The Gold Trail by FOA - May 2001

All times are U.S. Mountain Time

(05/06/2001; 20:30:52 MDT - Msg ID: 69)
A Tree in the Making

Hello everyone!

Let's gather around and begin with a talk first, then an extended hike. I'm sorry to be so late and am also happy you didn't decide to start without me (smile)!

It's good to see so many familiar faces. It looks like the whole forum is here! There is MK with his warm cup,,,, Randy away from his tower,,,, and Mr Gresham who is just back from a historic visit to the "The Pearl City Tavern". His visit there (see #53150) was in response to my recent return post [#53119]. More on that in a moment.

I brought something with me today, as an example of human foresight. Yes, this fine ancient rosewood Bonsai tree. It's one of a collection I own and is quite old. Some of you may have already experienced these "works in progress" at The Bonsai National Arboretum in Washington DC.. Or perhaps you traveled to Elandan Gardens (in Bremerton, Washington State), where Dan Robinson has collected and displayed some of the oldest Bonsai known. Indeed, he has collected them from all over the world! They are priceless.

It's important, for our talk today, to understand the difference between many of the Elandan Garden ancients and most of those at traditional museums. Mr. Robinson retrieved many of his specimens from mountain tops after they had been growing for hundreds and hundreds of years. Untouched by man's hand, they formed most of their shapes by fate of nature long before Dan found them. The more traditional Bonsai, started by people, were formed and trained from birth. Hence, their more standard styling.

So,,,,, what does all this have to do with the old "Monkey Bar" at the Pearl City Tavern? The same bar that our Mr. G just paid a mental visit to? Well, many years ago I was there for wine and dinner. The place was rumored to be a hangout for spies and international intrigues, but I didn't
happen upon any (smile). Later in the evening, I was taken up on the roof and given a private tour of their Bonsai collection. One tree, in particular, was a spectacular item that had been passed through over ten generations of Japanese lineage. It was here, on the roof of the Monkey Bar, that I first began to understand how societies endeavor to manage the events of life yet never fully control it's outcome. And further, it seems the difference between great leaders and simple manipulators is perfectly demonstrated in the art of Bonsai.

The blatant controller will twist and turn, cut and destroy,,,, in an effort to replicate an image he has seen in the past. The beautiful landscape scene he remembers as perfect,,,,, all good and all right for himself and perhaps society at large; this system he strives to repeat as the bonsai grows. In the end,,,, he fails,,,, unable to reproduce what once was. Killing the system,,,, the tree,,,, the old currency. The very thing he and we all wanted so much to grow.

But, greatness is within those that know life is dynamic,,,,, what we do is never certain and subject to the leadership of nature. That person will spin the Bonsai on a table for hours, days, and even years as he styles what will work for that period of growth,,,, perhaps planning the timeline in a currencies development. A cut here,,,,, a change there as time grows the next limb. In the process creating something we all recognize, can use, understand and enjoy,,,,, yet,,,, different in many ways from what we knew or saw before.

Onward a bit

Thank you Michael, for your outstanding post today ( #53135). I suspect, my friend, you have always raced before the wind! Perhaps a fine example for others to see as they drag anchor on the rocky bottom of history. It's sometimes good to seek safe harbor, I know, but this time the prize will go to those that outrun the storm (smile).

I see that our poster ET has gone away for a golf trip. Too bad, I wanted to remind him to be sure to bring plenty of currency along to pay his travel expenses (grin). In this world we all need much; blessings from above,,,,, family,,,, home,,, friends and good health. But after all that, one must have currency and an enduring, tradable wealth asset that places our footing in life on equal ground with the giants around us,,,,,, gold! Understanding the events that got us here and how they will unfold before us is what this GoldTrail is all about. Everyday our political world is pruned like two Bonsai, in an effort to shape a more healthy future. The dollar tree is failing because it needs so much dead wood cut off,,,,,, but if it is pruned it will not resemble the mighty Bonsai it once was! The Euro tree is growing as it is being styled,,,,,, what it will look like we have an idea,,,, but not a complete picture. It's hard to imagine that anyone can look at an early Bonsai and shape it's future some 20 years out? But, that is exactly what someone did with a tree on the roof of the Monkey Bar in Hawaii; indeed, this is what has been in process for so long with our changing money system.

