The Gold Trail by FOA - May 2000

All times are U.S. Mountain Time

(05/06/2000; 16:45:21 MDT - Msg ID: 20)
For Your Eyes Only!
Hello Again!

Thanks for stopping by my home before our hike. I have a large outdoor fireplace in back and plenty of chairs. Here we can first eat, talk some and then get on the trail.

I want to start by making my personal opinion more clear. Some of you that know what talk is coming are smiling already. But, this is for some of the newer ones.

First point:

It's shocking to me when I hear that so many are still trying to figure out "gold's place in the world". Some people even question whether gold is any kind of wealth worth owning, let alone be a substantial portion of their savings! With this mindset is it no wonder that this current slice of "Western Investors" can be so easily bilked out of their "hard money" savings. Instead of saving gold for coming currency devaluation's, these same try to only profit from gold's current small price movements. It's an old strategy built to fight yesterday's gold wars and it's costing them plenty. Here- in, we see there is a huge difference from our position and what they are trying to accomplish. In the quest for profits they have taken the Fiat bait, "hook, line and sinker" and brought into fiat gold substitutes in every form.

But, I guess it must be this way. The financial convulsions that lie just ahead cannot possibly occur with everyone holding physical gold. At least not at any kind of currency prices we see today. Perhaps this is just one more signal of the end of this financial era as we know it. Somewhere in the "good book" I read where in the end many would throw their metal in the streets. By buying gold substitutes we may be seeing a whole segment of our world savers literally tossing the metal before the fact.

Let me expand:

We, physical gold advocates, have largely built our views from the actions of several smart players. Players we perceive are out there in significantly large numbers. Here we find a kind of thinking that's completely opposite from the dollar asset world most (Americans) live in.

When all of us hear of someone buying gold with no intention of ever selling it for dollars, we laugh! What good or profit could they ever derive from it? Well, a lot of paper gold bugs are going to understand this real soon. In a way that's kind of "up front and personal"! Our fellow "Trader Gold Bugs" all firmly agree that it's much better to hold a trading position on some form of gold derivatives. In their view, mining shares, stock and gold futures options offer a much better play and much better profit potential than physical gold. At least in dollar profits, that is.

All of this is fine and probably very true in their world of perception. But we have to remember that these TGBs all present their case for a higher value of gold as "the reason" to play the paper derivatives game. Whether gold's value rises from an industrial use physical shortage or induced from a currency devaluation (price inflation) physical shortage, they see the currencies as bad and gold as good. But the deep flaw in this thinking is found in this: "Playing paper gold substitutes is only a game that tries to make you more of the same currency that's failing from price inflation"! It's a currency game that's apart from owning physical gold. In other words their position is: "if fiat prices are rising 10% or 20% I want to make at least that much more of those currency units so as to keep me ahead". Even if they get delivery in gold against paper contracts or receive some gold as a dividend from a mine, they need and intend to sell it for cash to profit.

Whether their gold stocks are surging or their stock dividends are rising or the leverage of futures options are gunning ahead,,,,, the gain "in the mind" and "in the hand" still comes in the same fiat you are losing against. You play the game because the money is somewhat failing, but keep making more of the same failing money to stay ahead! Get my picture? That's ok when the currency was just inflating a little and world governments were trying to save said currency. But the currency war ahead will paint an entirely different picture in these markets. The next price inflation will build well past "plain inflation" and explode into Hyper-inflation.

It all comes down to you playing with a paper gold supply that's supposed to represent gold you could conceivably get, if needed. But the closer we get to the "real act" in this play, the more the paper game is inflated with supply that cannot be covered outside a cash settlement. That is a simple position to understand and work from but just look around? The "Western Mind" is stumbling all over itself in an attempt to explain it with a different outcome. In other words: There must be a way this can all work out so as to preserve our dollar and the leverage we own in these paper gold substitutes. You see, it's the perceived leverage in paper games that keep them coming back, but official policy has changed these markets in order to conduct a now ongoing currency war! Paper gold leverage is only an illusion built on the desires of dollar players trying to prosper in a dollar position. Well, I can tell you that the further we travel this trail, the higher the eventual cash settlement of all gold paper will be and the less that settlement will be allowed to match any "free physical" price.

