold into "private EMU friendly" hands. All of the pre EMU deals were done in this fashion and the BOE would have done the same "IF" the purpose was for "reserve balance" prior to Euro application.
It is true that they are active in the gold leasing market. No one would expect anything less when the members of the LBMA are so very close to the BOE. I believe one of the members is the very agent for the government! (Someone here should be able to help confirm this for the group). However, this new sale of gold could never be used to "square the books" for gold already leased because the old leased contracts were done at a much higher price. The "auction" would have to be concluded at a much higher price than today for the numbers to match. A rare event, indeed!
The open announcement of sales did move the dollar price of gold, but that was not the purpose of this "verbal action". They had no choice but to announce, because they (BOE) were about to sell "unencumbered" physical vault gold to LBMA members. It was an obvious public statement to show that the LBMA had a "line" on "freed up real gold" to satisfy "a pressing situation"! Someone in the world community needed to know that this "future" gold was available with no way to reverse the sale. A public statement does just that! The credibility of the BOE to
perform was put on the line. Otherwise, the sale would have been held quietly and privately, over time, just as the EMU sales were.
Back to your item, TC, "What happened to the days when central bank reserves existed to defend one's currencies, not garner the best returns?". Well you have hit the nail exactly upon the head. This BOE gold "IS" currency reserves and it was being used to defend the currency. Only,
it was not the pound that was being defended, it was the dollar! As USAGOLD once said, some nations grow weary of using their reserves to back a foreign reserve currency, so to do the british grow tired. Because they were part of the IMF / dollar faction (thanks again Steve #6820), England used the services of the LBMA and the gold reserves of the BOE to help strengthen the dollar. They expanded the gold supply (and world ownership) by selling various paper gold
securities. They did this because the dollar is "their" reserve currency also, it mainly backs the pound! Today, we come to a point where a major reserve currency change threatens every dollar holding nation, and London is in danger of becoming the "odd man of Europe" during this time.
With the BIS having succeeded in leveraging the dollar into the brink of "implosion" Briton must make a dash for the EMU, even if the resulting "dollar slaughter" will destroy their LBMA through an exploding physical gold price. This, my friends, is what the BOE gold sale is all about. They
are clearly saving a small portion of their bullion bank empire prior to EMU. The sale has nothing to do with "balancing reserves" to meet ECB criteria.
Many words to make a small point. On to other comments. FOA
FOA (5/31/99; 18:57:01MDT - Msg ID:6931)
Reply
Cavan Man (05/25/99; 10:39:10MDT - Msg ID:6719)
FOA & Another
I am new to the Forum and the subject near and dear. With the help of this Forum I am learning a great deal. Many times in reading your posts I am uncertain as to the meaning. Could you recommend a short reading list for my continued enlightenment and edification? Many thanks!
Hello Cavan Man,
It has taken me a lifetime to grasp how money is used among nations. Hopefully, with the internet it will require only 1/4 a lifetime for you. However long it takes, I can assure you it is an interesting and useful endeavor. Sorry, I know of no short list? thanks for reading and discussing
FOA (5/31/99; 19:18:33MDT - Msg ID:6933)
Comment
----------USAGOLD (05/25/99; 20:37:01MDT - Msg ID:6735) Stever.......and All.....
"For those who say this has been an exceedingly long and dark period for gold, I would counsel that these cycles play out over many years period of time. The stock bear market that started on a constant dollar scale in 1965 did not come back to the level from which it first descended until
1982-83. Similarly, the stock market high of 1929 was not reached again until 1942. Bear markets can be long and merciless but always darkest before the dawn. Gold's overdue, Steve, but I still wouldn't go out and load up future's contracts or call options."------
Michael,
A very nice post. I read it all. Your last item should give people an idea of how long term these things can be. We must all remember that the perspective that most analysts write from (the last Barrons article?) is only using the action of gold from 1975+/-! They do not allow the "history of paper currencies" to influence their thinking. The US dollar is only some 30+/- years old when one considers how long it has been off a gold standard. During that time it has created more debt than has ever existed during the use of "any" form of money! Truly, a failure of this modern paper would turn the current analysts of gold on it's head and make the wait seem like only a moment in time. We will see it happen and chronicle the results on this forum.
thanks for providing it, FOA
FOA (5/31/99; 19:38:51MDT - Msg ID:6934)
Comment
-------beesting (05/25/99; 22:57:14MDT - Msg ID:6742)
Gold seen well supported near lows.
http://www.barney.co.za/reuters/may99/gold25.htm
Flemings global mining group said in a report:
The unique liquidity provided by Central Bank lending to the Gold market had prevented severe lease rate spikes, allowing the market to be played for the short side for extended periods.((3long years)).
While it was hard to say when this dynamic would change, for now and while there was negative sentiment,"this structure creates an Achilles heel which invites attack,"Fleming said. Click above URL for more.------------------
Hello beesting,
Boy, "unique" is the right word! If I wanted to expand a market, the best way to do it is to offer almost "zero" rates to finance it, right? Then, after some 10,000 to 15,000 tonnes of gold were leased around, I would control the equity of every player by controlling the lending interest rates. The above "lease rate spikes" can easily be created by withholding supply through open bidding for gold! It's a political sword that the BIS now holds over the paper shorts. All the market can do now is keep creating short paper by using "company equity" instead of gold. In time, the entire paper gold market drowns in "fictional" sales and becomes completely discredited as a true physical supply source. What a mess for them! What a success for real gold! thanks FOA
FOA (5/31/99; 20:02:57MDT - Msg ID:6935)
Comment
---------------The Flying Scotsman (5/27/99; 4:08:42MDT - Msg ID:6779)Farfel.............Gold Price
G'Day,
Weel, it lokks like the Gold price is going down like a "pork chop in a synagogue". This current compression of the gold price, how long can it last ? If as FOA infers that there are now two "Gold Camps", which one has the deepest pockets ? The "other" markets, well they appear to be in and out like a fiddler's elbow. Aye---------------
Hello and welcome Scotsman!
Your question of "which one has the deepest pockets ? Well it used to be that the one with the most gold made the rules and maybe it still does. Currently, it's the geopolitical group with the "world reserve currency" that holds the reins. However, this new open market for gold is about to award that title to a new entity. You see, it's not just "how deep the pockets are", but rather "what supports them that counts".
FOA (5/31/99; 20:17:39MDT - Msg ID:6936)
Comment
---------canamami (5/27/99; 6:03:41MDT - Msg ID:6781)
Brief Musings I only have time for a couple of sentences.
1. The POG is not completely unimportant, even for hardcore physical gold buffs. Would one still feel the same about gold if it were valued at $10.00 per ounce, to use an extreme example?
2. The recent and continued price slide appears to me outside of the realm of the hypotheses of FOA/Another and must subject those hypotheses to further examination, to any person who seeks objective verification of hypotheses. Obviously, the BIS is not intervening to hold the POG
at $280.00. The POG has dropped more than a $5 to $6 fluctuation from about $283. Our friends are learned, and I eagerly look forward to their input on this, IMHO and respectful opinion, unpredicted weakness.
Thank You, canamami.
Hello canamami,
I know you posted again about this, but I wanted to comment. If you have kept up with the massive writing here, I hope you were able to grasp some of the other fine points made by all. In addition I add:
The range to purchase gold looks to be the same. Yes, it has dropped further (another 10 lower?), but as the shorts attempt to lower it, the physical market will, no doubt "discredit the paper market" through a large disparity in prices. Soon, one may not be able to purchase bullion
as the entire system begins to break down. At the point of breakdown, physical may not be available, except at much higher prices. The "risk" is becoming obvious and clear, worldwide! We shall see. Thanks, FOA
FOA (5/31/99; 20:23:16MDT - Msg ID:6937)
(No Subject)
-------------USAGOLD (5/27/99; 9:29:58MDT - Msg ID:6787)
Today's Gold Market Report: Central Banks Cannot Print Gold---------
Fine report USAGOLD! We should all read this again and save it!
FOA (5/31/99; 20:39:01MDT - Msg ID:6938)
Comment
-------------Cassius (05/27/99; 12:09:10MDT - Msg ID:6795)
FOA's msgs 6766 and 6783
-----Also, could you please expound on your statement (msg #67660)"One can also see why the US will encourage a higher "world" price for gold, even as it's native market is destroyed!" This isn't intuitively clear to me why the US would do so. Thanks for your shared insight. Cassius----
Hello Cassius,
I hope some of the recent posts added to your other stated considerations. As for the US anticipated actions? It's the only play available to them! They cannot sell their gold in quantity (see my other posts) and the current shorting is based on the "equity" of the local bullion traders, not the future supply of gold! That equity is at "major" risk as I write. The dollar "will" be devalued
with a rising world gold price and there is nothing the US political factions can do to stop it. As I said before, they will make as much political hay out of an inevitable situation as possible. In that light they may close the paper gold markets as they begin to fail from non delivery (a future event). Then begin a series of verbal prouncements about "how much gold the US has" and "how much backing it provides for the dollar". Remember, gold is no longer the threat, the Euro is! Thanks FOA
FOA (5/31/99; 20:47:00MDT - Msg ID:6942)
Reply
tlc (5/27/99; 14:42:54MDT - Msg ID:6798)
paper gold contracts
I am puzzled by the statement that there is an excess of paper gold "shorts" in the market. It is my opinion that you cannot just open a "short" position without an offsetting "long" position being created.
Can anyone shed some light on this for me?
tlc,
Hello, usually, the short side of a contract must (theoretically) supply real gold to complete the transaction. The long side must supply currency to complete. True, every position offsets. The problem arises from shorts not being able to supply gold because they don't have it. It's not that there are excess "shorts", rather no excess gold. does this help? FOA
FOA (5/31/99; 21:10:17MDT - Msg ID:6943)
Comment
canamami (5/27/99; 14:44:45MDT - Msg ID:6800)
FOA,
Is it your position that the BIS will not intervene to protect the POG at $280, or any level, given the existence of the Euro? How does this theory jibe with the Euro's declining value in relation to the $US? When did you arrive at the conclusion that the BIS will not, or no longer, ensure the POG stays above $280.00?
I look forward to your return, to hear your contributions to the discussion. Thank You, canamami.
Canamami,
They gain more leverage against the dollar with each new gold short written. I believe they decided to allow the market to "implode" when it became apparent that the US was going to encourage gold. This political decision came about around the time that Mr. R. quit. As I said earlier, they now hold a sword over the market that everyone should be aware of. It could fall at any moment and end any further purchases of gold at today's values.
I think the $280 price was based on an old formula they used long ago. I'll offer it later when I have more time. Also note that the Euro was never to rise against the dollar until the dollar fell from it's own weight. The Euro was to become the "fallback" reserve currency that received the
flight from a failing IMF / dollar system. The BIS / ECB was very surprise that it opened as strong as it did. Many who criticize the ECB for not supporting it are the same ones who object to the "dirty float" and "rigged" dollar. Yet, here the ECB is trying to offer a fair, self evaluating currency and the speculators are crying for "intervention"! No doubt the same ones that currently "intervene" in the paper gold markets to save their skins. We shall see. FOA
FOA (5/31/99; 21:16:18MDT - Msg ID:6947)
(No Subject)
PH in LA (5/27/99; 15:20:47MDT - Msg ID:6801)
Probing the downward limits
PH,
Your support for open duscussion and consideration should be very encourageing to everyone.
It is to me. Please find time to offer your views on these markets, as your concepts are important.
thank you FOA
FOA (5/31/99; 21:19:02MDT - Msg ID:6949)
Time to go.
With the poor spelling in that last post, I should depart. Thank you all and please continue.
FOA
FOA (5/31/99; 21:30:30MDT - Msg ID:6950)
One last note!
Cavan Man (5/31/99; 21:18:07MDT - Msg ID:6948)
FOA IF you are out there tonight....
Mr. Cavan Man,
I am a "less" than average bear that knows nothing except what other fine humans have taught me. I believe that when one displays credentials in public, it only proves how little understanding they truly have! I must go now, thanks FOA
FOA (6/5/99; 10:45:10MDT - Msg ID:7188)
SteveH (6/5/99; 5:37:09MDT - Msg ID:7186)
SteveH and ALL:
Steve, I believe you are following a chain of thought that leads to many answers about this gold market. Most everyone agrees, even more so today, that this is a "new gold market". It truly is unlike anything seen sense the dollar went off the standard in 71. Analysts have often used
"technical interpretation", "supply and demand" or "price inflation changes" to explain it's past value trends. Yet, during these twenty some years, each of these "methodologies" have been shown to work only "part of the time". Truly, a thinking person can plainly see that the correlation between the dollar price of gold and the amount of "dollar currency inflation" is far out of line.
Some other factor is clearly at play, yet few will accept any "premise" that could, potentially, destroy their "present paper gold portfolio". Many investors talk about the terrible "gold - carry trade", "CBs leasing gold", "bullion banks shorting gold", "mines selling gold forward", and they want it all to stop so gold can return to it's proper commodity price structure! Yet, their perception is as such that all of this will end in a blaze of "short squeeze fire" with their own paper gold investments intact. Yes their personal "gold options", "comex gold futures", "mining stocks" and "gold certificates" will soar in value as this entire industry "practice" melts before the eyes of a disbelieving "wall street"!
This form of "gold investing logic" was born during the recent history that allowed for a super - expanding world dollar reserve to exist along with a gold market of "static value". As few as five years ago, no one questioned how the equity value of practically every world asset could be
expanded far beyond their economic worth without the gold value reflecting that "asset inflation". Lost in the reasoning was the "common sense" conclusion that only an "expanding currency base" could represent these asset values beyond practical, useful, economic purpose. So, many gold
bugs just shrugged off this "extended conflict" and said "someday people are going to recognize it and buy gold".
The lost fact in all of this was that "people were buying gold" on a massive worldwide scale and the dollar price was not reflecting it. Current "gold investing logic" says that cannot happen because "there is a buyer and a seller" for every commodity and the price quickly reflects it. This is true, except that only gold has been warehoused as money, to an extent far beyond it's commodity use (thank Mr. Parks of FAME for pointing this out to the WGC). It is here, that we confront the reason for "why gold has not kept pace" these past years. And why this new market is coming to the end of it's "era".
Steve, I again thank you for reposting my writing. In those posts it was offered how the overall gold market ownership was exploded during these years as every entity embraced the concept of lending gold. Truly, they all saw the money to be made for themselves, but did not fully question the "motive" behind lending gold for almost "no return" by the lenders. Most just accepted the public pronouncement that the "CBs were at war with gold" or that they were "obtaining a return on assets". I think any person, with a brain in their head knew that no one in this world lends anything for free (without a motive), so lets not discuss that one. Also true, some of the CBs are at war with gold, but only "some of them"!
The Euro / faction only appeared to be "at war" as some of them sold gold. However, one must look at the facts behind this, before reaching a conclusion. Haruko Fukuda, World Gold Council chief executive, pointed out on Friday that only two EURO CBs had sold gold, Belgium and Holland. I (FOA) know that those sales were done in private with the gold going into "friendly hands". It was the US / IMF faction that proclaimed to the world that "all of Europe was
selling off their gold reserves" with the purpose to "unmoney gold". Nothing could have been further from the truth. A quick look at statistics as given by the WGC offers:
""In fact the NET amount of sales from the official sector in the last 10 years was only 312 tonnes. Hardly a
landslide," she (Haruko Fukuda) said."
Steve, that is only an average of 31 tonnes a year hitting
the streets. This very fact negates the analysis of many "gold thinkers", in that they say the "CBs are filling the gold consumption deficit. The current deficit is being filled buy investors selling physical gold and holding paper gold. This was recently pointed out by myself, using Another's Thoughts from long ago. It was scoffed at then, now this logic is coming into view.
If one looks, clearly the most gold being sold onto the market is coming from entities that occupy the US / IMF sphere. Australia, Argentina and Canada to name a few. Yet, even these sales are consumed into this massive "new market" with only the small amount mentioned above set free. This same faction is also the one that is flooding the world with "gold paper" that has little behind it except the "currency equity" of the issuer. Their idea of a backed short sale is the holding of "OTC options". Many of the sales over the last few years were little more than "naked" shorts.
In this light it should be easy to see that the world paper gold market is "degenerating in quality", to a point of no return. Small investors are clearly "at risk" from an impending destruction of the current "paper mechanism" that sets the world price of gold. In much the same way the US
stopped the function of the COMEX silver market (in the 80s), because of inability to deliver silver. So will it shut down the gold market. Let's face facts, it was never intended to deliver gold, rather it's purpose was to "bet" on and manage the direction of gold's price! It's an old function, of this short history of gold that worked well as long as investors wanted to expand holdings using paper. But, all eras come to an end and so does this one.
The world wanted cheaper gold to replace dollar reserves. Some entities have taken advantage of this and invested in gold marked with a new "genealogy", that of the Euro and the BIS. Others will have to fight the war on a different front. I suspect that many "IMF / Faction" paper gold holders will be in the US courts for years trying to pursue what never existed, real gold. We shall see.
More likely than not, the BOE sales will mark the end of the road for this current gold market. While their decision appears "foolish" in public, Another knows that these actions are not taken lightly. The currency creators of other nations (Canada?) must also be "feeling foolish" as they stare into future national bankruptcy from price inflation. An inflation brought about from backing a failing dollar by selling their peoples gold to other CBs. The citizens find them to be "smart operators" as the appearance is that of earning interest as gold falls in price. Few understand, as do the treasury officials, that the lower price of gold comes from hollow paper selling. Nor will
they equate $200 oil to a lack of national gold. Later, many investors will grasp why physical gold purchased anywhere from $400 down was a fantastic chance of a "century in nature". Seldom does such a major change take place in ones lifetime.
I ask, what comes first in creating dollar value, "confidence in the dollar" as many think or "confidence in the ability of the dollar to settle contracts"? The history of paper currencies shows that citizens will continue to use even worthless currencies as long as they will settle old contracts. Find your books and research it for yourself. Then ask the question, "in the near future, will I be
holding paper contracts in need of settlement in dollars"? In this light, one can see why the real gold market is cornered, the physical market, that is. You see, oil and gold mix well in these new troubled times.
Thank you for reading and discussing. FOA
Reference Link:
http://www.yahoo.co.uk/headlines/19990604/business/0928478578-0000020982.html
FOA (6/5/99; 13:56:21MDT - Msg ID:7204)
Time to go again.
Julia and ALL,
I have not forgotten our discussion from the other day. It will be pursued in time. As I am still
very busy, I offer what I can. thanks FOA
FOA (6/6/99; 21:01:57MDT - Msg ID:7258)
(No Subject)
Michael,
Your post about the convoluted court "workout" of bankrupt mines is one for much consideration. In the event of mine assets being managed by a court trustee, I add: A massive increase in gold prices during this time would require the trustee to reopen the mine at a large profit, even during long drawn-out negotiations. Any new government taxes on such profits would require escrow for later payment "ahead of other players". Also, bullion bank claims would be
fully paid in gold (over a very, very long time) as the new economics of mining make such claims worthy to be satisfied. I do think the BBs will be fighting the government over any new taxes. Truly a mess. Please see below!
Please note that Mr. Faber suspects some CBs to buy back gold at a much higher price. I would add that they will use Euros to do this as that currency will be the "transactional" settlement medium for gold world wide. A price of $1,000 and higher will mark the end of the dollar as is presently known.
Also, his thoughts of "excessive profit taxes" are becoming a more common view as trends reverse. Again, I add that the "journey" from $280 gold to $1,000 gold "will" bring his massive increase in mine stock prices. The problem for most investors will be in timing the selling point. I
think, few will be able to sell their positions in the two or three days time required for gold to make this trip. Does anyone that thinks the shift from this era of gold price management into the era of paper gold "loss management" will bring a gentle price rise over months and years. If one
trades their position on that "premise", I think they will be holding these mine investments for much longer than anticipated. Any new tax legislation will be, no doubt, "grand fathered"! We shall see.
I apologize for not having the link to this story. Perhaps someone can provide it?
Dr Doom: gold, Murdoch, Soros
By Tony Boyd
Dr Marc Faber is the Hong Kong-based contrarian also known as Dr Doom. He writes a monthly newsletter called the Gloom, Boom and Doom report for 900 institutions and wealthy private individuals including some of Australia's better known multi-millionaires. Here he talks to Tony Boyd about his latest views.
On the gold price
Let's assume for one reason or another the psychology in the world changes in favour of an inflationary psychology
or for whatever reason people say they want to own gold.
With the world's population of 6 billion people, if each
person buys one gram of gold each worth about $13 that
would be about 6,000 tons of gold when there is an annual supply of 2,500 tons. The swing factor will be dramatic.
On gold and central banks I am prepared to bet with anyone in Australia that the central banks, which today are selling gold at less than $US300 an ounce, will go back and buy it at more than$US1,000 a ounce in a few years' time.
I am convinced it's going to be that way because I think
eventually the power will be taken away from the central
banks and the world will go back to some kind of financial system that has automatic built-in stabilisers.
The gold standard had some faults but the whole industrial revolution and the tremendous growth in the
world that occurred between 1800 and 1930 occurred under a gold standard, so you cannot dismiss the fact that the gold standard had some merits.
On a soaring gold price I think the gold price will go up so dramatically that governments will introduce excessive profit taxes on producers or, worse, expropriate them altogether.
If the gold price moves from say $US280 at the present
time to $US400, gold shares will go up by up to 200 per
cent, easily. So you have more leverage in gold shares, but if the gold price goes to more than $US1,000 then I would worry about excess profit taxes.
FOA (6/6/99; 21:38:40MDT - Msg ID:7261)
(No Subject)
Beasting, thank you for thinking through my post #7188 (7186 was steveH). I have always found that the "masterful" mind belongs to the one that can understand what the writer has written! In this day of language "slang", offered in every country, reading has become the most difficult task.
SteveH, also thank you for your grade of "A". I believe everyone that follows USAGOLD will pass this class in good economic health (myself included). We live our lives to produce something of value to others. This is indeed the basis of world trade. However, "fair" trading requires
understanding of each other as much as mastering the knowledge of "the transaction". This forum exposes the true nature of that progress as we gain the knowledge understanding people as well as ourselves.
Also, I add this story to your evolution. "Have you ever talked to someone that said the sun would rise in the east and then the world would end? When asked if they could explain? The reply was, I don't know the mechanics of rising suns. I'll leave that to the experts. But truly, this
world will end after the light, because it came to me in a dream. Dreams, I asked? I could never figure those either, but they are true, came the reply.
Thanks FOA
beesting (6/6/99; 21:19:50MDT - Msg ID:7260)
Question to FOA or any of our European friends.
Question: DO the workers in the 11 Euro Countries make the same wages performing the same duties?
Example:A grape picker in Italy,a grape picker in France,a grape picker in Germany?
FOA (6/6/99; 21:46:38MDT - Msg ID:7264)
Comment.
beesting (6/6/99; 21:19:50MDT - Msg ID:7260)
My answer is no. But, I suspect there is more to your question. Please, continue?
I will make time to return and reply in seven hours or so. Other duties call. thank you beesting
FOA (6/7/99; 7:45:04MDT - Msg ID:7282)
Reply
beesting (6/6/99; 23:51:29MDT - Msg ID:7269)
Follow up to msg#7260 to FOA.
In the U.S. there is currently demand for certain skilled occupations;Doctors,nurses top athletes. These occupations can very easily legally work in the U.S.(with proper immigration papers) demanding and receiving higher wages than they may get in their respective home countries.Hence, a higher standard of living for themselves and their families.
Now, my point is,wages may not vary from country to country(as they do now)with the use of a single currency(Euro),in the long term,when workers are payed in Euro's only.FOA do you agree with this?
Let me put this thought in perspective for our North American friends. Example: A Canadian,or Mexican loses considerable purchasing power when exchanging their
Peso's or Dollars for U.S.currency when traveling to the U.S. In my humble opinion if North America and other Latin American Countries ever went to the all U.S. dollar system (similar to what the Euro Countries are doing) after a long time would an equilibrium be established?
beesting,
I see your point, and it is a good one. Yes, wages will tend to converge and compensate equally for each form of production and skill. However, this will only work if the money creation is under one "many government" roof, such as the Euro zone. Many point out that this is a weakness of this new currency and will pull the union apart. I disagree and state that it will become it's strength.
Prior to EMU, each country changed it's exchange intervention policy to the benefit of local workers, usually providing a loss to it's currency. At least that was the overriding game plain. Now, the currency will retain the favorable attribute of "management" with the control of "diverse government needs" and lose the baggage of "maintaining mismatched skill compensation". Yes,
some citizens will be shocked to learn that their "better pay" was the result of currency intervention, not their special standing in life. It will promote a bitter struggle over time. But, it will result in far lower inflation rates in the member countries where citizens had no strong currency.
In contrast, this dynamic is far different from your example of Mexico converting to dollar use. They will have no "usable opinion" in the money policy of the US and yet still retain a lower living standard. As an example, Kansas as an independent country? All labor and resources would be
exploited from that state for the benefit of the rest of the US.
Also, note that the dollar is well past the point of management. It's timeline has come to an end as it's debt has rendered it into a "collection only" currency. For it to regain any balanced reserve use, worldwide, it's base would have to be contracted many times over. A loss to US citizens that will never be allowed. Again, this is the very attribute that so drives the quest for Euro success. In
time I would expect many other countries to join the EMU and convert to exclusive Euro use.
The gold of Arabia has made this path, for them, a very level one, indeed. The coming free market in gold will, not only judge all currencies and nations for the entry status, but create a fair way to value their contribution to world trade. We shall see.
Please continue your consideration. FOA
Voyager (6/7/99; 0:40:11MDT - Msg ID:7270)
Sir, Excellent post!
SteveH (6/7/99; 1:25:42MDT - Msg ID:7271)
FOA, I am still trying to figure out your story of the rising sun???
Steve, perhaps best applied to NWO discussion?
"Regarding the rise in the price of gold, if it goes from 267 to $1,000 in three days, and then moves higher still, these excess taxes you mention make sense, but I have yet to see our government move that quickly."
Steve, on this issue, they will move no slower than with the speed of one who finds a gold coin upon a sidewalk!
FOA
FOA (6/7/99; 20:00:03MDT - Msg ID:7307)
BIS?
Gandalf the White (6/6/99; 21:51:59MDT - Msg ID:7265)
Question to FOA
-----------Where in your opinion will Aragorn III's "Thunder in the night" occur ? --- Now we watch the Spot gold start out the week "Downunder" and move to HK before reaching London and ending in the US. -- Do you await the BoE, bailout of the Brittish BB's before the blastoff in the price of Au ? -- OR will the cause be from another tightning of the OPEC taps before the Y2K effect sets in ? -- Let us hear your pronostications on the timing of this event. Thanks for everything you have pointed the Goldhearts toward, and we shall all meet you sometime at the future world gold trading site in the East. ;-)-------------------
Hello Gandalf the White,
If we listen closely, I think Mr. Aragorn III's "Thunder in the night" may have just begun with a quiet statement. As USAGOLD and TownCrier pointed out today, the BIS is talking.
"General Manager of the Bank for International Settlements (BIS) Andrew Crockett said today that despite sales of gold reserves by central banks, gold would continue to play a major role in the reserves of central banks.
He said that since most central bankers seemed not to want to sell much more of their gold soon, he did not expect the price of gold to fall much further."
I suspect this statement is the beginning of a "threat of action". The WGC knows that (GW, read my last few posts) only two Euro CBs sold gold for "reserve alignment" prior to EMU. No public accounting was ever made as to the placement of that gold. It is no longer on the books, but did it remains in Euro friendly hands? Now consider all of the writing that analyst and officials have offered over these last few years, that Europe was unloading gold! Yet, after untold physical sales and paper shorts by dollar / IMF factions, the BIS states "gold would CONTINUE to play a MAJOR ROLE in the RESERVES of central banks"! I ask you, what Central Banks could they be referring to? Does the ESMB (Euro System Member Banks) come to mind?
Does this statement, "He said that since most central bankers seemed not to want to sell much more of their gold soon, he did not expect the price of gold to fall much further." really mean, if the dollar / IMF wants gold lower in price, they will have to sell gold (not paper)??? And, if they don't / can't sell any more real gold, the paper price will fall no further?
Further, as I have stated before, the current paper short position only has "credibility" if gold falls further in price. Otherwise, the paper is worthless as no gold can be delivered against it. Also, with the G-8 meeting about "derivatives" about to open the shorts books for viewing, this gold era is about to close! Watch Comex OI these next few weeks!
GW, the timetable will be as long as it takes for the next chess player to make their move. Not long, I think! FOA
ANOTHER (6/8/99; 18:27:21MDT - Msg ID:7353)
USAGOLD (6/8/99; 13:57:54MDT - Msg ID:7343)
Mr. Kosares,
I again, thank you for presenting this forum. It does give the fair view for eyes "not so clear" in nature of world. Your thoughts, are smooth for all that touch. A needed display and welcome relief from common banter. Writing here does attract other persons of the "honest feelings" and "deep views". They do carry with them the "reality of life", a quality lost to many of this day. A
quality so needed for future defense of ones family wealth.
My words are slow for a time, as events move forward. Truth spoken once be priceless, spoken many times and value is lost. Time will prove all things, not the repetitive voice, yes? Later, my speech will discuss "what has just occurred" and meaning of such. These future events will demand much text and and thinking, wait we do.
I not mean to slow my good friend, FOA, for he does offer a great deal for the reading. I does tire even my eyes, at times! It is the fair say, I speak, for some require many words, others few.
Sir, I write soon again, on the changing tide. The new flood tide of gold! Another
FOA (6/8/99; 19:56:57MDT - Msg ID:7359)
Comment
Mike55 and ALL,
Hope you understood that Another was complimenting everyone here for their fine posts. I think the banter remark was directed at other mediums. It seems I am the one that's overwriting at times??
Aragorn III,
Santa Claus gold prices for anyone that can get it delivered! You bet!
FOA (6/14/99; 5:40:12MDT - Msg ID:7561)
The two months of opportunity to buy gold is ending!
http://www.iht.com/IHT/TODAY/MON/FPAGE/seven.2.html
""""" If approved this week at a summit meeting of the Group of Seven industrial nations in Cologne, the proposal would""" See link above.
At this same meeting, new rules of disclosure, for international hedge funds, will again be considered. The gold sale will, like the BOE sale, also be used to balance a very chosen few of the "out of balance books"! All of this is done prior to a major shift in gold valuations, brought on by Euro / BIS actions. The US will openly go along with this change. Please see my posts stating that these last few weeks were the last opportunity to find gold at affordable (and deliverable)prices! The "era" of "this new gold market" that Another was scoffed at for discussing years ago, is over!
SteveH, the long fuse on the dynamite has been lit. Everyone is grabbing their gold and running like hell! Why, because, this time no one is remaining to attempt to put out the burning string. As Another last said, the tide is now changing. I will stand, quietly at a safe distance for a
while. FOA
FOA (6/19/99; 9:34:41MDT - Msg ID:7804)
"Thinking Through The Thoughts"
http://www.smh.com.au/news/9906/19/national/national4.html
ALL,
I had considered writing many letters (posts) to address each of the different questions / concepts posed on this forum. This was as a similar process that Another used to get readers to view and analysis events in a different light, using their own concepts. However, this subject is
now much to large and all consuming for brief points of comment. We have reached a time when "everyone" has seen the obvious management of gold prices and accepts this as fact. Only a few years ago, most investors considered the gold market as a "somewhat free" supply / demand situation and invested using that premise. As Another pointed out that "events" would prove all things so do we witness the evolution of investor logic into the realm of "reality"!