OK, it's late for me and I plan on walking for some time this trip. So, let's camp here and rest. There is more trail ahead.



(05/08/2001; 09:59:55 MDT - Msg ID: 70)
A Tree in the Making #02

Well good morning everyone!

Waking up on the trail is always a great experience. Our thoughts are fresh and the air is clear. Indeed, clarity is something that us real Gold Advocates are now fully experiencing in these latter days. Over a fresh cup of coffee, we can look around and for the first time begin to place the GoldTrail landscape in proper perspective. A perspective that breaks the old illusions of gold's paper worth and replaces it with an understanding of it's coming dynamic value as real wealth.

Down the trail,,,,

gold will no longer be able to successfully carry the Western name of Money so as to allow for it's political price fixing. A process that, it seems, has been with us for generations. Enslaving millions of hard workers by always officially classifying the terms and value of both their paper currency and their metal savings. Always inflating both items for the good of society's never ending political agenda. Then, never allowing Another currency to command an equal reserve position so as to engage and weigh the motivations of more than one political arena. Engaging and weighing these fiats not just within the exchange rate function, but additionally against the real wealth function of gold. (see MK's post below)

Allowing FreeGold to circulate as a wealth asset would denominate it's true worth through the much larger real demand of "Wealth Possession" instead of paper possession. Such a gold scale would measure our world reserve currencies against each other instead of against our Western concept of gold as official money. But, in addition, on a more higher level, prevent any one country from subjugating other nation states through fiat dominance. To more fully grasp the impact of "Possession" and why ancient gold was worth so much more as FreeGold; hike again that part of our trail (FOA (04/18/01; 20:20:06MT - msg#64) Lombards, Normans and Franks.)

Both as official wealth and private wealth, physical gold will march with us into a future at values the likes of which we have never known. Understanding the how and why this would all come about took time and personal reasoning for each of us to sort through. Much of our background building would not have been possible without this modern internet. Further, without the fine folks at CPM, this unfolding story would not have been defined in mass, for all to see. Events now slowly build the story on their own as we become ever more secure holding physical gold for the acts that will follow.

Onward a bit:

I'm handing out these reprints of two important explanations of what we have meant and the perception that has been created. These are perceptions built upon not only our ongoing discussions and hikes here but also the refining input of the thousands that walk with us on the USAGOLD forum. Below defines their authors take on Another's thrust. I would say they are very much on the mark. First, from Randy at the Tower (USAGOLD sitemaster):


Randy (@ The Tower) (04/17/01; 13:37:02MT - msg#: 52046)
Mr Gresham, nice question (msg#: 52041) --- "Was the Washington Agreement the most significant event in gold since you were last posting in 1998?"---

If I may be so bold, let me anticipate ANOTHER's answer with an answer of my own.

The most significant event in gold since the dollar's gold default in 1971 has been the successful launch in 1999 of a long-awaited new currency system built upon neutral (meaning, multi-national) management and, more importantly, a floating gold reserve structure that finally abandoned the now obsolete "fixed" gold legacy of the failed Bretton Woods structure.

With this new reserve structure, the prevailing institutional incentive -- from '71 to the end of the millennium -- need no longer be one of "price suppression" for the perceived market value of gold.

In this light, the most significant element of the Washington Agreement is seen to be NOT the amount of pre-announced gold sales, but rather, the self-imposed curb on gold lending operations by these European central banks. And if you think about it, this action with the Washington Agreement was nearly just a predictable inevitability from the moment the eurosystem committed to provide for freely floating gold reserves. The "tools" of the prior suppression are on the outs. Believe it. The WA simply announced the foregone conclusion in a package suitable for newspaper headlines.

Just as the value of the post-'71 paper dollar has long been propped by the international yet artificial "mandate" to hold these dollars almost exclusively as reserves (acting in tandem with the dollar settlement for oil and the overhanging debts of the "Third World"), through this new currency structure gold (and its price/value!) has now been "officially" set free to replace these dollar reserves (savings).

The reason this full transition has not already occurred is that institutional interest still exists to foster the smoothest practicable transition until that unknowable moment where the final remaining *SNAP* in the adjustment occurs.

