Nick: I'll take you up on that sometime in the next couple of years. I'd love to visit oz without having to work while i'm there. I've got a grandaughter named Sydney. Seems my son took his wife with him on a trip to Oz about 3/4

C'mon Who Cares! You are a frustrated would be trader who "thinks" he has higher motives. Long term ANYTHING is a death sentence. If you had bought and sold, B & s, B & s, etc. on ANY market, you would have made 10 to 100 times the dough over the last 30 years. Buy and hold is not only boring, it is extremely poor logic. All you need is an indicator of when to b & s and you would be WAY ahead!!! A good one is the p/e ratios. They indicate when things are overpriced ( like now ) and when they are underpriced. If this is too complicated, then just listen to oldman's posts on trading and you'll still come out way ahead.All the people who are holding now with huge profits are gonna come back to the fold in a year or two.

Check it out. Is this the future?

KUALA LUMPUR ( Reuter ) - Malaysia threatened
Thursday to use a draconian security law against
citizens involved in stock and currency "manipulation,"
sending a chill of fear through the financial community.

Cautious under the best of circumstances, almost
all financial analysts in Kuala Lumpur and Singapore
declined comment on Malaysia's latest proposals to
shore up its stock market, citing possible government
reprisals.

"No way, man. Nothing on record. They are going
on a real witch hunt right now," said an economist
with a Singapore-based equities research firm when asked
what he thought of Prime Minister Mahathir
Mohamad's proposal to make available 60 billion
ringgit ( $19.8 billion ) to buy shares.

"No comment. For all practical purposes this
conversation did not take place," said a regional
economist with a European brokerage house in
Singapore.

The research head at a Malaysian brokerage was
vehement: "I don't think I want to say anything. I
don't want to get arrested."

The head of research at a European brokerage in
Kuala Lumpur was no less reticent: "I am not allowed
to comment at the moment."

The fearful reactions came after Deputy Prime
Minister Anwar Ibrahim said the dreaded Internal
Security Act ( ISA ) could be used against Malaysians
involved in helping foreigners sell down the country's
stocks and currency.
"If they [Malaysians] continue to break the rules
and sabotage the economy, of course, we do not
preclude that possibility," Anwar told reporters when
asked if Malaysia would use the powerful ISA against
local stock market speculators.

"But, what I'm suggesting is that right now, as it
stands, I'm satisfied there's absolutely no necessity
for us to resort to any such measures ... We are being
supported by all quarters," he said.

The stock and currency markets reacted sharply,
falling to new lows. The Malaysian ringgit plunged to
a record low of 3.0245 to the U.S. dollar and the stock
market shed 10 percent before both markets recouped
some of their losses.

The ISA allows for virtually indefinite
imprisonment without trial. It was enacted under
British colonial rule to deal with a Communist
insurgency in the late 1940s and 1950s.

Opposition leaders have been jailed under the act
for fanning racial hatred and religious leaders for
preaching deviant creeds.

Observers say this could be the first time the ISA
is being applied to an economic situation. Malaysia
has accused foreign speculators, aided by some
Malaysians, of ruining its economy. Its stock market
is down about 40 percent this year and its ringgit off
about 20 percent since early July.

"Nobody would like to endorse or support any act
of sabotaging the economy of the country. At the
same time, we also cannot endorse the use of the
internal security act on Malaysian citizens," said
Mohamad Anuar Tahir, chairman of the Center for
Peace Initiatives, a non-government organization.
Chandra Muzaffar, a political scientist at
University Sains Malaysia, said he opposed the use of ISA
against any citizen.

"[People] being seen as market saboteurs or rogue
traders or ... as traitors to the country, I don't
think one should use Internal Security Act against such
people.

"If there are people who are manipulating, there
are laws against such manipulation. You should put
them on trial, take them to court," Chandra told
Reuters by telephone.

Some financial analysts and economists, who
normally comment to media on the markets, spoke
only on condition of anonymity.
"Over this kind of thing if you pull in the ISA, it
is like imposing an information blackout," said a
Singapore-based economist. "There is no point
shooting the messenger. We are not the cause of the
problem.

G'day ( g'nite ) oldman--nice chattin with ya. Your hardass/no nonsense sentiments are exactly what a trader needs.

I don't question that buy and hold can be a poor strategy, Nick.

But I like things that I can predict fairly well. Like real
estate. : ) Or bonds. Sometimes. : ) You're right, I'm a frustrated
would-be trader. If I could ONLY get my cash-flow back up. I
absolutely refuse to put it on my credit cards. : ) Yet.

Old Man...how perceptice you are...and patient, too. I for one applaud your measured responses to WW. He sure clammed up in a hurry. "Mega dittos on Rush...he is a bombastic waste of airtime.

Who Cares...isn't it amazing that some kids get all the way through high school without the ability to even read? But, thats liberal education at its best. Too bad the younger generation isn't being given a full deck of cards to enter the game with.

WW...I hoped you don't invest on your feelings.

Who Cares. We'll turn you into a trader yet! It's father's day here in OZ, so I have to take the missus and daughter out so "I" can buy me a good feed. One last question. Your opinion--which way is gold going out of the triangle????

If I had to guess, short-term? Down. I'm waiting for the big spike
up, which might be two or three years out.

Rush is one of "them". : )

I am appalled at the education system, now that I see the product
with my own eyes. I have several students that don't know BASIC
math laws, like "associative" law, "distributive" law, etc. They
can't even do arithmetic reliably.

Why would gold drop? You know, I was reading an article about
two years ago. Historically, gold prices have dropped sharply
just prior to inflationary environments. When liquidity dries
up, gold gets hit first; then when the printing starts to keep
the economy going, gold starts to skyrocket.

Would traders *know* when liquidity dried up? What would be an
indicator?

Phone service has been nonexistant most of the afternoon and evening. So I just have time to say that I've never, ever, Ever, EVER, met a liberal who could argue political issues with the least shred of intellectual honesty and integrity. Liberals ALWAYS accuse their opponents, usually at the earliest possible moment in the debate, of racism.

This cherished liberal tactic is nothing more than a tired rhetorical cliche meant to cut off debate. Indeed, it is meant to end discussion forevermore by all who are within earshot of the debate, lest they, too, be similarly accused.

Meantime, we are to believe that the Kennedy family, or the morally depraved likes of Clinton, should be admired for their noble and charitable intentions toward all. What's wrong with this picture? Euro-Anglo whites who advocate that one should act -- and vote -- in one's own best interests are labelled racists, whilst those who kill and rape are able to get elevated to national celebrity and national leadership? It's nothing less than sinister in my eyes.

Thanks, Who Cares.

One last comment before I go. The death of Mother Theresa this week was the single most important passing in the last 32 years. In 1965 Albert Schweitzer passed away. They both won Nobel prizes and they both will rate in history textbooks 1000 years from now ( assuming our species lasts that long ) as two of the most important people of the twentieth century ( long after all the posters at Kitco will not even rate a footnote in documentation- excepting maybe Puetz after the crash ) .

I'll try and repost a chart from earlier that Oliver was kind enough to post. Seems by this chart that gold usually goes quickly up after a sharp dip except for early 93.

http://nmg.com/wew/curves/wdco004.html

Hey Watcher--I don't like the direction that danged chart is pointing. The wife is nagging so I gotta go soon. After your comments about Hilo, I tink you one Kona boy? I used to go to Kona in the fifties before the developers got there. Great place!! Visited Cap"t. Cook"s death site several times, went fishin' for marlin and shoulda bought some of those pahoehoe acres they're selling for a fortune--but I was just a kid and had no dough. My fondest memories are of Havaii nei. Maholo and Aloha.

Skylark: A new investment paradigm is indeed necessary to trigger a major gold reversal. As long as private investors and CBs see the dollar and treasury securities as the ultimate safe haven, a major gold bull is out of the question. But once the dollar is knocked off its perch, the sky is the limit.

Donald; Most of the economists who contend the CPI overstates inflation work in the financial community. Their employers have a vested interest in this argument. Helps them to sell bonds and convince employees to accept paltry raises.

More objective academic economists are divided on this question. My own feeling is that the CPI UNDERSTATES inflation outside the high-tech sector. Just ask anyone who goes to the supermarket each week if inflation is "dead" or "alive".

Oldman: Do you still see gold making new lows?

Mother Teresa ran an order that was weak on healing skills and preached
surrender and prostration to the poor. She preached the message that the
poor must accept their fate, while the rich and powerful are favored by
GODDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD
Truth will be answered by the price of gold. It is truth v lies.

Good mornin all!

Modern Liberalism=The tyranny of feel goodism...

WW. You were incredible last night! Took unusually large dose?
Oldman is right, any nation that is not uniform culturally will destroy itself.

Ted: Good mornin' back at ya

Who Cares: I taught for 12 years in public and private schools in a "minority" loaded part of the country. Fortunately for me, a technical school was nearby, teaching the 4th quintile as you put it. I earned an AA in Information Processing and last year ( 6 years later ) doubled my best teaching salary. This year I got a double digit raise with stock options. You are in a thankless job, but many of us owe you and yours a big THANK YOU! Note: Everybody in the Information Systems group in my company is scheduled for BIG raises this year and next. The tight labor market and high demand for programming and networking and analyst skills is making us very popular. If you can stand the heat and humidity, Houston is a great place for folks with all kinds of computer skills. You could call it a GOLDen opportunity. ( Sorry Bart, that's as good as I can do early a.m. )

Tonights pending story on 60 minutes about Russia not be able to account for 100 portable "backpack" nuclear weapons made me wonder. What would be the likely impact to the stock markets and price of gold if terrorists were to detonate some of these these things in the US? Would like opinions as to the market reaction to each of the following sceneros:

1. Level the Capital during the state of the union address.
2. Level Wall Street & New York Stock exchange.
3. Level Fort Knox with enough force to vaporize all gold stored there.
4. Level the Magic Castle at Disney World.

Also consider this, If I were China, I would be looking for those 100 weapons. It would be very easy for China to buy the bomb by posing as a "fake" middle east terrorist group, then plant the bombs in the US, and blame the damage on Iraq, Iran, libia, etc. What better way to destabilze and weaken the US than having a nuke going off in a different US city every month for the next 8 years ( 100 nukes / 12 months ) = 8.3 years.

Mornin Speed!...Netanyahu:"Palestinian peace accords no longer binding"
"We decided that the peace process...in which Israel,time after time,hands over land to the Palestinian authority,and the murderers use these territories as their launching groung,shall not continue"....About time as the "peace accords" ( ? ) were a farce from the start!..buy RDC,GLM ect ect...and gold!

GEORGE COLE: My own feeling on the CPI accuracy, and I can't defend it, is that it both understates and overstates inflation. It depends where you are on the socio-economic scale and also how old you are. For example, at age 63 I am less likely to buy new furniture but those changes are calculated in. Since I retired I go as much as two weeks on a tank of gas so I am semi-immune to motor fuel prices. Perhaps the best way to reduce the cost of living would be to abolish the Bureau of Labor Standards entirely. We'll save several billion right there.

Ron: If all liberals were in the US and the US was a country with many liberals your comments would have wider application. As it is ,most industrialised countries have a political spectrum which has conservative politics starting about where the US liberals are and goes left. That's one of the reasons the US is unable to progress effectively from the civil war--there is no sophisticated liberal view in the US that goes beyond giving food to the descendants of former slaves. The rest of the world that counts learned that this sort of liberalism doesn't work about the time the feudal system came to an end. The US being inward looking for the past 300 years has missed most of the advances of of the civilised world when it comes to how countries are run on a day to day basis. One of the results of contunually looking back to 1776 is that every year the founding vaslues of the country are not expressed in current matters of concern except as they can be deduced from the writing of individuals who had no idea what problems would exist at this time.
The lack of modern liberalism and the inertia of WW11 technical progress has resulted in a very rich country with a standard of living which makes so it attractive to people in underdeveloped counties and a one with such an abysmal quality of life the much of the rest of the world trys with varying degrees of success to avoid. One noticable result is the types of people who wish to get into the US and those who think it foolish to enter the US even for a vacation.

I note that a lot of people on this site hiss and boo Rush Limbaugh, call him fat and a racist. I have listened to him for at least three years when occasion permits. He is not racist. If all a person can do is call a person a fat windbag, it usually means they don't have an intelligent reply to his arguments. I have never hear Rush say anything of a racist nature on his radio or on his recent television show. In fact, his position is that everyone ought to have an equal opportunity in the work force. Now, I reckon that in WW and the other liberals on this site's mind that is racism. To suggest that a minority can compete on a level playing field with us WASPs is herosy. My feeling is that anyone who wants affirmative action is saying---yes Blacks and Hispanics are genetically inferior and have to be given special breaks and quotas to complete in the workforce. I thought the blacks were freed about 140 years ago ( about 4 generations ago ) . I think that is the sum of Rush's position is the pursuit of rugged individualism. Let everyone work for his or her own success and position and not envy and attempt through taxation or liberal rehetoric to bring to their knees those who have made it to the top. Sure Rush is stuck on himself and not afraid to tell it the way he sees it; and yes he is horizontially challenged, but he fights it just like anyone else who is overweight. To call him fat slob and a racist says more about the person saying it than him. He's one of the few talk show hosts on radio who doesn't have to use profanity and foul language to inform.

TED: Good morning. We had dense fog this morning, but now it is bright and beautiful at 67F. We'll need it for today but will send it up your way for tomorrow.

Affirmative action is a necessity to combat the latent racism that we all know exists. It balances against the racism which would persisit. It has nothing to do with inferiority but rather ones inferior social position because of latent racist sentiments.

Mornin Tort + Donald!!! Tort ( 9:06 ) Well said!...Weather:Sunny,10-15 MPH winds,71 degrees and I'm outta here ta do some seakayaking!!!!! Tort: stay out of that damn office! Anyone read the quotes from Venus William's ( in the finals of the U.S. open ) father, calling her last opponent a "tall ugly WHITE turkey"....racism goes BOTH ways in the U.S.of A....and it's only gettin worse!

There has been a lot of controversy about whether homosexuality is hereditary or an acquired taste. Not being of that ilk I don't know as my hormones run in the predominant manner. I was listening to Dr. Laura the other day ( don't blackball me because I listen to both Rush and Laura ) and she said that she had heard of a place where gay people can go to receive therapy which will help them change from gay to straight. I don't know anything about it but can't see this as being successful with all but a few people. It is my understanding that a person is basically what he or she is when born and I think we all know how difficult it is to change anything about us. That is not to say we can't change who we are. I would be interested in some thoughts on this before the markets kick in this evening.

Tortfeasor: I have listened to Rush since 1988 and he is not racist. He yields his microphone to people like Thomas Sowell and Walter Williams, both of whom are libertarian who just happen to be black. Most americans have been conditioned to believe that there are no absolutes, so no one can really "know" anything with certainty. Rush is brash, confident and assertive of his values. This irritates the "know nothings", the luddites and the liberals. He is scratching a mighty big itch out here, with a 20 million per week audience.