Gold: Saving Real Money In A Time Of Transition
I am going to offer a series of posts (chapters) starting at the "beginning". We will use simple logic and common terms to explain "what has happened" along this "journey through time". Another will edit it for direction (as he has this post). This will be a long process, and I hope it will
offer a real value for "thoughtful minds". As many are now starting to discover that most of the Western ideas of gold investment were flawed from the beginning, so to will they find their present (gold) portfolios "unprepared" for the storm that approaches! With that I leave you with a portion
from the "Sydney Morning Herald" and a quote from Another.
---------Miners and prospectors at the historic town of Kalgoorlie, 550 kilometres east of Perth, said big operators were sacking staff and marginal mines were facing closure as gold plummeted to around $US260 ($400) an ounce.
One high-profile prospector, Mark Creasey, said this week that although Australia's$5 billion gold industry had experienced periods of economic gloom in the past, this was its darkest day. "It is the quality of the gloom that makes
the difference: pitch-black and horrible. This is the worst downturn I have ever seen."------------
""""Your wealth, it not as large as this paper money say it is!"""""" Another
I will offer my first chapter as soon as possible.
Thanks FOA
FOA (06/19/99; 16:43:16MDT - Msg ID:7809)
(No Subject)
Cavan Man (6/19/99; 10:38:45MDT - Msg ID:7807)
Hello Cavan Man,
Thank you for your comments about these writings. I hope I did not give the wrong impression in reference to timing my future posts? This will take many days (weeks, months?) to offer as each section will be reread and edited.
I was asked to do this because it's time to deliver a clean road map of this long discussion. We are truly near the end of this "new era of gold". By the time I complete and offer the last chapter, the markets will be very loud with the noise of change. This message will then be old
news.
So, we will for the last time, walk this trail of gold and discuss how so many lost their way. At the end, our group will gather to view the path that is directly ahead. After such a trip everyone will clearly see that this road was well traveled by today's world investors.
Thank You FOA
FOA (7/4/99; 10:55:22MDT - Msg ID:8382)
Aristotle
Mr. Aristotle,
Your "Aristotle Life on Earth: Gold and the Free Market" is a fine work! Myself and everyone thank you for writing it. I did not wish to offer my posts during your composition, so I waited. If I may, some of your thoughts will make a good addition to further this cause.
Time, is very close to "proving many things"! We will most certainly document these "eye opening" revelations on this forum, as they occur. Today, I offer my brief introduction.
FOA (7/4/99; 10:57:06MDT - Msg ID:8383)
SteveH
Steve,
I have been busy for a while. Will discuss with you several things later. thanks FOA
FOA (7/4/99; 11:01:14MDT - Msg ID:8384)
Gold: Saving Real Money In A Time Of Transition
Introduction
------ A gentleman leans over the fence and tells his neighbor that gold is going to rise in price from it's current $300. As the person on the other side of the fence thinks differently, they both agree to a binding bet. In three months, we will settle up with a payment of the change in the price of one hundred ounces of gold. Whatever it rises, the "bull" collects that amount. Likewise,
whatever it falls, the "bear" collects from the bull. Each puts a $1500 payment guarantee into a common shoe box and gives it to another neighbor for safekeeping. ---------
As an observer of the above, we have just witnessed the creation of a wager not unlike a comex futures contract. On each side of the fence stands a long and a short, that together create an open interest of one contract. Neither has any intention of buying gold, nor do they expect
physical gold to be a part of this bet. Yet, at cocktail parties and on public internet forums, one claims to have "brought gold" and the other states that he "sold gold".
To build a further understanding of this transaction: Both of these gentlemen, probably don't have the $30,000+/- to buy or deliver 100 ounces of gold. Human nature being as it is, if they did have that much, they would most likely increase the bet to ten or twenty contracts. Clearly, the
intent of this paper market, is to bet on the price of gold as it is determined by the buying and selling of other physical traders. The western public should take these trades for the concept they truly represent. ""I (the long side) bet on the "price" of gold not because we need or want the physical metal. Rather, my wager is that others will need real gold to protect themselves from bad monetary systems. In fulfilling that "need to own", these others will drive up the dollar price and I will make money while working within the confines of our good monetary system.""" The shorts make the opposite bet, in that they think the world monetary system will work itself out and induce "the others" to sell all their gold. That is, gold they brought in the first place, because they did not know that our money managers could repair the world financial system.
Yes, today Western longs and shorts are playing out these two views of the gold market. Yet, both sides are using paper gold bets to represent their beliefs. Truly, the major majority of this market does not buy or sell physical gold to represent their investment concepts. There are a few
that buy coins and bullion, but, even in their large amounts, it is only a drop in the paper gold bucket.
This, my friends, is the very nature of western trading of gold. The mindset is to treat it as a concept for making currency, not protecting existing wealth. The exact same mentality exists when one invests in the gold mining industry. Even when these players see the faults in the dollar, and loudly proclaim it's inflationary downfall, the largest part of their assets go into the business of
producing real gold in exchange for more of the same paper currency. It is a means to build wealth through paper asset appreciation, using the very financial system the "concept" says will fail without physical gold.
There are many mental angles and philosophical side steps one can take when understanding the above. But, in this concept lies the very basis of the flaw in the current gold market. A paper market, built upon world misconceptions of currency values and the historical reasons for owning
gold. The present deployment of world assets into a paper system of valuations is liken to traveling a trail of no return. History has shown that the assets accumulated in this way will never be transformed into "the things of life"! The paper wealth you currently own is no where near the real value your currency says it is. With the above introduction, we have begun close to the end of this journey. In the upcoming chapter one, we return several miles to walk ground already well traveled. We will observe concepts on the right and the left, not discussed by other guides. The very sights that make such a trip, "worth wile".
" You will see this trail thru the eyes of history and feel old ways as new Thoughts!" Another
FOA
FOA (7/7/99; 19:02:17MDT - Msg ID:8531)
Open intrest?
ALL:
I hope to offer our first chapter on Saturday, July 10. In it we will begin to see some answers to hard questions. Truly, the price of gold is plunging because the governments are running out of unsecured bars to offer. Physical will become more expensive than paper, very soon. As they run
out, did you think the London gold market would just sit there and allow the paper price to soar and wipe them out? No, the world gold market as we know it will be completely dishonored from inability to deliver. But only after they have flooded the system with worthless short securities.
Forget the options, futures, otc paper and the mining industry, as they will all burn. Just as Another has warned for some time. The chess game continues and we wait the next move.
FOA
ANOTHER (7/10/99; 17:35:55MDT - Msg ID:8633)
Gold: Saving Real Money In A Time Of Transition
Gold: Saving Real Money In A Time Of Transition
Introduction
------ A gentleman leans over the fence and tells his neighbor that gold is going to rise in price from it's current $300. As the person on the other side of the fence thinks differently, they both agree to a binding bet. In three months, we will settle up with a payment of the change in the price of one hundred ounces of gold. Whatever it rises, the "bull" collects that amount. Likewise,whatever it falls, the "bear" collects from the bull. Each puts a $1500 payment guarantee into a common shoe box and gives it to another neighbor for safekeeping. ---------
As an observer of the above, we have just witnessed the creation of a wager not unlike a comex futures contract. On each side of the fence stands a long and a short, that together create an open interest of one contract. Neither has any intention of buying gold, nor do they expect
physical gold to be a part of this bet. Yet, at cocktail parties and on public internet forums, one claims to have "brought gold" and the other states that he "sold gold".
To build a further understanding of this transaction: Both of these gentlemen, probably don't have the $30,000+/- to buy or deliver 100 ounces of gold. Human nature being as it is, if they did have that much, they would most likely increase the bet to ten or twenty contracts. Clearly, the
intent of this paper market, is to bet on the price of gold as it is determined by the buying and selling of other physical traders. The western public should take these trades for the concept they truly represent. ""I (the long side) bet on the "price" of gold not because we need or want the physical metal. Rather, my wager is that others will need real gold to protect themselves from bad monetary systems. In fulfilling that "need to own", these others will drive up the dollar price and I will make money while working within the confines of our good monetary system.""" The shorts make the opposite bet, in that they think the world monetary system will work itself out and induce "the others" to sell all their gold. That is, gold they brought in the first place, because they did not know that our money managers could repair the world financial system.
Yes, today Western longs and shorts are playing out these two views of the gold market. Yet, both sides are using paper gold bets to represent their beliefs. Truly, the major majority of this market does not buy or sell physical gold to represent their investment concepts. There are a few that buy coins and bullion, but, even in their large amounts, it is only a drop in the paper gold bucket.
This, my friends, is the very nature of western trading of gold. The mindset is to treat it as aconcept for making currency, not protecting existing wealth. The exact same mentality exists when one invests in the gold mining industry. Even when these players see the faults in the dollar, and loudly proclaim it's inflationary downfall, the largest part of their assets go into the business of
producing real gold in exchange for more of the same paper currency. It is a means to build wealth through paper asset appreciation, using the very financial system the "concept" says will fail without physical gold.
There are many mental angles and philosophical side steps one can take when understanding the above. But, in this concept lies the very basis of the flaw in the current gold market. A paper market, built upon world misconceptions of currency values and the historical reasons for owning gold. The present deployment of world assets into a paper system of valuations is liken to traveling a trail of no return. History has shown that the assets accumulated in this way will never be transformed into "the things of life"! The paper wealth you currently own is no where near the real value your currency says it is. With the above introduction, we have begun close to the end of this journey. In the upcoming chapter one, we return several miles to walk ground already well traveled. We will observe concepts on the right and the left, not discussed by other guides. The very sights that make such a trip, "worth wile".
" You will see this trail thru the eyes of history and feel old ways as new Thoughts!" Another
FOA
(( 1. )) Thinking Gold: A montage of views
-------- Pioneers:
"the first step is taken and thus defines the trail, a second step brings others and upon this journey we do now make sail"
"pioneers bring light, for directions long unknown, new spirits shine like stars, so bright the seeds are now all grown"
"quickly to the heights we climb, even the top of the mast,
for there I see the the end of knowledge, as it was written in the past"----------
To fully understand the past and present concepts of gold as money, we are going to have to use logic and common sense. In addition to these attributes, the ability to place oneself into the context of the moment of history will also be helpful. For people who demand solid facts and figures to make investment decisions, I submit; we are not trying to create reasons to invest, rather our purpose is to build a background for the understanding of these Thoughts.
In this light, all that read this will become the pioneers of new insights. Travelers in search of new vistas that best present the lost concepts of money. The real money that this generation has never known.
In our introduction, we witnessed two friends with a fence between them. Neighbors, betting on the "price direction" of gold. Not it's future impact on their daily lives or the use of gold as money, but rather how much currency would other people use to buy gold at any given time. Contrast that perspective to our concept of gold and you will see that a wide gulf of understanding stands between our "minds from different worlds".
-------- "They never said it wasn't money! Only, that they could no longer use it as money for their purposes" ------
The author of that statement is unknown, but it was spoken sometime after the "Smithsonian Agreement" of the early 70s finally closed the door on using gold as part of the world monetary system. The old Bretton Woods articles were then officially dead and the dollar would no longer
be a "contract currency" for the delivery of gold. Shortly after this event, banks, governments and large investment entities still agreed that gold was real money, but it should be held only in reserve. So, instead of using the dollar as a contract for gold, the world would substitute it as real gold in the currency system and thus sent it down the road of being "demoneyized".
From the 1920s to the 1970s (with striking similarities to today), gold loans between private and official sectors had periodically become so great that they simply couldn't be paid. The world economy was being built upon a debt of gold that no one could pay off.
Early on, it was agreed that because the repayment of loans in real money would break the banks, payments in newly created real money substitutes would suffice as gold. Over time, the reaction to this concept was easy to understand. Every thinking person knew that creating more (inflating) paper currency to cover existing debts would lead to devaluation's of such fiat currency. Therefore, we will all hold gold in reserve, while these bankrupt deals are worked out with fraudulent money payments. Money that was no longer "contract currency". Later, gold will be revalued upward to balance these newly created money substitutes. In time, all world currencies would finally be officially devalued against gold. That, my friends is why so many investors
continued to buy and hold gold as a long term savings asset throughout the 1970s. It was perceived that the world would eventually return to using gold as the money for payment of debt, instead of using paper money substitutes.
This perception was extremely prudent because history had proven, through the actions of countless generations that creating paper money to save governments and banks from bankruptcy eventually destroys the "concept" of using created money for currency. No one ever expected the general populous to continue using and saving "non contract dollars" for any extended period of time. Mostly, everyone expected the citizens to patriotically continue to use the "new inflated paper legal tender" as asset savings until price inflation exposed that they were sharing their life savings with the state. A process that would require five years at most. Never the ten to fifteen years that have passed. In the end, it made little difference how long it took, as the
adjustment in value always compensated for the inflation plus interest. The only investors that didn't think gold would outlast this new system, were the ones with a "short life of little history experience".
Again, from the failure of Bretton Woods to this present day, there is an ongoing event being further played out from the early twenties. By now (2000) the world can no longer use gold as money because to do so would require virtually every debt to fail. But, what is never considered is that a fiat currency system always "fails" the debts anyway. When the price inflation begins, old currency debts lose value at the same rate as the inflation. A history lesson soon to be performed today right before our eyes. We have but to watch and learn!
But, why do we nowhere read that it would be OK for these banks and businesses to fail, thereby allowing others to buy them up for pennies and save the system? Truly, this was the same real problem with the use of honest gold money as it forces "the important" people to fail. People of influence and prestige. Persons that will not allow their debt assets to fail, even if they gain only a few years. For them the world cannot function without an "expandable monetary system"! An ages old scam that is presented to each new generation as a new and improved currency system.
Custom tailored for their own technological advances and special time in world History. A special system that wil force the average worker to "share" in the loses but still retain this new generations wealth! With this system, any government can then borrow or print money to inflate (expand) the money system so as to bail out failing businesses and foreign entities. Does this sound like the
present IMF?
Yes, gold was our money back then (pre- 1920s). But, the bad business debts and wars of the world had "used up" much of those gold savings. Over time, the savings stock of much of the gold that every citizen, business, government and bank had, was borrowed to finance expenditures. It is imperative to understand that using the expression "gold used up" meant that it was "lent out"!
Of course, back then, even if gold is "lent out" it went somewhere, and from that new savings account (somewhere)it can be borrowed again. However, if the world financial strains become great enough, failing governments and businesses could not borrow gold at all. Therein lies the solid law of real money that scares governments today. We must totally fail and start again.
"It is to say, the gold you thought be in your bank, was not. In your account, the real money was lent and the credit claim represents your wealth" Another
It was here, in the 20s 30s 40s, in that context of time, that we witness the harsh reality that wars and governments are financed by borrowing real savings assets and spending them. When gold is used as money, it effectively demonstrates the real risks in lending ones life savings. That being: you may not get your money back. Is it any wonder that many families decide not to lend their savings? A compelling truth, that allows one to separate their money from the state and not share in the loses of others. In this light we confront the real issue of why so many governments always move from using gold as money, to using fiat currencies as money. It enables them to force you to lend!
During the time (1930s) that the American government called in gold from it's citizens, it would have been very simple for the US treasury to revalue gold upwards into the $300 +/- range (from the low twenties). Yes, many major financial players would have fallen from this dollar
devaluation. In addition, America would have lost much international prestige. However, the real productive assets of this great country would have been kept, "intact"! Those assets were much of the private savings of working people, and most of it was in gold, in their hands. Again, in that
time, it was the only money not lent out. This unprecedented action of devaluing the dollar would have clearly identified the loses from wars and poor lending decisions. It would have forced the large wealth holders and governments to lose assets in proportion to their size. As it was, the small citizens were forced to share in balancing the destroyed assets by turning in unlent gold.
History has shown that "some great leaders" have taken the honest gold "deflation" route when they are not under the influence of "money lenders". In these situations, the context of deflation is not the destruction of the money supply, which was gold, rather it was the destruction of the debt securities held as assets. Assets, due to be paid in gold, and cannot! Deflation, in these terms is a far different animal than what is discussed today! In our time, all currency assets are debt securities. That is why any form of price deflation or price inflation, today, will destroy the entire world monetary system. Forcing people back into using real gold, the only money that cannot be
deflated!
"It is the clear view for an honest eye, yes?" Another
The Bretton Woods system was bound to fail because the world governments continued to pursue a a strategy of saving the integrity of all debts. Even while holding an international pledge to use the dollar as a "contract currency" for gold as money. After the US had robbed it's citizens in the 1930s (of gold money) to help balance the books, the stage was clearly set to proceed into currency inflation. They continued to print "dollar currency contracts" as the dollar was a legal contract to deliver 1/35 of an ounce of gold. They did this knowing full well that this process would further demoneyize the dollar. The final destruction of Bretton Woods was but a further step to no longer using gold as money: not using gold because it's use required debts to fail. If the debts are "to never" go away, the currency substitutes must be continuously nflated. Thus, the savings of workers must be diluted in order to always save the system from default. As long as the next generation believes that their money assets are growing, they will accept the currency and the fraud it represents. The price inflation (that history shows will always follow this process), is totally dependent on how many currency units the citizens will hold without spending them! If the
world population can hold one trillion dollar debt units, and ten years later hold ten trillion without spending them, then no price inflation will show. However, even though each person thinks they have ten times more assets ( and are as much more wealthy), that wealth is quickly degraded if and when such currency savings are exchanged for real goods. Again, history shows that only the spending of a small percent of such highly inflated currency holdings will quickly jump the price of things to such a level as to revalue the remaining existing currency. It then becomes equal to real world buying power, not the fiction in your savings account. This, my friends is the realm of price
inflation and currency destruction! No currency has survived even a short time, once this spending process begins from the money inflation levels that exist today.
Now you have read some many views of the old dollar and gold. We will discuss these much further in other chapters. So, how do we (myself and Another) view gold?
I want to openly state that we have absolutely "NO" faith in gold! None! We do have "absolute", "unending" and "complete" faith in the judgment of our fellow humans. Because we travel this life journey as a society of like kind, our success over time depends on the ability of
people to deal fairly with each other. There is nothing to gain in this life but the honest productive efforts we bestow upon each other. These are represented as the goods and services each of our special talents can produce. We also believe that no one, in this life, should be cheated out of any portion of their savings and will act to protect themselves from loses. This act of protection can and does take many forms as the "lessons of a long life" become the "tools of a families defense". For most of us, indeed, money is "the" lifelong lesson.
I believe, that in the time just ahead, most people will use their natural good judgment and leave the "world monetary system". Mostly because they will begin to lose savings from price inflation. If the history of human kind is any guide, they will return to the safety of the past. They will use the only "conservative money" the world has ever known that cannot be deflated or inflated They will do this until the currencies are correctly revalued against gold. Gold will then become the de facto world money as currency will be used only for commerce and trade. It's
value in trade closely governed by it's exchange rate into gold.
To this end, we do not hold gold for any currency return. We hold it as money. No return of any kind is expected because it is not lent or invested. What is expected is a continuation of an open world market for the purchase of gold at lower paper substitute exchange rates. These values of world currencies, as expressed in gold will be governed by the "tolerance" of world savers to hold ever increasing amounts of paper currency as savings. In addition, the ability of governments to keep the market open with physical gold at lower prices are necessary for the
continued use of the present currency system.
It is our current perception that the performance of both of these functions is coming to an end as the dollar currency creation process has ended. As this progresses, the value of gold will be best judged by it's ability to purchase real things. Out of necessity, the failing paper market place presently called the "gold market", will price gold at ever lower values even as their ability to deliver gold is failing. This situation is not unlike the massive gold loans of years past. Using dollar "contract currency" as a proxy for gold, the world found out that the promise to pay at even $41=/- per ounce was a fraud! We shall see.
In chapter ((2)) we will build upon the workings of the gold market as it represents oil, the most strategic world commodity. Thank You FOA and Another
ANOTHER (7/11/99; 17:07:45MDT - Msg ID:8673)
Reply to: USAGOLD (7/10/99; 19:35:16MDT - Msg ID:8634)
Mr. Kosares,
The time from our thoughts has been long as your Forum does well for all. As you ask, then Intellectual our conversation will be.
In reply to your post I add. The sands have indeed moved a considerable distance, and we should not seek to survey it's new location. For it seems the same grains of sand, like gold, can have many owners at the same time. Better to stand your face to the wind and prepare for the next storm. It may be many seasons before the fury comes this strong again.
I suspect that many are unprepared for this gold market. They write in many places about it's falling dollar price. A common conviction all share that the dollar price will one day explode. True this be as the sun will rise. Yet, blind in one eye are they! For all paper gold will burn first
from a "destroyed world market"! First it be destroyed from a fabricated low price. Contrary are their paper portfolios to this wisdom of ages. Gold bulls, fully invested in securities that must have the higher currency price to return profit, even as history proclaims the dollar war that attempts to bring gold to zero. Say they, "All paper gold will burn, just not my paper, yes?"
The dollar, once the "contract currency" for gold at $35. Even the fool did know that $35 could not be right! Yet that paper market was accepted around the world as the true value and price for physical gold. Gold loans were outstanding for millions and millions of ounces from the
US treasury to foreign treasuries. Non payable then as they are non payable today. The dollars Europeans held were as the same as the leased contracts we see now. Part of the financial landscape that provides liquidity, liquidity that saves the system. Never to be paid, but still accepted, then and now! The trading of old dollars represented the low gold price that closed mines and broke markets, yet the fraud did continue for some time.
Today, the gold sand blows from Central Bank to Central Bank, and is loaned many times. It has become the "fractional reserve" currency that we dare not speak of, but have it we must. The BIS and the ECB now hold the London market in the palm of their hand. And this old British
market holds the fate of the dollar in it's hand. Truly, if no fraction of Euro gold is forthcoming as reserves for the Bullion Bank market, then it will become as only a "wager" arena.
As the old dollar was once a "contract currency" that everyone accepted as creating the $35 price of gold, we soon found that value was a fraud. Today, it is gold that has created the value for the dollar. A value to be lost as this currency is put to rest in the pages of history.
At all costs, England will save all of their houses possible, before the Gold market is destroyed. We may see gold at "any dollar" price. Every entity in the world that trades gold, will have some loses from "non delivery" as this work is done. Some major gold mines may see their shares at "0" before this is completed. Physical gold will become "almost impossible" to obtain on your "legal"
market. I suspect, that the "legal" trading of gold on the Euro market will find the dollar buying 1/
10,000 of an ounce (or less), in time.
Yes, my friend, this "lost land" does hold much control of the currency price of gold, because the currency price of gold will now have no influence with the House of Europe. I believe oil wealth is leaving the Pound for the Euro. If oil do not join the EMS soon, they will suffer. If England stays with the dollar, they will fail.
My words to you,
Another
SteveH (7/16/99; 4:03:16MDT - Msg ID:8964)
ThaiGold
Good sense of humor.
Re: your leasing post. Generally, I agree. I think when making a point about dangers of gold-leasing, the part about gold-property leasing for mineral rights, although, valid, is not poignant. It has relevance to gold-mining operators but not MA and PA. Now, your gold leasing explanation itself was on the mark. I would have to re-read it, but I did see a point about Comex not having to deliver. It is my understanding that deliveries occur every day and in fact they are being made. The problem with a COMEX delivery is it takes a while. To my knowledge they don't give a hard time about it other than make you wait a bit (I have heard six months). So although it can be used as a delivery method, it is not efficient.
Secondly, the Central Banks (as a rule) act as a guarantor who backs up a Bullion Bank with a promise to make good on their gold loans. A bullion bank only need make sure they can deliver if they have to, but they will get gold from the market or another bullion bank. By obtaining the backing of the CB, the bullion bank is free to make trades with more gold. Since much of it is for hedging from mines, and the mine is the source of most deliverable gold, with the CB guarantee, the bullion bank can use mines as a source of gold but not more than the production amount. It appears to be the period of time that is being relied upon from the mines by the BB's -- up to 10 years of production is now hedged. Now here is what I think has gone wrong. The mine sold forward up to 10-year production. This allows the BB to sell out gold in the amount of 10-years production. It is back by the CB. Since most of this gold is used in derivatives and counter-party risk, physical delivery wasn't an issue until recently, as a BB could borrow from Peter BB to pay Paul BB. Now the demand for physical is increasing, as more and more dealers and brokers, and countries are taking delivery. Since the only gold available is in a CB or the production of a mine, the more physical gold is demanded to satisfy any futures contract or gold deal option or derivative or demand, the fewer places gold can be had. Some of these BB's are rolling over their contract in hopes of not having to deliver or ever having to deliver.
Add to this, the thought that certain Mid Eastern countries are buying up these contracts for repayment of mining company gold in gold. As the production is mined the country(ies) then receive the gold. In return for receiving the gold, they funded the BB with oil money. But now that physical demand is increasing, I think some of these countries are concerned that others may make a claim to the physical gold from the mines. I believe that this concern has prompted a country(ies) to ask for settlement of some payments in gold (as a show of faith that the gold will still be delivered). It must be the country(ies) didn't want to wait six or more months, nor to affect the price of spot, so they went after the BB to get the gold, who in turn went to the Bank of England and said, "We's got to deliver 25 tons of gold, you said you'd back us, that's why we pay you the money, now we are in danger of defaulting here, help us out, ok? Please?" The BOE probably figures that the ripple effect of these one or more BB's not being able to deliver will cause a lack of confidence in the paper gold markets, so they are obliged to deliver in a way to not force further demand of gold, thus the dutch auction method and the secrecy and the limited subscribership. If they admitted that the reason they sold their gold was to prevent a BB from not delivering on a gold demand, the world would know that gold is in short supply. This would further increase demand for physical delivery. Since it would take 10 years to deliver some of the gold, the price would be forced higher thus spiraling out of control.
In essence the BOE move to auction gold bought time, keeps the dollar at its position of strength and the pound too. I believe the theory of CBs must be that if we can keep the dollar strong, gold down, and let it be known that leasing needs to stop, then they may be able to unwind some of the positions and turn things around. My fear, and I believe most peoples fear, is that it can't be unwound without major harm to bank and market. As a crashing market and skyrocketing gold price are politically unfavorable, I believe the stalling game is in place.
I believe some of the CB folks are well-intentioned and are using what leverage they have to hold it together, but as you can see by ORO's post earlier that this is becoming increasingly more difficult.
Since, as I have previously stated, their is a Money clash between the Euro and the Dollar for reserve status, the trump card to be played in all of this (and here is what Another and Friend of Another (FOA) come in) is the following: A/FOA claim the Euro will become the payment media for oil. It seems that even as we speak, this is coming closer to reality, because NOT ENOUGH GOLD exists from the mines and the CENTRAL BANKS don't want to let it go. So, the only other alternative aside from accepting dollars to settle the gold debt is to settle in Euros. Check.
Gold and the Euro, that is where it seems to be heading. Since we are but bystanders all we see are the arms and legs in the fighting dust ball. We don't actually get to see the gory infighting and negotiations. Problem is the tickets to this fight have been free to the Consumer (a gift in the form of a rising stock market) because goldbugs paid for their tickets with their money). Yes, the gold lending, hedging, and derivative market money made its way into a behemoth stock and bond market, which has been our prosperity for the last four or five years. Throw in a twist of yen-carry trade, which was much of the same with the YEN as it was with gold, and you can see why we have a stock bubble and a beat up gold market.
SO, HERE IS THE BIG CONCLUSION: BOE AND IMF GOLD ARE DESTINED TO BAIL OUT BULLION BANKS TO MAKE GOOD ON GOLD DELIVERY CONTRACTS TO OIL COUNTRIES BECAUSE ENOUGH GOLD DOESN’T EXIST OTHER THAN IN CENTRAL BANKS WHO DON’T WANT TO LET IT GOLD. NO BOE GOLD SALES; NO IMF GOLD SALES, EURO WINS. CHECKMATE.
Euro was introduced with 15% in gold reserves.
ANOTHER (7/16/99; 6:22:04MDT - Msg ID:8973)
Gold
SteveH (7/16/99; 4:03:16MDT - Msg ID:8964)
Mr. SteveH,
Excellent post! My good hand to you, my friend. In the next day or two I will discuss your Thoughts in public, and a good talk we must have. Mr. FOA has not sent his next chapter for my read, but the time is now for further discussion. Good are these days in gold. The exchange rate
continues as expected. A fine rate, that is for the benefit of all. Thank You Another
ANOTHER (7/16/99; 6:43:05MDT - Msg ID:8974)
Thoughts!
I add also:
Mr. Aragorn III and Aristotle, your writings are to become the rock of this forum. All of us may build upon these foundations of truth. Over time, every one here will become "pioneers" of these new concepts of "modern money". Modern money that will use a free market for gold. Another
ANOTHER (7/17/99; 14:03:07MDT - Msg ID:9054)
THOUGHTS! OIL, GOLD, DOLLARS
To ALL:
The thinkers here have some very interesting posts. I will be reading and writing for a time now. With the help of FOA, some good discussion should prevail. Another
ANOTHER (7/17/99; 15:42:31MDT - Msg ID:9057)
THOUGHTS!
Mr. Aristotle,
Your book of posts, "Life on Earth: Gold and the Free Market" is very well done, indeed! It will bring forth much use and discussion in other chapters (Gold: Saving Real Money In A Time Of Transition) from FOA. In the interim, I will touch the many points you have made "so well".
Another
ANOTHER (7/17/99; 15:44:38MDT - Msg ID:9058)
THOUGHTS!
jinx44 (7/17/99; 13:31:51MDT - Msg ID:9051)
Mr. jinx44,
In your post, we should consider using a much higher currency price for gold. If it does become necessary to demand a gold based evaluation for oil payments, the number of gram per barrel would be very small. Remember, the purpose is not to control the commodity use of gold,
rather it is to implement the monetary usage of real money. In the real world, all money does circulate to buy things and does not stagnate in accounts to monopolize value. The flow of gold in this new era would truly occur in a free market. A new market provided by the demand for oil!
Not a new concept, my friend, only a new evaluation of the worth of domestic currencies as reflected in real things. Even today, gold does participate beside the currencies as money. However, today it's price as a money continues to reflect the need to "prop up" currency values
already lost to debt deflation. A process that was expected and ongoing. The final destruction of the "reserve dollar" will not initially be shown as an extreme dollar price for gold. Understand that the real dollar implosion will be manifest in it's inability to honor "gold contracts" and "gold loans". Just as did happen to the "contract currency" this dollar once was. It only failed when it could no
longer honor the $35 contract to deliver. The present reserve currency is not "backed" by gold as it may not default twice. However, the "fractional liquidity" of gold has created the assets, as "gold loan" paper assets "marked to the market" do provide backing. Backing needed to balance the financial books. The breaking of a "contract currency" in the 70s was but a bookkeeping entry, where this new default will be of real terms. Such will be today as all forms of "gold commerce" as denominated in dollars is put to fire. It is, "the" very reason nations of resource wealth do not invest in "gold in the ground". Our wealth is already under the earth, in liquid form (real and financial meaning)! Gold above the ground is the real money for the future.