Speaking for The Tower and personally, I continue to buy gold with excess funds because I prefer the real wealth of gold over managed paper (and digital) contract currency. As a bonus, the real wealth value of same gold will provide a pleasant benefit upon full completion of the transition in world currencies' reserve structures. (An understatement, to be sure.)


Absolutely, Sir Randy!

As clear as mountain air. Next, the most recent treatise from USAGOLD (who is this guy? smile):


USAGOLD (05/06/01; 09:48:35MT - msg#: 53135)
ET et al. . . .On Currency Competition Quote from ET:

Randy asked me the other day what I thought about the "suffering" that has been caused by the US currency hegemony. Why do you think he would ask this? My guess is that he believes great suffering has come to pass and I certainly agree with him. However, he then goes on to say we should adopt another version of the same thing, apparently so the suffering can be spread around a bit. ---------

I have spent more than a small amount of time analyzing and interpreting the Another/FOA message, and I think you have reduced their message to a very narrow interpretation that falls short of of the mark. The statement above is indicative. As a result, I thought I should comment on the subject because I think you've missed a great deal of their message. I hope to add to your thinking as well as to others who may have fallen into the same misreading of their analysis. The danger in this sort of thing as always is that I may not be saying things with which FOA and Another agree, but I think my recapitulation accurate and if I'm missing something, I hope the other participants will fill in the gaps. I will not comment beyond this on this subject, because, as always, I am sensitive to playing too large a role here at this esteemed table. Those who are bored with this sort of thing, I beg your indulgence. Those who revel in it, I think you will find much to chew on. . . .per below.

Onward. . . . .

You and Randy are correct in pointing to dollar hegemony as a source of much suffering in the world -- intended or not. In fact President Bush has expressed the same reservations, more or less in a backhanded way, in his criticisms of the IMF during the campaign. So none of us are alone on those concerns. I think however that you need to expand your understanding of what Another/FOA are trying to convey, because it is not a simple advocacy of the euro over the dollar -- but a much deeper and important advocacy of competition in currencies, much as we have competition in other realms within the economy. This lack of competition is the problem with dollar hegemony and makes it possible for New York based multi-nationals and international banks to make bad (non-repayable) loans in the third world and then turn around and impose stringent conditions through the IMF that strap the local economy and eventually send the people into the streets -- ala Indonesia a year ago -- agitating for "economic" justice. (And of course that's just one example of the excesses of a monolithic reserve currency) Years ago, such injustices would have been fertile ground for Communist agitators, but now with the fall of the Soviet Union perhaps the multi-national crowd has been unjustifiably emboldened. In the long run, competition for this market from Europe, with an agenda of its own, would be good for the dollar and the international economy as well as the U.S. and Europe, and therein lies the real thrust of the FOA/Another analysis.

Let me take this a bit deeper:

I do not believe that Another/FOA are advocating a fiat euro which would "replace" in toto the dollar. Instead they advocate the euro, dollar and gold should "compete" for the hearts and minds of ordinary people (in terms of the currency they employ to store wealth), important financiers (as a hedging methodology), and, yes, central banks and nation states (as a reserve asset). In the case of nation states, the competition would inherently create circumstances leading to each doing what is necessary to make their "reserve" better than the other "reserves."

Under such a regime, the importance of gold ownership, for nation states, as well as individuals, would not be diminished because any nation state is capable of dalliance along the road to currency inflation making it necessary for the other participants to "hedge" their holdings. It is in fact a novel concept built closer to the von Hayek foundation of competing currencies -- including gold -- than possibly your own reliance on a gold standard as the ultimate and only magic dart that will find the target's center.

In fact there is a danger there that you might have overlooked. Take for instance the widely disseminated Kemp/Polyconomics New Bretton Woods proposal of a gold standard being bandied about in the conservative press. That proposal pegs the price of gold at $300. A major problem quickly surfaces: Whatever's left of the U.S. gold supply would disappear completely within six months of posting the $300 price -- the work of Continental Europe begun in the 1960s/1970s will have been fully rendered. The danger of course is the gold standard you would like to see is not remotely connected to the gold standard others, more politically inclined would like to see, so you always end up with this warmed-over version of a gold standard that gets right back where we started.

