The Gold Trail by FOA - October 2001

All times are U.S. Mountain Time

(10/03/2001; 10:21:26 MDT - Msg ID: 110)
The makings of a dust storm

Hello Everyone,,,,, packs on,,,, there is ground to cover!


That's not dust from our feet -------

As we walk along this Gold Trail we no longer have to look far ahead to see results; real events are directly under our feet now. True, many will point to this tragic attack on New York and Washington as the catalyst for current woes. But I say that our entire economic structure was already weak and failing from decades of dollar expansion. If these recent events had not come along, something else would have eventually triggered our economic cascade.

The effects are falling into place just as I said they would. -------

As a note to hikers: I will begin using "I" while talking and, from here on out, clearly indicate when I'm speaking the thoughts of a friend or associate. Over the years I have very often spoke the words from others, as they wanted it produced. Often doing entire posts while stating other's positions or inserting their views in my posts, mid stream, without saying I was doing such. We have all come far enough, now, that our understanding can grasp the changing tide without this. My planting seeds of thought in such a way may no longer be needed, but your leg work is far from over. This change is a result of the evolution of our political and financial world just as much as your growing in insight.


For decades hard money thinkers have been looking for "price inflation" to show up at a level that accurately reflects the dollar's "printing inflation". But it never happened! Yes, we got our little 3, 4, 8 or 9% price inflation rates in nice little predictable cycles. We gasped in horror at these numbers, but these rates never came close to reflecting the total dollar expansion if at that moment it could actually be represented in total worldwide dollar debt. That creation of trillions and trillions of dollar equivalents should have, long ago, been reflected in a dollar goods "price inflation" that reached hyper status. But it didn't.

That "price inflation" never showed up because the world had to support it's only money system until something could replace it. We as Americans came to think that our dollar, and it's illusion of value, represented our special abilities; perhaps more pointedly our military and economic power. We conceived that this wonderful buying power, free of substantial goods price inflation, was our god given right; and the rest of the world could have this life, too, if they could only be as good as us! Oh boy,,,,,, do we have some hard financial learning to do.


Over the years, all this dollar creation has stored up a massive "price inflation effect" that would be set free one day. Hard money thinkers proceeded to expect this flood to arrive every few years or so; the decades passed as those expectations always failed. Gold naturally fell into this same cycle of failed expectations, as the dollar never came into it's "price inflationary" demise.

A number of years ago, "I" began to learn of some smart people about the real political game at hand and how that would, one day, produce the final play in our dollar's timeline. Indeed, you are hiking that trail with us today; us meaning Euro / gold / and oil people. All of us Physical Gold Advocates that have an understanding about gold few Americans have ever been exposed to.


Our recent American economic expansion has, all along, actually been the result of a worldly political "will" that supported dollar use and dollar credit expansion so as to buy time for Another currency block to be formed. Without that international support, this decades long dollar derivative expansion could not have taken place. Further, nor would our long term dollar currency expansion produce the incredible illusion of paper wealth that built up within our recent internal American landscape.


The relatively small goods "price inflation" so many gold bugs looked for will be far surpassed and the "hyper price inflation" "I" have been saying is coming is now being "structurally" set free to run.


Why "structurally", why now?

For years now, "politically", the dollar system has had no support! Once again, for effect,
"Politically NO", "Structurally Yes"!

For another currency block to be built, over years, the current world economy had to be kept functioning. To this end the dollar reserve system had to be structurally maintained; with its IMF agenda intact, gold polices followed and foreign central bank support all being part of that structure. Truly, the recent years of dollar value was just an illusion. An illusion of currency function and value, maintaining the purpose of holding the world financial and economic system together for a definite timeline. Politically, the world does not hate America; rather they hate the free lifestyle our dollar's illusion value brought us yesterday and today.

Now that the Euro block is passing a point where the Euro currency is viable; this same past dollar support that built American's illusion wealth will now fall away. In it's place we will see the beginnings of a currency war like no other in our time.


This very change in structural dollar support is the same change that has been impacting our fed's actions for over a year now. This change is the difference between "my" call for super price inflation and the endless calls past hard money thinkers have made. Their on again / off again goods "price inflation" outlook is based on the same failed analysis that expects price rises because the fed was into another "printing money faster" cycle. I point out that that cycle has come and gone many times without a price inflation anything close to our total, long term, dollar creation.


To this end, I have been calling for a hyer inflation that is being set free to run as a completed Euro system alters Political perceptions and support. That price inflation will be unending and all encompassing. While others call, once again, for a little bit of 5, 10, 15% price inflation, that lasts until the fed can once again get it under control,,,,,,,,, I call for a complete, currency killing, inflation process that runs until the dollar resembles some South American Peso!

Understanding the Western View

Most current brand of American gold bugs all invest along the "hard money socialist" line. They harp on the gold story while placing their money in leveraged bets on gold. Perhaps 10% of their hard money portfolio is in physical and even most of that is in the falsely perceived leverage of lesser hard metals. All the while 90% of their investment is in various leveraged near gold games.

Their story sounds good, but their bets can only pay off if the government statist are able to control the gold market they way it has over the last 30 years. Indeed, if the dollar banking factions were to win this round, we will get another little price inflation cycle and paper gold will, once again, rise a few hundred dollars. The payoff would serve the mines and leveraged paper players at the expense
of long term wealth creation for physical gold advocates. In past cycle form, the statist would send the paper gold price back to the pits.

Fortunately for the majority of world physical gold owners, the hard money socialist game has ended. In fact, it has been on track to fail for a decade or more. To this end, I invest for a full American economic and associated dollar currency breakdown that is reflected in a total revaluation and function of all dollar using business entities. Because governments do and must combat these types of breakups, gold mines and the hard money socialist that guide most of them will fail little better than other investors or companies. They will cry for the government to again create a stable, leveraged paper gold arena so their bets could return to even. The creation of a Euro based World Free Gold physical only market will bar all trading nations from again playing the socialist Western gold game. Physical gold will be the very best holding as all of this comes into play. Virtually all government gold policy will gravitate towards sponsoring citizen gold ownership. Essentially because Europe will have removed the entanglement of modern fiat competition from
said gold markets.

Yes, late comers to this understanding will encounter a true free market, but their buy in price will be at a much higher natural trading level. Present hard money socialist decry this and invoke a call for "official money gold" as the only way governments can go. That will not ever be allowed again
and it guile's them because they need their leveraged gold investments to get them back to even first. Remember, these are the same people that hold free markets on a high plateau as the goal for everyone. Yet, they talk a story of gold control for just a little while longer so adjustments can be

Won't happen! Plan on Americans using inflating dollars as their local transactional currency and Euros as their second currency. All the while calling CPM for their monthly purchase of a world class savings asset; 1oz bid $8,324 - ask $8,388! (right MK,,,,,,smile)


Greenspan will not embark on a dollar building policy again! Even if he changes his mind about leaving. Unlike our past inflation cycles, he has only one act to follow because he must support the internal economic dynamics of this country as its dollar falls from reserve status. There will be no
inflation "cycle" on this go around. The creation of a competing Euro currency block has changed his policy dynamic.

The fed has cut rates below perceived price inflation levels already and will cut again and again; even in the face of real, published, soaring, official statistical CPI. The die has been cast and the game in in process.



We, and I, as physical gold advocates, don't need timing for this position! Timing is for poor, paper traders. We are neither and our solid, long term, one call over several years to hold physical gold will confirm our reasoning. There is no stress for me to own this ancient asset as it is in a good proportion to all my other wealth.

There is no trading an economic system who's currency is ending its timeline. Smart, quick talking players will joke at our expense until fast markets and locked down paper gold positions block their "trading even" move into physical at any relative cheap price. Mine owners will see any near term profits evaporate into a government induced pricing contango that constrains stock equity with forced selling at paper gold prices.

My personal view

They will, one day in the future, helplessly watch their investments fall far behind a world free market price for physical gold. Further into the future, one day, mines will make money on the last thousand per ounce price for gold; only the first $XX,000.00 of price will not be available to them.


Now that I have more defined mine and our position and views; it's time for us to begin another

"Walk On Solid Ground".

I'll be back as able.

Thanks Michael, Randy,,,,,, all


(10/04/2001; 11:34:15 MDT - Msg ID: 111)
Walking On Solid Ground

Hiking the Gold Trail: understanding the evolving message of gold.


Good morning to everyone!

Glad to see so many here. This is a more formal presentation and one of our usual departures from my casual ramblings I brought a few other friends with me to support my thoughts and help guide the hike today. We'll bunch up close when we pause to talk, then stretch out in a line to stay only on the trail. Don't worry, you will all be able to hear me as we walk.

Let's go

My friends and I are Physical Gold Advocates. We own physical outright and do so employing the same reasoning mankind used in owning gold throughout most of history. However, there is a major difference between our perceptions of this historic reasoning and the current Western perceptions so many of you are attuned to. Ours is not a mission to unseat the current academic culture, concerning money teachings; rather it's to present the historic and present day views of the majority of gold owners around the world. Those of simple thought and not of Western education. Plain people that, in bits and pieces, own and use the majority of above ground gold. Whether or not our perception is correct will depend on your ability to apply logic and reasoning.

As we stand here, examine this ancient formation to the left

Most contemporary Western thought is centered around gold being money. That is; gold inherently has a money use or money function; built into it as part of the original creation. This thought presents a picture of ancient man grasping a nugget of gold, found on the ground, and understanding immediately that this is a defined "medium of exchange"; money to buy something with. This simple picture and analysis mostly grew in concept during the banking renaissance of the middle ages and is used to bastardize the gold story to this day. Even the term "money", as it is
used in modern bible interruptions, is convoluted to fit our current understandings.

Much in the same way we watch social understandings of music, literature, culture and dress evolve to fit current lifestyles, so too did gold have a money concept applied to it as it underwent its own evolution in the minds of political men. This is indeed the long running, background story of our Gold Trail; an evolution, not of gold itself, but of our own perceptions of this wealth of ages. A evolving message of gold that is destine to change world commerce as it has never changed before.

Onward my friends

In ancient times there was no concept of money as we know it today. Let me emphasize; "as we perceive money today". Back then, anywhere and everywhere, all things known to people were in physical form. All trade and commerce was physical and direct; barter was how all trade was done.

If one brought a cart to market, loaded with 20 bowls and 20 gold nuggets, he used those physical items to trade for other valued goods. The bowls and gold had different tradable value; as did every other thing at the market. Indeed, gold brought more in trade than bowls. Also true; if a barrel of olive oil was in short supply, it might bring even more in trade than all the gold in the market square.

The understanding, we reach for here, is that nothing at the market place was seen as a defined money value. All goods were seen simply as tradable, barterable items. Gold included. Truly, in time, some items found favor for their unique divisible value, greater worth and ease of transport.
Gems, gold, silver and copper among others, all fit this description. These items, especially and more so gold, became the most tradable, barterable goods and began to exclusively fill that function.

But the main question is: was there money in that market place? Sure, but it was not in physical form. Money, back then and today, was a remembered value in the minds of men. Cumbersome it may have been, but even back then primitive man had an awesome brain and could retain the memory values of thousands of trades. In every case, able to recall the approximate per item value of each thing traded. That value, on the brain, was the money concept we use today.

Eventually gold climbed to the top of in the most tradable good category. Was gold a medium of exchange? Yes, but to their own degree, so were the bowls. Was gold a store of value? Yes, but to a degree, so were dinner plates. Was gold divisible into equal lesser parts to define lesser barter
units? Yes, but to a degree one could make and trade smaller drinking cups and lesser vessels of oil. Perhaps gold became the most favored tradable good because the shear number of goods for good traded made a better imprint on ones memory; the worth of a chunk of gold in trade became the value money unit stored in the brain.

Seeing all of this in our modern basic applications of "money concept", almost every physical item that naturally existed or was produced then also held, to a lesser degree, gold's value in market barter. But most of us would have a hard time remembering a bowls value and thinking of a bowl
as money. The reason this is such a stretch for the modern imagination is because bowls, like physical gold, never contained or were used in our "concept of money". Back then, as also today, all physical items are simple barterable, tradable goods; not of the money concept itself. Their
remembered tradable value was the money.