Why will gold paper be honored for special resources?
More later
Thank You Another
ANOTHER (7/17/99; 20:27:12MDT - Msg ID:9079)
THOUGHTS!
canamami (7/17/99; 10:19:16MDT - Msg ID:9043)
Mr. Canamami,
I do ask, what in this life can be proven for you? Does one not fall asleep for fear of awakening into a new day of unknown? Without proof, a new day may not arrive.
Many expected outcomes are born from the understanding of social interactions. If the king declares all thieves are to be executed, one does understand that death is to befall an apprehended pickpocket. It is the unproved, but "expected" result, yes?
Such is the case as one evaluates the world political game. A game we play with many kings. I place my wealth with respect to the past actions and present thoughts of current rulers. Seldom does one have the luxury of experiencing the actions of leaders, prior to the events that trigger said response! I would bow low before such knowledge!
Truly, $280 was an inflection point that would, indeed, have ended this present currency system as it is known. An action to have been taken, in another time and place, for a
predetermined event. Without the birth of the Euro?, as the expected action, "the purchase would have been done". For yourself, at that moment, it would have been proven. Yet, perhaps unprepared were many for such an outcome.
The "currency war" of Mr. SteveH? The lines are clearly drawn, the troops deployed and smoke in the field, but no proof is seen by many? As said before, I suspect most of the western gold investors are not of a portfolio position to weather this storm. They need evidence that this plunge in dollar gold price marks the end of this currency as has been known.
Your World Gold Council openly presents that over the last ten years only some 300 tons (net) of gold are sold from the Central Banks. That is 30 tons (average) per year, my friend. Yet everywhere, I see posters such as Mr. H. proclaim how these banks are filling the public deficit for physical gold. World investors accept the paper liquidity this gold does offer. Yet, fail to understand that this new gold is owed to someone at a price that can never be delivered against.
Sometimes proof comes as mountain air, so clear and clean it cannot be real!
Thank You Another
ANOTHER (7/17/99; 21:17:11MDT - Msg ID:9081)
Thoughts!
jinx44 (7/17/99; 15:52:06MDT - Msg ID:9059)
Mr. Jinx44,
It would require only one large producer to demand a small amount of gold as payment. Even the smallest of payments would introduce gold as a functioning currency. Every other seller of oil would then ask for this payment method, as a higher price it would present. The draw upon
physical gold supplies would be very little, as the intent is to "transition" gold into said "functioning money".
At present, gold is used as an "asset currency", for the addition of liquidity. A process that builds upon the dollar use in trade. It is (and has been for some time), as you say, "the one way street of no return". Always lower gold for lower oil to build economy. With the Euro intact,
Europe does no longer need lower gold, as oil will join the EMU in fact or in practice from the use of their currency in settlement. With said intentions, no longer do the ECB lend gold.
It is now the obvious change of position, as oil prices do rise as gold falls. The falling gold price no longer represents the past intent of payment for oil. Today, the dollar world does war against gold without offering much real metal. It seems they do reach the end of this "one way street". The only outcome can be the destruction of the dollar gold market thru a "low price with no delivery".
Truly the BIS/ECB will stand ready to create the new "Euro Bullion Market Association" (EBMA). The present rising price of oil, so soon after the EMU does indicate this new
expectation.
Thank You Another
ANOTHER (7/17/99; 22:18:17MDT - Msg ID:9083)
THOUGHTS!
beesting (7/17/99; 18:20:45MDT - Msg ID:9074)
ANOTHER/FOA
Would be very interested in your response to Mr. I.V. Holtzman's 3 posts yesterday 7/16/99--msg. #8986--msg. #8987 and msg. #8988. He makes many valid points, that seem to
be the majority view, here in the western world. Thank You......beesting
Beesting,
Mr. Holtzman does indeed hold the secure western view. His support is found in the history of the dollar, as it's short life applies to ones assets. His last paragraph:
"The next few months, and probably the next few years, are going to be horribly demoralizing for gold bugs. But don't panic and sell at the bottom. Hold onto at least some of what you already own, if for no other reason than that selling it all now is exactly what "they" want you to do. And hold shares in the big gold mining stocks as well as holding coins. True, if Another proves right, the shares will be worthless and the coins will shoot for the stars. However, if Gordon Brown proves right, the coins will be permanently halved in value but the stocks will more than
compensate for that. Someone who owns both will have a small chance of watching both soar, a decent chance of having one soar more than the other falls, and a small chance of watching both fall. That's why you should own non-gold assets, too. Remember, the best revenge is to be
diversified enough so that only a small part of your wealth is having a bad year."
------
I submit that every thing upon this earth is the potential "asset" of an individual. Social order requires the diversification of ownership and use of these "assets" to promote a reasonable life thru trade and commerce. The interaction of this commerce requires "honest money" with a
"proven" history of "use" that allows for a true valuation in trade.
When an individual offers that he is "diversified" in holdings for the purpose of only some of it having a bad year, I agree. However, I ask, how will you assess your assets when the currency is changed? History has shown that society destroys government paper currencies when the debts
denominated in them can on longer be paid with honest daily work.
In this light, a bad year comes from owning assets that derived a high value solely from their association with the currency. This is evident in the wealth of most of the western world.
It is to say, your wealth is not as much as your currency say it is! Another
ANOTHER (7/17/99; 22:20:58MDT - Msg ID:9084)
Return!
I will return a time later. Thank You
ANOTHER (7/18/99; 9:31:04MDT - Msg ID:9099)
THOUGHTS!
SteveH (7/18/99; 6:10:38MDT - Msg ID:9091)
Mr. SteveH,
Your words: "gold up -- gold stocks up -- sell gold stocks -- get dollars -- pay off mortgage, cars, credit cards and put kid through college, and buy gold at 10K per ounce."
FOA did demonstrate in his "book of Posts" how two neighbors bet on gold. In addition, I add, one must make the bet on the survival of the dollar first, before investing in the gold industry.
The perception of most have been wrong about the dollar price of gold. All increases in price from the 70s thru today, were the result of "foreign" holders of dollars bidding for gold. IMF / Dollar nations did only supply gold at ever higher prices. A process that quickly stopped the
bidding before it became "out of hand". In such environment, investors projected this action as "normal" gold response to inflation. Modern analysts did now considered that gold "the
commodity", today, has the "natural worth of $400 to $500. To this day, all (westerners) invest in gold industry and wait for this "natural trend" and "tendency" to reassert itself. A poor conclusion that has lost the wealth of many.
Some also expected (correctly) that the dollar destruction would bring explosion in gold price. What was not understood in this perception, was that entire world gold market is based upon dollar system and the liquidity it provided. The destruction of this reserve currency would first bring the total loss of confidence in the dollar pricing of gold. The "setup" of a run by official Central Banks from dollar reserves would be preceded by total "non support" of the London Gold Arena". In such a process the paper price of gold could go to $10. Yet delivery would be
the "joke on the holder" of such paper. Just as the old dollar "contract currency" of Bretton Woods was also "joke on holder". However, today, most gold paper holders are "Western in nature". History in reverse, yes?
There is enough gold in world market to supply some coins. Even some paper is delivered to, if asked. If BOE, IMF and Swiss supply, some Bullion Banks will be only partially "made whole". How long will paper holders stand with "gold loans" as the new "contract currency"? I suspect a further increase in oil price will demand delivery of gold.
My friend, do you expect the mining industry to continue in business when they have a world market for gold at, perhaps $100? If London Bullion Houses cannot deliver to total conversion of paper to gold, would not their world market price, a paper price, be discounted to said $100 or
less? Just as a bond is discounted from "par" as it ability to pay is questioned, so do we witness the falling price of paper gold. The same world paper price that every mining house must sell into. A perception many have not known, yes?
The price of gold to me is an exchange rate between currencies. The dollars I hold are worth more as the exchange rate falls against gold. It does balance against the "perceived" less value of gold already owned. The difference between you and myself, is that I feel the dollar will soon have no rate of exchange with gold.
As one sold old Russian debt into a rising market, so do I sell dollars into gold. Like the dollar reserve of old, the Russian debt is no more!
Thank You
Another
SteveH (7/18/99; 10:33:37MDT - Msg ID:9100)
Another
Another,
You provide much food for thought.
Here is a summary of your point as I view them:
Dollar/IMF/BOE digging a hole by staving inevitable inability to deliver against paper gold contracts at world future exchanges.
Most Western countries, led by the BOE, the Swiss, and perhaps the IMF and its represented countries, are the ones entrenched in paper gold leasing and loans. These will be defaulted, but not before driving the price of paper gold to possibly $10-$100 per ounce.
As paper price declines against dollar, physical gold demand will increase even more at lower and lower prices until it is apparent that no physical gold can or will be delivered at such ludicrous prices.
Then, the dollar will be discredited (as will the British pound), as it no longer can be used to buy gold: no one will accept it.
Gold mining stocks and perhaps even silver stocks traded in dollars will flounder because their perceived values will follow the price of gold downwards, such that they will be had for pennies on the dollar (an occurrence that is now in progress mind you).
The EMU is prepared to step in to offer a true and fair-priced market in gold in Euros, which will launch the Euro as the world Reserve Currency, forcing the US to convert its dollars to Euros at an increasing exchange rate, thereby devaluing the dollar and launching the US into major economic upheaval.
Somewhere in all this oil will become fairly priced in Euro's but exorbitantly priced in dollars, if available at all.
You defend the $280 price you predicted early by the event of the Euro's actual introduction on the world currency market. Had that not occurred on time, the oil countries or country would have demanded a small amount of gold with each barrel of oil.
Finally, you believe that London, the Swiss, and the IMF will permit the dollar price of gold to go as low as $10.00 as they attempt to defend the inevitable.
Have I missed anything?
Comments: I believe your perception on the sidelines of the greatest chess match in history is superior to most, as you show an ability to play several moves ahead of others. Being an American, and a proud one, I hope that our leaders make the right decisions to protect our way of life but at the same time be fair to those who you have pointed out have been (in my words) screwed by the dishonored 1971 gold debts. I believe I sense a certain animosity and a certain predilection that you don't or won't see this happening again. In fact, and as I have stated earlier on, I believe you believe the pieces of the puzzle are in place and their for all to see and that has been your mission to expose or to teach those in the forum of this. If it weren't for you, most would have been blind sided by such moves as the BOE auctions, the IMF gold sales, and the Swiss need of selling, as the reasons they have given are not honest reasons. Although I can understand this, I do not condone and in fact am disappointed by their lack of forthrightness.
What each of us chooses to do about your words in on each of our shoulders. I hope and pray that we do what is right. Thank you.
Steve
ANOTHER (7/18/99; 17:24:36MDT - Msg ID:9119)
THOUGHTS!
SteveH (7/18/99; 10:33:37MDT - Msg ID:9100)
Mr. SteveH,
I read your post and find agreement with most of these words. Indeed, your perspective comes from: "Being an American, and a proud one". A same view and feeling you do share with FOA, for he is also, as you say, "born in the USA"!
You write (analyze): "Most Western countries, led by the BOE, the Swiss, and perhaps the IMF and its represented countries, are the ones entrenched in paper gold leasing and loans. These will be defaulted, but not before driving the price of paper gold to possibly $10-$100 per ounce."
You have read my post, yes? #9099
Again, in this comment (analysis of my thoughts), I note your western perception of these countries now "driving " the price of gold. I think, one should observe that this possible pricing level is achieved from a lack of "confidence" in the gold market to honor it's paper! My friend, it is the "buy side" that has backed away from this arena and forced this new evaluation. They withdraw, not from want of metal, rather from no need of fraudulent contracts. Mr. Canamami once asked, in a recent post, " what is holding up the big players"? I add, indeed, at these levels should not they be buying hand over the fist? (more on this in next item)
A true market must have a buyer and seller of good strength, to provide the fair value. This current market has both, and the value is "fair" in light of paper product offered.
You write (analyze): "As paper price declines against dollar, physical gold demand will increase even more at lower and lower prices until it is apparent that no physical gold can or will be delivered at such ludicrous prices."
The demand for physical gold has already taken all supply for some ten years out and more. Only, at present, this demand is manifest in the holding of paper gold. The realization that this current falling price will create tremendous demand upon what little "spot" physical there is, will ignite a rush to convert existing paper gold into real gold. A rising oil price in the face of falling gold may generate this fresh buying and expose this false market into action. To this end, your present gold market system will fail.
I offered to continue my Thoughts from an earlier post, with: "Why will gold paper be honored for special resources?" This will explain why "gold paper" of oil will be honored at all cost.
Thank You Another
ANOTHER (7/18/99; 17:27:35MDT - Msg ID:9120)
THOUGHTS!
koan (7/18/99; 14:55:23MDT - Msg ID:9108)
Mr. Koan, Your words: "I believe we are witnessing the beginning of the industrial revolution part II, with the US the main beneficiary."
Please expand your thoughts as they are interesting to all. Understand, that I offer my Thoughts for any mind that thinks. Do find the fault in these writings and pursue the "untruth" you perceive. Draw your sword and slash with power. For only in the "conflict of thought" will fact prevail.
ANOTHER (7/18/99; 18:52:35MDT - Msg ID:9130)
Thoughts!
Mr. Jade, to reprint your post:
Jade (7/17/99; 17:52:07MDT - Msg ID:9071)
Another look at the Gold to Oil Exchange rate. I have not posted these calculations for a great while. The numbers are becoming rather dramatic.
Gold/Oil Exchange Rate. These calculations are approximate.
Oil in USD per Barrel [Avg. for Yr]….Date….Gold Price [Avg. for Yr]….Gold/Oil Exchange Rate [Barrels of Oil per 1 OZ Gold]
14…..1988…436…31.1
15…..1989…381…25.4
17…..1990…383…22.5
15…..1991…362…24.1
14…..1992…343…24.5
13…..1993…359…27.6
12.5.. 1994…384…30.7
13…..1995…384…29.5
14.5...1996…387…26.6
14…..1997…325…23.2
13…..1998…300…23
11.5..Dec98...297…25.8 Averages for Months
12.8..Jan99…287…22.4
12.3..Feb99…287…23.3
Event [Gold manipulation downward and rise in Oil
15.25.Mar99…282-284…18.6..18.5
15.9..3/6/99…..279…..17.55
17….3.31.99….280…. 16.43
19….5/2/99…...286….15
20….7/17/99….255….12.75
Average is 21-1 for 1968-1999
Average for 1986-1999 is 26.5 to 1.
We are now at 12.75 to 1. This has been a dramatic movement over a very short period of time. Oil has been in the position for a number of months to acquire Gold for Oil at an absolutely favorable rate, which has only occurred before during a few brief moments over the last 30 years. What is Oils plan for Gold?
---------------------------------------------------
Mr. Jade,
Thank you for posting these numbers.
A new trend of a rising dollar price of oil may destroy the "dollar gold market" with liquidity. All past oil for bullion deals now become a stronger asset for Euro banks to hold. This improving ratio does speak much for the integrity of these loans. I should think that $30 oil will "gold plate" these assets for "preferred delivery".
For some time I have asked persons to consider that all gold paper will burn! The investment in physical gold by dollar holders will collect a lifetime of value. A value hidden in the dollar price of gold! Today, all "gold industry" paper is on fire, for all to see, as the present system for trading gold falls into failure. Indeed, $10,000 gold may prove a "contradiction" that cannot be true, yet
does exists in the future. In the past, the thought of such a price of gold did present the "irresistible" urge to buy into the industry, this "Dollar based market represents". Only greed can explain the need to gain more than the value "real bullion" will one day present.
Perhaps, it be the same "ages old" human emotion that forced America from a contract with gold! A contract with greatness, that now passes on to others.
I will be gone for a time!
Thank You Another
ANOTHER (7/18/99; 19:39:15MDT - Msg ID:9138)
Last Thoughts!
The Stranger (7/18/99; 18:47:50MDT - Msg ID:9128)
Yet ANOTHER New Gold Market?
and
Leigh (7/18/99; 18:50:38MDT - Msg ID:9129)
Mr. Stranger and Leigh,
Many do often find that my words do not express the Thoughts I wish ones to consider. My intent is to promote "consideration" of these thoughts and the events they propose. Also included in my post was this: "You will soon see gold begin to strengthen the Euro as the dollar continues into a mighty fall.". The collapse of dollar and dollar gold market is the event that begins this process. Also, expressed in this: "The order of events will show that the dollar will now fail, first, then all will race for Euro."
However, the context was not well presented. My effort was lost. Some find pain in these words even as others find direction. My wish is that all will find understanding in their own way.
We watch this new gold market together, yes?
Thank You Another
FOA (7/19/99; 6:17:09MDT - Msg ID:9155)
A lot to read!
ALL and SteveH,
Rereading what Another sent this weekend and all the other posts. I'm going to have to think about this as some new thoughts are coming into view. Am still working on Chapter 3. This post was sent to me from Kitco (interesting?):
Date: Sun Jul 18 1999 05:02
mozel (@SDRer @a new currency system, built on a world market price for gold"
FOA) ID#153102:
Copyright © 1999 mozel/Kitco Inc. All rights reserved
A Sovereign can stiff other Sovereigns if it's willing to risk war. The United States Government has stiffed all other Sovereigns since 1971 when it reneged on its gold contract. When USG reneged on it gold contract, settling current account deficit on a country to country basis broke down. This was not new. But, it had never happened before with the official creditor nation. When it happened with lesser Sovereigns, they were invaded and the debt was collected by soldiers. For example,
Mexico in the 19th century, France the collector; Haiti in the 20th century, USG the collector. What is the solution ?
The solution is to require international trade to settle in gold so no deficit can accummulate and so the war power of the Sovereign is removed from the commercial equation. This is the BIS part of it. You can't securely and conveniently settle internationally without BIS's participation as neutral third party ( "moneylaundering" is how the drug trade does this ). Gold will assume the role that the reserve account has in the Federal Reserve System. The settling party's CB or the party itself will have to have gold on deposit to complete the transaction, I suspect.
Now, consider all that part of the world whose unpayable debt is denominated in greenbacks. Further, consider the proposal to sell IMF gold to buy US bonds to relieve their debt burden. It's a mighty small carrot, isn't it, compared to the carrot of having your debt devalued by a revaluation of gold against the dollar in the numbers from $6K per oz to $30K per oz which FOA is speaking.
As I see it, countries are going to have to step to the mark and declare their currency's international trade value against the gold pricer ratio set by the Euro. China is pondering on this.
China and Russia now buy gold from domestic mines with local currency. India is moving to buy gold with local currency. In case this is not familiar to you, it's the FDR official local currency POG money system.
"
"Currency system ?" "World market price ?"
Observations. Currency system means international monetary system means IMF.
Or it means a new principle for currency.
World market price means gold is the pricer. Gold is now the pricer in the Euro.
There is also a presently inactive gold as the pricer ratio in the Articles of the IMF.
The alignment of these two ratios would create a world market pricer. Can you see
this as a possibility from your window ?
The other declared currency is the dinar. What is the relationship between the dinar
and the Euro in terms of gold grams ?
From here, it's starting to look like what the POG is in London and New York is purely a problem for the anglo-american bloc.
FOA (07/19/99; 20:10:08MDT - Msg ID:9204)
All Posts this weekend!
ALL:
I have been reading and thinking about many of the weekend post here. If things play out along the path that Another has outlined, this gold market is going to be a very hard one to stay with! I should have known this would be the case.
What makes us think that the fall of the dollar (or even a major inflation with the dollar still left intact), would open the door to easy profits for savvy gold and silver investors? Are we so naive (or ignorant) as to believe that our winnings would come without major risk and pain?
Think about this? What if the 1970s wasn't a guidebook for gold investing. Maybe it was only a controlled explosion in the gold price as Another offered. If so, what lies in the future could truly be the downfall of the dollar, and we will participate in a massive transfer (and loss) of wealth such as this generation has never seen Such a turn of events would most certainly come with incredible risk for anyone that would attempt to financially survive.
My views:
Anyone that tries to time this market with paper gold investments (futures, mine stocks, mine options, gold certificates, etc.) is making a play for a repeat of the 1970s markets. Or even a quick turn around of the current trend. Perhaps those are good bets.
But, what if, in the late 1990s we are currently beginning a "controlled implosion" of the dollar? A type of slow dollar debt destruction, that breaks every market that uses the dollar for settlement ? A kind of dollar squeeze that changes the psychology of foreign nationals that use it for trade. An attitude like this one from Asia::
"This dollar thing is killing us and it doesn't want to go away. Their (IMF) solution is to lend us more of the same! After all these years, it's getting to the point where we wouldn't lose that much if we just switched our trade to something else. We'll pay the dollar debt when and
if we can!"
Do you get my drift? This sort of "implosion" is a viable direction and would impact the gold market in a far different way than in the 70s. The dollar wouldn't necessarily crash quickly, just slowly be defaulted on in a transition from it's use. In this circumstance, buyers could create a major short squeeze/run in the paper gold market that could drive it's price so high, so fast, that the exchanges close from immediate bankruptcy (without any gold delivery).
OR, the world does just what I outlined above. The players on the buy side slowly back away from the dollar gold market (the entire present paper market as we know it) and allow it to short itself into bankruptcy in an effort to protect the dollar. Let's face it, the London market could "burn" as Another puts it, in both of these fashions.
Both ways, no one is going to be taking delivery of any physical gold during this era! Except for a black market, gold will have no viable market makers and no official exchange from where we "usually" buy today. As Another points out, gold will probably be trading on a new Euro
exchange and that is where he gets his $10,000++ rate if one uses dollars.
Friends, this is new and chilling for me. I truly never saw both sides of this, in this way. If the market does play out in this second fashion, paper and mine gold is indeed finished! Yet, physical bullion buyers must be prepared to buy into a product that no dollar price may exist for! Indeed, before all is done, the dollar gold price could fall to the degree that Another has offered!
Again, I should have realized this because I often pointed out that what was conning is a change in wealth the likes of which we have never seen. The swings in the dollar value of all assets will be enormous. If one is right about gold, their holdings could show the same swings in dollar
prices.
I must think longer on this, because, truly, I don't know what else to say!
Thanks Everyone FOA
FOA (7/20/99; 9:20:23MDT - Msg ID:9268)
DISCUSSION!
SteveH(07/19/99; 21:50:05MDT - Msg ID:9217)
SteveH,
You pretty much hit on my feelings with this:
"I think FOA is saying ANOTHER surprised him and he hadn't considered the logical end-game if the IMF/$ folks push it to the limit. IMO, it won't make it that far."
Steve, That is exactly what I wanted to express with my #9204.
In response to this part of your post:
"In the meantime, the A/FOA guys seem to have been not so good on predicting prices but excellent at predicting behind the scenes explanations and motivations and directions to look. Time will in the end tell all. And we wait."
Steve, What I offer up is the private "Thoughts" of a very private person. I believe his appraisal of this ongoing political game comes from his real interaction in world events. On that count, his is the very basis of thinking in major circles. The "Total" concept offered was never so much about gold as it was an impending political move away from using the dollar. Yes, the impact on gold values will be important to us, but the real asset wars will be in the currency transition. For the majority of world commerce, this action dwarfs the gold market! The price of gold, the when and how much are interesting, but are far overshadowed by the "having of gold in your possession" before this change occurs! He (Another) said, he doesn't care what the dollar price is because it won't matter anyway. He sees it as a real money currency, here and now. I agree and try to
position myself for this event.
Most of the major critics of his Thoughts (there are many outside this public rendition) can not and will not see his outcome. I think that's because they are blinded by their portfolio. The truly "BIG' critics have massive real world holdings of companies and trade credits that would be
imperiled. I suspect people like "Stranger" have quiet holdings in some form of paper gold (mining stocks?) that will be chewed up big time in Another's world of events. Whether gold goes to $10,000 on the black market (or new official Euro market?) or it goes to $100 on a fictitious
dollar paper market, they lose everything. Their response is usually to attack the messenger because they can't build an adequate "time line of events" to explain what's currently happening to gold. They have a "Strange" concern that talking about this will induce a reading public to sell their paper gold (mine stocks included) or other investments, in some form of induced mine control! It's not that this might hurt the public so much as it might hurt the "critics" portfolio if the public sells. Besides, let's face it, anyone that brought physical gold some time ago has lost far less than paper gold investments purchased at the same time. In some cases the mines are gone, completely! So much for offering bad concepts for people to consider!
In addition, Another has always welcomed any thinking response, reply or statement. He does access this site through several links, reads the good western views and the rational they present.
The public bantering of Another by the LGBs and Strangers of the world only reinforces readers interest to follow these events more closely as they unfold. He always said to me that "the more people who stand on his shoulders, the more obvious his Thoughts becomes" (Steve, let me tell you, his mind and knees can stand the weight). Another, (leader that he is) knows people and has intense respect for their ability to think for themselves, once the accepted beliefs don't jive with what's happening in the real world. This is exactly what has happened as he offered these Thoughts from long ago. At first this "new gold market" wasn't doing anything different. Then it went way against the 1970s guidebook of technical analysis and group think. I have seen
many people comment that he took their line of thinking, when they didn't realize that he (Another) had offered it, in public long before their writings. The difference between them is that Another has always encouraged his analysis of these trends to be offered as their own. Through me he has put it "out there" for free, right or wrong, for everyone to consider. Often he presents it in an "off the wall " manner, usually to create a line of reasoning and thinking.
If we believe the Strangers of the world and think that the 1970s are going to repeat, then follow the standard line of western gold investing. But, if you "consider" these "Thoughts" and conclude that they may occur, then physical gold bullion is the only holding. Steve, (and all others
that discuss this) my recent post was offered to demonstrate the physiological difficulty we are going to endure if events play out as I described. These events demand that we take delivery "now" (as I have done and continue to do) even though gold may be priced at an "undeliverable" price later. A dollar price that could show major loses. I expect to hear from some that they are still buying some ounces of gold at $100, or whatever. Good, so will I. But, some of us have
much more to protect that a few thousand delivered ounces will cover. Conversely, if the price spikes in a week from a short squeeze that bankrupts bullion dealers, who is going to take delivery then?
If I am responsible at all to the concerns of readers, then I am fully concerned that people have the opportunity to judge this market as it evolves. And view it in a different light than what is offered by traders. To date, paper gold is burning, the Euro was created at least above parity to the dollar, oil is rising after the Euro birth and the ECB has stopped selling gold. To our "advantage" and good luck, oil did not bid for gold and the BIS did not chose to break the LBMA at $280. At this time, both of these entities may, MAY be allowing the paper traders to break themselves in support of the dollar with short sales.
To close, I add "Thank You Mr. Another", Thank Mr. Kosares of USAGOLD and thank everyone here for reading and discussing these Thoughts.
And not least: "GOD BLESS AMERICA, MY PLACE OF BIRTH AND MY HOME"
FOA
FOA (7/23/99; 5:43:24MDT - Msg ID:9516)
More Discussion
http://www.users.dircon.co.uk/~netking/finan.htm#tquotns
I have more to talk about this weekend. Does Alan see a change coming?
---------As Alan Greenspan said today,
"Something has got to give somewhere... Where it apparently will give at some point in the future is a lesser inclination to hold dollar claims on the United States..."
Greenspan sees no reluctance to hold dollars [July 22]
With a view to the clear and present risks of economic warfare, it is indeed surprising and indicative of a great deal of complacency that the average investor does not include a precautionary level of gold, gold stocks, and bear market funds (which seek to perform inversely to the main stock market indices) in their portfolios. Try mentioning such instruments on a stock market chat room and see what happens! ------------
USAGOLD,
I have a reply for you from Another. It was about your "Deflation" question several days ago. I also have a thought about it. Will post later. FOA
FOA (07/24/99; 14:26:57MDT - Msg ID:9585)
GOLD
ALL:
Because most of this "educated" generation has never received a true course in "what money is, no one explanation could possibly impart the truth into every mind. We are creatures of varying thoughts and viewpoints. Each of us can see only what our past life's experience allow us to bring
into focus. Another knew that it would take more than just "his" explanation of this "new gold market" to bring it's evolution into the mainstream.
He planted these seeds of understanding in truly "hostile ground". If any of you have undertaken to read "all" of Another's Thoughts and comments, it seems to be a trail into a thousands directions. Although, some found them consistent, most read with curiosity as they grasped only what they could. Indeed, the seeds were planted, DEEP! Today, I am happy to say that more are placing these Thoughts into real context. The water of "current events" is reaching the sprout zone, as people begin to explain what could not be taught.
If someone want's to understand "The Full Gold Concepts" as they can be applied to real life, they should read all of these writings:
Mr. Kosares ABCs of gold.
Mr. Kosares "In The Footsteps Of Giants"
Mr. Aristotle "Book Of Posts" in the USAGOLD Hall Of Fame
Mr. Aragorn has offered many posts and influenced the "Book Of Posts" creation.
Mr. SteveH has presented many good posts on the subject. Also he offered "ORO" from the Kitco forum. Read them at Steve's #9405 and #9340
Read and be part of the many informed USAGOLD Forum posters
To date, many others that post here and on the internet are voicing new views that clearly show a better grasp of how gold will impact our future lives. The more that people read the above items, the better will be their grasp of this new money from the past. The destruction of the dollar
as a world reserve currency will bring to the forefront the number one asset for the future, gold.
The present pricing mechanics used the world over to determine how one values and buys gold is failing. From it's short birth, only a number of decades ago to today's end time struggles, the modern gold market is the work of promoters. The same promoters that advance the current fiat
currency markets as a modern system for modern people. At the same time we "New Era" travelers are urged to largely ignore the massive failings this system has had for citizens around the world. A failure that many dollar holders worldwide are about to share with American savers.
Is $250 a fair price? More fair than you can imagine, when the new trend begins. A new trend of "non delivery" that is. Below is part of an Email I sent to Michael. More later.
------------- Be prepared for your readership to explode with the further exposure of the gold market. We are now in the middle of an outright effort to break the mechanics of the world gold market as it is currently used. The major players that stand behind (by buying paper gold) the bullion houses (most these are the LBMA) are backing away from
it's buy side. Now the dollar price of most gold securities are being discounted to reflect the liquidity of the market.
Because the world has only known physical gold to be priced in the London market using mostly derivatives paper, physical trades are being handled at a major discount to the value current demand would normally represent. Truly, the Bullion Banks must be buying some of their own short trades to establish a price. Yes, you read that correctly! A dying marketplace always ends up fabricating it's use to justify it's continued purpose.
The west has little knowledge of how to bid for bullion without going though the dollar market. This is why we may see the current gold price plunge until it negates the use of London as the "price maker". When the function of the physical market exposes this fraud by going around all forms of dollar gold securities, LBMA (and comex) will close
and gold will explode on a somewhat "black market".
No one knows when the physical trading will supplant paper trades. Today's price could be the bottom, or western investors may continue supporting the "fabricated" price (by not buying bullion) all the way down to who knows where? One thing is certain, the turn in this new market will not be a repeat of the 70s guidelines. There won't be any bullion to bid on when everyone attempts to switch from derivatives to
the real thing.
