Walking On Solid Ground: Hiking the Gold Trail

Ok! We have quite a crowd here,,,,,,, this morning. This must be an overflow from our recent Talks Series. There are more of those scheduled next time; but today we will go for a hike. As many of you already know, and some newer visitors are finding out, there is a price to be paid to hear mine and others Thoughts. Yes, you have to use your legs and mind, because most of the gain here comes over time and distance. If one want's the whole story you will have to walk with us and watch it unfold. Out here, there is no waiting at the Trail Head for someone to return with a complete report. The understanding is found within yourself, while completing the trip, not just at the end.(smile) I'll speak loudly so those in the back can hear. Packs on,,,, keep up, now! Let's hit the trail!

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It's a clear day, today, and easy to see how the world is changing. Once we thought that everything in the name of "dollar money" was an anchor of financial stability while our organic planet changed; we now know that even our money systems have seasons, too. Watching evolving events with a Physical Gold Advocate based perspective, over this last decade, demonstrates this perfectly. Indeed, from here on out our world now has two major fiats and their competition is going to prove that anchors do not hold because they are attached to the weight of gold; rather money is made
stable by moving it's value with gold.

Look to the left

The gold perspective, most people have employed, is little more than a shadow of what the political gold world, in it's immensity, is all about. Shallow Western perspectives and their view of gold, being just it's dollar price, proved over and over how dangerous such a narrow thought can be to one's wealth. Making the object of one's gains to be "the inflating denominator of wealth", fiat money, instead of "the real wealth itself", gold; leaves us at the mercy of any political money evolution! When seasons change, as gold trail hikers know they always do, the risk becomes the "question" so many gold bugs have grappled with this last decade; can my investment in the price of gold keep up with and purchase an equal value of physical gold itself? For most, it has not, as paper leverage hacked away at their wealth held in paper gold assets! The future may be even less kind!

An investment in the gold industry, not just mining, can be nothing more than an investment in a business that balances fiat production cost against fiat market prices for it's product; gold. The return, if any, is always in fiat and places this portion of one's wealth smack on the tracks of more political manipulation. Today, we can see this play out all over the world as fiat returns in the gold business head towards and even sink below zero. The investor watches this fiat illusion of his net worth drain away while the opportunity to build a real wealth of "bullion ownership" escapes yet again.

Playing the various paper gold investment games is no different. When the time comes, when the dollar season really changes, dollar denominated paper gold bets will do well if they can just break even. The real wealth owner will stand aside this burning of paper and watch his coins and bullion explode hundreds of percent ahead of any fiat paper gains. This is what the real world of a gold advocate is all about.

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Onward the trail,,,,,, look off towards the end

I, myself, own gold for one purpose; to save a real wealth that's in addition to all the other things I own. I save it this way because it outmaneuvers, sidetracks and escapes all political money evolution. It does this in such a way that I will later have the same relative amount of real wealth for my future needs. Or, in the very worst case, have close to the same as I have today. Still, the upshot of this is an additional aspect that is good for me and bad for so many players trying to leverage gold. Pause and see this:

-----The very political motive that is moving our world away from dollars has, for some time, changed the dynamics of straight bullion values. In the long 20 or 30 year process of evolving our currency world, the time span required to do the job has rendered gold far below it's worth; "relative" to all other things. When the seasons change, as mentioned before, bullion will first have to find it's true "free from money involvement" price in the world. From that point it will return to do it's best job of marking the historic process of falling currency values; unproductive political currency inflation. It will do this so well because physical gold will return to it's roots. It will again be recognized as the best,,,,, "lowest taxed",,,,,,"barter wealth",,,,, the world has even known! Low gains taxes will not allow it to replace digital money; as will it's inability to duplicate fiat's efficiency.

Rather gold will accentuate fiat use by becoming a real wealth reserve that compares fiats against each other thru a single arms length medium. Unable to control this gold medium, because it is no longer money and subject to credit entanglements, national fiats will resort to competing against each other. The free markets as we have always wanted them! First worlds, third worlds, all worlds; trading for what they can do, not what they can control.------

Back walking again

During this short and slight moment in time, a decade of years in the making by our human measurement, physical gold has become an investment of a lifetime to persons like myself. A wealth of ages that will not only transport my savings forward, during fiat evolution, but will increase my total wealth many times over. From there it will defend that value against all comers; all fiat price inflations!

This is the opportunity paper traders forsake as they bet on a train that's running away from them.

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Further we walk

I have tried to point out that the gold concept today is not one of just matching dollar price inflation in the future. If that was all we owned gold for, one could have covered that with several stock market games years ago. If $500, $700 or $800 was the goal, it becomes just another commodity bet and there have been plenty of other leveraged "plays" that already beat that. No, buying gold today is a political move; one that will add political sized returns to this gold advocate's wealth.

For this reason we outline the political "fiat against fiat money nature" of the battle more so that the gold to money battle. In the future, for any currency to compete against the Euro, native gold markets will have to trade at least in equilibrium with a Euro based free gold price. This will further pressure "political money posturing" to relinquish all fixed gold relationships with their moneys; fixed legal tender gold coinage included. This could become a very convoluted affair for gold coin investors. Especially if Euroland eventually mints a free floating gold coin; not dissimilar to the K- Rand! Not to be confused with Robert Ms 100 Euro or Germany's new offering; perhaps it will be
called the "Euroland" gold coin? In fact, I bet it will (smile).

Coming to a nice clearing

While I am not unloading any of my various Eagles, maples, etc.,,,,,,,,, I want my involvement with gold to be as free of fiat involvement as possible. As an extension to this, all out of circulation, old gold coins make an excellent contribution to this thought. A powerful thinker once said that old gold coins will one day be treasured as forms of antiques in addition to their gold values. Few enough in circulation to carry extra value, but not rare enough to dissuade one from selling or trading them in the future.

To this end that same gentleman made a statement that embellishes the entire trail of Thought we walk today. It inspires countless large and small private gold advocates with a warning for a future we must prepare for and a call to stand guard!

I'll say the words again to end our hike.
--------
"when a thousand hungry lions fight over one scrap of food, small dogs should hide with what's in their belly"

"we watch this new gold market together, yes?"
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The sun is going down and it's time to camp here for the next speaker. Something about burning paper; I won't want to skip that one. Thank you each and every one for walking with me on this very fine day (smile).
TrailGuide



MK (08/02/01; 17:31:52MT - usagold.com msg#88)
Huff. . . .puff. . . .huff. ... .puff
Hello, FOA. I've been climbing all day, and just when I think, I'm not going to quite catch up, I round the bend back there and see you sitting on that rock just beaming at me. It is good to see you, my friend. Good to meet you here on the Trail.

I want to mention before all else that this hike we are on now -- The Message of an Evolving Market -- is nothing short of phenomenal, and would like to take this opportunity to ask your permission to use a portion of it in the upcoming News & Views. We've decided to go to a larger quarterly publication to augment all that's going on here at USAGOLD. You might be interested to know that Randy just informed me by e-mail that just today he has registered several new posters including "gold-hearts" from Germany, Paraguay and Sweden. Now if we can just get them to post! It used to be that investors would call and say that they were inspired to act on the basis of something they read in the newsletter. More and more, their interest is piqued by something said or published at USAGOLD. So, we change with the times my friend, and this too is a message from an "Evolving Market."

Like some at the main forum, I took an interest in the Legal Tender discussion from the Political Gold post and, it is something you said in that essay, that brought me over here for my first post.

This I find very interesting:

". . .All gold held by the state, unless distributed first to it's citizens, is subject to world wide "Legal Tender" political claims first. The precedent for this is clearly revealed as the Swiss must ship their "Political Gold" to others first; while sending currency to satisfy gold claims against it.

As the IMF has recently extended this protocol, swapping gold at different values, to settle political debts; this action further justifies the US being able to use it's gold to defend it's currency's settlement function. Aside from the US minting eagles for public sale and it being against the law for gold reserves to be sold outright to open bidders."

This idea of a gold drain from the U.S. to those countries holding copious amounts of U.S. Treasury paper, as a form of settlement, is something I, like you, see as a consequence of a potential post-1971 U.S. dollar order breakdown. You are quite right to imply that gold mobilizations are often related to settlement issues including currency breakdowns and possibly even gold carry trade settlements (wherein the central bank acts as a gold lender of last resort). For the press and some economists to underplay the role of gold in international settlements is to throw a cover over the truth and maintain the fiction that gold's role is secondary, when it is not. It is in fact primary and the cases just in the last decade are legion. The Argentine treasury for example is devoid of gold. So is Brazil's. So are a dozen other countries which have experienced currency problems. (Leaving aside for a moment, all the hapless third world countries who have entrusted their gold to the gold carry trade.) In Q1, 1998 S. Korea -- a country that uses 25 tonnes of gold a quarter -- exported 250 tonnes of gold in defense of its currency! The sure route to rebuilding a currency is to somehow associate it with gold. So we have Russia and the Chevronet, the Islamic Dinar movement, and gold reserves in the ECB.

Along these lines, I think I probably speak for many when I say I am intrigued by your statements about a future U.S. gold mobilization in defense of the dollar. Somehow I think there's a great deal more to your thinking than what is contained in that paragraph.

I guess my major question has to do with the settlement price in such a situation. At the current price, I think the 8000 tonne U.S. Treasury hoard would be sitting in Brussels, Tokyo and Beijing within 30 days of the mobilization's announcement. With something like $6 trillion floating around the globe, few would dismess that concern. Could you give us some details on your thinking?

Well, I need to get back down the mountain, FOA. It's getting close to dinner time and that cloud rolling over that mountain to the West looks like it might spell trouble.

Good to be here, good sir. I always enjoy these discussions. MK

Well,,,,,, my goodness,,,,,, just when I thought everyone had gone home,,,,,, here comes MK!!

Ha! HA! I hope no one sees us right now because what a pair we make up here. You are gasping for air and I'm lost for words??

Not to worry for long. After a rest your golf conditioning will show up and good speech will overcome my surprise! (smile).

TrailGuide

http://www.thetimes.co.uk/article/0,,5-2001243118,00.html

Hello all

While work is in progress to reply to MKs question; I thought a few markers on the trail, from time to time would be helpful.