Gather around

Money, or better said "the money concept", and all physical goods occupy two distinct positions in our universe of commerce and trade. They have an arms length relationship with each other, but reside on different sides of the fence and in different portions of the brain.

For example: say I take a bowl to the mint and place an official government money stamp on the underside. The bowl now is stamped at $1.00. Then I take one tiny piece of gold to the mint; one 290th of an ounce or at today's market a dollar's worth. They stamp that gold as $1.00. Which
physical item would be money? Answer; neither.

Using ancient historic reasoning and the logic of a simple life; the bowl could be taken to the market square and bartered for another good. Perhaps a dinner plate. In that barter trade, we would most likely reach an understanding; that the "bowl for plate trade" imprinted our memory with what a digital, numeric dollar concept is worth. Again, the 1.00 unit was only stamped on the bottom for reference. While the dollar concept is only a rate able unit number to compare value to; like saying a painting is rated from one to ten when judging appearance.

We could do the exact same thing with out 1/ 290th ounce piece of gold as with the bowl above. In the process we again would walk away with the knowledge of what a $1.00 unit of money value was worth in trade. The physical gold itself was not the money in trade; the value of the barter itself created the actual money value relationship. Again. the most important aspect for us to grasp here is this:

----- The use of physical gold in trade is not the use of money in trade. We do not spend or trade a money unit, like the dollar, to define the value of gold and goods: we barter both goods and gold to define the worth of that trade as a remembered association to the dollar money unit. That
remembered worth, that value, is not an actual physical thing. A dollar bill nor an ounce of legal tender gold represent money in physical form. Money is a remembered value relationship we assign to any usable money unit. The worth of a money unit is an endless mental computation of countless barter trades done around the world. Money is a remembered value, a concept, that we use to judge physical trading value. ----------------


Naturally, for gold to advance as the leading tradable good it had to have a numerical unit for us to associate tradable value with. We needed a unit function to store our mental money value in. In much the same way we use a simple paper dollar today to represents a remembered value only. Dollars have no value at all except for our associating remembered trading value with them. A barrel of oil is worth $22.00, not because the twenty two bills have value equal to that barrel of oil: rather we remember that a barrel of oil will trade for the same amount of natural gas that also relates to those same 22 units. Money is an associated value in our heads. It's not a physical item.

The first numerical money was not paper. Nor was it gold or silver; it was a relation of tradable value to weight. A one ounce unit that we could associate the trading value to. It was in the middle ages that bankers first started thinking that gold itself was a "fixed" money unit. Just because it's
weight was fixed.

In reality, a one ounce weight of gold was remembered as tradable for thousands of different value items at the market place. The barter value of gold nor the gold itself was our money, it was the tradable value of a weight unit of gold that we could associate with that barter value. We do the very same thing today with our paper money; how many dollar prices can you remember when you think a minute?

This political process of fixing money value with the singular weight of gold locked gold into a never ending money vs gold value battle that has ruined more economies, governments and societies than anything. This is where the very first "Hard Money Socialist" began. Truly, to this day they think their ideas are the saving grace of the money world. It isn't now and never was then.

Further along

When investors today speak of using gold coin as their money during a full blown banking breakdown, what are they really speaking of?

In essence, they would be bartering and trading real goods for real goods. The mention of spend their gold money is a complete misconception in Western minds. Many would bring their memories of past buying with then and that is where the trading values would begin. Still, it would take millions of trades before the "market place" could associate a real trading value to the various weight units of gold. It took mankind hundreds? of years to balance the circulation of gold against its barterable value. Only then could a unit weight value become a known money concept. In that process, in ancient times, gold had a far higher "lifestyle" value than it has seen in a thousand years. This value, in the hands of private owners, is where gold is going next.

If you are following closely, now, we can begin to see how easy it is for the concepts of modern money to convolute our value and understanding of gold. It is here that the thought of a free market in physical was formed. Using the relationship of a free physical market in gold, we will be able to relate gold values to millions to goods and services that are currency traded the world over. Instead of having governments control gold's value to gauge currency creation; world opinion will be free to associate the values of barter gold against barter currency. In this will be born a free money concept in the minds of men and governments. A better knowledge and understanding of the value of all things.

Next trip, we will hike the currency trail.
From an associate:

" Some men will stand on a stage, their backs to an economic forest; growing tall and green from fiat dollar use. These men will tell the audience before then that this forest does not exist and they are really in a desert. They say only gold as money will bring rain to this sand. To believe this, one has to accept that 30 years of American fiat dollar use had no part in making this landscape. I say that if the dollar created only a part of this desert, then the Euro and free gold will keep lumber mills employed at least 20 years, no?"

Thanks all

MK, I'll reply about your Harry Browne thought soon (smile).

(10/05/2001; 10:55:19 MDT - Msg ID: 112)
Discussing the World with Michael Kosares

Hello MK

I wanted to come back to your last stop here on the GoldTrail to address your points and expose myself to the world. (smile)

I bet you and many hikers think I am tagging all Americans and gold thinkers with this "Hard Money Socialist" label. Ha Ha,,,,, let me slowly turn around so everyone can take a good look what a HMS looks like. Yes, that's right,,,,, I fit the definition completely.

Most of my life I thought gold should be locked into any official currency system so to act as a gauge and controlling factor against socialist tendencies in governments. I studied and in some cases talked to all the prominent thinkers on the subject.

In the late 60s, when Harry B. was living in LA, his pre book views took on quite a following. Me included! Oh, it all seemed so natural then; the eventual breakdown of our misguided economic policies had to, one day, kill the whole dollar printing game! We all thought that "the coming big failure" would drive every governments back to using gold as money; or at least in some version of another gold exchange standard.

However, even then, I had some serious people pointing me in a different direction. You mentioned how people saw Harry's thoughts " " ----- considered him the lunatic fringe back then simply because most people never heard of such a thing---- " "! Ho Ho, you should have seen my reaction
to these other perceived, radical, foreign views I heard?

Truly, Harry's stuff seemed so much more real, so much more the "American Way", that it just had to work. Well, it did and we have whole libraries full of historical scrip and economic writer's papers to chronicle his correctness. But, you know, I also looked back at these other guys explanation of things and they were every bit correct too,,,,, the effects were the same. Then as the 70s ended and the 80s ran on, their much more longer term understanding really took hold and left all other gold / currency explanations in the dirt. True, all the rest of the hard money crowd gained a little with each gold cycle high, but were also shot down with each cycle drop. The trouble is that historic process is a time consuming afair (smile) and most of the younger boys and girls that come here don't have a full hands on perspective to how we got here. Current dogma has a way of leaving out important turning points that are really needed to be factored in. Hell, a few decades of cycles became so regular in our mind set that a whole industry was born, explaining why cycle investing works (smile). In time I came to understand that there really was a long term, singular move, evolving along as a political play at work here. The last decade only served to underscore it all.

The early 90s Gulf war spike in gold should have been the final revenge for us bugs. Can you imagine,,,,,, war in the middle eastern oil fields,,,,,,, hundreds of well burning and gold gets shot down?? I was already 80% in my associates camp of thinking by then and that spike down pulled my other 20% right in. I knew then that the whole story was changing on political grounds and was not going to follow the Mise path.

My typical hard money shared long held belief, back then, was always:

----"Gold is the only official money of the world and will return to these roots one day"-------- and -----" some world wide financial dislocation will drive all governments back to this position"-----!!!!

It wasn't going to happen, no matter what, short of nuclear war. All we had to do was look around and see how people the world over were attached to using fiat currencies. The economic system itself was morphing into new ground as world trade learned to function very efficiently with fiat
digital settlement. And that's something the 70s crowd said could never happen. That was how many years ago?

A lot of the Mise crowd tried to point out that ---- " hey, this is all very good but if you were on a gold system this economic game would be all the more better" ----! Ha Ha, no one cared,,,,,, why risk what was already in process. Even the third world didn't want to hear it. They figured that any return to a hard money system would harked back to a time they remembered well. These guys suffered during the early century and no one was going to tell them that the gold standard wasn't the fault. The US, is today and was then, robbing them blind but the situation seemed, to them, that this new dollar standard was building them up. Looking at it all,,,,, we robbed the Japan life style standards the most. All to buy us an almost free standard and they loved it.

When it came to using fiat money in our modern era, it made little difference what various inflation rates were in countries around the world; 50%, 100% 1,000%,,,,,, they went right on playing with the same pesos. There have been countless third world examples of this dynamic, if only we look around. Mike, look at what happened in Russia after they fell,,,, the Ruble stayed in use and function with 6,000% inflation. My god they still use it now.

No,,,,,,, my guys are dead on the money with respect to the political dynamic that's playing out. The world is heading towards a huge financial / currency crack up, but it won't work out with gold coming back into the money game. This very long term transition is playing on a move away from
dollar domination with Europe preparing to suffer less than us by pulling in as many other political trading blocks as they can.

When you look at who they are reaching for; every one of these blocks wants gold moving higher to shelter their dollar trading losses. None of them expect to unload dollar reserves because our end time trade deficit won't permit it. They can't just send the dollars to each other, buying their
own goods that would never exhaust the external dollar float. Hell they now have their own money to do trade with, the Euro.

The game is to let the US economy suffer from its own bloated expansion by moving slowly away from supporting foreign dollar settlement with CB storage. This is more than enough to end the dollars timeline as we are already stretched to the leverage limit. They know that Greenspan has but one policy to use and that will be super printing. He is doing it now, right on que!

The ensuing domestic price inflation will waste away all buying power of dollars overseas. This is where they must install a free market in gold that ends international confidence in the current gold fractional reserve game. This is the "what for" of Britain moving itself and it's gold operation into the Euro arena. Once safely there, or there in initiative, the ECB and BIS could cash out England's gold
liabilities without crashing London's banks.

Mind you, this is all happening while Western style "Hard Money Socialists" are defending their stance by saying the Euro is just another fiat. Ha! These are the same guys that, throught the 90s, put every dine in expensive gold stocks and watched dollar currency inflation drive the dow up a
trillion points while political actions killed their leveraged gold plays. Now they will refuse to buy physical when political will is about to impact this sector and they will most likely stand by while a Euro based dynamic starts another economic surge later.

Truly, reasoning and logic is all about your point below: "it is", Mike.

Mk, you mentioned:

Europe will be no more aggressive than it needs to be. As a casual political observer, 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.-----------

Right Mike, your last part is like Another said about the forest growing anyway. The fact that it worked with fiat is the way it happened,,,,, "it is"!

To address your point: well, they are awfully dog gone aggressive now. Note that they didn't make any attempt to match our post crash rates with a larger drop in their own. That has placed then in a very pro-active dollar warring position now. I'm sure Greenspan is smoke-en over this break away. Its built a major carry proposition against the dollar with it and the Euro has to gain on this. Here is an item from your News feed:


Currency Europe
10/05 13:06 Dollar May Fall vs Euro, Yen; U.S. Unemployment Seen Rising
By Chris Gothard
London, Oct. 5 (Bloomberg) -- The dollar, little changed, may decline against the euro and the yen on expectations a report will show U.S. unemployment climbed to the highest level in more than four years, more evidence the nation is headed for a recession. -------------------
``We expect unemployment to rise,'' said Rod Davidson, who helps oversee about $1 billion as head of fixed-income securities at Murray Johnstone Asset Management in Glasgow. ``Everyone is watching for the slowdown in consumer spending.'' He expects the dollar to decline to 96 cents per
euro by year-end, and recently sold U.S. Treasury bonds in favor of European government debt. ----
Since Sept. 11, U.S. Treasuries maturing in one year and more returned 2.05 percent in local currency terms, according to Bloomberg indexes that take into account reinvested interest. For a European investor, those returns are reduced to 1.79 percent because of the dollar's drop against the euro in that period. ----------------


Add a,,,,,,, solid rate difference on top of these figures,,,,,,,,, factor in a "beggar thy neighbor" who is going to survive this economic war between Japan and US ,,,,,,,,; and europe's thrust is major! I fully well expect Europe to sell into any dollar gold market spikes,,,, now,,,,, so as to hold the level stedy,,,,,,,in an effort to inflate paper and discredit our gold market. Eventually they will move to create a rift between physical dollar gold prices and dollar derivatives prices. The call will go out
that American gold does not reflect what's happening to our Greenspan dollar policy,,,,, real US price inflation,,,,,,, and is a fraud.