This is why so many were perplexed by Another's ongoing Thoughts of this market. It is a market in evolution towards a predetermined end. Every Western mind (educated in current market function) will reject the notion that there will not be any gold to buy at the bottom. Nor, will there be any available for the first $1,000 off the bottom (if there is
a quoted market to show this price).
Is this the bottom? Could be. The persons, that have most of the gold are now are pulling out from participation and will not create the turn. It will come from those that hold undeliverable claims on gold (or are waiting to buy lower), that discover they hold nothing. The whole market dynamics will become very confusing as this unfolds.
-----------
Your friend, FOA
FOA (07/24/99; 15:37:27MDT - Msg ID:9588)
Reply
SteveH (07/24/99; 14:20:29MDT - Msg ID:9584)
---------PS. FOA, the first paragraph above seems to describe what a Gold contract for oil is. Did I get it
right?
Bullion Banks guarantee or deliver gold to a bullion bank for a small fee of 1 or 2%. Most probably only guarantee gold backing in the event a bullion bank defaults. A bullion bank cuts a deal with a mining for physical gold in return for money to operate. The mine pays back the loan over time with gold plus gold interest. One or more oil countries buy the contract from the Bullion Bank for the repaid gold from the mine with dollars from oil production. The oil country now receives the gold that the mine repays. The bullion bank's guarantee from the CB goes with the contract to the oil country. So, if a mining company defaults on a repayment, the Bullion Bank will guarantee the oil country payment against the default. It may actually have to go to a CB for the gold to repay the default. This is what I believe is happening in the Bank of England Auction.----------------
Steve,
It's right in that that is one of many ways. When one reads "Aristotle's Work", it's so easy to see the purpose behind it all. The maintenance of a world fiat currency system requires a constant expansion of liquidity (more money) to keep it working. In the old days, when a borrower
defaulted on a "gold loan" (that was what a dollar loan was back then) the entity that held that debt paper lost his buying power. Be it the bank or an individual, the loan security became worthless and was written off. The write-off was certain because no one could (or would) come up with the gold to pay off the loan. Eventually, the US did issue more "gold loans" in the form of the dollar ("a gold contract currency") than it had gold to honor the $35 contract. Just a plain old fraud of creating new money so someone of importance didn't have to fail (lose some of their wealth).
Today, all kinds of loan guarantees are used to back modern fiat dollar loans. If they default, someone (a national treasury) prints the money to buy the loan so no one loses anything. Usually, if the loan is guaranteed, the lending institution just lends more money to try and keep the business going. However, in real life, a fiat reserve system, just as in a gold money system, is always in a
natural state of deflation as bad loans appear. So, in time, a paper money system always swells large enough to pass the point that it can create more liquidity (money).
That's what happened with the dollar reserve world. Every US treasury obligation held as a Central Bank reserve was used to create it's maximum amount of liquidity. Sometime in the 80s or so they had to start borrowing against gold as debt defaults were destroying wealth faster than the dollar system could supply replacements.
We all worry so much about CBs lending gold reserves, my friend, every other reserve they hold is in the form of lent assets! I won't find any crisp, unlent dollar bills in any of their reserve hoards. The gold represented the last asset for the expansion of the world money supply. It's lent
because they can fractionalise (sp?)it just like a fiat currency. One ounce sold creates only one ounce of liquidity. One ounce lent, can create 90 ounces of paper gold and the dollar liquidity that provides. When they do actually sell it, most of it goes to other CBs. A "fact" supported by the WGC that no one wants to factor, because it destroys their argument about the CBs supplying physical to fill the deficit. Check it out, 300 tones or so over ten years is the net out reduction of gold reserves.
All of this bears out why this entire "new gold market" is SO important to the present dollar / IMF system. It's entirely a paper gold arena that really trades CB vault gold "as guarantees". Crash this Arena and the dollar is history as we know it.
thanks steve, I'm here for a while. More later FOA
ANOTHER (07/24/99; 18:07:04MDT - Msg ID:9596)
THOUGHTS!
USAGOLD (7/20/99; 10:37:50MDT - Msg ID:9275)
Your words:
It is important to note along these lines that Another has turned the discussion toward thepossibility of deflation in the United States (as I read it) at precisely the time that Greenspan and Duisenberg seemed to be acting against the same phenomena in the currency markets. Gold might
be seen here as a messenger -- and this certainly is the subject we should be focused upon. Do I think the U.S. economy has switched to a deflationary bias? I don't know but it is certainly a matter of interest to me to know what Another is thinking along those lines. (If I am wrong in my
assumptions, good sir, please clarify your position for me.)
By the way has anyone else had the thought that unbridled short speculation made possible through the proliferation of derivatives has driven down all commodities including gold and perhaps brought us to the brink of a deflationary failure? I am toying with the idea and I am wondering if this isn't a phenomena Greenspan and Duisenberg are thinking about. I have considered that perhaps when these two saw what was happening to gold (and the euro) -- being
mercilessly beat into the ground by the shorts -- at the expense of the producers worldwide that perhaps something needed to be done and fast.....Hence yesterday's interventions.
Comments anyone?
Sir, I would add this for your consideration.
This deflation of today, I think it is not the same beast of years past. See deflation in the Japans, it shows a strong yen and falling prices. Fight it they do with no avail. That is the performance you speak of, yes.
Not to be for the dollar. Mr. Greenspan does overcome any such outcome with the ink and paper at his disposal. His concern is loss of use of dollars. The beginnings of such an evet would create the far different deflation from which you speak. I think, "stagflation" would apply as prices
of imported goods rise as local assets fail. Loss of dollar as reserve currency would cause large external "collateral damage" for financial institutions. Such lowering of values would create the "deflation" beside the "inflation" of foreign costs. Bad mixture indeed. The walk away from dollar
use is result of "commodities values" of unfair proportions when viewed in dollar contracts. A result the Greenspan does not want and can not prevent.
I think your family investors will find the failure of this gold market to their liking. It always has been the world "institutional arena". It is there that this paper gold price decline will destroy assets. Your coins "of inventory" will show the "real bullion value in dollars" long before advantage is taken by public. News of $100 or $200 gold brings the quick destruction of Bullion houses, in
hours! It also brings the 500 customers to bid for last ten ounces. Your new price will reflect this, yes? A new market with a fair price. A price that reflects the true value of oil in free market of
gold.
It is the event to observe, that few will be part of.
Thank You Another
FOA (07/24/99; 19:28:32MDT - Msg ID:9597)
Comment
Aragorn III (07/24/99; 17:30:34MDT - Msg ID:9591)
FOA, your continuing efforts are appreciated.
Aragorn III,
Thank you for the thank you, sir!
The revelation of a failing gold market always struck me as one with a sky rocket dollar price. It took me a while to gather the thoughts of where he was going with this. Your partial Email to a friend is a perfect expression of what is happening. Very well explained. I earlier understood the
dynamics when I realized that the "plunge" would be a "end" event with a very short duration. The positioning of the market, prior to such a catastrophe, will no doubt bring six month lead times for delivery of physical. A dealer with "bullion on hand" would never sell it anywhere close to "paper reality" in such a market. Just as Another pointed out tonight, the end time paper price is something no one is going to participate in.
Conversely, an external event could plunge the dollar before this all plays out. In that situation, the shorts would shut it down in a mad scramble to close. Then we have "Bullion Bank destruction" from a soaring price. This was my "limited" conclusion. I think everyone can now see the difference between my brain and Another's!
I agree with you entirely about Ted Butler and GATA. They don't realize what they are fighting, in that the entire Western monetary system is built on the same concept as gold lending. The system will destroy itself, as it always does. Yet, we will go to war before any "manmade"
lawsuit forces an end to the dollar reserve system.
Just as the WGC saw the error of their ways in promoting gold as jewelry, so should GATA change. If they want to preserve their members (GATA) lost asset values, as represented in mining stocks, they should be attacking the mining industry. Not the Bullion Banks. The quickest
way to wealth recovery would be for every mine to declare bankruptcy from "impaired assets" due to low gold prices. It would jam the shorts into covering and impair the Bullion Banks before they could attach assets in court. The big time rise in gold would still shut the market, however the
negotiating table would be full of "let cut a deal lawyers", supplied by the CBs, free of charge.
All of you stock owners out there would have to live with no market for your investments until this works out. I have to admit, this would make me invest in the industry. It will never happen, of course.
thanks FOA
FOA (7/25/99; 22:30:53MDT - Msg ID:9655)
Reply to old question.
Carl (07/20/99; 19:57:56MDT - Msg ID:9324)
@FOA
http://www.usagold.com
Mr. FOA, I have not posted here before. However, I have followed Another's posts since they first appeared on Kitco. I have been particularly confused about the inclusion of gold shares in his "will burn" category. When I questioned this way back on Kitco, Another reasoned that when physical gold became astronomically priced in dollars, governments would seize the mines. Now, the reasoning is less clear except to refer to mining shares as "paper." Please explain how shares are paper. They are not promisory notes like debt instruments. Yes, they are dependent on some degree of civil order, but so is private ownership of anything, including my house. Perhaps Another is referring to the paper transactions which gold mining companies have entered into? Butlet's look at those. For example Barrick, in which I own some share, has borrowed physical gold from central banks and sold that gold. They then bought treasury instruments with the money.
They make money on the difference between the interest rate paid on the gold and the rate received on the paper they own. What are the risks? Well, THEY are the DEBTOR party in the physical gold transaction. It's the Central bank, or others, who hold the paper. They (Barrick) hold government paper. Does Another mean THAT paper will "burn?" Please explain this to me if you would. Respectfully, Carl
Carl,
I'm glad you posted here and hope you read this. Here is my understanding of the risks involved with owning mining shares.
From the very beginning, Another was offering distinct comments about portions of a "larger problem" in the gold market. Usually, these were offered "in the context the current events" and structured to make people think. A signal of sorts, sent to accepted western knowledge that "not everyone in the world agreed that the dollar was the only money. Descriptions were given as to the reaction some entities would have to certain "events".
A recent partial post as an example of his intent, in his own words:
--------------ANOTHER (7/17/99; 20:27:12MDT - Msg ID:9079)
THOUGHTS!
" Many expected outcomes are born from the understanding of social interactions. If the king declares all thieves are to be executed, one does understand that death is to befall an apprehended pickpocket. It is the unproved, but "expected" result, yes?
Such is the case as one evaluates the world political game. A game we play with many kings. I place my wealth with respect to the past actions and present thoughts of current rulers. Seldom does one have the luxury of experiencing the actions of leaders, prior to the events that trigger
said response! I would bow low before such knowledge!
Truly, $280 was an inflection point that would, indeed, have ended this present currency system as it is known. An action to have been taken, in another time and place, for a
predetermined event. Without the birth of the Euro?, as the expected action, "the purchase would have been done". ----------------------
Carl,
The ongoing problem with the world gold price, as expressed in the world reserve currency was that it's value was incorrect for a human reason. Not because of some supply demand effect. Gold today, was still the money it was a hundred years ago. The governments had only decided not to use it as money in an "official way" because they couldn't pay it's true value in the production of goods and services. That price would have included "official loses" and "real
bankruptcy" for their economies. Even after it's removal from the use of "local" money, they kept right on trading it against their currencies. Only they did it on what was called a free market "commodity" exchange. Through out the 70s and most of the 80s, Central Banks brought, sold
and loaned gold just like the paper currencies. Only the currencies were "official" government money and gold was "just a metal". A metal that competed like hell against the dollar.
Carl, call it what you will, but the gold bull of the 70s and partial rallies of the 80s were never the free market "textbook guidelines" that people buy gold mining stocks for. That period is the only moment in history that present investors have as their example of gold trading as a
commodity. A moment in time that never saw a "free market "in gold. It was simply a "controlled explosion" that eventually contained it's price. Gold did not, at any time come close to it's true value price that it's use as money would have required.
During this time (after 71), the dollar came to settle almost all trade, and it's use distorted the true value of all commodities, not just gold and oil. The very day that the dollar left the gold exchange standard, every currency in the world became a kind of modern day derivative
contract. Without the use of gold to settle foreign trade surpluses (and deficits), countries had to settle these differences in dollars. In real life, their Central Banks exchanged excess dollars for US treasury holdings and held them externally (outside the US). In effect, these foreign native currencies no longer reflected their citizens productive efforts in real terms. Their money became
derivatives of the value of the dollar, as "IT" expressed it's value in terms of the "commodity" market in gold. In effect, the very dollar that found it's value in a low gold price, was the same dollar that created the price of gold.
The most visible exchange for gold is comex. On that exchange one can sell thousands of contracts without owning one ounce of gold. Virtually all of the contracts are settled for cash. You don't even have to borrow gold to sell it. All you need are dollars as long as the trader on the long side settles for cash. Multiply this times the massive, far less visible world market for gold as it's easy to see how gold can be traded against currencies. As long as it is settled in "CASH"!
The present world gold market negates the true value of gold by removing the "real demand" that "gold settlement" creates! Break the mechanics of this market and you will find that gold is the most valuable currency in today's currency arena. Many investors, today think that the answer to this dilemma is for traders to take delivery and cause a short squeeze. My friend, in this arena, taking delivery means settling in cash! No, this market will not be destroyed by anyone but itself. Even a "short" cannot sell to himself, but for so long. In that light, major bullion buyers are walking away from this fraud of a market and allowing it to break itself from non participation.
I assume you have read my post: FOA (07/24/99; 14:26:57MDT - Msg ID:9585) and all the fine, up to date articles mentioned there. It will give a true background for this work.
When the dollar was on the gold exchange standard, all gold mines were effectively taxed into a a state of very low profits. The tax came in the form of the artificial gold price represented as $35 per ounce. With the dollar trading as a "contract currency" for gold, none of these mines
attempted to circumvent this fraud because the dollar was the official representation of gold value received. Their "business plan" was to sell gold for currency, not use gold as currency! For mines in the US, the latter was "against the law"! Only the Treasury could make legal tender. Except for brief moments in time, their shares were poor investments.
Today, many investors only see mining shares in the light of the 70s. Blinded by the fact that it was only a period of transition between gold eras. From a period of governments failing to use gold as money into a period of total use of one fiat currency value as money, the dollar. Now we enter an era where gold becomes the dominate currency value of the world. Even as other paper moneys continue to trade in commerce, a free market in the trading of "real gold only" will come to pass. It will "mark to the market" all currencies in question. During this time, gold mines (if they can remain private) will again, carry the burden of the heavy government hand of taxation because of the real nomey value they mine.
Another envisioned two paths for gold to follow during this period. Both trails lead to the failure of the dollar and it's many thousands valuation in gold. One contained an external event, such as a BIS intervention, oil bidding for gold or a major crash in financial markets At the time,
posters could hardly grasp these events as plausible, let alone consider them. In the context of the time these were the most possible if the Euro was not produced. Analysis did not even want to discuss the manipulation of this market, let alone move through a trend line of logic to consider
what may lie ahead! Some were even heard to say that such thoughts were "on the fringe of reality".
Now we can clearly see into the future as the failure of present gold market to exist is a real possibility. It's impact on the mines would be devastating as they would be bound to continue selling into this arena.
Please see Aragorn III (07/24/99; 17:30:34MDT - Msg ID:9591):
--------FOA, your continuing efforts are appreciated.
FOA, there was much made by several posters one week ago of the appearance that ANOTHER had "changed his mind" about the direction of the gold market and price. Your post today affirms my suspicion, as related in the opening portion of my e-mail (partially reproduced below) sent mid-week to a friend that also reads this forum.
-------
It seems to me that ANOTHER has not so much changed his mind as it seems he has recognized the potential for a path to be taken that from several paces back upon our trail did not seem apparent or even remotely possible. Yet here it is. Successful delivery/receipt of metal will truly be the key, as he says. You may recall a post a couple weeks ago with a seemingly obscure comment by FOA that essentially "the price could be falling because the banks were no longer able to find an adequate supply of deliverable gold". And while
that notion flies in the face of the "common" sense of many, you need only to consider how this price might indeed fall as the "Big Purchaser" would no longer be supporting what has become a ludicrous paper gold trade...no interest in
buying the paper with no hope for future delivery. This system did make sense as a contracting mechanism alternative from the dollar during a time that they could reasonably self liquidate. But a span of years and commercial speculators through fractional reserve lending has brought yet another quasi-fiat currency (paper gold) to the end of its useful life. You can almost hear them shout... "NEXT!"
Can you picture a person starving as "paper food" falls to a price of poor investment returns? No! The time comes when possession means more than price of paper by paper--an old fashioned run on the bank...for gold!
This is where Ted Butler and also GATA have a clouded view of the problem, and proclaim unfair institutional manipulation of this special financial commodity. If they would see it as pure money, they would easily recognize the "time-pattern of value" of paper gold follows exactly the diminution of any other currency under a banking system of
fractional reserve lending. Consider how many must think they hold the equivalent value of gold, when what they truly hold is only an illusion...an artificial portion of a lender's artificially inflated supply! With credit-based fiat currencies it is not meaningful to have a run on a bank for your fair share of ledger numbers. However, the gold-based monetary system that exists worldwide is not immune to such a "run". As this current paper system fails, the metal that remains will inherit the vast value spread thin over much imaginary paper supply. While they are to be commended for their passion, GATA's interests would be best served if their efforts were focused on education and lobbying for an end to the currently lawful banking practice of fractional reserve lending.
--------------
Then, my reply/comment:
--------FOA (07/24/99; 19:28:32MDT - Msg ID:9597)
Comment
Aragorn III (07/24/99; 17:30:34MDT - Msg ID:9591)
FOA, your continuing efforts are appreciated.
Aragorn III,
Thank you for the thank you, sir!
The revelation of a failing gold market always struck me as one with a sky rocket dollar price. It took me a while to gather the thoughts of where he was going with this. Your partial Email to a friend is a perfect expression of what is happening. Very well explained. I earlier understood the
dynamics when I realized that the "plunge" would be a "end" event with a very short duration. The positioning of the market, prior to such a catastrophe, will no doubt bring six month lead times for delivery of physical. A dealer with "bullion on hand" would never sell it anywhere close to "paper reality" in such a market. Just as Another pointed out tonight, the end time paper price is something no one is going to participate in.
Conversely, an external event could plunge the dollar before this all plays out. In that situation, the shorts would shut it down in a mad scramble to close. Then we have "Bullion Bank destruction" from a soaring price. This was my "limited" conclusion. I think everyone can now see the
difference between my brain and Another's!
I agree with you entirely about Ted Butler and GATA. They don't realize what they are fighting, in that the entire Western monetary system is built on the same concept as gold lending. The system will destroy itself, as it always does. Yet, we will go to war before any "manmade" lawsuit forces an end to the dollar reserve system.
Just as the WGC saw the error of their ways in promoting gold as jewelry, so should GATA change. If they want to preserve their members (GATA) lost asset values, as represented in mining stocks, they should be attacking the mining industry. Not the Bullion Banks. The quickest
way to wealth recovery would be for every mine to declare bankruptcy from "impaired assets" due to low gold prices. It would jam the shorts into covering and impair the Bullion Banks before they could attach assets in court. The big time rise in gold would still shut the market, however the
negotiating table would be full of "let cut a deal lawyers", supplied by the CBs, free of charge. All of you stock owners out there would have to live with no market for your investments until this works out. I have to admit, this would make me invest in the industry. It will never happen, of course.---------------------
Carl,
I hope you can begin to see what is being discussed here. Of course, many do very openly disagree with Another and myself. This USAGOLD site is very open and considerate. Please make your thoughts known for all to consider. Thank You FOA
FOA (7/27/99; 5:59:10MDT - Msg ID:9720)
World gold trading is mostly paper with cash settlement!
http://www2.techstocks.com/~wsapi/investor/reply-10664816
Does this sound like what I was speaking of in my post #9655. I said
-----"The most visible exchange for gold is comex. On that exchange one can sell thousands of contracts without owning one ounce of gold. Virtually all of the contracts are settled for cash. You don't even have to borrow gold to sell it. All you need are dollars as long as the trader on the long side settles for cash. Multiply this times the massive, far less visible world market for gold as it's easy to see how gold can be traded against currencies. As long as it is settled in "CASH"!"--------
Now read Mr. J Orlin Grabbe and his description of world gold trading. Link above is to post board, while his link is below.
--"Compare with The Gold Market: Part 2 by J Orlin Grabbe--
"Gold accounts at a bullion house may be allocated or unallocated. The unallocated account is most typical. One holds on deposit a specific number of ounces of gold, but
these ounces of gold are not identified with any individual physical gold bars. These unallocated accounts may or may not bear interest.... All clearing accounts are
unallocated accounts...."
"Most gold trading takes place by paper transfers between unallocated accounts. Bookkeeping entries avoid the transactions costs and security risks of moving the actual
metal...clearing members clear their net trades with one another through their gold accounts at the Bank of England, as well as by physical gold transfers."
http://www.aci.net/Kalliste/gold2.htm
Might this provide some insight into what's happening? ----
His talk describes a lot and everyone should read it. FOA
FOA (07/31/99; 17:29:43MDT - Msg ID:10016)
various thoughts
What is a "natural market" as opposed to a "manipulated market"? Do people really think that the only true natural markets are where every owner sells everything he can at whatever price current demand will bring? Like wise, every buyer buys all he can use at whatever price current supply will provide? When I read some of the philosophical reasoning presented on the net, I get the distinct feeling that the human factor should not play a part in the marketplace. In other words, anyone that holds off from buying or selling, waiting for a better price, is helping to manipulate the market. Has mankind lost sight of the fact that for a human marketplace to be "natural" it must show the imprint of "ulterior motives" in it's trading price! Yes? No?
Say, I am a big time oil owner and considered not to sell any of it. One day I decided to pump 100 million barrels into a giant tank. I'll just hold it there with the intent of selling it later at what I considered a better price. Am I manipulating this commodity? Or do my actions present the "natural" greed and fear that must be present in a human marketplace? Perhaps, I do not feel that the present world dollar prices of oil, gold, copper, cotton or corn, truly represent the "human use value" this currency reflects. If others think that fiat currencies offer the "natural" values that "supply and demand" create, do I have to sell to escape their damnation of my intent? Is it
manipulation because I play all factors into my reasoning? I do consider that, usually these "critical" voices come from "economies" that are already receiving more production value per barrel than the dollar price can reasonably repurchase in real things.
It's like the carpenter that is making $.05 per hour on a government job and his manager tries to convince him that is all he is worth. We should not blame the manager for taking advantage of the system? In the same light, nor should we underestimate the ability of Western economist to
justify the "supply and demand values" of oil as expresed in dollars. Their readers are coming out ahead, just as long as supply and demand is settled in "their" dollars, that is!
Some even profess that world trade must "play by the rules" and deal in a spirit of honesty . But, what are these rules? And what is honest in our world trading system?
The present world banking operation creates a monetary arena that demands everyone to settle the transfer of all goods and services in a "fiat money" system. One that is clearly "manipulated" to the advantage of each country. The Japanese wrestle the value of the Yen to promote their trade advantage. Every country has it's "behind the scene" method of "interfering" with the way world trade sets the value of it's currency. Do not the actions of these countries truly
reflect the needs and wants of their working populous? Even if their motives are, by design, manipulation, they do this with a perception to help their citizens. Even with this view, we see the imprint of "human nature" in world trade, as it's always been.
My point is that "manipulations" are a large part of modern trade valuations. Under a fiat monetary system, it is a "natural" tendency to hold for "your best terms" because the value received in paper currencies is always changing. Just look at 1985, when the G7 plunged the value of the dollar. What was that? Honest "value reduction" in a currency, "new rules to play by" or just a plain old natural response to a modern world?
So why do so many search for and cling to reasons that cannot apply in this current trading market?
A lot of people have been caught holding the wrong "outcome opinion" on this gold dollar thing. Just as in the above analogy, many "Western economist" that analyze the gold market also use a "western dollar perspective" to advise the same conclusion. That being, because we cheated
the rest of the world to maintain our lifestyle, we are due for a little inflation and loss of dollar value. So, lets compensate by buying some gold, leveraged gold paper and gold stocks to retain any of our lost wealth.
Well, it just isn't working out that way, is it? You see, that "perspective" is based upon several concepts that we have "evolved" past:
1. "The repeat of the 1970s international currency panic."
That panic never ended and is in evolution into this day! The dollar reserve system has been patched up with debt and more debt over all these years. It was maintained because, prior to the Euro there was no other alternative to go to without shattering the world economy "completely".
2. "A 70s repeat of a rise in gold prices in dollars, at least back to the $400 or $500 range."
That gold bull of the 70s was a controlled burn! Contrary to every thinker, they allowed gold to be sold into the market to take the pressure off the dollar. As the price rocketed, it was easy to see that only a tiny fraction of the dollars held overseas would ever be exchanged into gold at any reasonable price. To fully complete the deal would have seen gold in the many thousands.
The rising gold price sealed the fate of the world into using dollars in settlement. In effect they said, raise the prices of oil (and anything else) but you must settle trade in dollars. The USA would then write IOUs to everyone on the planet in order to keep the system going. In effect, to the world, stop buying physical gold, put the dollar on an oil standard, through dollar only settlement and "gold " will be priced to your advantage in a different venue.
Remember, in those days, they did not have a functioning "derivatives" market for gold. The only method of manipulation available was to allow it's price to rise in open auctions, well before any major portion of "foreign" dollars were exchanged. Stopping the auctions put gold back
undercover. Falling gold prices kept the dollar on an oil standard until alternatives could be worked out. It "IS" a different game today!
3. "The continuation of a world gold market, expressed and settled only in dollars."
Few people ever factor in what would happen if the London gold market stopped trading gold. It's a "given" among "Western economist" that this is "the way it is" and could never change. If the IMF/Dollar gold market ever failed (from Y2K or whatever) all gold trading would revert to physical, immediately!
The amount of gold held around the world in paper "derivative" form is enormous. It dwarfs any reasonable estimate I have seen. Every analyst that expresses current supply and demand for gold as under 5,000 tons per year, truly doesn't have a clue. London moves that much "demand"
around in a week. Much of it in the modern world form, "derivatives". It is in this massive new market that gold ownership has exploded without spiking the price. On the contrary, this market created the falling dollar price of gold as a function of "maintaining a dollar reserve system".
Without this new form of gold market, a rising physical price would have destroyed the dollar well before the Euro could be established. However, within this paper gold system lies the ultimate self-destruction of the dollar and the destruction of the entire gold industry that relies upon the LBMA for settlement.
more in a minute.
FOA (07/31/99; 19:36:29MDT - Msg ID:10020)
more on various thoughts
Hello to all the new writers here! Old Gold, is that you?
If you have read my last post #10016, I assume you have also read my post: FOA (07/24/99;14:26:57MDT - Msg ID:9585) and all the fine, up to date articles from other writers mentioned there. It will give a true background for this work.
Back into #10016:
If one buys into any dollar based venture today, he is making an assumption that the Central Banks of the world stand ready to maintain this currency as the current world reserve. An assumption, that I believe will cause a major loss of wealth as this plays out. Today, we have "evolved" past the need to keep the dollar "above value" in terms of real things.
Forcing foreign trading partners to take on more dollar debt in an effort to maintain the credibility of past debt is destroying the world economic system. In the past, a US trade deficit provided a home for dollar reserves outside it's local market. Because these "foreign held" dollars
were held as backing for other currencies, they expanded the international monetary base during a time of increased world trade. Through out the 80s and 90s, as the American inflation of it's currency threatened several financial blow ups, this system still offered the only logical alternative.
Today, competitive devaluation's of foreign currencies is changing the "old expanding" qualities of the US trade deficit. The same dollars, once sent to buy "overseas", are now contracting the very currency systems they once backed. These economies no longer earn a "return on commerce" large enough to generate enough dollar reserves. Truly, the more Americans buy from their failing trading partners, the more their local currency systems contract. Generating the need
for more IMF induced debt. Debt in the form of dollars that flow back into servicing old debt without creating new money. An endless circle that points to the end of using dollars as reserves. Clearly, this new era has sent the IMF / dollar supporters searching for every form of liquidity
expansion possible in an effort to buy time.
This is the expected outcome from using a patched up reserve system, built upon an ever higher mountain of debt. The effect creates lower buying costs (price disinflation) in the currency host country (USA) as it destroys foreign financial holdings by building debt into the balance
sheets without increasing real assets. The only countries that can escape this fate are ones that can insulate their trading block with a new reserve asset currency (Euro) or have "commodity assets" large enough to back entire currencies (oil).
It is this "deflation" draw down in world trade that will force the removal of the dollar as the settlement currency in international transactions. The modern evolution of events clearly show that no other path can be taken. It is well within the authority of the BIS take this route. It is a reaction that the dollar has brought upon itself from the early 70s decision to drop gold.
The moment that this event transpires, the global deflation of dollar financial holdings will change into the hyperinflation of all local US assets. The exact same fate awaits every country that has tied it's economy and treasury to the dollar. A process completely out of the hands of the
Federal Reserve and one that will require "intense foreign exchange controls"!
I suspect that the gold market, itself will signal this event long before it's arrival. All or some major players in the paper gold market will pull away from it's use and create a void on the buy side of the trade. A logical point because the dollar gold contracts could never settle physical gold at the price a "non reserve" dollar would produce. As I said before, this could destroy the current
mechanics of the world gold market and could plunge the paper price as the trading market fails. Another gives this good odds, I don't?
I think (and have prepared for) a financial event, that triggers the withdrawal of dollar users and forces a physical bidding war beyond the confines of the current gold market. Either way, the dollar price of gold will soon soar as London is removed from the gold window!
In reply to Carl, I also think that gold mine stocks will (in some way) suffer as they are locked by their local governments, into selling gold at (new) controlled prices to honor dollar credits. Also, most all of them will, no doubt (in all the confusion) be trading otc options and futures in
current dollars, not to mention their gold loan repayments. I hope you are right in that they are smart enough to wiggle through this. FOA
FOA (07/31/99; 20:23:21MDT - Msg ID:10026)
Comment
Chicken man (07/31/99; 19:07:05MDT - Msg ID:10017)
FOA
If the market is going "against" one's BOOK,then it is perfectly reasonable to believe the market is manipulated....if you don't believe me ask M.Armstrong when silver spiked up to $7.50
Good point CM!
I was "in there big time" when the Hunts were knocked off! That incident alone was enough to show me that the silver market was internationally too small. Because it was an industrial metal in the minds of CBs, they didn't have an agenda with it. When Comex locked out the Hunts, the big
currency players didn't care.
The sane thing will happen again in a different format. Because the gold market is today the product of a paper expansion of epic proportions, every player in the world will be trying to raise liquidity to cover his gold short exposure if the market is closed. Just as most of the silver shorts brought gold in the late 70s to cover some of their silver exposure, then sold it, today, they will sell their silver in the same mad rush. Only the silver market is nowhere deep enough to handle the selling. It's price could go to? In the Hunt thing gold easily contained the liquidity selling by silver short holders.
What I'm saying is that, if they close the gold market because of currency problems, silver and most of the other commodities will probably keep trading. Only, by association, those with major short gold exposure will not lose that obligation just because the market is closed. They will sell into anything that is precious metal related because they won't have any other way to cover!