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From The Times WEDNESDAY JULY 18 2001 (see link above)


Misery deepens for US high-tech industry
BY LEA PATERSON, ECONOMICS EDITOR

-----A SHARP contraction in US manufacturing has pushed American industry into its longest uninterrupted period of decline for almost 20 years, figures revealed yesterday. -----------

------industrial output dropped a larger than expected 0.7 per cent in June. This was the ninth month of contraction, the longest unbroken period of decline since 1982.------------

--------- Capacity utilization fell to a 18-year low of 77 per cent. -----------

-------- "Another sharp decline in output confirms the damaging impact of a strong dollar, excessive inventories and weakening sales," Matthew Wickens, at ABN Amro, said. -----------


==========================

Unlike past periods, when America rolled over the top of another economic cycle, this fall away should begin to develop into a permanent downhill slide! Never before in our post 1971 financial cycles have we defended the dollar against a reserve rival while trying to adjust world financial policy during a building recession.

This time the world may slow somewhat as we fall away; however, they will not have to follow us into an inflationary money policy that floats all ships in the same reserve currency ocean. America is, for the first time, about to experience the impact of such an arrangement.

As the "strong dollar" gives way, the effects mentioned above by Mr. Wickens, will fold over time and again in a historically new inflationary trend the likes of we have never seen. Each time our output declines the resulting "excessive inventories and weakening sales" will not overcome the effects of ever rising prices.

Just as our dollar's exchange rate falls, placing us in a better competitive position, localized price inflation will mute that effect. One again producing the calls for lowering "the too strong dollar" from that level. Over and over the game will cycle; producing a kind of inflation we have never known! A kind of price inflation that cannot be overcome with "typical accepted" inflation investments of the
past.

This time, investing in "the industry" or "business" that produces inflation hedging investments will not work enough to do the hedging job. From oil companies to coal companies,,,,,,,, home builders to lumber producers,,,,,,, carpet makers to gold miners: costs will outrun their ability to create an after tax profit.

Even leveraged games of paper will fall victim to political moves; aimed to protect local currency use.

The world is changing and we are on the right "Trail" to understand it all. The "burning of paper" wealth is coming and one of our future talks here will describe it all so well!

Thanks TrailGuide

Hello again MK!

Glad you could meet me here in Denver and share this next presentation. We can talk a bit before things get started. Yes, it was very good to have seen you up there, on the trail, and thanks for complimenting the first parts of this "message". MK, you also presented a question to me that I'm sure was rhetorical: permission to use some of these works in News & Views?

Oh my! You build a forum rock for Gold Advocates to stand on and present their case from; then you ask such a question???

Sir, you are the epitome of what gracious courtesy strives to become! Yes, please do use even the smallest portion of offerings as you desire and do feel free to disagree with any point in them. (smile)

Michael, the reason for our city meeting, today, was so we can step behind this closed door and listen in on a discussion there. It's in progress and we are suppose to be here, so let's go in now.

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Hello to everyone that just arrived.

In this talk we are shifting the schedule a bit to delve into a political money issue: as the question was presented by Mr. Kosares earlier. He is the gentleman that's just entered and is standing to our left. Not only is he also an educator of gold issues, to the public at large, he is also a keen observer of human dynamics in the political sense. So, this particular area of thought was the attraction for his being here. It's a privilege and honor to have him sit in on our discussion.

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To start off:
Someone once asked me if all of our thoughts were on the level? Well, at a young age I often thought there was difference between fact and opinion; then I learned that everything spoken was opinion and anything written was fact! A few years later, someone told me that anything spoken is not true and all things written is opinion! Last year I was told that everything is an opinion and nothing is true! Ha! Ha! So, today, I state for the record that all of our Thoughts are Absolute fact!(smile)

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We are asked to expand our thoughts pertaining to "a future U.S. gold mobilization in defense of the dollar" and elaborate on what "the settlement price in such a situation" could be? These truly are exceptional, thought provoking questions, and will require an equally dynamic explanation. I'm assuming most or all of you were at all of these "message" talks and have our past, long running, basis of context in mind. To understand our position, one has to grasp how position we came to know it.
We begin.

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I am sure most Americans are uncomfortable at the prospect of our stores of Political Gold being shipped off to defend the dollar. Uncomfortable as this may be, unprecedented it is not. During most of the years of an active Gold Exchange Standard gold was routinely "shipped off" from nation to nation to satisfy foreign demands. Not just entirely to defend our dollar's value; the aim of these operations was, then and now, more so to keep the dollar in settlement use.

Yes, the dollar's continued use for trade settlement and the defense of that valued use was always the aim of these gold trades; but even below this is a deeper meaning to this function.

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From a dollar point of view, shipping gold then, and now, was in the same context of defending one's currency on the exchange market. In the context of this use; gold was not sold as a commodity, rather it is clearly traded as an officially earmarked "good" that can further support the "tender status" of internationally held dollars.

The psychology of "gold exchange" is more manifest in our "legal tender" function than most strive to understand. Standing aside, for a moment, from our previous discussions concerning modern fiat demand's impact on the dollars recent value; we look more closely at the logic of this "tender"
function.

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Local dollar currency, circulating within US borders, is given political value because of it's legal tender designation. Dollars outside our domain, while often sharing the same trading value, are not covered by that law. Even though, through protocol they are commonly accepted, they are not legal tradable money; unless they re-enter the US again.

The process of defending the dollar by shipping gold is, today as much as yesterday, an expression of maintaining political "Legal Tender" status for international clientele. Indeed, as an ongoing trade deficit in the US has become irreversibly structural to the integrity of the local economy and remained in this function for many years; the legal tender function of foreign dollar reserves comes very much into question. It begs this suggestion: does the international dollar have any internal political force backing it's value overseas? This question can only be addressed by shipping gold in a legal "currency defending" process.

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During most of the "gold exchange standard" period our dollars were nothing less than contracts for gold in storage. As we all know, to defend such a non expiring gold contract nature, as the dollar was held then, one must sometimes perform as the note is written; and gold on demand was said performance. Indeed, the circulation, use and retention of international "dollars in reserve" was built upon both; it's old gold deed form, that could be traded for gold, and it's use as a viable "legal tender" vehicle, to buy local US goods.

Over the last decade or so, with both it's gold deed function and "legal tender" function blocked by political motive and structural economic forces; the currency can and must be defended through other means. Further, our international dollar has degenerated away from being even basic "money"; to being little more than an international derivative of derivatives; that represents currency swaps, gold loans, uncollectable foreign debts and still more gold swaps. In this end stage of failure, our external dollar arena must eventually be defended with performance, if demanded; if it's use and credibility as an international settlement medium is to continue. With the US now clearly proceeding into a recession, and doing so with the competition of another reserve currency for the first time, local price inflation will prove irresistible in undermining international dollar exchange values.

If foreign political motive decides to no longer support international dollar denominated gold derivatives with physical delivery or refrain from using gold as a trade settlement; the US will have to choose between shipping it's gold or seeing all international dollar structure and use fail! In it's place, Euro system currency would easily become the main reserve as soaring gold values would
replace "tender" value lost from dollar failure.

We think that: given ongoing lifestyle enhancements afforded to US citizens from the current dollar's value as a reserve currency; the loss of this standard is of greater importance than the loss of gold! Local political motive will answer this foreign dollar value challenge by using gold as somewhat of a bribe for letting the air out of the dollar slowly. The result will be a massive dollar price rise in gold that performs over several years; as the reserve function transition politically begins.

The nature of the current dollar based gold market, outside US borders, is perhaps leveraged 1,000+ to one and will require ever greater physical gold shipments, at ever higher values, to maintain dollar credibility. This failure process will draw US gold stores out in the form of "currency defense"; not as gold sales aimed at keeping the price down. A purely legal defense use of politically owned gold.

Still, gold shipments will always be far behind the price curve and only be done as last resort crisis operations. Further, the rise will be so intense as to provoke a complete cessation of all derivative gold trading within US borders. Long before this occurs traders, both foreign and local, will bail out of our gold derivative markets even as physical prices rise. A spot physical gold market will be all that remains. Something local citizens will cherish and paper brokers will deplore!

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To date, these gold shipments have been ongoing but have not, yet, involved original US political owned gold. The bullion involved has been metal subjugated from foreign third world countries through dollar for gold swaps; executed thru US currency protocols. Mr. Kosares is correct in observing how foreign gold is drained from these nation in trade for debt relief and crisis support. In classic form, we will be the next in line to be "swapped out" also!

I expect that "our" crisis will begin by year end as the Euro foundation becomes complete in the issuance of real currency. The new designation of our gold reserves is a classic signal that a major crisis is coming. A suspicion will eventually arise that native US money growth, now approaching 20%, will accelerate in hyper form to save it's banking function and political gold stores will not be
available to redenominate the currency. The very thought of a loss of reserve status for the dollar is on everyone's minds and will soon break out into open currency warfare. By then; the Washington Agreement's restrictions of bullion supplies will begin to bite as players demand gold and rush from the failure of contract credibility. By then: it will become known that the only way to stay whole, without bullion relief, will be in aligning one's self within the Euro Zone of financing. Those that started early in resolving some of their political gold debts will be the first to receive backing. England? Swiss? The rush will be on!

How far will gold rise? At first blush, foreign dollar assets will not, in any way, return home! They will circulate offshore; either from lack of understanding of the issues, a thought that things will be worked out or from foreign exchange controls aimed at protecting the failing US economy!

These reserves will circulate until their gross exchange value simulates a figure that can be reasonably expected to "buy something" within the US; ten cents on the dollar could be a guess? However, keep in mind that the fed will be printing like mad, local prices will be soaring and no one will be chasing dollars like they do today. I expect that physical gold trading, within the US, will follow far behind foreign trading for a time. Perhaps a $5,000 to $15,000 ratio will be a thought as dollars within the US will be worth more than outside. Still, the relative value of physical gold will eventually converge as a trading standard is reached.

Keep in mind that there could be a gap between physical prices, reflecting reality, and futures prices crashing. The Western gold world looks to the current paper gold price as the value for bullion; even though it is but an illusion. A market trading 90% derivatives and 10% physical cannot, in any stretch of the imagination, produce a gold price relative to real things.