You know, the US wants and needs a higher gold asset price now and I bet they are confounded to find a way to achieve it. We are stuck in a situation where we will ship a good portion a cheap prices first. We spent a decade or so playing this gold game for better oil pricing and economic
dominance; now a higher dollar price would hand our banks a trillion dollar derivatives loss if it rises. It just kills them because the Euro banking establishment would simply cash our all the dollar based gold derivatives into euro settlement and gain as gold spikes and builds an ever larger asset base for all the ECBMBs.

I have to laugh at all these jokers that keep trying to understand the ECB gold policy as some sort of currency backing similar to years past. It just flies right past them that the ECB wants gold as an dollar replacing asset, not local money backing. For your European clients, they would be in the best of all worlds it they buy gold now. Their system is almost making rising gold a law so as to buffer domestic dollar exchange rate loses.

Mk, you also wrote:

-------- 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? -----------

The difference today is that the whole worldly financial, economic and currency structure evolved to service a much more fast paced dynamic. Simply put, we cannot go back to not using digital settlement again. If we are to use our trading efficiencies we must embrace fiat currency use,,,,,,,,, and all its evils. This is what was recognized as we were placed on the road to high priced gold. Kind of like high priced oil has been factored into our equation,,,,,, so too will a rising gold price be seen as the price we pay for modern operation. Of course, just as those that don't have oil must pay to play, and gladly do so,,,,,, those that don't have real gold when the tables turn will have to pay to keep up.

Back when Harry wrote his early views, gold was largely a physical market. Let's see, were there futures in the late 60s. Nope, didn't think so (smile). Gold was largely a government transfer thing with private players outside the US moving a relatively tiny amount of gold. The real story in the 70s was in how much gold the truly big operators couldn't get, even at those oh so high prices. The little American brought his K rands , gold stocks and post 1975 futures and thought he was doing something big. In retrospect, gold was dead in the water compared to where it should have gone. The dollar faction never really stopped controlling it.

Today, it's not the government pricing policy that in jeopardy, it's the very market itself and this change will break not only the price fiction but the institution also.

Ok, guess I went on enough here. I sure hope everyone can overlook my english mistakes in those last two posts? More so in all my posts? (smile) Talk later my friend


(10/08/2001; 08:04:08 MDT - Msg ID: 113)
Gold on the trail.

Hello Again.

While we watch world events agrivate the markets, the GoldTrail becomes an ever safer place to be.

With US bombs working overtime, we may as well get used to living, talking and investing in a world of disorder. It seems this particular period isn't going away any time soon. However, there is another dislocation on the horizon; once we get past this war phase, by then a real economic / currency transition may be well under way.

I wanted to further discuss a closing portion of MKs post, here on the trail.

----- 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? ------- I think we may have come to a new Trailhead -- perhaps 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. -----------


In MKs quote above, he was concluding a comparison to our early seventies gold market and its predicted change as seen by Harry Browne. He also considered the European perspective and what it will mean for us. That "us" is you, me and our friends in Europe.

My thoughts:

I made a point in my last talk that: ---- In time I came to understand that there really was a long term, singular move, evolving along as a political play at work. The last decade only served to underscore it all. --------

Within this evolving political play, gold is but one portion of the pie. For us gold advocates, "how this portion fits in", is the most important segment of this economic transition in progress. In time that question will become the most all consuming topic on gold forums.

If you have spent any time at all with mine or my associates thoughts, you may have come away with a perception that these past decades did not contain gold cycles. Indeed, all of these fluctuations could be understood as one long, determined, singular process; a competitive political process of taking the world off the old dollar standard. As in MKs thought above; most European planers realized long ago that there had to be some inevitable "play out" or "wear out" of the dollar's mechanics. Especially when its whole linkage to gold was broken; making the dollar an
international medium that only expressed the political management for one nation: the US!

Modern Euro Zone thinkers, today, are even more so aware of what their new currency initiative will mean in the time ahead. As much as we Americans turn a deaf ear to such logical discussion, there is no avoiding the fact that every currency that lived had an end. This fate is being hastened for our dollar even before full Euro use is established. We have but to look and see that "safe haven" currency buying has dramatically shifted to favor the Euro in this present time of warfare; something that was not recently the case for any other major national currency.

The historical fact, that fiat currencies end, is all the more true as modern economies probe the useful limits of fiat currency systems. We have pointed out many times that the dollar has a definite timeline and the equation that controls that line is linked to "political use". Where once hard metal backing or at least "hard style money" management determined a fiat's value, modern economics seem destine to morph even the next "world money" into the same process. This is part of the "why for" Europe's ECB built its gold policy as it did. In addition to replacing the huge hole a fallen dollar will create, their "non money" gold assets will establish a world class commodity link that oil
producers and other natural resource rich nations can use to deflect "new world order" building by the next zone of nations. A return of gold back to it's ancient real purpose and use in a value ratio that reflects the worth of the world's created and owned wealth in something other than national paper currency. This will send gold on a long term run over decades. Creating an international asset that forces the comparison of all economic orders, and the national currencies they use, against each other; negating the need to reinstate a Western policy of artificially controlling gold values for the currencies benefit.


The US placed its money into this current equation in 1971. Then it failed to accept the internal price inflation that over printing its money demanded and a remarking of it's gold reserves would expose to the world. Once off the last possible connection to a gold exchange standard, the dollar became a modern political tool. Little more than a derivative of value that depended upon what it could buy within our American borders. While this will be the fate of every new currency in our modern world, the US was politically and structurally unprepared for this shift in dynamics. We left our currency in this international pot, subject to every bit of unknown economic evolution that would come along. Because we could not walk away from the free lunch it brought us, that evolution dynamic is now upon us. The price we will now pay is the complete loss of dollar utility.

We managed this threat with help from our Euro friends; somehow thinking they enjoyed and wanted our fleecing their lifestyle to the same degree we did it to the rest of the world. Their cooperation, we will find out, was but a structural policy that brought time; time for a dollar
replacement to be made.

Our ability to print and ship ever larger numbers of dollars overseas, against our local purchasing power alone, demanded a gold relationship to prove the dollar derivative's value. While implementing this policy, we morphed our internal goods production base so as to further decrease its ability to match the flood of dollars we were creating. From local manufacturing to services we moves, all the while our leaders and economists told us; "don't worry, noone is watching,,,, and if they are they are too stupid to understand it all". Herein is where gold fit into the pie. Herein our newly fiat currency became a tool with a timeline. A currency with an end.

While hard money historians, to the man, clamor for a return to honest government and a dollar backed with gold; they leave out an important step in the process that history says will never be skipped. Once a nation embarks down a road of inflating its currency for local political use, the cast is set for a constant redenominating of the money unit; that is "real bad" price inflation. However, modern economic evolution has presented an even more profound reply. Once a nation embarks down a road of inflating its currency for international political use, the cast is set for the world to find said fiats useful limits, then drop it from use; that is super price inflation as a result of fiat replacement. To this end we come.


The gold market, today, is composed of a relatively tiny physical sector with an all consuming paper component surrounding and dwarfing the standing stocks. This relationship is fine and well as it served the international community with a way to hedge dollar positions with price rises in gold. It worked as long as this "paper gold" float had credibility; not to be confused with delivery credibility. In our modern dollar gold markets, derivative gold investors need only have faith that their position "could and would" deliver a gold "price matching" quality. As long as the dollar remained the world settlement reserve currency one need not have access to real gold to generate hedged buying power, paper gold would do this for you. Whether the gold price moved or no, a position and faith was all we needed to continue dollar use.

This kind of position has grown in the final decade of dollar use. In order to float ever larger numbers of international dollars, the paper gold float had to expand with it. Our dollar was very much hyper inflated as it was used in a final act of world economic leverage; "political use" that drained the last bit of "leverage value" from a failing currency system. To this end, the "paper gold"
markets were matched, point to point, with international dollar inflation.


As we proceed with this act, the dollar will come to be seen more and more as "just another currency" rather than the world's reserve settlement money. We see today the makings of this move as national blocks move in this direction. England, Russia, China and South Africa are thinking more and more in terms of using Another currency; in a percentage that more reflects a realistic ratio of their trade flows. Soon oil, debt and all world settlement will be done more so in this same ratio. Soon, investors will match their fiat needs and savings plans so as to be denominated in Euro positions; again equal to a more worldly economic exposure.

While, at first, not completely replacing the dollar on a world trading scale, this initial shift will have a dramatic impact on the use, need and overall function of our current paper gold markets as expressed in dollar terms. In order to replace the loss of our international dollar demand and its impact on domestic economic and financial structure, the US fed has and will begin a structural currency inflation that builds upon an already overextended base of world dollar liquidity. This incredible currency expansion will break out into the open with real price inflation as never before witnessed in the US. In turn, foreign holders of dollar based assets will, not only, demand price performance of their "paper gold" hedges, even as they are compelled to shift a larger portion of their asset bases into Euro positions.

The ECB will not only be forcing a higher return to Euro holders, they will also be promoting a shift away from the US method of hedging currency risk. Moving their quarterly marking to the market of gold assets to using a local Euro Zone spot physical price; a price that will prove to out run the dollar "paper gold" market's ability to keep up. Such a play will emphasize "physical gold" positions for hedging as opposed to "paper gold" positions. The latter will become an obvious useless play as investors ratio their exposure into physical and glut the "paper gold" market with no longer needed, unwanted dollar positions. An action that forces a discount upon a market physically unprepared to match real gold against a decade of super inflated paper supply.

In the end analysis; the dollar will suffer an ever more negative reallocation of assets in a snowball effect that trends investors away from dollar use and settlement. As dollar price inflation roars, and physical gold demand soars; the dollar gold markets will completely fail their past hedging purpose as they become locked into a political cash settlement mode. A mode that forces an ever expanding discount against spot physical trading in Europe and the world.


The new world order MK mentioned above will, in time, be seen as simply a redefinition of currency use and values. As seen in a historic scope of human affairs; the world has always been on the brink of a new world order. Perhaps better said: the old world order has never stopped
changing. (smile)

thanks all

(10/09/2001; 10:05:48 MDT - Msg ID: 117)
PIZZA,,,, Bronco's,,,,,, Tonne of Yellow Metal,,,, and USAGOLD: Ha Ha,,, a gold advocates dream come true (ssssmile)

Background for everyone

All through out this period bullish gold traders have lost their shirts trying to bet on the price of gold. It wasn't until around 1995? or 1996? that these same traders even began suspecting that the price of gold was manipulated. As years turned into decades, hard money traders plunged theirsavings into our gold markets as up and down cycles drained their leveraged gold wealth. All the while thinking that the highs and lows, that were killing them, were just the ebb and flow of paper prices representing the fundamental demand and supply of physical gold. With Mises like faith they knew, someday, the currency inflation that has driven our financial markets and economies upward, would meet its end; finally taking their leveraged gold position to the top. It didn't happen then and it won't happen now; not as they are playing it! Period.

Remember, this writing is coming from one of the longest running (now ex.) "Hard Money Socialist" anyone has ever seen!

Without mentioning any names, I can remember when some of today's most avid supporters of the manipulation cause were shouting down, not only Another's voice of reason to buy physical, but anyone else that suggested manipulation or a "political thrust" was controlling the paper price.

Today, countless gold people around the world point out that gold is a manipulated item. While being on the right track, they are still using the wrong perception to grasp the dynamics of these markets. This lack of perception is what keeps them from positioning themselves and other gold
people correctly: positioned to gain wealth when a stake is finally driven in the heart of this paper monster.

The efforts by most are focused in one direction; to once again make our paper gold markets reflect the real rarity and actual fundamental value of physical gold bullion. While my heart, support and courage goes out to all gold bulls that strive for this end, it's chances of happening are the same as having government moneys return to being backed with gold: zero chance!