This, my friends is the reason so many Physical Gold Advocates have no intention of selling their physical gold for dollars any time soon. "They don't expect the dollar to retain enough real value to warrant trading it for gold. At any price! When the "real act" begins to play out, international gold will be settled outside the dollar world and done so far above the coming forced contract cash settlement prices. Whether traded "outright" or for a "better" currency, gold and the current dollar derivative world will part ways.

By holding physical gold you are owning a super leveraged "derivative" that will be exchangeable against the value of real things at a par level lost to the minds of most investors. Today, physical gold purchased in dollar values is discounting it's worth by perhaps 100 times. For us PGAs, that is a leverage worth "playing the physical game for"! (smile)

Second Point

(that smoked salmon is good, no? go ahead, there's more here)

I have made it clear that I follow in the footsteps of giants and by extension remain in Another's shadow. We have been buying gold all through the 90s as a portion of out savings. It's held just like any other currency and represents a major portion of the (my) pie. I also own some gold stocks (smile). But own them in a portion and for a reason that any leading gold mine executive can only crave:

"they are held not for trading and in small enough portion that they will never be sold".

In effect, we own their product first and foremost for the real world, long term leverage it represents. We own a share in their business with a far away view across the "coming currency war valley". In the middle of that valley, amiss the war, we expect some of these businesses to survive by changing into the Euro world. But, most all of them will experience a crushing collapse in equity values during the war. My view to the other ridge sees a gold price, so high, that it will eventually overcome taxation, government production controls and even the failing dollar based contract gold market. Even though these shares will plunge "in the valley", my holdings are such a percentage that I will own them "through it all". This is why I own only a few of the very best and one in particular.

For all of you here today, contrast this position against the trader of the last few years? During the worst plunge in paper gold assets seen in a quarter century, these same have lost most of it through their leverage. In and out, in and out, and all the while saying they are only "a little down"! Then, at the slightest little rise in their paper positions, it's given that this proves they are right. Right in that paper leverage beats physical any day. I submit that the way traders work, they will be lucky to be even as gold runs past $1,000.

Again, Yen, Euros, dollars and Marks are in my savings position, but physical gold is held as the derivative that will best outvalue them all! I do not trade these positions, I build and save them. The coming political transition from dollar reserve use will break the paper gold markets into cash settlement pieces. In that process, induced by this Euro / Dollar war, physical gold will outperform any any all failing paper gold. The value is there to own today and anyone can have it! Events will prove that the footsteps we follow have placed on "the real gold trail".

Now, onward the hike.
See you there in an hour or so.

FOA/ your Trail Guide

(05/06/2000; 21:50:37 MDT - Msg ID: 21)
I see Gold!


Anyone following these walks knows I am not the best at putting the trail into words. We must therefore rely on events (and other writers) to demonstrate the real world around us. Recently the completion of the Swiss gold sale is a case in point. Here you have a country known for it's pragmatic hard money trends, yet it's selling gold. Something they would never do unless the process could in some way return the lost value back to them.

Trading Swiss gold into the BIS system gives further support to the Euro "free gold" cause. Giving the ECB / BIS more control over how physical gold is allocated only further starves the dollar paper gold world. Having once backed a low dollar price of gold for oil, the Swiss helped build and sustain the same contract gold infrastructure that would eventually be the undoing of the dollar. Today, they further align themselves with the Euro world just as a "deflationary" phase is set to impact the dollar dominated gold banking world. In the end, gold values will be much better with the Euro pricing a Free Gold marketplace. This in turn will mark to market the remaining Swiss stocks of gold at a higher level than could be currently achieved. Add to this a strong Euro system and the benefits will be enormous.

Gold banking paper deflation will lead to Gold banking paper inflation

Just as deflation in a currency block is caused from the defaulting of currency loans, we are on the same road in the gold banking business. Such deflation is cured the same way in both instances, paper printing! Be it gold paper or currencies.