WW: Affirmative action stigmatizes minorities. They must constantly overcome the notion that they got where they are by processes other than hard work and competition. To the majority, it is really just reverse racism. Let everyone compete on the basis of merit alone and the market place will promote the best and brightest because it is profitable to do so.

Thoughts on what? Gays? Or "nurture versus nature?" I can relate
the tale of my four siblings. Only two of us have the same mother,
none of us have the same father. All grew up in the same environment,
from within a few months of birth.

We all have extremely different dispositions. From my experience,
well over half of your disposition is genetic.

FUNDY: One of the results of
contunually looking back to 1776 is that every year the founding values of the country are
not expressed in current matters of concern except as they can be deduced from the writing
of individuals who had no idea what problems would exist at this time.

I certainly disagree. The U.S. Constitution is a masterpiece in that it was written by men who understood history and the failings of humanity through the centuries. It has had only minor changes for over 200 years and remains a workable document for as far as the eye can see. Give me an example of where you feel it does not provide for a modern reality that could not be seen at the time it was written.

WW, I don't know that latent racism exists as your assert. I live in Albuquerque. We have a great melting pot of races here. We are a well known Mecca of welfare ( for Blacks, Hispanics, Native Americans and some Anglos of course ) . The only racism that I am aware of is the irritation that working Anglos feel in having to have to pay taxes to support non-workers. Its a fact that there is a greater percentage of minorities receiving welfare than there are for Anglo's. Hence the feeling of resentment against a minority race as a whole. I don't think it is a feeling of disgust with skin color or culture, which is what I think of as rasicm. Also when a help wanted ad says Equal Opportunity Employer--what that really means is, WASPs need not apply. That can tend to turn a WASP off. In New Mexico we have a great many Hispanics who are very wealthy. In generaly all the races get along very well here. Most of the people I know look on the person as to who he or she is and not on his or her race. In fact probably half of my client base is Hispanics. I have a law partner who is Hispanic. I have an adopted Hispanic son. Yet, deep in my heart of hearts I feel resentment that Hispanics get the lion's share of government jobs and a lot of welfare. WW, affirmative action promotes discrimation and prejudice, it does not cure it.

Oh, god, no. More Princess Di on television this morning.

Princess Di on television. Racism on Kitco.

Please. Please. Please. Let it end. : )

Morning all. Ruskie--Your scenario re suitcase size nukes. I believe the vaporizing of Fort Knox Gold is in the cards. Have you all noticed we haven't heard from GOLDFINGER for a while? Ever hear of "Operation Grand Slam"? I rest my case.

Morning Ted. I'm at home pounding this stuff out; pounding the liberals into submission. I don't think WW is poundable though--he's thoroughly entrenched in liberalism. My wife says I've got to go walk with her so I am leaving these etchings for the fresh air of the Taco Belt. More later, aligator.

TORT: The welfare mix in Albuquerque does not track with the national stats apparently. The majority category on welfare used to be white elderly female but I am not up to date on the latest.

Oldman -- Insightful comments as usual! Why should I give up my job to someone with inferior abilities because of their skin color or place of origin? As one of those evil white males, I know the syndrome well. Ive been the target more times than I care to think about. Funny, no one gives a damn about me though! Except, of course, when they need MY money, and MY skills. Then its O.K. to have me around. Hmmm, sounds,..., racist to me.

TED -- Owing to the current home project on an old house ( I feel like Im doing an episode of , This Old House ) ; Two years ago a box of Red Cedar shingles were ~$67, today that same box goes for $87. I could give other prices on construction materials, but they dont count in the CPI. Last example is sheetrock. About three and a half years ago, a 4 X 8 X 1/2 panel cost $2.99. Today its in the neighborhood of $4. 65 to $4.85. Roughly 50 % higher in less than four years. This pattern exists in many other areas except for the imports coming in from China or the Asian countries. Got to go and do more siding today. Hanging off of the second floor can be exciting at times! But then, isnt that what panda bears do, hang around? :- ) )

BBML

Speaking of welfare.....World Bank to loan Albania $20 million.
http://web.albaniannews.com/albaniannews/headline/d1/text002.html

Japanese Stocks Seen Falling, Led by Banks, on Economy Concerns

Japanese stocks will probably fall this week, led by electronics and banks, as Japanese investors
rush to sell those shares which have risen most to book half-year profits by month's end. Japanese
accounting practices encourage institutional investors to sell stocks to realize an actual profit for
accounting purposes. On Friday, the benchmark Nikkei 225 Stock Average rose 2.3 percent on
the week to 18,650.17. The Topix average of all shares on the first section rose 1.17 percent on
the week, to 1427.99.

I don't see anything wrong with racism, as long as they let EVERYONE drive those fast cars round and round the track. WW: Re your 9:14 - That's why we suffer you warmly here at Kitco. YOU are our token affirmative action liberal. ( :- ) RUSKI: Why in the world would China want to destroy its biggest customer? Bomb the Magic Castle? Now THAT's WAR! FUNDY: I'm disappointed in you. Such dripping criticism of America so early in the morning. There are wonderful places and people and pockets of culture in America. As there are most everywhere in the civilized world ( whatever that is ) . ALL: There is one other factor to ponder when we talk of things like sexual predisposition, riches or poverty, rising and falling of lives and civilizations. That is "Karma" - or, earned destiny according to one's thoughts and deeds over previous lives. A better notion to ponder, I would think, than an arrogant tyrant of a cruel "God" or a "descent from Apes." But then, that would entail more responsibility than many could bear. And Finally, What's wrong with FEEL GOOD POLITICS? As a "libertarian" I feel Creative, empowered, responsible, and willing to accept what comes after doing everything possible to affect my own fate. And I don't twist nobody's arm doing it. That FEELS GOOD!

Brazil: Ex-minister warns of weakness in
economy

FRIDAY SEPTEMBER 5 1997

By Geoff Dyer in So Paulo

The Brazilian economy is in a weaker position than several of the
south-east Asian countries which have suffered currency crises over the
past two months, according to Rubens Ricupero, the former Brazilian
finance minister.

The slow progress of reforms of the civil service and the social security
system, seen as crucial in reducing the budget deficit, and the failure to
boost exports, were increasing the vulnerability of the Brazilian economy,
said Mr Ricupero, now secretary-general of the UN Conference on Trade
and Development.

Describing the Brazilian government's policy as a high-risk strategy, he said
economic stability also depended on variables outside the government's
control, such as US interest rates and the performance of international
stockmarkets. "So far we have been lucky," he added.

Mr Ricupero, a former Brazilian ambassador to both the UN and the US,
was finance minister in 1994 during the initial phase of the launch of the
new currency, the real.

The economic crisis in Asia has focused considerable attention on the
Brazilian economy because of its large fiscal and current account deficits.
Brazilian shares have fallen sharply since the Asian crisis started in
mid-July, although they have performed strongly this week. Mr Ricupero's
tone contrasts with the more optimistic outlook of most economists. They
argue that Brazil will avoid a crisis in the short term because of strong
inflows of direct investment, spurred by a large privatisation programme,
and because of its sizeable reserves.

Speaking in So Paulo, Mr Ricupero said several of the south-east Asian
countries facing currency crises had lower budget deficits and a greater
capacity to export than Brazil. And unlike Mexico in 1994, Brazil did not
have a stand-by economic agreement with the IMF.

He added that Brazil's high levels of foreign direct investment had
drawbacks. In the short term, new foreign companies tended to import
heavily and in the medium term they could start to repatriate profits and
dividends, leading to capital outflows.

Mr Ricupero said the government was correct to stick to its strong
currency policy to keep inflation under control. However, arguing that
economic "stability is a long way from being guaranteed", he called on
President Fernando Henrique Cardoso to turn next year's presidential
elections into a referendum on the stalled fiscal reforms. "Only the
mobilisation of the public will guarantee the success of the reforms," he
said.

Mike Sheller: Be very careful how you jest. The new 1st commandment is "Don't hurt anyone's feelings". ; )

To all: Gold marketing has moved from the newsletter province to the airwaves. Rush Limbaugh now runs ads for Blanchard and Pat Boone does ads for Swiss America. More bullion marketing must be done, but the ground has been broken.

News story from December, 1986. Posted this just so you could see the difference in psychology 10 years ago.

Neither Boesky brouhaha, Khomeini kickbacks, nor contra cash has checked this market's upward
flight. Last week, the Dow Jones industrial average stormed to a new high of 1,955.57. It marked
the third time this year the Dow has charged to a record above the 1,900 mark.

But will this rally have enough oomph to shatter the Dow 2,000 barrier?

Statistically, it's only a few upticks away. One boisterous day of futures-related program trading
could easily make the difference. Indeed, there's a ``triple witching'' expiration day due Dec. 19.

Some analysts say the 2,000 mark poses a mental wall to investors.

``It took so many years to break 1,000 on the Dow, I don't think you'll see 2,000 by Christmas,''
says Carol E. Morrow, a market technician at Piper, Jaffray & Hopwood, a brokerage firm in
Minneapolis. ``In the next couple of weeks you're likely to see an indecisive market. People will be
psyched out by the Dow 2,000 level.''

There are all sorts of economic and financial factors that could conspire to restrain the Dow.

Brian J. Fabbri, chief economist at Thomson McKinnon Securities, has a few yellow flags up. He's
worried about the Organization of Petroleum Exporting Countries, which is meeting this week and
could, he thinks, ``agree to reduce supplies, pushing prices toward $18 per barrel.'' That, in turn,
could interrupt or reduce the scope of the bond rally.

Mr. Fabbri also predicts that ``merger mania will end'' momentarily, as it becomes too late to
complete deals under 1986 tax laws. ``Fewer deals could take some of the enthusiasm out of the
market,'' he says. ``On the other hand, that money may get redistributed'' into a broader range of
stocks.

Still, both Fabbri and Ms. Morrow expect the new year to usher in significant new highs.

Blue-chip, interest-sensitive stocks will lead the way, says Fabbri. The economy will slink along
through the first or second quarter, he predicts, causing Treasury bonds to slide to ``about 6.5
percent.'' As a result, ``stocks could easily go up 10 percent. In other words, Dow 2,100 to 2,200
in the first quarter.''

Once again, the economic weather vanes have been shifting directions. Last month, business
seemed to be picking up. Last week, the Commerce Department's index of leading indicators
posted a hefty 0.6 percent rise for October. But economists say the gain was misleading, noting
that the strength came from financial, not production, components of the index. New-home
purchases were also off in October. And retailers reported soft sales in November.

``We're seeing very little indication of economic strength. At best, we're muddling along,'' Fabbri
says. Thus, he holds with a growing opinion that the Federal Reserve will cut the discount rate again
to juice the economy.

He expects a cut in January or February. With a lot of year-end tax-inspired spending or saving, he
thinks, the Fed will wait ``to get some harder numbers in the first quarter before making a decision.''

Also, Fabbri thinks that, to avoid currency gyrations, the Fed might wait to coordinate with a West
German rate cut. The economy is softening there, too. But Bonn is likely to wait until after the
elections in early January to take stimulative steps.

Fabbri's investment advice: ``Between now and early 1987, I'd be committing funds to utilities,
telephones, insurance, banks, and profitable savings-and-loans. In the second and third quarter,
start looking around for cyclical stocks.''

The latter part of 1987 could present some problems, he says. ``It would be very difficult for the
stock market to keep advancing if interest rates start to rise sharply - even if profits are rising.''

While Fabbri's bear side doesn't emerge until mid-'87, William J. Gillard is already out of the cave.
``This is the time to remain wary,'' contends Mr. Gillard, director of investment policy at Kidder,
Peabody & Co. ``The economy is very erratic. Fiscal policy management is, well, absent.''

Conventional wisdom dictates that about 60 percent of a balanced portfolio be invested in equities.
Kidder, Peabody's model account stands at 45 percent. Gillard says Kidder upped the cash
position in April and again in July. Twenty percent of the invested portfolio is in long bonds, 20
percent in Treasury notes, and 15 percent in T-bills.

``We want to be in a risk-averse posture,'' he says. ``Our bet is that you're better off in fixed
income than in stocks - but it's not a heavy bet.''

In periods of uncertainty, money pros favor the safe dividends and steady earnings of the blue
chips. Gillard is no exception.

``We're not fooling around with the small stuff. We're going with real American powers'' -
specifically, companies with proprietary products, high barriers to entry, and ``service sectors rising
to meet great needs.''

In practice, that puts pharmaceuticals on the top of the Kidder buy list. American drug companies
( Pfizer, Bristol-Myers, Merck ) are ``among the best in the world and valuations still look good,''
Gillard says. Financial data companies ( Dun & Bradstreet, Reuters Holdings ) take the second spot,
followed by companies that mop up toxic waste ( Waste Management ) .

But the pickings are slim. ``I don't think there are a great number of great buys now,'' Gillard says.

What would change his viewpoint? ``A price drop. And 100 points wouldn't do it.'' Barring that?
``A credible US fiscal policy.''

Meanwhile, the Dow tacks back and forth below the 2,000 mark. The index of 30 industrials
closed at 1,924.78 on Friday, up 10.55 points for the week.

Ruskie: Any kind of terrorist nuclear bomb detonation in the U.S. would completely reverse the ongoing investment paradigm which rests upon the U.S. ability to have its way in the world without fear of reprisal. Any serious challenge to that perception would trigger a Puetz-type super crash in stocks and the greenback. Gold would soar out of sight. All in a matter of hours.

Story from July 20, 1987 ( As long as it is quiet this morning I am taking special requests for old news stories )

Sorry; here is 7/20/87
After nearly five breathtaking years - from Hong Kong to New York - the bull market continues to
astonish with its record-setting gait.

Talk is now turning to what was once viewed as a pie in the sky projection: Dow 3,000.

Last week, the 2,500 mark on the Dow Jones industrial average was easily trampled. Stock
exchanges in London, Sydney, Hong Kong, Mexico City, Madrid, and Oslo also set records.

Indeed, gains abroad are often much greater than the impressive 600-point rise seen on the Dow
since January. This 30 percent gain ranks a poor 14th out of rallies on 19 major international
markets. This leads some Wall Street sages to suggest that in a global context even a 2,500 Dow is
undervalued.

``Stocks here look cheap to foreign investors. Our bull market has been a lagging market,'' says
Martin Sass of M.D. Sass Investors Services of New York.

The Dow's close on Friday at 2,510.04 gave it a price-earnings ratio of 13.5 times estimated 1988
earnings. The Nikkei average in Tokyo is 71 times 1988 earnings.