On another note: If you remember, a few weeks (months) ago I said that we should look at comex open interest to see when the gold shorts were establishing long positions to balance their world market short holdings. That would signal their run for cover. Well they never did. In fact, OI is plunging! This does nerve me a little as it gives backing to what Another said about the major players backing out of the system! I hope this changes, as it will be a real challenge for most bullion holders (don't even think about mine owners!) to understand this dynamic.
FOA
FOA (07/31/99; 20:39:45MDT - Msg ID:10031)
SteveH (07/31/99; 20:23:18MDT - Msg ID:10025)
"Jamaica Accords"
I will return later.
FOA (8/2/99; 12:59:44MDT - Msg ID:10156)
more various thoughts
http://www.cba.uh.edu/~rsusmel/7386/ln1.htm
Aristotle (8/2/99; 0:04:57MDT - Msg ID:10122)
FOA thanks for your Saturday effort!
Aristotle,
If you have read my Saturday #10016/10020, I want to add on to that line of thinking. SteveH asked where it all started so I told him "Jamaica Accords". In good order, Cage Rattler #10065, found a nice rundown about the entire evolution of the world monetary system. The link is above.
Everyone here should read all of it because it helps put into perspective much of the Historical material that we analyze.
In section, 2.B Bretton Woods Agreements (1944-1973), it gets right into the breakdown of the money system. --------- "In January 1976, the IMF convened a monetary summit in Jamaica to reach some agreement on a new monetary system. The Jamaica Accords formally recognized the managed floating system and allowed nations the choice of a foreign exchange regime as long as their actions did not prove disruptive to trade partners and the world economy. Gold was demonetized as a reserve asset. The Jamaica Accords were ratified in April 1978." --------
This is where many investors lose the concept and start declaring "manipulation"! Right here, our leaders agreed in writing to a "managed floating system". I guess it needed to be clarified further in the form of "manipulated floating system". Nothing here about moving the currency markets in response to "free world supply and demand" is there?
Next, it gave an open hand to using whatever a country thought was best as a currency or reserve. This item, "allowed nations the choice of a foreign exchange regime" was hotly debated, I know! Because everyone knew what it meant. It was aimed directly at the "new" gold market. Buy on the market all that you want, but be prepared for the price to soar. If anyone, just had to get rid of their dollars quickly (in a year or so), you were not going to get a deal.
Their purpose was to sell gold over time (many years), so as to allow the markets to balance themselves. To do this, they didn't "demoneyize" gold as everyone on the planet has said they did. The Europeans and the oil countries would have dropped the dollar right then and there. They only demonetized gold as a "reserve asset", repeat, a "reserve asset"! This was the only way to unlock gold for delivery and or modern day trading without driving up it's price.
Notice that these accords were not ratified until April 78. Right after that , in the fall, the US started selling gold in a "controlled burn" (because it was no longer a reserve asset) to satisfy those who wouldn't wait. Don't get me wrong, everyone bid on it because no one knew if the
accords would work "over time"! Price inflation was to be the balancing mechanism until gold could again be sold into the sea of foreign dollars.
A big agenda for the US in all of this was to get the price of oil up! If this action didn't accomplish that, every US producer was going to run out of oil reserves because of our high cost production. The Middle east could, and still can, produce for almost nothing compared to us. But that's Another story.
We suffered through most of the 80s waiting for more gold to be sold. Europe (and oil) got tired of waiting and proceeded to build the Euro out of the EEU. Isn't it interesting how quickly the LBMA was born to market gold, in the late 80s in response to this new initiative. Their first
purpose was to create a paper gold market to trade commitments of CB gold. The dollar price of oil has been falling in fits and starts, right along with this new liquidity in the gold market.
This rough explanation brings us into the 90s. But that is where things started to change. SteveH is asking (hi Steve) for a look at a written agreement. The real contracts are written in the LBMA commitments. As for a international or heads of government signed accords, the Jamaica is a close as you will ever see. Often, in politics, protocols are but forced standoffs. Just like when two armies stop shelling each other. Someone makes the wise observation that "the generals must have come to an agreement to stop fighting". Yet, a reporter, trying to make a "responsible"
assessment to the public, asks "when will we see a copy of the contract?"! My friend, the observer exclaims, "the events and the actions are the agreement"!
Going back to my earlier posts:
Aristotle, when the dollar went off the gold exchange standard in 71, it was the modern day equivalent of destroying the gold market. Back then, all dollars were "gold loans" in every sense of the word! The world dollar market was the gold market that everyone used. When that market failed, because there wasn't enough gold to deliver against the "gold loans", everyone was left holding "empty gold loans" in the form of dollars!
Yet, today, tell people that the gold derivative markets that represents 90% of the entire gold market is going to fail from non delivery, and they don't conceive it can happen! This is an arena that isn't even a government treasury production, as the dollar was back then.
Every mining company in the world is required by their local governments to sell their gold for currency. None of them are allowed to barter that gold for goods and services. If the present world gold market fails as the dollar did in 71, the price of gold will continue to be established
through trading on this same "discounted" derivatives market. Just as people kept trading and using "discounted" dollars after it failed in 71 as a contract for gold. Yes another physical market will no doubt develop, but no new "from the ground" production will be allowed to trade "off the established exchange". Just as US "savings and loan banks" continued to operate as viable institutions, even though they were worthless, so to will the LBMA be propped up by the US/IMF because it is too big to fail.
This entire play will be acted out during the confines of a transition of currency power. The final evolution of the dollar from world reserve currency into the Euro as reserve currency. I suspect that an alternative physical gold market in Euros will begin to show this destruction.
Everyone should read Mr. James Turk "What Does It All Mean" to grasp just how "non-typical" this market truly is. Many of the old accepted actions of gold, in response to "usual" events are being invalidated. Through out the net, gold thinkers continue to look for a return of "inflation" to bring back the "good old days" of "bunker Hunt silver" and "fast rising comex gold"! The future may not repeat the past. We shall see. In the days to come, we will do well to consider following in "The Footsteps Of Giants" as they continue to lead in a direction of "physical only"
gold. FOA
FOA (8/2/99; 14:02:07MDT - Msg ID:10159)
Reply
Cavan Man (07/31/99; 20:32:03MDT - Msg ID:10028)
FOA
I understand your reasoning, I think. You are presuming that the Euro will replace the dollar as the world requires a reserve currency. "Europe" has never been in the lead nor has any European country been a dominant player in geo politics since Hitler. I discount Russia because, IMHO, the
Russians are not Europeans. I discount Britain because I really don't believe the British are or were Europeans and I believe they believe the same. The Euro must be forced into a role of monetary dominance yes? Is this the oil position? Also, I ask you and Another for a third or perhaps fourth time now; why would the rest of the world let the economy of the strongest nation on earth ( debatable I agree)go into the tank? Yes, there is a penalty for sin even with repentance but why level the US economy? Can't it be saved? Please elaborate. Thanks.
Cavan Man,
When a currency dominates the world, it usually isn't forced into that position. It evolves there from forces governments cannot stop! Did you think the entire world wanted the dollar to be on top from long ago? A quick history read will show that other governments tried to prevent it, but couldn't. Just as the British Pound fell from dominance, they didn't want it to happen either, but
couldn't stop it.
Understand, the dollar isn't being forced out of position because it's getting better. It's building so much debt that it's destroying the current world economy. If you think it's been doing a good job, then please read the history of Foreign Exchange (in the link I provided earlier). My friend, battle after battle has been fought to save the dollar, not destroy it! Did you think Nixon took it
off the gold standard to "kill it"? No, they were trying to patch it back into some useful form, as nothing else was available.
The world economy will demand a useful currency as the dollar further fails to do it's job. They will go to the Euro for the same reason they have stayed with the dollar all these years, "there isn't anything else"! As this modern world has evolved well past the use of physical gold as a
circulating currency, a "free world gold market", not based upon any government will provide the "mark to the market" valuations governments need to measure paper money in trade. The Euro will indeed be held against gold, but not as a gold loan (as in contract currency at $35 to the ounce) standard of the past. That system clearly failed as the present dollat/IMF gold market shows.
Does Europe want this position? I doubt it, but given what is coming down the pipe for the dollar, they will most likely be glad for it.
My friend, I (as taken from Another) use the term "western view" because it is a clouded perception of how the world sees the dollar. For the dollar countries, it buys much at the expense of others. The very strong dollar that "bulls your stock markets" does not clearly represent the
value of the foreign goods it is exchanged for. Your view is to save the dollar and the US economy because it is holding up the rest of the world. That is the very problem, as only on a dollar based reserve system does this occur. Instead of using a currency based upon only one countries interest, the USA, use a currency based upon the "conflicting" interest of many nations, the Euro! Under such a system, world trade and exchange rates will balance more fairly. Would you still find fault if the rest of the world economies were holding up the US as opposite from what you suggest? A positive trade deficit for the US in their dollars would indeed "prod your perception", I believe. Let us see if this great economy can stand on it's own feet with the yoke of paying it's debts from "real production"? We may indeed get an answer to this dilemma.
FOA
FOA (8/2/99; 14:30:39MDT - Msg ID:10160)
Reply
Carl (8/2/99; 13:38:54MDT - Msg ID:10157)
@FOA on forced selling in currency by mines
FOA, On what basis do you make this statement?
Carl,
On the contrary, can you name one major mine in the US that "has" bartered it's gold production? I would like to see that dynamic in action. A large mining operation, with perhaps hundreds or thousands of employees, bartering gold directly onto the market during a full blown currency crisis. Foreign exchange controls and restricted movement of currencies would be enacted in about , oh let's see, 8 hours? Just in case you don't think your government classifies gold as a currency, wait until a banking crisis begins. The truth will be on the front page of your news paper the next day. When a Gold loan crisis threatens to collapse the world dollar based banking system, do you really think trading in gold will be open and free? If yes, you should follow your spirit.
Carl, the context from where I speak is not during these tranquil times. When you need the value that gold provides, to compensate for "other loses", gold in the ground will be "quickly" held in place as "necessity" changes the rules of engagement. Your government will not confiscate gold again, as long as it retains the use of the US dollar as legal tender, but it will, in an emergency block the movement of all gold until it's value can be shared through taxes. thanks FOA
FOA (8/2/99; 19:49:12MDT - Msg ID:10175)
Reply
Carl (8/2/99; 15:51:56MDT - Msg ID:10168)
Reply to FOA
My Dear FOA, Your words touch on so many things, they make my simple head spin. I have little knowledge and must depend on logic and simple consistency with what I do know in order to find my way.
FOA, When the illusion was dropped that you could get an ounce of gold for $35, was it not the $ that reduced its price relative to gold? When the time comes that people holding paper claims on gold wish to or need to lay claim to gold, is it not likely that existing claims will "burn", as
ANOTHER puts it?
Carl,
In the real world there are two kinds of dollars, ones held by persons living within the US and ones held by persons outside the US. Under normal conditions, these same dollars can buy any item in any country through out the world. In Japan you trade them for Yen, then buy a car. In
Britain you trade them for pounds and buy a TV. One can even live in Germany and send the dollars back into the US, without conversion and buy a computer. In these "normal" times, most of these "overseas" dollars stay overseas and circulate around, constantly being exchanged for other native currencies to buy goods.
This vast block of US currency, once termed Eurodollars, floats "with value" outside the US for two reasons:
1. The "confidence" that they can be sent back into the US to buy goods. Without this ability, they are worthless as every other nation has it's own money for local trade. That is why an Englishman (as example) usually has to "exchange" his dollar holdings for pounds before buying in Britain.
2. The world CBs make a vast inter bank market in dollars because they hold them as trapped reserves. They were trapped into these holdings a long time ago when they held these dollars as "gold loans". Before they could exchange them back into gold from the US, it negated these gold loans. In order to maintain the world monetary system, once based on this contract currency, the dollar, all CBs simply continued supporting (trading) the dollar. So the vast block of overseas dollars continued to grow. With the US having trade deficits all the time, these dollar holdings
have now grown into a huge proportion.
These foreign dollars can never come back into the US to buy real goods. There are simply too many of them. We could never create enough real things to sell for these dollars. Besides, much of them are held as "assets" for savings, and not seen as earnings to spend on daily bread. So, without the above two items in play, we see why the dollar value of gold is so important, "overseas"!! The gold price in local US terms is meaningless to most here because, being a local
currency one can spend his savings on local goods.
So in real life, a war, a financial upheaval or even natural disasters (California sliding into the sea) can create a situation where the "open door" for dollars to return home to find value, could be closed! Often referred to as "external foreign exchange controls". In this light, countries that run massive balance of trade surpluses with the US (many dollars flowing into their banks from the US) must look at the dollar in terms of what it used to be, a "gold loan" contract currency. Truly, in the larger sense, for overseas dollars, the amount of gold it can buy is still it's only true value. A local in the US would not perceive this threat as the door would not be closed upon his
holdings! Now you know why a falling price of gold makes the overseas holdings of dollars "strong" in reality if not perception! We have never moved that far from Bretton Woods. In gold value, yes. In concept, no.
What does this have to do with our original discussion? A failure of the world gold market would create a massive run to unload "foreign held dollars" for anything real. Gold first, everything else second. The flood of money into the US would bring absolutely solid exchange controls upon
dollars entering the country. Every other country would respond in kind. Any form of paper gold would be discounted in price to reflect it's slim chance of having gold delivered against it. The local US paper gold market (comex), would see it's dollar price fall to but a fraction of the value that trade for physical gold would bring. No one within the US could trade any gold inside or outside the country (where the dollar price would soar) because of the money flow controls (for reasons I stated in earlier post). To bring order to the system, the government could sell it's
treasury gold to the comex at a discounted price. Or they could demand the local mines to sell gold to Comex, the only market for them to sell into.
What about the value of gold mines outside the US. They would face the same problems as they would be blocked by their local governments from selling gold for dollars. They would have to also sell in local currency.
Or all trading in gold could be blocked for a while, worldwide. Sure, there would be a huge black market. Only big gold mines are "very obvious" traders and can't move their mines to hidden places.
Carl, none of this may happen. I do not consider you as simple a thinker as your post offered. I can only say that the Giants do not need mines or the problems they may present during these troubled times. Besides, when the dust clears, physical gold will offer more than enough return for
the average person. I expect a true world free market for physical gold to be coming. We have plenty of gold already produced and circulating to trade in this arena. Only, this time the currency price will not only reflect gold's value as money, it will allow a vast liquid pool for savers to hold their long term wealth. Unfortunately, the governments will most likely be attracted to using unmined gold for national expenditures. FOA
FOA (8/3/99; 8:53:06MDT - Msg ID:10209)
Reply
ET (8/2/99; 20:34:19MDT - Msg ID:10178)
FOA
Hey FOA - thanks for your continued presence here. That was a wonderfully cogent explanation of the contrasting views of the dollar depending upon where you sit. Given your explanation, do you think that perceptions of possible problems surrounding the y2k issue might precipitate this
'closing' of the dollar door? I posted something earlier about the BOE and their apparent attempt to become very liquid come the end of the year. It is interesting that they intend to denominate this increase in liquidity in Euros, not pounds or dollars. Is this the first public shot across the bow of the US dollar?
ET,
Thank you for the compliment. I also enjoy all of the other presentations offered here, including yours. I'm always impressed to see everyone display their own perspectives in written form, and then hint at how they intend to put those thoughts to work. Some posters are into silver, others in mining stocks and others buy gold or options. For most of us, these pronouncements not only
openly display our view of the future but indicate our actions and how it will impact out wealth to a great extent.
I have often found that people will "bet" a great deal of their money to make a return. However, most never would "place" as much money in an effort to maintain their "wealth". This concept has grown right along with the current global expansion of the last 50 years or so. It's
easy to understand, because seldom does the world experience massive wealth destruction. Consequently, in those few times that this occurs, everyone is usually "betting" on a percentage return "on their wealth" not "a return of their wealth". They are caught in a once in a thousand year change, just as may befall the world from Y2K. If something is unseen over several lifetimes, it cannot happen, right? The constant successful repeat of an economic function creates a "common belief" among people groups that is hard to refuse.
If Another has not read the minds and actions of leaders correctly and I am completely wrong, I'm not going to increase my wealth very much. However, if the life cycle of our world monetary system is coming to an end, those that are expecting a repeat of the past will lose a great deal.
Even those that position themselves in expectation of similar "currency crisis" as in the past will lose. A line of thinking I have presented here recently.
Yet, for me to actually "lose" wealth, the entire history of human nature would have to be repealed. Gold would be pushed into the background as everyone made good on their debts. This is why I "place" my wealth in the "no return on investment" position. Gold rose 32% during the 1929 contraction, while most people lost "everything. Even though that gain was not a return from investment, it was an increase in value from the falling price of everything else.
There are truly many financial giants that currently walk this earth. Some "bet" on silver, some "bet" on gold, but most of them all position these "bets" to function within the framework of this present system. The giants I follow have "placed" a good portion of their wealth in a position for change.
Truly, there is so much more in life than loss or gain. We gather here to learn, to understand and share our perspectives in this changing world.
Yes, ET,
The BOE is sliding into the Euro arena as we speak. They cannot stand on both sides of the fence. Like it or not, the IMF/dollar and the london gold market that gives it value are failing. They sold their gold to back up a few survivor banks for entry into the EMU. The signal is loud and clear, England is NOT running to the Euro, they are running "FROM" the dollar! No wonder oil money is leaving London. I don't care what the odds are, the British pound is history and
Michael K. is going to owe me one US dollar! With all his millions of tons of gold, I'm sure he can afford it! (smile) FOA
FOA (8/3/99; 11:23:57MDT - Msg ID:10226)
Reply
canamami (8/2/99; 21:42:28MDT - Msg ID:10185)
Reply to FOA #10175
FOA,
A fine and magnificent post - very clearly stated, and it contributed to a shift in my "understanding curve", as opposed to mere movement along the curve. One quick caveat: Does not a portion of the $US value and importance stem, not merely from the US goods it can buy, but from the US'
political stability, the rule of law, advanced securities regulation, fair treatment of foreign investors, immunity from direct military attack, etc. - in sense, is not the role and value of the $US based partly on the public sector or international relations equivalent of the accounting entry "goodwill"? Alternatively, could not economic/ political/military stability and the rule of law, etc., be
conceptualized as a US "export" which can be contra-accounted against the US trade deficit?
canamami,
Thank you. I have to say yes to all that you pointed out. But we have to acknowledge that the world has always functioned with these problems. There has always been a "strong country" where people held wealth. The problem is in the question: "what price am I paying for all of this?"
Conversely, of what value are these attributes if a crisis blocks my use of the "strong nations" money? Also, why do we have to hold dollars to obtain these benefits? Why not just sell us the gold? We can always sell the gold back to the US for dollars, can we not? Are we left to assume that no other country or group of countries could perform this same function? Indeed, the early US was also looked at as a "ragtag", "rebel" country, that could not be trusted with "my money". Besides, they didn't honor their gold loans at $35. How do I know when the "goodwill" will not be dishonored also?
canamami, I am American and to war I would go if needed. But these are real views that must be factored in, if we are to understand the unfolding problem.
thanks FOA
Also, SteveH and TownC thanks to both of you for so much work.
FOA (8/3/99; 20:55:21MDT - Msg ID:10252)
Comment
Unknown Economist #33 (7/18/99; 21:15:29MDT - Msg ID:9143)
Gold is a Commodity-Currency is Labor
Mr. Economist,
Your words and my comments:
------First , Gold is a Commodity, and it always has been. It has had its ups and downs for literally thousands of years. As has silver, copper, corn, wheat, meat, & even water.--------
Agree. In addition, gold is also money. Fact: If you review history, it will show that gold has been money for over 90% of the time span that humans have used money.
------ Currency is not a commodity. ---------
Agree. Facts will also indicate that currencies have been used as receipts or "contract currencies" for precious metals during the majority of their existence.
------(currency) It can be in many forms, yet it is always the same, it is Labor. Currency is 'shorthand' for service rendered. It is something accepted by at least two persons toaid in exchange of wanted commodities. I serve you, you pay me, I trade it for what I need. If I buy more than I need , then I have 'stored my labor'. It could be a barrel of oil or anything.-------
Agree. What you have described above is also equally applied to gold. As I pointed out in the first item, gold has been used in this very application far longer than any currency has. It is a tribute to the ingenuity of the human race to equate the use of "currency receipts for gold" in this
same fashion. It promoted the ease of commerce and speed of settlement. It is to the disgrace of dignity that governments embarked upon using currency, by itself as a receipt for labor. If not for the ages old cheating nature of mankind, it could have worked.
---------If you are a trader, a Real Trader, you do not become attached to any commodity in an emotional way. The commodity will gain or lose value in only way anything gains in value, by the pressures of supply and demand.------------
Agree. Because you are a "real trader", you must certainly know that anything can be traded if and only if it can be measured accurately. Man can equate no value to anything without a constant rule of measurement. Being bound to earthly things, said measurements can only be in the form of
real things to be honest. We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way! Truly, gold has a supply and demand, while the modern dollar is like the air of your breath. Always expanding and contracting.
-----------This year, Gold is in a downturn. Despite exciting reports of 'coin shop gold sales' it is
continuing to be priced lower because of lower demand and higher supply than what is sought in the world marketplaces. Period.--------
No, a "True Trader" would recognize that it is the dollar that is in an "upturn"! The emotions of traders can play tricks on their judgment. Tulips were once in high demand yet supply was infinite. Double Period
-------Despite all the distress expressed by many here , despite the anger felt for the Bank of England or the Swiss Nation itself, the hate felt for the 'short-sellers', whoever these dastardly persons may be, and the pleading for help to support the price of gold, the Truth is that gold is
Not In Favor and the short-sellers are the Real Traders. If you held a commodity, any commodity, and its value was sliding with little let-up, then you would be a fool to buy more! As a horse race progresses and your horse is losing ground yard by yard, do you bet it to win or to lose?---
--------------and the rest of your post----------
As Mr. Another said, "time will prove all things".
As I say, "Your experience with life has but only time to make wisdom sing"
Follow your spirit my friend, your path is indeed, before you!
FOA
FOA (8/3/99; 20:58:15MDT - Msg ID:10253)
Item
http://www.iht.com/IHT/TODAY/WED/IN/edkevin.2.html
------------If America's Wealth Bubble Bursts
By Kevin Phillips Los Angeles Times Service
WASHINGTON - The United States is approaching the millennium with a lotus-eating culture and e.commerce that some insist have banished the bad old business downturn. But what if it is actually living in its first major example of an aging economic cycle on the financial steroids of a ''wealth
effect''?
The next business cycle and politics could easily bring the reverse of today's giddiness: an ''unwealth effect'' in which consumer spending contracts as paper affluence shrinks.-----------------------
FOA (8/4/99; 10:09:21MDT - Msg ID:10322)
Comment
Buena Fe (8/3/99; 23:50:45MDT - Msg ID:10272)
BANG ON!!!! FOA
Economist #33
---------If you are a trader, a Real Trader, you do not become attached to any commodity in an emotional way. The commodity will gain or lose value in only way anything gains in value, by the pressures of supply and demand.------------
FOA
Agree. Because you are a "real trader", you must certainly know that anything can be traded if and only if it can be measured accurately. Man can equate no value to anything without a constant rule of measurement. Being bound to earthly things, said measurements can only be in the form of
real things to be honest. We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way! Truly, gold has a supply and demand, while the modern dollar is like the air of your breath. Always expanding and
contracting.
me
FOA, you could not be describing the coming storm any clearer, I only hope and pray that understanding comes to many before it is to late. The whole world (even creation) is groaning under the weight of SCALES (ancient tool for
conducting commerce) being out of BALANCE! Boy oh Boy hear it comes!
Buena Fe,
I'm glad it's clear to you. I'm also happy that you are able to grasp it without having any idea who myself or Another are. It's really a very simple message tangled up in a giant web of political cross currents.
There is only one investment direction anyone should have been able to pull from all of these posts. Buy as much physical gold, in your possession, as is prudent for your finances. In addition, Another always presented it in a way that should have signaled, "let the percentage of gold be in
proportion to your education of the current gold market dynamics"!
Also, people who buy gold in small amounts, will probably always be able to find physical at local dealers of extremely high moral standards (USAGOLD as Example). The ethics is important because the coming crisis will prompt many players to charge exorbitant fees to unsuspecting clients. Run from any company that offers high pressure sales people pushing leveraged plays. You have most likely seen their people posting on other web sites.
I have a further drum to beat about this, but will offer it later after more commentary.
thanks FOA
FOA (8/4/99; 10:12:04MDT - Msg ID:10323)
More Comment
Aristotle (8/3/99; 21:33:22MDT - Msg ID:10256)
Wow, FOA, I'm awestruck by your comment:
"We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way."
Exceptionally well put! A week ago I was hold a discussion with various posters about the meaning of "$17." Aragorn had the last word with various comments and revealing questions that pretty much put the wraps on the issue in my mind. (Come to think of it, I don't think I ever said "thanks for the input, Big guy," so this will have to serve in its stead.)
I think your comment opens the next chapter. Not only must we be concerned whether this particular "$17" is an electronic counterfeit, but we must always contend with the emotional element that at any time could alter its prevailing sentiment to conclude that even non-counterfeit
dollars are bogus by the very nature of the government's willful and indiscriminant creation of them.
Aristotle,
And a WOW back to you for expanding on this item. We are getting right into it here. It isn't just confidence that counts, "credibility" from past performance is a "concrete" fact that haunts foreign dollar holders like the "Blair Witch Project"!
The "real" default on gold in 1971, followed up with a confirmation of that action with the "Jamaica Accords" begs the question, can it happen again? What would stop the IMF/dollar group from defaulting all present gold loans and trading contracts? It's obvious to everyone now that there isn't enough gold to satisfy all the claims. Are we headed into the same circumstances that lead to 71? If not gold, what about the pound? If they are running from the dollar, into the Euro, they have to change a lot of valuation to make this fit as MK points out. Changes that will impact my English holdings. In addition, if England is bailing, what do they know that I don't?
The same holds true for the dollar. If the American economy, that is supporting the world currency system, begins to slump, as a preemptive measure, they will "HAVE" to devalue the dollar. Against what? You got it, the Yen (fact in progress) and the Euro (fact in progress)! Guess
what else will be caught up in this, "GOLD"! A fact that if it is in progress, will bring the need for some big time bailing out of major banks! SteveH, perhaps this is what all the "collateral eligibility" increases is all about. Under cover of Y2K (still a real threat) the new credit is readied for other purposes.
As I have (only recently) said many times, Another guided me to the point that the entire gold market may fail on this move. That's because it's unlike the circumstances of the 70s and 80s. One person on this forum finds this to be "not responsible thinking". On the contrary, if it does
take place, some "simple people" may take massive loses as this plays out. It may not, but it's a huge risk to take. A gold only position may make this trip a lot easier to weather. We "are" going to see!! FOA
FOA (8/4/99; 11:38:23MDT - Msg ID:10332)
Reply!
SteveH (8/4/99; 1:35:51MDT - Msg ID:10288)
Tom Cat
I wasn't sure what the post meant. I was hoping someone would comment on its significance. Just seemed important but complicated, eh?
FOA, why the full-court press now? You must feel we are close? Certainly, the GATA release below'shows a move is immanent but why would it be different this time than all other failed gold rallys? After all, last time we got the BOE announcement. What this time?
What is it that Mr. Another senses from his fellow world leaders that tells him that 1999/2000 is the possible last notch in the dollar belt? Why now?
SteveH,
First I want to thank you for making this statement in your:
SteveH (8/2/99; 20:52:53MDT - Msg ID:10182) "The message is important, whether they are 100% correct or just 25% correct."
This may offend some, but this drum must be pounded home.
In the past, so many writers have come down hard on me for posting Another's Thoughts. Yet, they don't even examine their own writings and the agenda it pushes. Be it options, silver, mines, or gold options, it's always the same story to other investors:
"you can't just lay there and hold gold! Out of the investment capital you have put only a tiny bit in physical gold, then get a great return in all of these other paper gold products. At the very least, if paper won't do, buy silver"
If these thinkers are being responsible to readers "of lesser knowledge" why don't they ever talk about the loses these item can and have recently produced? Why does the "average reader" have to make this "good" return on this portion of their insurance holdings. Their matra is almost
like the CBs saying they must make a return on their citizens most sacred gold reserves!
Most of the mine bulls have been talking and trading these items all the way down over the last many months. Some readers that had decided to hold gold instead, have a loss to show, true. But, they still hold metal that can't go to zero as some companies have. I remember some friends
plowing big bucks, on leverage into ABX and laughing at others for buying anything else.
"I don't mess with the foolish stuff, they said".
Almost every one of them took far bigger loses than they thought. From a mine "fully hedged", they even lost more in percentage than gold bullion! So much for "brains"!
Each step down the slippery hill of this crisis, they said,
"oh no don't buy gold at these cheap levels, the mines have fallen even further and present an even greater value".
Today, gold in the $250 to $280 range is still considered crazy to consider! The mines are still cheaper they say, and
look at those mine options? Then, if someone says gold could fall further (destroying some mines) before it spikes, the "stockers" say, "how could you be so nuts as to cause these poor people to miss out on the greatest opportunity to buy holes in the ground?"
Well, people, the CRB is going up, oil has doubled, crisis is in the air and gold?
A think persons might, just might, consider that the gold market itself is failing. And, worldwide, on the sidelines, people may be taking gold where they can get it. And, yes, as Carl says, the mines may find a way to work around it. But, it's a "total washout" if they can't! What percentage of risk do we place on that?
Do we wait for "responsible", "professional" conformation before even considering this possibility. Remember, the professional "smart money", "money too smart to buy physical gold like the average people", has been trading in and out of leveraged paper and mine stocks "ALL THE WAY DOWN"!!!
Yes the paper investments may explode. I only point out that any explosion will be in proportion to the risk presently in this market. If one has risk capitol, Gold Fields (thanks MK) would be the one. As for silver, they killed the Hunt brothers and millions of simple investors in the last run of that thing. And they have killed it several times in between. This time, I think they will do it long before it ever gets to that extreme. As Another said, gold is presently the most important money in the world. This should make it important to you.
Steve, "Why the full-court press now?" Not now, but a month or so ago, around $280. The action was heating up then so I didn't wait for any lower. Delivery could have been a problem then and it could be even more of a problem now? For me, it makes little difference from here on out. For others, it's going to make a great difference.
I'll be away for a while. FOA
FOA (08/06/99; 10:09:22MDT - Msg ID:10486)
Several posts.
Canuck (08/06/99; 05:29:55MDT - Msg ID:10468)
Response
Bill, The Scot, & Stranger,
As The Unknown Economist recently stated, '...let's not complicate the issue ...'
Gold is either going to go up or its going to go down. I believe Watcher and I are in the same school, that is, gold has an inverse relationship to money. If stocks, dollars, etc. (boom) gold will go down, if they bust, gold goes up.
I have 'poised' myself (cash) to enter into gold very quickly (15 minutes) if Y2K rears its ugly head. I'm, in general terms, 80% cash, 10% PM's, 10% resource.
Canuck,
I'm going to make several posts now. Please read all of them as together.