In the end, a currency deflation is halted by supplying the currency units until rising prices become an obvious default of the fiat money. For you and I the prices of everything race ahead. For business caught on the wrong side of this, it's hell! In other words, the dollar prices of real physical things rise higher than many business contracts can deliver against. Hyper - inflation bankrupts businesses that agreed to supply a physical item at a price they can no longer buy it for. Whether tires, tools, batteries or gold bullion, anyone writing supply contracts that last into a major price inflation will end up settling those contract in cash. That is up to the limits of their capital. Then, only if the treasury deems them important enough does the government prop them up with more public cash to bail them out. This endless circle goes on until all currency contracts fail from the loss of credibility.

Our current world dollar gold contract business is arriving at this same juncture with different results. Paper gold markets expanded to meet investor demands. The only difference between now and in the past is that "Western investors" today want to invest in the price movements of gold, not use gold as a money holding. The demand for gold today became the demand for leveraged gold paper. Instead of selling real gold to meet demand, governments, bankers and brokers created more contract gold. In the same way that people borrow cash created out of thin air, would be gold owners and traders brought a lot of gold credits based on nothing but thin air. The paper market expanded until a political change now threatens it with default deflation.

Just like a fiat currency, modern gold currency is only credible until prices start rising against it. It will start out with a settling of contracts with only a percentage of physical and the rest in cash. Then, in the same way as prices rise against a currency during an inflation, physical gold prices begin to rise against paper gold. Slowly but surely, less and less gold is supplied against contracts until we end up with total cash settlement. All along, the physical "free gold" market trades at a higher and higher currency price. This, my friends is what dollar hyper - inflation may look like in our modern paper gold markets. The selling of paper gold "into the dirt" even as all prices run away.It may last for an hour, a week, six months or several years, but it will unfold this way. As long as investors believe in paper gold, their wealth will be slowly absorbed by physical gold buyers until trading breaks down. Eventually we have the super failure that locks up the entire paper gold arena and ends it for good as everyon's holdings are marked to the real market.


On another note, please read ORO #29003 and especially #29498 on the USAGOLD Forum. His Euro Crush and Dollar spike describe many of the items that impact our currency world. These same forces are also shaping the transition of the gold markets.

I noted this past week how the dollar rose against the Euro. Many rushed to proclaim the Euro weak and failing. I have to ask: "without a dollar to compare exchange rates to, how would anyone measure the Euro's weakness"?

If you lived in the Euro Zone countries, with a bank account full of Euro credits, what impact on your lifestyle would lead you to see how the Euro is weak? Against what? For myself, I can find none! In fact, most all prices of goods are rising slower than in the US. I can borrow money at lower rates than in the US. The Swiss unit is falling and costs there are out of site! The Pound carries interest so high I would certainly not give up my Euro system to operate there. Here in Euroland I sell more abroad than I bring in.

Perhaps the world is not what it seems!

The view:

The dollar faction is having a hard time keeping paper gold under $280. Now that the world has seen how the WA is placing Swiss Euro Gold, the paper markets should start to discount physical. I think weeks are all the time the dollar faction has left before things begin to change!

Thanks for hiking with me
See you at the USAGOLD Forum

FOA/ your trail guide

(05/14/2000; 20:39:25 MDT - Msg ID: 22)
Mothers: the only real gold of this earth!
Hello to everyone!

No hiking today. Let's just ramble on about some recent discussion and do it in a relaxed format. This is an especially good time to do this because most all investors are softened in spirit from mothers day. Yes, we all came from somewhere and even thought us guys try to take credit, it's the mothers that worked the magic! I am of an age where my mother is long sense pasted, but still celebrate the occasion with those of the new generation.

After a good dinner, a few glasses of fine wine and exceptionally good company, I'm now writing this piece. Thought you should know this (smile). Having read lightly through the USAGOLD forum I / we want to touch on a few things.

Yes Leigh,
"it's a beautiful day for a hike". Thank you for considering (smile)!

Peter Asher,
indeed the American public and private debt still grows. Yet, we as clear minded, broad thinking conservative citizens are expected to believe this debt has no end. This debt growth process alone is enough to make one seek financial cover. All of the economic facts , figures, projections and sentiment don't make a hill of beans compared to the corrosive powers of the total US dollar based debt. This alone completely overwhelms any near term bullish considerations. No economy in the history of mankind has survived long enough to make good on this magnitude of IOUs. None! This country will be forced, in our time, to hyper inflate us out from under a debt than cannot be covered. This is a proven fact from the beginning of all history, especially that of paper money.

