Hello PH, ------------ as I write this today the sun is shining not only on me but the goldmarket as well. The Comex Dec contract is up $2.00 US to $301.00 in after hours trading. It is my understanding that some entities are inquiring about for physical gold (not paper)to return leased material. Some of the old deals are in default? It makes perfect sensebecause, if the leased gold was sold to someone else, it's gone. What is left is the moneyfrom the sale and that may have been gambled away. Without the money or the assets thatmoney purchased, there is no collateral to stand behind the lease contract for the securityof re-acquiring gold. It's default time. Also, any and all derivatives that may have beenused to leverage these assets further, such as gold OTC options, futures contracts (bothon and off exchange) and LME paper is now floating with no coverage! In other words,these items are worthless unless the physical gold they are suppose to represent ispurchased to cover. As TYoung would say "it's a whole new ball game".---------------------------------------------- Your thoughts about LTCM come into play here.I don't think they actually sold gold short as the rumors say. These people only used thecheap cash, supplied by others, (3% rate?) from these sales to leverage themselves. As tothe political motives for the Fed to kill them? PH, it's not that they were not the only fundto do this. All of these management's copy the profile of a well connected winningoperation. You may have already heard that several other funds are in trouble and it isspreading with the rally in 30 year bonds! The truth is that the FED had lost control of thismarket because of the size of these investors. It was either kill them or risk a totalmeltdown later on, as opposed to a partial one. We shall see! Look's like Another roughday in the markets! thanks

Whoa!! Hey! A light just went off in my head when I read that a Portugal bank lost 24% of it's value and their market was shut down after a 15% loss. Maybe this is goofy but I'll put it out there anyway.....Current events are a deliberate attempt by Greenspan & Co. to throw the sea of the world economy into turmoil and make the launching of the Euro impossible.....Maybe somebody already said something like this and I just didn't catch it.....Am I a genius or is this really stupid??? -GF

To Another: The NY Times and other papers ran an article on S.A calling on US oil co. to help them develop the kingdom's vast energy reserves. Saudis "desperately need capital to invest in their oil sector to keep the oil flowing" etc. How does this fit into your postings. On 10/19/97 part of the post Only one oil state counts, Gold very important to them, etc... Of course, I am assuming thatS.A was the one oil state. Also, I believe you posted S.A.has enough oil for our parents, parents, grandparents. etc..What is the real story behind this article. What and why does S. A. need US Oil Companys help. How does this fit into the US economy today with the oil for gold deal thats soon to end. Thanks by the way to Another, USA Gold for "book on Another" forum, etc. I've learned so much in such a short period of time.

Jayne,---------------- I haven't received anything from Another for a while. Think thingsare heating up so we will wait and see. --------------------------All: I am called away forperhaps six days. It would be good for me to continue to read and post during theseturbulent times, but urgent items must be addressed. Please continue to add your thoughtsto these pages as I look forward to reading them later. Thanks, FOA

Regulating the Hedge Funds??"The combination of many of the world's most sophisticatedfinancial powerhouses to operate jointly hedge fund activities may add up to more sway over relative currency values than any central bank or finance ministry in the world can match," House Banking Committee Chairman Jim Leach said.

As per my 15:39 yesterday.

Well, I refer you to my 9/29 @ 20:33...gold to mid or high $280's...so it will go above $300...cause the tea leaves are stuck together. :) Like I said I can't predict the gold price short term. Let's see if we get a weekly close on spot ABOVE $300.Tom

Goldfly: Your idea (10/1/98; 07:23:27MDT - Msg ID:299) that Greenspan and his cohorts might be deliberately cultivating an environment of chaos and economic turmoil in hopes of derailing the launch of the Euro merits comment. If that were actually their intent, it would seem way too little, way too late, to me. The preparations for the Euro's launch have been in place for many years now and are closer to reality than we in the US can easily comprehend. In Spain, one of the 11 countries involved, the population is already being conditioned to accept the new currency in several ways. Prices are already being listed on consumer goods in both pesetas and euros by many of the largest retailers. Banks have already begun listing all account balances in both currencies, also. Granted, the euro number is still somewhat hypothetical as the peseta is still being allowed to float slightly against the euro. On December 31, 1998, however, its value will be frozen and the euro will become a theoretical reality for all citizens. At that time (only three months away) all interbank money transfers will be negotiated in euros. I just heard today by telephone conversation that one small town in Spain is actually using euros in day-to-day transactions. I will report more on this as I hear it.---------No, Goldfly, to many people (in Spain, at least) it looks much too late to try to disrupt the launch of the euro, no matter how unstable the international currency situation becomes between now and then. At the same time, and to a very real extent, the euro's looming existence is contributing to the roiling of the international situation, too. We have been hearing about the coming disruptive changes to the international currency system that the euro will bring for some time now. Even before ANOTHER began to describe it, we were already reading intellectual economists at Gold-Eagle saying vaguely (without much detail in their description) that the euro would have a great impact on the dollar-based system. Anything that Greenspan and the authorities were planning would have to have been done long ago to have much effect. Even suggesting that their lassitude in allowing US interest rates to remain relatively high for so long was a passive restraint towards the euro is hard to accept since they have literally been between the rock and the hard place since the "irrational exuberance" bubble engulfed the international financial scene. As the US markets soared and the Asian tiger collapsed, they could neither raise rates nor lower them without adversely effecting one side of the equation or the other. No, I do not think that we see them trying to disrupt the euro launch with international financial turmoil. But I'm also quite sure that they are not particularly happy on the one hand about the euro's advent, nor about the state of the world financial system, either!

PH, I see your point. Perhaps I had some over-exuberance myself. How about if I tone it down? Could the objective be just to make the air so smokey that nobody can make a sure move? (Ala Microsoft- FUD: Fear, Uncertainty and Doubt) But then, this would only buy so much time too.....If you were the USG and wanted to maintain your position what would you do? -GF

Here is the source of my post yesterday (you heard it here first) about Merrill-Lynch's derivitive position:Date: Thu Oct 01 1998 19:22 Strad Master (Calling All Bears!!!) ID#250297: Copyright � 1998 Strad Master/Kitco Inc. All rights reserved ALL: I haven't had time to post this before but for those who are concerned that the market may tank due to over-leveraging this story will be of interest. I have a very close friend who is a stock analyist for a small fund ( $100 million or so ) . This little fund was just bought up by Merill-Lynch. On the day the Fed engineered the bailout of Long-Term Capital she happened to come over for a visit and she was telling me how bizarre it was for the Fed to call together heads of these big brokerages at the Fed office in NY. Apparently, it is not only unprecedented but almost illegal insofar as these people are not supposed to be in contact with one another so that insider trading laws don't get violated. What was more disturbing, though, was that she said she had a chance to look over the internal statements of Merill-Lynch and it was her conclusion that Merill is leveraged at a rate of about 97 to 1. If so, it is no wonder the big brokerages were willing to pony up to bail out Long Term Capital. If LTC suddenly had to dump all their holdings into the market it would cause such a spiral of selloff that Merill would soon be under water as well. It was her feeling that if the Market went down another %10 below the recent summer low, Merill would be out of business! As she put it, "If the Fed and the brokerages can't stop this selloff soon, we are all going back to living in mud huts." Pretty scary stuff, coming from her. She is a very conservative, generally bullish, long-term investment-oriented professional with no leanings toward gold, doom 'n gloom, astrology, or any other contrarian viewpoint. Anyway, if she is right, Puetz's crash due to leverage feeding on itself may not be quite so farfetched. Comments?

Goldfly: I posted along these lines a moment ago and it seems to have vanished into cyberspace. Reconstruction from memory since no backup:made. Absolutely no need to down your exuberance on my end. On the contrary! Your idea got me thinking. And that's what this forum is supposed to do, isn't it? As for the governments options on maintaining the hegemony of their currency it looks like a lost cause to me. Reminds me of something my father used to say: When rape becomes inevitable, sometimes it's just better to relax and enjoy it." The powers that be are now probably thinking more about minimizing the damage than about maintaining the status quo.

Hmmmm.... First Another, and now FOA.....POOF!......Where do you think they went? What are they up to? Are they hanging out in the same pit scarfing up cheap ingots? (A little roasted hedge-fund on the side, garnished with paper truffles?) What *did* Another mean by (approximately)"add my own flavor to this market"? What does gold taste like?.......Prediction: Gold at $50k by the end of the month. -GF

Last night I heard it mentioned on a major network newscast that the number of hedge funds like Long Term Capital is estimated to be 4000 (four thousand). "It is not known how many of them may or may not be in similiar trouble."!!!!!

Gentlemen: I find it hard to believe that the majority of the activity in the gold markets is short covering. If the chief move was to cover shorts, then open interest should be declining. Open interest in the futures contracts are rising! Central banks are adding to holdings in small amounts, not selling. Certainly we hear some have cancelled planned sales, presumably to wait for higher prices. Regarding the UBS involvement in LTCM. I believe the more correct sum of their financial involvement was CHf950 Million!!The list of the others involved were quite impressive according to reports. Dresdner Bank, Bankers Trust, Republic Bank, Swiss Life Insurance, a few Third World central banks, Italian foreign Exchange Office and other hedge funds.If you are a believer in the cockroach theory, there will be more LTCMs. Maybe we will hear of them, maybe not.

Holding well in view of $ and stock price action. Needs a weekly close above bearish 02/1996 trendline to confirm so that system traders will enter the market next week.We will see.

gold, the IMF and how it effects our investments xau5 Oct 2 1998 2:26PM EDT What could cause us to lose money in gold right now? ITs obvious that we have the wind at our back here for awhile but I have to think what could slow down what we all think is a bull market here. Let me give you some thoughts on this. Watching AG, Rubin beg for money to the IMF should give us a clue. CLinton literally went off on this subject today and I believe that should tell you something. The IMF is the clue here to a move for gold going not to 350 or 400 but to 600 or better. What the IMF does is soak up liquidity and keep the money supplies of the world down. By issuing bonds to soak up liquidity and not having to print money to be placed into the real world the IMF was able to keep inflation down. Bonds soak up liquidity and cause financial inflation which does the gold bugs harm. HOw else can you explain the fact that we have a global stock market rally for 10 years and gold and other commodities are dying? They are dying because they have zero money coming there way because the money is tied up into bonds. ONce investors dont buy the bonds the feds of the world must then buy the bonds for their own account and that frees up the money. If the IMF gains the confidence of investors again they will issue bonds to pay off the old bonds and the money supply will not increase like we want and we are back at square one with one exception (i will explain later). This is why Clinton is so adamant about bailing these guys out. If these governments have to buy their own bonds to finance their budget deficits (like Russia) their currencies will tank and inflation will come back. Its a zero sum game and the physical stuff has been losing to paper until recently. So If the g-7 this weekend bails out the IMF I look for gold to take a hit of about 10 bucks. I hope it doesnt happen but that is how important the IMF is. Now even if the IMF gets bailed out gold is still going up. Just not as much or as far for now as we wish. The reason is that all of the credit that went to hedge funds to buy bonds is now history. Hence their demand for credit is over. So that is why bonds (except Treasuries in the US) are sucking. Around the world the demand by hedge funds for foreign bonds is over and therefore bonds will be bought by the issuing foreign govt. and that will be inflationary. The money supply world wide should accelerate regardless of the IMF just because of this factor. One last thought. Foreign central banks use to hold 600 billion or so of US bonds at the US fed. Why did they do that? Because they didnt want their trade surpluses (the money) with the US to stay in their country and cause inflation. NOw that the fear is deflation wouldnt they want that money back. YEp. So you would sell US bonds, translate it into yen and that would boost your money supply. So the dollar is a short here because the demand for our currency will decline as the foreign feds unwind that 600 billion dollar bond position. Our fed will probably buy the bonds to feed our money supply making the dollar real go down. Sorry this was so long. I just find it interesting

As this unbelievable week moves to a close, we are hit with another bombshell after the markets closed today. Last Friday it was LTCM -- a hedge fund most people never heard of until it collapsed. Now, Reuters reports that Wall Street was abuzz today over rumors that well known Lehman Brothers could collapse. "According to rumors circulating in financial markets," reads the report, "the Federal Reserve Bank of New York, which played a key role last week in organizing the rescue of the troubled hedge fund Long-Term Capital Management (LTCM), was involved in finding a way to save Lehman." This is indeed fascinating. Here we have one of the financial institutions that agreed to bailout LTCM now on the verge of going under itself. Lehman's problems revolve around its mortgage portfolio. There were additional rumors, reported by Reuters, that Bankers Trust borrowed heavily at the Fed discount window because of its exposure in the hedge fund, Omega Advisors, Inc. The New York Fed denied any such borrowing. Do you get the feeling that things are spinning out of control?

If these countries that get in financial trouble can't get money from the IMF (that in turn goes back to the big international banks as loan repayments), it could be a signal that the post World War II system designed by John Maynard Kenes is in its final throes. I'm sure that's what the pro-IMF Clinton administration will argue before the Senate. The people I talk everyday to who for the most part are staunch conservatives don't want the IMF re-funded, they don't want LTCM bailed out, and they want the free market to be allowed to assert itself.