``The US market,'' says Jean-Marie Eveillard, manager of the SoGen International Fund in New
York, ``is a better value than the Japanese market. And vis-a-vis Europe it's probably equivalent.''

In April, Tokyo passed New York as the largest market in the world in the dollar value of its
shares. But success has soured many money managers on Japanese stocks. ``At these prices, it's a
gambling casino,'' says Mr. Eveillard.

Indeed, the Nikkei currently is not setting records alongside other markets. It has slid from a high
of 26,000 to around 24,000 in the last month.

Some market analysts worry that equity trading and attitudes are so intertwined worldwide that if
the bubble bursts in Japan, other markets will dissipate also. John Connolly, investment strategist
with Dean Witter Reynolds in New York, disagrees.

``I don't think the Japanese market is a harbinger of collapse here,'' he says. ``Logically, if the
Japanese market goes down, where will the British, Dutch, and Swiss put their money? The next
largest market is the US.''

With the Japanese leading the pack, Mr. Sass also thinks foreign investors will be doing a lot more
equity fishing in US waters. He notes that two years ago, overseas investors bought $5 billion in US
stocks. Last year, that jumped to $18 billion. This year, he forecasts $40 billion.

This latest rally is benefiting from that presence, says Monte Gordon, research director of the
Dreyfus Group. ``The first half-hour of trading has been very heavy with foreign buyers,'' he notes.

The basis for this long-running international bull market: lots of money waiting to go into financial
assets.

``The market is supported by enormous liquidity,'' says Mr. Gordon. ``Every time it pulls back,
money comes pouring in from all over.''

That liquidity stems from many factors, including loose, stimulative monetary policies worldwide;
sluggish economies which do not give corporations much incentive to invest profits in new plants or
equipment; climbing financial markets which create new wealth; and deregulation with its looser
restrictions on where money can be invested.

Of course, heady bull markets also create a fair number of Nervous Nellies who sit on funds
anticipating a market collapse. Currently, a hefty 9.4 percent [DL]of mutual fund assets are in cash.

Peter Eliades, editor of StockMarket Cycles, a Los Angeles-based newsletter, considers that
liquidity bullish. ``At major market bottoms you see levels of 10 to 13 percent cash. Ultimately,
those people are going to stop being so conservative. That cash will go into the market.''

Given the market's height and the foreign-buying tendencies, blue chips will be the primary
recipients of new funds, Mr. Eliades says. He expects this to help push

the Dow to 3,000 by January 1988. By 1990, he predicts, the Dow will peak at 3,500 to 4,000.
Eliades ranks among the top market timers for the last several years. His forecasts rely on cycle
theory, which says there are rhythmic patterns of varying durations in the market.

``The important cycle lows are over for the year,'' says Eliades. ``February was the end of a
four-year cycle. The intraday low of 2,180 at the end of May was the end of a 12-year cycle. I'd
be very surprised to see a move below 2,200 now.''

More traditional technical analysts, however, are warning about the lack of breadth in this rally.
Eliades understands their concerns. ``If you look at the daily advance-decline line, breadth is
terribly lacking. But we heard the same complaints in September 1985. Within five or six weeks,
the Dow moved to all-time highs.''

He suggests that a better indicator of breadth is the market-weighted Value Line composite index,
which includes stocks from the New York Stock Exchange, the American Stock Exchange, and
the over-the-counter market. This index has moved to all-time highs in recent days, he notes.

Gordon at Dreyfus, relying on fundamental factors, agrees the Dow may be heading for 3,000. But
not this year. ``The bulk of the advance for 1987 has been seen. You may see another 100 points
on the Dow but that's about all.''

MILLHOUSE said: "I think it was probably CMAX who mentioned the bucket loads of money which were created by the Venezuelan Govt in order to prevent asset deflation in that country. I suspect that the price of gold did quite well in terms of the Venezuelan currency".

I wish that this goverment was capable of even woorying about asset deflation. The reality is that they are more worried about stopping bolivar inflation....at any cost. This is particularly hard to do when you inject such huge quantities ( per capita, probably the highest in the world ) of paper money on the market. As they must also keep high liquidity and circulation, less risk another insurgency, their only way to semi-control the hyperinflation is to inject daily into their for-ex markets in order not to allow the bolivar to slide against the dollar. What this has done, is make the imported products slightly cheaper than the national ones, which has forced great numbers of factories to close. The price of a nationally produced product, in any contry, is limited to the after duty price of a comparable imported product. ( Aussy factories are the masters of this mode also ) . Only Venezuela can get away with this, for the moment, due to their petro-economy. But the moment oil drops, they will have the IMF on the Bat-phone in seconds flat. To finish the answer, gold has never been ( factoring inflation ) cheaper in terms of the bolivar. But then, the average Venezuelan investor sees the US goverment as infallible and omnipotent ( not an attitude shared by the other latin countries ) , and thus believes that the dollar is the only real money that exists, and gold, is just something flashy to have your Rolex made of. As the dollar and bolivar have been virtually joined at the hip for almost 2 years ( despite 80% inflation ) and there is an open exchange rate, no one is buying gold in bolivars here.... ( except me ) ....they all prefer the mighty dollar. A rude awakening is in store. We have one of the world's most distorted economies.

Story from January 28, 1981.
The popular inflation hedges of the last few years -- gold, silver, diamonds,

rare coins, and stamps -- are failing.

Gold, which peaked in New York at $875 an ounce last year, was down to $524

an ounce at the closing fixing in London Jan. 27. The latest blow was the

agreement of President Reagan and Federal Reserve Board chairman Paul A. Volcker

at a meeting Jan. 23 that they would like to see the price of the yellow metal

move even lower.

Silver prices slumped dramatically after the Hunt brothers of Texas -- nelson

Bunker and W. Herbert -- and their friends got caught in a futures market

squeeze last spring. Diamond prices are down about 11 percent in the last month

or so. Stamp prices have been falling. One set, the Zeppelin set, dropped from

according to one view, may have "bottomed out about a month ago."

Experts figure that two basic factors have hurt the market for precious

metals and collectables:

* High interest rates. When money costs 18 percent or so, it is expensive to

hold non-interest-bearing assets, especially if they are bought on margin.

Gold opened in London last year at $559.50 an ounce and closed at $589.50 an

ounce. Thus, it offered a return of 5.4 percent if safe-keeping costs and other

expenses were ignored.

"If you had kept your money in a savings account, you would have done better,

" noted Charles R. Stahl, publisher of Green's Commodity Market Comments.

* Hopes for a decline in the inflation rate have risen. Many people believe

that the election of President Reagan and a determined Federal Reserve System

will stick firmly to their anti-inflation goals.

In the case of gold, the release of the hostages by Iran and the removal of

the freeze on Iran's assets by the United States has eased some of the fears of

international turmoil, particularly in the Middle East. Thus, some buyers of

gold as a safety measure have sold some of their hoards of the expensive metal.

As to the future price of gold, opinions naturally vary.

Merrill Lynch Pierce Fenner & Smith's gold expert, Leon Brand, canceled a

sell recommendation Jan. 27 that had been made four weeks ago and made a buy

recommendation. His decision was partly technical, regarding the market as

"oversold." He also figures gold investors have by now taken account of the

"good news" -- the hostage release, the Reagan election, better inflation

prospects. Now, he believes, they will start looking at the difficulties ahead

-- the decontrol of the price of oil, budget troubles, increased defense

spending, rising food prices -- and decide that gold may not be so bad a buy

after all.

Precious metals expert James E. Sinclair agrees with Mr. Brand that in the

short run the gold price may turn about. "There is no road in the world which

doesn't have a turn in it," he says. But for 1981 as a whole, he adds, "It is

not going to be a rewarding year for gold."

Mr. Stahl of Green's Commodity Market Comments predicted last month that the

high this year for gold would be in the $580 to $620 range and the low in the $

380 to $420 bracket. The reasons for the decline, he suggests, include a more

stable dollar, an increase in the Unted States balance- of-payments surplus from

expectations, a 40 to 60 percent drop in the use of gold by jewelers last year

as customers resisted the higher prices, and an easing of tension in the Middle

East.

Some analysts have maintained that purchases of gold for their international

monetary reserves by third world nations would support the price of the rare

metal. But Stahl says: "Baloney. They would have to have their heads examined.

They can get 14 or 15 percent on their money."

In any case, among gold analysts, the bears currently outnumber the bulls.

As for silver, Stahl notes that the public was "100 percent right" in

unloading its silver last year. Some 70 million ounces of scrap were dumped on

the market, compared with a normal 35 million ounces. This, he thinks, could

depress the market to $8 an ounce this year.

In the case of diamonds, one New York dealer maintains that their prices are

near the bottom of a cycle they go through every five to six years. Some types

of diamonds increased in price by 70 percent in 1979. Then, he says, the bubble

burst in March 1980 as interest rates took their first big jump. They were down

25 to 30 percent by September before recovering some of their losses.

Some stamps have risen in price, but, in general, prices are not keeping up

with inflation, noted an expert. Some rare coins doubled in price between

January and April 1980, but then lost nearly all of that gain before the end of

year. James Halperin, president of the New England Rare Coin Galleries, hopes

they have "bottomed out."

Mike Sheller: Hardly dripping criticism of the US. The observation that
the US is steadily falling behind the rest of the civilised world is nothing more than the common understandling outside the US. The suggestion that it is an extreme remark could be used as an example of the satisfaction that comes from believing truth for all time arrived in 1776. The rest of the world has moved on from then where it has been possible to do so.

Story from December 4, 1996.The American gold rush now extends from Alaska to Texas.

A year ago, a new gold mine opened northwest of Anchorage, Alaska. The Nixon Fork mine,
owned by Consolidated Nevada Goldfields of Denver, is the first gold mine to operate in the state
since World War II, and half a dozen more projects are either in planning or construction.

And Davis Mountains Mining Company of Houston recently announced plans to begin prospecting
in Shafter, Texas, a ghost town a few miles north of the Texas-Mexico border. The last
precious-metal mine here closed in 1942. Dozens of crumbling adobe and rock buildings and
hundreds of ornate graves are all that remain of the town's mining legacy.

The return of gold prospecting to this parched land and to the cooler climes of Alaska is part of a
surging domestic gold industry. Since 1980, gold production in the United States has increased
more than tenfold. And while US output has leveled off in recent years, new discoveries in Alaska
and elsewhere portend another jump in production. Some analysts even predict that over the next
few years, the US could surpass South Africa to become the world's biggest gold producer.

The increase in gold production hasn't been fueled by a jump in prices. The price of gold has been
relatively stable - at $380 to $400 per ounce - for the past decade. Instead, it's being driven by
better mining technology and worldwide demand for the precious metal.

Computer-aided mapping has allowed geologists to more easily determine the size and value of a
deposit. Processing ore with cyanide in a process called heap leaching has turned deposits once
thought to be too small or too low in gold content into money-making ventures. Developed three
decades ago by the US Bureau of Mines, heap leaching allows mining of ore bodies containing as
little as half a gram of gold per ton.

The increase in American production parallels a worldwide trend. Global gold output has nearly
doubled since 1980, from 41 million troy ounces to a projected 74.5 million ounces this year.

John Lutley, president of the Gold Institute, which represents more than 60 companies in the
mining, banking, and refining industries, says emerging free-market economies like India and China
are hungry for gold. "India is now the most important gold market in the world," he says. "There
are 150 million middle-class people in India. They have some disposable income and they love
precious metals."

Last year, according to figures published by Gold Fields Minerals Services Ltd., India used 303
tons of the precious metal for jewelry-making alone. China used 191 tons of gold for jewelry. The
US used about 130 tons.

Gold production in the US is projected to rise from 10.8 million ounces this year to 13.9 million
ounces by 1998. By comparison, South Africa this year will produce almost 16 million ounces.
Other big producers, behind the US, include Australia, Russia, and Canada.

The surge in domestic mining has created thousands of new jobs, but it has also raised
environmental concerns. In Montana, environmentalists are fighting a planned open-pit gold mine
that could be built near the Blackfoot River.

John Miesner, a biologist at the US Fish and Wildlife Service in Reno, Nev., says giant open pits
that will be left at Nevada mine sites could pose long-term threats to the state's wildlife, including
migratory birds, and water quality.

After such mines close, the pits fill with groundwater. If the rock in the pit begins to generate sulfuric
acid, which in turn liberates heavy metals in the rock, Mr. Miesner says, "There's nothing you can
do. It's just too big."

Philip Hocker, the president of the Washington-based Mineral Policy Center, contends that much
of the domestic gold production has occurred at the expense of US taxpayers. Mr. Hocker has led
the fight for reform of an 1872 mining law that permits companies to mine on federal land without
paying royalties to the US Treasury. "This is a giveaway of $2 [billion] to $4 billion ... every year,"
he says. "We believe the royalty should be 12.5 percent. That's the same royalty the government
gets on oil and gas or coal that is on public lands."

WW: I think that you miss the point about liberalism entirely. Its really about cheap labor and its greatest supporter is corporate America. How can the richest most powerful nation in the world milk the greatest amount from its inhabitants. Here are a couple of ways. Don't pay your citizens a living wage. Invent welfare instead. Those who are undesirable in the work force to begin with can always collect it, nobody starves, and society isn't turned upside down with social unrest. Viewed in this way, what we call the social safety net is in fact a cheap buyout program in which labor can no longer demand a living wage because there is an alternative which is in fact subsidized by labor through taxation and redistribution of wealth. The trick is to convince us all to go along with the program. Obviously the truth won't work. So, lets make up liberalism. We are all racist, meanspirit, politically incorrect, etc. if we don't buy it. Well it this works fine for a while but things begin to get tight with all that taxation, a declining standard of living, etc. Next we get womens' rights. How else can we get both adults out there adding to the ol GDP. Again, the truth won't work so lets tell labor that they are a bunch of chauvanistic, sexist, dirtbags, etc. unless they admit that women are just as good as men at arresting a felon, removing you from a burning building, producing science, etc. The point I'm making here is that all these social changes have been of benefit to someone, but not to those they claim to be helping. After a half century of economic dominance by the U.S., the working class has little to show for it, in fact they have less.

Story from June 28, 1982. When the Israelis marched into Lebanon, Andre Sharon was certain this would

pump up the price of gold. After all, Mr. Sharon reasoned, tensions in the world

were supposed to be good for precious metals. And, he said, this was the third -

and potentially most explosive -- war that was going on simultaneously.

But when the price of gold fell instead, Mr. Sharon, a vice- president at

Drexel Burnham Lambert Inc., a brokerage house, was disappointed. So were many

other precious-metals analysts.

The lesson to be learned from this disappointment, the analyst says, is that

''the underlying economic realities are more important than political

developments.''