This grip on physical prices, that paper trading has, is only going to be changed because dollar gold derivatives no longer work. Not because some form of private lawsuit, world disaster or private coin buying is going to redirect investment flows. Only an official government change away from supporting their currency with paper pricing will do it,,,,, and don't expect the USA to be at the forefront of this move.


Lost in all the confusion is the distinction between investing in the price of gold and investing in gold itself. Perhaps 90% of all the investing in today's worldwide, dollar settled, gold market is done in this first way mentioned. Yes, the market is structured, contractually, to settle in gold. However, in practice, in norm, and in past legal precedent, it is accepted that paper gold trading is meant to only capture the price movements in gold while ceding, what could be, controlling physical trades and
their price setting function to other market areas.

Obviously, this is the way it all started, years ago, with the physical trading and its fundamentals dominating the lesser paper trading. But the market evolved with the paper contractual trading becoming 100 or more times the size of the physical side. But everyone already knows all this,

What doesn't seem to be obvious is the "why for" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into

In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work these items don't need to really perform "dollar price movements" in the holders favor as much as they are present in the portfolio to act as insurance stickers.

In that truth, these paper gold positions act like FDIC insurance at our banks. It can and will manage only a small determined portion of bank runs,,,,, not a full scale failure of the banking system. In a real full banking failure we would all get, perhaps, 80% of our covered $100,000 and 10% of the rest.

The same is true for these gold position's performance; real gold delivery along with true price performance, matching real bullion trading, would be only for the very few. For that matter, an actual functioning paper gold marketplace would be for the very few, too! But, in the same way a bank account owner understands the credibility of FDIC insurance when times are good; the international dollar asset owner will not grasp that modern paper gold hedges cannot be allowed to work until after a real serious price inflationary run begins.

For the first time in this portion of the dollar's timeline and our lifetimes, such an inflation is about to show its face!


While so many of our gold bulls salivate at the prospects of some player calling for delivery and driving the gold derivatives market to the moon; it ain't gona happen! Our world of dollar based gold derivatives has grown so large and become so integrated into supporting (hedging)
international dollar assets, the central banks will band together to crush any delivery drive.

This is in the ECBs intrest as I will explain in a moment.

If some big player said he was going to take 100 million ozs out of the paper gold market, the Central Bank systems would just order him to trade out for liquidation only and go to the cash market to buy his gold. Don't think I'm confusing Comex positions and their rules as being different from the rest of the world gold market. What works on comex works everywhere when the system is at risk. The controlling governments, who's domain Bullion Banks reside in, would, could and will force those holders of bank busting positions to simply cash out for the good of their

By the way; not only does a liquidation market send baby gold bulls running to sell, also, the BBs would be selling enough additional paper to temporally send gold down $100 bucks so our boy would trade out with a little less cash (smile). Then he would find an opposite "premium" spike in
the cash markets, waiting for his order.

I hope my little dose of reality drives some sense into our gold community. This is the reason Another says only fools try to buy their gold all at once on the paper markets. "NOONE" is going to exercise their "corner" until the dollar based gold system is changed.


OK, thanks for waiting, MK, I'm getting to your point. (smile)

Mike, while I'm writing this, I see gold selling off (silver more so). Once again, we see where the paper based trading has plenty of selling power and completely dominates the physical fundamental markets. How may postulated, even just a few years ago, that with the fed expanding the money
supply by a year to date "one trillion"; that paper gold could not reflect this inflation? This only further confirms that this form of market "hedge" is failing to function for its owners. Changing are coming, my friend, changes are coming! Back to the story:


Paper gold derivatives became a major force in allowing this last, end time, demand for dollars and subsequent surge in it's value. This is why Another said it would run way up, even while being inflated, before the end would come.

Only now are we coming to a point where theory meets practice as Alan Greenspan now is and must hit the presses. This forced printing inflation, currently happening, is the very precursor to a lower dollar exchange rate, rising real price inflation and the very first destructive test of paper gold derivative hedges. As price inflation rises the US will protect its own banks and the short paper gold portion of these positions they created. They will sell all the paper gold they can in order to stop these hedging positions from functioning and breaking their writers.

On the physical side, the US wants and needs a higher price as they ship real gold commitments to help balance our sinking ship. So, the dollar supporting paper gold position we have sold for years will now block our ability to gain some ground with high US gold reserve prices.

In turn, Euro factions will also sell into the paper gold dollar system to help further discredit its hedging function in the face of dollar price inflation. Now to the good part:


If you are a major international dollar asset holder, watching this evolving transition, how would you act? Remember, not only is paper gold not rising to reflect real dollar price inflation, even physical gold cannot react because the dollar based market, as it currently functions, keeps physical subject to paper discovered prices.

With the world dollar gold markets completely locked from rising and performing their portion of a hedge function for your portfolio,,,,,,, because, if they rose trillions would be lost by the writers,,,,,,, what asset based currency would you escape into.

How about a currency that wants you to redirect your fiat hedging to using outright physical gold instead of paper gold leverage? A currency, with a stated free gold pricing policy, that will allow your physical hedge to function in place of that locked dollar gold market; and function in a
currency supporting way.

They say:We understand that there will be an inflationary transition form this dollar world because we, ourselves, must absorb a certain portion of all the past created dollar inflation. A portion of pain we and the world must all bear in order to economically get pass this period. But, at least, we offer a position in the wealth of ages to reflect this financial loss as it is manifest in price inflation.

We will allow and support any physical gold Euro price rise to balance this action.



the leverage today will be in a physical gold position, not any other form of gold ownership. By accumulating physical gold today, we are truly walking in the footsteps of giants; advancing with them as they work thru this singular, long term political move. Truly, the oil producers also fully understand and appreciate this position.

Yes, I think it is theoretically possible to see physical Euro gold priced very high while traditional American paper gold markets become cheap, non functioning, cash settlement shadows of world spot gold values. In the near future, there will be no form of arbitrage between physical gold and this failed , crushed dollar gold market because it will only allow cash settlement. While a

US physical gold free market will be locally encouraged, it will most likely simply be a shadow function of Euro Gold prices. Besides, politically, unless we once again stop all gold ownership and or implement exchange controls,,,,,, all gold buying money would head to europe. Besides again, politically, a Euro based free market will end all fictions of gold's true value anyway. (This is my private understanding or scoop, if you will) I also expect a European gold coin to become real usable legal tender (not a collector item) and be named the "EuroLand"". Again, a barter asset that is taxed when used. Just as we have sales taxes and excise taxes; gold coins used outside an investment realm would be taxed. (again, this is but the shadow of an evolving down the road position as I can best grasp it)

I also fully well expect that most world gold mine production will be forced to ship gold into the leftovers of the dollar cash settlement paper market until the Bullion Banking system is made whole on their physical side. In adjunct to this, the ECB and BIS will play a major roll in cashing out failed paper gold positions for certain clients. Cashing out in Euros, that is.

A US workout to cover its failed paper gold position will most likely be using gold industry profits. It could be done via "windfall tax legislation", plain tax or part of any variety of emergency financial arrangement. All built in order to allow our current gold reserves to be repriced at higher world levels and help our dollar stay somewhere in the next currency system. Considering the size of the failure, real gold will outperform any and all investments once this all gets started. However, we should not be naive and not expect some serious taxes of our own on bullion sales. Still, only just enough so as to keep currency tender protected from being supplanted with illegal gold use. Illegal in that too high a rate and everyone would use gold in barter and stopped paying their capital gains taxes all together.

Dollar hyperinflation and super high gold prices are closer than many think.

MK, while I think you have always understood our thrust, if this post is sinking into the readers understanding,,,,, the words should be jumping off the page at them. Let's hope so.

Now, I think I will do some gardening and also have a pizza later. Sounded too good to pass up! (smile).



I hope to later comment on the good words of Mr. Strauss.

MK (10/08/01; 18:28:05MT - msg#115)
Question from Beneath a Tonne of Yellow Metal:
FOA, with respect to your comment below (which fell on me like a tonne of yellow metal), let me ask a question or two:

FOA: "The ECB will not only be forcing a higher return to Euro holders, they will also be promoting a shift away from the US method of hedging currency risk. Moving their quarterly marking to the market of gold assets to using a local Euro Zone spot physical price; a price that will prove to out run the dollar "paper gold" market's ability to keep up. Such a play will emphasize "physical gold" positions for hedging as opposed to "paper gold" positions. The latter will become an obvious useless play as investors ratio their exposure into physical and glut the "paper gold" market with no longer needed, unwanted dollar positions. An action that forces a discount upon a market physically unprepared to match real gold against a decade of super inflated paper supply."

MK: I think I might understand where you are going with this. But let me ask you just to be sure: Do you foresee "using a local Euro Zone spot physical price" as you put it, (and I interpret that to mean Europe pricing gold in euros independent of the dollar price) as a means to breaking the bullion banks' grip on the price of gold? Let's just deal with that piece of the puzzle before moving on. In such a scenario, what would happen for example if natural supply and demand took the price to EU500), while the bullion banks through derivative selling held the price at US$290? Let me throw in one more ingredient: The exchange rate between the dollar and euro remained within 90% of what it is now. Is this even theoretically possible?

(10/09/2001; 14:55:32 MDT - Msg ID: 118)
Patching the trail!
Well. I read thru my last post and thought it was ok. Then I returned, pulled a copy off the printer and gulped. Don't we wish we could change these things? Here are some corrections and expansions.

[Sitemaster note: msg#117 has been properly amended to incorporate the corrections FOA indicated in this post, #118.].

sorry about this,,,,, I think I'll go hide for a while.
Just a TrailGuide

(10/10/2001; 07:07:06 MDT - Msg ID: 119)
At the Trail Head parking lot

I'm here to post a notice that another guest speaker will soon be talking somewhere on the trail. I think this one will be covering fiats or moneys, not completely sure?

(leaning against my car, while talking to a few day hikers)

After yesterday's awful writing I went into my back property to hide and do some gardening. Some of the guys that help me out came over and dug in. It wasn't long before they, once again, started telling me what to do and, in a weekly ritual, I fired the whole bunch! By now they know this is my usual banter and just kept right on working,,,, and still telling me where and how things should be planted! The truth is, after all these years I'm still learning from them. Looking at the whole situation; I know I can talk better than they can garden, but I also know they can garden better than I can write! So, there is a certain symmetry ,,,,,, somewhere in this scheme of human affairs. It requires us all to put up with the other's weakness; especially if we want the other's understandings.

(pulling a cloth from my pocket and cleaning my glasses while talking)

On most parts of this Trail, I could walk with my eyes closed; while in other areas I would need six maps and two GPSs units just to know north! Right now, I can tell ya what's most likely out there, but in those strange areas; not really sure?

Take this Euroland gold coin thing? My guess is we won't see this anytime soon. I suspect it will be something like a K-Rand, with no marked currency denomination, but different in that it will be a hybrid legal tender. If you look here in the US, gold coins are somewhat a currency as they stand.
Just like IBM stock, real estate and most any other asset, we just have to sell it for currency first; pay our taxes and then use the money to buy something. The process only becomes illegal if you use the stock, land or gold to trade directly for something and don't pay your taxes.

Mr. Strauss pointed out that the current trend in motion is that all VAT taxes are being lifted or phased out on gold trading. Eventually, most of the world will have only some form of capital gains taxes on gold. This is fine and is bringing gold into focus as the one and only metal asset the official sector is trying to work with. But I think there is more to it than this.

As I said many times; Europe it looking to bring gold back into use as a very tradable asset. Perhaps "the most very tradable asset" but still outside the fiat money context. They want to keep the government's and socialist's hands off gold and its market function so it will serve everyone as a
savings medium. But, they also want it to gain as a trading medium so the combination of the two will create immense demand.