Looks like you got gold to close above $300 for us.....What's next?London Previous close 299.25 up 4.00 Morning fixing 301.40 up 2.15 Afternoon fixing 301.75 up 2.50 Close 300.50 up 0.90Zurich 301.95 up 2.30Hong Kong Closed holidayNew YorkRepublic cash 300.60 up 1.00

Hey PH.....did you see they picked up your post at SI Price Monitor. You're going to make us all famous. What's your feel on this Lehman thing?

Friday October 2, 5:32 pm Eastern TimeLehman denies troubles as rumors fly on Wall StBy Isabelle ClaryNEW YORK, Oct 2 (Reuters) - Lehman Brothers Holdings Inc (NYSE:LEH - news)., the parent of U.S. primary dealer Lehman Government Securities, on Friday denied several rumors about financial troubles tied to its mortgage-backed portfolio."There are no issues around funding, credit and cash flow," a Lehman spokesman told Reuters when asked about market rumors that Lehman's financial problems were serious enough to trigger an imminent rescue takeover by Bankers Trust Corp (NYSE:BT - news).Bankers Trust was not available to immediately comment on the rumors.According to rumors circulating in financial markets, the Federal Reserve Bank of New York, which played a key role last week in organizing the rescue of the troubled hedge fund Long-Term Capital Management (LTCM), was involved in finding a way to save Lehman."We have absolutely no comment," New Fed senior vice president Peter Bakstansky said when asked about rumors ofmeetings at the Fed on Friday afternoon.Fed Chairman Alan Greenspan and New York Fed President William McDonough on Thursday testified before the HouseBanking Committee about the Fed's role in organizing the recapitalization of LTCM.Lehman last week agreed to contribute about $100 million to LTCM's recapitalization and Bankers Trust contributed $300million.Another candidate for a possible acquisition of Lehman was rumored to be Credit Suisse First Boston , which also declined to comment.The rumors about Lehman came during a day awash with speculation about LTCM's woes spreading to other financialinstitutions and necessitating some Fed action.The safe-haven rally into Treasuries triggered by the emerging markets crisis has made U.S. government securitiesabnormally pricey versus any other debt instrument -- including usually conservative investments such as mortgage-backed securities.Rumors began circulating overnight in Asia, spread to Europe where most equities were suffering sharp losses, and hadspilled into the U.S. trading session before the 0830 EDT/1230 GMT release of the September U.S. employment report.While the rumors were met by either a "no comment" or a denial, they weighed on the U.S. Treasury markets were allmaturities ended either flat or lower -- except for the safe-haven 30-year bond.Also, the Dow Jones industrial average bucked a depressed global trend, ending up 152.16 points to 7784.69.Amid other rumors circulating in the morning were:-- Talk of an emergency Fed policy meeting before Greenspan attends the G-7 meeting of leading industrialized nations'financial and central bankers on Saturday in Washington.That talk earlier had been coupled with rumors the U.S. payrolls would come in weak -- which they did, up 69,000 inSeptember due to declines in manufacturing and construction and absence of growth in the government sector."As a matter of policy, we don't comment on these things," said Fed spokeswoman Lynn Fox when asked about therumored emergency meeting of Fed policy makers.The Fed just lowered the federal funds rate by 25 basis points to 5.25 percent three days ago.-- Talk that Bankers Trust because of large exposure to the U.S. hedge fund Omega Advisors Inc., had to borrow at theFed's discount window.However, the New York fed on Thursday reported zero borrowing at its discount window -- which rules out Bankers Trust as a distressed borrower, forced to turn to the "lender of last resort."Also, Omega Advisors denied it was in financial troubles and said in an industry memo that assets under its managementcurrently exceeded $3.5 billion.

USA Gold: By SI Monitor do you mean the Silicon Investor discussion board? I have heard often about them but never logged on. Could you post a URL? I assume you are talking about the story about Merrill-Lynch that I copied from the Kitco board?

http://www2.techstocks.com/~wsapi/investor/Subject-15208Just scroll to bottom. Type USAGOLD in their search box and then make sure you check Full Text. It's about three or four down. We get a lot of mention there..... Merrill's in deep. It's obvious. How does the Chairman of Merrill Lynch lose $22 million of his own money in LTCM, not to speak of what was lost by ML, and then lead the charge for a Fed brokered bailout? I can see why certain Senators, including the Chairman of the Banking Committee are talking about a full blown investigation of this debacle.

Let me answer an e-mail just received from EF at this FORUM since I think it may interest all: EF asks: "Thanks for continuing to mail your monthly letter. I have not purchased any gold yet. When I do your company will be my first choice. I continue to wonder how gold will be used when our paper money becomes worthless. Can we actually expect to use gold when buying food, gas, paying bills, etc.,? Your comments/enlightenment will be appreciated."EF, I think it certain instances you will be able to use gold in direct exchanges as a currency. This has happened to a large degree in countries like Indonesia that have experienced severe economic dislocation. I have heard through a client that worked there at the height of the crisis that gold was used for everyday transactions like buying food and believe it or not, water. (Indonesia experienced an el Nino drought co-incident to the economic breakdown.) His primary interest with us was British sovereigns because they traded well there. I also think that in the event of a crisis gold exchanges -- small and large --will spring up everywhere thus facilitating trade in the currency of the day. One pointer: This might be obvious but I feel a need to say it. In the event of a breakdown, sell or exchange only the gold you need to on a daily basis. The Asian experience teaches us that the problems could be prolonged and that the currency can become even more debased as the process unfolds. You can't go wrong with gold. There's always a market for it; no matter what.If others would prefer to ask questions by E-mail. Feel free I will try to answer some of them tonight.Thanks EF. Hope that helped.

With the Stoc above the 80% line for a number of days and the Friday top in the 83's which is now touching the line of the tops from prior highs of this year can the XAU go much higher ? The spot price of Gold also has reached the trend line of the highs from a couple of years ! AND nowHM after the close announces a huge writeoff of unprofitable mining operations. Is this the TOP ? I'm all ears ! <;-)

USA GOLD I understand and am prepared to use gold coins if a doomsday arrives, but what do you get in change when you part with a British soverign (appox 1\4 oz) or even a Mexican 2 Peso (approx 1\20 oz)? Do you see silver coins in use? I do not like to consider smaller pure gold, or 22K (like most older gold coins) for many reason, they are too soft, to small, easy to loose, difficult to handle. Do you see a Government or some firm, like yourself, issuing coins that are say .250 fine (75% copper)? Advance thanks

It's been a tumultuous week starting with the LTCM breakdown and bailout and ending with rumors of old time Wall Street stalwart, Lehman Brothers similarly on the ropes. The Rocky Mountain News runs this headline in the morning paper: "Economists beat drum of doom." Well known Colorado economist Tucker Hart Adams says "In 20 years as an economist, I have not seen a time of more uncertainty. For the first time I see a possible disaster scenario in Japan, the second-largest economy in the world and home to a number of the world's largest banks. If the situation there is not reversed, it could lead to a severe lengthy worldwide recession." Perhaps we should stop looking over the fence at what's going on next door and start keeping an eye on events in our own backyard. The way things are going, the U.S. banking system could collapse before the Japanese -- or the two could collapse together. Here's what I glean from this past week's events as they affect the gold market. Because of the way our server formats this discussion, I will break the analysis into two or three more segments for easy reading. Please feel free to comment as we go along. We start with some groundwork:1. For years I have been saying that somebody has been manipulating the gold market. At first my colleagues and critics thought I was blowing a lot of hot air. But I did not come to this conclusion willy-nilly or from some inside source of information. To me the evidence of the manipulation was there like footprints in the sand. I could see the prints; I couldn't see who left them. I only saw that the gold price was not going up and it should have been. Demand was outstripping mine supply in every report published by a wide and growing margin. No, something else was at work. ************************************

2. That something else appears to have been a concerted, massive effort to short gold on the exchanges in London and New York and in the physical market through a series of loans made by certain central banks through the bullion banks to the hedge funds and mining companies who were willing takers both as arbitrageurs and simple debtors. Rumors float the gold market that as much as 1200 tons of gold has been dissembled in this way to the hedge funds alone. The World Gold Council reports that LTCM alone is rumored to be on the hook for 400 tons. The amount lent to the mining companies is another factor. I haven't seen a credible number on that volume but it has to be in the thousands of tons as well. The difference between the mining companies and the hedge funds is that the mining companies presumably have the metal in the ground and are therefore capable of filling their shorts. So it wasn't the selling of gold by the central banks at all that brought about these conditions in the gold market, but the lending of gold. Once the gold was lent to these parties, it was sold on the open market depressing the price. As George Milling Stanley of the World Gold Council has rightly pointed out this metal has been made into coins, jewelry etc. and, like Humpty Dumpty, cannot be put together again.***************************************

Relative to my previous post, my best guess is that you will take the sovereign to an exchange and receive currency to make your purchases. Of course, individuals in such circumstances will deal with it in ways that suit them particularly. Some will want change in currency or silver. Some will will make sure they pruchase one sovereign's worth of goods. I think your real question is whether or not silver should be part of the doomsday arsenal. I have mixed feelings about silver. It is predominantly an industrial commodity with monetary applications. Gold is the opposite -- primarily a monetary metal with some industrial application. The problem with silver is that in a deflationary environment it is likely to decline in value because usage will decline. Gold is likely to become very scarce in such a situation and the price is likely to rise or remain static even in a deflation. This is why I prefer gold. I do not quarrell with those who buy silver though, particularly silver bags. I just think that gold is the better option. It protects against either inflation or deflation in whatever order they arrive.

Relative to my previous post, my best guess is that you will take the sovereign to an exchange and receive currency to make your purchases. Of course, individuals in such circumstances will deal with it in ways that suit them particularly. Some will want change in currency or silver. Some will will make sure they pruchase one sovereign's worth of goods. I think your real question is whether or not silver should be part of the doomsday arsenal. I have mixed feelings about silver. It is predominantly an industrial commodity with monetary applications. Gold is the opposite -- primarily a monetary metal with some industrial application. The problem with silver is that in a deflationary environment it is likely to decline in value because usage will decline. Gold is likely to become very scarce in such a situation and the price is likely to rise or remain static even in a deflation. This is why I prefer gold. I do not quarrell with those who buy silver though, particularly silver bags. I just think that gold is the better option. It protects against either inflation or deflation in whatever order they arrive.

I tend to follow Mr. Buckler's THOUGHTS @ The Privateer...gold has bottomed. Politics being what they are, I still see a battle royal ahead. If the paper players lose contol gold will rise dramatically. Debt destruction seems to be the key to paper...derivatives included.I leave my US $285 intact. I wait for the long bond collapse. I'm already insured so I'll wait. Hope my record remains intact.:) Tom

3. Now that game appears to be over. The LTCM scandal has stopped it. With the collapse of LTCM and the prospect of several central banks losing their gold, the central banks have already pulled back from their lending practices. That is why the gold leasing rate is being bid up. Any central bank willing to let go of its gold under current international conditions will deserve what they get. We don't think you will see much more gold coming out of the central banks. This could very well force the LTCM's of the world to try to square their positions on the exchanges, take delivery and repay the loans from the central banks. The obvious implication is that we could get an explosion in the price.4. As these scandals unfold, the derivatives� departments in most banks and brokerages worldwide are going to come under increasing supervision. There will likely be a scaling down of positions in all markets including gold. We do not know what this will mean to the various markets because we do not know what positions are being maintained for what reasons. The LTCM bet for higher interest rates came as a surprise to me. Here you have two Nobel prize winners with high speed mainframe systems and oceans of data betting on higher interest rates and losing an enormous amount of money. Simultaneously, a gold dealer/analyst in Denver using little more than simple deductive logic came to the conclusion more than a month ago that the United States was the only country that had the power and the room to move against global disaster through lower interest rates. That room is now being utilized (but I don't think for long. That's another analysis having to do with the euro which we will save for another time). I'm sure others saw the same factors at play, and were equally astonished at the LTCM gambit. At the very least, it is unlikely that the hedge funds or the big brokerages and banks will be shorting any more gold, not under these circumstances, at least not in any substantial volume. It seems to me that the biggest drag on the gold price has now been removed. As one of my colleagues put it yesterday morning: "We now have a free gold market."

5. So if the central banks aren't going to let of their gold (as reported by Reuters several times during the week) where's it going to come from to satisfy the short contracts? It will not come from the public either; the public, for good reason, are buyers. This metal will have to come from the mining industry assuming they are willing to take the short side of the contract on the exchanges. I think the central banks out of necessity will give the hedge funds and bullion banks time to sort this out, but no matter, the gold must come from somewhere and that somewhere is most likely the producers. The only this can be logically resolved is through much higher prices, in my opinion. Production has to be cranked up and the only way to crank it is through higher prices. On top of that, it could take time to crank up production sufficiently given the damage this down market has done to the industry. We could have a long pull upward.6. Let me end by saying this is not a complete analysis and it is not intended to be. It was thrown together just before the Ohio State/Penn State football game on an overcast Saturday morning in the early fall. I offer it simply for discussion purposes at this FORUM. Anybody who uses it to make investments or place bets in these markets is not dealing with a full deck. Anything could happen in the weeks and months to come and probably will. I am certain there will be more surprises. My advice remains the same. Accumulate the physical metal for delivery to your doorstep as a long term hedge against economic disaster. This is not commodity advice, stock advice or any other kind of advice. For that seek out an expert in those particular areas.That's it for now, fellow goldmeisters. I invite your comments.