As a matter of fact, I see the FOA/Another currency concept as closer to the tenets of libertarianism (and Jefferson) than a gold standard because of the exchange restrictions which inevitably follow. In other words, we would very well be right back in 1971 with the United States once again facing the prospect of shipping its gold reserve to Japan and Europe in defense of the over-produced dollar. (Unless of course, the price were set at something like $3000 to $5000 per ounce -- then you might have some equilibrium.) Idealistically the gold advocate would most certainly would like to see a gold exchange standard -- but at what price and what would be the economic consequences if it were to be set where it should be? Polyconomics offers up this
arbitrary $300 price because it wouldn't break the current international system, but when it comes to real political/economic policy ideals and practical reality often clash. It's always nice to hear someone like Jack Kemp speak glowingly of gold, but before we roll over and cast adoring glances at the politician perhaps we should better understand what the politician is actually stumping for, and in the Kemp/Polyconomics case it is more currency hegemony under the guise of a free international gold standard, a hegemony paid for by the American people in the form of its gold reserve.

Currency hegemony is precisely the opposite of competition -- it is, in fact, the imposition of a currency, even gold (at a stated currency price, of course), on the population. As such the euro is important in that it challenges that hegemony, and does so with the key concept of utilizing gold as a "currency without a country" to act as a reserve for interventions if required -- a breakthrough. Re-read Mundell on this. You and I and the rest of this forum could be talking about the need for a gold standard now, tomorrow, the day after that and for all the days remaining in both our lives, and I do not believe we will be any closer to its imposition then than we are now -- thanks to the wayward and half-baked thinking on the part of some of the very gold "advocates" who are supposed to understand economic history well enough to anticipate some of the consequences. In
other words, the gold standard probably isn't going to happen. In the meanwhile, practically speaking, the best option is for all of us, including the various nation states to own gold as a talisman against our own worst instincts.

If Randy is concerned about hegemony and its effect on various populations, I don't think it's because he would like to replace that same hegemonic error with another. I think he agrees with FOA/Another that competition paves the road to a better international monetary system. I do believe, as FOA/Another do, that with the euro we are talking about the currency of the future here, and I believe that the dollar will eventually be modeled after the euro. Not only that, I believe we are talking about, not just the currency of the future, but the international monetary system of the future -- for what its worth. Sometimes the world heads off in a direction even if we don't want it to.

Once again I'll reiterate what PH hinted at in his post: For most investors the world over, the ownership of gold is a pragmatic undertaking, and what FOA/Another are advocating is a practical, hands-on solution for the average investor -- personal gold ownership. I think Randy agrees with this position, as do I. I can envision private gold ownership as a necessity even under a gold standard -- because there is little doubt in my mind that if the government were to undertake a gold standard even under the best intentions, with Lewellyn Rockwell serving as Chairman of the Fed, it eventually would botch the whole scheme -- politics being what it is. (By the way, I can't imagine a currency regime at this late date that would allow only the circulation of specie. Therefore, you will always have various derivatives in circulation along with the government largesse, currency printing, tinkering with the gold price which threatens the value of the paper. Gresham rules.)

In the end, he who owns the gold, makes the rules. And it is the personal ownership of it that will carry the day on a practical level while governments will do, well ...... governments will do what governments do.


Ha! Ha! Now, that was good! What chance do us poor hikers have against a mountain climber like that? Legs like tree trunks and a mind the size of Bolder (Colorado?). (grin)

My friends, think carefully about these while I go over to see what Econoclast dug up on the trail. I asked him a question on 04/25/01 usagold# 52540 and I think he found something! A little later today we will continue the hike as I address the views above. Even later, I will post Another's latest Thoughts here on the Trail. Events are unfolding and it seems the BIS is thinking of making some changes.