From Another:

you are a miner, I see. Good fortune for you any your family. I encourage your support for GATA and all who fight against the suppression of "FreeGold". Soon, a foreign political tide will turn strongly against the American dollar and drown it's policy of maintaining this paper gold
marketplace. When the great tide changes, the current will be like wind in a miner's sails. But my friend, it will be an exceptionally strong breeze. One seldom felt on desert nights. Only the strongest boats will race before our storm. My only fear on this day is that your people voice no clear
understanding of how this change will affect the trading of physical gold. They still long for the past and a return to an honest, supportive paper gold marketplace. They base their financial plans on $600+/- gold in context of a concurrent futures / paper market. I submit to you it will never happen. Paper gold will live with falling prices or die a horrible death. No middle path will modern miners walk. May your best dreams be as a fortune in hand's grasp.

Thank You, Another


Hello TownCrier! My best to your Mother (smile).
Your item on the German 20 mark was an fabulous piece. It tells a true story that few can believe today. Those coins are both a part of history and the future. I read some of Holtsman's article and have to add something.

Many people today picture gold as an evolving asset that's only just now showing it's real potential. Perhaps this is seen in a context that gold value never did represent people, rather it represented our created wealth on this planet. Yes, actual physical gold, in ounces, has increased dramatically over the human time span. But, never before in history has human physical creation been as it is today. The real wealth assets of our modern world have increased thousands of times over the mined gold supply! Had mankind not intervened over these last 50+ years and created gold substitutes, there is no telling what gold would be worth.

As the only real wealth money this earth has ever had, it's unthinkable what value physical gold would have had to attain to denominate our created holdings. This is where so many "gold advocates" completely sell themselves short in projecting gold's future price. They try to somehow reconcile gold's value with it's cost of production. In fact, once man's drive to attach his official currency / fiat money to gold is broken (as it is about to be), all the gold "IN" the earth today could not represent human created things at 10 times it's current price! Throw in the fact that the earth will not give up all it's gold any time soon, present world gold holdings in reserve currency today must rise in value at least 100 times to match what assets now exist. On top of that add in the fact that dollar gold will go sky high just to equal past dollar creation (as the dollar fails) and one can see where physical gold is "the play" in modern times. Forget stocks, business valuations, land or currencies: physical gold is the wealth for the next generation. The generation that in "our time" came from today's "Mothers" (smile).

But TownCrier,,,, you already know this. Perhaps I am expanding on your thoughts? ,,,,, if so, then it's good for you, me and everyone here!

Hi - Hat,
The people at the Hi-Hat ranch have a pigeon shoot (target practice) using real birds, no? A friend of mine said it caused a controversy there recently. It's a practice commonly used in other parts of the world. It's the same with our gold perception, just depends on where one has been and who we have known.

Oil begun rising in dollar terms again, even though many thought some deal was cut! Well, cheap oil is hard to maintain now that the Euro is breaking our paper gold market. It seems that only real gold flow will slow the oil rise. Today, derivitive gold is on the way out! Let me tell you, this revelation is sinking in on American policy. Without cheap oil, this Western economic illusion is going to fade quickly. And with it will also go the Western illusion of value in paper gold.

Like those in the rest of the world, a Sovereign Individual will be the one with real gold.


You say

-----I hereby nominate the overextended timelime of the US dollar on life support for one of the great wonders of the modern world. Certainly on a par with the Colossus of Rhodes.-----

Ha! Ha! Never in the history of human endeavor has such a debt been built! I dare say it is greater than the seven wonders. When I listen to how players plan their next investment based on TA, I fully understand their narrow view. Truly, they are trading paper deeds as Rome burns!


You say,

-----The only gold mining company that I know has the capacity to fabricate both gold jewelry products and bullion wafers is Harmony Gold Mines. It would appear to me, that this gold equity (paper gold investment vehicle) would have the potential to shift its product sales into EUROs should the buying power of USDs implode. Do you know of any other such companies?-------

Quite a few miners are talking (very privately) about how they could sell their product "outright". The problem is that they have built their whole financial plan on selling gold to the "middlemen" first. So, now that paper gold has priced their product to a bare bones margin level, they have no resources to just "cut and run". When the "real" "next" physical gold bull breaks open, it will be lightning fast and lock the very market mines must sell into. Truly, it will be pandemonium at it's best!