I don't know if you saw it, but during the week, one floor specialist in gold said that LTCM probably was not squaring its position yet. He said a 5 ton purchase on any given day could move gold the limit. The limit, from what I could find, is $25 the first day; $50 the second day and $75 the third and every day thereafter. Estimates range from 100 to 400 tons on LTCM's exposure.

USA Gold: At the same moment in history that you have Tucker Hart Adams saying �In 20 years as an economist, I have not seen a time of more uncertainty" we heard the President of the United States say yesterday in the rose garden, "It is NOT a foregone conclusion that the world has to slide into resession (or did he say depression?)...We can do something about it...to stop it...etc..." That was an incredible remark for the President to make. He sounded desperate on the money for the IMF, too. "I have been asking for this for almost a year, now...etc." With Lehman Bros. and Merrill Lynch under suspicion, one can't help wondering how many others are in the same boat.----------Your comments leading to the conclusion that the gold leasing trade is about over pose two questions in my mind: 1) To what extent can the system as we know it withstand the strain and continue to function as 1200 tons of loaned-out gold is called in? As one major player after another defaults? Because let's make no bones about it. One outright default will lead to many others with the way the whole derivitive web is put together, one bet hedging another position and another on and on... Or will more drastic measures be called for? In fact, just what other measures could be more drastic than outright default? 2) Was the whole gold-leasing idea just a mistake that led us to this point? Did the gold-loaners, ie the Central Banks, know what they were doing, and do it anyway for some other end? Ie. the manipulation of the value of the Dollar to usher in the Euro? Or was it all just another exercise in stupidity? Probably a question that will be debated for centuries, right up there alongside the Tulip mania, etc. But a question we (at the historical center of events) have first crack at. Who knows, with the internet and your archives, not just posters at SI will note our words; historians hundreds of years from now will be citing our remarks today to bolster their arguments one way or the other. I can already hear them now: "Observers at the time, such as the perceptive and thoughtful posters at USAGold, PH in LA, TYoung, MKosares and many others said blah, blah blah...even as economist THAdams and AGreenspan were saying Blah Blah BLAAAH..."

PH..Thanks for joining today's discussion. I think that the gold lending business was highly lucrative for all involved and that was the chief motivating factor in its proliferation. It got out of hand due to lack of oversight at the tops of several major financial concerns. The next debate as we are now seeing in the development stage will be over government regulation and oversight. In my view, history will record that it was greed that fueled our demise ( if that is what we are experiencing) and hubris which allowed it to go unchecked. In my view we are coming to the end of the Age of Socialism that started with the socialization of the monetary system in the United States in 1913 and the communist takeover in Russia in 1917. As Frederich von Hayek pointed out in so many words you can no more be a little bit socialist as you can be a little bit pregnant. "In the Road to Serfdom", the book I believe garnered him the Nobel Prize, Hayek said that socialist theory creates economic systems that require increasingly more control from the center until you end up with a Hitler or a Stalin. I hope we are not headed to the same place. It is disturbing, however, that in this country and the West in general, we privatize our profits and socialize our losses. LTCM should be allowed to fail. Lehman should be allowed to fail ( if it is indeed in trouble). By not allowing these smaller failures, you simply transfer the losses to population as a whole and a more disastrous and pervasive day of reckoning.........Too bad FOA isn't around with all that's going on.......I also wonder what ANOTHER would have to say about all this. FOA did say however that he would respond to any and all conversation, questions, etc directed his way.........PH...I think you make an important point when you allude to Clinton's utilizing the "economic crisis" to provide more funding to a failed institution like the IMF -- a socialist enterprise if there ever was one. I saw some IMF defender talking on CNBC about how it was unfair to call Camdessus "a French socialist" as he recently was by Speaker Gingrich. Interesting that this individual thought calling Camdessus a "French socialist" was enough of an insult to defend him and deny that he is.

Has anyone thought about the times over the last few months that Another has been gone for a time-what was going on in the world. Possible attendance by him and maybe even FOA9/26 message 204 from A. I will be gone for a while.Starting on 9/28 and ending on 10/8/ is the annual meetingof IMF Worlds Finance Ministers & Central Bankers,IMF Exe.Board 24 rep. from 182 member nations as well as deputies and ministers. FOA then announces he will be away for a bit.Let's see their date of return. These two aren't typicalarmchair economists. Another knows exactly what is going onand has told us all over the last year.of

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I have felt for the last year or so that our world economy was heading into a deflationary period. Hence, i bought some gold. I was also considering downsizing my house to lower my debt exposure. In a deflationary time my house could end up being worth less then my mortgage. However, reading the notes posted in here and in the archives of another....I sense that the euro could bring on a hyper inflationary period, this then would suggest that keeping my home with a large mortgage would be a good decision...the dollar worth less and hard assets like gold and homes would be worth more in a inflationary arena and good to hold onto....so what is it deflation or inflation?Keep the big house with big mortgage or sell it?WOW a lot to think about.... World economy going into the pits, Hedge funds and other going down, The Y2K bug and its effects, the euro and what it might do...hmmmAnyone have any suggestions...I know my wife is hoping for Inflation (keep the big house..smile)

I think it could go either way, but I lean to inflation. I don't want to speak for ANOTHER or FOA but I think they lean toward inflation too, even hyperinflation. As for your house, I don't know. Tough call. That's a personal decision in the end. I read somewhere don't know where that inflation simply covers up an economy that has already collapsed -- an interesting observation. Along these lines, most of the inflations I've ever read about end of in a deflationary depression anyway, the most famous being the Nightmare German Inflation. In Asia, we are getting both simultaneously -- an inflationary depression. If its going to be inflation first the tough question is whether or not it will last long enough to pay off your house in cheap dollar. Hope that helps. Just one man's opinion.

What you say is very interesting. I didn't know about the big IMF conclave. I agree that ANOTHER and FOA know too much to be simply "armchair" analysts. Of course, I've always felt that way and others who involve themselves in these things professionally have said the same thing to me. You have good instincts.....

I listened to the recent McDonough testimony and did not understand the combination of the words "Moral" & "Hazard". Can anybody explain it to me in the context of bailouts? Don't get it.

He's not saying its our moral responsibility to bail out Wall Street's failures, is he?

Moral Hazard - as I understand it, this term refers to the possiblity that any bail out will end up benefiting primarily the inept financiers who put their money in a place it shouldn't have been. The "moral hazard" is relieving lenders of the punishment that should be inflicted on them as a result of their ineptitude. I believe that's right, anyway. TR

Dallas Gunns: Yours is a question I think many of us contemplate every moment that all this unfolds. As ANOTHER's inflationary collapse of the dollar occurs with the concurrent revaluation of gold, it would make complete sense to borrow everything we can lay our hands on right now and buy gold. Then pay everything back when the gold has risen. Keeping the bigger house, or the bigger sailboat, or whatever when everything is paid for. Your personal dividend on the collapse of the system. (Just don't forget there might be a period of high interest rates before the gold market normalizes! Or that it took 30 years after FDR called in the gold before Americans were permitted to own it again.)--------We hear talk of deflation almost every day. But most of those using the word actually mean price deflation; which is when the cost of things go down. The word's textbook definition really refers to a loss of liquidity in the monetary system. With our fiat currency system firmly (for the time being) in place, that will never be permitted to happen. When it did happen in the great depression, it was during a time when the world was on the gold standard. Gold was money. There was only so much of it. When the owners of it took it out of circulation by saving it, there wasn't enough of it to go around for everyone else. That is what drove prices down then. Now it is overproduction that is driving prices down. (Except for gold, which is being driven down by manipulation. And in a sense, gold leasing is like overproduction, too, while it lasts.) What we have now, are the consequences of Reagan's "supply side economics". There is no shortage of (fiat) money, either. On the contrary, there is overproduction of that, too: Which should be causing a healthy dosage of price inflation.--------The immediate problem for all of us as participants, is: When? These things have a history of confounding everyone. Even the experts. Even ANOTHER; who points out that it was expected in 1978, and here we are in 1998. These forces are so huge, that once set in motion, they take forever to reach their conclusion. That doesn't mean they aren't happening; it just seems that way. Afterwards, it won't seem like a long time at all. Historians will say, "and after only a few years..." Our problem is: After just a "few" years of being too early, we might be filing for personal bankrupcy, before it even hits the fan.

Date: Sat Oct 03 1998 17:42 Boardreader (From SI Thread:) ID#20768: To: waldo ( 20497 ) From: Richard Harmon Saturday, Oct 3 1998 11:24AM ET Reply # of 20523---------LTCM saga true about gold? Yes!!! Jack Thompson CEO Homestake did a Great interview with Neil Cavoto on Fox Business News. ( no on line link - sorry ) He was fearless in stating ( and fully explaining what it means ) that L.T.C.M was being forced out of their short gold position, He did not say "maybe", or "perhaps", he stated it as firm fact. When asked where the POG was going he answered with only a grin and a twinkle in the eye, while starting into another subject. IMHO we are headed to $600-900!

So then why did McDonough put together the bailout since it rewards gamblers like Merriweather? Was he trying to say the risk of moral hazard paled in comparison to the social consequences of LTCM going under? I guess that was it. If casino owners bailed out all its gamblers on the basis of the greater good over moral hazard, Las Vegas would have been given back to the desert. Of course, the casinos don't have a taxpayer base to fall back on. By the way, TR, do you think this bailout engineered by McDonough & Co will end up being dumped on the taxpayers ultimnately? It's hard for me to see investors being interested in buying into this thing. Is the next step for the banks to go back to Congress with their hands out?

Did he give any indication when the short covering would start?

USA Gold: I don't know anything more than what is in the post. It was a repost on Kitco and that makes it a repost of a repost here. It seems to come from our friend Waldo over at SI. You might ask him over there. But how long would they want to put something like this off? Seems like procrastination only makes such a disaster that much worse.

In it, and earlier today you pointed out that silver tanks during deflations. Could you give examples?

Yes, that's what they are saying, the risk to the system outweighs the moral hazard of getting the investors off the hook. In the case of LTCM, it doesn't look like the taxpayer will have to bail them out. However, what is yet to appear on the horizon may be a different matter. We will just have to wait and see. I think the big problem is that the term "moral hazard" didn't even come into the public's consciousness until after the Mexico bailout a couple of years ago. So, at least the subject is up on top of the table now.

When I opened my mail this morning, I was surprised to find this penetrating analysis of the current gold short position, hedge funds, etc. by Veneroso Associate Bill Murphy. It was too long to post so I put in **The Gilded Opinion** section which can be accessed through the HOME PAGE. Above is a section of Mr. Murphy's timely analysis. We think Mr. Murphy's observations will fuel a little discussion around here and thank him for thinking of the USAGOLD FORUM as the place to publish it.

"...J. Aron, bullion dealer and big bullion LENDER keeps posting lease rates higher than other dealers. I suggest they are part of the Rubin Wall Street cabal ( and we know there is one now, so being a conspiracy advocate is mainstream thinking ) and defending their short positions at all cost; therefore, they need to pay up to do so. They know, if gold zooms, the Long Terms of the world could really be in trouble because their cheap loans would suddenly be expensive ones. And that could affect their profitable business and maybe even expose them to some serious problems. But, there may be even a bigger problem looming out there. What if the hedge funds are short 1,000 tonnes of gold, or more, like we think they are? Where do they get the gold if the price of gold takes off? Yearly world production is only about 2400 hundred tonnes. This is the time bomb we have been talking about."

"So what gives? Have any of you invested in a vehicle in which somebody gets paid back in full and your buddy loses everything? Give me a break Italy. The story gets worse, or more intriguing, depending on how you look at it. Next day ( yesterday ) Bank of Italy Governor Antonio Fazio said he was unaware, until this week, of an investment by Italy's foreign exchange office, UIC, in Long-Term ". "I never heard about it." Fazio told reporters. Not so fast Fazio. Pierantonio Ciampicali, UIC's director, suggested in an interview with Daily La Republica this morning that Fazio might have been aware of the investment. He said the investment had been discussed by the board at the beginning of 1994, an no one had opposed it". Asked who was present at the board meeting Ciampicali said " either the chairman or the director general or both must be present at board meetings".That brings me to the point of the story. We think their may be as much as 7.000 to 8,000 tonnes of gold loans our there to producers, hedge funds, fabricators etc. The hedge funds alone are short big time. The Central Bank of Italy ( with its huge tonnage of gold reserves) appears to be clueless about what they were doing. Or they are liars? Or they are scared?" *******************************************The plot thickens, fellow goldmeisters.................

Please go back to this morning's discusion for information about the Bill Murphy article "THE BEAR DAM BREAKS", or go to THE GILDED OPINION page thru the HOME PAGE. This is good stuff from our friend and fellow goldmeister. Don't forget that FOA said that he would answer any questions you might have upon his return which we hope will be early this week. Also, we haven't heard from ANOTHER in a while and I'm hoping he's been storing up some interesting THOUGHTS! for the FORUM. We have added George Milling Stanley's This Week in Gold as a regular feature please enter through the HOME PAGE. George Milling Stanley is the top anlayst (in my opinion) for the World Gold Council and his report results from consultations with WGC offices around the world. We will get good insights here especially with respect to what's going on in the key London market. Our registrations for posting continue to impress, so does the rising level of observers, but where are all the posters? Let me say again that you do not have to have a PhD in economics to post here and there is no such thing as a stupid question -- not when you are trying to learn something! Nor is there such thing as a stupid comment when you are trying to contribute to the conversation. Just take a look at all the typos, grammatical errors etc in my postings and I am supposed to be a writer. I would like you to view this site as your site and I would like to fade into the background (except for an occassional post) My daily report is enough to keep me occupied. At the moment though I feel a need to fill up some of the empty space. C'mon posters, let's get with it. *********************************************************************************************TODAY.....We go back to my original offer. A free book if you post (something pertinent to the conversation of course). Your choice: The ABCs of Gold Investing or In the Footsteps of Giants. Just E-mail us which one you want. After you post of course. Then it's out the door to you. Offer good until midnight tonight (10/4/98) The goal here is to get you to break the ice of course. We hope your first post will be the beginning of a long direct connection to USAGOLD FORUM!