(05/08/2001; 20:54:48 MDT - Msg ID: 71)
A Tree in the Making #03

Across the high pass,,,,,

The other day I came upon Econoclast working the Trail. After asking him to define what his actions would be to defend a modern gold standard, he replied and his answer hit some gold! My initial #52540 request in summary was: ---- How do we stop this ages old evolution of "thinning our gold" when our economy slows?---------

Hello Econoclast,
I'm going to take parts of your find and comment on it out of sequence. You write in #52646:

------Any system that could possibly be thought of or proposed must include the use of law. Part of the answer (transparency) includes a complete treatise of the "new" laws written in simple, direct English (8th grade level-2 pages instead of 2000). The laws would be directed towards controlling the bankers, not the people for a change. The laws would be written with input from bankers, but not by bankers. Penalties for financial fraud/counterfeiting/etc. would be severe. ---------------------------------This new gold dollar system would function alongside the current FED system. Any large debts (mortgages, business debt, most importantly, govt debt) would be denominated in fiat dollars. That way govt could continue to operate (maybe, ha ha) and the banksters could still have their play money to manipulate and try to capitalize on. A free market would exist to redeem back and forth as necessary. This free market would show the relative worth between the two currencies. ---------------

Excellent thought sir. Econoclast, using your thrust as my platform:

One of the major problems faced by past hard money planers was that any time real wealth, gold, is denominated as credit money, it always placed the relationship between the rule of law and the rule of gold at odds. If our laws defined gold as official money, and lent it, then by association the law had to define a portion of gold that did not exist in circulation. That portion was the contract asset held as bank savings. Yet, a person's claims against it identified said gold as real. This was and is an inherent contradiction because no law can define the value of real wealth held in contract.

This particular fiat form of hard money owed it's existence upon a continuous function of the economy. What the above means is that you cannot take something real and lend it over and over, as banks do when lending fiat, and still demand that the law recognize said contract moneys as hard legal tender.

I would state that no form of lent gold be recognizable or enforceable in the court of law as a legal tender contract. One may borrow gold, relend it, or even borrow against it, but that gold would not be valid in the payment of all debts both public or private. It could not, by law be legal tender. This is not to say the trading of gold would not somewhat supplant currency in function. It could and most likely would to a degree, but it would no longer carry a credit quality that fiat would in the form of a time function. Indeed, in our modern economic structure, a credit time function is very valuable and gives digital contract currencies their demand.

To deal in the future,,,,, to borrow,,,,, to capitalize would require the use of a fiat function. Gold could / would be a final trade; I'll give you ten cars (or gold) for your house,,, deal done. If I want more time to pay, I and we must engage a fiat loan.

You write:

-------weaving OUR gold supply, literally, into gold dollars--------Contracts could be denominated in gold dollars, however these "gold notes" are strictly non-transferable. If someone wants to sell their gold note, they can't. It is only enforceable between the parties that entered into it originally. All forms of paper gold are illegal-fraudulent. Any debt larger than the legal tender law amount has to be denominated in fiat, smaller can be negotiated.------------

Well sir,
Once again, it looks good at first but later evolves. By mingling your gold currency into the contract / credit realm, it once again creates gold loans that are at odds with human nature. Yes, the gold notes may not be transferable, but the lent gold currency is. It is at once someone's asset while also another's liability. The gold currency in circulation expands thru the nature of loans. When these loans fail on a national scale (major downturn) the legal tender laws defining our new gold currency will be changed. We thin our gold again in an ages old cycle aimed at covering debts that are the common citizen's savings.

Still, we are not far from the position you see. We must remember that neither currencies or gold define society's economy. Business can function using fiat alone. We have been doing just that for a number of decades. Installing a trading medium outside lawful money that acts as a wealth savings and a final trade will not destroy the bankers, governments or paper credit inflation. But, it will allow society a way to judge political efficiency. A nation's productivity will then have two scales to measure with, one it must live with (final payment) and another it cannot live without (future payment).

We shall see (smile)

Thanks for digging deep


(05/09/2001; 07:20:23 MDT - Msg ID: 72)
A Tree in the Making #04

Sun's up, time to move:

We have covered a lot of ground and this framework, when viewed in context, helps explain much of what has happened with gold over the last twenty or thirty years. Even more so over the decade of our 90s.

Many hard money investors drifted with this evolution, right into it's most volatile decade. Thinking they were part of a much more efficient, changing, paper marketplace. A market that was utilizing all the modern trading system in order to not only advance gold perception but add profits to their accounts. It's been a painful mistake for many.