To gain in the "use department" I suspect we will see some push to drop all gains taxes on gold used in official coin (Euroland) form. In place of that, there will be some form of excise tax charged on payments / trades done using these gold coins. Most likely, you will have a choice of paying
completely in gold or Euros but not a combination of both. Probably, gold will be used for large purchases because gold will carry a very high price by then. And too, 1 gram coins will be the norm; being the size of our one ounce now, but with alloys. I doubt gold will ever be used in regular store / retail sales. In other words, I could go into my bank and use 50 Eurolands containing, say one ounce fine gold each, and pay off my $200,000 mortgage; minus some 15% excise tax on the deal? I could probably do the same thing with regular bullion, too, but would pay a somewhat higher gains tax rate; instead of the lower excise tax.

Anyway, this is all in the "for what it's worth area". Go ahead and take your hike,,,, I will be here giving the car a tune-up and changing the oil when you return. Then I want to talk some more about the words of Mr. Strauss (smile).


(10/15/2001; 07:49:09 MDT - Msg ID: 120)
Continuing from my last talk:

(returning to the trailhead parking lot: walking along the road with a few Gold Trail hikers I ran into along the way)

Boy, I wish those other day hikers would have returned from their walk before I had to leave. Sure could have used a ride to the auto store. Who would have thought I couldn't get my oil filter off? It seems the more we advance our so-called "modern lifestyle", the more complicated simple things become. Now it takes a $10, special angled grip wrench just to undo a simple filter and the darn thing broke just when I needed it!!!!!

You guys probably think this is all normal? But, I tell ya, all this complicated engineering only works when nothing goes wrong; the fella that designed that oil filter never thought somebody (me) would accidentally push a little more than needed; breaking the wrench and causing a problem that
stopped the whole car from running.

(now done with the car, sitting on a log with the guys)

You know, the gold market was put together the same way as my car: over the decades, a whole bunch of financial engineers each designed their own little part of the mechanics. Each one of them structured their little part to work perfectly as it functioned in the overall operation of the engine.

These fellas did exactly what their boss told them to do; make your part work and don't worry about all the rest. In truth, this dynamic works fantastically in a mechanical environment; devoid of organic imperfections. But, apply this kind of design into an economic function and sooner or later you're asking for all hell to break lose!

You see, a fuel pump won't look over its shoulder to see if the gas tank really has all the liquid the dash board fuel gauge say it has. Such a mechanical system, as an overall part of the engine function, will keep right on running until the very end! Now understand that..... if a person, emotions and all, was running that pump, he would eventually see what's what and go running down the hall screaming "we're almost out of gold,,,,, errr, I mean gas!

Let's take a hike:

You know, modern financial engineering incorporates all the physical factors of "just in time delivery" management and labels it "just in time dispersion of risk". In other words: they try to take all the perfect workings of a mechanical operation and replicate it into financial dealings. But, financial instruments, while understood by us as being paper bonds, stocks and bank accounts, are actually completely organic! They are, like money, really concepts of value we hold in our head; not oil filters or fuel pumps we hold in our hands. The "worth" of things is a "value" we mentally
create thru countless interactions with each other as we go thru the day: interactions we call "the markets".


It's no accident of nature that our world monetary structure embraced derivative expansion as it has over the last ten or twelve years. I think we can say that this modern creation of risk management began around 1988 or so. ( It's funny, but I remember living in San Diego and reading a paper about a gold company called Barrick that just started only a few years earlier?)

The record of derivative evolution meshes seamlessly with the recent need for supportive dollar currency measures; a strategy of maintaining a failing system that was ending earlier than expected. Truly, a decade ago, noone was going to carry the dollar any further, waiting on the endless delays of Euro creation, without some way to hedge risk. We had hit the end of the dollar's timeline to early; we had missed the mark.

The US could not physically save the dollar, then, with gold backing or the production and sale of real goods. In the course of all the previous dollar expansion, the gross liabilities of taking dollar asset conversion into anything real, and originated locally in the US, would have made us economic slaves to the world for decades. The only answer was to let the dollar kill itself while you create an illusion of risk dispersion in the form of derivative protection; a form of backing if you will. With this "illusion of risk dispersion" in hand, called a derivative hedge, the world currency system and its denominated assets, continued on. This "just in time risk management" was and is adopted into every present day currency that carried the dollar as reserve backing. This includes all the old Euro moneys and the Swiss and British etc.. Thus, in time, derivative use supplanted IMF protocols and SDR functions; sidestepping the whole basic structure of controls built upon the old dollar based system.

This derivative buildup has effectively removed US fed policy from being a controlling factor in dollar use and expansion. Gone were the days when the Fed could force everyone to disinflate with us. Today, if we slow our money printing, the outside liabilities would crush our banking and ,therefore, our economic way of life.

It's no wonder that Alan Greenspan has commented so often on the need to control derivatives yet has no workable plan to counter their function. Truly this dynamic was created to counter his function and few can understand this! In effect, the dollar was placed on a one way street that required it to be inflated into infinity. All as a means of protecting dollar originators; the US banking system. Dollar leverage, that is actually US liabilities, is now built up endlessly. This all points to a nonstop, end time need for an uncontrollable inflationary expansion by our fed.

Randy S, over in the tower at USAGOLD, has shown us a complete record of this current era of dollar creation. While others were waiting for a "little bit of 6%, 7% or 8% inflation" to show its head, are given a weekly guide of this new Fed policy agenda and its dilemma. An almost endless acceleration of reserve creation that, strangely enough, coincided with each increase in the confidence that the Euro was for real.

Today, our fed is confronted with a daunting task. The Sept. tragedy served to force its hand and show its true policy in the open and the risk that is driving it. We as consumers welcomed a derivative driven dollar expansion, the stock market assets it produced and the better lifestyle it brought us. We even thanked the political will that made this so; not knowing that the seeds of leverage that produced our illusionary gains were handcuffing our ability to ever stop the process. We are now learning that managing a dollar economy and the "derivative risk" that brought it, all works very well. In our first real test of "just in time risk management" our Fed is and will provide buying power to gobble up any and all risk, "just in time" and without end.

With this the decade long cries for comparison of our "US free market driven economy" and "Europe's terrible socialist polices" fall silent. It seems that when our "free market" created assets are threatened to be exposed as an illusion of value, Americans embrace any and every form of government socialistic bailout known to man. Perhaps, our much exampled form of a "free market driven economy" was little more than "free as long as derivative risk is covered with social money" "just in time".

Now, we will follow this trend in an accelerated fashion, until all derivative process is exposed as nonfunctional outside a massive hyperinflationary policy. Our wealth is and was nothing but an illusion of safety and created in our own minds. Within this mix is contained all the various gold derivatives we have come to love so well. The future failure of a gold contract does not mean that the long holder gets his price or his underlying good; it means his derivative fails to shelter his exposure by matching his other loses. In terms closer to a gold bug's heart; paper gold in any form will not match up anywhere near the price of free traded physical gold.

We are on the road to high priced gold and under priced derivatives. The same thrust will be apparent in all financial derivatives. Further, we are on the road to a fully "cash settled" contract market for gold; here in the US and abroad. In the time ahead, just before serious real price inflation rears its head, look for most all dollar based contract commodities markets to be restructured into pure "undeliverable" cash settlement markets. Markets that, also, many gold producers will be forced to use. The day of big premiums on gold coins and bullion is coming and
coming fast.

Let's head back to the parking lot and home and get ready for another day. A real hike is coming.


Randy, please rework the recent mistakes on the trail, in your time(big smile). thanks

(10/18/2001; 08:22:07 MDT - Msg ID: 121)
There they go!

(At the trail head, loading the packs)

Quick, use your binoculars, watch the action on the other side; across the paper gold valley.

Do you see them? Right over there, follow my point? Just under those low bushes; next to that big bolder; making their way out of the paper valley. Yep, that's a big paper gold trader, going over the top. Ya see em? Ha1 Ha! Sure sign the seasons are changing!

These guys, and others like them, are trying to run ahead of a trend we already knew was in process. They are going over to the other side of the paper gold mountain. If only they knew about USAGOLD a long time ago?

Yep, us PGAs beat um to the punch and those pikers

(slang for hikers on some peak in Colorado [smile])

will pay a big premium to be in our dust! Indeed, they are headed where our very own gold trail has been: in the middle of a physical gold market transition that finds its roots in

Yup,,,,,, silver is back into the 4.20s as China sells it to buy gold; while the question of what to do about gold paper gets more official consideration every day! The dynamics of money is in flux, for sure!

Keep loading your packs, people, take lots of stores for a true wilderness experience under a starlit night; a big hike is coming.


(thanks Randy)

(10/20/2001; 08:50:20 MDT - Msg ID: 122)
Taking broader steps: heading towards a clearing


I'll repeat a remark made here on the trail before:
-----[One day the ECB will be] Moving their quarterly "marking to the market" of gold assets to using a local Euro Zone spot physical price; a price that will prove to out run the dollar "paper gold" market's ability to keep up. Such a play will emphasize "physical gold" positions for hedging as opposed to "paper gold" positions.-------------

Follow my steps

The coming dollar currency crisis will be, very much so, driven by an across the board failure of all derivative market function, not just in our gold derivative markets alone. As these risk dispersal markets built up over the years, that system allowed the dollar to continue in its reserve roll. The very failure of this hedge system is what will begin to transition the world away from dollar holdings. Not to mention settlement use and retention in CB reserve function.

Truly, our dollar's value would have never arrived at or retained its current level, for so long, had foreign CBs not supported it by making a background market for derivative exchange management and low rate gold loan commitments for major world investors to use. Within this tremendous mass of paper risk assets, our modern paper gold markets find their home.

When this whole quagmire of dollar support is allowed to fall away, the true nature and worth of paper gold derivatives will truly come to light. Prompting a trading recognition of their real value and their quick disposal. The ensuing price action will sever investor's faith that there is an equal connection between the owning of; what is the fundamental value and leverage of physical gold assets and simply capturing gold's currency price changes in paper asset form.

This change in market pricing dynamics will shift investor perception and force private and public wealth hedgers to see physical gold as having a far greater leverage over paper positions. An image and position the dollar gold faction and the entire gold industry have fought against for years.

This transition in hedge book policy will set off a new dynamic trend in our gold markets where physical gold soars to find a fundamental value modern gold thinkers knew existed. A value steeped in gold's rich history of being the very best barter wealth savings in the world. A value that gold could never find when tied into official money systems.

Our evolution of thought will find its roots in an inflationary financial crisis that is now beginning to unfold in dollarland. In fact, "all" dollar hedging systems will most likely meet the same fate as the effects of a real, serious price inflation in local US markets escalates. In the final overview, physical gold will be seen as the only real risk hedge; in fact; the only world class asset "that can perform such a task"!

Onward further

In simple political terms; the very leverage that all modern currency supporting derivatives represent, never could be allowed to perform; in large outright quantities! Once real inflation begins to demand that these hedges truly spread financial risk with real performance, resulting in a pile
up of loses, the political solution used time and again will return as the time honored utility that saves the day:

------change the rules------!

You see, just as there wasn't enough real gold stored in official US vaults to match pre 1971 dollars at the then existing exchange rate, there isn't enough "tradable gold" to match the inflated paper gold markets today. Both then and now, the paper derivative's function to relate and capture the value of gold was blocked from functioning.

Pre 1971; people held dollars because the physical gold that those dollars should have represented and could be traded for, hedged the risk of government sponsored price inflation. But, people found out, too late, that those gold derivatives; those pre 1971 dollars; would never be allow to function as risk hedges. We found once again that man's ability to maintain a constant link, a constant derivative value, between official money and gold,,,,,, was always an evolutionary failing trait.

The response will be exactly the same for our problems now as it was then.

-- Then --:
The dollar faction universally abrogated all gold delivery options against dollar currency and implemented cash settlement against all claims for gold. In other words; implement a pure fiat floating exchange rate and close out all gold claims by saying that investor holdings in dollars were equal to gold. In hindsight this was just another illusion; dollars were only ablr to capture the gold price if that relationship was controlled thru paper market valuations.

Then -- to -- Now:
By saying that dollar cash, using the old 35 dollar controlled rate, was the same as owning gold; the Western world embarked down the same paper road we travel today.

Modern "Western Thought" is convinced of an illusion; that capturing the price of gold is as good as capturing physical gold. Indeed, this thought was further extended to include capturing a leveraged price of gold.