IS the proposed special fund of $90 Billion going to do anything more other than bail out Wall St? THat is of course, assuming it works- I doubt that it will, and that the inevitable collapse of many banks will still happen. In the end, the government is still just printing more money right? The hope being that then some loan payments will be able to be met, and not cause more banks to go under. Question is, temporarily, how does this bode for gold? TIA

Silver hit a high of $1.34 in 1920, but fell thereafter as production increased. In 1928 just before the stock market crash, silver sold for about 60�. In 1933, at the height of the first wave of the deflation, silver went to 25� at the bottom. In that same year, Roosevelt took gold from $20.67 per ounce to $35 by government mandate in an effort to re-inflate the economy. Those in gold nearly doubled their money; those in silver halved. In fairness, silver moved up from there but never exceeded the 60� level again until 1945. Deflation is not kind to commodities or commodity producers. Ask any family with a history in farming. That's why so many in agriculture today are calling for a "devaluation" now. The prevailing wisdom is it would push up commodity prices. In Colorado the silver mines shut down during the Depression hoping for better days. Gold is the best way to preserve assets if history is a teacher.

Just out of curiosity. The fundamentals for silver all point up, and yet, many are still bearish. A rather disturbing article by Martin Armstrong (Princeton Economic Institute) saying that there is actually a huge load of unreported silver inventory was disturbing (at least to me- I love silver). Taking M. Armstrong out of the equation, I can't believe that silver has not started to really move up in price. Perhaps, a shortage really isn't a shortage until the final buyer steps in and can't be filled. Put M. Armstrong back in, and honestly, is there really a massive supply in unreported amounts and anaonymous warehouses? Because I respect your opinion (and find this site incredibly informative), I'm curious-seeing as you mentionned silver, what do you think of silver?

I would like to know what other readers think about gold and y2k. This is shaping up as a huge disaster, especially for the current financial system. After the first of the year, it is likely we will start seeing many problems with accounting systems that need to look ahead a year. My question is; how safe does everyone think the markets are for trades? This trading system we all rely on seems to be in jeopardy. I think we are likely to see a run to physical gold if many failures become apparent. ET

What is the difference between BOOKIES, HEDGE FUNDS AND ASSOCIATES? ......NONE!...... THEY ARE BOTH LOW LIFE! I have a sneaking suspicion that there has been a coordinated effort between MAJOR CBs, Governments and certain PET Hedge Funds to control the price of CERTAIN COMMODITIES thereby scarfing up unbelievable profits for the above entities and elites thereof. ITMW, consumers are happy as hell. There is no inflation in goods. What a great situation for these CBs, BOOKIES AND THEIR GOVERNMENTS.....NO ONE WILL COMPLAIN EXCEPT THOSE GOLDBUGS, MINERS, FARMERS AND THOSE OUT OF THE BELTWAY.....THESE GROUPS ARE INCONSEQUENTIAL, IN THE MINORITY AND EXPENDABLE ANYWAY.......AS THE GODFATHER SAID, "TO HELL WITH THEM, THEY HAVE NO SOULS"........NEITHER DO THE UNFORTUNATE NATIONS THAT HAVE BEEN RAPED BY THESE LOW LIFES.Just what would be the advantage of doing so? It's a one sided insider bet that can't lose. Let's use gold as an example. CBs lease gold to hedge fund "A". Major banks and elites extend credit and capital to hedge fund "A". Hedge fund "A" leverages it's credit and capital within acceptable and calculated risk parameters. Now the question is, what is acceptable risk or is there any risk at all? ......NO!..... UNLESS.......... Hedge fund "A" having inside info and blessing by the powers that be.......GETS GREEDY AND LEVERAGES THEIR BETS BEYOND THE POINT OF NO RETURN FOR A PARTICULAR MARKET AND BECAUSE OF AN UNACCOUNTED FOR OR UNEXPECTED HICCUP IN SAID MARKET, GOES BUST.........SOUND FAMILIAR.........YOU BETCHA!The next question is, did hedge fund "A" pull a fast one on the powers that be, or did the powers that be deliberately engineer this disaster in the making, or was it an accident waiting to happen? I have to believe that it was an accident waiting to happen because of unmittigated GREED. How can banks extend credit without adequate collateral and accountability? ......ESPECIALLY MILLION & BILLIONS....... CAN ANYONE BELIEVE THAT HEDGE FUND "A" POSTIONED THEMSELVES WITH 100 TO 1 OR BETTER LEVERAGE WITHOUT THE POWERS THAT BE KNOWLEDGE?.......NO WAY......NO HOW!.......IF A BANK BOARD MAKES LOANS OF THIS MAGNITUDE WITHOUT ACCOUNTABILITY OR ADEQUATE COLLATERAL, THEY WOULD BE DERELICT AND CRIMINAL .....SOMEBODY OR SOMEONE IS GUILTY AS HELL OF FRAUD TO THE Nth DEGREE..... WHERE IS THE OUTCRY ?.......... WHY IS'NT SOMEBODY OR SOMEONE PROSECUTED FOR THE LOSS OF BILLIONS BY FRAUD?..........INSTEAD THIS SOMEBODY OR SOMEONE IS ALLOWED TO RETAIN 10% OF SAID HEDGE FUND "A"......THE ELITES WILL BE BAILED OUT BY CBs......DID CBs LOSE CONTROL OF THEIR ASSOCIATES GREED AS ..."ANOTHER"..... ALLUDED TO IN ONE OF HIS POSTS?.......METHINKS THIS GAME COULD HAVE GONE ON AND ON AND ON.........EXCEPT FOR ONE THING...........ONE OF THE DEADLY SINS......GREED AND AVARICE BEYOND REASON.......SUCH IS THE NATURE OF MAN.Thank you,Pete

ET wanted some thoughts of people about Y2k and gold. I'm one who believes that Y2K will have a large effect upon us. We may not have the extreme large scale disruptions that some say but I think that there will be enough problems that there will be food shortages, some rioting , company shutdowns AND monetary problems. Even though the US is working on solutions, the rest of the world isn't and with the way the economies of the world are melting down now, it won't take much to get back to bartering and using gold and silver as tender (at least for awhile). I think it is prudent to have some gold. At least as a means to retain a portion of your wealth. I do believe that the dollar will be devalued. Fiat money is inherently a losing proposition. You only have to look at other, smaller economies, to see what will (?) happen to ours. Who's in a position to bail us out? When the rest of the world has stopped suckling on us and the teats have gone dry, I for one wish to have something of value rather than paper.The introduction of the Euro will be a big distruption as money hedges it's bets between what it's used to, but increasingly unsure of (the dollar), and the euro (fad?). This will cause a drop in the value of the dollar as the dollar and the euro find their levels. As the european community will be pressured to use the euro, the dollar will be sold and out of favor.I think it will be a time of getting back to basics; Cereal, oil, timber, metal, etc... Things that people need no matter what happens. Keep some cash handy at home because you don't want to be on the news as you are lined up at the bank trying to get your $100 dollars out (because that is all they might let you have).Hope that's a start for you.

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On Silver. My primary focus is on asset preservation which means gold. Silver will do well during inflationary periods, but could disappoint in an economic breakdown as I explained earlier. Silver has a history of outperforming gold in inflationary situations, and therein lies its appeal. Obviously, Warren Buffett thinks a great deal of it and obviously his opinion carries slightly more weight than mine. We place some silver but not a lot compared to gold. My advice to most clientele is to establish a very strong position in physical gold because it will cover you in inflation or deflation and no matter in what order they arrive. This fits the bill for most people who simply are looking to protect themselves. I have heard the same stories about a large over-hang, but I do not know if the holder is a seller or not. Beyond that, this holding may just be precious metals market legend. I have never seen the claim verified. Once again, if there is one, Warren Buffett didn't seemed concerned about it. Hope this helps.

Query for information pertaining to the Bank for International Settlements: It has been my understanding that the B.I.S. is a private banking institution owned by it's member central banks. At the same time I believe I have seen some references suggesting that public equity ownership in the B.I.S. is possible, and one past reference in particular which suggested that the "stock" of the B.I.S. trades OTC on one of the Swiss exchanges. 'Not entirely sure about this, and I'm looking for information on whether , or not public equity ownership in the B.I.S. is possible. Any response pro, or con ,would be most appreciated. Thanks in advance. Art

Thanks-yes it helps. For whatever it's worth, I noticed recently that William Fleckenstein (assuming the same one) purchased a lot of Pan American Silver shares. I'm not putting a quantity down, because I'm not entirely sure my numbers are totally accurate.

One of the Denver papers ran a bib story on Y2k this morning showing people at a conference standing in line to buy books on the subject and a guy in his basement with wall to wall food and water storage. No matter what the government or press thinks, a growing segment of the population is concerned about it. By the way, the guy with the basement full of food and water was a computer programmer dealing daily with the Y2K problem. Also we have had several programmers buy gold from CPM based on Y2K concerns. When asked, the pros simply tell us they don't how bad the problem will be, but that there will be problems. An aside: ANOTHER has stated that the problems associated with euro introduction will strike us long before Y2k comes knocking at the door.

Excellent question....I think that BIS is available on the Swiss exchange at a very high price per share. I don't know how it performs, but some have used it as a proxy gold investment because of their large gold reserve.

They should at least take the loss.

Wow, the Nikkei down 248 points to 12975. Guess the bank problems over there didn't all get solved this weekend (that was tongue in cheek). Gold is down but not a lot $0.70. Other metals are up though.

Sunday October 4, 5:10 pm Eastern TimeG7 statement "bit empty", Soros saysWASHINGTON, Oct 4 (Reuters) - Billionaire financier and philanthropistGeorge Soros said on Sunday a statement by the Group of Seven majorindustrial nations had little content.Asked whether the statement issued on Saturday went far enough, Soros toldreporters: "It sounded a little bit empty."He declined further comment as he came to the headquarters of the InternationalMonetary Fund.Soros has called for major industrial powers to cooperate more closely in trying to solve the world's financial crisis.*****************************************************************************************************************DOW DOWN 67 on GLOBEX.....Dollar getting creamed.........

What's George Soros doing at the headquarters of the IMF?????

One can not "make" things change by ones desire. Gold(and silver) will not rise because this is your desire. There is a currency, derivative and liquidity crisis raging. Bide your time...enjoy the present...it will probably much more pleasant than the future. Most of all, follow the teachings of my dear mother...PMSP...patience, my son, patience. Tom

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EU Ministers downplay economic fears"European finance ministers downplayed fears that the spreading global economic turmoil threatens to derail growth within the region as it prepares to launch its single currency next year. "Europe has become an anchor of financial stability," Autrian finance Minister Rudolf Edlinger said Friday as a two-day meeting of finance ministers and central bank governors from European Union nations got under way in Viennna. "We expect dynamic economic growth in 1999." Edlingers optimism was echoed by other officials as the meeting despite signs that the worldwide financial turbulance is beginning to take some of the shine off Europe's economic recovery. Italy forcast its economy will grow just 1.8 percent this year instead of the 2.5 percent forcast last spring. Chancellor Helmet Kohl on thursday revised Germany's growth projection to "around 2.5 percent" compared with an earlier forcast of 3 percent. However, EU officials said confidence in the strength of the coming European currency, the euro, would shield Europe form the worst of the Global crisis.comment to follow:

It appears to me that Anothers thoughts on the euro are very real. That newspaper article kind of tells the whole story. They don't have reason to be that optimistic...their economies are heading downward...slowing down. What do they know that the average person doesn't about the euro? !! What do they know that ANOTHER and FOA also knows...smile (wish they were on line to make some comments) Y2K, the Euro, World wide reccesion/ maybe depression, Hedge funds going bust......If this doesn't move the markets in gold over the next year or so >NOTHING WILL!I am buying more GOLD in the morning.........Dallas Gunns

Twenty some years ago I opened one of these. Only put 200.00US into it. I moved a number of times but assumed my money was ok. Last time I wrote to them they said my account was under $100.00 claiming administrative mailing costs were the reason for the reduction in the account. I find this somewhat disturbing as I always thought that the idea of money in a savings account should be safe from such administrative robbery. I guess I was wrong. The thought of depositing a penny to buy dinner at the restaurant at the end of the universe shan't work at that bank (Hitchhiker's Guide to the Galaxy series "The Restaurant at the End of the Universe").December gold at $302.10 in overnight trading. Nikkei under 13000. Globex S&P down 100 or so. The Vancouver stockmarket has been in the green lately while other markets are down. I think the technical bottom is in for the VSE and its resource dependent micro's. I am waiting to see how long before the juniors take to rally in parallel with the seniors. My take would be when the price of gold plateaus and the seniors are overbought that smart money will look to juniors to gain further leverage from higher gold prices.Anybody care to put a timetable to when juniors will join seniors in the gold rally of Oct98?