Our modern gold market and the price illusion it creates, is little more than a fiat dollar system that denominates gold credits in contract form. Is it a free market? Why yes, very free. But only free in the sense that supply is unlimited. Investors and the industry in total, brought into paper based gold and yet they fully well knew 90% of it had only cash equity as the collateral on the other side. Then, somehow expected that those contracts were limited in creation by the fixed amount of gold in the world. Their mistake, not the markets.

Clearly, anyone schooled in classic hard money Thought should have known that this was but Another inflation, a transitory era between systems. This was a time to gather gold over years, not invest in the leveraged aspects of gold's new fiat versions. Nor, to buy into the gold industry that owed it's life and cash profits to the maintenance of such a system, transitory as it was.


In USAGOLD #53135 (see earlier), the perception was stated that; ------- As such the euro is important in that it challenges that hegemony (my note: dollar's), and does so with the key concept of utilizing gold as a "currency without a country" to act as a reserve for interventions if required -- a breakthrough. --------

a currency without a country! In order to implement such a currency, gold would require laws that would keep it within it's wealth concept. Gold in possession would be wealth in possession as long as governments could not use it as credit money. In my discussion with Econoclast, I took his legal meanings and applied them to this "wealth without a country" position.

Keeping gold out of the fiat arena would be more simple than many hard school advocates envision. The key to that is found in the implementation of international law. The leading economic countries (EuroZone in the future) would have but to establish a protocol that forbid the enforcement of collateral attachment anytime physical gold is traded, lent or involved in a trade. In this context, no banker would lend you gold to buy a house if, in a default, he could not claim your house in a court of law. Even private parties would never lend gold if the asset behind the loan could not be claimed for nonpayment. It's that simple. With a stroke of written law, the trading of gold as wealth would become a final payment with no possible credit implications. Our official fiats and wealth without a country would never again function as one.

When USAGOLD went further to say that; ------ that competition paves the road to a better international monetary system. I do believe, as FOA/Another do, that with the euro we are talking about the currency of the future here, and I believe that the dollar will eventually be modeled after the euro. Not only that, I believe we are talking about, not just the currency of the future, but the international monetary system of the future -- for what its worth.----------------

Yes Michael, this future is before us. As hard money advocates, I think we failed ourselves by falling out of the loop of economic evolution. Truly, we have circled the earth and now return to our roots. Only, once unearthed after all these years we cannot recognize them.

We lost our ability to advance with the advances,,,,,, to grasp that ours is a credit society compared to none before. Even the world's gold dealers operate on credit,,, on loan,,,, on fiat! It's our accepted way of life,,,,, to function within this era,,,, as loans both personal and official live and fail. We gamble,,,, we bet,,,, we play at life. Sometimes suffering the loss, no matter the gain.

We are no less than the citizens of Rome, only they knew how to keep their wealth aside the "games people play". They understood the "possession of gold"!

Further on we walk,,,,,,

Within this perception we can separate the actions of goldbugs and gold advocates. Western goldbugs strive to fix the current system. They hasten to make right the paper markets that have failed their gold industry investments. In doing as much, they push for a return to a status quo that never existed, failing to see that this past decade was but a passing,,,,,, an evolution,,,,, a transition that started long ago. I doubt Gata will ever see the end they seek as our gold market will fail sooner rather than "in time" for their legal resolution. They fight a good, worthy fight and call needed attention to the situation. But fail to "seize the moment" by clinging onto the past. The gold industry is lost as time and marches past. As events transpire, gold in the ground will be of less importance to common man and officials alike that gold on the surface. Gold will be produced, but it will be a far less profitable experience than our future gold price will dictate. Truly, it's a gamble no different than guessing the future of dollar fiat. Perhaps a small win, but more likely a large loss.

The future a Gold Advocate seeks is not found in Euros, Dollars or just gold. Rather it's found in understanding the Euros impact on the dollar's value and how that will change the gold markets,,, forever! The political motivation in all of this is the show of the century and worthy of our respected attention. Even now, the oil card we have discussed for so long is changing our dollar way of life and quickening it's fall. As seen in the Black Blade chronicles. Was this connected to the planning for gold and Euros? You bet, grasp it or no, we will feel it's full effects later.