I would like to comment on your post. Most people in this era live their lives with little fear of change. As "The Unknown Economist" puts it, we are way too complicated. Just keep it simple! I agree. The majority of us can and do drive down the highway without seat belts. If we see to
many wrecks, then it's time to buckle up. On a golf course, don't worry about lightning. Get off the green only after several people have been hit, close by!
Most of the world functions in this way. Be it in private life or business, the perception is that we can rearrange our strategy "IF" things start to look bad. The reason we build on this mindset is because the odds are in our favor. Through out time, seldom do events turn so radically against us that we cannot dive for cover before all is lost.
This is the "steady as we go", "let's not go overboard", "play the odds of recent history to your favor" thinking that perhaps Stranger and several others here promote, regarding gold. It could be a good bet. But, if you follow the reasoning offered by myself, based upon the thinking of
Another, we could be about to make one of those "once in several centuries changes".
When things do change to this degree, history has shown that it's always these "regular simple thinking" people that get ground up, "unmercifully"! Canuck, you are "'poised' (cash) to enter into gold very quickly (15 minutes)". That's fine, but a "fantastic financial crisis" may, this time, lock up the very system you use to function in. Your order may book in 5 minutes, but if the other side of your deal can't close, you will receive nothing! During these few times that events reverse "big time major on a world class scale", everybody holds onto what is considered "most dear". You will hear this often: " Yea, I owe you 5,000 barrels of oil. Yes, I have it, but it's going somewhere else because your deal with me is not as important as my deal with this other guy. He has something I need more, so get in line and kill me or sue me! I'm bankrupt anyway!" This is the way business dealings are resolved during war, natural disasters and major international disputes. Your, so called "lightning fast trade", is killed by a much larger breakdown involving much larger players.
Truly, I don't expect most people to change from this current line of thinking that embraces a "western style" of secure economics. If they did, it would negate thousands of years of natural human behavior. Most of the time, people will continue to play with paper contracts right up to and during the "burning of Roam". The Hunts thought they had "big" oil in Libya. They even borrowed against those assets as banks clamored to lend against these secure in ground holdings. Right up to the last day, traders booked contracts against delivery of those producing wells. Then, in a split second, it was nationalized. All gone! The same will be seen with gold stocks one day. Traders will buy them right down to .05, and still say, "I know it will come back with the demand for gold because the asset value is in the ground". Heard this before Carl? Gold goes from $100 to $10,000 during the crisis, and someone bigger (the local government?) then the shareholders says:
"Yes, I have it, but it's going somewhere else because your deal with me is not as important as my deal with this other guy. He has something I need more, so get in line and kill me or sue me!"
None of this is anything new. It's just that most "westerners" haven't been defaulted on recently, in a big way. Think about it. FOA
FOA (08/06/99; 10:14:02MDT - Msg ID:10487)
Several Posts
Hello ET, your words:
"I'm extremely reluctant to take 'anonymous' articles seriously."
ET,
Another never wanted me or anyone else to "take anonymous articles seriously"! He wants you to consider the content, apply them to the real / current events and with the education time brings, come to an opinion on your own. Then you should "take your thoughts as unanonymous" and act
on them in your families best interest.
Many of us are a "world" apart in our perception of money. Another is trying to bridge that gap using human experience. FOA
ALSO:
ET (08/05/99; 17:04:25MDT - Msg ID:10440)
FOA
Hey FOA - thanks for your response. Yes, as you have probably been able to tell I am certainly concerned about the return of my wealth. It is an easy decision. Your point about current 'bets' having to have the current framework to work is well taken.I think what few realize today is that the current framework is subject to the same market forces as any other. The dollar framework must compete with other forms of money. To think otherwise one would have to take a very, very short view of economic history. A 'bet' on one system exclusive of all others is actually a very risky venture. Not only must the 'bet' in the system produce a return to be successful but the system itself must remain successful. A two part failure here could cause one to lose not only the 'bet' but one's total savings if all is denominated in the system's units.
Too risky for me. I don't think one can be too conservative at this point in time. Thanks for all your thoughts, FOA. They are always most enlightening.
ET
ET,
As others would be glad to know that I understand their motives and reasoning, so am I happy to see you "know where I'm coming from"! thanks FOA
FOA (08/06/99; 10:16:30MDT - Msg ID:10489)
Several Posts
Golden Truth (08/06/99; 01:19:34MDT - Msg ID:10457)
Sparks Fly Over GOLD Pegged At $200.
http://www.nationalpost.com
This article proves the tremendous tug of war that is going on to have two extreme views like this.It proves something is terribly wrong with GOLD!
I have to come back to F.O.A comments about how he disagrees with Another over the Market imploding or Exploding. It seems even the experts can't decide either way it should be very interesting to watch. Another says implode, F.O.A says explode, in my simple and humble understanding of the events to be played out.
GT,
Yes, I got hit right between the eyes when Another put this reasoning to me. Anyone that does not have a firm grasp of this "new gold market" is going to need a lot of guts and conviction to continue to hold even physical gold as this plays out. It could go either way, but the downside will
hammer the current "secure trade and paper mentality" of most Americans. (see my last post to
Canuck)
Most traders / investors are just looking for a little new inflation or some type of Y2K disruption to bring gold (and gold stocks) up. The process of moving away from the current gold market to a mostly world physical market could have the effect of driving down the quotes of London gold. Because, every physical dealer and trader buys from someone "upstream" from himself, we must look to the ultimate creators of the "gold price" to see how it's made. At the very top of the food chain, are all the menders of the LBMA, most of the major banks of the world. Practically all of their price setting function revolves around the paper trading of "allocated or unallocated" bullion accounts and the cash settlement of future delivery contracts. All marked to the market and settled in dollars. If the world begins to move away from "investing in gold" using dollar settlement and towards outright physical delivery (as represented by vault certificates) settled in, say Euros???? I think such a process will bring a shrinking liquidity into the dollar gold market along with lower quotes for "contract gold". Just as one bids the price of bonds down from $1,000 par to say, $300, not because the yield isn't good, but because the principal may never be paid.
Because "this new gold market" operates in a kind of parallel universe, most "western traders" will not see the dynamic at work. It will appear on their computer screens as falling gold prices on the world dollar market and increasing premiums on physical gold. If the London price is $100, and your dealer sells it at $650, the press will say that the premiums on coins have risen to $550 because of gold horders (or something to that effect). It will come across that anyone that buys gold at $650 is getting "ripped off" (english pronouncement) because everyone knows that the
true gold price is set in london at $100. This is the arena that the mines may get dragged into. Forced by the bullion banks to sell into London in much the same way they forced NEM to hedge. Today, LBMA controls most of the world mines. Believe it!
So, I hope this is understandable? FOA
FOA (08/06/99; 10:20:25MDT - Msg ID:10490)
Several posts
TownCrier (08/05/99; 09:56:18MDT - Msg ID:10412)
IMF gold sale uncertainty priced in, dealers say
http://biz.yahoo.com/rf/990805/wr.html
So essentially, if by some miracle the IMF sale were to be approved, there would be no further slide in price. But if the official word came that the sale would not occur, a big rebound mayhap...?
"Leach, a Republican from Iowa, said a number of alternatives cropped up at the meeting, among them the idea of revaluing IMF gold closer to market prices to give the institution more assets with which to furnish debt relief."
If they were to officially mark the gold to market price, they essentially throw in the towel on the current system as we know it, right? The BIS- (and euro-)type system prevails. Right?
ANOTHER or FOA, do you have a wise word or two on this? Anyone else?
TC,
A lot of people read your items. Thanks for posting them along with your comments!
This is a perception everyone may miss, but, if the IMF gold "doesn't" come to market, it would further damage the LBMA paper system and force a further lowering of bids on the world gold market. See my last several posts, especially the one to Golden Truth.
A loss of gold backing begs the question: "why do I bid par for London gold is it may not be backed with full physical delivery"? So, to the American investor, he just sees a further confusing and conflicting event as the world gold price falls as the Swiss, IMF and perhaps BOE sales are
withdrawn!
Can we now envision why a new physical market for gold priced in Euros may evolve?
FOA
FOA (08/06/99; 11:14:24MDT - Msg ID:10496)
Several Posts
Clint H (08/06/99; 07:49:04MDT - Msg ID:10472)
natural gas conversion
Cavan Man, Koan and all those who factor in natural gas as a competitor to OPEC. For natural gas to compete with oil above $20 per barrel is feasible. However the capital outlay
to build refineries to produce any meaningful quantity would be tremendous. Suppose OPEC raised the price of oil to $50 per barrel today. Eureka! We now start building refineries all over the world. Pilot plants first to perfect the technology, then plan for full factory construction and finally huge production into storage tanks for delivery into the market at a profit margin. Years of work, billions of dollars in capital outlay and the dream of a quick payoff. In this dream there is a $30 per barrel profit.
OPEC drops the price to $19 per barrel. Natural gas conversion plants operate at a loss, can't service their debt and go bankrupt.
IMHO natural gas conversion will not take place until the supply of oil is such that it cannot possibly drop below the conversion costs. Decades away.
Hello Clint H.,
Thank you very much for posting that. Your thoughts present the world in the viewpoint of someone "in the business". Not someone trying to project from a university desk.
A lot of people got cleaned out in the last oil runup and fall down. The average citizen only looks at the mechanics of BTU comparisons, then jumps to the conclusion that "we are saved from our sins" by this law of physics! A joke on the public, indeed.
It should be clear, by now that the supply of oil to the marketplace was never based on the amount of oil that could come from the ground. Politics and international money values have everything to do with how oil is sold. And these attributes are in a state of constant flux! They don't control the amount of oil, rather the value of oil.
After all these years and an actual hot war in the middle east, the oil price never went up and stayed up in dollars. As WWC #10461 points out , tanks are as full as ever. Now, suddenly right after the EMU, the price of oil starts rising, as it pulls up the Euro! At the same time, the gold market is sliding into a crisis that, as Mr. Turk wisely observes, has never been seen before?
While many wait for the oil price to come down from "competition" and "the Euro to sink because it could never work", the world reserve currency is being abandoned right before their eyes!
Stay right here at USAGOLD, where Mr. Michael Kosares is only a quick phone call away! The coming events are going to open some closed minds as they reverse the actions of many
investors. It will be poured out, a little at a time until the knowledge glass is full.
FOA
FOA (08/06/99; 12:08:37MDT - Msg ID:10498)
Last of several posts
USAGOLD (08/06/99; 09:16:08MDT - Msg ID:10480)
" I also believe that each of these currencies will be linked in some with gold. The euro serves as a prototype for the currency of the future. Stretching out the implications of such an international exchange rate system, gold owners who have assiduously exchanged dollars for hard metal over the years will be major beneficiaries of such a system. The dollar price of gold would have to be substantially higher than what it is today to make the reserve system workable, just as a much higher price than $35 was necessary to make the post-Bretton Woods floating exchange rate system work."
Michael,
Good report. I agree, In some way, gold will have to be brought back into the money system. Only, the current gold market will have to die first. That process could take London gold way up or way down. It's taking longer than I thought to play out, but it's starting to crack now. This
should get real interesting! FOA
FOA (08/06/99; 12:30:20MDT - Msg ID:10501)
Reply!
Aristotle,
Thank you very much sir! I am going away for a little while and will return later this weekend. FOA
FOA (08/09/99; 08:58:20MDT - Msg ID:10737)
Comment
Quabbin, Your link to this story is indeed a must read. Especially the one part I post below. As I pointed out in my posts a few days ago, the failure to deliver future sales by BOE, IMF or the Swiss could further drive confidence in this market to new lows. The result of "making new confidence lows" would be seen in the public as a withdrawal of bids for gold using LBMA menders. As such, the present world gold price making mechanism would be creating new lows in the gold price you follow, even as demand for real bullion soars "off market". A perplexing situation, indeed as most everyone muse sell their gold production and holdings into the paper "derivatives" markets using london prices.
To ALL: Before you discount that fact, find me someone that doesn't, then we talk.
A new gold market to be created soon, using Euro settlement and backed with oil demand. Believe it! FOA
Below: part of your link:
Quabbin (08/09/99; 08:00:09MDT - Msg ID:10731)
http://www.kitco.com/_a/news/474.htm
City: Passing the buck for that raid on the golden eggs
Source: The Daily Telegraph London
A concern of his at home must be the future of the London market. As the world's biggest market in gold bullion, it contributes to the critical mass of financial services on which the City must depend. For historic and operational reasons, this market has always been close to the Bank of
England. Now it knows that there will be a SALE sign at the Bank until further notice. Its customers know that, too, and so do its competitors. Gold no longer comes to this country on the Union-Castle liners, and the market could go anywhere. Mr George, who understands the ways of markets, can work that out for himself. No wonder he winced when he was told to put up the SALE sign.--------------------
FOA (8/10/99; 9:34:11MDT - Msg ID:10809)
Comment
ALL: I wish there was some way one could signal their feelings during a post. It seems that I often present a comment or response that is taken as a "retort" to what someone else has written even though it wasn't. My reply to ET about "anonymous" posters was given as clarification rather than being critical. Perhaps a I should preface with a (smile) or (frown) or (just thinking) to impart the feelings (facial english?) one would receive in a direct conversation? It's better that, than some of the things seen on other sites. I know it would upset the flavor of this forum ,(and MK) might not approve if I offered a (pie in your face) or (get out of here with that) before some reply posts. I guess not. It would be tempting? Probably would never hear from Another again, if I did. Anyway:
SteveH,
I was reading your post to Jason.
SteveH (08/06/99; 04:00:13MDT - Msg ID:10466)
Jason
It seems the more you want something the less likely it is to happen. We know gold will ultimately rise. We know that FOA believes it will rise soon enough but we don't know when. Everyone's clock ticks differently. Further, it is becoming a sad affair of "us or them at this point." In other words, why is it that for us to benefit from gold's rise, those who hold gold back would suffer the most and they hold the purse strings? That is what is seems to boiling down to. I feel Bill Murphy's frustration. It isn't right that it has to be this way. But it sure seems as though it is turning out that way. And, that just isn't
fair, is it? Life is all about win-win, not we loose-they win. How can it have come this far? It is if we all feel guilty for wanting our investments to rise, knowing more everyday that for them to do that means a greater and greater chance of financial collapse. Something not right about that.
Steve, (just thinking):
I wouldn't think of it in quite those terms. Gold is an international savings account that spans every generation through out history. Even the use of currency as a warehouse receipt for gold is a short lived experience compared to gold. Further along, compared to the time line of gold, the
use of paper currency "by itself" is an experiment of this current era only. The young people that have grown up during this period can not be blamed for seeing little use for gold. The only reason they continue to follow this current paper trend is the lack of major loses from currency
destruction. No one ever forgets the impact of a "money wipeout" upon their life's savings. Once experienced, the discussion once again returns back to the "damming factors" of unbacked money use.
When we follow the politics of world finance, it becomes clear that the "present system" players are only fighting to keep what they have. This "present system" inflates their portfolios with "fictional values" that would not exist outside government fiat currencies. Yet they believe these assets were well deserved rewards, received from implementing prudent trading practices. The ideals of gold do not rob world investors of their holdings, rather it correctly denominates these assets at much lower values. It's like them using an unrigged scale to weigh the beef. It
shows them as having 10 lbs instead of the 100 lbs they really think they had. In this light we should understand that they (world traders) don't lose in the transition. They didn't have the extra 90lbs in the first place so why must we think someone is taking a hit?
So, will the use of gold take down the system? No! The "present system" will be "taken down" by the very same players that participate in it. Their own human nature will drive them to dump their 100lbs before it's weighed on a true scale. Recent history is full of examples of people
destroying their own paper currencies in a race to offload it on someone else before it's weighed. "Quickly now, exchange your currency to the next guy so he takes the loss!" Such is life.
FOA
FOA (8/10/99; 10:23:41MDT - Msg ID:10813)
Comment
koan (08/06/99; 01:10:21MDT - Msg ID:10456)
oil thing
More thoughts on this oil question. I think, and someone correct me if am wrong, the oil industry - US, Japan and Europe- is working feverishly to perfect the technology and reduce costs with regard to coverting natural gas to oil products. It is my understanding that this is a big deal, as
there is so much gas, and it would reduce the reliance on the middle east - of course that begs the question would the middle east decide to make as much as they can now before the technology is perfected.
Hello Koan (just thinking),
Your words and my thoughts:
------US, Japan and Europe- is working feverishly to perfect the technology and reduce costs with regard to coverting natural gas to oil products.------
I don't think feverishly is a good term. Yes, they are working on it, but they are light years away from making it competitive. Any technology improvements would have to also price in the infrastructure to provide such a product to the marketplace. Present innovations would require $50+ oil to even get started. Besides, the US already has tons of natural gas yet it is still bottled up in political state to state regulations. It's already competitive in some applications, as is and no one is switching. Politics plays as big a part in energy as it does in money. It seems that no matter how much we improve our physical processes, the greed of people always get in the way.
----------of course that begs the question would the middle east decide to make as much as they can now before the technology is perfected.---------
The US was the very first to implement price controls on oil to prevent it from falling too far. Have you read Aristotle's work about the "TRC"? The oil producers were never worried about the US coming up with innovations that would drive the price of oil down. Our (US) own political
interest will always control the price of anything that would jeopardize national security. Low internal energy prices in the US would force foreign oil to switch settlement currencies and then deliver oil very, very cheaply. The resulting domestic inflation from a new reserve currency would cause the local US producers to become massively noncompetitive! You see, governments can and have manipulated technological advances just as much as they do currencies. That is the Human factor that blocks your "brave new world" of human advances. My friend, we are quick to steal from each other!
FOA
ANOTHER (8/10/99; 10:53:32MDT - Msg ID:10815)
Reply!
USAGOLD (08/06/99; 14:06:20MDT - Msg ID:10511)
To Another from Yukon Gold (YGM)
By E-mail:
Dear Another: To keep this brief please let me join many others in thanking you for all of your time taken to share your vast knowledge and understanding of these interesting times and their relationship to Gold. My education grows daily thanks to you and many others. As a Yukon Gold Miner (YGM) who became pro-active in an attempt to fight gold price manipulation thru GATA,I now find myself trying to relax and go with the flow and flux of world events and rest assured, safe in the knowledge that I own many miles of Gold bearing river beds. (Placer Gold Claims) Also I have the equipment needed to mine at any time.
** So now my question to you is-- Does Government view this Gold on my claims as a future asset??** I must also state that Gov't meddling and a never-ending continuous flow of new and cost restrictive not to mention ridiculous laws and regulations come out of Ottawa (fed gov't) with a net result of hampering the operations of all placer mining here in Canada. The favourite avenue to restrict is thru environmental laws. It almost seems as tho our Federal Goverment wants all placer operations to fail thru regulation.
Do you, from where you sit think the days of freely being able to mine Gold (primarily small scale)by individuals is at risk??
Thanks for taking the time to read this:
Sincerely: YGM (worried)!!
Mr. YGM,
All legal tender is owned by your state. Government money is yours for the use only. It be the not legal act to destroy treasury dollar notes, yes? As private citizen, your ownership is in what these notes may purchase, not the notes. When gold was the "tender" of your country, the
government did have right to "repossess" it's "tender", where ever it be.
Today, gold is not your money, therefore, gold in ground is asset, most private of citizen. If America does make gold "Legal Tender" again, gold in hand would remain "in hand" as money. But, gold production from ground must be sold to state. As such, the profit from production of money, that was once the paper production and ownership of treasury, would again return to treasury.
A problem for the thinker of western thought. If government did take gold from foreign dollar holders, it, by nature, may take gold from you, coin it and then pay you the wage. These coins in return, not be the world price of gold. If one could move mine to place of safety, perhaps this fate
is escaped.
Thank You
Another
FOA (8/10/99; 19:56:56MDT - Msg ID:10858)
Comment
http://www.gold-eagle.com/editorials_99/hickel080999.html
Golden Truth, reading yur post and "just thinking":
Golden Truth (08/09/99; 14:47:03MDT - Msg ID:10756)
TO F.O.A, MSG I.D: 10737
I agree that Confidence or "lack of" could drive the GOLD to new lows. If i understand this correctly? Are you saying that who would want to buy "Paper GOLD" if ther is no physical GOLD to back it up? There for the paper price drops which then creates this "invented" World spot price for GOLD?
I had this thought pop into my mind just now about "Cheese Cake" It goes something like this "the price of cheesecake is dropping because they say no one is buying, I say it is dropping because many are buying" ANOTHER?
GT,
The Cheese Cake thing came when others lost the trend of Another's Thoughts. Some time back (perhaps way back) he offered something to the effect that "gold is falling in price because so many investors are buying it". This was a real lost effort on some readers that didn't understand the full dynamic of the lending business. If I remember right, in that time the LBMA and the BIS both wanted gold to continue trending down. Yes, they were working together, but for different purposes and different final results. World investors were buying physical gold in volume, so these
government entities pushed even further into lending to free up more physical from private holders. It had the effect of lowering gold's market price even as more buyers emerged. No one could understand it then as the full manipulation story was still mostly hidden. Another was talking to a larger audience then and didn't worry that a few didn't grasp it.
Today, the dynamic has changed with the now obvious differences of intentions between the factions that are controlling gold. The Dollar/IMF/LBMA group are clearly in trouble as their portions of the lending business is much larger and in need of a constant new supply of CB vault
guarantees. They were hung out to dry after the Euro birth and the Euro/BIS people blocked all further gold sales. A political double cross? We could talk for hours about this! (before you go any further, I hope you have read my last dozen or so posts) Anyway; the gold price as we know it, is created by the LBMA. Without a further supply of CB lent/leased gold or outright sales to Bullion Merchant members (BOE sale), most of the fractional reserve dollar gold loans cannot be closed with bullion. We are seeing the beginnings of this effect in the current rise of lease rates. This is the reason I urged the purchase and delivery of physical gold, several months ago. If you search my posts, I offered that major players were "grabbing the gold and running like mad".
"Another" counseled later that the gold market, as we know it was in danger of failing. In this case, failing means less and less major players are offering bids for future paper in the top tier markets because the gold can't be supplied. This loss of bids allows the paper price to fall further as present paper holders also attempt to sell. This is the "EXACT" reason that gold does not respond to the major financial events of today! Believe it! Local downstream physical dealers, because they use the Comex and LBMA paper market as a price creator, continue to sell gold at lower prices even as buyers come in droves. This brings me to MKs question of physical supply. I get to it in another post.
SteveH offered a very good timeline of these events on the Gold Eagle site. See the link above.
We are headed directly into a storm of events that are being created by the downfall of the dollar as a reserve currency. Gandalf the White wanted to know when? The BIS is letting the dollar slide down a slope it was going down anyway. So my answer is: Any day, my friend, any
day. FOA
Aragorn III (8/11/99; 2:39:01MDT - Msg ID:10880)
Coming to terms with the dollar and with money (a continuation from earlier)
My good friend Aristotle has relayed to you much of the modern story. (Where has he been these days?) I am pleased it met with acknowledgements regarding its assistance, and would like to continue with perhaps some additional background for assistance to some in the understanding of money. Please forgive me the many oversights for which haste may have to play the fall guy. As later time allows, I shall attempt to repair what is necessary, but meanwhile this should help continue our dialog on these matters.
This is where we left off from before, more or less... (08/08/99; 17:19:07MDT - Msg ID:10664)
"...It should be obvious by the nature of our topic (money) that our conversation is focused on tomorrow, in addition to today. Were we to be truly concerned about today only, we would instead discuss whether our needs of food, clothing, and shelter had been adequately met, we would not speak of money. To speak of money is to speak of today's confidence in our ability of meeting tomorrow's needs."
A currency with an unknown expiration date is arguably of limited use for the role we expect our money to play...to hold its value within acceptable limits of fluctuation based on normal market pressures and thereby successfully fulfill its ultimate destiny to be spent as a medium of exchange for our future needs (food, clothing, shelter, hardware, medicine, etc.). No one wants to be the one left holding the bag when the purchasing value drops out the bottom.
Prior to 1971 the dollar was truly money (gold standard defined the dollar as gold) in the international economy, freely convertible with gold, with an equivalency of 1 oz. @ $35 -- FIXED, no questions asked! (Though it is fair to say there was squawking from time to time when overseas paper came home for redemption). Unfortunately, the U.S. had painted itself into a corner and was trapped. Here is how it happened.
Prior to 1933 the U.S. was on a gold standard domestically, also, at which time the equivalency was 1 oz. @ $20.67 -- fixed, no questions asked. A bank would readily exchange paper currency for the equivalent gold currency on demand. There was a general confidence in the banking institutions, and people were content to use their paper dollar equivalents, and further, were content to let their deposits remain in the bank. Fractional reserve lending privileges allowed banks to expand the money supply--YES...even while on a fixed gold standard! As long as not everyone together would choose to withdraw their money and convert the paper proxies for the gold dollars, this fractional reserve lending privilege did not cause any apparent problems. Did prices stay reasonable as the dollar still appeared "good as gold"? I give you... The Roaring Twenties! When the attendant stock market bubble popped in 1929, the financial system, and much necessary confidence began to unravel, and the bank run became a probationary event for the Olympics. In 1929, 659 banks failed. In 1930, 1352 banks failed. In 1931, 2294 banks failed. Late 1932 and early 1933 witnessed this trend swell to envelop not small or isolated banks alone anymore, but entire communities and statewide banking institutions. (I will tell you that by 1933's end, nearly half of U.S. banks had disappeared...such is the "privilege" of issuing excessive claims on money that cannot be backed through this fractional reserve system!)
You can see why the Roosevelt Executive Order of a bank holiday effective March 6, 1933 was something other than a trip to the beach. In this year, 4004 banks failed, or else were found to be unfit to reopen at the end of the "holiday". In the following year, only 62 failed. Why? Because as you already know, it was at this point that President Roosevelt took the money (gold) out of the domestic dollar, and it should be obvious to us all that a crippling bank run is no longer a threat when a bank need not be held to deliver real money. It could easily deliver the ledger numbers endlessly in portable paper form. A bank run becomes meaningless because the people are not at risk of being cheated by arriving too late, they have all already been cheated 100% in full! The government knew international parties would not fall for such trickery, so the gold convertibility was maintained, but only after defaulting on the paper dollars they held by redefining their equivalency to 1 oz. @ $35 (as was maintained from this point until the Second World War, and reaffirmed at Bretton Woods until 1971).
With domestic U.S. companies and citizens now subject to the inflationary dollar supply through fractional reserve lending, and a new dollar that even with the best confidence was not as "good as gold" within the U.S. borders, the anticipated effect of higher wages and higher prices was soon to follow. Here is the trap we fashioned for ourselves. The U.S. dollar would easily buy overseas products, as simple math and occasional "confidence reassurances" (by testing the success of convertibility) proved that to be paid $35 was truly to be paid one ounce of gold. Foreign goods were then priced accordingly, and imports flowed to American shores in due course as we spent down our national gold savings. And what of our balance of trade...the exports?
Domestically, with higher wages and prices reflecting a paper dollar rather than a gold dollar, American goods were not a bargain to foreign shoppers. The dollar itself (gold) was the best deal they could get from America in exchange for their own goods, and this money would then be used to shop where a gold dollar was properly held in value...anywhere but America! U.S. imports rose and exports fell against each other until the risk of gold exhaustion caused President Nixon to end international convertibility in 1971. This was essentially a world-scale replay of the 1933 Roosevelt action for the same reason...too many claims had been created on the gold money, and when the confidence for convertibility eroded to bring about a "bank run", the paper system failed to continue in its former manifestation. In the 1930's, gold was made available only outside the U.S. and the paper "price" rose from $20.67 to $35...a 70% increase. In 1971, the paper currencies lost their attachment to real money everywhere else in the world, and gold found a paper "price" in the many hundreds. So ended a time period of an fixed notion of a dollar's value.
Today, the international need for long-term reliable money still exists. Only gold can play that role to satisfaction. Speculators aside, the paper gold trade (as largely explained in Aristotle's work--which can be found at the Hall of Fame link atop this page--in the event you are newly arrived to our Round Table) has functioned as a much needed currency of gold in a fashion very similar to that just described for the dollar during the Roaring Twenties...albeit with a floating dollar attachment rather than a fixed one. The paper gold is received and held as a contract that specifies a right to gold delivery, perhaps some as a lump sum, perhaps as installments. (Contracts can be written so many ways!) The key parallel, and purpose of this post is to show you that this works only as long as confidence is retained, and that excessive issues of claims has not jeopardized the real ability to get gold without being the one left holding the bag of paper gold when the bottom drops out.
These various gold contracts have been a temporary patch in the monetary system, filling a niche in the economic environment of the world. You see why the dollar failed in 1933...too many claims issued on the available gold. You see why the "new dollar" failed in 1971...too many claims issued on the available gold. You see why the "new patchwork currency" of paper gold contracts will fail in due course...too many claims issued on the available gold. The caution is that more is in jeopardy than only the viability of this paper gold system. The dollar stands to fall with it as the excess paper side is firmly attached to dollars. In the 1920's, you might run to the bank with your "paper side of the deal", and the bank would be expected to make the contract "whole" by honoring the gold side or else it would FAIL trying--with no where else to turn. The parallel in today's system is that you might run to your contract writer (bullion bank) with your "paper side of the deal", and when the bank cannot itself produce the gold to settle the claim, it will have no choice but to turn to the spot gold market (if central banks will not stand for the clearing of gold reserves--such as the U.S. would not in 1971!) to buy gold with dollars, or else FAIL the dollar and themselves in the attempt.
Look for signs of lost confidence in the paper gold system to read the road ahead. Abnormally high lease rates on borrowed gold. The Bank of England, in the backyard of the LBMA, is selling much of its preciously small gold reserves into the hands of this same LBMA. The BoE has been the primary agent to push for IMF sales of gold. LBMA average daily turnover has been slowing, (to be taken as a sign of failing support of this paper system perhaps?) The ECB has called for a halt to gold lending activity among the euro system of member banks. This aggravates the fractional reserve system that depends on new loans to out pace loan repayments to the extent not provided by dishoarding and new production. And on those accounts, Y2K and low prices have brought record bullion sales, and these same low prices have brought failing mine production through shutdowns and curbed exploration. The warning signs are plentiful. When this paper system collapses, the gold metal that always remains will inherit the value currently spread thin throughout the expansive paper system.
got gold?
FOA (8/11/99; 7:17:03MDT - Msg ID:10890)
PAPER GOLD!
Michael,
I hope to comment on your question as I refer to several others. For everyone here, I will post each persons comments as I work on an understandable reply, but first:
Aragorn,
What a great post this was: Aragorn III (8/11/99; 2:39:01MDT - Msg ID:10880)
Everyone should read this and make sure you grasp it. Even better, first read Aristotle " Life on Earth: Gold and the Free Market" listed in the USAGOLD hall of fame. After that read SteveH's "25-Year Chronology of Gold" listed at:
http://www.gold-eagle.com/editorials_99/hickel080999.html
Once you have read the above, in order, come and read my next post later on, as we are going to get further into this topic.-------
Canuck: I read your post and, will comment as I am best able.