Good post tandem, Dallas Guns!!........The reason that the euro will insulate the European economy is because the crisis we are in is a dollar crisis and the breakdown of the post World War II international economic arrangement, but I'm sure you are aware of that, Dallas Guns. Too bad our political and economic leaders have their own best interests in mind instead of the American people's.....too bad indeed. Most of them either don't have a clue what's going down or they're so involved in their own political careers they don't have the time to meet this thing head on. I listened to Ross Perot speak the other night. He sounded pretty good.....has more of a grip on things than the Beltway crowd.

Good to see you on this forum as well, keep up the good Gold work...here's to the coming BULL!Brandon

They traded on the swiss exchange at about $5-6,000/sh. I condsidered buying it about 4 years ago. Don't know what the price is now. Buy it quick before the $US falls further - SFr.1.34 and dropping!

Big Guy George never steps into the light to say anything unless there is a substantial amount to be made by it. His crocodile tears to the US legislature is a cover for something that he and the Rothschilds are up to. I think they are major gold bugs as they run the LBMA and the Rothschild merchant banking empire. Maybe Soros wants someone to bail him out?? I believe his true intentions are to mask and obfuscate the current global dollar crisis until he can consolidate a position. My guess: he's going to make a FX swoop on the $US as it tumbles. He did the same thing to his own country - UK - earlier this decade. He sees AG as defending the dollar at (almost) all costs. That usually guarantees a profit for the speculators. How much FX reserves does the FED have??? Since 1+Trillion trades every day on the world exchanges, not even AG and the criminals at the Bureau of Printing and Engraving can face that kind of assault. The rest of the world will either participate in kicking the US bully as he falls or sit and watch in glee as all the wrongs and financial heartache that we have caused to so many comes back to us in spades. Even more reason to hold GOLD. I'm ready to kick some of that USGovt ass myself.

Returning from a full day of sailing and finding the question of silver still on the table I would like to offer my own two (copper) cents worth. Before I do, though, allow me to point out that I am no expert and offer no figures, production reports or technical analysis. My perspective does draw, however, on 18 years as a (mostly unhappy) silver investor and on the same number of years of thoughtful reading on the subject. This said, some of the salient points that have impressed themselves on my mind follow: In the first place, it is often pointed out by many that silver is mostly a by-product in the mining of other metals. Metals such as copper, zinc, magnezium, etc. In the ground, silver oar is mostly found in highly mineralized salts mixed in with those of these other metals. Silver, the element in pure form, is relatively rare (or non-existent) in nature. (Chemists and geologists please feel free to jump in here.) This fits right in with its easily observed tendency to tarnish. Everyone knows that just about anything will tarnish (ie. react with) pure silver, even a fingerprint, as opposed to gold which is the most noble (reacts with nothing) precious metal. That is why there are so few pure silver mines and why it is so hard to find a pure silver play in the stock market. At the same time, there is lots and lots of silver around (above ground) because it has always been considered a semi-precious metal worthy of hoarding (due in large part to its long association with gold as money) and given that its production is largely a function of and dependent on the mining of other metals; industrial metals that are mined in very large quantities. This combination of facts pretty effectively abolishes and/or nullifies the whole supply/demand dynamic that most commentators rely on so heavily to explain and/or predict the behavior of silver. This means that watching supplies ebb and flow at Comex, or trying to estimate world industrial useage, or linking the price of silver to economic activity is largely an exercise in futility. This is easily seen and long remembered. None of the commentators who rely on these methods have ever demonstrated results better that pure chance in predicting price movements. In short, they are wrong as often, or more often than they are right.--------So what does affect the price of silver?------I submit that the price of silver falls directly into the realm of Psychology. The thought processes of masses of people. The vaunted psychology of the markets: Fear...Uncertainty...The perception of inflation. Etc. All the factors that are supposed to determine the price of gold; but are held in check and/or manipulated by government and Central Bank control. It should be pointed out here that the silver market, in spite of the low price of the metal itself, is a much more thinly-traded market than is gold; making it highly suseptible to mass psychology. (That is partly why the Hunt brothers targeted silver instead of gold when they set out to corner the markets in 1979.) I have mentioned silver's long association with gold as money. Already in ancient times, it was considered the "poor man's silver". I will leave it to historians to explain the reasons for this; but let us not forget that Christ was betrayed for 30 pieces of silver; not 30 pieces of gold. Judas would probably not have known what to do with 30 gold talents. Such a sum would have been unthinkable to such a humble man; although the chief priests would probably been glad to pay it (and more). In any case, silver has always been used for small day-to-day transactions. (Most of us easily recall using real silver coins as money. That was all there was. I never saw a gold coin used in payment, although I knew that the silver certificates we used as dollar bills could be exchanged for gold if desired. It was rarely done, though; in my personal experience.) Silver is especially highly regarded in India, where it is used as adornment and symbolizes wealth even more readily and more often than gold--which fits in perfectly with India's status as one of the world's poorer countries. So what is the point of all this rambling?------Simple!-------There is a saying amongst financial commentators: "Money talks...but...silver screams!" Whatever intrinsic value (as commodity or money) that silver enjoys is based squarely on what people think it has and on little else. When enough people want it (for whatever reason), it will go up. Way up! Very fast. No matter what the laws of supply and demand say. And people will turn instinctively and naturely to silver the moment gold begins to go up. (Do not forget that the Hunts chose a moment when gold was soaring to try their squeeze. Without the upward pressure on gold, their plan would have been doomed from the start. Riding on the back of gold, however, they succeeded. Or would have, if the powers that be had not changed the rules of their game.)------It would be unthinkable for silver to fail to ride the coattails of gold upwards in the revaluation that is coming. Warren Buffett thinks so. So do I. Thank you for reading. I invite your comments.

I would appreciate any information and thoughts on CEF (amex). I understand they invest only in gold and silver bullion. Does anyone know how much of each? I know this would not be the same as holding in hand, but if you already had a small hand full, would this be a place to hold some of your investments to wait for the big picture to clear?

For info on Central Fund Canada try their website at http://www.centalfund.com. It really just holds gold and silver bullion...not sure invests is the right word. Good for retirement accounts where you can not take possession of your coins or bullion. I, personally, like coins but own a bunch of CEF for the IRA. Tom

My prediction for the next six months to a year is a slow and steady unwinding of the financial markets triggered by the impeachment of William Jefferson Clinton. In the long run I believe this will be a healing process for the markets as a whole. If it isn't the IMF bailing out some foreign country because a major bank has a boat load of money in the country that's going down or the New York Fed twisting the arms of deep pockets to bail out LTCM. It won't work long term. There's a saying where I come from and that is that the chickens will always come home to roost.Best Wishes, DavidP.S. I was in the room when Warren Buffet said, "Contrary to popular belief Alan Greenspan is not the most powerful man in the Federal Reserve. It's the head of the New York Federal Reserve.

What the heck.....the Book offer was such a success yesterday we're going to do the same thing today. Til midnight. Get it posted; get a book. First timers only.We will process registrations as quickly as possible. You've got the mail box bulging, meisters. Our lurker level is beyond expectations. Keep it coming. Please remember, this is to break the ice. Our hope is that you will keep posting. With the quality posts that we got yesterday, USAGOLD doesn't see how it can lose with this offer. Good information, good ideas, good analysis, good public participation -- our mantra for a good FORUM.With the markets open and business as usual today, I might not have much time to put my two cents in. I will drop by from time to time though. I leave the FORUM in your capable hands.........MK

David, do you have any details or comments surrounding the central one you alluded to? I'm sure that took most of us by surprise -- the kind of "good information" I alluded to in the Forum Business post below. Any details??

How long can this con game continue before gold finally is returned to its place in history as the supreme store of value? Back in the early 90's several books I remember reading (among them "The Coming Economic Earthquake" by Larry Burkett and "1995" whose author escapes me) exposed the lie regarding the dangers of governments' printing of currencies without being backed by tangible wealth and the fact that if the world markets would ever fail to allow debt to continue expanding, the game would be over. I believe that time is finally coming here in the good old US of A as it has been happening for- in some cases- years in other parts of the world. Batten down the hatches! Buy gold! The FED and Wall Street and IMF and their deceitful bandaids are being exposed slowly but surely (LTCM, IMF bailout fiascos, etc.) to the point where even the sheeple are having a queezy feeling in their personal financial ruminations. The financial house of cards is bracing for the ill winds that are blowing in from abroad. Tie everything in sight to the deck. The storm is imminent! Sound the alarm and get yourselves out of harm's way. Did I mention- BUY GOLD??!!!!!

You may think I am not looking at the total picture regarding gold and therefore my view that gold will fall a little is unfounded. Let me suggest that there are several factors to consider. First, during a paper currency crisis the last thing the paper boys can allow is a dramatic rise in the price of gold. As long as the paper still spends...is accepted as payment...then the paper will be spent to hold the gold price down. USAGOLD still accepts paper for gold? Point made. The question is when will the populace question their paper money. Then is when gold will rise...when fear of the paper being worthless starts to show. When will this occur? Don't have any idea but it is not yet upon us...today, anyway. Maybe this is years away. Maybe tomorrow. My guess, and that is all it is...is that when Brazil defaults and derivatives fail with counterparty defaults a liquidity crisis will implode our financial systems. Banks will mimic those in Russia...no money and that available nearly worthless. On the other hand if the defaults are avoided and calm returns then gold can be allowed to rise to $325-50 next year. With a default and financial system collapse...ANOTHER may be correct...gold may not trade for a while. You know well my position...I am a BELIEVER in gold...the question is when the insurance is called upon not if. Tom

Should one buy smaller weights of gold bullion coins as well as 1oz. weights?

I can't say that I disagree with anything you say. I especially agree that we don't know what rabbit the paper money crowd is going to pull out of the hat next. Today's a good example: The Chancellor of the Exchequer out of nowhere raises the possibility of change of a heart in Germany over the status of IMF gold and Ted Arnold jumps on it in Reuters like one of those fumbles in the Kansas City game last night. Must be football season...............

It continues to be a pleasure to read your thoughts and ideas. I was particularly interested in your comments about silver and your anxiety upon reading some published expert analysis not favorable to a rise in price. You indicated that the outlook was troubling because you are terrifically fond of silver. That statement caused me to think from a different perspective. Personally, there are few things that I like more than pizza (and fortunately an active lifestyle keeps me trim). Yet, for this thing that I like, I prefer to see steady or falling prices, not rising prices. Be pleased as you buy the silver that you like at prices you deem favorable. I too like silver, and own just enough to satisfy my attraction to its pale beauty...about a palm-ful. Clearly its future price has no great bearing on my day to day life. Now, as you may find that you are buying more silver than your attraction to it may warrant, you clearly have an additional objective for the ownership. As an investment, read what was recently written by PH in LA. Read also what I wrote regarding bimetallism somewhere near September 22nd. -------You will always be content with your silver ownership regardless of price if you buy what your heart requires of you. But if you buy more with an intent to sell at a profit, you may find that you are among the few that make profits on the deal. Or you may be among the few that don't.--------This is my main point...in these days of specialization and division of labor, it should be clear that only gold need shoulder the burden as the worldwide money standard. Silver and platinum (and pizza!) may make for interesting business arrangements, but they should not be mistaken (due to personal preferrence) for gold during this very special time in world history. Gold currently has a unique role to play in this unique time. The nature of money has been disguised for so long, as has the inflation of the US Dollar. Inflation is actually much worse than is apparent -- a result of the dollar's use as the world reserve currency. This status will soon change as it is a business arrangement that is no longer in the best interest of its customers. I will not let an unbridled buying spree of pizza negatively affect my ability to acquire ever more gold under these circumstances. I suggest a similar approach for you if you see any wisedom in these words. Again, the inflation is already walking the globe; it will be quite troubling when it arrives back home at the U.S. doorstep. This inflation of the US dollar money supply is a result of years of deficit spending by the US Federal Govt. And, believe it or not, deflation of the money supply in the hands of the American public may be worthy of mention. This deflation would be the result of unwinding years of loans issued by banks under fractional-lending practices that have spurred-on, and in turn have themselves been spurred-on by this past history of unprecedented economic growth. As the economic climate shifts to forecasts not so rosey, new borrowing halts while efforts are toward paying down past credit. Because this money supply was largely created by the banks out of thin air, as the loan is repaid the money supply taken from circulation must return to the thin air from whence it came. Only the interest remains...in the hands of the lender. Only when these loans are defaulted on does the money created not return into the void. And even as this realm of temporary money (loans) created by banks creates an uncertain picture...deflation if paid back, inflation if defaulted on...so too is the story for the original money supply created by the US Federal Reserve as loans to the Treasury. Much of these loans are now also held by foreign countries. The US national debt cannot be paid off, period. More money is owed (including the interest!) than was created (lent) into existence. Any concerted effort to pay it off will not only fail, it will also result in a debilitating deflation. To default on the loans will have not only an inflationary effect, but more importantly, it will reveal the dollar to be utterly worthless, sparking attempts at worldwide disinvestment...hyperinflation. Hold your wealth in gold. It is the only form of money that is truly yours when you own it. You cannot "own" a US Dollar, because all Federal Reserve Notes must eventually be repaid to the FED (with interest!), and on top of that, much of the domestic money supply is in existence through temporary creation by local banks...also to be returned (to vanish!) with interest. When the dust finally settles, let us continue to buy pizza and silver with the money supply that remains. Gold is money. And I hasten to add that gold is indestructible. ----------------------------------------------------------------- got gold?