The calls for "derivative cancellation" and "physical delivery" will wreck every possible banking network in the food chain. Both good and bad, solvent and bankrupt. There will be no market for gold in the banking world and these same BBs will be demanding all mine loans be settled from any miner that starts selling his product publicly before it's all settled out. Technically, many mines will be placed in default and their shares sold because their product is frozen.

There will be some huge profits to be made by holding certain mine stocks. But, almost all of them will go close to zero first. I doubt many investors could hold their current percentage through this price action. Physical gold will find a new market and soar in that medium of trade. In the face of this, few if any stockholders will hold their falling mining shares while watching gold soar. Yes, some will (like me) hold through thick and thin because they have a right percentage of (the best) mine shares to bullion. But, many, many others will pressure the market as they attempt to adjust to (our)level of holdings.

Companies that are "unhedged" and somewhat profitable at around $280 may attempt to restructure their bullion sales "near term". The problem comes in where so many "western share holders" do not believe that our paper markets are "maintained" much less about to destruct. So they vote for a status quo while waiting for some "legal" or "political" action to return us to "normal" paper prices. For these companies and their share holders, this backward view is the wet concrete that will set up and freeze their wealth as gold later soars.

As an aside, I hope the US will enter the paper arena and allow a controlled burn as paper prices rise. This would be the most "saving grace" for all long derivative (and stock) players. But the leverage creation has been so immense these last few years that I am afraid Another is completely right. All paper will burn! Completely!

Thanks on this Mother's day

FOA/ your Trail Guide

(05/25/2000; 02:54:39 MDT - Msg ID: 23)
Trail Marker #1

Hello everyone.

I'm placing a marker on the trail today so everyone can see our path more clearly. Please read my post on USAGOLD: Trail Guide (5/24/2000; 7:33:47MT - msg#: 31148). I'm calling it the BTD Marker.

No, I'm not becoming a futures trader. Rather it's done as a real life response to a post (#31098) made by BTD where he presented his case that holding 300 ounces as futures was just as good as holding 300 physical ounces. Far to many newcomers arrive at the decision to own physical gold only to be taken in with the paper song of futures brokers. Usually it is given in the context that:

"Your physical is just laying there doing nothing, so why not trade it. Better yet you can even earn interest to boot!"

More often than not, fresh gold investors end up losing a ton of their wealth before getting an "education" that leveraged paper gold is not real gold. Therefore, I will hold and even roll over several times my 3 - 100 ounce futures in an effort to compare it's return to holding physical gold. Anyone that is tempted to "unload" their real gold to follow the leveraged game can watch my money first. I sold 300 K-rands at $270, netted out $81,000 and brought (6 month) T-bills. Placed them in a margin account and brought 3 Dec futures at $283.30 (I mis typed this as 383 in my post, but most of you would have known this).

After a period of time (even a few rollovers) we will see if we can buy back those same 300 K-rands for even money. I'm now betting that the season is close enough that the two positions will part ways. For all of you that have been walking this gold trail, you already understand how paper gold is the tool being employed today to destroy the dollar gold market. It is very possible we will see the effects of this during our exercise as the value of futures is discounted well below the physical gold price. I'll be sure to update my new holdings for anyone that does not chart this trade themselves.

In all fairness I wanted (asked) BTD to track his "Publicly stated position" so as to articulate his gains or losses for new followers. He declined for personal reasons in #31154.