A process is in the works to change our dollar / gold relationship again, after derivatives were inflated beyond use. Now, even the price of gold can no longer be captured on a par basis between derivative gold paper and real physical gold as the preceived value of gold is soaring. Once a super currency inflation breeds super price inflation; the derivative markets will begin to fail their hedge purpose and their trading value. These asset themselves will become the real risk.

Dollar supporters have no choice but to "NET OUT" at even any derivative hedge that may risk the system. That is, "Net Out" in a way that completely voids their risk transferring purpose as they are settled in dollar cash "no matter what effect inflation is having on the currency's value or your other dollar assets! Remember, the financial world today turns on dollar assets that are hedged; not just pure bare holdings! Block the hedge markets from performing and the dollar itself is unseated.

Make no mistake, every official rule and regulation ever written for currency crisis management involves not only currency profile assets, but also gold profile assets. With this concept in grasp; it's easy to see, with gold derivatives so widely used in current dollar support functions today, why they will be impacted as part of the paper mass.

Modern derivative usage involves gold derivatives and a new evolving crisis policy management will function somewhat the same as in 1971. It will arrive as some "net out" policy directive and universally abrogate all gold delivery options as part of the package. Any gold derivative that is used to support dollar currency exchange rates will be reworked to implement cash settlement against all claims for international currency derivatives written for gold.


Is it no wonder that Euro Banks have no fear from writing short gold paper. Because the entire Euro money profile is in the background for them. Running in parallel to and not in conjunction with the current dollar system. Any Fed policy that must break the risk transferring dynamic of derivatives, to protect our US banks, will open the door to the ECB's dumping IMF protocols and using the Euro alone as their sole reserve currency. This will immediately shift all dollar derivative plays onto the market, dynamically devaluing our dollar in the process. The ECB would then be cashing out holders of their gold loans in Euros as dollar physical gold prices spike and paper gold prices plunge.

Higher still; we climb

Of course, the big difference is that Euroland will encourage a physical only market price that, in turn, also floats Euro gold values to the sky. All in an well balanced effort to replace the massive dollar asset base it lost. In this; the Euro will become the first currency block that functions as a local reserve, yet under scores its image with huge non- monetary gold assets. Is it no wonder that EuroLand citizens will be buying gold as much for its prospects to rise as for its ability to be a wealth savings. In this it will hedge the future remains of a dollar failure and its impact on the world system.

If Mr. Huge EuroLand bank owes the ECB system gold worth 100 million in current gold deals; with each 1,000 euro rise in gold he finds himself able to settle in less received physical gold. In a true "cashed out" transition of currency reserve hedges, each ounce of contracted gold owed could be
reduced many times. Every player in the gold system, that is caught with their pants down, will rush to be a part of any Euro workout. Indeed, for every major player that was long the gold loan system, for the purpose of buying gold, cash outs in Euros will offer the only return. Official players in the oil sector would eventually be receiving American gold (but that is Another story).

Pause here

Remember; we have presented, for some time, that official gold stocks were never physically "in play" to the degree the gold industry suspected. It has always been our position that it is and was "gold commitments" that were behind the market, while official physical gold was traded mostly within the CB system or delivered to the most pertinent oil players. The Swiss operation points to an end time settlement of these for the Euro side of things.

ECBMBs (European Central Bank Member Banks) never really sent out very much real gold; they just lent their good name to the BBs. That means cash pooling for the loans also. So, when a new currency transition workout proceeds, the members of the ECB are receiving Euro cash in payment for gold loans. In hindsight; it will be seen that they lent the commitment to sell gold only long enough for US inflation to end the dollar's timeline and bust its dollar system. Around ten or fifteen years over this recent concluding period?

Truly, the gold that is filling the fundamental demand deficit never was the gold coming out of CB ranks; this position was and is the gold industry just looking for an answer to explain what was truly an paper market problem impacted by official currency games!

Besides, if your business is financially structured within an ongoing paper gold market and needs said paper to trade at par with physical gold; you don't want to consider an outcome where you may be trapped selling your product at a discount! Better to fight for a rework of the same markets. A process that robs physical gold owners of fundamental value by reinforcing the paper market illusion for the benifit of a relatively small group of gold players.

That will not happen this time; believe it!

In a final thought that explains the fundamentals that tarnished gold:

The gold that filled "the supply demand gap" came from tired Western thinking gold bulls the world over. Over the last years of our dollar's timeline, they transitioned their portfolios from holding physical to holding essentially unallocated forms of leveraged paper gold. This took place in both public and big trading firms.

To the thinking of these smaller world players, who made up this mass of original physical gold ownership; future gold, options, gold stocks and long gold loans, all captured the price of gold in this modern era. Indeed, for them it was all the same and suddenly so logical and simple. But, they did and are losing their wealth to the paper monster and now,,,,, just when they thing gains are in their grasp,,,,, the rules were changed again.

let's rest here; that clearing is in sight; where some speaker if giving a talk

Packs off for now


(10/23/2001; 10:30:12 MDT - Msg ID: 123)
The real world

No backpacks today. Lets just stroll over to that clearing where I'll be giving the talk. In reality, I'm just sharing with everyone the thoughts and views of a like minded gold advocate. Someone we rarely understand but somehow always knew.


Hello again and I welcome everyone to these ongoing talks on gold. Talks that focus on where gold and its market is taking us: -- an evolving message from an ancient metal.

It's wonderful to be with you, here in the American West, with its clear skies and cool dry air. Meeting here on the gold trail speaks to our senses in ways no city location can; imploring our minds to hearken back to what is real and alive in our world. While standing here among the mountains and trees, our financial perceptions begin a change; recasting our thoughts of accounts and credits into hazy feelings of virtual wealth we never really knew. Suddenly, bonds, stocks and paper investments descend to lower levels of importance.

It was as true yesterday as it is today, and will again be so tomorrow; that the touchable things in life are what make us whole as much as they make us wealthy. Our bodies are real, so too is the earth and all upon it: is it such an unreason that our wealth should not be real also?

For myself and many others that hear our message, the answer is no. No, it is not unreasonable to clearly own and touch what our efforts in life have brought us. I suspect that during this era, within this moment in time, events will eventually define such logic more clearly and prove it to be sound beyond any doubt.

Times change, my friends, history moves on and so too will mankind's perception of wealth. Once our perceptions will evolve, not in a forward matter, but rather in an ages old oscillation that returns us back to saving wealth itself; instead of a paper promise of wealth. With a regularity of seasons, as sure as the phases of moons, a changing of "political will" is once again about to redefine what our virtual written worth really is. In response to these changes, often made with little more than the stroke of a pen, mankind will seek a secure position. A position that will more so value an ancient wealth: a golden savings that no politicians could ever write the value of.

- As my friend would say out here: onward we move

Once again we hear the voices of shock and dismay among modern gold bulls. Followers of paper values who, ironically, display the same emotions each time their gold strategy fails them. In cycles that seem to repeat on regular schedules these investors wager on the price of gold instead of investing in the physical attributes of the real thing. In doing so they fall victim to their own misunderstandings: -- falsehoods represented by their own perceptions of what our Western gold market does and does not do.

Somewhere over the course of these last decades, Western Gold Bugs learned that it was very easy to wager on the price of gold. During this time a market evolved that made it far more convenient to bet on gold that to own it. But as this market expanded to include retail gold buyers, even simple reasoning seemed to be cast aside and all logic was lost. Truly, these were becoming markets that traded opinions and failed to produce wealth.

---- Did we Consider that: if it was easy for me to buy a gold wager, is it not just as easy for one to sell a wager?

Throughout this period, Gold Bugs seemed to reach conclusions about their paper markets that were never real. They understood how rare and valuable gold was. Yet, they fully well expected these same attributes to be reflected, not only in physical gold, but also in the price of their paper wagers. The reasoning was presented as such: -- investors that wanted to bet on the price of gold going up were unlimited in number and their demand could easily overwhelm the supply side that created these paper wagers. -- Conversely; investors that wanted to bet on the price of gold going down were limited in number and their supply of these paper wagers could never keep up with demand. You have got to be kidding?

But why would this be the case?.

They looked at this paper market and tried to think of it as a physical market. They figured that any investor that sold a wager, had to have his hands in the actual gold market, so as to supply the physical gold his wager was created against. Somehow, in our gold bull logic, we never grasped that perhaps 99%+ of the "world's" paper gold game always settled in cash. With the wager / seller simply losing his currency if he is wrong.

In a further convolution of logic, paper gold bulls never thought real world reasoning applied to them. If our paper gold bears didn't have the gold or the cash to buy the physical item, if they were demanded to do so; -- neither did our paper gold bulls ever want the physically delivered gold either! Nor did they have their hand in a cash bin deep enough to to do the deal.

---- The purpose and structure of these markets was always ignored.

The reality that confronts gold players today is that their perception of this paper market is flawed. The entirety of the world's paper gold markets are structured to capture the currency price of the metal; not actually deal in a majority of the physical aspects of it. Lost in this reality is the understanding that these markets do not impact the supply and demand for gold as much as they make a "virtual" price for gold.

Those in the business of selling paper leveraged gold to investors love to point out that long buyers can and do demand from the shorts to deliver bullion. But these same sales clerks quietly ignore the fact that short sellers can and do demand delivered cash from the bulls! When we have a market where both sides run from the other's physical demands; you are left with a paper arena that makes a "virtual" market price; not a fundamental supply and demand price.

-----Supply and demand

Also lost is the very real perception that the sum total of dollar based paper gold wagers, that can be created on both sides, is only limited by the sum of dollar liquidity floating in the world. In this logic; the number of bets on where the price of gold is going is unlimited on both sides and has no corresponding connection to the actual physical supply of gold bullion.

What "IS" firmly grasped by every major player in this market is: -- If at any time a majority in the market were to attempt to use these paper markets to extract a gross amount of physical product, the rules would not be changed! Rather, the rules would be enforced and the players would be cashed out and sent into the real physical markets to do their deals. Only then would fundamental supply and demand, based on gross dollar liquidity, create a "non virtual" real price for the product.

-- Disappointment rules the day!

Time and time again Western gold players are finding out that as dollar inflation creates more liquidity, the same of which will eventually drive price inflation, it also creates more liquidity that paper wagers can use to sell against our "virtual" gold price. While this is truly a fundamental fact of currency supply, Western paper gold bulls want to use this liquidity to leverage and effect their long side only. So as to capture a gold price moves on the upside. But they don't want others to use an equal amount of this liquidity driven leverage to supply the other side of these wagers to send gold's prices downward.

We wanted a free market and a free market is what we got: -- but it doesn't move the virtual price toward the gold bull's favor. Now they are mad because their bets are countered while physical gold advocates scoop up an almost free metal: -- using the liquidity that dollar inflation is producing. Truly, if ever there was a way to profit from gold mining, today, it's by buying this almost free physical gold the mines are producing; while mine players and paper gamblers pound their wealth into the dirt. This is what PGAs call benefiting from the leverage in mining (smile).

--- Supply and Demand: one more time

In a convoluted stretch of reason, "virtual" gold bulls wanted these markets to be regulated so the supply side of these paper creations would pay off on their bets. The bulls wanted to be able to create all the buying leverage they wanted while the bears would be locked into delivering a metal who's total world amounts are fixed. The bulls wanted free leverage without the using full amounts of real cash but wanted the bears to mark to the market with real gold buying power for every wager they made. If there is manipulation in our paper gold arena, it's in this area of investor understanding. What these markets "truly represent" is the misconception about gold in our time.

If the gold industry is unhappy with the prices their product if bringing from this paper market's leverage; they should be pushing for a change in the rules so as to force physical delivery upon everyone in these markets. That is; force delivery upon both sides! They don't, because their
financial structure is so completely immersed into the current function of these markets. Many of them and their banks could not handle a real gold price that runs out of their derivative's trading ranges.

Western paper gold bulls fueled the creation of these markets by supplying the demand for such gold vehicles and governments helped their currencies by using these same as FDIC like stickers on their reserve positions. They all wanted a place where they could bet on gold, using maximum
leverage, and not have to fully fund the physical delivery of bullion if it came to that.