All this talk you may hear about IMF selling its gold...it sould be a concern only the the commodity traders of gold--those who are affected even by daily price fluctuations. I cannot emphasize enough that the world's institutional leaders know the nature of money, and that paper money supply can easily be created whereas gold cannot. The strong ones do not sell gold for paper. Only the weak ones on occasion sell gold (and anything else of value) when they find that they have no other way to manuver out of a paper contract that demands settlement with paper. Sometimes we think they are thus squeezed intentionally as the only means with which to get this gold...correct? The IMF is among the stronger hands of the world. They will not be squeezed until they bleed gold. If we find someday soon that gold is leaving IMF ownership, it will not be in order to raise paper dollars (although that will be the pretext espoused for the media). Gold will leave only if the strong hands feel that it is needed elsewhere, specifically. It will go there by ways either directly or indirectly, yet secretly in all likelihood. Do not expect it to flood the open market for gold. The news may be used to facilitate objectives on the paper market, but they would be temporary and of no consequence to physical gold ownership. If it moves, the gold will move with a purpose; NOT to simply raise money. Shifting sentiment by the likes of Germany is an important indicator. The IMF has no purpose if not for propping-up dollar dependent nations. Perhaps this is a clear sign stating "Because the world has no more need for the dollar (and hence no more need for the IMF), the IMF has no more need for gold." It could be viewed as final preparations and reorganizations for the euro, perhaps.

You almost have to just shake your head that people really believe that what's in their wallet is money. No sense of history or knowledge of even SE Asia of 1997-8. With that kind of mentality...only a crisis will bring the point home. Maybe another Alexander Hamilton will come forth...not that many remember he returned the US to real currency.**********Another...any response on RSA shares...if'n you get a chance. Tom

What is incredible about today's gold market action is that the comments of the British Chancellor of the Exchequer would have such an effect. Germany said nothing. Britain did all the talking and what they had to say came from left field. The shorts liked it, not doubt, but it had little to do with what the Germans were thinking. When you think about it, selling gold from the IMF to deal with the problems of the hedge funds makes no sense whatsoever unless the hedge funds themselves are going to be the one's doing the buying. After all it is they who are in up to their eyeballs to the central banks. Selling gold to the public, it follows is not going to alleviate the problems at the hedge funds -- not by any analysis. No, this is just another round of anti-gold propaganda. London no longer has the central banks to offer as a red herring so they've switched the emphasis to the IMF and another buying opportunity for those who like gold as the ultimate portfolio hedge. I recently saw an ad from the World Gold Council which alluded to gold being the real "Long Term Capital". I had to chuckle.

I read your impassioned posting and I thought you represented your feeling towards Ag and made a rational arguement for its' continuing value in the world. I am in Aragorns camp on this one, though. I have a box of Ag Eagles in their funky little green mint box. They are beautiful, to be sure. I am also a bimetallic (humm, sounds sexual?). I am enamoured of the gold stuff and believe that it will rise farther in the next 5 years than silver. So, what about Silver? Since there are so few people even thinking about the PMs right now, I think you will be happy with your choice. With the amazing industrial demand and the atavistic tendancies of the Asian subcontinent - India loves silver, right? - you will be rewarded over time. But, just for me, buy a little gold too, OK?

I agree that the British put their foot into it today. But I also am beginning to have a funny feeling that little Georgie Soros has been making a lot of noise about bailouts, international funds to guarantee credit, world supervision of ALL BORROWINGS AND TRANSACTIONS IN EVERY COUNTRY. I think GS is trying to get the IMF to part with their gold using the global fiscal emergency as a subtrifuge. The IMF is the last GO/NGO I am aware of that still holds a large pile of that barbaric relic. Gee, what would I do to get the last pile of gold away from the bureaucrats??? Maybe I could buy it up? Maybe with a whole pile of soon-to-be-worthless FRN's??? Maybe I could threaten to dump 2-300 Billion USTB's on the exchanges??? Maybe that would show what they thought of all that gold??? Wow. What a coup!!! Didn't GS make a billion on his own countries currency??? That would really give the world something to be cheerful about. The US taking it in the shorts. Then let the game begin! Humm,

One feature about silver that should interest you is that it will not be confiscated when they come for your gold. Hmmmmmmmmmmmmmm..Worthy of consideration.Pete

Your post "silver, pizza, inflation and deflation" was a great pleasure to read. Your thoughts have ever been a deep source of inspiration and provocation to further thought. That image of fiat dollars disappearing into the thin air whence they came was particularly vivid. Is it literally true that more dollars must now be repaid than have yet been created? Or was that an image conjured up to make a point? Obviously, the possibility of such a situation arising lies within the realm of possibility, but do the numbers actually compute already?------If I see any area where your thoughts (and even more so, my own) seem hazy, it might center around the mechanism of the coming reorganization of the world financial system. Will the return to the US of the inflation now walking the globe be what drives up the price of gold? Or will financial leaders be far enough ahead of the curve to revalue the gold in dollar terms thus reorganizing the financial system in time to establish the stability of a new reality? I wish I could say with any certainty which is more likely. I know that at one point ANOTHER said that we would wake up one day to a new reality. And that you yourself have suggested that such an outcome is possible: I remember a post of yours about ANOTHER's numbers and how much you like how they compute. Clearly, if the rising prices of inflation are allowed to run ahead of the price rise of gold, my silver will do well, also. If not, well...------Actually, it is a bit of a stretch for me to imagine how the system would pass up the (golden) opportunity to take advantage of the small investor with a spectacular run-up in silver. In any case, it would not seem irresponsible at this point to cover all eventualities with bets on gold, silver and euros.

Well, I just recieved my first shipment of bullion coins (1/4 oz Eagles) and at first I was rather disappointed. They seemed somewhat pale and plain (and small!). With all the mystique and hype, I guess I expected Alan Greenspan to come to my door asking me to bail him out (He might yet!).......Later when I began to examine the coins, the first one I picked up had a tiny scratch on the back- boy, then I was Really Bummed (I am a small-time collector too)......But that scratch forced me to make a close inspection of the rest of my cache. About I half-way through I was starting to enjoy myself. Toward the end I think I was feeling something on the level of that mystique I had expected. These things are really beautiful. (And so much concentrated wealth!) .....Cool ......Now every few minutes I'm popping the holder open and feasting my eyes........When gold finds a bottom here, it's time to get some more! -GF ..... P.S. (Oh yes- did you notice Liberty is making tracks *away* from the Capitol Building?)

Aragorn, Yes! I have gold!

Your message (10/5/98, #394) re: IMF Gold sales) is well stated. At the end you state: ...'Perhaps this is a clear sign stating "Because the world has no more need for the dollar (and hence no more need for the IMF), the IMF has no more need for gold." It could be viewed as final preparations and reorganizations for the euro, perhaps...'....This got me thinking. Suppose, market conditions do get worse, turmoil increases, the dollar weakens further, and the Euro comes online as a working currency (after Jan 1, 99), then the IMF makes a statement like: "We're selling gold, but denominated in Euros, not US dollars." At the same time, oil starts selling in Euros (as ANOTHER predicts). In concert, these could be powerful stimulations to shift demand very quickly to the Euro. BC

Test

PH in LA, I am glad that you have found some benefit from my words as I have from yours, also. You asked,----------"Is it literally true that more dollars must now be repaid than have yet been created? ...the possibility of such a situation arising lies within the realm of possibility, but do the numbers actually compute already?"-------- The answer is YES! Because it is understood by too few, let me present the situation with the simplest of examples to reach the widest audience. We start the example from the very beginning, with no money. The US Govt uses a 30-year Treasury Bond to borrow into existence One Dollar (more properly known as a Federal Reserve Note) from the Federal Reserve. The Bond represents the US Government's promise to repay TEN Dollars thirty years from now. Already you should see the problem, as only ONE Dollar exists in the whole world! Now, let's say that one original dollar created by the Govt finds itself deposited in a bank. With the fractional-reserve lending policies, the bank can temporarily expand the money supply among the people by lending ten dollars into existence. The bank does with with the agreement that the borrowers will pay back the ten dollars plus interest. Because this new money is manufactured as an entry on a ledger, as it is paid back the money cancels itself out of existence, but the interest paid to the lender is allowed to remain. Again, you should see the problem in this scenario. More money is owed than created in the first place...it is simply that the time delay for repayment allows the game to seem viable...and as long as borrowing continues into the future by both the Govt from the FED and the People from the Banks, the game almost works. The borrowing must continue, and the debt must always grow, or the game ends in calamity. Right now, instead of that original Federal Reserve Note Dollar used in the example, the Govt has borrowed much more into existence...such that the national debt is 5.5 Trillion and growing. Banks have used this as seed money to grow a larger supply. Debt default means a loan is not paid back, and the money does not then get cancelled out as it should. We see many examples default today, don't we? We see many foreign holders of U.S. Bonds that expect Dollars upon maturity, or dollars upon early sale on the bond market. Dollars held in accounts as Foreign Exchange Reserves have walked the world over and have rested in countries while giving strength as "backing" to the national currencies. As the world reserve currency, the dollar provides the principle foundation upon which these other currency stand. As they falter, they attempt to prop themselves back up at the expense of other currencies in their Foreign Exchange reserves, setting off a chain reaction. To bring from rest the dollar and to spend the dollar is to weaken the dollar and therefore weaken the very foundation upon which the national currency finds its global value. As it is seen these days that this battle for holding value is being lost anyway, these dollars will be called up in the final days to meet the various payment obligations to other countries. Once brought up from rest, they shall find their way home as the holder retires this debt for payment in full instead. The dollar only moves--changes hands--when a deal is done, something is purchased, the dollar is spent. Think now, what is for sale in America that may be chosen to hold in lieu of the dollars now being held "in limbo" by international banks and Central Banks. My pizzas may find they are in higher demand. The price will rise accordingly. My gold may find it is in supreme demand. I will not take dollars for gold; what would be the purpose? ----------------------- I hope this is helpful.

By BOF's Trichet: ".....if I am not being misled..."

What does he mean...."if I am not being misled....??"

Also, Japan making noise again this afternoon about the dollar playing too strong a role in Asia. Will post details later....

ALSO, WE NOW HAVE PARAGRAPHS!! "....if I am not being misled...."
********************************

No gold sale plan by big powers -Trichet

WASHINGTON, Oct 6 (Reuters) - Bank of France Governor Jean-Claude Trichet said on Tuesday the French central bank had "absolutely no plan for gold sales" and that he believed this was the same case for its major Western counterparts.

"As far as the Banque de France is concerned there is absolutely no plan for gold sales, and to my knowledge it's the same as regards the major owners of gold holdings, which
are if I'm not misled, the U.S. first, Germany second, France number three and Italy four," he told Reuters.

He was responding during an interview to a question on whether central banks were considering gold sales after the gold market was swept by rumors this week that Britain -- an advocate of selling IMF gold -- would officially propose such a move imminently. Britain has already denied it planned to make any such announcement.

I guess paragraphs need work...Oh boy...Been one of those days.

Readers of your post who are interested in learning more about currencies might like to check out the Transaction.net site for a good overview of the different types of currencies that a nation or community can use to transact business. Depending on the type of currency a group selects, that group can expect the currency design to influence the behavior of the people in that group in predetermined ways. For example: Our current debt-based money system, by design, assumes that a certain percentage of the people who borrow money will not be able to pay back their loan, and they will be forced to default. Such a system forces people to compete very aggressively so they will not be the one to go bankrupt, and from a group perspective, this motivation yields an economy that develops relatively quickly. On the downside, it is unfriendly to the environment, because people are rewarded to consume natural resources rather than conserve them for the future. At the same time, there are types of money systems that are win/win for all the participants, while rewarding people for conserving natural resources for coming generations. Another section addresses how to design a currency that works for online transactions. I found it to be a worthwhile site for getting up to speed on the subject of money. Link for "How Money Systems Work" http://www.transaction.net/money/index.html It's maintained by Bernard Lietaer, who is currently a Research Fellow at the Center for Sustainable Resources of the University of California at Berkeley. For five years he was head of the Organization and Planning Department at the Central Bank of Belgium, where he was President of the Electronic Payment System; he has other strong credentials as well....After getting a clearer picture of how to design a currency for specific outcomes, something tells me that someone somewhere knows what's going on in the current equity and gold markets, and the rest of us are stuck trying to figure out the rules, if there are any anymore. BC

It is incredible to me how the market swings on 'rumors.' Are these 'rumors' more misinformation intentionally put out there? Is LTCM really short 1000 tons of gold? Why would the IMF even be considering selling gold in the midst of this economic turmoil? Who would they sell it to? Japan? China? Why don't they, along with the G7 group etc., begin to establish a gold standard for everyone's currency and bring some stability to it all? Or is that really their plan and the timing isn't quite right? I'd welcome anyone's reply with the intention to get better educated.

Dow closes on sour note.

Australia called to open lower.