This marks a major change in the mythology surrounding gold. ''Gold bugs''

have traditionally called gold an excellent investment during times of world

crisis. Gold has always been called the one ''currency'' that would be accepted

when other currencies were worthless. And gold buffs could always drag out tales

of how Frenchmen managed to eke out an existence during World War II on their

gold hoards.

This year, however, even with a war in the South Atlantic, a war in the Gulf

between Iran and Iraq, and the Israeli invasion of Lebanon, gold continued to go

down in price. Even the wars could not halt a slide that began early in 1980,

when gold peaked at more than $800 per troy ounce. This year the price started

at just over $400 an ounce. On Friday, it closed at 305.50 in London.

What ''economic reality'' is more powerful than multiple wars?

In two words: interest rates.

In a recent speech at the annual conference of the International Precious

Metals Institute, Jeffrey A. Nichols, an economist with J. Aron & Co.,

precious-metals dealers, said: ''Since the initial price break in early 1980,

restrictive US monetary policies have continued to be the main determinant of

gold and silver prices. High real interest rates have made alternative

investments more attractive and have led fabricators to pare their

precious-metal inventories.''

Drexel Burnham's Mr. Sharon figures that with three-month certificates of

deposit yielding 131/4 percent and inflation running at a 6 percent annual rate,

investors in such things as CDs and money-market funds are receiving 7 percent

real rates of return. ''Thus, they are being well paid to do nothing,'' he

comments. ''And when you are well paid to do nothing, why invest in gold, bonds,

or stocks? I figure you have to get at least a 20 to 25 percent return ( from

gold or stocks ) to justify investing in them.''

Charles Stahl, the publisher of Green's Commodity Market Comments, says

somewhat facetiously that he has given up predicting the direction of gold. ''If

I was able to forecast interest rates, I would be able to give you a proper

forecast for gold,'' he says.

Yet some analysts are still debating whether interest rates will be the

all-determining factor in the price of gold. Mr. Nichols, of J. Aron, maintains

that investors' fascination with interest rates is only temporary -- part of

what he calls tunnel vision. This tunnel vision focused on the weak dollar in

the mid-1970s, inflation and rising oil prices in the late 1970s, and on

international political developments in late 1979 and early 1980. Now,

investors are firmly locked on to interest rates. But, he concludes, ''After

some interval, which can be as short as a few weeks or as long as several years,

market attention shifts to something else.''

Mr. Stahl suggests that the markets may soon focus on the US elections this

fall. ''If I see a lot of Democrats voted in in November, that may stimulate

gold,'' he says, ''since people may think inflation is starting all over

again.'' And Mr. Nichols holds that any economic recovery, if built on lower

real rates of interest, will strengthen gold and silver prices. He believes

purchasers of gold will look back at these prices levels and consider them

''attractive.''

Exactly when the price of gold will rebound, however, is another matter. On

June 17, James Dines, known at the ''original gold bug,'' threw in the towel and

sent out what he called his ''MVAOOAOGASSS,'' or ''Much Vaunted All-Out One and

Only Gold and Silver Sell Signal.'' Mr. Dines's removal of his multiyear buy

signal helped the gold price fall that day another $8.80 per troy ounce.

Story from September 28, 1982. Gold is no longer a reliable barometer of political weather. Whereas the

slightest international commotion used to move its price needle, now it takes a

major storm to boost gold on the London market.

Historically, when political crises occurred, people viewed gold as a stable

store of value, and bid its price up. But this year that has not been so true.

It's not as if this has been a dull year. Britain and Argentina fought over

the Falkland Islands. Iran and Iraq continued to chafe. Israel marched into

Lebanon. Through all this, the price of gold fell.

Only when the Mexican government nationalized the country's banks, and asked

to stretch out its massive US bank loans, did gold react in the expected manner.

For example, on Aug. 20 its price jumped $28, from $357 to $385 per troy ounce.

The difference was that the Mexican issue puts a strain on banking

institutions, whereas the other events were basically political in nature. Also,

the fall in US interest rates renewed fears of inflation.

''Economic factors are always present,'' notes a State Department official.

''They seem dominant when all's quiet on the political front. It's when you

superimpose economic repercussions on a very significant political event that

you see big swings.''

After gold recovers from this latest scare, some gold-watchers argue, the

price should continue its downward trend. If President Reagan and the Federal

Reserve System continue their success in restraining price increases, investors

will be less interested in gold as a hedge against inflation.

''But the essential character of gold has changed,'' observes Timothy Green,

an international gold consultant and author of ''The New World of Gold.'' ''It

used to be you would buy gold if you didn't want to lose money, because it was

so stable. Now you buy gold to make money.''

Mr. Green contends the interest of the sophisticated investor, as distinct

from users of gold - like jewelers, dentists, and electronics manufacturers -

has become a more important variable in the gold equation. Traders, in theory,

can make money on price volatility, up or down; some users will lose money if

gold prices jump.

And what sophisticated investors watch is big economic events, as when

President Jose Lopez Portillo announced gold could not be removed from Mexico

without permission from the central bank.

The price, gold-watchers maintain, will still jump at scary economic events.

They don't expect it to return to its double-digit price level of the early 1970

s.

''The question is, will you have the economic stability to depress the price

of gold?'' asks Alden Anderson, president of Rhode Island Hospital Trust

National Bank, the largest US supplier of gold for industrial purposes.

''Less-developed countries will put strain on their infrastructure as they

industrialize. You'll see pressure on financial institutions. And inflation will

continue to be a problem. All these put upward pressure on the price of gold.''

The consensus of 150 gold manufacturers, fabricators, and industrial traders

surveyed at a conference sponsored by the Rhode Island bank Sept. 14 and 15 was

that gold would cost $481 an ounce at the end of 1982. In 1983, they said the

average price would rise to $512 ( the range: $350 to $800 ) .

Factors quieter than politics, but in the long run just as important, could

buoy the price of gold during the 1980s, according to some experts: namely, a

flat supply of newly mined gold and strong demand.

The amount of new gold coming on the market each year will probably increase

at most 2 percent a year through this decade, Mr. Green estimates.

* South Africa, by far the largest gold producer, saw its gold profits plunge

33 percent last year. So it decreased production by 17.5 metric tons, to 657.6

tons. This trend has existed for over a decade: The country now mines 34 percent

less than in 1970.

If the price keeps increasing more slowly than production costs, such

cutbacks will continue. Even if the price rises considerably, however, South

Africa might choose to mine lower-grade ore and retain high-quality gold for its

reserves.

* The Soviet Union, thought to be the second-largest producer, will remain an

unknown factor.

''The Soviet Union uses gold sales only when the economy is in deficit,'' Mr.

Green notes. ''But the Russians are a fact of life in the gold market. It's as

natural for them to sell gold as it is for the Saudis to sell oil.''

But the Soviet Union is not always price-sensitive. When gold soared to its

record high of $850 an ounce in January 1980, the Soviet Union sold very little

( an estimated 90 tons ) , because its budget was in surplus. But in 1981, it sold

an estimated 283 tons to replenish its reserves, according to statistics from

Consolidated Gold Fields Ltd., a mining company.

Continued trouble with satellite countries, such as Poland, could force the

Soviet Union to step up sales, while additional revenue from its big natural gas

pipeline may allow it to slack off.

* The United States and the International Monetary Fund discontinued their

gold sales in 1980. Demand, however, will continue to be strong, although some

industries will cut back their usage.

* Sales in the Middle East, the largest gold market, will remain high. In

this volatile region gold is considered the best store of value.

While some industrial users, such as dentists and electronics manufacturers,

are looking for replacements for gold, jewelrymakers will absorb at least 50 to

60 percent of all new gold that comes on market, an expert at the Department of

Commerce says.

To all,
just passed through this: http://www.yahoo.com/headlines/970907/business/stories/greenspan_3.html
thanks ! donald ..THANKS FOR THE POSTS!Saved a lots of time to check..!happy sunday....

Auric: All it would need is exactly what "GOLDFINGER" wanted to do .... Contaminate the gold supply in Fort Knox .... Set off a nuke bomb within 3 miles of the fort and the gold would get contaminated is my bet. I wonder though if the guys with the bombs know that the gold is kept in New York ? May be they'll read Kitco and get that info for free eh!

Donald: Zed's Zed's ..... excellent !

Oldman: Sounds like tribalism to me. Not sure I like it but in reality, there seems to be no give and take from either side so one MUST exist to ones best levels. Just a shame that it's come to this. Like others in the world, even we Canadians have problems. Ours are not colour but language. I just wish my daughters had a chance at a better world. I've gotten to used to it being wrong but it would really be nice for a chance for them. Maybe that makes you right .... but I still don't want to accept it ...

TTFN

George Cole: Your comments about the US ability to have its way in the world have raised some issues that I have wondered about for quite some time. Notwithstanding the nuclear attack scenario, can US maintain this ability any longer? Should it? Is this ability creating long term prosperity for the US population or destroying it?

In my view, this ability is more used to bully others around than to achieve a more stable world. The result is not a more stable world, but a less stable one. Let me give you a couple of examples:

1. Israel is clearly an underdog. US spends a huge amount of money to maintain it ( why? ) . US also spends a huge amount of money to bribe some Arab countries ( like Egypt ) away from challenging Israel. Is all that money well spent? What does it buy an average American? Threat of kidnapping in half of the world? The supporters of Israel aid often claim that the rewards of friendship such as Israeli intelligence out-weight the costs. If this is the case, why did US spend all this money to gather intelligence on the Soviet Union rather than hiring the KGB to do it? History has often shown that foreign money brought in to establish political entities AGAINST demographics of a region never worked - these were the ways to START wars not to STOP them. How do you deal with people who are desperate enough to take their own life to make a point? How is an Islamic terrorist different from a Polish "terrorist" who would blow up SS soldiers during WWII?

2. US is in a business of "recognizing" and "un-recognizing" countries. US has "un-recognized" a perfectly independent, self-sustained country like Taiwan, and recognized Bosnia, this idiotic, un-maintainable artificial creation, that has no chance of survival on its own. Why isn't Tibet or Chechnya recognized then? US sends soldiers to Bosnia ( most of them never heard of it before ) and asks them to risk their lives for Bosnia's "independence?!" Or is it risking their lives for Bosnia's DEPENDENCE on the US ( maintaining Bosnia will require huge military and economic aid ) ? I am confused.

3. US has put into power, using US taxpayers money, a remarkable collection of crooks, morons, criminals, dope-smugglers, Communists, and Fascists all around the world. Examples:

Hussain of Iraq
Arostide of Haiti
Marcos of the Philippines
Noriega of Panama
Pinochet of Chile
Sallinas of Mexico

4. US involved itself actively into politics and elections of some unstable countries like Russia. The old school of diplomacy would always prohibit such involvement, and for a good reason - it always backfires. It can be clearly seen in Russia's example, where US's open support for Yeltsin gave rise to an assorted bunch of Communist and Fascist parties who gain political support by accusing Yeltsin of "selling out mother Russia to the US." It was a miracle that Yeltsin was re-elected. We will not be so lucky the next time, in my opinion. Is Clinton TRYING to bring fascists to power in Russia for some insane reason, or is he just an idiot?

FUNDY: We all lose sight of our heritages of truth from time to time. Not that those precepts, or ideals, or concepts, or scriptures should bind us into a blinkered box of stagnation and illusion. They are often, however, ample grounds from which to launch the future of a civilization or a decently rational society. In that regard they are precious. Perhaps for me the divergence in American thought and philosophy from the concerns of the Founding Fathers is a source of DISsatisfaction. But then, I am not aware of any budding new gem of enlightenment anywhere in the world today. Why doth they then persecute U.S. so?

Front: There is no gold left in Fort Knox. Even officially, US treasury owns only 8 billion dollars worth of gold. Compare it with about 80% of all world's gold after the WWII ( Goldfinger's time ) . All the world's gold is worth about 800 billion dollars.

The Federal Reserve officially owns about 80 billion dollars worth of gold and supposedly keeps it in the basement of the Federal Reserve of New York Bank. How much of that gold was leased? Is there any way to know if any gold at all is still physically kept there? Why cannot we take a guided tour of US gold reserve? You could do it in Goldfinger's time.

PUETZ: Where are you? Watching football? ( too early! ) Out bashing gays? % ( :- ) ( too weird! ) I did my homework as promised. In Milton Friedman's "A Monetary History of the United States, 1857 -1960 ) a chart on page 647 shows the following action for interest rates as defined by three categories:

1 - Baa Bond Yield minus stock earnings yeild rises dramatically from 29 to 32, then declines, troughing in 1949.

2 - Basic yeild on 30 year corporate bonds decline moderately from 1929 to 1932, then rise sharply for a year, then decline and trough in 1946.

3 - Commercial paper rate declines preciptously, and uninterruptedly, from 5 3/4% to below 1% ( ! ) from 1929 to 1936.

Indications are, on balance, as you said last nite: Initial reactions by debt instruments are short term paper down, long term paper up. But after 1932, ALL rates are in a severe and prolonged downtrend.
It waren't the GREAT depression for nothing. I will continue to look for nuggets to share from this marvelous book, but now you've succeeded in giving me a headache. Not the first time. ( :- )

FRONT: Tell the whole world about New Yawk, why doncha! Thanks fer makin' me a tawget. Now what I gotta do, take me money an' run Venezuela?

Who Cares and Tort: I find your questions and comments interesting -- about whether a person's disposition is learned or genetic. The diversity of the discussion here at Kitco always seems to have an investment under-tone. This behavior issue is a case in point. Let me explain.

I have noticed with my 4 children, the same thing that Who Cares noticed with his siblings -- they all have different personalities and behaviors, in spite of growing up a similar environment. In fact, I noticed their distinct behaviors within a few weeks of their births. Jessica cried a lot when she was small, now she frequently complains about things. Zeke and Luke were quiet as babies, we hardly ever noticed them. They are still mostly quiet now that they're older. Jake laughed a lot as a baby, he still laughs and smiles all the time now. These personal experiences led me to believe that behavior is mostly ( maybe 80% to 90% ) genetic.

In the investment world, behavior is also somewhat predictable. There a followers, leaders, lunatics, etc. In the current stock market mania, most investors are not thinkers, rather they are followers -- Just follow the trend, listen to our financial leader say, and do what the majority are doing, buy stocks for the long run.

But the leaders are getting out. Corporate insiders are selling. This is ominous for stocks.

Finally, my theory on full moons during manias -- lunar eclipses in particular -- is another example of human action that is emotionally induced rather than thought out. A certain class of people -- lunatics -- seem to be influenced in their buy-and-sell decisions by the phases of the moon.

What are the odds of this phenomena being random? Here is the calculation for the major crashes since 1980 -- Gold during March 1980, stocks during 1987, and Tokyo during 1990. The chance of each of the panic phases starting within 3 days of a lunar eclipse ( which they all did ) is 6 chances in 175. ( There is a lunar eclipse about every 175 days ) . The chance of all 3 happening is 6/175 x 6/175 x 6/175 = 1 chance in 722,000 of being random. This is strong evidence that some investors are influenced by moon phases.