Somehow in the process, everyone was thinking they were doing an end run around the slow thinking, stupid gold advocates the world over. Hoping that coin and bullion buyers, who were creating the physical demand, would one day feed the leveraged paper profits of paper players. Hoping that the rules would be changed just enough so gold could be kept in a nice tight range (300- 500).

We are seeing the results today as this fraud of a paper game as it comes to an end. It's not nice to watch. Busting, not only the dollar factions that played this sector for their best interest, but also denying any profits to the whole gold industry that chose to ignore the long term best interest of gold's market value. The same industry that decided to cater to the singular greed of a small group
by sacrificing high gold prices so leverage plays would work. In the process they played a political game to limit gold prices from getting too high and will now suffer on the altar of a "gold price without a range".

They can call the outcome anything they want: "bullion at a premium to comex" or " comex at a discount to bullion". Either way the whole system is destine to split and leave the paper players holding an incredible bag as bullion runs away with the help of fundamental gold factions in Europe.

So the message to paper players, gold mine owners and the gold industry is clear:
--we are in a world where free markets rule and political games bite the hand that feeds them
-- if you don't like your profit margins on the market you are forced to sell into, close your mines like the rest of the world's business is told to do,, if you can!
-- if paper players don't like their investment returns because the leverage is eating their lunch, move to another area,, you are free to choose -- or better yet
-- go control your controllers if you don't like the way it is in this evolving political world
-- in the mean time we PGAs are and continue to exercise our free market rights
-- we will keep doing something to advance our wealth: buying physical gold!


Next talk is about inflation, titled:

---- "Forget deflation! The deflation theorist are losing their wealth fast enough for all of us!" --


OK: lets head back and rest up for the next round

(10/25/2001; 09:30:26 MDT - Msg ID: 124)
A quick report and comment from my office on the trail.

Once again the ECB is acting in a way that lends credibility to it being a true hard backer behind the Euro currency system. The ECB is taking an international, long term stance to managing their money and the dollar faction hates it. They hate it, because such a policy position is no longer open to them as we are forced into a super inflationary direction from which there is no turning back.

It won't be long until this downturn in the US drives the dollar into the toilet and leaves the Euro as the "last man standing". As the gap between inflation rates and returns on Euros grows, that currency will be seen more and more like a world class money. World class; in that the Central Bank is more driven to keep the money strong and not base its policy on local politics the way the US does.

---- Remember: Unlike the Fed, which has a mandate to boost jobs, the ECB's main task is to combat inflation.------

----- Over the last decade or so, my nation (the USA) has always played it's economy and financial arena as a free market driven system. Well, it always looked that way as long as the dollar's reserve function helped deliver those free trade benefits. But, low and behold, let us turn down a little, come under a little preassure and our socialist printing pressed go into overdrive.

The call goes out to bail out the Airlines, banks, brokers, insurers, post office and anyone else that's in trouble. Protect our Steel industry and to heck with the world: this free market idea can take a hike, boys. --------

The media concentrates on treating the dollar more like a stock investment than a major international reserve. Considering the way our Fed is socializing our money policy now; perhaps the dollar has embarked down that road and is becoming " just a quick trade investment"! Perhaps a Hyper Trade investment, at that.

I think the majority of Western money theorist want this perception in place:

--"lower rates build the economy and therefore the currency, too!"--

Never mind that this flys in the face of everything we and the IMF taught the third world about money policy over decades! A policy that says: your country is going down the drain because your money policy is not free trade structured like ours is! Now, we suddenly cheer any policy that trends to support us and try to explain it in a "dollar supporting" slant.

We do this, because we want the dollar market to deliver our investments out of the current US fire storm; it has nothing to do with the strength or hardness of the dollar. In this respect, media cheer leading has little to do with the dollar being a sanctuary for foreign holders during troubled times, either. It has everything to do with local internal US investments going bad. To hell with the hard currency policy we taught you: -- a return on money that's above inflation or free market competition to weed out the week: -- We want my money back and hang the world!

This is a repeat of the same message sent in 1971 when we dropped gold.

I think the ECB and the BIS have known, for some time, that this would be the typical US reaction whenever some trouble really came along. They just waited untill the world twistes the wrong way and sure enough, the US dove for the bait! This is why Europe and the BIS structured the Euro system so it could completely discard all dollar reserve function if needed.

Truly, if the dollar IMF system can be the reserve for all internal US banking assets; then the Euro could easily do the same in Europe. Especially as US inflationary money printing eventually drives our price inflation rate to a level that makes dollars and dollar debts, outside the US, valueless assets! Paying back those debts will be like tossing a nickel where one once launched a bill to settle a debt.

Today, many dollar investors have a terrible flaw in their view of Euros; not unlike Western thinking gold investors. They curse the Euro as it strives to reverse the very trend that dollar lovers say is taking down their own currency. Standing next to them, gold players curse the dollar and buy illusions of gold assets; but at the slightest move up can's wait to sell their gold paper for more dollars. Then they tell everyone that they are making wealth by building up their holdings of a failing currency. I tell you this simple minded human game has bankrupted more than one nation of

I buy Euros because that's the currency I intend to keep through out this transition era. Of course I own dollars and will likely keep using them right thru any super inflation. I never expect the dollar to disappear. Most hard money investors, with extra funds to hold, also have that same view. They are simply wanting some of their wealth in the next international currency trend. A trend who's management policy is based on creating a real return; not socializing the currency holder wealth thru US and Japan like give-a-way interest rates.

Apart from our Western trading crowd, who consistently lose their money, Euro owners and Physical Gold Advocates own these items with no intentions of selling these to make more dollars. They hold them because the world financial system is changing faster than trading can compensate; and this trend will accelerate to run right over traders as their markets shut down around them. Believe it.

So, I say, good for the ECB and more so, good for gold. I'm playing the leverage that modern dollar derivatives are delivering to my door step; buying cheaper gold and cheaper Euros. The leverage in gold mines is delivered to us; in that derivatives markets force them and stale physical longs to supply the world with gold at almost free prices. At least until the dollar crashes this illusion gold market price. The leverage in dollars is delivered to us; in that the US must super inflate their currency to support its derivative hedges, in the process creating Euro exchange rates at low levels.

The game goes on and Physical Gold Advocates keep right winning while leverage hard money types pour their wealth on the ground. In this day, at this time, investments in most dollar assets and any other "gold want to be" metals is to be doing little more than to play the leverage side of a
failing derivative.

Physical gold is the only wealth to hold and the only wealth that can and will stand beside to the next reserve currency system; the Euro. The history we are writing will further prove this to be so. Events are moving our way. I say; find yourself a coin and bullion dealer that has a grasp of these
events and stay with them thru it all. The world is moving towards high priced gold on a free physical only market and physical shops will find themselves at the center of this evolution.

USAGOLD: get you one


(10/25/2001; 17:19:54 MDT - Msg ID: 125)
More Thoughts and Comments from the Trail House

Somewhere in the 1970s era I was exposed to the thinking of several different deflationist. It seemed that all of their conclusions came to the same end: that dollar deflation would rule the day, no matter what. Mind you now,,,,,, most of them were split on the finer points of the issue, but for all of them; inflation would have its day even if prices would rise somewhat. Deflation was always the final outcome.

One of the central themes, in these thoughts, was concerning how this coming deflation would impact plain old residential real estate. You see, most of these guys advocates selling excess residential property because it was, sooner or later, going down for the count. Mostly because the mortgage markets would be destroyed in the deflation and nobody could buy.

-- Note: The reader has to understand that these discussions were directed towards people and investors that had plenty of net worth. And I do mean Plenty! The argument wasn't about how to survive; rather how to balance a truly conservative estate portfolio. --

As time has passed we can see several major flaws in their thinking. Flaws that cost them a bunch of credibility, if not personal money. One point, that I have touched on here several times, was in understanding just how much ourselves and our economic structure would and did evolve into accepting fiat money use. Even though it was, "god forbid", separated from gold.

In one area alone, the bond markets, investors reacted far different than deflationist thought they would. Twenty ++ years ago, it was expected that just gross increases in money printing alone would be enough to crash the bond markets. Not talking about price inflation here, but money inflation and that should have started a deflationary fall in our credit markets. It almost happened, several times, but never followed thru. It seemed that the market function had evolved to accept fiat inflation as a prerequisite to modern economic function. In a like comparison to today's thinking; investors assumed that as long as we had an expanding economic stance, sourced by inflating fiat supply, price inflation would not impact long bond credibility. We saw confirmation of this over many years. We saw that our credit markets, especially long bonds, were used in spite of
the price inflation threat. Indeed, there was a ready market demand for bond purchases.

In hind sight, long term holders of bonds did do very well if their position was part of a balanced holding and they didn't need to sell at bad times. Even now, dollar bonds have gained as rates are pushed lower.

Back to the thought:

This whole IMF dollar system has always been based on an expanding fiat theory that swells GDP over time. Investors that bet on deflation coming along, after each of our bouts of inflation, were badly burned as deflation was overcome. Economic function returned, essentially because price inflation could not rout the overall market for long credit.

The flaw in all of this was in the reserve structure of our Dollar IMF money system. The fact that the world had to walk, lock step, with our money policy meant that their goods production would almost always be cheaper than ours; keeping local US price inflation under control. In other words; local US based price inflation could not get out of hand as long as the rest of the world was willing to use their economic production to control it by selling into our expanding fiat system.

In this, the dollar could be inflated without end while our credit markets functioned in a non inflationary environment.

But there is an end.

A money system like this has a definite timeline and that point is reached when the world can move away from keeping price inflation low in the US. That point is reached when Another money system comes along to challenge the dollar and, in the process, offer these other goods producing countries a chance to buy some "lifestyle" for themselves.

At first, the show is dull as investors keep right on buying into the dollar argument above: that an expanding fiat base builds non inflationary growth. This is one reason traders still buy US long credit, not to mention chasing rising dollar exchange rates; they expect more of the last several decades of economic theory to keep right on going. It won't.

The dollar faction saw its match early in the 90s as the Euro was taking shape. To counter this threat, as I have outlined here in several ways, they promoted derivative hedges as a way of insuring dollar dominance. These hedges, including gold derivatives, only served to leverage the entire dollar / IMF system beyond its ability to serve as a real fiat money system, today.

I mean; that our whole dollar landscape has now become just a trading asset arena: its now evolving away from any meaningful currency use to trade for real goods. It can head in no other direction because our local economic structure, the USA economic base, cannot possible service even a tiny fraction of the buying power currently held in dollars worldwide.

So what does this have to do with Real estate?

Take a look at any broad section of the US; Northeast, SouthWest, etc.. If any of the deflationist were correct, their reasoning back in the late 70s and early 80s should have produced at least an average fall in Residential real estate. Can any of you find an "average" of property today, that is lower than early 80s prices?

Of course I'm not talking about the spikes in Hawaii, New York , Denver or San Francisco; those are just blips on an ever rising inflation scale. Even if they fall some from here, it isn't part of a deflationary act playing out. Average home prices will rise all across this country no matter what the future economic holds. A super inflationary stance by the Fed means that even unemployed workers can buy a house and pay for it! Watch how this all comes about. The dow will not be much different when seen ten years from now; a drop to 5,000 then off again, is a real possibility!

The same is true for anything perceived as something real: "even silver" (grin).

The difference is in the drastic ups and downs derivatives will place on all asset markets. Silver may hit my .50 before taking off and so will many other real assets. My point is that we are on an "end time run" in fiat dollar production that will soon produce a spike in real price inflation that crushes hedge vehicles. One item alone, physical gold, because it is the main wealth asset behing the next currency system, will outrun everything by a wide margin. No matter the derivative's hold on it!

As the Euro builds a base, it will drive an inflationary recognition into our credit markets, then freezing up our derivative markets. That perception will fuel a complete failure of our bond markets and force the fed to buy up any and all credit; paying in full. If needed, Bush and congress will see to it that enough money is printed so we are paid in cash for everything! Don't laugh, this is where we are headed. In the mean time, whether or not our economy is growing, stalling or failing, will have little or no impact on price inflation.