Lawrence Summers now says growth, not inflaton, the priority.

Gold recovers at end of New York session after IMF sales rumor found to be unfounded.

Gold up 60� on Globex.

Do 'paragraphs' now work?

Many of the anti-gold rumors come out of London. The British government and Bank of England are rabidly anti-gold probably because they have such small reserves.

This latest gambit by the Chancellor of the Exchequer was ill-conceived. All it did was buy an extra day of down market and the gold market is already telling us that the gambit was a failure. Stark from Germany's finance ministry said that the IMF would not be "selling" or "pawning" any gold. The use of the word "pawning" displayed, I think, the disdain the Germans have for the British proposal. The quick response from Bank of France's Trichet on no central bank sales was also aimed at the British in my opinion.
That statement also had a strange flavor -- especially the part about the rankings on gold reserves (..."if I am not misled..." See earlier post.)

Do you get the impression that there was much maneuvering going on behind the scenes at the Washington conclave? I think some of the old European hostilities are beginning to surface. I read somewhere that the French and Germans reacted with hostility to another newspaper story that a new triad had formed in Europe between Germany, France and Great Britain. The continental Europeans said something to the effect that British could never play a crucial role until they accepted the euro.

Question for all: Would Britain be able to meet Maastricht's strict requirements at this time including the ones with respect to gold reserves?

Looks like paragraphs is working.

Co-incident to what I just described below, Japan's FM Miyizawa also made a rather cryptic remark about Asia being too reliant on the dollar as he departed.

Then on top of that you get the Summers statement about emphasizing growth over inflation concerns -- code for another Treasury push for futher lowering of U.S. interest rates.

Did you notice too in all the press how Russia was left out of the action? What happened to Group of Eight with Russia being the eigth? Better that mess faded from public attention, I would gather?

I remember the Denver Summit of Eight breaking up in rancor and then Hashimoto's famous comment about selling Treasuries and buying gold. Are we in for more of the same?

Further evidence: When an "official" floated the possibility of a special late year summit in London of G-7, the U.S. Treasury Department politely said the "timing's not right."

No, I don't think this Washington conclave went well. It will be interesting to see how the markets react.

Dow now down 37 on CBOT
Yen up sharply.
Gold up 1.20!

A priori of Gold --

i. Gold pre-dates modern civilization
ii. Gold permeates modern peoples� lore of what is wealth
iii. Gold is malleable
iv. Gold doesn't loose its shine
v. Gold is used as the basis of most jewelry
vi. Gold is held by all Central Banks as a store of wealth
vii. Gold is no one's debt (except modern gold lessors)
viii. Gold is a great conductor of electricity
ix. Gold is expensive
x. The dollar is indexed against gold
xi. Gold is a precious metal
xii. Gold is gold is gold
xiii. Gold is a political metal


-- Feel free to add or subtract from this list to develop the a prior of gold (the essence of gold).

I'm thrilled, to say that, after the last two days. Gold up $2.80 overseas!!

Now on a more annoyed note. What's this I hear that Clinton is announcing that there ought to be controls so that the market doesn't take such wild swings up and down? He didn't seem so concerned when the market was headed straight up. Government these days, is unbelievable. He's just terrified about the trillions coming out of the market, oh and I guess capital gains, and thus income taxes. The good news was no IMF sales.

I posted the below on another forum. What I would like here is a little help to resolve an issue as to the reasons why a party or individual would offers blocks of stock just above the current level of volume's ability to absorb that block of stock and thus knock the stock down in value from a high of .60C this year to its current level of .11. My theory is that the stock is being shorted. Yet I check the shorting reports for this stock and it does not list it as shorted. MIQ.M or Exploration Mirandor has a deal with Kinross regarding their properties in the Carlin Trend, Nevada. Drilling is ongoing but news has been sparse. Drill results to date have shown good results. We hear that results are awaiting approval from the senior. In the mean time the stock broke a new low today. Volume is in the 30K to 200K per day for the last week or so. Any help in understanding what we are missing here would be greatly appreciated and a good lesson for all. In essence, what is the most likely reason for a box to be held on a stock that slowly lowers its price in the face of what appears to be a successful drilling campaign? (Kinross has agreed to foot the cost of drilling over four years to the amount of over $10Million US.)

"Contrary to popular opinion of late, I view the MIQ price a great buying opportunity. Today I checked. At one point the depth was 25K at .10, 50K at .105, and 29K at .11. IMHO, I believe MIQ is being shorted. I can't prove it but it has the look and feel. I inquired into obtaining my shares from my broker. He said that it would take 3-4 weeks and cost $35.00. What turned me off was that in order to sell I had to have my shares in the hands of the broker. Hard to do when they are far away. This could be costly in a runaway market.

I believe that shorting makes the only sense here. They, the shorters, are playing into the fear of us MIQers and is only exacerbated by the lack of news. Frankly, I believe that MIQ continues to drill and are sincerely awaiting the Kinross executive to sign out those releases. It may be that the delay is that MIQ just isn't a priority for Kinross at this juncture but I believe that the releases are in the control of Kinross not MIQ -- Agora said as much.

It probably is not in Kinross's interest to have MIQ stock at all time highs. Further, I see no reason to believe that the fundamentals have changed. Further, I believe that MIQ is under accumulation by smart money and that the cheaper the better as they can accumulate our shares that we have sold in fear and anger and at a steal of a price. My tact is to buy more and more the cheaper it gets. I do this because the fundamentals appear the same. No information that I have tells me any different. I read on the Kitco forum that to buy on fear and sell into volume is the key to successful trading. Learning to live with fear of low stock prices and dollar cost averaging seems to be the only defense you and I have at the moment. I have owned MIQ so long that I am prepared to wait it out. My purposes in posting the price of gold is to point out the obvious -- that gold is rising and with it the likelihood that the shorters will find any gold stock a hot-potato. If my analysis is correct, at some point these shorter will have to cover and that will drive MIQ quickly to .30. Imagine having dollar cost averaged the whole way down. It won't take much to be in the green. Even .25 would do. It could hit that in one day. So yes, the price is frustrating and causes lots of consternation and even fear. But I remind myself that as long as the fundamentals are the same, fear creates opportunity and that is how the game is played."

December gold is now $299.50 and rising.

tsk...tsk......Never begin or end anything on the number 13.
Let me add my favorite and get you covered.....

Gold is Money.

Maybe you didn't hear. The ten commandments of the New World Order begin with:

I. Thou shalt privatize all profits.
II. Thou shalt socialize all losses.

As you can see, Steve H. I like your idea....Just as Steve H was kind enough to invite us to add to his "a priori" list, I do the same. Hey, maybe we're onto something here......

I forgot.

Gold up $1.40 on Globex!

Just got this e-mail question. One of several of the same genre:

"Mr. Kosares:
Whatever happened to "Another?" Doesn't he post
anymore? Mel"

Mel, Friend of Another posted (I believe it was last Tuesday or Wednesday), that he would gone for six days. Maybe another poster can be more precise. FOA describes himself as "the firewall" between the internet and ANOTHER. Therefore, when FOA's away so's ANOTHER. I wish he (they) were here. I'm hoping we will hear from either or both in the next day or two. We must be patient, I'm afraid.

Only when the banks convert it. Only when more than just coin shops exchange it. Only when there isn't such a conversion rate to change it. Only when you, your neighbor, and mine accept it freely. Thanks for expanding the list beyond 13. December gold just crossed $300US, asking $302.

Asking $300.2, not $302.00.

Does that help move the market? Hope so. Also, hope my call of spot $285 is way off the mark. Right now it seems so. We will see what spot gold does if it crosses $300. When, if ever, will "they" lose control?

Tom

One thing is certain "they" don't like it when gold goes over $300. Did you see George Milling Stanley's report today? He said the funds might be now net long? They might not be totally "they", but they are at least partially "they".

First: it is the first day of the remainder of our lives.
Second: Dollar sinking fast, Yen rising rapidly.
Third: December gold up from 296 to 302.50 in intraday trade
Fourth: Rumours of something big happening, but nobody knows, well almost nobody (not me).

Interesting times.

"Dollars held in accounts as Foreign Exchange Reserves have walked the world over and have rested in countries while giving strength as "backing" to the national currencies. As the world reserve currency, the dollar provides the principle foundation upon which these other currencies stand...To bring from rest the dollar and to spend the dollar is to weaken the dollar and therefore weaken the very foundation upon which the national currency finds its global value." Aragorn III (10/6/98; 14:01:18MDT - Msg ID:405)

Aragorn III:

From your post yesterday, (and from the writings of ANOTHER) I get the impression that it is the large number of dollars held as reserves by foreign countries that represents the largest inflationary threat to the US. Wouldn't their conversion to gold, thereby sparking a revaluation upwards in the price of gold, (in effect soaking up those dollars making them unavailable as fuel for inflation) thereby protect the US from price inflation (in everything but gold, of course)?

(I think you have made this point before...And I remember admiring your perceptive concepts then... It is only now that I begin to grasp some of the startling implications involved.)

If this would actually work, wouldn't it be a near-perfect escape route for the Fed? And therefore be something the Fed would encourage and assist in? Do you see the lowering of US interest rates lately (thus setting up the demise of the gold-carry trade) to be an intentional step in that direction? ANOTHER seems to see the factors that encouraged the gold-carry (ie relative high US interest rates versus low gold leasing rates) as intentional preparations for this process inasmuch as it encouraged the buildup of the current huge short position overhanging the world's gold markets, especially now on the eve of the Euro's introduction. If this is a correct interpretation of your thoughts (and ANOTHER's) it would seem that the Fed has aided and abetted in the process; in fact been one of the principal players in setting it up. Which would make complete sense: After all, how could such a change in the world's financial orientation be expected to come about without the consent and participation of the world's largest player?

From this perspective, the process as a whole seems less like a broadside in a currency war, than as a vast plan carried out in full international view with the world's financially most powerful as cooperating participants. Which would only argue even more strongly in favor of its veracity.

I could not agree more on the prospects for MIQ. I cannot beleive the market is not buying up this stock. I think the stock is not so hot because of the last drilling but that drilling was to try to extend the property. It was in effect "step out" drilling. The core area has excellent results and the company has the where-with-all to develop it. I am a believer in MIQ (Montreal) and it will not disappoint.
The only stock that I feel is comparible would be EAG on Vancouver. They have a great deal of land in the Lake Victoria Goldfields. Frank Veneroso is recommending two companies (Rangold & Resoulute Resources) and their mines are only a nine iron shot away and EAG grades are much much better and are continuous from surface to depth of between 60m and 100m. EAG has two excellant prospects that will be low costs mines each on their own. Whats really interesting is that Sutton Resources is also very very close and they are just putting an underground mine on stream and they are at depth of approx 600m. EAG has not even explored at depth yet!!! They are drilling right now to move their reserves from inferred to over 1 million ounces calculated at surface and the depths are not even explored!! The potential is huge. On the last drilling results that were released the stock spiked to $.90. At the prices it is trading for it is a bargain and drilling results will be released in the very near future. If nothing else look it up and pull the releases. The not up to date website is at http://www.gorilla.net.au/presentation/eagc/index.html and the releases will fill in the blanks.
As a general note it would appear the mainstream media is starting to move more in favor of gold which is the first time I have seen that conversion. The Calgary Herald just article suggested one to have 5 to 10% of their porfolios into gold and gold stocks. If only a small portion of the baby boomers do this they will move these junior mining stocks very quickly.
Thanks and gidddeeeyyyuuupppp GOLD!!!

Where is everybody today?

Hi PH. It is rather quiet. I was wondering about your earlier post.

I don't think that gold can soak up dollars. The only reason someone would sell a hard asset is to buy something, right? And if nations are divesting themselves of greenbacks who's going to accept them as payment? ("Heck no, we don't want your filthy, moth-ridden, debt-laden, dead presidents! Go get us some shiny new Euros!")

Then what happens to the once mighty dollar? I think today could only be a foretaste. I remember hearing about creditor in post WWI Germany running away from people who wanted to pay off their debts in horribly devalued marks.

But then I could be wrong. I'm not planning to go out and put a Mercedes on my plastic.

GF

Looks like the neighborhood is quiet this afternoon. Everyone must be out calculating their gains made in the markets today!
I'm new to this forum, but then again everybody is I guess. Michael manages an excellent port of information, thank you for your efforts Sir. Gleaning (or lurking) from the opinions posted here has been very profitable. I hope I can contribute something of value from time to time in return. To me, the single most important event taking place in this period of time is the (actual or intentionally apparent) CENRAL BANK WAR(S). I do not particularily care who wins (Euro versus $US). Just the fact that they are at odds signals to me that the new gold bull market has just begun to stretch its' legs! Keep Well

"One of our more keyed in sources tells us that Long Term Capital has been let out of their short 300 tonne gold borrowing position by a central bank in an " off market transaction". In our last Midas we stressed the fact that their short position was actually an impediment to the price of gold rising. There is no way they could just go out and buy 300 to 375 tonnes of gold at the market." Commentary from Bill Murphy

OK, OK! We heard about this yesterday...but what I'd like to know is: Which central bank?