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Our understanding


For years academia has gone round and round about how the US illegally went off the "gold-is-money" standard. Well, I know that and so too has most every hard money person has delved into this area. All of those days are never going to be reworked to change history; so why waste our time on a wrong that's not going to be brought to justice today? Well, we can look at some of those particular points so as to find clues for a better context concerning our subject.

As you know we have discussed, at length, how gold is not money; rather it is the very best form of physical wealth barter the world has ever known. We also separated money from gold by defining money as a "retained value thought"; a thought that exists between both sides of a barter transaction as an "associated tradable value". In this, the fiat dollars we know and use today; represent today modern money in the very best of this money context.

The result of such thinking draws a conclusion that fits perfectly into our fast paced world. Fiat currency, unbacked except by it's legal tender statutes, is a fine immediate trading medium for short term buying and selling. It's best saved for short term use, only, and spent to buy any and all forms of real wealth. Of course, if it's printing production extremely outpaces even basic GDP, it's use value eventually falls.

The problem for our dollar is that it has entered into this modern "single use" fiat world, as a currency promoted as "real wealth saved"; and the use of gold, as a parallel long term savings vehicle, is dismissed and cloaked in an illusion of price. No fiat can serve it's modern function while becoming entangled between these opposite forces of use; a wealth for saving and a money for trade.

Many times officials have tried to mitigate this cross function failure by storing gold in government control and printing fiat in a straight ratio to gold owned. Hopping to keep gold values static so as to retain fiat values and keeping a fractional reserve banking system viable and expanding; while having said stable fiat values stabilize it's debt that's held as a reserve. In the real world this cannot function as all prices and values are dynamic. Including gold and all forms of money!

Further, we hire auditors to count the gold and the money to make sure they match. Counting the gold is easy, but counting fiat, in it's endless credit functions and derivatives, time and again proves an impossible affair. Eventually the stores of official gold must have their value "controlled" thru fiat credit entanglements; all for some ridiculous balancing act.

It is, and will be, far better to just hire auditors to do the best they can to count fiat issuance as an independent function. Then, allowing gold wealth ownership to return to the public and freely trade outside it's old official money and credit entangled realm. There, gold can be used to "tender" in the form of real purchasing power; as the real wealth trading item it always was.

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Concerning this subject; we find collaborating evidence to this chain of thought from the fathers of our constitution. Note that they do not mention gold and silver in the context of money! Few hard money people or historians have thought seriously about the context of this wording, or how the minds of that era were thinking. Consider the word tender as one version of the dictionary presents it:

Middle French; tendre to stretch, stretch out, offer ------ also --------- to present for acceptance.

----Article I, Section 10 of our Constitution says, "No state shall make any thing but gold and silver coin a tender in payment of debts."-----------

Clearly, even then, gold was connected in thought with being something one "stretched out" and presented for acceptance. These are common perceptions from a time when much of what one brought and sold came to them through barter. Even though these early colonies were closer in time to our modern use of money associations; their lives were still very much in an era where, perhaps, 50% of trade was still outright barter!

Truly, in their perceptions gold and silver was a "good (tender) in the settlement (payment) of trade (debts)" and no state should make anything else to function in that context. But what about something outside this context? A medium of trade different from bartering gold wealth for goods?

-----Would American fiat money one day be issued as a "medium" in trade, more so than using gold as a "tender" in barter? ---------------

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The common use of fiat currency is and was a natural evolution into using "money", in it's pure associated value form, as a medium for the trade of goods; far removed from using gold in a "real good barter" context as a "tender in the (final) payment (settlement) of trade (debt).

American money law may have been desecrated over and over again; however, nothing in our original thinking precludes us from designating "the money concept" as a "legal tender" in trade along side gold or silver as a "tender" in trade.

In reworking the definition of "note" as it appears on our currency, perhaps it is the money our system never had time to allow it to become. In another time and another place, fiat will be know as:

-a written promise to trade at a determinable value a variable sum of other goods to the bearer--

The difference between use function and value function, of our money, was most surely convoluted for political gain and banking credit interest. Truly, American history has shown we did a terrible job of rendering this ages old gold barter function useless in a modern world. Mostly because of our complete lack of money vs. barter understanding. Today, we enter the "end time" thrashing of such a currency experiment.

Thank you for attending and I thank Mr. Kosares for his presence here. Sir, please drop in at any time.

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Back on the trail again to watch it all unfold! (smile)
Thanks (MK)
TrailGuide

Hello all!

Thought I would ramble a bit while we walk this 1/4 mile circle in my back yard,,,,,, here on the trail. Only a few here today,,,,,, so we can talk quietly .

Couldn't help but notice that MK posted some of his fine points from ABCs of gold! I saw it while attending that discussion, yesterday, in Denver (smile). You know, for people that lead a hectic life, that book is all one needs to understand the meanings of gold. Just do as the thrust of the text implores; put yourself on your own gold standard and save some of your wealth in gold. After reading all of it, it's a real simple concept grasp. Don't put off the necessary things required in your daily life so as to buy more gold; that just puts you in the same category as most sweating goldbugs! Saving gold, over the long run, will allow one to enjoy the wealth when it truly does appear. This, perhaps, was the centerpiece of Another's thrust, so long ago: just buy gold as you are able and as the understanding comes! Perhaps that just proves that the ancients were smarter than we are today; they owned gold and didn't need to hear all the politics.

Yes, I have had a copy of the ABCs for some time (smile). Only, I had to go through all kinds of antics to acquire it. You know,,,, CPMs private club of clientele gets all this stuff real easy, while guys like me have to pay a small fortune for it on the black market! But well worth the cost. (huge grin) Wait a min.,,,,,,,, I'll pull a copy out from my backpack. I'm only doing this because we are few here today,,,,,, I'd get thrown off the trail if anybody finds out.

I like the part on page 69:

---------- The American political process today is characterized by the politics of debt -------

Well, here,,,,, pass it around so you can read it.
Good stuff!

You know,,,,,,,

I think far too many people try to think of gold as an investment instead of an asset. Aside from modern financial doublespeak, with brokers of every kind and nature trying to sell us leverage,,,,,, the old world ideals of real property and ownership imparted a much more stable meaning to the term, "asset", than we place on it today. In Old French; assez ------ enough------ implied a holding that was appropriate. Or Latin (1531); ad to ,,,,,,,,,,, implying a build up of things.

Truly, the return on an asset, placed into use, was a return of the value of that use. Not an increase in the value of the asset. We watch gold today and see it only as an investment that returns little. It should be seen as an asset we can acquire at a very low real value. In such times we should consider this action as an opportunity to ------"ad to" or the building up of things.

You know,,,,,,,,,,

We are all trapped in the society we came into this world with. The history of mankind is an endless record of "us" coming to terms with the the people we love,,,,,, but their politics we cannot stand! The ideals are always there to reach for but for the life of "us" our little group, in our little time frame, cannot come together to reach for the right thing. Strangely enough, within this America, there go I.

A friend once tried to insult me in a toast; referring to me as the best and smartest mutt he ever knew. Ha! Ha! I lifted my glass, in front of all, and drank with a loud gulp. Then returned the compliment; "to my family and friends, from the best dog in the pack"!

All that: from a fifth generation, typical Anglo-Saxon that was born in the "USA". I walk this land, upon which my home is owned, and tear for a future we may face. Oh the irony of it all; that one day my time will end with a pocket full of gold and left fist full of Euros,,,,,,, whist a sword drawn to defend this soil of my fathers. Against all comers,,,,,, here stand I,,,, America or nothing,,,,,, my country, my sole! To the attackers I say " these are my people,,,,, so right and so very very wrong".

You know,,,,,,,,,

The seasons change, so do I
and the better part of life is in knowing why

I'm off the check the path!
TrailGuide

Hello again!

I'm just placing another "rather large marker" here on the trail for us to follow all the conflicting stories that come out; especially as all this moves into a higher gear. Note the first news item and how it reflects the paper pusher view of dollar advocates; all taken from USAGOLD NEWS FEED:

=====================

US euro futures data could spell currency trouble

-------Europe's single currency could be headed for trouble if data on U.S. futures traders' positions is any indication. Recent figures from the Commodity Futures Trading Commission show that speculators have been fortifying long positions in euro futures for almost two months, a situation some see as a contrarian sign of an imminent decline.----------

-----The Commitments of Traders report showed that speculative interest was nearly flat the week of June 12 and has steadily built up to the current long bias, analysts said. "It is a fairly bearish signal,----------------

------ But the fate of euros really hangs on the performance of the U.S. economy, since the gains in euros have been largely a factor of weak dollar fundamentals.------------

http://money.iwon.com/jsp/nw/nwdt_ge.jsp?section=news&news_id=reu-n09239372&feed=reu&date=20010809&cat=USMARKET

end
=====================

Note:

The last item above could just as easily be printed in Another format that better indicated the new financial market ahead:

------ But the fate of DOLLARs really hangs on the performance of the EURO ZONE economy, since the RECENT LOSES in DOLLARs have been largely a factor of STRONGER EURO
fundamentals.------------

Puts a different view on it doesn't? Now read a bit of reality news from today's item:

================

Dollar Falls to Three-Month Low as Extended U.S. Slowdown Seen

-------- New York, Aug. 9 (Bloomberg) -- The dollar fell to a three- month low against the euro as a report of rising U.S. jobless claims reinforced concern the world's biggest economy won't revive anytime soon. ------- Since a Federal Reserve survey yesterday showed stagnant growth the past two months, the U.S. currency has shed about three- quarters of a cent versus the euro. Today's report that more workers than expected filed claims for unemployment benefits last
week drove the U.S. currency to the day's weakest level. --------------

------- ``People are questioning the relative strength of the U.S. economy'' after the Fed survey ----------

----- U.S. corporations would likely welcome some further weakening in the dollar, as gains in the currency make their products less competitive overseas. General Motors Corp. Chief Financial Officer John Devine criticized the government's strong-dollar policy yesterday, telling reporters that the currency's strength -----`is destroying the manufacturing competitiveness of this country.'' -------------

-------- The euro started trading in January 1999 at about $1.17, and since falling below $1 in February last year, it has twice failed to sustain rallies above 95 cents. ---------------

-------- Today's euro gains also came as the European Central Bank said in its August monthly report it will ``closely monitor'' whether interest rates are appropriate, a signal it may be preparing to lower borrowing costs as soon as this month. A rate cut may bolster expectations for
a rebound in European growth. -------------------------

http://quote.bloomberg.com/fgcgi.cgi?mnu=news&ptitle=Currency%20World&tp=ad_uknews&T=news_storypage99.ht&ad=world_currency&s=AO3KXQxWhRG9sbGFy
end

====================

Note:

Notice our General Motor's CFO's comment --------- "the (dollar's) strength is destroying the manufacturing competitiveness of this country.'' -------!!!