Canuck (8/10/99; 21:17:00MDT - Msg ID:10866)
FOA re:your last post
I have to ask a simple question that I hope you can answer very simply. I will be straight forward and completely honest. I simply don't understand this 'paper' versus
'physical' concept at all. I read your last post several times (and all other posts re paper vs physical) and at the moment when I think I have it I loose it. MK even asked today, something along the line of, "...with demand reaching such highs what is holding the price down...."
Canuck,
After reading the top listed items, try to grasp this first part of my work (edited by Another)
ANOTHER (7/10/99; 17:35:55MDT - Msg ID:8633), then I will continue:
Gold: Saving Real Money In A Time Of Transition
Introduction
-----A gentleman leans over the fence and tells his neighbor that gold is going to rise in price from it's current $300. As the person on the other side of the fence thinks differently, they both agree to a binding bet. In three months, we will settle up with a payment of the change in the price of one hundred ounces of gold. Whatever it rises, the "bull" collects that amount. Likewise,whatever it falls, the "bear" collects from the bull. Each puts a $1500 payment guarantee into a common shoe box and gives it to another neighbor for safekeeping.
As an observer of the above, we have just witnessed the creation of a wager not unlike a comex futures contract. On each side of the fence stands a long and a short, that together create an open interest of one contract. Neither has any intention of buying gold, nor do they expect
physical gold to be a part of this bet. Yet, at cocktail parties and on public internet forums, one claims to have "brought gold" and the other states that he "sold gold".--
I will post later. thanks FOA
FOA (08/11/99; 21:47:49MDT - Msg ID:10973)
A very long day!
Goldman Sachs stopped 4,718 contracts!! Ha Ha, who said Warren Buffet doesn't like gold?
Must read:
Aragorn III (8/11/99; 2:39:01MDT - Msg ID:10880)
SteveH (8/11/99; 6:40:22MDT - Msg ID:10888) oro
FOA (8/11/99; 7:17:03MDT - Msg ID:10890)
Canuck,
I have been in deep thought and discussion with a number of people today. Will do my best to get this posted in a simple form with the time left. I have to repeat, that post by Aragorn was presented in a way must certainly give a guideline to others. Every person receives information
and concepts differently. Myself and Another could never present this in a light that could be perceived by a large mass of people. With others writing from their own viewpoint, the message is more easily engaged. As events occur, the motives and the intent of this puzzle will become
public discussion on many mediums.
SteveH, I didn't read your #10888 before posting to Canuck. I don't know ORO but he does have the technical ability to present his view of this market in a higher format. He sounds like a player that has had ties to Bullion Bankers. Sometimes, a person in "position" sees things they
can't explain. Then a few clues come along that make it all fall in place. Anyway, it's also an excellent run down of the present situation that, like Aragorn, brings us right up into today's action.
So Canuck, Paper Gold? Here is a story that could be true.
Have you ever been to a high profile cocktail party with a bunch of mover / trader types. The talk always gets into investments then sooner or later international finance and money flows. Of the gold bulls: One guy says he is "betting" on gold and brought and paid for 1,000 K-rands.
Another says he is also "betting" on gold and brought 200 Comex futures. Then a third, the money man that gave the party, says he had his broker go long some major gold commitments in London.
The average observer would perceive from this discussion that these gentlemen all brought gold. However, his observations would be only 1/3 right. Let's look at these investments "in context".
The first person was the only one that brought gold. He said he was "betting" on gold, but in true context, he was the only one that was "investing" in the metal. His casual use of the term "bet" was for him only a figure of speech and did not carry the same meaning as the other two. It's also, most important to grasp that his investment was the only one that actually created a demand for the metal.
The next person was, in every sense of the word "betting" on the gold. He only put a small cash deposit with his broker and paid a commission to buy 200 contracts. Let's say I was the floor trader that took the other side of those contracts. I also had to place some cash as a deposit to
take the other side of that position. In the true context of this trade, gold is not involved. Neither one of us expects to buy or sell or in any way move any gold. I don't have any gold to sell him anyway, nor does he have enough money to pay for the 20,000 ounces those contracts represent
(for discussion let's say he is like 90% of the people that trade this arena and I know his financial position) So, if we are not buying and selling gold, what are we really doing? He and I are "betting" "ON THE PRICE OF GOLD". The only reason there is any gold in the warehouse, is to
make the contracts legal. Truly, there doesn't need to be any gold deposited for these trades to be successfully concluded. In the rare event that some players want real gold, the short would just go out and buy and deliver it. (Bear in mind that we are trying to understand the concept, not the finer points of the rules and regs. of this arena.) If the price goes up he takes some of my cash. If the price goes down, I take some of his cash. The whole game is about cash, not gold. Why is it so important to drag this point out? Because, the trading of Paper Gold has a very small impact on the demand for gold, compared to the amounts of paper traded! Yet, in today's world gold market, the price paid by investors (not gamblers) for the purchase of real gold is created in these very paper gold markets. Every dealer sells downstream using some derivative price based on
Comex or London.
Let's look at our major player, the money man. He's big, real big. For a number of years he had about 1.4 million ounces of bullion bars in a vault in a Euro depository. Then some bank approached him and asked to use his gold. They would write him a certificate of ownership that committed the bank to owing him the gold. He would receive a nice yearly fee for this and still have his gold. The only difference is that he now owned Paper Gold. For him, it was time to "get with the program" and "think in this new world era". Besides, the world class size and history of this bank made their "commitment of gold delivery" "as good as gold"! Hell, he had that much in cash with them already and that was loaned out to earn interest, so why not the gold for fat fees? The bank sold the gold for cash and held that cash on deposit as the offsetting position for a negotiated gold loan to a miner. Then they sold the gold loan commitment (but not the gold loan) to a major gold investor that would take delivery of the new mined gold as it came in. That
investor may have used future oil sales as his equity or outright sale of oil futures or just plain cash. The banks original cash was now freed up, because another player was offsetting the gold loan. The miner saw the money in a special account, building interest that would fund his production sales at higher than spot prices. Yet, any time that loan was paid down with gold delivery, it went
directly to another player.
With the original cash raised from the first sale, the bank can now sell it's own gold commitments on the open market to other would be gold owners. Using the funds to support various carry trades for other clients. All the while collecting fees for this good legal service. And
it goes on and on and on and on. Just banking, paper gold banking, that is! The variation to this are as numerous as the people involved. You see, as gold from the private sector poured in, it's sales were used to build a massive infrastructure. And, indeed as long as gold price went down to slightly sideways, it was very profitable.
Canuck, this is how the paper gold trade has been used to first deflate the demand for real gold and second, increase the supply of physical gold. All the while building a massive gold ownership following. The problem is that most of this new ownership is based on cash settlement, using the
price of gold. Usually, in the small print, it states that if gold can't be delivered, they will give you cash based on spot and you can buy it yourself.
Now Michael knows how the demand for physical has been covered with supply from the private sector. As the WGC numbers show, the CBs mostly used gold comments to lend to the middle men while the mechanics of the market used the private stores for supply. On a net basis, very little gold has left the world CB vaults. A fact, not my opinion!
In the event of failure, the "important" customers will be covered by the Euro CBs or made whole in Euros. Everyone else is watching as the private supplies are now gone. What a mess!
Yes, the gold shares will do well as long as investors see gold rising and don't discount the mines need to have an established market to sell into.... However, the miners have never been tested in an environment that has the "establishment" world gold market falling while the physical
market is locked up in a demand crisis. If they (the mines) owe gold to a bullion bank (to repay a gold loan) and the BB has failed, will they be allowed to dump the gold on the market? I doubt it.
Some of them have a clause that allows them to postpone the repay of gold loans in the event of a price spike (ABX???). But, in this crisis the "official" inter bank paper price may fall! Only the physical has risen on what will be described as a "simi black market". I bet they would still have to sell to whoever buys the loan from the defunct BB and sell at the paper price.
Will the media set back and watch the "unhedged" miners, sell $2,000 gold to the public when everyone knows that it should be sold at the official world price of $200? After all, the public still thinks the government price of $42.00 is correct and the present value of $250 is the result of gold bugs? A giant can of worms.
The way I see it: The mines stock will rise. But, is this rise enough to justify the risk the owners will take if this market blows up? Remember, the nature of this new market isn't like the 70s or the 80s gold bulls. No one has ever witnessed the short squeeze of a world class financial
instrument that can not be covered! No printing press resolution here. If the G-7 must intervene and negate all gold clauses, it will most certainly involve an attachment to every mine in an effort to share the pain. They used this market of gold loans to their advantage so part of the problem is also at their doorstep!
Still, the resulting void of paper gold to supply demand would drive all trade into physical purchases. Add this to the concept of the Euro as a new reserve currency and one can see how the dollar price of gold could run into the many thousands. Enough of a value for me to stay in physical only. In the footsteps, my friend!
I'm sorry Canuck, there is just no easy way for me to explain this. I am very tiredand look forward to everyone's discussions on gold at a later time.
Thank you FOA
FOA (08/12/99; 08:03:10MDT - Msg ID:10994)
One Post!
Good day everyone:
There is so much going on right now I cannot possibly keep up. So this will be my one post.
Canuck (8/11/99; 5:35:12MDT - Msg ID:10885)---------Question, funds currently invested
through RRSP (401K?s in the US) do not allow ownership of much other than equities, or in some cases bonds."
Canuck, some people use CEF? Next best thing?
Julia (8/11/99; 9:25:06MDT - Msg ID:10897)----------Hi FOA, Didn't you say once to watch the COMEX to see this new gold market played out? COMEX delivery intention
breakdown? What are Issues and Stoppers?
Julia, I said watch Open Interest figures as they will most likely surge into all-time high territory (400,000+++) when an uncontrollable run starts. Comex is the only visible arena that paper shorts can cover in when they can't get the real metal to close trades. Because Comex mostly represents cash bets by longs, the shorts can use cash equity to establish long positions as a means to offset their paper sold position. It's won't close their exposure, only cover it. The OI hasn't spiked yet, but I think it will, big time. As for the local jargon, it just indicates who is locking up real metal deposits. Not much left there, as I think GS is positioning for Mr. WB!
Another said a long time ago (in one of his posts) that his (WB) silver purchases were only front running in a public company. As the cash amounts were real small for his size. His private money was moving quietly into gold. This Comex lock may indicate that there isn't any more (in size)
around?
18KARAT (8/11/99; 13:10:24MDT - Msg ID:10922)
Foreign Purchases of T bonds chart----http://www.investech.com/---Has anyone noticed this?
18K, that chart tells the story. Everyone keeps asking why any entity (or conspiracy) would want to destroy the dollar? Wrong context to view the action. The dollar is being dumped because of the inflationary expansion of this US money. The debt it has created is destroying whole economies. People are moving out of it because they are looking into the future and see a currency that "will" be devalued from it's own sins! If you sell your house and move on, are you killing the neighborhood that made you prosperous? No, you sell because the crime and decay is
going to lower your asset values!
Peter Asher (8/11/99; 13:21:27MDT - Msg ID:10926)----The Credit and Tulipmania Global bubble, cannot burst without destroying most paper held value. What else can they move paper money into and have value survive? On this premise is built the opinion that there will be visible Gold accumulation before there is visible equity distribution."
Peter, Yes! The gold part of this action has been going on for some years in the form of Paper Gold. Only now they will run from Paper gold first, before the physical gold bull!
TownCrier (8/11/99; 13:39:57MDT - Msg ID:10931)---Fed has no comment on Greenspan resignation rumor"
TC, it was a done deal when RR quit. Believe it!
Leigh (8/11/99; 14:42:29MDT - Msg ID:10937)---silver will be re-monetized?
Leigh, the hyped talk about silver has been around sense "forever". It's a good medium to gamble in but the real old world money always has and always will be in gold. I would go against my thoughts and bet on Goldfield (GOLD) or Homestake (HM) long before going for silver.
Orca (8/11/99; 15:20:53MDT - Msg ID:10941)---------It makes no sense that physical gold will increase, but companies that own non mined or just mined physical gold will not share in gold's value. They can hold it or sell it directly to those that want it thus reaping the benefit. Short of total confiscation by governments around the world, this will hold true... and if not, why not?
Orca, confiscation was never my term (that I remember anyway?). Does the government confiscate your assets when they tax your earnings? Do they confiscate oil profits by controlling the local price of oil as the Texas Railroad Commission did? Did they Confiscate oil reserves with
the windfall profits tax ( that was retroactive backwards, I might add). In the future, if they said "to promote fair trade and protect the consumer from the fraud of a manipulated private gold market, that has artificially priced gold in the thousands, we, the G-7 propose that all mine sales of gold must be made at the London (or wherever) world market price". Did someone just confiscate a mine here? No way my friend, dig away! (just thinking and smiling, without offense)
koan, I know you are reading this also (as I read all of yours too).
SteveH (8/11/99; 16:04:14MDT - Msg ID:10943)---I take exception to the extremis position that A/FOA hold to the dollar being on its last leg. Who would want this?
Steve, no one wants it, it is just a function of being "free to choose". No one wanted the British pound to fall from it's centuries old standing as a world reserve currency, but it did. And a lot of people lost a bunch of money in the process.
Also: Your post: One clarification please: "CBs mostly used gold comments to lend to the middle men while the mechanics of the market used the private stores for supply...." If you had to substitute a word for 'comments,' what would it be?
Sorry, bad word. I intended to use commitments, yet guarantees would have been an even better choice.
thanks all, FOA
FOA (8/15/99; 19:10:39MDT - Msg ID:11215)
More tomorrow.
Aristotle,
Glad you are responding to this subject, as I hope to later. I have some very interesting "facts" about the TRC that may also give direction to everyone here (and Koan). I'm sure you will find it especially thought provoking. Here is a sample:
------June 12, 1920 Legislature declares the production and sale of natural gas to be a public utility and gives the Railroad Commission jurisdiction. Tex. Rev. Civ. Stat. Ann. art. 6053 (Vernon 1962)(original version at 11920 Tex. Gen. Laws. ch. 14).--------
-------April 16, 1928 First Rule 37 Case. United States Supreme Court holds that the Act of March 31,1919, conferring authority on the Railroad Commission to administer the oil and gas laws is a proper exercise of the police power of the state in controlling the development of natural resources. Rule 37 was attacked as violating of the 14th Amendment to the U.S. Constitution.Oxford Oil Co. v. Atlantic Oil & Producing Co.,22 F.2d 597 (5th Cir. l927), cert den., 277 U.S. 585. 48 S.Ct. 433 (1928)------------
-------May 11, 1935 Legislature levies a tax on petroleum products and provided for the proceeds to fund the Railroad Commission and the Attorney General's department of enforcement of the oil and gas conservation laws. 1935 Tex. Gen. Laws. ch.245.--------------
-------June 21, 1975 Legislature enacts the Texas Surface Mining and Reclamation Act and requires the Railroad Commission to adopt rules and regulations governing the mining of coal, lignite and uranium and the reclamation or restoration of lands disturbed by mining operations. Act
also creates the Interstate Mining Compact and the Texas Mining Council. Tex. Nat. Res. Code Ann. '131 (Vernon 1978) [original version at 1975 Tex. Gen. Laws, ch.690, Tex. Rev. Civ. Stat. art. 5920-10 (Vernon Supp. l979-1980). Also Tex. Nat. Res. Code Ann. Chap. 132 l32.004
FOA
FOA (8/15/99; 19:13:57MDT - Msg ID:11216)
(No Subject)
Aristotle,
By subject, I was thinking about your reply to Koan's post. Be back later.
FOA (8/16/99; 18:21:39MDT - Msg ID:11282)
TRC
ALL:
Aristotle: Life on Earth: Gold and the Free Market
-----------The great irony is that a Venezuelan lawyer (and oil minister) named Juan Pablo Perez Alfonso studied and used the Texas Railroad Commission as his model for OPEC, which he co-founded with the Saudi Arabian director of the Office of Petroleum Affairs, Abdullah Tariki, in 1960. OPEC from the beginning maintained that oil was a depleting asset, and it had to be replaced by other assets to balance national budgets and fund developments.----------
When Aristotle wrote his great piece (partly reproduced above) I wondered if others would like to further read the history of the TRC (actually it's called the Railroad Commission of Texas). A fascinating read that gives a clear picture of the how and why it came into being. The TRC
produced "An Informal History Compiled for Its Centennial" in April 1991. They don't talk much about gold, but in a way, because the TRC has been studied and copied worldwide, it's precedent has everything to do with the future of the gold industry in our time. In as much as many of you are
invested in this area, it could be important to understand. Texas "controlled" oil and gas by declaring it's production to be a "public utility".
-----------June 12, 1920 Legislature declares the production and sale of natural gas to be a public utility and gives the Railroad Commission jurisdiction. Tex. Rev. Civ. Stat. Ann. art. 6053 (Vernon 1962)(original version at 11920 Tex. Gen. Laws. ch. 14).--------
They never confiscated anything, but in the end controlled it completely. Koan says "we are a nation of laws". Yes, and those laws are created and administered by governments in the interest of people. Not always "all the people" but " the people" never the less. Even the US supreme court
declared that Rule 37 was the proper exercise of government power in controlling "natural resources"! Notice they didn't say "just oil and gas".
-------April 16, 1928 First Rule 37 Case. United States Supreme Court holds that the Act of March 31,1919, conferring authority on the Railroad Commission to administer the oil and gas laws is a proper exercise of the police power of the state in controlling the development of natural resources. Rule 37 was attacked as violating of the 14th Amendment to the U.S.Constitution.Oxford Oil Co. v. Atlantic Oil & Producing Co.,22 F.2d 597 (5th Cir. l927), cert den., 277 U.S. 585. 48 S.Ct. 433 (1928)------------
Even though the Texas Surface Mining Act does not presently contain laws that apply to gold mining, it is but a short jump for the US to declare the production of gold a "public utility" and implement Rule 37 controls on a national level.
-------June 21, 1975 Legislature enacts the Texas Surface Mining and Reclamation Act and requires the Railroad Commission to adopt rules and regulations governing the mining of coal, lignite and uranium and the reclamation or restoration of lands disturbed by mining operations. Act
also creates the Interstate Mining Compact and the Texas Mining Council. Tex. Nat. Res. Code Ann. '131 (Vernon 1978) [original version at 1975 Tex. Gen. Laws, ch.690, Tex. Rev. Civ. Stat. art. 5920-10 (Vernon Supp. l979-1980). Also Tex. Nat. Res. Code Ann. Chap. 132 l32.004
Just so we can read the sign post along the trail, let's see where the TRC came from. The following is indeed a general history that leaves out much of the behind the doors wars that controlled prices. I'll reprint some of their work in an effort to lay a foundation. I believe the Gold industry will quickly come to be governed in the same manner (only much quicker). Perhaps we discuss later.
-An Informal History Compiled for Its Centennial(April 1991)
THE RAILROAD COMMISSION OF TEXAS
CREATION OF THE RAILROAD COMMISSION OF TEXAS
The floor of the Texas House in 1889 and early 1890 was not a peaceful place. The battle had been joined between the railroad supporters and the supporters of Governor James S.
Hogg. While he was Attorney General, Hogg had taken on the railroads, prosecuting several of them as well as the rate-setting organization of railroads, the Texas Traffic
Association, for monopolistic actions and conspiracy to discourage competition. In the race for governor which he won in 1890, Hogg had campaigned for the creation of a
commission to regulate the railroads.
In just a few decades, the railroads had turned from being the object of enticements by the state and many communities to being an object of derision. Why this change?
Notwithstanding Mr. Brown's remarks, Texas had early on encouraged the railroads. In 1850, Bexar county became the first of many counties issuing bonds to railway companies
to encourage settlement and communication. In 1852, the State began to grant railroad companies land: 8 sections of 640 acres each for every mile of completed road. Within two
years, that was upped to 16 sections per mile completed.
In the Eastern United States, the railroads followed the people, connecting already existing population centers. In most of Texas, it was the other way around. From the time
of the Republic, it was a recognized policy to set about attracting settlers from back east and the countries of Europe. One way to do that was to have a transportation system already in place. But, railroads are heavily capital intensive--it took a lot of money to do the necessary grading, buy and install the ties and rails, purchase the steam locomotives and cars. Since the companies did not want to invest if there was no market--no people and no goods--the state sweetened the pot by land grants, bond issuances, and loans.
Some railroads were given right-of-ways and alternate sections of public land along them, with the off sections usually going for schools. The railroads advertised heavily back east and abroad to bring in settlers to whom they could sell land from their grant sections. To encourage purchases, the railroads sought to endow selected communities with an aura of stability by aiding in the building of sturdy courthouses, jails, and even churches.
Coming out of the boom in construction that followed the Civil War, the Texas and Pacific Railway finished construction of its railway line from Texarkana to Sherman and from Longview to Eagle Ford--a total of 251 miles--in 1873. The next portion of the Texas and Pacific began in 1881 as the line moved from Fort Worth toward El Paso, using a land grant from the State for 5,338,528 acres.
By the next year, the law authorizing land grants was repealed--there was no more available public land.
In the decades after the Civil War, the people of Texas began to recognize the power railroad companies held. Dirt roads for wagons were rough and most were short. The state had no navigable waterways. Railroads were the only way to ship materials in and products out. The major railroads had formed an organization, the Texas Traffic Association, which set rates at whatever level it was felt the traffic would bear. One result was an arbitrary cast to some rates: one railroad shipped lumber from East Texas to Nebraska for a lower rate than when it was shipped from East Texas to Dallas. M. M. Crane, a prominent Texas political leader of the time described the situation. "The owners of the railroads were like many other people," he said. "Having the power to charge what they pleased, they were never overly modest in fixing their compensation."
Such abuses and discriminatory rates primed the people of Texas for change. Let's take a more detailed look at those early Texas railroad years and trace the path leading to
effective regulation.
---------EARLY TEXAS RAILROADS------
[from an early(ca. 1940), unpublished Commission manuscript]
The Republic of Texas granted the first government charter on December 16, 1836 to the Texas Rail-Road, Navigation and Banking Company. The company soon dissolved without any stock being sold or a single mile of track laid.
In 1838, the Brazos and Galveston Railroad Company was granted the next charter which included the provision "Congress...shall have the sole power of regulating rates of tolls." Later charters required "good and sufficient causeways" at road crossings, signals with locomotive bell and steam whistle, brake upon hindmost car, "good T- or U-shaped iron rails" of defined minimum weight, and the provision of connection between intersecting railroads.
The great difficulties attending the construction of the first railroads caused many of the early charters to be forfeited for failure to fulfill the conditions of the charters. The first company to begin actual railroad construction was the Harrisburg Railroad and Trading Company which was chartered January 4, 1841. Construction had progressed to the extent of some grading of the right-of-way and the contracting for some cross-ties when the project was abandoned because of lack of funds and the "threat of invasion of Texas by Mexico." On February 11, 1850, a charter was issued to the Buffalo Bayou, Brazos and Colorado Railway, the successor of the Harrisburg Railroad & Trading Company. Grading was begun the following year, track laying the next, and by August 1, 1853, the first twenty miles of railroad in Texas was in operation between Harrisburg and Stafford.
Despite the relatively early date at which the operation of the Buffalo Bayou, Brazos & Colorado Railway was begun, the Texas Legislature had already enacted rather comprehensive laws pertaining to railroads. On February 7, 1853, the Legislature approved, "An Act to Regulate Railroad Companies." Its provisions included
requirements for annual reports, legislative regulation of rates (allowing a 12 percent profit), directors being liable for debts, fixed regulations covering uniforms, crossings,
facilities, bells, etc., and allowing the state to purchase railroads.
The recognition of the people of Texas that railroads were urgently needed to carry forward the development of the State is reflected in the subsidies which were granted the
railroad companies, subsidies of both land and the use of money from public funds at a low rate of interest.
Although much of the early legislation regulating railroads was adapted to control inherent abuses in a monopolistic form of business enterprise, the administration of the laws left a great deal to be desired. Since there was no agency especially created to administer the provisions of the Act to Regulate Railroad Companies, the railroads
generally did not comply with the regulations. As the abuses of the carriers became progressively worse, especially after the Civil War, various groups were organized for the
express purpose of fostering regulatory measures to which the railroads would be directly amenable. One of these groups was a farmers organization called, the Patrons of
Husbandry, commonly known as the "Grange", organized in 1873, and having a membership of 40,000. The Grange directed its attack against the "fearful rates of freight," "profligate and greedy management," and "efforts to control legislation, influence courts or override law and justice." The agitation of the Grange resulted in a resolution calling on the Constitutional Convention of 1875 to prescribe a remedy to eliminate the abuses of the railroads.
The character of some of the constitutional provisions points significantly to the nature of some of the abuses practiced by the carriers. And it also indicates the increased ability of the peoples' representatives to cope with the problems of railroad regulation.
However, as sometimes happens in the passage of new laws, there was a very considerable lag in time between the enactment of the regulatory provisions and the effectual implementing of them by the government or one of its agencies. As yet no agency or commission had been created and especially charged with the responsibility of
administering the new regulations. Although the setting up of a railroad commission to administer the railroad laws had been recommended as early as 1876, the recommendation was strongly opposed by some interests, especially the financial backers of the railroads, who considered such legislation hostile and branded the proposals as "injudicious interference with business by legislatures."
After much agitation the office of State (railroad) Engineer was created in 1883, but the office had no power to order or compel obedience of the laws. Its function was to
investigate and make reports to the Attorney General. The office was destined for failure, and after two years it was abolished. Bills calling for a railroad commission were passed by the House in 1887 and 1889; however, the Senate refused to pass the bills on the grounds of constitutionality. This objection was circumvented by the adoption of a constitutional amendment authorizing the creation of a railroad commission. With the last obstacle out of the way, the Legislature passed an act creating the Railroad Commission of Texas in 1891. The fight for its creation had taken sixteen years. Some say it was the
predominant political issue of the time.
[The Caption from the Act Passed by the Texas Legislature in 1891]
An Act to establish a Railroad Commission for the State of Texas whereby discrimination and extortion in railroad charges may be prevented, and reasonable freight and passenger tariffs may be established; to prescribe and authorize the making of rules and regulations to govern the Commission and the railroads, and afford railroad companies and other parties adequate remedies; to prescribe penalties for the violation of this act and provide means and rules for its enforcement.
---ON JAMES S. HOGG, CAMPAIGNING FOR GOVERNOR IN 1890----
Hogg campaigned with awareness that there were more common people in Texas than any other kind, and he suited his merchandize [sic] to the market. He was a great commoner.
He knew the dirt farmer's soul, and which allusions grabbed his mind. Hogg was earthy in his speech, inventive in his epithets--though "by gatlings" was the worst he essayed when
ladies were around. Hogg was a flaming reformer on the hustings, standing against everything the embattled farmer hated, inventing some things the farmer had not yet
imagined. But Hogg was no fool, nor was he really radical. He was a flamboyant, but deeply folk-conservative man; he knew how to survive in party politics, whom to fight, and
with whom to make a deal. He was a hoeman champion, but no farmer himself; he ended up quite rich. Hogg had a keen mind, and he proved it more than once in court against
some able outside legal talent. Above all else, however, in the public eye he was a stump man.
On the stump, he could hold a crowd of Texas farmers for hours, blasting railroads, bloated capitalists, insurance companies, gold; he extolled the simple life and the virtue of the men who tilled the soil. He threw off his coat and worked up sweats; he dropped his suspenders and splashed water over his brow, got his second wind, and went on to new
heights amid cheers. Hogg and his railroad commission plan won by a huge vote.
Fehrenbach, T.R. Lone Star: A History of Texas and the Texans. New York, American Legacy Press, 1968. pp. 620-1.
----------THE "RAILROADS" IN THE RAILROAD COMMISSION-----
Within a very short period of time after its creation, the Railroad Commission cut the rates railroads were allowed to charge. Almost immediately, the Commission was taken to
court and placed under injunction. It was not until 1894 when the United States Supreme Court ruled that the act creating the Railroad Commission was constitutional that the
lower rates were put into effect.
In the meantime, in 1892, the railroads made an unsuccessful run at having the legislature abolish the Commission. In 1893, the Commission was granted statutory authority to regulate issuance of railroad stocks and bonds. In 1894 the constitution was amended to change the office of the three Commissioners from appointive to elective, with six year staggered terms.
The Commission's responsibilities included:
1. Administration of laws relating to the railroads of Texas.
2. Determination of passenger fares, freight rates, and charges for all classes of commoncarriers in Texas.
3. Holding public hearings.
4. Receiving of reports, making investigations, and keeping of records regarding fiscalstructure, valuation, revenues and expenses, and train, terminal, and traffic service of
Texas railroads.
The legal focus of the Commission was on intrastate passenger and freight activities within the borders of Texas. Interstate moves fell under the jurisdiction of the U. S. Interstate Commerce Commission.
NOTE: John H. Reagan, first Chairman of the Railroad Commission, had been instrumental in the creation of the federal commission in 1887 while he was serving as
U.S. Senator from Texas.
When the Commission was founded in 1891, there were some 8,700 miles of track. When the railroads reached their peak in Texas in 1930, there were 17,500 miles. Following
World War II, increasingly goods began to travel by truck and people by buses and cars and the miles of track began to shrink.
Over recent decades, the role of the Railroad Commission in the regulation of railroads has changed, moving from economic regulation to safety regulation. The Federal Railroad Safety Act of 1970 vested rail safety responsibilities in the Federal Railroad
Administration. In 1983, the Railroad Commission began a cooperative process with the federal government, implementing a rail safety program. The Rail Safety and Planning section of the Transportation/Gas Utilities Division monitors the state's rail lines, inspecting railroad equipment, operations, and track. This section also maintains the state's rail planning program and oversees the use of federal funds for track rehabilitation projects.
Under provisions of the 1980 Federal Staggers Rail Act, the Railroad Commission recognized that it could hold only a passive role in rate setting. In 1984, the Railroad
Commission ceased its historic role in economic regulation of the Texas rail industry.
---------------OIL AND GAS---------
Shortly after the end of the Civil War, the first purposeful and successful attempt at drilling for oil in Texas occurred at Oil Springs, near Nacogdoches in East Texas. In 1866, less than a decade after Colonel Edwin Drake's 1859 Titusville, Pennsylvania well brought America into the age of oil, Lyne T. Barret struck oil at 106 feet. Oil had been found before in Texas, but it was either through surface leaks or when drilling for water. Alas for Barret, though, the greater volumes and lower producing costs of Pennsylvania oil beat his Texas oil. As a result, he abandoned the well.
Then, in 1894, the beginnings of the Texas age of oil were realized by the first major discovery--Corsicana in the east-central part of the state. Then it seemed like it was one discovery right after another. The first true boom came from the 1901 Spindletop gusher of Anthony Lucas. Working with a salt mining company in Louisiana, he had noticed the
gentle mounds that raised the surface of the Louisiana and Texas Gulf Coast. He recognized these as salt domes--natural traps holding reservoirs of oil. Spindletop was not the last of the south-east Texas fields. More followed.
The next cluster of discoveries was in North Central Texas between 1902 and 1920--Petrolia, Electra, and Burkburnett--and, during that same period, and a little further south--Breckenridge and Desdemona in 1918.