This shows why the discussion on heredity and individual's control over their decisions is also important to investment decisions.

PETRONIUS: Don't blow my cover. I have been surreptitiously tunneling from Long Island to the Fed's vaults in Manhattan for several years now ( gone through 12,000 spoons already ) . The project is finally ready for outside financing. I need investors to help me defray the considerable costs of trucking mining equipment through the Queens-Midtown tunnel. We will go during rush hours when it will be difficult to be noticed. But the tolls will be frightful. Offering, of course, by prospectus only.

PUETZ: I respectfully submit that if, as you say, "behaviour is 80 to 90% genetic," why such wide variations in your kids? Consider one other possibility if you will. Behavior is neither essentially genetic nor conditioned ( though these are indeed FACTORS ) but is inherently Karmic. Behavior and inner nature of an individual in any one life is an inheritance of past life behaviors. As are the major events of the life, and destiny. This is the basis of astrology. It is the reason why a human horoscope contains all of these things in blueprint, in code if you will, from the moment of birth. Please do not think I am a fatalist. As you know from my posts I distinctly believe in FREE WILL. But our scope of free will has been limited by past thoughts and deeds. We have only Free Will to do the immediate thing before us that is our duty and right. Other than that, we weave destiny lifetime after lifetime, and are the dreaming victims of our OWN conditioning. Just a thought for Sunday. 0 ( :- )

Mike Sheller, post 12:18
Maybe the reason that all bond yelds went down and rates went up was because people had to raise cash to pay off their debt. They had been into bonds ( long term bonds ) for three years to protect their money with the crash of the stock market. No one expected that the market would stay down for so long. In 32, maybe the banks started to call all debt.

Front: Whether one judges it to be good or bad, the fact is that all peoples everywhere practice what you call "tribalism" ( Hardin and I call it discriminatory altruism ) , except for Euro-liberals. History, from at least the time of Rome's dominance to now, proves the truth of Judge Bork's statement that multi-racial empires can only be held together by force.

I do make a value judgement about those who, while practicing restricted altruism themselves, extoll the virtues of "diversity" to outsiders. Ergo, The Revvvvrrrrund Jackson, fully aware that about 90% of the starting players on the Cowboys are black, does not hesitate to demand 50% of the front office jobs. 75% of the total payroll is not enough. He, like most practitioners of discriminatory altruism, wants it ALL for his 'tribe', while incessantly exhorting outsiders to be "inclusive". Mr. Rabin, the late liberal p.m. of Israel, stated in a speech not long before his death that his goal was that Israel remain at least 80% Jewish. Can you imagine the outrage that would erupt from those among us who are the strongest supporters of the Jewish state if an American politician said that he thought the U.S. should remain at least 80% Christian? Or at least 80% white?

Mark Twain said that not a single square foot of the earth was in the hands of its rightful owners, and that ownership was changing everyday. It was ever thus, and remains so. As we speak, groups who practice tribal discrimination are displacing universalists--read Euro-liberals--from more and more of the earth's surface every day. That's not a value judgment---its a statement of fact. Nature has decreed that any group that does not protect itself by practicing altruism only within the group will disappear. That aint just politics, its also anthropology. Now the value judgment: Euro-liberals are being displaced and will continue to be displaced to the point of extinction for a very good reason, i.e., they do not possess the will to survive.

WESTLEY: You remind me of a chart on p. 5 of the book that shows how currency held by the public took a jump upward from early 1932 to end of 33. Doubtless this was liquidation of untrustworthy deposits at equally untrustworthy banks. Perhaps if Steve ( Puetz ) and Donald are correct, we should be buying stock in mattress makers. Hello, Dial-aMatres$?

Fidelity Select American Gold & Precious metals Charts
5 Years, 120 day, 30 day and hourly charts at:
http://www.geocities.com/WallStreet/5969
Click on Gold Sectors
Select Defense ( FSDAX ) is in 2nd place on the
30, 60 & 90 day regression tables. Very strong,
very consistent.

GS Cole: As a slave to the charts, I must expect the triangle on the gold chart to be resolved in the direction of the trend, which is DOWN. The silver lining is that, once new lows are made from here, all the requirements for a trend change will have been met. It then becomes a matter of time, not of price.

For IDT
Your 11:32 was magnificent. You are 100 % right.
The REAL enemies of the working class and the poor
in the US or anywhere are the Liberals such as
Weenie Wacker of Vermont. These guys know all the right
and "caring" - oh so "caring" things to say. Meanwhile
they initiate programs to undermine the people they
pretend to be helping. The Kennedys were masters of this
kind of thing. Dumdum Clinton tries hard but is just
too transparent to fool anyone from anyplace other than
Vermont.
You have also fingerred the obvious fact that the
feminist "movement" was simply an elitist sceme to
generate a rapid oversupply of labour thus preventing
any meaningfull increase in the standard of living for
20 years - all in the liberal guise of "emancipating"
women.

Did those who followed Jin's link to the Greenspan article catch this comment "The still-open question is whether productivity growth is in the process of picking up," he said. "For it is the answer to this
question that is material to the current debate between those who argue that the economy is entering a 'new era' of greatly enhanced sustainable growth." According to my calander,US Productivity & Costs Wholesale Trade is due out Tuesday 9/9/97.

Peutz: I agree, if investors believe in "heavenly signs", those beliefs can be relected in the markets. I think there are a lot more "believers" out there than most realize. Remember Nancy Reagan?

Mike Sheller: You need to give me hard facts and hard evidence to support your theories. Until you can, put me down as a non-believer of your ideas. I have presented statistical correlations to support my theories. Anyone that wants can look up the turning points of the 1980 gold crash, the 1987 stock market crash, and the 1990 Tokyo crash. And they can go to old World Almanacs at the library and look up the dates of the lunar eclipses during those times.

Here is some more data on those crashes. The time-spans for the topping pattern ( a series of 3 peaks, usually a series of declining peaks ) of those 3 crashes ( the time between the primary peak and the third peak ) were as follows:

1980 gold crash -- Gold peaked 6 weeks and 0 trading days prior to a lunar eclipse.
1987 stock crash -- DJIA peaked 6 weeks and 1 trading day prior to a lunar eclipse.
1990 Tokyo crash -- Nikkei peaked 6 weeks and 0 trading days prior to a lunar eclipse.

Then, we can calculate the odds of the primary peak being independent of lunar phases. Specifically, what are the odds of the primary peaks of each of those crashes occurring on either 6 weeks or 6 weeks and 1 day prior to a lunar eclipse. The odds for any one are 2 chances ( 2 days ) out of 175 days ( in the eclipse cycle ) . The odds of all 3 happening are 2/175 x 2/175 x 2/175 = 1 chance in 667,000 of being random.

Correction: In my previous posting, the arithmetic of 6/175 x 6/175 x 6/175 = 1 chance in 25,000 of being random.

Finally, we can calculate the odds of both the primary peak occurring either 6 weeks or 6 weeks and a day before a lunar eclipse, in conjunction with the odds of the final peak occurring within 3 days of a lunar eclipse. Those odds are the product of the prior 2 odds. That is, the odds of the topping-pattern of the crashes of 1980, 1987, and 1990 being independent of a lunar eclipse are 1/25,000 x 1/667,000 = 1 chance in 16 billion of those events being random.

I might add, the top in the DJIA made on 8-6-97 is exactly 6 weeks and 0 days before the lunar eclipse on 9-16-97. Anyone long stocks do so at the risk of these lunar odds.

PUETZ: I was driving at LARGER questions, questions that your unlimited spirit can address, not statistics and empirical details ( with which, astrologically, I could inundate you ) . But I see you cannot speculate with large ideas. Forgive me for intruding. It always amazed me how many who gravitate to the sublime metaphysics of Ayn Rand equally unquantifiable by numbers and figures, mistake any other Metaphysical thought for superstitious subjectism. I guess ALL religions are the same, are they not. Or should I say WE bring the same flaws to everything we do.

Lunar effects: Years ago My Uncle used to live with my Mother and I. At the time he was a volunteer for the local rescue squad. When a full moon fell on a weekend, many of the volunteers go to the fire dept. ( where the rescue squad vehicles were located ) and simply wait for the inevitable a rash of severe car crashes that full moon weekends always seemed to bring. The guys even had a nickname for "Red" full moons. They called them "blood" moons. These "blood" moons were frequently out on the nights of the worst crashes. Strange but true.

Mike Sheller: I'm not saying that I have closed my mind to any idea at all. However, before I accept an idea -- especially an idea that is not widely accepted or one that seems off-the-wall -- I want some hard evidence that the idea has merit.

My theory on the connection between stock market crashes and eclipses can easily be put into the catagory of "off-the-wall." However, once a statistic analysis is performed, this strange idea suddenly gains significant merit as truthful. In fact, the odds are overwhelming that the connection is for real.

I bring up this correlation because the current stock market down-turn is fitting the pattern of the prior 3 crashes -- almost to the day. That includes the market making a primary peak 6 weeks before a lunar eclipse.

Not many people will take notice of this correlation if I wait until after the fact to point it out. But, if I document it before the crash, it will have more credence.

Petronius: I don't think it is an accident that the century's greatest bull market began soon after the Soviet Union collapsed in 1989 and the US. won the Gulf War in 1991.

US. international dominance combined with Fortune 500 dominance internally is what this bull market is all about. That is why the dollar has for now displaced gold as the asset of last resort in times of international turmoil. With the world now on a de facto dollar standard, we can run huge trade deficits year after year, financed only by a flood of IOUs.

Anything that changes the market's perception re: the ability of the US. to keep calling the shots in global finance and politics would be very bearish for financial assets and very positive for gold.

The same applies to any development that promises to reduce the total domination of domestic politics by big money. Such a shift could involve a move to the political left or the populist right as long as the ability of the Fortune 500 and Wall Street to call the shots domestically is impeded.

Oldman: It does look like the lows will be tested before the downtrend in gold can change.

Can anybody give me details on THE FISHER REPORT produced by Robert W. Fisher also authored Energy and the Enviroment

thankyou

London Bullion Marketing Association ( LBMA ) is best described as a riddle wrapped in a mystery inside an enigma. Daily gold trading nearly 50% yearly production. Who & Why?
http://www.gold-eagle.com/gold_digest/baron907.html

Shanghai housing glut, 6.3 square meters vacant.
http://www.hongkong-window.com/shanghai/sstr/sst.html

Hingis 5-0 ( first set ) over Venus Williams....YES!...down with racists! Gettin set fer good old time Cape Breton hoe-down ( fiddle music,newfie screech ect ect ) with Bob + Dude ( a woman ) ....Cape Breton fiddlers ( A rare Cape Breton speciality ) commin ta the house to give us a show....GO GOLD!

Puetz/Mike Sheller

Mike: After having spent some serious time with astrology, I was going to respond to Puetz's comment about the different personalities of his children as being influenced by astrology. However, I chose not to, expecting a negative reaction from some of the posters. Its been my experience that people who have never studied astrology, can have very strong negative opinions about it. Most adamant converts to astrology ( like myself ) , have studied it for themselves in order to determine if it were true or false. If you really study it with an open mind, you will come away a convert. It not only explains many personality traits that we all have, but it also can predict many events that will come our way in the future. I use it as a tool to better understand those around me. However, I dont assume that karma is the reason that it exists. I concede that is a possibility, but I cant prove it. However, I have been able to prove astrology works! Have patience, and deal with the FACTS of astrology. The lunar eclipses mentioned by Puetz are becoming more acceptable in the investment world. Soon people will begin to expand their thinking by asking if a lunar event can effect traders, maybe other celestial events can also. The beginning of investigation!

That should be 6.3 million sq. M

Aubrey Dunne points out that worldwide there are more solar eclipses than lunar eclipses
( although a typical fixed observer sees more lunar eclipses, because solar eclipses are visible only
in a relatively narrow band, while lunar eclipses are visible anywhere on the side of the Earth facing
the moon ) .

CURIOUS LURKER: You are clearly a person of grand scope, open mind, and a profound desire to delve into the mysteries. I would only humbly suggest that thinking about the concept that the horoscope holds the imprint of cosmic necessity written upon it will go a long way to deepening your understanding, and use of, astrology. As an astrologer, I do a lot of work on corporate charts, etc, but the true value of astrology is the symbolic reference language that it is for revealing who and what we are, where we come from, and what our true purpose and path should be. Without such a search, this universe of intricate laws of cause and effect, of reason and organmization so intelligent we can only stand in awe of it, is a pure accident. And that CANNOT be so. "God" and religion as it has been aberrated over the centuries is a wasted hulk. As too is "Darwinism." Neither gives living man and answer or a path, save kneeling to a gold-ringed bishop or swinging from a tree. Astrology, when pursued with diligence, will take you to the revelation of your divine origin and the promise of a divine return. Use it well.

DONALD: Is that anything like the North Shore of L.I. facing Connecticut? Seriously, tonite's the last nite of a marvelous carnival and Italian Feast on West Shore Road, Hempstead Harbor Park, in Port Washington. The Zeppoli is fantastic. As for astro phenomena, eclipses are relatively lightweight stuff. A number of heavyweight economists, especially those into cycles, have recognized the Jupiter/Uranus synodical cycles of conjunctions, oppositions, squares, etc, as callouts of important reference points in the business cycle. It is not for nothing that an infrequent major conjunction of Jupiter/Uranus took place this spring. Could that be a topping year signal, seen many years , even decades, ago by wise financial astrologers? My specialty is Pluto. It stays around longer, and packs more punch for me than anything else. I go for the astrological no-brainers. Eclipses are a bit too ephemeral for me. You need a lot of other factors to fall into place for them to add anything. But Pluto, that's another story.

DONALD: Re Shanghai, Wu was very adamant about more mortgage money being made available, wasn't he. He said it twice. My son lives and works in Shanghai. In fact my daughter in law who is from there is visiting us now. The kids have been hitting me & mom up for bucks to buy an apartment in Shanghai for a year now. They are not cheap by any means, oversupply of RE or not. The PRC is still wading through revising their laws to allow more of what goes on here. I think it's called "private property." Tho from the tone of that website, Shanghai officials are starting to sound like damn liberal commie pinko's to me. @ ( ;- )

MIKE SHELLER: Daffynition: Zeppoli; Movie Theatre on the Hindenburg.

Malaysia counting on Dipster Society ( founded 1928 ) to keep rally going.
http://www.jaring.my/~star/current/077sto.html

Inflation in the purest sense is an increase in the supply of money. No more no less. Through the use of credit cards, each and every citizen that "purchases" an item or service creates inflation just as real as the government does by printing money. As such, inflation throughout the world continues unabated. Only the inflationary effect is now gone.