Onward, my friends, this trail is only just now becoming extremely interesting. Truly, the ownership of physical gold will make this trip even more so,,,,,, perhaps even,,,, fun? (smile)

More later


(05/15/2001; 09:50:11 MDT - Msg ID: 73)
Fed - BIS - ECB - China

Hello all!

Boy, things are shaping up for a real good Trail hike in a week or so! Let's look at some recent items and try to come up with a plan for our walk. Consider:

There was a little mention in some circles about China buying gold recently. I think Gata got wind of it, too. Here is an old post I made at the main forum:


Trail Guide (04/25/01; 15:04:48MT - msg#: 52536)
Comment to Randy's post of:

Randy (@ The Tower) (04/24/01; 10:38:48MT - msg#: 52458)
Follow-up on my comment last week that China has lately been a net been seller of silver
------Philip Klapwijk, managing director of GFMS, explained at Monday's conference of the Gold and Silver Institute that China sold near 60 million ounces of silver in 1999, with additional sales of 40 million ounces per year likely over the next couple years. Continuing...----------------

Your (Randy's) words:

--------China is simply lagging by one Century in performing this act. Many of the other nations of the world unleashed their silver reserves near the arrival of the 1900's when the usage of silver was abandoned as redundant within the banking sector. And in contrast, not surprisingly, global gold reserves have GROWN since those days. Further, the dollar can be expected to suffer a worse fate than silver when it, too, loses its particular reserve and settlement role within the international banking system. And gold? All reasonable signs show that it shall maintain the king position as THE reserve asset par excellence for a long time to come. Get you some. ------------------

(TrailGuide responds)

Hello Randy,
You know, your thoughts got me thinking (grin). I have time to do that right now as my files are restored.

Following your chain of thought about China silver,,,, I noticed a comment from Bush that we would fight them over Taiwan. Then silver gets hit real good (the day the comment was made). Could it be they are unloading silver so as to buy Euros and gold prior to calling it splits with us?
They do have more silver than their needs require (possibly more than all of us require).

If they are, indeed, going to run with the Euro later and the ECB is marking gold (not silver) as their main "wealth reserve", then it makes sense for China to position themselves this way. It also makes sense because as an addition, Hong Kong has so many dollar reserves they, too, could never unload them. Following the Euro system lead, they could afford to let their dollar reserves burn as long as they had even 15% of that value in gold prior to full "Euro roll-in".

If any EuroZone based gold paper they (China) own that had a US originator (US financial institution) and that defaults; with China's approval, that paper could be restructured to pay back in Euro currency assets. Courtesy of the ECB /BIS. Forcing the US originator to dump dollar based gold hedges (that's a lot of paper gold) as they buy Euro coverage to ensure exchange matching. Of course, extrapolating this system wide, we would see paper gold credibility plunge (therefore it's bid price also) aside from the Euro exchange rates spiking on the dollar. All the while out right trade in physical gold or "five day" (super spot delivery) would spike to the heavens. I do wonder if we are, as I said a number of days ago, seeing history in the making with lease rates doing strange things now? (smile)



OK everyone, could it be that Europe and China are linking more closely? With China not only playing the Euro card, but also seeing this future economic powerhouse (EuroLand) as a two way market for their goods? Lets look at a more recent item out of the IHT:


Europeans Grab a Piece of the (American) Action
Mark Landler New York Times Service
Tuesday, May 15, 2001

China Has a Change of Heart on Bond Sale

HONG KONG For American investment banks in China, politics has often been a handmaiden to business, enabling the more savvy firms to elbow aside their rivals with comparable credentials for deals.

Now, with the debut of a potential $1.5 billion bond offering by China, the Americans have gotten a taste of their own tactics. And politics, far from being subordinate, may have played a decisive role.

On Thursday, the Chinese government announced that three top U.S. investment banking firms - Goldman, Sachs Co., J.P. Morgan Chase Co., and Morgan Stanley Dean Witter Co. - would handle its first overseas bond deal since late-1998.