This should read --------"the Euro's weakness is destroying the manufacturing competitiveness of this (USA) country.''

This item of relative logic is further confounded in that the Euro is hardly week! American media, being dollar biased as it is, has used every moment to educate us to see how far the Euro has fallen. When it fact the Euro has only fluctuated in a tight band; just below a currency level that shifts "American real productivity" competitiveness toward the next largest economic block. Giving the world financial structure every reason to move into Euros to denominate and settle trade.

Consider this item: ------ The euro started trading in January 1999 at about $1.17, -----------

Using this 1.17 figure blurs our reasoning just enough to allow one and a half years to pass without anyone complaining it's fall. We are positioned to look at this process as --" oh see the poor old Euro, it can't hardly get back onto its feet". Consider that that 1.17 figure was nothing but a "nano-second" spurt, more similar to an IPO (initial public offering); relative to almost no actual
goods trading. In it's beginning setup we can see that the real range, from hindsight over a period of time, was between around 98 and 83. This is the area where the ECB/BIS wanted the new currency to occupy in its war to unseat the dollar. Yes, the Euro is only down some 10% as of today! This is not the sign of a failing reserve system of 300+ million people!

Further:

Also note the above -------- Today's euro gains also came as the European Central Bank said in its August monthly report it will ``closely monitor'' whether interest rates are appropriate ------

Suddenly the tide has turned and the ECB is seen as ahead of the curve while still in a non inflationary management position; relative to the dollar. Going forward everything the fed does will be seen as stroking US price inflation. Perhaps this is the reason Another said that Mr. D, of the
ECB, can and is about to leave. His hard job is done! Only to see Mr G, of the Fed, beating a hasty retreat! Truly, no one wants to reside over the transfer of our US horde of political gold as prices soar,,,, both of gold and all local goods!

Even further:

This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and
every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this.

Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of
magnetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!

For the first time,,,,,,,, our industrial production, along with the demand for industrial metals like silver, will fall away even as hyper inflation in prices takes hold.

For the first time,,,,,,,, demonstrating that no other asset is equal to gold, even though promoted to be!

When the coming paper illusion price of gold is destroyed, sending its trading price way up and way down, several times, before shutdown,,,,,,,,,,,,,, the thinner paper markets of lesser metals will be absolutely devastated. Yes we will see $50.00 silver in our time,,,,,, $50.00 for a hundred ounce bar,,,,, that is! No less a relative price decline for the other metals is in store. Even if these
actual dollar numbers prove incorrect,,,,,, relative inflation adjusted prices will show the exact same ratios to gold. The gain will truly be in gold!

Gold,,,,,, a wealth for changing times,,,,, a wealth as new as it is old!

thanks
TrailGuide

Note to MK:
Nice change, going to a quarterly paper! According to
Will Rogers "everything I know I read in "News & Views"!
errrrr,,, I think that's what he said? (smile)

Oh boy!



This item below:
----- magnetizing almost anything and everything ----

should read:
---- monetizing almost anything and everything---

But then,,,,,, you already knew that? (smile)



MK (08/12/01; 11:16:50MT - usagold.com msg#95)
A couple comments. . . .
Greetings, my good friend.

I would like to first of all thank you for your very kind words. It is you -- not I --that deserves the accolades. At every turn in this trail you bring us new mental challenges and new understandings of the economic and financial times in which we live. I have always said the message of FOA and Another, whether one agrees with it or not, inspires a deeper meditation of world affairs -- beyond the pablumatic representations of CNBC, et al. How many who read these pages could say that they have not walked away with something valuable each time they walk this Trail? That's why I am proud -- make that honored -- to sponsor and be a part of this page. A humble bow in your direction, FOA.

So now you mention that Another believes that the ECBs Mr. Duisenberg is on his way out and it appears that you also take seriously the report from News Max that Alan Greenspan may be close to retirement as well. These would indeed be major changes on the world financial scene that I do not think the markets, including gold and stocks, have even mildly factored into current pricing.

So now do we see what the French might do with the ECB?

I have always thought the French central bank to have a Gaullist heart no matter what was happening in the French politicial sector. It has been unwavering in its position on gold leases (strongly against) as well as its position on gold reserves ( strongly for). Of course, the dream of a united Europe was seeded and nurtured by Charles DeGaulle, the same man who said:

"Indeed there can be no criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence."

DeGaulle was a strategist and masterful politician. He understood that gold was the key to breaking away from the dollar for Europe, and that idea has stuck in European politics, particularly French politics, from immediately after the War. He led the move to repatriate European gold from the United States in the 1960s (at $35/oz). He led the move in forming the intellectual beginnings of a United Europe. And now France and Germany together can dictate the direction of the EU confederation. It seems that gold has staked out inviolable territory in the EU thanks in large part to the French Gaullist influence within that country, and it will be interesting to see what a French head of ECB might do next.

Those among us who treat the suggestion of a gold drain from the United States to defend the dollar as unpatriotic should recall that the United States and Great Britain have not been the victims of a hostile takeover with respect to our lost gold reserves. As a matter of fact, the United States and Great Britain invited it, indeed acquiesced to it -- just as Great Britain invited and acquiesced to the drain of gold reserves over the last few years. All justified -- then and now -- by one lame-brained analysis after another. I have always said that nations do not ship gold reserves because they want to; they ship gold reserves because they have to. Usually, as you point out, for political reasons -- and the gold becomes "political gold" meant to buy time or prevent one politican or another from being blamed for the collapse of the dollar. So we sink ever deeper every day (with more and more dollars piling-up overseas by the day, the result of a massive U.S. balance of payments problem) with no apparent solution on the horizon. Let's make that no apparent solution save one: The threat of destroying the U.S. export market if its trading partners fail to hold U.S. government debt. Why wouldn't the U.S. gold reserve come into play under such circumstances. To be sure, there are those who believe it already has! (Though I, for one, do not relish that possibility.)

Back in 1997 when I was still writing in mainstream publications, MoneyWorld magazine published an article I had written titled: "The Real Story Behind Central Bank Gold Sales." I wrote the article having suffered through dozens of articles published in the mainstream press that the "central banks" were selling gold and would continue to sell gold. This, they maintained,was the weight hanging on the gold market that would not let the price go up. We should keep in mind that this article was written long before bullion bank involvement (leasing and carry trade programs) in the gold market became common knowledge and widely blamed for gold's woes. My goal was to destroy the mythology that "central banks" as a group (in its entirety) were pro-gold sales because they were not.

I started with a simple division of central banks. I put the United States, Great Britain, Canada, Australia and New Zealand in one camp and called it "the Anglo-American countries." I put Germany, France, Switzerland, Italy, Netherlands, Portugal, Spain, Belgium and Austria in the other camp and called it "the Countinental European countries." I then tracked their gold reserve holdings as groups from 1965 on. The results were incredibly interesting. They also spelled out in very clear terms that it was not the "central banks" who had been gold sellers through the period but the Anglo-American group. In order to understand what is really going in the gold market, I see this division an an important demarcation point.

Total Anglo-American reserves went from 15,754 tonnes in 1965 to 9197 in 1996 -- a loss of 42%. The U.S. went from 12,499 in 1965 to 8138 by 1996. Of course much of that came well before Nixon closed the gold window in 1971, but some was also sold in a series of futile gold auctions in the mid-1970s. Britain went from 2012 tonnes in 1965 to 717 in 1996 (and now 350 tonnes due to the latest round of gold auctions to kick off the 21st century.) So Britain's gold reserve is almost nil. It now holds 17% of the gold it did in 1965 and explains the virulent anti-gold posturing by the British press, politicians, international bankers and bureaucrats. But if Britain's gold situation seems remarkable, Canada's has been even more prodigal. It now holds 9% of the gold it had on reserve in 1965. And the policies of currency destruction continue in that country virtually unabated.

Continental Europe in the same period went from 17,740 tonnes to 16,007 -- a drain to be sure but nowhere near what the Anglo-American countries had sold. Since 1996, the only anomaly in this pattern has been the Swiss sales -- one I am still scratching my head over. You will note that what was lost in the Anglo American camp did not show up on European central bank balance sheets. Some of it showed up in the Asian official sector, but the majority of it, it would seem, has gone into private hands -- a trend I suspect will continue given the history of monetary management over the past 100 years on both sides of the Atlantic.

And then there is always the potential for secret acquisitions on the national level -- operations too sensitive to reach the International Monetary Fund's annual blue book tallies -- something I would not totally discount. I recall Toyoo Gyohten's comment of several years back. He is "the" heavyweight in Japanese banking circles and former chairman of the Bank of Tokyo. "The size of our gold reserve," he said, "really did affect our status in international monetary discussions." Japan for the record holds 750 tonnes -- up from 292 tonnes in 1965. That statement was made prior to the famous Iyaru Hashimoto (former prime minister) comment that Japan would sell U.S. Treasuries and buy gold indicating that the at the very least, the Japanese at the highest levels have discussed gold ownership.

So you see, my dear FOA, you are absolutely correct about the potential for dollar settlement for gold. One thing I have learned over the many years I have studied the gold market is that events seem at time to move glacially only to rev up just when you least expect it. The British sales are part of a long term program tied to the policies of John Maynard Keynes and the defense of the dollar. That era is coming to an end with the recent rumblings by the Bush administration to reduce the influence of the IMF (a creation of John Maynard Keynes along with the World Bank and the rest of the Bretton Woods system).

I too foresee a new international financial architecture wherein gold plays a key role.