Citizens today have no wealth to speak of. The wealth that they think they have is all in their heads. In other words imaginary. Net worth? There is no net worth its all just paper and ink.

"Inflation is possible without the inflationary effect only at the expense of the standard of living, until wealth expropriation consumes most of production and the public begins to starve." Merrill Jenkins, Sr.

Money and Credit Expropriates Wealth
Gold and Silver Is Portable and Private True Wealth

Mike Sheller: To answer your question from Sat Sep 06 1997 18:24 "TO ALL
ARMAGEDDONITES: And WHY, pray tell, would Russia, basket case that it is,
want to, need to, be beholdin' to, support ANYONE in the Middle East?"

Maybe, just maybe, to dust off the image of Great Russia, the image of
power broker who has something to say about the world's events, the image
which was denied to her since the fall of Berlin Wall when she is was
taken off the world power pedestal and treated as a non-existent entity.
Maybe to use this opportunity to divert the attention from domestic
problems. Do not underestimate the Russia by trying to apply the west
logic in predicting her behavior. There was enough of "put downs" that
even people on the street have a feeling of loosing.
Would not be the first time when Russia would sign an agreement with
"devil" to gain the advantage which may not be clearly understood
( remember that Russia negotiated "friendship" with Germany just shortly
before Germany invaded her in WWII and recently they try to reach
agreement with China - not exactly Russias friend - to create the new
"power block" as the new counterbalance to the US and NATO

Puetz: Incoming e-mail
Also, what do you make of the gold mutual funds in the event of a market crash? I have seen data for both pro and con, which appear very conflictive.

MONITARY REALIST: Is it not a rise in prices when two people must work and earn incomes to buy the same standard of living that one did prior? Is it not a rise in the price of a necessary item when public schools cannot educate our children adequately, but the taxes for that effort are not reduced. And some of us who are more fortunate than others send our children to private educational situations. Which must be paid for on top of the high taxes for public schools that have not changed. Or how about the corporate side? Same price for a five pound bag of sugar ( that 2 people work to buy ) but now there's 4 pounds in many brands. Or a 12 ounce can with only 10 oz in it. Yes, we could go on and on.

MIRO: Catching up on 24 hrs of Kitco can be brutal. Thanks for thinking of me. Hey, I know a little about the Russian mentality. I'm half Russian on my father's side. They are a STIFFNECKED people. I do not discount what you have said, but I consider it an outside possibility at this time. However, I would be the first to agree that human actions are not always rational.

Malaysian financial advisor says "worst is over" but then he adds, "we've had to take certain measures to catch the short sellers"
http://www.jaring.my/~star/current/07udai.html

Wow, what a night it was again on Kitco. Clash of liberals,
conservatives, politically correct, etc. ideas. I think that the truth
and political correctness are not compatible!
In a quest for truth, things have to be said which are not likable by
all. This, in many times, looks like a cold-hearted, uncaring,
insulting, behavior. But the truth is not suppose to please! That is
the main reason why you wont hear the truth from politicians
- they are here to please the peasants to get their votes. Bill C. has
mastered this skill to a perfection.

BTW, I think that if the politicians in civil war ( and post civil war )
area have used todays political correctness we still would have a
slavery in the US.

Cmax: During previous crashes, gold shares have typically gone down with other share prices. I image there will be turmoil in gold mutual funds as well. I expect many mutual funds to suspend redemptions as the panic spreads.

If gold shoots up to $1000 during the crash, then gold ought to pull gold shares up with it. However, if gold only rises to $400 or $500 during the crash, then gold shares may have trouble rallying.

Fallout from the Crisis

SLOWER GROWTH: With central banks tightening rates to protect their
currencies, local companies won't have the capital to expand. Watch for GDP
growth to slow dramatically. Hardest hit: Thailand, with zero growth projected for
1997.

DAMAGED BANKS: Banks in Thailand, Indonesia, and Malaysia will hit
turbulence as local business dries up, real estate ventures weaken, and
borrowings in dollars come due.

NEW TRADE FLOWS: After the currency depreciations finish, exports should
surge as foreign multinationals expand manufacturing to profit from cheaper labor
and plants. Imports, though, from U.S. and Japan will swoon.

NEW RESTRICTIONS: Some governments have imposed sharp limits on
capital and stock market trading in a vain attempt to protect local currencies.

POLITICAL PAYBACK: The prestige and power of the region's leaders could
suffer considerably if the crisis lowers the standard of living and triggers
widespread investor distrust.

Indian government approved gold import licenses for 7 banks. Dubai sales down this weekend.
http://biz.yahoo.com/finance/97/09/07/z0009_6.html

The Clinton administration has sharply lowered its forecast for the nation's budget deficit in fiscal
1997 which ends Sept. 30. The gap between what the nation spends and what it collects will stand
at an estimated $37 billion _ the smallest budget deficit since 1974. The new forecast by the Office
of Management and Budget is nearly $90 billion lower than earlier estimates.

Mike, I would not claim that I understand Russia either, though I was
on a receiving end of the Russia bear while growing up in Czechoslovakia,
including invasion in 68. The thing which scares me about Russia is that
I see too many similarities between the situation in Russia today and
in Germany just before Nazis steered it into WWII disaster. Country
going through turmoil, ambitious but deprived her place on a top,
creating the unusual coalition ( Japan, or China today ) the rest of the
world being complacent and writing them off. The result was a disaster
and it would be much worse disaster today.

Digital cameras no threat to silver.
http://www.yahoo.com/headlines/970905/tech/stories/camera_1.html

This will probably be a complicated post. I have a unique family
situation. My father's brother is married to my mother's sister. : )

Each couple has five children. My uncle's family is genetically
theirs, while three of my siblings are adopted. I and my sister
have my mother's genes. The other three have no common genes.

So, I probably have a unique perspective on "nurture versus nature"
argument. : )

My uncle's family has a strong resemblence to myself and my sister,
and my mother. We have, in general, moody and serious personalities,
relatively withdrawn, non-social.

Of my non-genetic brothers - one is a true sociopath, which is highly
correlated with adoption or loss of a parent at a certain age. My
other brother is the life of the party, and quite successful in his
job, despite lack of a degree. My other sister was the prototypical airhead, had tons of friends, and died from what
might have been a hereditary form of cancer.

I have concluded that heredity plays a greater role in personality, and destiny, than most people believe.

Puetz - your numbers are highly interesting. But...

#1 - I'm surprised you bothered to track the correlation. What
prompted you to look for?

#2 - Your sample is too selective. Where are the dates for 1929,
1937, 1873, 1893, 1907, etc? I will admit, even excluding
these dates, the correlation is strong.

During the Great Depression, long rate rose. Short-term rates
remained the same, or dropped. That's the scenario, right?

In terms of interest rates, won't rising long rates bring down
the price of gold?

WHO CARES: Long term rates in the DEPRESSION rose only briefly. Then EVERYTHING DECLINED. Puetz is only half right. The experience of the GREAT DEPRESSIONE was one of DECLINING rates over all.

Australian miner denies cash flow problems.
http://www.afr.com.au/content/970908/invest/invest1.html

CNBC: Larry Kudlow calling the dollar the worlds' adult reserve currency and calling for a global economic conference addressing the modernized
version of the Brenton Woods agreement. Dollar/ gold relationship.
Tri-lateralists ??? Hate um.

Japan and Russia negotiating big energy deal.
http://www.abcnews.com:80/sections/business/energy904/index.html

The chess-board is the world, the pieces are the phenomena of the universe, the rules of the game are what we call the law of Nature. The player on the other side is hidden from us. We know that his play is always fair, just, and patient. But also we know, to our cost, that he never overlooks a mistake, or makes the smallest allowance for ignorance. ( Thomas Huxley )

The chess-board is the world, the pieces are the phenomena of the universe, the rules of the game are what we call the law of Nature. The player on the other side is hidden from us. We know that his play is always fair, just, and patient. But also we know, to our cost, that he never overlooks a mistake, or makes the smallest allowance for ignorance. ( Thomas Huxley )

U.S. Govt. "not concerned" about missing nuclear suitcase bombs.
http://www.yahoo.com/headlines/970907/politics/stories/nuclear_1.html

U.S. still probing Russian "seismic mystery"
http://www.rferl.org:80/nca/news/1997/09/N.RU.970903150609.html

- Gold gossip: Saturday's column regarding the price of the South African Krugerrand ( not
Kruggerand, as it was misspelled here ) discussed why the Krug sells at a slight discount to the
American Eagle and the Canadian Maple Leaf. It's generally been blamed on apartheid and the
subsequent ban on the Krug's sale in the United States. E-mailer MAJones, who sounds like an
authority, adds: ``The South African Mint started to advertise the Krugerrand when the ban was
first lifted, but they gave up after a few months when no one was interested. Because of this,
probably 99 percent of Krugs in this country are old coins and are therefore not very attractive.
Most people who purchase coins, even strictly as an investment, like to look at their shiny new
coins. Most Krugs you'll find are scratched and discolored ( which is why ) it's wise to inquire,
before you purchase,what the dealer's practices are regarding repurchasing the coins. Keep in mind
that all mints want to keep pumping out new coins and don't encourage secondary markets on
recirculated coins. And whether you are investing or collecting, always maintain your coins
properly. Even the slightest scratchor ding diminishes its value.''

"There's no way to rule innocent men. The only real power government has is the power to crack down on criminals. Well, when there are not enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible to live without breaking laws."--Ayn Rand, "Atlas Shrugged". See ya next weekend. Good trading.

U.S. considers gold-platinum bimetallic coin.
http://www.phillynews.com:80/inquirer/97/Sep/07/arts_and_entertainment/COINS07.htm

I just the full text of Greenspan's speech. Puetz & Donald, if
you have not read the full text, I strongly recommend it. I
believe this speech is a direct confirmation of everything I
believe about the past seven years regarding the Fed Reserve.

I am in shock. : ) He just comes right out and SAYS it. Yup,
we propped the banking system because it was necessary for the
economy to recover. Etc. Etc. Etc.

I can repost the full text if anyone wants it. I think Greenspan
has shifted focus from the real economy, to equities. I believe
that he thinks he can pull off a pinprick on the bubble.

Gene: To put it in a different way, "the law of supply and demand is not to be conned." Alan Greenspan, "Gold and Economic Freedom." Kind of makes you wonder how somebody who wrote something like that can be a central banker.

I am a relatively new lurker--investor. Can't recall the name or date of the post
re: silver data. I believe the enquiree could benefit from a reading of James U.
Blanchard's book SILVER BONANZA. It contains daata which I find
informative and which may be of interest to others.
Publisher: Simon and Schuster. It is cataloged by Library of Congress.I am a relatively new lurker--investor. Can't recall the name or date of the post
re: silver data. I believe the enquiree could benefit from a reading of James U.
Blanchard's book SILVER BONANZA. It contains daata which I find
informative and which may be of interest to others.
Publisher: Simon and Schuster. It is cataloged by Library of Congress.I am a relatively new lurker--investor. Can't recall the name or date of the post
re: silver data. I believe the enquiree could benefit from a reading of James U.
Blanchard's book SILVER BONANZA. It contains daata which I find
informative and which may be of interest to others.
Publisher: Simon and Schuster. It is cataloged by Library of Congress.I am a relatively new lurker--investor. Can't recall the name or date of the post
re: silver data. I believe the enquiree could benefit from a reading of James U.
Blanchard's book SILVER BONANZA. It contains daata which I find
informative and which may be of interest to others.
Publisher: Simon and Schuster. It is cataloged by Library of Congress.

My apologies. I don't have the slightest idea what happened. From now on I'll pre-view any post I may have courage to make! ( :+^}

WHO CARES!: Please post that Greenspan speech. I'd love to read it. Thanks.

Greenspan Transcript, 9/5/97 Stanford ( schechte@gate.net ( Brett Schechter ) , 14:32 )

Verbatim:


Remarks by Chairman Alan Greenspan
At the 15th Anniversary Conference of the Center for Economic Policy
Research at Stanford University, Stanford, California
September 5, 1997

It is a pleasure to be at this conference marking the fifteenth
anniversary of the Center for Economic Policy Research. The Center, by
encouraging academic research into public policy and bringing that
research to the attention of policymakers, is performing a most valuable
role in our society.

I am particularly pleased that Milton Friedman has taken time to join us.
His views have had as much, if not more, impact on the way we think about
monetary policy and many other important economic issues as those of any
person in the last half of the twentieth century.

Federal Reserve policy, over the years, has been subject to criticism,
often with justification, from Professor Friedman and others. It has been
argued, for example, that policy failed to anticipate the emerging
inflation of the 1970s, and by fostering excessive monetary creation,
contributed to the inflationary upsurge. Surely, it was maintained, some
monetary policy rule, however imperfect, would have delivered far
superior performance. Even if true in this case, though, policy rules
might not always be preferable.

Policy rules, at least in a general way, presume some understanding of
how economic forces work. Moreover, in effect, they anticipate that key
causal connections observed in the past will remain fixed over time, or
evolve only very slowly. Use of a rule presupposes that action x will,
with a reasonably high probability, be followed over time by event y.

Another premise behind many rule-based policy prescriptions, however, is
that our knowledge of the full workings of the system is quite limited,
so that attempts to improve on the results of policy rules will, on
average, only make matters worse. In this view, ad hoc or discretionary
policy can cause uncertainty for private decision makers and be wrong for
extended periods if there is no anchor to bring it back into line. In
addition, discretionary policy is obviously vulnerable to political
pressures; if ad hoc judgments are to be made, why shouldn't those of
elected representatives supersede those of unelected officials?

The monetary policy of the Federal Reserve has involved varying degrees
of rule- and discretionary-based modes of operation over time.
Recognizing the potential drawbacks of purely discretionary policy, the
Federal Reserve frequently has sought to exploit past patterns and
regularities to operate in a systematic way. But we have found that very
often historical regularities have been disrupted by unanticipated
change, especially in technologies. The evolving patterns mean that the
performance of the economy under any rule, were it to be rigorously
followed, would deviate from expectations. Accordingly we are constantly
evaluating how much we can infer from the past and how relationships
might have changed. In an ever changing world, some element of discretion
appears to be an unavoidable aspect of policymaking.

Such changes mean that we can never construct a completely general model
of the economy, invariant through time, on which to base our policy.
Still, sensible policy does presuppose a conceptual framework, or
implicit model, however incompletely specified, of how the economic
system operates. Of necessity, we make judgments based importantly on
historical regularities in behavior inferred from data relationships.
These perceived regularities can be embodied in formal empirical models,
often covering only a portion of the economic system. Generally, the
regularities inform our interpretation of "experience" and tell us what
to look for to determine whether history is in the process of repeating
itself, and if not, why not. From such an examination, along with an
assessment of past policy actions, we attempt to judge to what extent our
current policies should deviate from our past patterns of behavior.