You see, living with real serious price inflation goes something like this:

---- "Honey, I talked to Fred again, he can't sell his house! Poor guy, he has had it up for two years now and has to raise his asking price again. No takers, yet. The last couple was just about to close but took a month too long; they almost got the cash together, too. He backed out to raise the asking price, again. Oh well, that's not so bad, we had to jump ours up three times before selling."
Inflation runs crazy when a money system is forced to "print out". We will "print out" our dollar, too. Getting there just takes time and an alternative system to cause it.

In the mean time look for the premiums on cash bullion and cash coins to begin rising well above contract and futures prices. I have been watching for this confirmation for some time. This one signal is all we need to confirm that a breakdown and total failure of dollar based bullion markets is near. I expect we will hear and excuse like this:

-- The settlement price on future contracts is really a wholesale price. Besides, because we are moving into full cash settlement of gold, without physical delivery, you can take this wholesale price and add whatever premium is necessary to buy your physical gold. No matter that our wholesale settlement cannot match a payment for bullion cost plus premium; just use more leverage to buy more contracts than you need for outright physical. See,,,,, it all plays out! (BIG BROKER SMILE with little horns sticking out of his head) ----------


People, take a hard look at Randy's post on the main forum. His ----# 64186 Monetary choices -- ECB holds rates solid, dumps dollars------- goes a long way to showing the mindset of the Euro system. (thanks for sharing, Randy) This stance is very appealing to a whole host of nations outside our dollar faction world. We have but to look no further than Britain to see that this is true.

------Blair says 2002 EU summit key for euro, economy -----
Thursday October 25, 2:41 PM EDT --

LONDON, Oct 25 (Reuters) - British Prime Minister Tony Blair said on Thursday the success of the euro and the wider European economy hinged on the EU's ability to push through
long-discussed economic reforms next year.

Blair, launching a Belgo-British conference in London, earmarked the European Union's Barcelona summit next year as a key staging post and said the success of the launch of euro notes and coins was crucial not just for the 12 euro zone members but for Britain too.

"We have an interest in this," he said, stating his policy that in principle his government wanted to join a successful single currency.

"Barcelona will be critical in how the world views the development of the European economy," Blair said.

If the summit is a success, it will help make the euro a success, he said.-----------------


Another thing we can count on and I mentioned this before:

The moment England is seen as even a "virtual" member of the Euro club; the world will jump on every physical ounce of gold available at whatever dollar amounts anyone will part with it,,,,,,,,,,,,,,,,, and sell every paper gold play into the dirt in the process!!

I say, know your dealer, buy your bullion early and watch for this act to begin. It's closer than you think!

Thanks for hearing my thoughts

PS: I'm going to stay on this track for a while because I think something may be in the works. I'll post as able (smile)

(10/26/2001; 09:01:38 MDT - Msg ID: 126)
Still at the Trail House

Check out those new home numbers? How can this be; people are financing and buying homes in the middle of massive layoffs and cutbacks. It just goes to prove that if you expand a fiat enough, the physical market for anything real will be brought. The secret is in "expanding enough" and using the right kind of fiat to expand with.

----- New Homes Sales for September were just released and came down 1.4% at an 864K pace. This was slightly stronger than the consensus estimate for 860K though softer than August's reading of 898K. ----------------

Well, our fed isn't shy at all. They don't hide behind some hard dollar theory when it comes to giving out free money; especially when the currently they are giving away is the world's reserve. No sir, our American home buyer has the right to buy himself a roof no matter what his economic fate.

This is the game plan that works,,,,,, has worked,,,, for decades. As long as your local economic structure is based on a "fractional credit reserve banking" that is not affected by price inflation: then the people using your internal dollar market will buy goods using whetever "almost free credit" that's avaliable.

Americans exploit the system because they use credit created buying power to buy real "non inflationary priced goods". No matter the debt load as long as the fed will cover their cost by refinancing said debt at ever lower rates. And the Fed can do this as long as the world has to support the "only currency game in town" by delivering their real goods for our dollars.

Again; this all works as long as the world "buys into" using our dollars. As I said; an expanding fiat works to grow the economy thru expanding credit buying power because the fed can support the system with credit creation that has no "inflation premium". That lack of premium only exists as long as Americans can exchange free credit for real physical goods. Once this perception changes its over. Once the world understands that it's not local US goods that stands behind dollar growth, but less expensive foreign goods,,,,,,,,,, the stage is set for our "supporters" to sell to themselves!
Making themselves "lifestyle rich". All they need is Another currency unit.

Today, the ECB said that their M3 was rising at a 7.6 rate and doing so because people were moving more wealth into savings. Can anyone figure that one out? Hello,,,,, they keep their short rates well above inflation (or at least above the US dollar rates) and international people are saving the currency. In the face of this our fed is expected to lower rates again to around 2%?

Somewhere in the middle of all this; real savers will supply Euroland with a solid base of credit wealth that can be borrowed without driving their local price inflation thru the roof. Then: other national economies will have a market that shares realistic price levels for all goods. Then; all economic systems will begin a non inflationary expansion that centers around Euro use! All of this period will mirror our (US) internal coming inflationary expansion that limits our ability to import or export. Think about it.


There is a lot going on now,,,, so: Later today I'm going to address some posted items made on the Main forum in an effort to expand on the political game in process. Will be back later.


(10/26/2001; 21:21:33 MDT - Msg ID: 127)
A few comments on comments!

----- The Euro is a mere convenience for trade among the group of user nations if it cannot buy a bbl of oil in international markets. That's a fact.----

I hear that some French buys are already being invoiced and settled in Euros. But, then again, they don't like to admit that they even use the awful stuff. (grin) Actually, with so much of their electric needs provided by Nuclear,,,,,, what doooo they need oil for?

------ Could it be that some dollar holders are buying up US stocks at what will later seem to be bargain prices? What better place is there to dump dollars without upsetting prices?-------

Well,,,,,,,, some small players may be doing this. But, big holders of overseas dollars have to ask: "what would foreign exchange controls do to my big stock gains"? Besides, if they can only get 5 or 10% of their dollar wealth into physical holdings,,,,, the rest of the cash could evaporate later and they would still be light years ahead. Considering the coming gold / dollar free market revaluation. Only, the problem has been for a number of years; how do all of these old Euro Dollar accounts get into even 1% physical when the whole market has such a waiting list. But, ask about paper gold? Sure,,,, all you want. Has anyone ever figured how much gold 1% of the whole Euro Dollar float would buy? Even at $1,000 US per ounce?

----------Europe has not matched US efforts to stimulate growth since the September 11 attacks, Breuer said, because "we have no common, defined, decided economic and financial policy in Europe".-------

(comment by USAGOLD site steward) More importantly, it does have a single independent authority steering monetary policy down the middle of the road so as to be neutrally suitable for a wide coalition of interests. ------

You have that right Randy! Rolf Breuer sounds like all the late model financial planers in Europe that still don't know where EuroLand is headed. These guys got their economic stars while studying at the socialist feet of our political Federal Reserve. Only trouble is that they never understood that fiat inflation using a world reserve currency, like our dollar, is different from other systems. We buy cheap social policy and economic expansion with the blood and sweat of foreign productivity. I bet Old Breuer thinks its ok for a business to buy $1.00 running shoes from asia and sell them in Dollar land for $120.00. Then he would point out that shoe inflation is only running at a few percent
because those shoes went up $3.00 last year. Oh well.

The Euroland Germans, and the ECB studied our ways for a long time and now fully understand how to attract other nations into a fair game. The Euro will become a "world standard" more so than a reserve because they want it to be a fair currency that's accepted for it's value. For the Euro to gain American financial acceptability later, it will do so because it will be the "last man standing" when this inflation storm resides.

------ Government gets "tennis elbow" from throwing the ball of string --------

I know where that one came from (smile). All of us concentrated much too long on when the Fed would eventually fail to push our monetary string. Did we ask this question as if the US was about to become "suddenly dollar responsible"? Or was it because the markets would over rule the fed's hand? I bet we asked because "fiat credit theory" said the fed would eventually meet such a fate.

Double baloney! Our fiat world would and did evolve around this problem. Once the dollar inflated itself to the end of its "gang plank", it was into the inflationary drink sailor! The Euro will take over and we will become like any other national currency; subject to pay as you go politics and social policy. Can't push that string? Pick it up and heave it in a third world like inflationary pitch. That ball will fly, brother,,,,,, oh will it fly!

--------Putting these two together, I observe the following -- So, really, the Euro Banks don't mind selling gold short, because when the big blowup comes, they suddenly have a use for the the dollar reserves they have piled up. Is this a fair conclusion? ---------

Well sir,,,,,,,, we should all think about this for a bit? It's awful clear, to anyone that has just a little of the facts, that the paper gold markets cannot ever be converted into physical gold. The numbers would be????,,,,,, That's just a rhetorical, don't even try to put a real number on it.

You see, all the armchair gold bugs hold onto their paper leverage and cheer for some big paper short covering blow up. A paper squeeze that forces the "virtual" price of gold way up. But, who exactly is it that is going to be a threat to the paper Bullion bank market? You,,,,, me,,,,,, that man
behind the tree?

What if me and a thousand others came up with a 1 trillion in cash and used it to lock down paper contracts to deliver us 1 billion ounces of gold. The paper gold market has the means to match our commitments dollar for dollar. I mean, they could put the money up, not gold ina a vault, and get
on the other side of us,,,,, margin to margin.

OK, now we stand face to face. Even if we had enough free cash to pay for delivery,,,,,, what jurisdiction would let us settle; England, US, South Africa, Canada,,,, who? No, we would be told to cash out and buy our gold on the tiny physical markets. In a Hunt like joke,,,,,close out would come and we would eat it, big time. Even if we broke even, how exactly would we exchange our cash for metal in the tiny bullion markets without driving the price to the moon?

The reason I play this out, in text, is for others to understand that there ain't gona be a run up in paper gold. That market is a derivative style currency support and it was never set up to be a big time deliver machine. Its control will end when the currency system, it's built on, fails and takes the "virtual" gold market price with it,,,, to the floor! But, long before that plays out, the real bullion markets will get extremely thin and build up a huge premium to contract settlement. It will do this because some financial disorder will invalidate, and most likely, force an official deferral in physical delivery; indefinitely. From there the show will proceed.

The big dollar gold shorts in Euroland have real market exposure but no political exposure. Their political house would just as soon settle this at whatever level the paper prices sink to; this is their real market exposure and it will most likely be profitable. There will be no political exposure, forcing them to settle in physical delivery; because the US system will opt out first because of inflationary preasures! Very simple political logic, right? Try asking someone that is hip deep in gold stocks or futures if they grasp it? Hard thing, that political perception is,,,,, especially when your pocket book controls your brains. (smile)

Again; this all mostly covers the bulk of the markets. Paper gold owners that have oil to trade will get their ticket clicked,,,,,, believe it. However, I bet that by then most of them will be asking to settle their gold in Euros.

----- So, Japan has excess fiat they don't know what to do with.------

Japan is a different problem. They have been locked into the US dollar economy for so long that they cannot escape. There is simply no way that China will let them into the Euro house. The HK / China central bank system, also known as Big Trader, simply wields too much economic sway between Asia and Europe. In historical precedent, the orient express always headed to Europe and never saw "The Japans".

Actually, Japan doesn't want to go there and has risked a decade of time waiting for some economic change in the US. I have said from way back, that Japan will go down with our (US) inflationary tide. They will waste away their dollar assets following our lead. Those that think that these peoples want to be part of a third world currency block do not know them. I do,,,, but that is another story.

--------- A Trail house? A Trail office?! Life on the Trail is growing much more comfortable than before, when we all "pitched camp" and ate pork 'n' beans around the fire! ----------

Believe it or not,,,,, I was in a real tent on my last vacation. Tell this forum the truth,,,, my-Lady,,, when was the last time you went for a wilderness experience,,,,,, slept in a tent and watched the stars while around a fire? On the GoldTrail such an expierence is valuable beyond all things, no?

Pork-n-beans??????? I should not have saw that,,,,,, I'm off to eat! (smile)


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