The perception gained by following a losing position in paper gold comes in seeing the different mentality inherent in the gold market today. As I presented many times before, their game is to play the "price" of gold in a paper leveraged way. It's an old failing tool that is compounding loses as the years go by. In no way can they understand the massive leverage in holding gold itself against the coming discounting of the paper industry. From my post:

------"My friend, it would only be the end of the world for paper gold traders. Indeed, if comex stays intact, I bet my physical will match your contracts ounce for ounce (smile). Something that cannot be said for a reverse situation I see coming. You see, our position is leveraged for a worse case, while yours can only keep up with mine in your good case!"------

Immediately after I presented my "trade", futures brokers jumped in to council and precondition my comparison. As if to outline how it had to be done. Well, I have brought and sold paper from every position you can guess. Up, down, sideways and in reverse! Most of you have also. Having to listen to them backtrack and explain to me how futures are meant to be traded and are a short term investment and how it should be done,,,,,,,, it's like having our just grown up children return for a visit and listen as they "educate us" on politics, human interaction and sex! I can only quietly think "you're kidding", "I didn't know that" "wow, didn't know things worked that way" (smile).

My friends, they are a fine example of this new generation of "Western Thinking" when it comes to gold. Read all of the 05/24/00 USAGOLD for some background. No matter how many thousands of words are written to identify the different impact that Physical gold and paper gold have on the market place they promote a paper investment as the saving factor that will drive the price higher.

The very forces that Chris Powell and Bill Murphy of GATA are fighting against are using these "mindsets" as the tool to control gold. The vast majority of traders "buy into" the concept that paper gold is real gold, all the while placing real investment money against the opposite side of a cash trade. In the process freeing rare physical to satisfy the established contracts of a loan / leasing game.

Further we walk

The Washington agreement formed the ground work that will eventually destroy all of our dollar based paper gold contracts. Yes, PH in LA we are still "on the road" to high priced gold. Today, selling paper gold is almost free money to the banking industry! No one opposes the complete unbridled selling of gold contracts because so few want delivery. More and more, real gold is being channeled outside the contract arena. It has become so obviously clear it should appear as a blinding light to anyone that looks. Trading on established paper exchanges will dry until they fail.

On the US side, we continue to write gold derivatives to keep the "followed" price down for the dollar's sake.

On the Euro side, they write gold derivatives because it further dilutes, discredits and eventually destroys the dollar's gold market.

From the BIS perspective, "noone" cares what the paper price of gold goes to now because the acceptance of paper gold has been replaced with "real gold flow" as the regulator of dollar oil prices. With a "full on" cash settlement of outstanding paper contracts on the horizon, Euro paper will best out dollar paper, but no one is stupid enough to be covering paper with real gold. Well, perhaps a few are.

The view

This is the landscape from where GATA is trying to pressure a return to "fair trading" of paper gold. My friends, it's not going to change back for the better and the industry doesn't expect it to. In the words of Goldfinger in a 007 film: "I expect you to die Mr. Bond!"

This failing system is also one of the same investing vehicle so many futures brokers push! Brokers present all these leveraged items as a good way to "play" the price of gold. At the same time my friends are selling, creating, writing and unloading all the paper derivatives the world can handle. Indeed, they will keep doing it as long as the market has money to give away by not discounting these derivatives against physical gold. It's free money from paper gold investors!

We rest

No, we gold bugs are not all on the same side! Many think I don't like paper gold just because it's not physical. They say there is no precedent for a large scale devaluation of all paper gold. One has only to see the perception just prior to 1971 when the dollar was discounted against gold. That discount, unlawful as it was will in every way compare to the coming discredit of all paper gold. One day you will have a gold contract, the next it will be a currency contract. Marked to the market, the currency price to settle this crisis will not even compare to the coming "free gold"
trading price.

Perhaps we will see the beginnings of this while I hold my 3 futures. I expect our resident paper pushers to jockey and squabble all the while this unfolds.

Back to the city.
Thank you for Hiking

FOA/ Your Trail Guide

(05/31/2000; 06:54:53 MDT - Msg ID: 24)
For anyone that wishes to follow along, we have been having a long running discussion about gold futures on our USAGOLD forum.[ Archives here] Right after I placed the BDT Marker #1 I was somewhat challenged on it's validity by the good words of Mr. Goldhunter and others. Here are some of my recent posts. Please review all the good writers that posted both before and after me. We will be hitting the trail for a good outing this weekend! (smile)

TrailGuide (5/25/2000; 12:51:58MT - msg#: 31250)
TrailGuide (5/26/2000; 13:21:36MT - msg#: 31367)
TrailGuide (05/29/00; 18:38:21MT - msg#: 31510)
TrailGuide (05/30/00; 05:37:20MT - msg#: 31538)
TrailGuide (5/30/2000; 13:16:32MT - msg#: 31562)
TrailGuide (05/30/00; 18:48:46MT - msg#: 31570)

Also: my discussion with Mr. Michael Kosares (USAGOLD)

USAGOLD (5/28/2000; 10:50:58MT - msg#: 31446)
TrailGuide (05/28/00; 19:20:44MT - msg#: 31469)
TrailGuide (5/29/2000; 8:28:27MT - msg#: 31482)

All of the above created the train of thought that brought us here to today's post on the forum. I will spring from this trail head for our hike later.