When this Center was founded 15 years ago, the rules versus discretion
debate focussed on the appropriate policy role of the monetary
aggregates, and this discussion was echoed in the Federal Reserve's
policy process.

In the late 1970s, the Federal Reserve's actions to deal with developing
inflationary instabilities were shaped in part by the reality portrayed
by Milton Friedman's analysis that ever-rising inflation rate peaks, as
well as ever-rising inflation rate troughs, followed on the heels of
similar patterns of average money growth. The Federal Reserve, in
response to such evaluations, acted aggressively under newly installed
Chairman Paul Volcker. A considerable tightening of the average stance of
policy--based on intermediate M1 targets tied to reserve operating
objectives--eventually reversed the surge in inflation.

The last fifteen years have been a period of consolidating the gains of
the early 1980s and extending them to their logical end--the achievement
of price stability. We are not quite there yet, but we trust it is on the
horizon.

Although the ultimate goals of policy have remained the same over these
past fifteen years, the techniques used in formulating and implementing
policy have changed considerably as a consequence of vast changes in
technology and regulation. Focussing on M1, and following operating
procedures that imparted a considerable degree of automaticity to
short-term interest rate movements, was extraordinarily useful in the
early Volcker years. But after nationwide NOW accounts were introduced,
the demand for M1 in the judgment of the Federal Open Market Committee
became too interest sensitive for that aggregate to be useful in
implementing policy. Because the velocity of such an aggregate varies
substantially in response to small changes in interest rates, target
ranges for M1 growth in its judgment no longer were reliable guides for
outcomes in nominal spending and inflation. In response to an
unanticipated movement in spending and hence the quantity of money
demanded, a small variation in interest rates would be sufficient to
bring money back to path but not to correct the deviation in spending.

As a consequence, by late 1982, M1 was de-emphasized and policy decisions
per force became more discretionary. However, in recognition of the
longer-run relationship of prices and M2, especially its stable long-term
velocity, this broader aggregate was accorded more weight, along with a
variety of other indicators, in setting our policy stance.

As an indicator, M2 served us well for a number of years. But by the
early 1990s, its usefulness was undercut by the increased attractiveness
and availability of alternative outlets for saving, such as bond and
stock mutual funds, and by mounting financial difficulties for
depositories and depositors that led to a restructuring of business and
household balance sheets. The apparent result was a significant rise in
the velocity of M2, which was especially unusual given continuing
declines in short-term market interest rates. By 1993, this extraordinary
velocity behavior had become so pronounced that the Federal Reserve was
forced to begin disregarding the signals M2 was sending, at least for the
time being.

Data since mid-1994 do seem to show the reemergence of a relationship of
M2 with nominal income and short-term interest rates similar to that
experienced during the three decades of the 1960s through the 1980s. As I
indicated to the Congress recently, however, the period of predictable
velocity is too brief to justify restoring M2 to its role of earlier
years, though clearly persistent outsized changes would get our
attention.

Increasingly since 1982 we have been setting the funds rate directly in
response to a wide variety of factors and forecasts. We recognize that,
in fixing the short-term rate, we lose much of the information on the
balance of money supply and demand that changing market rates afford, but
for the moment we see no alternative. In the current state of our
knowledge, money demand has become too difficult to predict.

Although our operating target is a nominal short-term rate, we view its
linkages to spending and prices as indirect and complex. For one,
arguably, it is real, not nominal, rates that are more relevant to
spending. For another, spending, prices and other economic variables
respond to a whole host of financial variables. Hence, in judging the
stance of policy we routinely look at the financial impulses coming from
foreign exchange, bond, and equity markets, along with supply conditions
in credit markets generally, including at financial intermediaries.

Nonetheless, we recognize that inflation is fundamentally a monetary
phenomenon, and ultimately determined by the growth of the stock of
money, not by nominal or real interest rates. In current circumstances,
however, determining which financial data should be aggregated to provide
an appropriate empirical proxy for the money stock that tracks income and
spending represents a severe challenge for monetary analysts.

The absence of a monetary aggregate anchor, however, has not left policy
completely adrift. From a longer-term perspective we have been guided by
a firm commitment to contain any forces that would undermine economic
expansion and efficiency by raising inflation, and we have kept our focus
firmly on the ultimate goal of achieving price stability. Within that
framework we have attempted not only to lean against the potential for an
overheating economy, but also to cushion shortfalls in economic growth.
And, recognizing the lags in the effects of policy, we have tried to move
in anticipation of such disequilibria developing.

But this is a very general framework and does not present clear guidance
for day-to-day policy decisions. Thus, as the historic relationship
between measured money supply and spending deteriorated, policymaking,
seeing no alternative, turned more eclectic and discretionary.

Nonetheless, we try to develop as best we can a stable conceptual
framework, so policy actions are as regular and predictable as
possible--that is, governed by systematic behavior but open to evidence
of structural macroeconomic changes that require policy to adapt.

The application of such an approach is illustrated by a number of
disparate events we have confronted since 1982 that were in some
important respects outside our previous experience. In the early and
mid-1980s, the FOMC faced most notably the sharp swings in fiscal policy,
the unprecedented rise and fall of the dollar, and the associated shifts
in international trade and capital flows. But I will concentrate on
several events of the last decade where I personally participated in
forming the judgments used in policy implementation.

One such event was the stock market crash of October 1987 shortly after I
arrived. Unlike many uncertain situations that have confronted monetary
policy, there was little question that the appropriate central bank
action was to ease policy significantly. We knew we would soon have to
sop up the excess liquidity that we added to the system, but the timing
and, I believe, the magnitude of our actions were among our easier
decisions. Our concerns at that time reflected questions about how the
financial markets and the economy would respond to the shock of a decline
of more than one-fifth in stock prices in one day, and whether monetary
policy alone could stabilize the system. By the early spring of 1988 it
was evident that the economy had stabilized and we needed to begin
reversing the easy stance of policy.

Another development that confronted policy was the commercial property
price bust of the late 1980s and early 1990s. Since a large volume of
bank and thrift loans was tied to the real estate market and backed by
real estate collateral, the fall in property prices impaired the capital
of a large number of depositories. These institutions reacted by
curtailing new lending--the unprecedented "credit crunch" of 1990 and
1991.

Not unexpectedly, our policy response was to move toward significant
ease. Our primary concern was the state of the credit markets and the
economy, but we could also see that these broader issues were linked
inextricably to the state of depository institutions' balance sheets and
profitability. A satisfactory recovery from the recession of that period,
in our judgment, required the active participation of a viable banking
system. The extraordinary circumstances dictated a highly unusual path
for monetary policy. The stance of policy eased substantially even after
the economy began to recover from the 1990-91 recession, and a
stimulative policy was deliberately maintained well into the early
expansion period.

By mid-1993, however, property prices stabilized and the credit crunch
gradually began to dissipate. It was clear as the year moved toward a
close that monetary policy, characterized by a real federal funds rate of
virtually zero, was now far too easy in light of the strengthening
economy on the horizon. Financial and economic conditions were returning
to more traditional relationships, and policy had to shift from a
situation-specific formulation to one based more closely on previous
historical patterns. Although it was difficult at that time to discern
any overt inflationary signals, the balance of risks, in our judgment,
clearly dictated preemptive action.

The 1994 to 1995 period was most instructive. It appears we were
successful in moving preemptively to throttle down an impending unstable
boom, which almost surely would have resulted in the current expansion
coming to an earlier halt. Because this was the first change in the
stance of policy after a prolonged period of unusual ease, we took
special care to spell out our analysis and expectations for policy in an
unusually explicit way to inform the markets well before we began to
tighten. In addition, we began for the first time to issue explanatory
statements as changes in the stance of policy were implemented. Even so,
the idea of tightening to head off inflation before it was visible in the
data was not universally applauded or perhaps understood.

Financial markets reacted unusually strongly to our 1994 policy actions,
often ratcheting up their expectations for further rate increases when we
actually tightened, resulting in very large increases in longer-term
interest rates. At the time, these reactions seemed to reflect the extent
to which investment strategies had been counting on a persistence of low
interest rates. This was a classic case in which we had to be careful not
to allow market expectations of Federal Reserve actions to be major
elements of policy determination. We are always concerned about assuming
that short-term movements in market prices are reflections of changes in
underlying supply and demand conditions when we may be observing nothing
more than fluctuating expectations about our own policy actions.

Most recently, the economy has demonstrated a remarkable confluence of
robust growth, high resource utilization, and damped inflation. Once
again we have been faced with analyzing and reacting to a situation in
which incoming data have not readily conformed to historical experience.

Specifically, the persistence of rising profit margins in the face of
stable or falling inflation raises the question of what is happening to
productivity. If data on profits and prices are even approximately
accurate, total consolidated corporate unit costs have, of necessity,
been materially contained. With labor costs constituting three-fourths of
costs, unless growth in compensation per hour is falling, which seems
most unlikely from other information, it is difficult to avoid the
conclusion that output per hour has to be rising at a pace significantly
in excess of the officially published annual growth rate of nonfarm
productivity of one percent over recent quarters. The degree to which
these data may be understated is underlined by backing out from the total
what appears to be a reasonably accurate, or at least consistent, measure
of productivity of corporate businesses. The level of nonfarm
noncorporate productivity implied by this exercise has been falling
continuously since 1973 despite reasonable earnings margins for
proprietorships and partnerships. Presumably this reflects the
significant upward bias in our measurement of service prices, which
dominate our noncorporate sector.

Nonetheless, the still open question is whether productivity growth is in
the process of picking up. For it is the answer to this question that is
material to the current debate between those who argue that the economy
is entering a "new era" of greatly enhanced sustainable growth and
unusually high levels of resource utilization, and those who do not.

A central bank, while needing to be open to evidence of structural
economic change, also needs to be cautious. Supplying excess liquidity to
support growth that turns out to have been ephemeral would undermine the
very good economic performance we have enjoyed. We raised the federal
funds rate in March to help protect against this latter possibility, and
with labor resources currently stretched tight, we need to remain on
alert.

Whatever its successes, the current monetary policy regime is far from
ideal. Each episode has had to be treated as unique or nearly so. It may
have been the best we could do at the moment. But we continuously examine
alternatives that might better anchor policy, so that it becomes less
subject to the abilities of the Federal Open Market Committee to analyze
developments and make predictions.

Gold was such an anchor or rule, prior to World War I, but it was first
compromised and eventually abandoned because it restrained the type of
discretionary monetary and fiscal policies that modern democracies appear
to value.

A fixed, or even adaptive, rule on the expansion of the monetary base
would anchor the system, but it is hard to envision acceptance for that
approach because it also limits economic policy discretion. Moreover,
flows of U.S. currency abroad, which are variable and difficult to
estimate, and bank reserves avoidance are subverting any relationship
that might have existed between growth in the monetary base and U.S.
economic performance.

Another type of rule using readings on output and prices to help guide
monetary policy, such as John Taylor's, has attracted widening interest
in recent years in the financial markets, the academic community, and at
central banks.

Taylor-type rules or reaction functions have a number of attractive
features. They assume that central banks can appropriately pay attention
simultaneously to developments in both output and inflation, provided
their reactions occur in the context of a longer-run goal of price
stability and that they recognize that activity is limited by the
economy's sustainable potential.

As Taylor himself has pointed out, these types of formulations are at
best "guideposts" to help central banks, not inflexible rules that
eliminate discretion. One reason is that their formulation depends on the
values of certain key variables--most crucially the equilibrium real
federal funds rate and the production potential of the economy. In
practice these have been obtained by observation of past macroeconomic
behavior--either through informal inspection of the data, or more
formally as embedded in models. In that sense, like all rules, as I noted
earlier, they embody a forecast that the future will be like the past.
Unfortunately, however, history is not an infallible guide to the future,
and the levels of these two variables are currently under active debate.

The mechanics of monetary policy that I have been addressing are merely
means to an end. What are we endeavoring to achieve, and why? The goal of
macroeconomic policy should be maximum sustainable growth over the long
term, and evidence has continued to accumulate around the world that
price stability is a necessary condition for the achievement of that
goal.

Beyond this very general statement, however, lie difficult issues of
concept and measurement for policymakers and academicians to keep us
occupied for the next fifteen years and more.

Inflation impairs economic efficiency in part because people have
difficulty separating movements in relative prices from movements in the
general price level. But what prices matter? Certainly prices of goods
and services now being produced--our basic measure of inflation--matter.
But what about prices of claims on future goods and services, like
equities, real estate or other earning assets? Is stability in the
average level of these prices essential to the stability of the economy?
Recent Japanese economic history only underlines the difficulty and
importance of this question. The prices of final goods and services were
stable in Japan in the mid-to-late 1980s, but soaring asset prices
distorted resource allocation and ultimately undermined the performance
of the macroeconomy.

In the United States, evaluating the effects on the economy of shifts in
balance sheets and variations in asset prices have been an integral part
of the development of monetary policy. In recent years, for example, we
have expended considerable effort to understand the implications of
changes in household balance sheets in the form of high and rising
consumer debt burdens and increases in market wealth from the run-up in
the stock market. And the equity market itself has been the subject of
analysis as we attempt to assess the implications for financial and
economic stability of the extraordinary rise in equity prices--a rise
based apparently on continuing upward revisions in estimates of our
corporations' already robust long-term earning prospects. But, unless
they are moving together, prices of assets and of goods and services
cannot both be an objective of a particular monetary policy, which, after
all, has one effective instrument--the short-term interest rate. We have
chosen product prices as our primary focus on the grounds that stability
in the average level of these prices is likely to be consistent with
financial stability as well as maximum sustainable growth. History,
however, is somewhat ambiguous on the issue of whether central banks can
safely ignore asset markets, except as they affect product prices.

Over the coming decades, moreover, what constitutes product price and,
hence, price stability will itself become harder to measure.

When industrial product was the centerpiece of the economy during the
first two-thirds of this century, our overall price indexes served us
well. Pricing a pound of electrolytic copper presented few definitional
problems. The price of a ton of cold rolled steel sheet, or a linear yard
of cotton broad woven fabrics, could be reasonably compared over a period
of years.

I have already noted the problems in defining price and output and,
hence, in measuring productivity over the past twenty years. The simple
notion of price has turned decidedly complex. What is the price of a unit
of software or of a medical procedure? How does one evaluate the price
change of a cataract operation over a ten-year period when the nature of
the procedure and its impact on the patient has been altered so
radically? The pace of change and the shifting to harder-to-measure types
of output are more likely to quicken than to slow down. Indeed, how will
we measure inflation in the future when our data--using current
techniques--could become increasingly less adequate to trace price trends
over time?