Throughout these early years, whenever a boomer came in, oil seemed to cover the surrounding lands. The pressure of some of these wells was so great that it was days before the flow could be controlled. In the meantime, oil soaked into the ground, or ran off in nearby creeks and gullies, or was directed into nearby pits that were hastily dug. Even
after the flow was controlled, pits were used for storage or vast open tanks. The results were inevitable--waste and pollution. While pollution may not have been a concern in
those early days (oil was a sign of wealth and adventure even if it was in a creek), waste was. And, a fire roaring from one well to the next, engulfing one tank then another, was an all too frequent occurrence.
While the Texas Legislature in the later 1800s and early 1900s had passed several bills relating to the use or conservation of the state's oil and gas, a familiar thing
happened--very little or nothing in the way of observance. Laws without enforcement or with enforcement only through the courts had a tendency to be ignored. As each discovery
occurred, more waste occurred.
Other problems cropped up in the infant industry. Transportation was one. To have substantive value, the oil had to reach its markets--the refineries. Early on, miles of tank cars were pulled by steam locomotives. Then, pipelines became the choice in many regions. However, if a company owned both a pipeline and wells, the tendency was to take
from its wells and ignore surrounding wells owned by another company. In 1917, to prevent abuses, the Legislature designated oil pipelines as common carriers and, more
importantly, give jurisdiction to the Railroad Commission which was already regulating a transportation industry--the railroads. By 1919, the Commission was also granted
jurisdiction over oil and gas production. It was at that date the Oil and Gas Division was created.
Regulation did not truly take hold until the 1930s and it was a struggle all the way. The East Texas Oil Field was discovered in 1930. Unlike many other fields at this stage of industry development, the East Texas Field was taken over by a multitude of small independent operators, each racing to put up a rig. Derrick touched legs with derrick. Each well was produced wide-open. The price of oil crashed. More critically, it was felt that the natural water drive of the field was being lost. When the Railroad Commission tried to step in and cut back production, action began in the courts and, at one point, State military forces were called in to regain order. It was several years before courts and the
State Legislature were able to settle on the position that the Commission had the right to prorate production--to conserve the state's natural resources, to protect correlative rights, and prevent pollution.
Since the 1930s, the Railroad Commission has held a leading role in the regulation of oil and gas, one that has been recognized throughout the world. Even though production has been declining over the last few decades, the state still produces more oil and gas than any other state. Indeed, if Texas were a nation, it would rank as one of the top ten producers. Today, there are some 241,000 active oil and gas wells which produce an average of some 1.7 million barrels of oil a day and 11.5 BCF (billion cubic feet) of gas a day. The Commission's Oil and Gas Division tracks that production and ensures that it follows allocations that are calculated each month. In addition, through its ten district
offices, field inspectors visit the wells and facilities across the state to ensure compliance with Commission rules and regulations. Increasingly important, the division works to ensure that the water resources of the state are protected from damage by oil and gas field activities.
FOA
FOA (8/16/99; 19:40:00MDT - Msg ID:11288)
Just thinking
koan (8/14/99; 22:04:51MDT - Msg ID:11153)
What about Asia?
Here is one of the problems with this gold conspiracy idea. If gold were artificially low, or if there was true physical shortages, or both, as most maintain, Asia would be in there buying with both hands. I do not believe Asia has ever been considered as part of this gold conspiracy - so how do the conspiracy buffs explain Asia?
---------About a year or two ago, that is all everyone talked about. The facts, to "eagerly address the obvious hard question, is that Asia was buying with both hands. All of the WGC figures point that out. Go back and review their (and any other gold news letters) articles for the 96, 97 era. It's all there. Every gold bug looked to Asia and India to ignite the next bull market. It didn't happen! This massive physical buying was on the verge of destroying the liquid supplies that backed much of the modern paper gold market. Without a liquid market, gold in dollars would have exploded, wrecking the dollar's credibility before the Euro was born. The BIS stepped in and stopped supporting the Asian currencies. An effect that broke the ability of these countries to buy gold. Koan, this was all pointed out some time ago. You must have not seen it. It's only today, that we see the recovery of demand from this part of the world. With the Euro in place, that demand will not be hindered again.---
koan (8/14/99; 22:27:44MDT - Msg ID:11155)
the truth
Personally, I am only interested in the truth. I don't care one way or the other what it is. I have found in life that when people get defensive, when hard questions are asked, it is because they are not as interested in the truth, as they are in defending a position. I have said all along that the
claims made by many may be correct. I just would have no way of knowing.
-----In the early days of the American wild west, educated "easterners" often found their way into these bad lands. Traveling with a scout that knew the way, these nouveau cowboys often rejected the common sense directions that would keep them secure. If we would listen quietly the advise of "John Wayne" can still be heard: "Pilgrim, those arrows flying past your head may not be aimed at you, but you can sure as hell duck down with the rest of these good people. And while you're waiting for events to prove otherwise, load my rifle, please, dam it!------ (smile)
koan (8/14/99; 22:38:23MDT - Msg ID:11158)
no evidence
I know of no evidence, whatsoever, that when paper is presented that gold or silver, or stocks or whatever are not delivered. Does anyone? The conjecture is interesting, but where is there evidence that the contracts are not being honored.
------Now that you mentioned it, I would like to see hard evidence that these contracts are being honored? Does anyone have any recent news stories that suggest this is happening? If so, does it imply that all the rest of the thousands of open contracts on Comex are also going to be supplied?
And, indeed, if the paper contracts do become voided from nonperformance, should we wait for the outcome in the courts before attempting to purchase more gold? Is it possible that the price and availability of physical gold could become a bit of a problem as as the mainstream media confirms these events? Indeed, it is interesting conjecture.----------- (just thinking)
FOA
FOA (8/16/99; 20:16:29MDT - Msg ID:11294)
Reply
Cavan Man (8/16/99; 19:52:39MDT - Msg ID:11289)
FOA
What are your thoughts on the Goldman Sachs event as it relates to our favorite subject?
CM,
Be back tomorrow with some other replies and a comment on GS. Our favorite subject is in for some major battles for control!
FOA
FOA (08/17/99; 12:16:06MDT - Msg ID:11339)
Reply
Cavan Man (8/16/99; 19:52:39MDT - Msg ID:11289)
FOA
What are your thoughts on the Goldman Sachs event as it relates to our favorite subject?
CM,
Our present gold market has evolved into a paper trading arena. It didn't just happen overnight (meaning the last several years).
During most of the 90s the actual demand for gold was easily covered by selling paper gold to those that wanted "a gold portfolio". Contrary to current thought, most of the major buyers of gold (investors that put 500,000+ into it), don't buy coins, bars or fully paid for warehouse receipts. In this "new gold market" they put 20% into some form of paper gold derivative that theoretically can deliver a half million in gold and the other 90% into interest bearing instruments. They then proceed to tell everyone that they have gold in their portfolio.
This is why the current and recent past demand for gold has not impacted the actual physical price. The majority of the paper gold market is a cash market that circumvents the buying of real gold. The demand is satisfied because short players can sell a paper gold derivative without having
or needing any gold, just a large cash deposit will do. In addition, it also works because gold investors are willing to hold and roll over this paper as long as they perceive that the short could buy gold if delivery was ever asked for.
As long as some gold can be delivered and it's price is down trending, over time, a mindset is developed among investors that this paper gold market is "the physical gold market". It's not! A true physical market, buying coins, bars or holding fully paid for warehouse receipts would totally overwhelm the physical supply today. Converting just the current new demand for paper gold (not
considering anyone trying to move out of old paper gold) into physical, would blow the market sky high. It hasn't to date because the demand is hidden as it is channeled into paper supply.
I tried to comment on MKs question about where all the new gold is coming from. Currently, new mine supply is covering industrial and coin needs. Any additional physical gold needs are covered by private investors slowly scrumming to the "new age" trends and holding gold derivatives
instead of their real gold stock. This process has been ongoing for some time.
Every industry observer keeps tabs on the "so called "big supply deficit". I can tell you that deficit is almost nothing compared to the demand being covered by paper gold. Forget the shorts running for cover, that's the small potatoes angle followed by the trading crowd. The real move
comes when the current world gold market, operating as the "real physical gold market" breaks from default! Once it's discredited all that demand will then funnel into physical gold and lock up the dealer network for some time (perhaps years) untill price can balance demand.
Yes, we are a nation and world of laws, and because of that the courts will be loaded with gold owners that ended up with just "the obligation of another to supply gold". We saw in my bit about the TRC and how they evolved into something different from what was started. The same can be
said about the gold market. Evolution: The breaking of the dollar obligation to supply gold: the need to create an equal exchange medium for oil supplies: then the use of no interest gold to generate liquidity as cover for destroyed dollar reserves. These real life politically inspired manipulations have brought us to today's approaching destruction of our world gold market. Not the rambling
commodity supply and demand conjectures of traders.
What of the GS comex gold grab? First here is a part of an earlier post: FOA (5/26/99; 20:00:20MDT-Msg ID:6766) ------My friends, the choice is now "clean" and "clear"! The writers of paper gold "outside" the Euro realm are cornered with the lack of available gold! Completely!
--- Presently, from inertia, they still control the "paper price" in the dollar / IMF arena, but they can never convert it into gold. They must do what any cornered being will, continue to create (short) contracts of worthless nature to protect their position. At some point, their market will suffer a total collapse and cease to function. It will happen no other way.-------------
CM, Several months ago and some $20 higher I said that gold would go no lower and physical would become hard to obtain in quantity. I was wrong on the price because I did not fully understand Another's post. Later he pointed out that the actual process of this market failing would
bring on the discounting of paper gold against physical. I didn't believe it at first, but he has to know, he's in the middle of it.
Now I know he was right as there are no large blocks of gold to be purchased. Anyone wanting a few hundred thousand ounces must wait for unknown delivery. As everyone begins to hold onto whatever gold they have (and buy more), the outstanding paper will be forced to revert to cash
settlement. Much as the dollar prior to 71. No gold delivered, you just settled for cash, the dollar cash in your hand. Only, this time, the settlement cash will make a run for gold. It's started.
Truly, we watch this new gold market together, yes? FOA
FOA (08/17/99; 19:16:09MDT - Msg ID:11365)
Comment
Cavan Man (08/17/99; 13:20:11MDT - Msg ID:11344)
FOA 11339
In re-reading your post, I noticed the term "scrumming". Are you in fact a current or ex- rugby player?
CM,
Ha, Ha, you are good! I was wrong all the way around on this one. In my mind I meant to say "scrumming into" as a kind of rugby disorder that occurs in that play.
---Any additional physical gold needs are covered by private investors slowly scrumming INTO the "new age" trends and holding gold derivatives instead of their real gold stock.--
For anyone else here: Scrummage: a rugby play in which the forwards of each side come together in a tight formation and struggle to gain position of the ball as it is tossed in among them.
It was a poor use of words for speaking to a large audience. English is a tough language for anyone to master, well!
ALSO:
Cavan Man (08/17/99; 12:34:49MDT - Msg ID:11341)
FOA
Please accept my humble thanks. From my simpleton's perspective on worldly matters, I cannotunderstand how anyone could refute your commentary; it makes too much sense to me. Either you are a fabulous hoax or, "right in the middle" and just a fine specimen of humanity desiring to give "the little guy" a small break. I say the latter.
CM,
Thanks for yours and others comments. I and Another would rather you consider us the simpleton's. If anyone's perception of these writings are as a "fabulous hoax", that is fine as long as they make the people of this world "think"! Events will prove this path is the right trail to follow, not our credibility. In part reply to Koan and SteveH; we offer only direction, in that others may find
truth. Thanks FOA
FOA (08/17/99; 19:25:53MDT - Msg ID:11368)
Comment
http://www.iht.com/IHT/TODAY/WED/FIN/ecb.2.html
Aristotle (08/17/99; 13:49:23MDT - Msg ID:11349)
Aristotle,
Your writing along with Aragorn's helps enormously in expanding the view of this subject. It is little wonder that the general public is confused from the hellacious interpretations from the media. Even the news reporters understand but tiny bits of this and that is applied out of context of the big picture.
Below is a good write-up about the Euro. It offers the very reason why it will outlive the dollar.
------''Since the internationalization of the euro, as such, is not a policy objective, it will be neither fostered nor hindered by the Euro system, the bank's analysis said.-
The ECB is clearly not playing the "trading" game. World movers want the Euro to move quickly up and down, so as to profit in their derivatives positions. That is the real reason for criticism. To their credit, the ECB did not sell the Euro when it opened too high and they didn't buy it when it went too low. That practice alone will win massive support for this currency when the dollar is broken with a high gold price. In that time, using the Euro for trade and accounts will look no different to Americans than it would to Canadians using dollars. In truth, the Euro will look much better! see below
Paris, Wednesday, August 18, 1999
ECB Focuses On Potential, Not Frailty, Of the Euro
By John Schmid International Herald Tribune
FRANKFURT - The European Central Bank moved Tuesday to shift
attention away from the euro's prolonged weakness and toward its potential for gaining an expanding role in the global economy.
While few would disagree that the euro stands a chance to cut into the dollar's hegemony, the central bank's position points to the growing acceptance of the 11-nation currency by non-European governments and companies and the eventual prospect of greater European Union influence in international affairs.
''The ECB can be pleased about this because it shows an underlying confidence,'' said Adolf Rosenstock of Nomura International in Frankfurt. 'The trend is well documented, and it is a good time to review the issue.''
The central bank's view, laid out in its bulletin for August, presents a brighter view of the euro than foreign-exchange traders have conveyed so far this year.
The euro lost 15 percent of its value against the dollar in its first six months after its debut in January, nearly reaching parity with the U.S. currency. After bouncing as high as $1.08 less than two weeks ago, the common
currency has begun to soften again.
In midday trading Tuesday in New York, it fell to $1.0525 from $1.0578 on Monday. It also slid to a new low against the yen.
The central bank was careful to avoid any suggestion that it was striving for global influence. Rather, the bank emphasized that however the euro's role evolved, it would be determined by market-driven forces.
'Since the internationalization of the euro, as such, is not a policy objective, it will be neither fostered nor hindered by the Eurosystem,'' the bank's analysis said.
Despite its disclaimer, economists say the euro's role abroad is just as important to the central bank as the exchange rate. Indeed, the euro's global role will become one of its permanent features, while its value in currency
markets fluctuates daily.
The central bank avoided suggesting how rapidly the euro's role would expand. Nor did it say to what degree the euro could dent the dollar's dominance. It also made clear that the euro's gains as a reserve currency for use by central banks would come more slowly than its gains in the private
sector.
A handful of ''risk characteristics'' will determine how forcefully the euro establishes itself, the bank said. Those include investor confidence in monetary union and the pace of economic reforms and fiscal discipline among the 11 euro nations. Sustained growth in Europe and the competitiveness of its companies can also ''foster the international use of its currency,'' it said.
The euro made its most immediate and concrete debut with an unexpected flourish of new euro-denominated bond issues. In the first half of 1999, the euro accounted for a greater share of international debt underwriting than the combined shares of the former euro-bloc currencies.
The euro even overtook the dollar in that period, the central bank pointed out. About Û100 billion ($105.78 billion) in euro-denominated bonds, notes and money-market instruments flooded the market in the first half,
compared with the equivalent of Û87.1 billion of dollar-denominated securities.
'This is one part of monetary union that is going better than planned,'' Mr.Rosenstock said.
The report also pointed out that the euro began from a position of global strength. The euro already ranks as the ''second most widely used currency at the international level,'' behind the dollar and ahead of the yen, it said.
Compared with the United States, the euro area has a slightly smaller economic output but accounts for a greater share of world exports, it said.
The euro also will remain the second most important reserve currency for the world's central banks, it predicted. The euro's reserve-currency role also has the potential to expand, albeit slowly, the central bank said. Central
banks typically refrain from abrupt changes to their reserve balances, the European Central Bank said.
FOA (08/17/99; 19:39:19MDT - Msg ID:11370)
Comment
Cavan Man (08/17/99; 15:08:43MDT - Msg ID:11355)
Al Fulchino (08/17/99; 14:50:25MDT - Msg ID:11354)
In reply to your thoughts: Let's all watch and see who makes the next move. As for me, it should be obvious that I have taken my checkers off the board and gone home.
FOA (8/18/99; 7:12:53MDT - Msg ID:11442)
FEARS SYSTEMIC FAILURE IN WORLD FINANCIAL SYSTEM
http://www.Minesite.com/feature3.htm
-------Poor Ms Fukuda. Little did she think she would be taking on the entrenched power of the world's financial system when she took over as chief executive of the World Gold Council earlier this year.-------
------Now the scales have dropped from her eyes and she sees the size and complexity of the problem. Producers, banks, hedge funds and now politicians are all aligned against her as bears of gold, though for differing reasons. Producers, to obtain cash ahead of production at a fixed price,
bankers and hedge funds to make money, and politicians because they fear an implosion in the financial system.----
ALL: I think we are about to see just how important gold is in our present system of dollar reserves. ""implosion in the financial system"" Didn't see that on my local TV?
FOA
FOA (8/18/99; 9:02:39MDT - Msg ID:11452)
Please! Everyone read this also!
http://www2.techstocks.com/stocktalk/msg.gsp?msgid=10990132
USAGOLD, Michael, this link was sent to me! It's just too important for this knowledge to be hid! I hope everyone get's a subscription to the The Freemarket Gold & Money Report because of this exceptional report.
Aug 17 1999 9:49PM ET
**within two weeks of August 16 ...** Ron, this GATA like article I present here is a slim'ed down vesion of it's
appearance on Le Metropole Cafe's web site. It's pay per
view protected by copyright, so I hope the next knock at my
door is not a law enforcement officer or a messenger with an
injunction order served against me. Please comment, and in
about 10 days us all can observe predictions justified or not.
Move Over Fisk & Gould, James Turk, james@goldmoney.com, August 16, 1999
Copyright c 1999 The Freemarket Gold & Money Report. All rights reserved.
In 1869, Jim Fisk and Jay Gould tried to corner the Gold market, and for a time, this notorious duo succeeded. It is a fascinating story, that is relevant to what is happening in the Gold market today.....
... to protect this hoard, Gould paid $2 million to two shameless attorneys to lock up in litigation the assets of the NYGE and countless brokers, as well as to defend the pair from the 300-plus law suits subsequently filed against them. Some of this money also went to Boss
Tweed, who through the Tammany Society controlled New York City's finances and politicians.....
... why have I related this story ? ... within two weeks of August 16, 1999 another Gold squeeze will start .....
... Consequently, central bank manipulation of the Gold market has limits.
... abnormal conditions now prevailing in the Gold market provide the opportunity for the spike...the spark is being provided by Goldman Sachs.
This past Thursday, Goldman Sachs responded publicly to its actions taken over the past few days behind the scenes on the Comex. Goldman announced that it had given notice to the Comex that it was standing ready to take delivery of about 473,500 ounces of Gold, about one-half of the total weight in Comex vaults.....it could take delivery of even
more metal, possibly nearly depleting Comex stocks.
... the reasons behind this move by Goldman ?..... put two-and-two together.
... rumors ... that the big Tiger hedge fund is in trouble.
... investors in hedge funds...are withdrawing their investment quickly at the first hint of poor performance. Thus,Tiger has been suffering withdrawals of capital, which has required Tiger to liquidate investments to provide the funds needed to meet these withdrawals.
Now here is where it gets interesting.
Australia's largest Gold mining company is Normandy Mining (NDY). According to NDY's fourth quarter report dated June 30th, Tiger owned 11.68% of NDY. At present prices, the face value of that position is about US$156 million, surely not one of multi-billion Tiger's biggest positions, but nevertheless, it still is a big chunk of change.
Tiger acquired this stake from another Australian company a couple of years ago around A$1.75. NDY is now trading at A$1.20, and before the latest run-up in the Gold stocks was around A$1. But don't shed any tears for Tiger.
As I understand it, Tiger did what most hedge funds do; they hedged this position. How? Tiger had sold short Gold bullion, and its gains from this short position as the price of Gold slid lower have more than offset the losses on the drop in the NDY stock price. But these are paper profits, and now the hard part for Tiger begins. How do you unwind
this huge position without eroding your paper profits? Taking profits becomes exceptionally important when you need the cash to meet investor withdrawals, as Tiger apparently now does.
The first thing to do is buy the Gold needed to cover the short Gold position, and here, Goldman once again enters the picture. The metal now being accumulated by Goldman on Comex will I understand be delivered to Tiger, to enable Tiger to cover its short Gold position. What I hear is that Tiger will then unwind its long NDY/short Gold trade. In other words, Tiger has already purchased this metal on a forward basis.
Goldman is Tiger's broker on this trade, and Goldman will deliver to Tiger the metal Goldman will obtain from the delivery it is taking on Comex. Here's where it gets really interesting.
During the delivery of any month, it is the shorts that choose the time to deliver on their short position. The longs have no option but to wait for the shorts to decide when to deliver, and normally the shorts wait until the end of the month This slowness to deliver is understandable because it enables the shorts to earn interest as long as possible. This month the shorts must deliver by August 27th, which in Comex terms is the end of the month. Somehow and from somewhere, the shorts must come up with 473,500 ounces of Gold bullion, and possibly more if Goldman takes delivery this month on even more Gold.
No problem, you say, because there is 948,973 ounces of Gold in Comex vaults? Well, that is true. But who owns that Gold? What if none or few of those ounces are owned by those who are short the Gold that must be delivered to Goldman Sachs? In that case, where will the shorts get the Gold they need to deliver to Goldman?
Therefore, on or before August 27th, which is the last delivery day, one of three things will happen, AND IT ALL DEPENDS ON WHETHER OR NOT THE SHORTS OWN THE 948,973 OUNCES OF METAL IN COMEX STOCKS.
1) If the shorts own this metal, they deliver metal to Goldman, and the Comex stocks will drop by 500,000-700,000 ounces (which is the weight that I expect Goldman to wait for delivery). The upward pressure on the Gold price in this case may be muted, and the squeeze in all likelihood averted for the time being. If so, all the shorts who have driven down the Gold price to its abnormally low level can continue for now to wring out every penny from their short position.
2) OR, IF THE SHORTS ARE NOT THE OWNERS OF THE METAL IN THE COMEX WAREHOUSE, we will get a huge short squeeze as the shorts try to find metal to meet their commitment. And I do mean HUGE, because there is no metal in the pipeline not already committed. The high Gold interest rate is a stark warning to the shorts that metal is not available.
3) Or finally, the market goes berserk because of the short squeeze and the Comex announces a repeat of what they did to Bunker Hunt, i.e., horrendous cash margins and only trading for delivery into Comex stocks is allowed. This alternative will probably prevent the short squeeze from reaching its full potential, but the Comex cannot be expected to act until the short squeeze has already begun. So there is still plenty of opportunity to make a lot of money on the spike that I expect in the Gold price.
The potential now exists to make the 1869 short squeeze engineered by Fisk and Gould look like child's play compared to what is coming up, if we get alternative #2 above. And my own guess is that we will get #2, but this is just my guess.
One other bit of info. Apparently, Goldman did not want to take delivery of this Comex stock (which they obviously knew would bring a lot of public attention to this move), but Goldman had to tap Comex. The reason? Goldman could not get their hands on this metal from any other source! There's nothing in the pipeline of this size not already committed, so this shortage of metal will add fuel to the fire of any short squeeze. This shortage of metal also explains why Gold interest rates are so high because as I have been saying in recent letters, there is no lender of last resort to the bullion banks.
Without any doubt, it should be an interesting couple of weeks! In nearly 30 years of commodity trading, I've never seen anything like this before, but the upside could be spectacular, even bigger and better than it was for Fisk and Gould.
THE BIG SQUEEZE If I've learned anything over the years, it is to not underestimate the power of central banks and their willingness to play 'hard ball' to enable them to keep their hands on that power. Witness the Gold sale by the Bank of England as evidence of my proposition. So if a big squeeze in the Gold market does occur, will the Federal Reserve stand idly by? Probably not, because I doubt very much whether the Fed would like to see the Gold price scoot to $500 per ounce in a fortnight.
We must therefore try to think through the other options as to what could happen if the Federal Reserve sticks its nose into the Gold market, if it hasn't already done so (some argue that the Fed already has its hand in manipulating the current low Gold price). In any case, some of its options are:
1) The Fed gets its central bank pals to lend metal, throwing to the wind any concerns they may have about the solvency of their counterparty and/or about their need for metal as Y2K approaches. This action would keep the Gold price and Gold's interest rate tame, much like what has happened since 1996.
2) The Fed gets more central bank pals (like Bank of England) to dishoard Gold. This option would accomplish much the same as #1 above.
3) The Fed brings in the federal government to intensify its anti-Gold media campaign. The nameless 'specs' are about to get bombarded with bad press if Gold begins to rise. The Fed will arrange with the media to get many quotes from friendly sources talking up what the Fed wants you to hear. Left unsaid of course will be the huge short position in Gold established over the past few years with central bank connivance, which has created today's abnormal conditions in the Gold market and made a squeeze possible.
4) The Fed gets the federal government to force the IMF to sell some of its Gold and/or to return Gold to its members, which will then be loaned and/or dishoarded by them, thereby providing enough metal to postpone the squeeze. These actions would also allow the abnormal conditions in the Gold market to prevail somewhat longer.
5) If all else fails, then the Fed asks the federal government to close down the Gold market and/or to confiscate Gold like Roosevelt did in 1933, thereby providing the opportunity for them to get their hands on enough metal to relieve the squeeze. This time though, the Fed would probably get most countries to participate in the closure/confiscation as well.
But if #5 happens, then I think the implications will be even far greater than just trying to prevent a Gold squeeze. We will in that case be witnessing the end of fractional reserve banking, a system fostered by central banks since the creation of the Bank of England in 1694. In other words, it will mean the end of the cartel given by governments to commercial banks to bilk a country's citizens in exchange for the power that commercial banks, through their ability to create fiat money, give to governments. What power is that?
Governments survive on fear and power, but they cannot create bullets out of thin air. So what do they do?
Through their captive central bank and partners in crime, the commercial banks, governments create money out of thin air to buy bullets. This observation explains what central banks work so hard to preserve, but the implementation of #5 above will show how desperate the central banks have become and how little power they have left to prevent a systemic collapse. There are parallels to the waning days of the Soviet Union, which could not in the end prevent the fall of the Berlin Wall, let alone the collapse of its unconscionable people control system.
In short, banks and governments will no longer have the ability to work hand-and-glove toward their objectives, extortionate profits for the banks and unbridled power for governments. And it won't be a pretty sight.
The ultimate irony? The worst predictions of the Y2K doomsayers come true, but not because of computer problems and glitches. Rather, the monetary system built upon nothing but promises collapses because people finally realize that sometimes promises mean nothing, and if promises mean nothing, then the money from a monetary system built upon promises is worth nothing.
Le Metropole Cafe
http://www.lemetropolecafe.com
FOA (8/18/99; 16:25:54MDT - Msg ID:11486)
Later comments
http://www2.techstocks.com/stocktalk/msg.gsp?msgid=10990132
http://www.Minesite.com/feature3.htm
Phos (8/18/99; 12:10:47MDT - Msg ID:11472)
Hello Phos,
It's getting late, but some great dialog and reading came out today that I must address. I will reply to you later tonight, but first I hope you read both of these items. I posted the Minesite piece early on at 7:12:53MDT - Msg ID:11442), then offered the Turk article 9:02 MDT(Msg
ID:11452). If you have been reading the Forum over the last several weeks, then reading these two write-ups will only confirm these thoughts. Many participants on other net groups are not only completly losing their cool, they aren't even taking the time to follow the context of this thread.
Time no longer allows me to read the other sites, so I depend on several others to send in clear thinking discussion (such as yours).
It looks like GS is following the concepts I presented from Another. Sad as it is they are selling short all the various paper derivatives attached to gold that their capital will allow and at the same time buying physical Gold. Others have been doing this prudent arbitrage for some time, only now it has become visible and the street is in total denial! The play they are following is easy to
understand, as the present paper gold market is going into discount with no way to arbitrage it from the opposite direction! More later FOA
FOA (8/18/99; 21:41:40MDT - Msg ID:11496)
comment
St. George (8/18/99; 7:05:07MDT - Msg ID:11440)
Hello St. George,
I'll comment on your questions in order.
---Query to FOA: Sir; I would like to know what percentage of arab oil's physical gold holdings is actually in the hands of its owners? ie. within the respective owners national boundary as opposed to being in a vault "overseas" in NY or London etc. --------
SG, I really don't fully know. My understanding is that much of it is spread between Europe (Swiss?), London (that may have been changing the last year or so) and New York.
The following is a political answer that is more than troubling and confusing for most. For the sake of deep interesting thought, I'll throw it out here. No need to discuss, just think about it. A 007 type mind is needed to grasp it fully. Hard trading commodity types usually roll over with this one.
The first thought most westerners derive from this is that "oh, well, we have the gold so we'll just keep it if they don't give us the oil"! I don't often state this in writing, but I have to laugh at that joke of a thought! You see my friend, in this world black gold is far more valuable than yellow gold. It's just that very simple. For our lifetimes, the majority of the two most important items for commerce will both remain buried underground, gold bars in NY and oil in the ME. Another often said that "oil and gold never flow in the same direction". With that statement, most of us close our eyes and imagine a barrel of oil crossing the ocean while a gold bar sets in an airplane heading for the desert. In reality, as long as the worlds largest pool of oil is under that sand, their gold deposits are safe in
almost any government bank. Long standing protocols state the obvious: if the oil runs out, the gold is ours; if the gold runs out, the oil is ours! They get a warehouse receipt that says the gold is shipped when and if wanted, we get a warehouse receipt that says the oil is shipped when and if
wanted. Stated another way, they keep the hostage and demand that we hold the reward?
Well enough of that, this market is hard enough without adding more.
Your conclusion:
---------I believe this is an important fact to know for it will help answer the recurring theme/ question on this forum of WHEN? Assuming that there is increasing fear of defaults on paper gold contracts, are we now witnessing the owners of physical gold held overseas "backing up the truck" and taking their money home? For it is a matter of "trust in your banker" Finally, as gold is repatriated, the ability of the bullion banks to use this gold and engage in fractional reserve gold banking would seem to end and would answer the big question of WHEN?-----------Your comments are most appreciated. Thank You.
SG,
This new gold market is a vast sea of paper gold IOUs. We can divide the owners of those receipts into two groups, owners with major oil reserves and "everyone else". Because the world is so much more dependent on oil than it was in 1971 (the last time gold loans failed), oil producers will get their gold "no matter what"! Dam the citizens rights, war to the infidels, burn all books, but oil will flow! The only real problem for this failing gold market is what to do with the "everyone else"? I suspect that investors will lose their respect and money in the paper gold market when they
see the premiums on physical gold rise in a major way. If any person knows WHEN people will come to their sense, I reply as Another did "I would bow low before that knowledge".
Remember, even as Rome burned traders inside the city were still buying and selling houses. As the foreign armies were "pounding at the door", merchants gave runners orders for new supplies to buy. Nothing has changed. When / if gold closes in london at $50, someone will still say that you
should buy it there because it's a better value than wasting your money on $6,000 gold trading in the alley. And a better deal than $6,000 in the alley would be that gold mine for a nickel.
FOA
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