I would like to hear your thoughts on the potentiality of Alan Greenspan's retirement before going further. Do you see this as part of a larger picture related to euro introduction? Or just good timing for our Fed chairman. Knowing Mr. Greenspan's affinity for gold as pointed out in the Gilded Opinion piece "Gold and Economic Freedom" -- an essay which he recently said he would not change a word of.

I would point out to our readers that if I am understanding you correctly, and I think I am, you think that these gold movements of gold out of the United States would occur at very high dollar prices -- a currency windfall for gold holders. Are you also saying that at the same time buying gold in the United States would be problematic?

Do you believe there is anything the United States might do to prevent an extraordinary gold price?

I know, and would point out to our readers, that this is all conjecture, but it is interesting conjecture.

Hello MK and everyone!

I thought I would add a few thoughts now; before working on several new "talks" and a long absorbing reply to MKs post here.

OH boy,,,,, did everyone read J. Turk's latest? I did and am carrying a shovel with his name on it. (smile),,,,, if I ever run into him I'll use it to cover the guy up with praise and admiration! Fine work and great conclusions! This should just about cap the story as it breaks open.

Of course, the US still owns it's gold and has yet to ship any of it's official stocks of the same. A quick check of the ounces held in storage will confirm that. Any physical gold that has "walked from our accounts", to date, came from some other supplier. We contend that this bullion was the
same stores that were "lifted" from other 3rd world countries in return for US support during their various banking and currency crisis of the 90s. See back as few talks.

Now, the big question is; will the US stand behind it's international "legal tender" obligations and ship it's official gold when serious crisis and currency support protocols demand it? Our record isn't good in this area. In 1971 our dollar held an even closer connection to gold that any of the modern IMF "paper gold" substitutes today and we still closed the window! Still, we think that at this time in history, given the Euro competition, US "political gold" will be shipped to keep the dollar in play. Nothing illegal, mind you, just basic currency defense as needed.

Several years ago, many gold bugs and gold advocates missed the path as the trail turned. Something I pointed out at the beginning of these "message" talks. As most of you will no doubt agree, almost all gold discussion still centers around "the dollar's war with gold". Truly, the evolution of this story will be how that war ended then and now the dollar's war with the Euro began! A very large part of that war strategy, employed by the ECB/BIS, was to let the dollar / IMF faction hang themselves by expanding and supporting the whole arena of this dollar paper gold market. Inflating
the gold market place with so much "paper gold" that we would eventually have to bankrupt ourselves just to keep the dollar in the war game against the Euro.

Because Saudi Arabia is a member of the BIS and marks it's currency to the SDR, we are going to be hard pressed, for oil reasons, not to ship against demands. Perhaps, oil's continued settlement in dollars is directly tied to gold,,,, Do ya think?

Further, much of the current credit in our modern gold market place is backed with this "legal tender" of the IMF. As we have contended for years, 90% of the entire modern
dollar gold market is a paper game first, and that will burn as the dollar loses it's position as the reserve currency. All these Giants that are holding physical gold and credible paper" are going to win big as escalating gold values displace their dollar asset base. There are a few of you smart cookies out there that "NOW" understand what we have been getting at for such a long time.

We have said all along that how much credibility your "paper gold" holdings enjoy will depend on just how important you are in the scheme of worldly economic and political affairs. Last on this list, I can assure you, are all the paper traders on various public and "industry use" gold exchanges. Did I once hear some paper brokers scoff, on various internet forums, that real gold supply was what was moving the market,,,, and that all this talk about paper gold was a joke?? Hmmmmm,,,, the trail is soon to become very, very quiet on this account. I say into this silence, plan your "asset" moves wisely as the future is now directly before you!

Yes, the war now is between the Euro and the dollar! The Washington Agreement placed gold "on the road to high prices" as it signaled a phasing out of Euro support for our American gold values. How fast gold can, now, rise will gauge how much staying power the dollar has in all this. If there is any gold war now, it's to be in just how fast the dollar gold market can disintegrate into worthless
IOUs! So, don't count on this destruction of our paper gold market to mark the real value and availability of physical gold; that ratio will split somewhere down the goldtrail. This action will scare most harden gold investors to death; especially the ones in leveraged gold stocks and lesser white metals!

Ha! Ha! What a revelation and change of events for paper gold players. What an exciting day and future for physical gold advocates! To paraphrase and old 1970s texas oil commercial:

------ "If you don't have a gold broker, get one! You'll love doing business with Centennial! ----

(smile)
TrailGuide

Note: MK, an idea for your company T-shirts:

a picture of a loan convertible car going west down the highway with the top down,,,,,, the rocky mountains, downtown Denver and a sunset silhouetted far in the distance,,,,,,, the wind blowing thru the passengers hair,,,,,, a small HY sign to the left with " ROUTE USAGOLD.com" on it,,,,, under it all the caption,,,,,,

------ The fastest gold freeway in America! ---------

Ha! Ha! Ho! Ho! I'll take a dozen large! (smile)

Hello again, everyone.

Yes, I am still working on several posts. Some of then involving the current SDR discussion and how its evolution has changed the face of modern bullion banking. Randy Strauss offered a very good map of how these international paper gold assets came into the world. I'll draw a few more lines on the paper to show where that map leads us today.

No, our bullion reserves are no more ours than navy war ships are ours. Still, both items are fair and legal assets to use in defense! One in war and the other in currency skirmishes. Truly, it is coming to that.

I am between entertaining and talking to some thinkers about what comes next, politically. Hope to get some of this into words next week. Have a good weekend (smile).

TrailGuide

http://www.bday.co.za/bday/content/direct/1,3523,913236-6078-0,00.html
I'll be back a little later with some "coffee cup" discussion and views of MKs last post here (and much more) (smile).

Here is one that most dollar bulls never saw coming:

=================
German economy improving: Ifo

------ MUNICH - The German economy showed signs of improving on Wednesday after the widely-followed Ifo index of the western German business climate rose unexpectedly to 89.8 points in July from 89.5 points in June. ----------- Analysts had been expecting a sharp fall in the index, which is conducted by the Ifo economic institute and is closely watched by financial markets. ------------ The euro broke the psychologically-important level of $0.92 shortly after the figures were released, rising to its highest level in five months. ------------------ end
======================

The war between gold and the dollar has been over for a while now. The action, today, is between the dollar and the euro arena and this is what will break the price lock on gold. Leaving gold bugs with a lot of questions that ask why this: both systems will strive for a higher currency price for gold; one doing it because they have to; the other doing it because they want to! The casualty on this battlefield will be the world gold market as we know it. A market caught between how Western perception thinks gold's price should be "discovered" and at what price level trading in physical gold craters the entire paper structure. A structure of American based "paper gold".

We have been saying for some time that this will be "the" show to watch unfold; but only if your holdings allow you to stay still in your seat as it happens (smile).

back later
TrailGuide

Hello MK!

In your message # 95, posted here on the trail, I saw a nice invitation to engage in some "conjecture" and a warm cup of coffee. Sounded too good to pass up. Actually, the seasons are changing, high up here on the trail, and it won't be long before cold weather demands much hot coffee to follow the path. Later, I'll be at my little house in Florida as winter arrives in the northern half of the globe. As you know I live in several places, but our USA is the only real home. (smile)
=========================

Mike,

You mentioned DeGaulle's famous quote that ended with: "as the unalterable fiduciary value par excellence". He made that statement in 1965, but Pindar also said in 522-442 BC: "Gold is the child of Zeus. Neither moth nor rust devoureth it."!

Do you see the common thread linking these thoughts; neither time or lineage brought these gentlemen to think of gold as money. Ha! Ha!, I just had to throw that in there (big grin).

Actually, referring to your chain of thought,,,,,, I don't think we can be so sure that the Gaullist of our reference period can be the same as the ones in power today. Our Charles, the one that passed on in 1970, was a military man and even taken prisoner once. His thoughts on gold and money were molded from a harsh war experience and an extreme political interventionism common in that era. To this end, his positioning had to promote French nationalism, even in money affairs, if his Fifth French Republic was to hold up. To his credit, and far more important than his gold stance, he planted many of the seeds we see as trees today. Back then, he was leading France to be part of a greater regional economic power; early on he stroked Russia, China, even Iran and Iraq. Even though none of these nation states remotely resemble, then, what they are today; the thrust was an
ideology to unite the economies more so than the powers.

Mike, in this, you are so very correct to note his "forming the intellectual beginnings of a United Europe". Still, the hard money people and leaders, we grew up with, have all moved on. The ones now in "positions of influence" and "outright power" are our very piers. Many are not far from our age group and in this; the range of life experiences, so similar to ours, so shape modern money thought. Yes, they studied the same history books we did, but have evolved to embrace different forces shaping this, oh so, different world. If you want to see the Euro Gaullist of today, just look into a mirror and try to reach for their same understandings. Its not hard to do.

How long will this era last; how much will it all change the dollar's timeline; can EuroLand ever be the same animal it once was??? Questions that only time will answer. For us, today, we follow their progress for our direction and understanding.

In a recent Financial Times article out of Paris, Jacques Chirac (French Precident) and Lionel Jospin (prime minister) were both noted for talking about the coming ECB succession. One of the few points they agree on (few indeed) centers around the fact that a Frenchman will head it next. Still, more so than knowing who will lead; understanding the political strategy that's unfolding is what counts. Seeing all this with my eyes, we can envision the posturing very clearly.

As this reserve currency transition, or perhaps war is a better term, moves on; the ECB must shift it's thrust with a leadership statement. Wim Duisenberg provided an excellent political cover for selling into the American paper gold market; as it exists around the world today. His national pedigree demonstrated a distinct flavor against gold as a monetary reserve. Truly, the ECB could not be seen prompting all their big bullion banks to short American paper gold, if they ECB / BIS were serious gold advocates. In our time of Western thinking, who could understand such a contradiction? But, politically, the game was to serve two goals; temporally support the dollar for trade settlement until the Euro was on its feet (sending gold prices down); and inflating the American lead gold market until it burst from over issuance. A good chuck of this ties into the SDR
issue that I'll get to later.