The next day, three European banks - Barclays Capital Group, BNP Paribas SA, and Deutsche Bank AG - issued a statement saying that they had been awarded the portion of the offering that would be denominated in euros.



OK. Next, we move to an excelent commentary in the COMMENTARY & REVIEW portion of USAGOLD (get your password if you want to read all of it). In this, Michael Kosares notes how the latest LBMA volume seems to show that the gold lending business is unwinding. He writes:

--- """LBMA April gold turnover was down a steep 12.5%. That could very well be the largest drop since the LBMA started publishing its daily volume figures. If nothing else it clearly signals that something is changing, and perhaps changing abruptly, in the gold lending business.""" end ----------

Combine this with a recent,,,,,, almost permanent overall rise in gold leasing rates,,,,,,,, the start of which began with a rate spike that was only lowered when England was forced to reduce it's London gold sales to 20 ton from 25 ton,,,,,,,,,,,,, then, the ECB no longer following the FED and continuing it's responsible management of it's money rates,,,,,,,,, our Euro creation spawned this new high world oil price from currency competition and that's beginning to bite the weekest financial structure (USA),,,,,,,,, and some thing is indeed changing!

We have completely agreed with the ECB policy, in that they see the EuroZone as the stronger (in overall economic function) between them and the USA. Stronger, in that they could handle a short term dollar oil rise if it lead to Euro settlement. In fact, the recent 1/4 point cut by the ECB, as opposed to the several cuts by the FED, is enforcing that note of distinction upon producers as the FED will and must cut much further. They (the FED) now risks exposing that their purpose of lowering rates is a effort to save the bookkeeping side of it's derivative bloated financial structure, not rebuilding of the US economy at all.

All this, in an effort to slow the dollar killing effects of sharing the currency reserve function with the EuroZone. Only one step in the complete loss of reserve currency altogether. We will see this spelled out as they pump dollar reserves from now on,,,, over and above any possible economic need. The result will be a slow and steady slide into higher and higher price inflation inside the US.
(Look to Randy at USAGOLD to repost this progress)


The pressure may be pushing toward a colossal "transition" of financial power later this year as the Euro begins it's final stage of EMU; the distribution of circulating Euros. Once complete, EuroZone economic dynamics will lead them to no longer need Dollar reserves for international use or the backing for their currency. A fact not lost on China and other major dollar holders. If events proceed as expected, they (EuroZone and or China) may just discard these assets as worthless. Especially given that with the US running a tremendous trade deficit, dollars cannot return on a "net / net" basis without plunging it's exchange rate to nothing! Perhaps it's worth further watching how our long bond treasury paper is sold ahead of the fact!

With all this in the background, we now feel a disruption in the force (old line from star Wars movie). The recent BIS meeting may have set the stage for an eventual monumental change in the way gold is traded, owned and valued. The very fact that a major portion of the US gold stock has been changed in status in a way that would allow it's movement (ownership); means that the US has now entertained the same position as England is doing regarding gold and the EMU with Europe. We (the US) are preparing for the destruction of the dollar's gold world. In this, some players will have to be saved (with real gold) if the dollar is to have any existence at all in the new Euro reserve function.

At some point, our dollar denominated paper gold system will crack and plunge in value as it's credibility to be converted into real gold is destroyed. In the process taking down most of the gold industry. An industry who's stock equity value is daily market to and closely follows said dollar gold system. In time, we will all understand the currency supporting function and the industry killing nature of a Free Gold price. As it's surging value more than compensates the dollar's lost value in the hands of foreign CBs.

This particular line of perception is being driven home in recent ECB commentary as their President, Mr. D., has discussed the very mechanism to delineate foreign held Euro money assets. (see Randy's recent ECB news) Assets that, per my above to Randy, will explode in numbers as our busted paper dollar gold market drives these institutions into Euro financing arrangements. These new, increasing, non expansive assets will be balanced by their system's surging gold price and exported bullion from other nations. A process that in part allows the US to adjust it's gold ownership just to stay in the game.

The world is changing and the Physical Gold Advocate will be the ones keeping score!

I'm going fishing now. Both, for the real item and with one that knows the name of our recently caught prize fish. I'll make a few more comments on Centennial's forum before going. Rest up, the big walk is coming!


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