THanks for reading

FOA / your Trail Giude


My post of today.

Trail Guide (5/31/2000; 6:48:50MT - msg#: 31587)

Comment on:

ORO (05/30/00; 22:58:11MT - msg#: 31580)
Solomon - 100 fold

----A 10 fold drop in the value of the dollar has occurred in your lifetime.-----

----I grew up (in part) in a country that saw 1000 fold depreciation in the currency within the space of a few years in the 70s and the 80s, and finally reached a better than 10000 fold depreciation. -----

---The currency had some 0s knocked off and was renamed. Then the currency inflated again and again a couple of 0s were knocked off - and the currency renamed.-----------

Hello ORO,

Your background life has helped build a real working perspective about currency inflation dynamics! I wish more Western Gold Bugs could have spent some time in these "real life" countries. Or at least study their currency history. Far too many of them dismiss these awesome figures as a function of said money being in the "third world".

Most people understandably draw a complete blank in trying to see the dollar doing the same. Truly, as the dollar "reserve" function is politically removed, this real inflation will begin. Just as you witnessed, we US citizens will continue to use our dollars no matter how many 0s are added. I use Mexico as a close relation to this event because so many Americans travel there or have close business ties to that country. It's very common to use pesos but dollars are the mainstay. In the next event in our currency experience we will eventually use Euros as the Mexicans use dollars. Hard to accept but easy to prepare for.

This brings me to Journeyman:

Journeyman (05/30/00; 22:04:20MT - msg#: 31579)
Re: Skirts & bank runs @ Trail Guide

Hello again Journeyman and thanks for considering.

I used the Comex as an example because, like my Mexican peso example above, it's a market most Americans look at. The key to understanding our gold markets is in placing paper gold trading in a correct perspective. It's not gold trading, it's leveraged currency trading with a little physical delivery thrown in. What hurts the public most is when Gold Mine investors and supporters bash the manipulated paper dynamic but fight to keep it in place for the gold mining industry sake. Most of the front lines battles are aimed at retaining the same paper trading concept, but "cleaning it up". Then, in their mind gold can return to it's proper "futures determined price range" of around $400 - $600.

This amounts to returning to a gold standard after a financial crisis wipes everyone out. Then the governments can start the same decay all over again.

We want to avoid this in the gold trading arena of the future by forcing the concept of "free gold". This has been approached by the next reserve currency backers. By trading physical only as the price making medium, gold will act as a real currency outside the established fiats. It's value surge will make it deep enough to actually carry a good proportion of world financial trade. But do it as a "wealth money", not a borrowed, lend able, bankable, government fiat system. A true natural vehicle for holding ones wealth. Most likely the way gold was meant to be used in the beginning.

I fully accept the political motives for getting us to this point. They are using gold to destroy an aging, failing, over debted dollar reserve system and doing it to promote their next fiat arena. The only difference is that they are structuring their system to take advantage of a surging gold price, not be destroyed by it!

All of this points to a breakup of the old paper gold trading business as a physical crisis eventually crushes their derivatives based equity. This is why we point everyone to look in that direction. All paper trading contracts along with their "price discovery" function are going to fail as the dollar begins it's "great price inflation" destruction. The vast majority of Western gold bugs are all watching and waiting for this event but reject the political certainty it will bring about. That being the failure of most all paper gold substitutes to shelter an investors dollar depreciation. As such, the leverage in using these vehicles is lost while said leverage moves to physically held gold!

I'm going to place this post on the Gold Trail with reference to my discussion posts about futures trading. I hope it continues to give readers a new perspective as we hike this path.

Trail Guide


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