Now,,,, with the US vs Europe economic war in full bloom today; and Euro money policy in a position of leadership; and Euro circulating currency about to begin; it's time for a shift of thrust. Jean-Claude Trichet, or at least someone of his same pedigree, will usher in a new position;
"physical gold is a great asset for private and official sectors to save"! Bamm!!! Suddenly, our decades old paper gold game will run smack into a new idea; "Euro promotion for private gold ownership" and "high gold prices are good"! And more importantly; this concept will be presented from the controllers of the next reserve currency!

Contrast this against a whole world invested in gold as a hedge,,,,, by owning all of an American sanctioned paper gold market that's inflated 1,000 times beyond physical reality. (smile) Makes a physical gold advocate feel real good inside; like this warm cup of coffee! (double wide smile)

This is the new Gaullist; a variant time traveler who arrived from failed official gold wars that pitted currencies against bullion. Never again!

[more]

Apologize to all,
I was about to do a series of
posts yesterday and
ran into some communication / sending problems.
Have everything written up but can't pull it up from my location.

Will
post as able.
TrailGuide

Hello all!

Well,,,,, with my replies drifting somewhere in cyberspace, I asked our speaker to return and address a whole cross section of recent developments. Besides, this guy always could hit the mark better than me. (if I don't find those documents, some heads are going to roll for sure) (smiling with a medieval ax in my hand). OK,,,,, let's chair up to a nice round table talk:

==========================================================

Good evening Mr. Kosares, nice of you to spare some time to join us.

Historically it's appropriate for French thought to be, once again, influencing Euro Zone gold policy. In an Alpha / Omega analogy, their pro gold stance should prove to be a fitting conclusion of our 30 years of gold suffocation. It will also be most satisfying, I presume, for them to see gold valued and used independent of money function and American's "dollar foreign policy".

I agree with you, in that gold has its own territory staked out within a broad range of EU economic and currency initiatives. In time, this policy will be much more clear and further entertain a close scrutiny from all other domestic powers. I submit that this day has always been on record "as coming"; even though noone could mark it prominently on their calendar until now.

===

We enjoyed your dissertation about "the threat of an official US gold drain". It records, not only the numbers, well, but also points to long running common political attitudes concerning gold and its prominent position in international currency valuations. This recognition of gold being an important official currency measure, is something Western Gold Bugs have consistently longed for. Now with it openly acknowledged thru outright manipulation, these same thinkers object to it's being used in a similar manner as currency? It seems they want gold branded "important"; only as long as such branding makes the price go higher; not lower. In their minds this somehow places bullion in a different category from currencies that are routinely forced up and down for political objectives.

Ah yes, to this end I must present a exert from my good friend who cannot keep track of his files (smile):

---- You know,,,, I look at the last several decades of modern paper gold trading and cannot help but think of Arizona (state in the USA). Throughout the region they have roads going over old stream beds labeled "dry wash / subject to flooding". With this context I can construct a good analogy with American gold investors.

A guy begins building his house of wealth in the middle of one of these dry washes. A known gold expert comes along and tells him; "hey buddy, that old stream bed floods from time to time". The Bug says,,,, yea I know, but I only plan to be here for a quick trade or two,,,,, I know it's unstable and washes out every so often,,,,,, taking all paper values with it. I'll just catch some good sun between the rain,,, I'll be ok.

Well,,,, years go by and the rain comes and he gets washed out a few times more that usual,,,,,, but the guy still stays,,,,,, even thought the paper gold price keeps getting washed ever lower. Then,,,,,,, a huge unending wash comes even when no rain is falling. After seeing his house of wealth float away with a falling paper price he decides to walk upstream and find out why all this water keeps
driving the gold price down??

By god,,,,,,,, miles later he finds a government dam that suddenly started releasing tonnes of water all the time. He raised hell and said it wasn't right,,,,,, but the man at the valve said they aren't doing anything any different than what this type of "paper market"-- I mean stream bed,,,,, was built for. This is a derivatives market, son,,,, meant for betting on the flow,,,, not building a house from it!

If all the public is just speculating on when the rain will fall,,,, why is it so wrong for the government to do it,,,,,, and help maintain your lifestyle to boot. Besides, if all your gold talk is so right,,,,, then we are catering to gold advocates and making physical prices more reasonable???

But the Bug says,,,,,, hey, this isn't a natural market,,,, I mean stream flow!! This bed was only suppose to flow between natural dry and wet spells,,, like a real free bullion market! In reply the valve man asked,,,,, who the hell told you that??? The Bug answered:

I learned it from My Broker!

===================

Sir Kosares,
American dollar policy has built a substantial wall of separation between its currency and gold. More philosophical than material, the last decades of official declarations have served to block any useful "voluntary" return to high dollar gold prices. At every turn of the road, treasury and fed spoke persons have said that a low gold price indicates good dollar management. The price and time needed to reverse such a "learned experience" would, today, be enormous. Thus, we see a trapped currency policy that can only travel toward intense dollar inflation, riding ever lower paper gold values until both processes default; both printing press and price wise.

The reality of all this is that dollar gold prices could have soared as far back as 1971 and the world could have gone its way. I believe that noone would have left the dollar then, even with $5,000 gold, because no other currency system was ready to assume the dollar roll. Yes, US inflation rates would have soared and world economic trade would have fallen victim to mangled exchange rates: but that happened anyway and the dollar would still have retained it's reserve status.

This drive to prove the dollar, in low gold prices, now comes to its destine end. An end extended by inducing paper gold inflation backed by ever more official involvement in the world gold markets. The dollar faction is pumping paper gold to support the dollar while the Euro / BIS faction has shifted to doing the same to destroy the paper gold market faster. In recognition to my good friend's story --- the water flow is now washing away dreams and exposing houses built in the wrong place---. Indeed, why on earth would Western thinking Gold Bugs believe in a paper gold system that could only show value if it was not inflated? Did they expect a deflation in paper gold to drive prices up?

Their government considers their current derivatives based gold market to be just as important a tool in economic and international affairs as the dollar gold exchange standard was prior to 71. America opened the dam to let gold contracts flow thru the dry wash then, as dollars were printed to inflate the largest paper proxy the gold market traded with: dollar gold!

If this was important to maintain US lifestyles at that time: so why would it not be important now? They destroyed worldwide wealth held in gold, in the form paper dollar proxies. They changed the very currency of the world to gain an American end. Now Bugs cannot believe this same system would inflate their same little market to extend the same courtesy again? In the process, this time, also destroying the whole of the gold industry.

A strong dollar policy is built upon a low gold price; once again by inflating the widest scope of the usable gold markets: credit gold. In an incredible contradiction, it seems that the real fools are the gold bugs who buy into this paper market expecting some kind of deflation to drive the contracts higher? In order for this to happen, the US would have to counter modern gold thought with policy that said; high priced gold is unimportant to dollar policy. More than ever, with Euro competition creating a currency war, dollar gold must fall or the whole system must freeze up! Dollar prices cannot rise until the entity of our credit gold market is removed from function. This will happen.

=============================

I have presented this topic many times and again state that "all gold paper will burn". Most mine values included. Then and only then will gold values soar as physical units traded. Not before. As an adjunct, the illusion of most American paper wealth will also burn with this process that
transitions the dollar away from reserve status.

At the right time the Euro Zone will withdraw from the IMF, leaving the US and its factions as the only support for dollar credit assets held overseas. Then the evolution of SDR use our guide knows so well will be complete. This will leave the SDR interpretation open to only one avenue to finding support: it's basket currency function dissolved, gold will have to flow from American based stocks. With most of the present official credit gold leverage built upon IMF protocols, the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates.

With the world credit gold markets paralyzed in default and dollar credibility placed in question along with American economic stamina; physical gold will return to official hands in Europe in exchange for Euros. A paradox observed as high gold places more demands upon Euros and sends the dollar ever lower.

=====================

In all of this Alan Greenspan will say good by. A gentleman of his ability and stature will find no use for a position he cannot change from; a good general does not only retreat. Any lesser player can buy public and treasury debt for the purpose of constant hyper inflation; there is no policy strategy or gamesmanship in this.

As for gold being a problem to buy in the USA? Once again, I point out that American policy has only the wish to manipulate its currency valuations with official currency trading. It will be in the US advantage for gold prices to rise and rise strongly. An acknowledgment to Euro planning and a defeat for 30 years of American gold misuse. If treasury gold is traded at all, it will be within official channels to help control dollar values.

However, as paper gold values freeze up and their use fails the public, physical bullion brokers will become a popular as "crude oil" is to producers. I wish you "a deep well" in your affairs, my friend, and will respond more for a time.

======================================

Thanks Mr. speaker,,,,

Thanks all
TrailGuide

http://quote.bloomberg.com/fgcgi.cgi?mnu=news&ptitle=Economy%20World&tp=ad_uknews&T=news_storypage99.ht&ad=world_economy&s=AO4rDHBa.RXVyb3Bl

European Money Supply Growth Accelerated in July, Analysts Say By Sonja Dieckhoefer

--------- Benchmark interest rates in Europe are currently 100 basis points above rates in the U.S., ``causing investors to turn to Europe,'' said CDC's Nehls-Obegi. That may also have lifted M3 in July, she said. The ECB said ``non-resident holdings of money market paper and debt securities issued with a maturity up to two years'' have been distorting M3 growth figures higher. ---------

==========================

The beginning of a reversed carry trade? I think Michael Kosares called this one long before anyone else could see that far down the path.

I'm working on a rewrite for the trail. Watching, hiking, talking and writing all at the same time.(smile)

TrailGuide

MK (08/27/01; 19:22:43MT - usagold.com msg#103)
Is that Milton Friedman I see peeking from behind that boulder??
Hello again, my friend. From your last post I was struck by this statement, one I am still pondering:

"As for gold being a problem to buy in the USA? Once again, I point out that American policy has only the wish to manipulate its currency valuations with official currency trading. It will be in the US advantage for gold prices to rise and rise strongly. An acknowledgment to Euro planning and a defeat for 30 years of American gold misuse. If treasury gold is traded at all, it will be within official channels to help control dollar values. However, as paper gold values freeze up and their use fails the public, physical bullion brokers will become as popular as "crude oil" is to producers."