However, so long as individuals make contractual arrangements for future
payments valued in dollars and other currencies, there must be a
presumption on the part of those involved in the transaction about the
future purchasing power of money. No matter how complex individual
products become, there will always be some general sense of the
purchasing power of money both across time and across goods and services.
Hence, we must assume that embodied in all products is some unit of
output, and hence of price, that is recognizable to producers and
consumers and upon which they will base their decisions.

The emergence of inflation-indexed bonds does not solve the problem of
pinning down an economically meaningful measure of the general price
level. While there is, of course, an inflation expectation premium
embodied in all nominal interest rates, it is fundamentally unobservable.
Returns on indexed bonds are tied to forecasts of specific published
price indexes, which may or may not reflect the market's judgment of the
future purchasing power of money. To the extent they do not, of course,
the implicit real interest rate is biased in the opposite direction.

Doubtless, we will develop new techniques of measurement to unearth those
true prices as the years go on. It is crucial that we do, for inflation
can destabilize an economy even if faulty price indexes fail to reveal
it.

It should be evident from my remarks that ample challenges will continue
to face monetary policy. I have concentrated on how we have tried to
identify and analyze new developments, and endeavored to use that
analysis to fashion and balance policy responses. I have also tried to
highlight the questions about how to specify and measure the ultimate
goals of policy. Nonetheless, all of us could easily add to the list. In
dealing with these issues, policy can only benefit from focussed and
relevant academic research. I look forward to learning about and
utilizing the contributions made under the sponsorship of the Center for
Economic Policy Research over the years to come.

Points to mull over in Greenspan's speech. Alternate explantations
welcome:

1 ) The "exploitation of past patterns". Translation - we're using
1873, 1893, 1907, 1929, etc, for our playbook.

2 ) "Discretionary policy versus Rule-based". We're basing our policy
on historical relationships when we think they fit, and doing
a best guess when we think they don't. : )

3 ) The rise of M-2 during the "contained depression" of 91-94
was a false indicator of impending inflation. We chose to
ignore it.

4 ) The re-emergence of M-2 as a valid indicator. Now that the
economy has been deleveraged by a significant amount, M-2
now appears to be functioning the way it used to - as a price
indicator.

5 ) "Depository institutions balance sheets deteriorated". Banking
system was collapsing, we figured a way to prop it up with a
play on long-term/short-term rates. We did this because we
believe the Great Depression was exacerbated by the banking
collapse.

Please read THIS paragraph closely. Greenspan SAYS that
the Federal Reserve was ANTICIPATING the crash in real estate
and subsequent banking losses. They KNEW it was coming.

6 ) The whole paragraph on '87. Explicit intervention to prevent
a collapse. Note that by the "Spring of '88", they knew the
economy was on safe ground.

7 ) Note the references to "consumer balance sheets", "depository
institute's balance sheets", etc.

8 ) Rate increase during '94-95 pre-empted inflation. "We gave
plenty of notice". Notice the references to short-term
leveraging effect on long-term rates. Do NOT underestimate
this guy, people. He knows EVERYTHING that anyone here knows.

The Fed Reserve explicitly avoided a sharp, sudden rise in
interest rates.

9 ) "Each episode is unique". In other words, we're flying blind
now, the history playbook is out the window. It is no longer
relevant because we are tracking a new path. Greenspan knows
it.

10 ) Equity effect of prices and on economy. Please note the
reference that short-term interest rates are used to guide
COMMODITY PRICES. Any effect on equities is COINCIDENCE,
and should not be construed as evidence that the Fed will
prop up the market. Couched on cautious terms, but quite
explicit, I think.

11 ) The indeterminate nature of the "information economy". God,
it's nice to see somebody REALIZE that the pricing model for
information is LAGGING the creation of the information economy.

In other words, they don't have a CLUE on how to price information.

I wish Wall Street Traders would be as humble.

Please note that Greenspan mentions gold ONCE in this speech. As
a "rule-based" financial policy that is not applicable to how
modern democracies want to function.

He thinks he can do. He thinks he keep it all going. I would
not underestimate him.

DONALD: More grain for your deflation mill. http://biz.yahoo.com/finance/97/09/07/y0003_y00_1.html

Who Cares: Thanks for your perceptive posts on Greenspan speech. Contrary to many posts in kitco archives but so what, who can argue results? Speaking of contrary, how about that gap this am between Nick 03:46 and George Cole 07:46, nearly four hours w/o a post. Has Kitco become a contrary ( less posts + less related to metals ) indicator? Not according to the charts but time will tell. Hate to post and run but worked 30+ of 48 this weekend and I AM beat, and maybe incoherent anyway! See all in morning.

Count me in Mike, Screw the outside financing, we can do this ourselves. The tolls will be a bear, but I have recently come into possession of a lot of Russian platinum so we should be able to cover it. I own a couple of those large stainless steel cooking spoons, should outlast regular spoons 80 or 90 to one. Better yet, forget the spoons, forget the mining equipment, what this job needs is some high powered particle beams. Why dig and blast rock when you can just vaporize it? I know where we could get ahold of a prototype particle beam, I'll put Rocco and 3 Fingered Louie on it, it'll be good to see them working together again.

Some of the best minds in the world have tackled the Manhattan Fed caper, but no one has been able to put it all together, until now. As usual your mastery of planning has made this a "can do" score. Only a champion of non-linear thinking would have come up with this Long Island route. Yes, its a longer route than most, but they will never expect us to come at them from that direction so I think surprise is on our side.

You have always been better at the idea, the big picture, and this plan is a beaut. Allow me to take over the final operational phase. This is were I shine; logistics, getting the job done, anticipating bogies and naturalizing threats before they threaten. I will be counting on you for the final timetable. Keep an eye on the planets, we'll want a "go window" with as much Mars influence as possible, strong medicine for a job like this.

I'm thinking we could use the particle beam to grab the gold once we get to the vault. Stay with me here, I've got a plan to get all the gold through a four inch hole in the floor of the vault. We tunnel in below the vault and drill a hole strait up. I can have Rocco make a device that will direct the particle beam up through the hole, through a particle diffuser, and into the vault. This should raise the temperature in the vault enough to melt the gold, let it pour through the hole in the floor, and into our molds in the tunnel below. By the time the last mold is full, the first will have cooled enough to stack. We'll cart it out on narrow gauge mining track directly to a waiting Liberian freighter. We can sell the gold in small lots at our leisure from the obscure luxury of matching penthouse suites in Monaco.

I feel good about our chances of pulling this off and, before we know we've started, we'll be halfway through. Rocco and 3FL should get their standard 5% with a nice bonus to insure silence. Costs should take up another 40%. Of the remaining half, I'll take 40%. The lion's share belongs to you, rightly earned. When we're done with this, you'll be able to buy Bill Gates for your mantle. The wheels are in motion and things are going to start happening pretty fast now. Keep your head low, and let me know when the planets portend a vault assault. Let's do this

If I had to bet now... I think Greenspan will try to shave 2K off
the DOW, perhaps drive down 30-year rates below 5.7%. Gold might
spike up for a brief period, maybe up to $400. But then back down,
I think.

SKYLARK: This is an extract from the Greenspan speech that relates to our discussion yesterday: "Moreover,
flows of U.S. currency abroad, which are variable and difficult to
estimate, and bank reserves avoidance are subverting any relationship
that might have existed between growth in the monetary base and U.S.
economic performance." He is talking about the overseas holdings of U.S. currency. Additionally, the remark about "reserves avoidance" relates to Eurodollars. Overseas dollar accounts , even of U.S. based banks, do not require reserves and are not under the control of the regulators. This is a serious flaw in the system. Derivatives of Eurodollars compound the problem. When the Dollar Meltdown begins it is most likely to be in this area.

I just learned that about 75 North American steel industry suppliers and producers made a commitment for a 5 yr. $100 Million advertising campaign to raise the profile of steel among consumers - perhaps you've seen some of the TV commercials ?

Perhaps the gold industry should take a similar approach to enlightening folks as to the industrial uses and historic value of gold.

Cheers

WHO CARES: Greenspan would indeed love to shave 2K off the market, but not by lowering long term rates. He'd rather die before inverting the yield curve. Greenspan is all too familiar with the common theory about recessions being caused / predicted ( chicken or egg? ) by an inversion in the yield curve. That is, short term rates becoming higher than long term rates. Alan Blinder, a Fed governor Greenspan hired a while back ( since resigned - I thought he would have become the next Fed chair ) was a big believer in this theory. I think Greenspan will continue relying on the old standby of manipulating the Fed funds rate to adjust economic growth. If it worked before...but I think this time there's too much instability in all the world's economies to allow that to work as predictably as it has before.

Euro dollars and Yen dollars may eventually cave-in the US dollar at home but the lack of a robust Japanese and German economy and the anti-inflation spin on U.S. statistics suggest that we may have to wait a long time. As Keynes said ...'in the longrun we are all dead'.

Cheers

WHO CARES: This part of his speech...."Gold was such an anchor or rule, prior to World War I, but it was first
compromised and eventually abandoned because it restrained the type of
discretionary monetary and fiscal policies that modern democracies appear
to value...." In my opinion this is an unresolved Constitutional issue. This modern democracy does not have the constitutional right nullify Article 10 without going through the amending process.

DONALD: I agree with your interpretation of Greenspan's comment. I think he's ( very ) concerned that his beloved money supply crystal balls aren't as accurate as before. Could reading tea leaves and entrails be far behind? Hmm...a new career!

YELLOW JACKET: The market decides those things, not the Fed. That is a theme that is throughout his speech. We tell the markets how to behave, we have the power. That is bunk. The market is the master and no Fed can make it otherwise. Look at the Soviet Union, they could do any damn thing they wanted, still they lost to the power of the market; it took 70 years but they lost.

DONALD, BOB: Donald thanks for the insight and explanation. The fact that European countries will place a tight hold on fiscal spending pending EMU entry which will cause a continued slow growth of EMU economies, that Asian tigers are undergoing recessionary trends in view of recent devaluations, that Japan's economy shows no sign of becoming vigorous for at least a year or more, and that the US economy is expected to slow and with an emphasis on controlling inflation - I also see little possibility for any significant rise in inflation. And I am becoming more persuaded that disinflation or deflation will continue to be a controlling trend as expoused by Donald and Puetz. Thus, unless a Puetz type crash develops, which I deem not likely, I see little hope for any significant rise in gold for this year and next and I share Bob's viewpoint on the dollar.

However, having said this, the present XAU basing pattern appears to suggest a higher price for gold whatever the reason. That is of course as long as it does not violate its trend lows. In view of an expected breakout in the triangular pattern in bullion, this should be a telling week as to what to expect, at least during the short term.

BOB: As I recall you have a position in BGO. In view of your apparent connection with the street, what have you learned as to what is the primary reason for institutional selling in the security.

Anyone have any news / comments on tonight's bullion price action on the Far East markets?

While you guys are having a nice philosophical discussion--you should see the action down here on the little pissant gold shares. Talk about a casino!!A few of my little darlings have been up and down 20-25% in the last couple of hours. Profit taking on Jubilee Gold ( the big nickel hit ) --closed Friday at 1.44, down to .96 last time I looked! I made a few quid on a quickie in 'n out this morn. Gotta go--this chat may have cost me a coupla thou.

PUETZ: Gold shares are currently way oversold, as much as they were at their last major low in 1992-93. Many are still breaking even and having reasonable cash flows. The Cash flow prices ratio is getting near 10 for several mid-tiers. If gold goes past $400...you can be sure that goldshares will rally a minimum 50%..with many 100%...crash or no crash.

NICK: What's happening in Oz, Far east tonight w/ the price of gold? Any news on how the exchanges are acting?

Back again at Kitco just to catch my breath. It has occurred to me that many of you here at Kitco are NOT investors but gamblers. I know I am.If you are buying puts and calls as a defensive strategy to protect a share investment--that is investing. If you're buying them to make a killing--you are a gambler. Buying gold in a long bear market is NOT investing, it is gambling.I'm not knocking buying gold--that would be hypocritical--just recognize what it is you are doing. If you are going against the trend, you are a gambler!! I am a professional gambler. When gold gets into a long established uptrend, I will be an investor in gold and a gambler ( shorting ) the share market.

Donald - Do you have seventy years to wait? : )

Re: Constitution - It's academic. The Feds will do whatever they
need to to retain control. They're already violating the Constitution,
what's one more charge? : )

Go back. Look at the predictions. Grant. Batra. Davidson.
Pretcher. Maybe soon to be, Puetz. : ) Find their failure points -

The Federal Reserve. The previous commentators all made one basic
error. They underestimated the power of the system to preserve
itself.

Yellowjacket ( got stung by one of you as a kid--hurt like hell! )
Gold is pretty steady at @322. I still think the action here on the blue sky miners is all about the Jubilee nickel strike. I was watching the share price of the guys with the ground next door ( Giralia ) --went from 8 to 18 to 24 on successive days--tried to get on board the sky rocket without getting burned but missed it a couple of times and then my cajones gave out so I let 'em go. I'm watching the price of gold very nervously as I don't want to be in too many of these little fellers if Au takes a dive overnight.

Greenspan would *love* long rates to go under 5.7%. Several
reasons:

1 ) It would put more credence into Harry Dent's theory, which
apparently has been appropriated by Ed Yardeni, i.e. that
the massive savings of boomers will create a huge cash
surplus, driving down borrowing costs.

2 ) The '93-94 bond blowout is largely responsible for the
subsequent pickup of the economy through until now. By
By refinancing net borrowers at lower rates, it allows
cash flows for consumer spending to increase.

3 ) Potential to reduce the ticking timebomb of the Federal
Deficit which has been shifted into short-term bills.
At some point, the Feds *have* to reverse this situation.
They're carrying enormous risk potential.

As for an interest rate inversion, we've already had it. : ) It
was 1-2 years ago. : ) And there doesn't have to be an inversion.
The Feds drove short-rates down to 3%, remember?

Donald - market forces are a mechanism for the interpretation of
cultural values into goods and services. They're not a god. : )

Cultural values have to change. There has to be a breakdown in
the belief system of The System. The Government. It's happening,
the System is taking hits, but I think it's good for at least one
more before it starts fracturing.

You're right. Greenspan is worried about his model. He doesn't
any valid model anymore. We're down a new path. It will
eventually fail, I'd bet on it now. Not this time, though, I think.

Roulette anyone? Further to my last post. The little skyrocket I missed out on ( Giralia ) has traded in a range from: open of .265 to a low of .115 to current .16 ( down .087 on the day ) . Talk about volatility. When you are trading these things on a rather large scale it is stimulating to say the least. Try spending 8 hours on a roller coaster sometime!

RJ and Mike Sheller
Your idea to get the gold is great. I have connections to arrange for the Liberian freighter. Only problem is, the last one that carried gold ended up half way around the world from its destination, abandoned and empty. Might want to see if Kadafi has any available personally.