I am particularly interested in your view that " it will be in the US advantage for gold prices to rise and rise strongly." Of course that is 180º from the current policy where the messenger throttled, imprisoned and killed in the hopes that the vacant dollar policy is not exposed to the world. Of course, as you have pointed out the euro could very well change all that. I also detect a hint that the oil producers might want "oil for gold" when you say "it [gold settlement] will be within official channels to help control dollar values."

I don't know if you saw the story today, but our friend Milton Friedman (who once proclaimed that the U.S. gold reserve should be put on the block and sold en masse to the highest bidder) proclaimed today that the euro was a "a big mistake."

What I think you might find fascinating are the reasons why he believes this. According to Forbes magazine, Friedman slammed the the euro "saying that it would create monetary turbulence and discrepancies instead of promoting political unity."

God forbid that we should suffer "discrepancies!"

Whoa, , ,Ho! Ho!

It is not difficult to see what he is really saying. The euro is going to get in the way. It's going to cause "turbulence!" (not that the dollar hasn't served this purpose all too well on its own.) And then there's "political unity." How could the Europeans be so . . . .well. . . .so totally uncooperative."

Here's the capper:

The esteemed Stanford professor goes on to say that "the U.S. should pull out of recession in 2002 but that recent Fed interest rate cuts could lead to inflationary problems."

"I believe the United States is already in recession," said Friedman, "The fall in production and employment show that clearly. Whether or not we use the word 'recession' is just a question of semantics," He also pointed to the Fed's seven interest rates cuts this year as reason to look out for inflation next year. "With the very unusual Federal Reserve policy of successive interest rates cuts...the key problem once the recession ends in 2002 will be how to control inflation," he said.

So its very clear:

With inflation just around the corner, it is difficult enough to deal with one inflation indicator let alone two. . . . .two safe havens not just one. What's the dollar to do?

Guess it all get's down to a matter of perspective. I've always contended that if the U.S. gold reserve is to be sold that it ought to be offered to the American public on a first refusal basis. (Grin.)

Thought this would be enough to raise a comment or two. . . . .

My best to Another, and hoping this finds you both well. MK

Good day everyone.

---- Two roads diverged in a yellow wood, And sorry I could not travel both -------- I shall be telling this with a sigh---Somewhere ages and ages hence: ----I took the one less traveled by, And that has made all the difference ----

This partial caption, as it appears at the top of our trails page, tells of the Gold Advocate story through out this modern gold era. An era that has so very decimated the savings of traditional hard money paper gold bulls. Clinging to all their failing theories, they assumed were financial hard money law, only to watch those market dynamics evolve away in our political world; taking much of their wealth with it.

So, down the single path we go and boy has that decision made a difference! As Physical Gold Advocates, buying and holding real gold for the future, we have avoided taking an enormous hit to the "safe side" of our long term savings. When one adds up the net accumulated loses from a decade of "gold market timing", in and out "leveraged plays" and good money poured down the "liar's hole" of gold mining prospects; is it any wonder so many are clamoring for the government to come clean and return policy back towards support for the "illusion of our paper gold market"? Back towards the leveraged player's favor so he can get even: perhaps even with coin buyers?

In a large part, this explains a lot about the cross currents and confusion gold buyers hear in today's media. Two entirely separate factions are in the gold game; one vocal and unhappy, the other quiet and very pleased to buy gold at lower prices. If you invested in the commodity side of our gold industry, that's the new gold supply side produced by the mining sector, you need a higher price or
your investment will eventually become zero wealth! If you invested into the real asset side of the market, physical gold owned and held as part of your long term wealth, higher values will one day come and easily match all the considerable currency inflation that has already arrived. For these buyers, life is good as lower prices and time are both on their side.

But, what of the guy that brought into our leveraged gold markets; thinking it was a free market that represented the real value and price for gold bullion? Was he a victim of a government currency supporting scam that rendered his leverage a loss? Or was he the victim of an market industry that told him not to buy physical gold, instead take advantage of the leverage we can sell you?

Ask yourself: who said years ago that we know how it all works and how to out maneuver this dollar inflation stuff, ,,, who said the paper leveraged gold markets were the real free markets,,,, and we know how the government does all this because we are professionals,,,, and we have a good leveraged play that will beat that inflation when it comes and beat it X times over!

The answer we hear: "Now that these leveraged plays have and are turning into toilet paper,,,,, we want to know why the government made us buy all this stuff" ,,,, instead of real gold????

In our society, dominated by Western Thoughts about savings wealth and the use of leverage to gain it, Paper Gold Advocates have advanced the logic of their position by using overlapping reasoning. Promoting an idea that share ownership in an industry, that sells gold to make a cash profit, is the same as ownership of the gold product they produce. This is the same thinking progression where history records a shoemaker's children without shoes. Following this you, as a paper gold investor, also risk a situation where your family goes barefoot, without real wealth, while political maneuverings wipes out your stock and trade business investment; not to mention your wealth. In the same social dynamic where friends point out the shoemaker's bare feet, physical gold advocates will one day be asking; "but I thought he owned a gold mine?"

=================

I read all the fine articles and elaboration about the woes of our gold mining industry, it's investors and losers that played leveraged paper bets against this evolving market. Still, we are struck by a glaring flaw in their presentations: instead of taking the high ground with Physical Gold Advocates and advise dumping paper investments in this politically manipulated market and buying gold with the proceeds, they sink to the background and wait for a legal retort that would eventually lock up their lost illusion wealth for good. In the process they are trying to legitimize their use of the same failed logic the mines and paper brokers pushed; "buy our industry not the gold product its all based on"!

For decades, this entire paper hard money reasoning reeked from terrible political understanding. They tried to sell hard wealth logic packaged into something new players couldn't resist: ----- " I know you are a smart gold thinker that knows the real money inflation score! And because you are immersed in Western Thought, you can understand our logic better than most average people; let the other simple people buy real gold while you buy something that is just as good and pays off x times better; all our near gold substitutes"! ---------

Truly, the reactions we are hearing today, on many gold forums and all over the hard money media, is the "hangover" of investors being sold that logic as a "static" law of the money universe! Without their being exposed to the fact that money, gold and politics are all an intertwined dynamic human action; coursing through nations and society, as organic players fight to hang onto our real wealth and savings over time.

The notion that "real wealth" and "money function" could be combined and retained, for trade use and as a long term savings for average man, was a dream for hard money socialist. These two separate forces were stamped together and coined by a narrow logic that never would concede how incompatible it was with changing human desires.

Again, this "hangover" of loses is the result of layer after layer of misconception being placed over real gold ownership. The sad fact is that those who stand outside the ranks of Physical Gold Advocates will mostly not ever catch up, financially, with simple gold owners! The world, it seems, turns once again as it always has.

===================

Yes MK, I saw Milton over there behind that rock. His comments and understandings are like the wines his old (part owned) vineyard produced; sometimes ok, sometimes bad. Years ago, when I lived in San Diego, we often went to his winery: San Pasqual in the Temecula valley area,,, if I remember right? Don't think he owns it any more. I never liked their wines, but one of his wine vinegars was absolutely fantastic. We stopped at Chinos vegetable farm, around the corner from us, on the way for a sunday drive. While later cooking, I would recall how I could only like some of
his offerings.

Today, my tastes for "a changing currency universe" is proving just as correct in opposing much of his thinking. Along the same lines our friend PH in LA said; we have to stop watching our favorite trees and start watching the whole forest!

=================

You write: ----- I am particularly interested in your view that " it will be in the US advantage for gold prices to rise and rise strongly.---------

I think this whole concept is the most difficult part for people to grasp. We wrote many portions of this logic and tried to tie it into unfolding events so it would be clear. Problem is that this was so spread out, as it occurred over years, it's hard to see it all.

A most interesting part, one I think will be studied later, is in the evolution of our modern paper money dynamic itself. The US was way behind the curve in grasping how our changing "world economic function" was reworking the use, demand and nature of how fiat money settled commerce. Even with all it's awful inflationary attributes, we were evolving with the markets to use our fiat moneys in ways that were in spite of their losing value. Had American money policy seen this in process, they could have dropped the war on gold long ago; the way the Europeans have already.

Still, as part of this political war of economies and currencies, the ECB / BIS played into our gold war theme. Aside from a separate strategy that kept cheap gold commitments flowing for cheap oil,,,,, Euroland played our gold war, too, as we murdered the paper marketplace along with the whole dollar gold system it was built on. I think that the US, just recently, caught on to the "total meaning" of the Washington agreement and is now rethinking what to do with their position.

They shifted their war on gold to become a war on the Euro,,,, only too late. Now, knowing that the Euro is a fact, we must have a super gold price if the dollar is to stay in the game! The question becomes one of supporting a cheap paper price for the sole function of keeping the market and all its bullion players alive. With the war on gold over, they need to turn their tanks around to face the
real enemy but cannot.

If we try to save the dollar gold markets, they will morph into a pure paper system with no gold supply to back them; paper would eventually be priced way below world physical markets. They will become a pure cash settlement item, in a way like the OEX. This will easily drive oil pricing into Euros. If we adopt a week dollar policy, trash the IMF and it's SDRs (prior to ECB withdrawal) we will have to supply gold bullion outright and allow a true market price based on some currency supporting function; still at thousands per ounce. Our entire anglo - London gold markets will spin off hugh,,,,, nation busting financial loses. By the way,,,, this is why our boy is driving for EMU as soon as possible. (smile)

In all of this; the main story / component is oil supply! We must keep our dollar function, if only in a diminished fashion, in order to buy oil imports. Once the dollar fully fails, everyone (our partners like Mexico and Canada) will bolt for using Euros as reserves and international settlements. OIL value in the US would spike sky high even as local inflation drives alternative energy supplies to
become uneconomic to produce. Even at $200 a barrel equivalent.

========================

You write ------ Guess it all gets down to a matter of perspective. I've always contended that if the U.S. gold reserve is to be sold that it ought to be offered to the American public on a first refusal basis. (Grin.)---------

Mike, I know you guys have written some fine thoughts about how the government may one day take our private gold back. I have to allow that we never know what they will do: a lot of nuts become favorite leaders??? Still, we say that the government already has it's gold back. They took back what was "legal tender" , then ,,,, and won't try to get at what is now private gold wealth.

Just like the dollar tender in your pocket, US bullion is not yours to begin with. They have the right to call it in. This area is also a hard concept for gold thinkers to come to grips with. After decades of being told that the gold in Fort Knox belongs to the public, the truth that it doesn't and never was Its impending use as a currency supporting supplement is shaking people up that believed that position. Soooo many investors thought that this gold reserve was there to back their currency at home, at some future high price, that they reasoned they could just buy gold mine stocks with their investment moneys for an added play. Letting a future currency deflation and a rising gold price meet at some high price in the middle and back up their other surviving shoe box savings! Again, this ain't gona happen! Our currency is going to inflate to hell, even as we clean out our official gold reserves to ship overseas. If ever there was a story to buy gold for your own,,,, this is the tail that will create a killer offtake the world over!

However, the political choice, as you alluded to above, should will be allowed to buy our governments gold,,,,, if offered,,,,,, OR have that gold keep oil prices down to $90 a barrel so we can still drive SUVs. I wonder what will happen???

===============

As a side item: I see where George Mitchell sold out his Mitchell energy and development. Funny, I know a guy that used to play with him as barefoot boys on Galveston streets. He said that young George once wondered (as boys do) if a small growth in his nose would finish him off. I think he had internal radium treatment for it or something?? Oh my,,,, who would have known that this barefoot brilliant friend would one day sell out as a billionaire?? What a wonderful, free country!

I'll post more about SDRs and Randy's notes if things don't go haywire again!

Thanks all (and MK)
TrailGuide

http://quote.bloomberg.com/fgcgi.cgi?mnu=news&ptitle=Currency%20Europe&tp=ad_uknews&T=news_storypage99.ht&ad=euro_currency&s=AO4zDXxLwRUNCJ3Mg

Here are a few quick observations:

It would be nice if our Fed could manage it's dollar policy with an eye on value only. This was suppose to be their job but it became morphed into an economic policy instead.

In his comments today, the ECB's Welteke makes a clear distinction between these two institution's thoughts on the matter:

------ Firstly, it isn't the ECB council's mandate to steer economic growth, but to stabilize the value of money. Price stability is the top goal of the European System of Central Banks. The U.S. Federal Reserve has a mandate that includes growth and employment targets ---------------

Notice that phrase "to stabilize the value of money"? After several decades of evolution, US traders have come to equate the value of a currency as to whether money policy is delivering them investment profits or no. If local prices of stocks and real estate are rising, then a money's exchange rate should also. It's only natural because everyone the world over will want in on the "next great investment"; where ever that process is being played out!

Of course, that's not the way money values are determined; but because international trade has delivered money flow control into the hands of an "out of control" dollar derivatives market, this is the thinking dynamic in charge. No greater case can be made that; world wide currency values are but an illusion while being measured with a dollar reserve system. We see this ever so clearly today as the ECB strives to place a real value upon their currency by employing strengthening rates of return behind it; saying that a nation's currency is worth something aside from structural economic function alone. All the while the Fed is inflating the dollar as an open sign that the dollar is worthless if our economy goes "only sideways" for a while.

What an incredible reversal of perceptions for American traders to latch on to; we are buying into the dollar inflation as a permanent structural component of our economic and financial markets. This trend is something we, as gold / Euro / oil people, have been promoting will happen for some time. As the Euro matures, this ongoing dynamic will lead to; a dismantling of our dollar reserve system; a flow of us gold out of the country as an only means left to maintain dollar settlement; a rising gold price that first disables, then destroys the current world dollar gold market; hyper inflation within the US and a critical loss of oil imports at cheap dollar valuations.

Our way of life and quality of life will be changing as this plays out. Truly, for those that understand, we will not actually lose anything real; rather we will lose the illusion of wealth Americans have come to value as their given right. An illusion we trade to the world and with each other in the form of an overvalued currency and the assets it denominates.

Again, I'll have more on this if this complex computer system stays together (smile).

TrailGuide

Well,,,,,, I tried to get this incredible cluster of wires and chips to work correctly, but to no avail. My computer is fine, something wrong in the private network that supplies me. Anyway, I'll take this interlude to work in some travel time. Have a great Labor Day and I'll be back in a few weeks.

While away, some points to consider:

The Dollar

On the plus side; all thru the 90s it was the best currency to store your extra cash in. No matter if one loved it, hated it or thought it was near destruction, the dollar worked well for its owners. It worked more so because of the way the world changed in using currencies. Not because we managed it so well.

On the negative side; it is a self serving money that caters to one and only one nation state. The needs of all other users of this reserve currency are cast down into second class status.

Because it has been in this reserve position so long, the gross amounts that circulate outside the borders are completely out of any proportion that our local economic structure could service.

Even with a huge, record breaking trade deficit, our fed shows no concern to slow further dollar printing.

The level of sophistication of world trading systems has bypassed the need for a one world, all serving currency unit; like the present IMF dollar system.

The Euro

Its structure, using several central banks, is very close to our dollar system. From that point the closeness ends.

Its political structure is much more appealing to world wide users. Because it's based on a number of different nation states, its management policy will tend to carry more of a worldly mix of initiatives. Not something for everyone, but far better than the dollar.

Its built to have more of an internal function that services EuroZone trading. If it becomes the best (or last) man standing, such an internal flow will cause world trade to flow thru Europe instead of using Euros bypass trade around Europe. This alone will keep it from being a world reserve. Gold wealth may come back to serve this end.

Will it fail?

I don't know! I do know that it will endure. The reason I have moved the cash side of my wealth into Euros is not because it will outrun gold or, for that matter, outrun the dollar in the near term (Euros are a small part of my asset mix with gold being the largest). I changed because I expect the dollar to fail in a super inflation as the world moves on. I expect the Euro to not fail at all or fail less?

Further, the main reason I own gold is because the current dollar gold market does not show us the real gold value at this time. There are a whole host of political reasons why this is so. Still, as the dollar fails, American gold reserves that still exists as the final backing will have to be used in a pure physical market to somewhat deflect the dollar's fall. You can count on the fact that the majority of that US gold will not be, in any way, used to shore up a then failing paper market. As this plays out the current Bullion Bank / london market will lock up and once again rob the paper owners of bullion. No different than the way pre 1971 foreign dollar owners were robbed before the payoff.

The paper gold bulls of that time were waiting for big boys to default on their gold debts,,, like GATA is waiting for today,,,,,,, so the bulls could collect. Didn't happen then and won't happen now.

I expect the dollar to fall away from its present stature in world trade. Bring with it a changing lifestyle for all Americans who have hitched their wealth to dollar related assets. Unfortunately, most gold mine operations are in that league.

I expect gold to do a sky shot, not because of coming us inflation, but first because of a paper gold market abandonment. Then, super dollar price inflation will only drive it higher.

The dollar system, as Mr. G. well knows, is locked into a structural inflationary trend that cannot be stood aside of because of the Euros existence. Any attempt by the fed to raise rates to slow dollar printing will stall our economy further. The Euro system will not, as in the 70s and 80s, have to follow our stance; they no longer have a mandate to bank unneeded trade dollar excesses. They have been sending this strong signal for some time by selling off dollar interest. This trend is going to accelerate as the Euro builds. They have no purpose or reason at this time to get into a real war with the dollar. They are at war just by laying comfortably with a Euro return a little above us for
their work to be done.

Good luck all

TrailGuide

MK (09/02/01; 10:05:38MT - usagold.com msg#107)
The Now Very Clear European Position and Remembrances of Harry Browne's "You Can Profit. .." Books from the Early 1970s. . . .
I see your #106 as one of the most important messages you have ever posted at the Trail or at USAGOLD. In some ways, it is a recapitulation. In other ways, it is groundbreaking.

I believe you are correct. The Europeans will be content to let the dollar take its own course in full knowledge that the seed of currency freedom it has planted is fundamentally sufficient to meet the needs of the new Europe. I do not think however that this was clear until the last euro rate cut. Your post focuses those considerations. Europe will be no more aggressive than it needs to be. As a casual political observor, I believe that this policy is a mistake that forces Europe to play the inflation game along with the United States, and that is not the way I would have played the game given the opportunity. However, I'm not the one calling the shots in Europe. I am an American businessman and investor and in that capacity I am not so much interested in the world as I'd "like it to be" but as "it is." I'm sure my European counterparts feel the same way.

What do you believe this now very clear European position means to the European currency holder and the U.S. currency holder (in the form of savings and equities)in the medium to long run? Do you believe gold ownership is important to the European investor? It is clear that you believe it essential for the U.S.-based investor as you foresee a complete dollar breakdown.

In reading your last message, I was struck with how close it came to Harry Browne's analysis in the early 1970s. In two books, "You Can Profit from the Coming Devaluation" and "You Can Profit from the Coming Moneatary Crisis", he laid out a thesis very similar to the groundwork you have laid in your #106. The Wall Street establishment and press considered him the lunatic fringe back then simply because most people never heard of such a thing. He was simply ahead of his time. And he turned out to be absolutely correct.

Here is what you said that made me think of the "You Can Profit Books":

"Further, the main reason I own gold is because the current dollar gold market does not show us the real gold value at this time. There are a whole host of political reasons why this is so. Still, as the dollar fails, American gold reserves that still exists as the final backing will have to be used in a pure physical market to somewhat deflect the dollar's fall."

Of course, this is precisely what happened in the 1970s. Harry Browne made the same argument back then -- that the $35 gold price was both an institutional fixture and institutional fiction. Europe took advantage of that situation by reclaiming a substantial gold reserve. When the London gold pool (both de jure and overt) broke down at the $35 price, the devaluation (both de jure and and overt) quickly followed. Additional formal gold sales proceeded from there from both the International Monetary Fund and the U.S. Treasury.

Since today the gold price is both an institutional fixture and institutional fiction much the same process is in motion at present -- only de facto and covert. Are you suggesting a similar result? And with the euro present and accounted for, will it lead to a new world order?

FOA, I want to thank you again for sharing these thoughts with us. I think we may have come to a new Trailhead -- perhas one that looks vaguely familiar, but then again perhaps something totally different. I am convinced you are correct that the Europeans believe that there is a certain historical inevitability to the dollar's demise and there is no need to hasten the process.

The real controversy in the weeks and months to come will revolve around what this might mean to both European and American savers, equity investors and gold owners.