Seems like the possible candidates are limited:

1) The US Treasury department: Unless I'm mistaken, such a deal would have to be run in front of the US Congress first. Those guys are all bogged down about funding for the IMF. Haven't heard a word about gold donations to prop up hedge funds. Can anyone here imagine consus on something so controversial? I can't! Besides, isn't the gold held by the US Treasury valued at $42/once (or something) not at market. Seems like that question would have to be addressed before a deal like this could fly, too.

2) A European CB: If that were the case, it would certainly be more validation for the ANOTHER story. According to him, the last thing the Europeans want to see is for the POG to rise precipitously in advance of the Euro's intro. Participitating in the bailout of a US hedge fund would certainly expose their hand. Wouldn't it?

3) LBMA: They have the gold. But why would they be so generous? What would be in it for them?

So......who did it?

PS. Just what is an "off market transaction", anyway?

Goldfly:

I was thinking that the gold to serve as reserves could just as well be bought with Euros. Since one assumes that the Euro will trade openly in dollars, that would depress the value of dollars even further (soaking up more of them) until they get back home to the US. If I understood Aragorn's post yesterday, as they find their way back to the Fed to repay debt, they blink out of existence (leaving only the interest that was paid on them still in the system).

(If all the debt is repaid, Aragorn, would the interest that remains in circulation still be inflationary? After all, there is growth of the economy to compensate for, isn't there?)

I seems like it would only work while the process was actually taking place. The dollar would begin to rise again ultimately as the inflated supply "walking the world" began to diminish. Maybe before it comes to that is where, in a desperate political gamble to control the effect in the US, currency controls would be tried.

We are all out here scared to death and either going long on gold and mining shares or making decisions to do so if the long bond and dollar continue to tank tomorrow...I'm in the later group. Hope we never see $285...again. Still a question, at least in my mind.

Tom

One thought that occurred to me as I watched these incredibly volatile markets thru the day is that after the Denver G-7 summit ( was that two summers ago?) Hashimoto went to Columbia University to give a speech. After the speech, he was asked a famous question about gold and delivered a now famous response. Japan, he said, in policy discussions had considered the option of selling U.S. Treasuries and buying gold. This was rightly taken as a warning. Ultimately, Japan did not act on that warning. At this year's Washington summit, similarly rancorous, there was no talk, no rhetoric. Only a simple statement delivered by Miyazawa that over-dependence on the dollar was at the source of Asia's currency crisis. The Japanese followed that this morning by selling 5 and 10 year Treasuries in massive amounts delivering on at least the first half of Hashimoto's threat. The tension between Japan has been ratcheted up a notch. The question hanging over today's smoky battlefield is whether or not Japan has started buying gold. Some say they started a long time ago.....now prepared Japan launches the attack perhaps more formidable than the military one over a half century ago.

Gold up $1.20 on Globex.

I meant to comment on this last night, but tucked in early. I too remember that comment by Hashimoto, which he later retracted, but come on the man doen't just shoot his mouth off. He did say that Japan might dump US Treasuries and buy gold. I agree with you that Japan has probably been buying gold quietly for quite some time. On the subject of the US Treasuries however. I believe it was Friend of Another who commented back to me when I mentionned the Hashimoto remark, that Japan would NOT sell the Treasuries. I did search back through the archives (admittedly scanning quickly) and couldn't find the reply. It was really interesting though. Embarassingly so, my memory is not the greatest at times, so if FOA is back and reading, please repost your reply. And if it was someone else=again please repost. But now that you've mentionned the same comment USA Gold, I really want to read it again.

I do not remember the exact remark but Hashimoto basically said that during automobile talks with the United States that they felt at a disadvantage because Japan was so reliant on the dollar, and that because of that, they had considered sellling U.S. Treasuries and buying gold -- more or less as an antidote. You jogged my memory, bmacd. Come to think of it the recent Miyizawa comments have a similar flavor.

The advisor to the current Japanese government is a man named Gyohten -- a very hard nosed central banker type who wrote a book with Paul Volcker called Changing Fortunes. In that book, he made some comments similar to Hashimoto's. I think that Gyohten has much influence in Tokyo and that we may have had a major change of policy in motion here. I do not recall any comments by ANOTHER or FOA on this subject, but that doesn't mean they weren't made.

I did find Gyohten's comment on gold easily in Changing Fortunes, published in 1992 -- mostly because I broke the binding on that page. There's quite a discussion about Japanese gold policies down thru the years that ends with this:

"...I think the size of our gold reserve really did affect out status in international monetary discussions. The fact that Japan had very little gold made us more averse to any proposal for gold to play a greater role in the system, and that postition was maintained in to the 1970s and even the 1980s."

The Hashimoto comments delivered later seem to dovetail with Gyohten's observation. Don't forget that this is the man now advising the Japanese government on international economic policies.

I wonder though how much of this was provoked by the Clinton administration and how much is Japan acting on its own? Japan holds all this U.S. debt and here's the debtor tries to tell the creditor how to run its economy. I don't think it sets well over there and that's what is at the center of all the rancor.

There's no 100% certainty that it was Japan selling bonds today, but it sured looked like the hand of Japan. They hold mostly five and ten year notes and that's what took the biggest hit. The reports also were pretty specific that it was Japan "repatriating" yen at the heart of today's action.

USAGOLD and ALL: I have just returned. With the world markets creating havoc daily,I must attend to other items before posting. Another has sent several replies and a
Thoughts! post dealing with the conclusion of the meetings. In a day or so I should catch up and participate in these discussions. thanks
FOA

Welcome back!.....Much has happened; much to discuss..... ..........USAGOLD

Reference your eurodollar vanishing act, as long as the dollars offshore (eurodollars) stay offshore, their direct effect on the US economy is attenuated by other factors. Only when the eurodollar holders buy an american widget do they sneak back through the fence. They are then circulated inside the US economy, where they cause $ price inflation, which effects us very directly. Gold goes up in dollar terms. I like the Pearl Harbor analogy, ouch! When the japanese dollars that went to purchase gold get back to the US, the FED can pull them from physical circulation or exchange TBills for the cash, then they can deepsix it (until the bond matures and the holder once again gets FRN's @ $.025 per sheet. This nice movement above $300 is fun to watch. See ya.

If a mining company has hedged all of their annual gold production does this mean there is no benefit to thier bottom line with an increase in the POG? Also is forward selling done at a minimum price with an exception for a significant increase in the POG? Therefore should a person avoid a company that has hedged 100% of production and therefore unlikely to benefit during a gold bull? Thanks to any takers.

ALL: A quick note for today. There are several stories that LTCM (and most other hedge funds) are covering their short positions. They are not! What they are doing (as the NY
Post article below shows) is further hedging in the paper gold markets to attempt to control the coming (huge) loses! That will not work as the BIS has changed the rules. Read my old post to Pete below:
------------------------------------

Pete (9/23/98; 21:26:13MST - Msg ID:131)

Pete, To answer your questions: Yes, this is only a very, very small tip of the iceberg. Many of these people are short the gold paper market and they are the ones in the
know, at least we are told? And just look who is in the rework group: Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter & Co., Travelers Group Inc. and UBS AG will make up the committee. Pete, I wonder how many tons they move in world gold markets!
The change in motion by the BIS, concerning gold and the Euro is going to play them right into the European game plan! Read a few of the last (Thoughts!) archives at USAGOLD. I may reprint some of the things written here the last few days, it begins to tell the story that is before us. The Fed will push money like mad for now, but they will be raising rates like mad a little later as the dollar falls off the charts! Keep up your analysis, as you see things some of us don't catch. All minds don't work the same and it helps to mix Gray Cells in different portions. Thanks
----------------------------------------------
There truly is not enough physical gold to cover these positions. We are heading into a total default event that will also impact your ability to buy real gold in a timely fashion. It will also impact the ability of the mines to function during this phase. The length of occurrence, that this pre-default period will span is unknown. We may enter into turmoil for a year or so? I believe the story of LTCM covering shorts (see below) is an attempt to calm the markets. We shall see! Michael, (USAGOLD) I sent you an E-Mail the other day that they were only using the money os sold gold, not short gold themselves! Now the cat is out of the bag!
----------------------------------------------
http://www.nypostonline.com/business/6373.htm

LTCM'S GOLD PLAY: THE LONG AND THE SHORT OF IT

By JOHN DIZARD

WHEN the Long-Term Capital
Management bailout became public
last month, there were stories
circulating in the market about a
gigantic short position it had set up in gold.

In other words, LTCM had borrowed a
lot of gold in the hope of buying it back later, ideally at a lower price.

Gold people believed that as this short
position, which they believed amounted
to hundreds of metric tons of gold, was
covered by purchases, it would add fuel
to the runup in the gold price.

I decided to check this story with
LTCMs p.r. firm and one of its people
dutifully reported back that Long-Term
had no gold position, long or short, and that the rumor had been started in an attempt to hike the gold price.

So I dropped it.

Now, based on extensive reporting
among gold market participants, I have
come to the conclusion that Long-Term
did not tell the truth.

I wouldn't have minded if they had said
no comment, but outright lying is
something else again. So my advice is
not to take these people's word in the
future.

A Long-Term spokesman reiterated his
previous statements on the fund's gold
position - or rather lack thereof.

According to my sources, by August
Long-Term had borrowed about three
hundred tons of gold. That's a lot, about $3 billion. After borrowing the gold they sold it in the market and used the proceeds to finance other positions, such as one in the Australian dollar.

Why do this?

If they wanted to borrow, why not go to
one of those overaccommodating
creditors and plain borrow dollars to
invest in securitized Antarctic
commercial mortgage forwards or
whatever other weird stuff they believed in that week?

Because the rates on borrowing gold
have been incredibly low - around 0.63
percent (annualized) if you borrowed it
yesterday for a month or 1.61 percent
(annualized) if you borrowed for six
months.

Usually, one-month loans are taken out
by speculators, and six-month or longer
loans are taken out by gold mines who
are going short gold in this manner so
as to balance out a long position that
they have from their mine production.

The problem, of course, is what
happens when the gold price goes up?
Gold has been in a bear market for 18
years, but theoretically, some day,
maybe now, the price in dollars will start to turn up in a bull market.

Mines don't have much of a problem,
because they can cover their short
selling out of what they produce. But a
hedge fund has to buy back gold, and
do so from a market that could turn
jumpy very fast.

Now apparently LTCM bought
out-of-the-money calls to hedge their
short position, which means that if the
gold price went up a lot, then they had
the right to limit their losses. But it didn't eliminate all their risk.

I understand that J. Aron, the gold
trading arm of Goldman, Sachs, has
been able to cover all or most of the
LTCM short in private transactions, with the intention of limiting the effect on the already stronger gold market.

So the Long-Term gold episode may
be drawing to a close.

What market participants have begun to
learn, though, is that the real danger to the system doesn't come from the
relative value hedge funds themselves,
which are in truth a very very small part of the financial system, but the banks and brokers who have been playing
hedge fund on a much bigger scale.

That's why the prices of companies
such as Bankers Trust, J.P. Morgan,
Merrill and Lehman have been marked
down so far.

How many of them have been doing
what is known as the gold carry trade?

-----------------------------------------------------

TEST

FOA:
Welcome back! You have been missed!

Yesterday in my post [PH in LA (10/7/98; 17:46:55MDT - Msg ID:431) Will the Guilty Party Please Stand Up!] I already had the impression that I was smelling a rat! Today I was not surprised to hear John Dizard say "I have come to the conclusion that Long-Term did not tell the truth."

But the crux of the matter seems to be revealed with, "J. Aron, has been able to cover all or most of the LTCM short in private transactions."

My original question remains: What does "private transactions" mean? Just more loans papering over the others? How does that eliminate the danger of collapse of the system? Because with the gold market (including the physical coin market) rising, it looks like just adding to the eventual problem. Or can we expect an all-out, no-holds-barred effort to push the POG down? Such a strategy would still seem to have its weak link as any attempt to cover such a large position, even at lower prices (lower prices attained by additional short selling) would merely cause another immediate rise, putting LTCM right back in the soup.

What's going on here? Have they lost touch with reality? Or do they just think they can convince us that we have?

The truth is, they tried to push the POG below a realistic level and now (or someday soon) will have to pay the price. Whether it is the BIS supporting at $280, or whether $280 is just the value below which the human collective mind cannot conceive of a value for gold will likely be debated. Certainly, with the events exploding on the financial scene that we watch daily, including a $25/ounce rise and a falling dollar, the human collective mind has already changed, making a descent to new lows seem ever more unlikely.

Reality will not be very much affected by that debate, in any case.

I can't seem to get into 10/8--it's either 10/7 or before. Am I the only one having this problem?

"Repatriation from the US investors now scrambling to get out of Europe may harm also spill over causing the Euro to be postponed entirely. If the European politicians fail to comprehend the seriousness of what has just now taken place and refuse to postpone the Euro, then we fear that the entire EMU will simply blow up next year... The Euro must be postponed before a second shock wave takes hold next year." Source: Martin A Armstrong

FOA:
Have you seen the above? Can they postpone the Euro? While you were gone, this was discused here at USA Gold, with me posting reasons suggesting that it won't happen. Seems like Martin missed my post. (grin) Should we get in touch with him? Or will he be ignored by the world?

But seriously, this idea seems to get tossed out every so often, lately. What is your take?

OR AS DR. FRANZ PICK SAYS, ANY WAR ON GOLD BY GOVERNMENTS WILL "ALWAYS FAIL", GOLD WILL TRIUMPH!

I would like to ask you both about the coming EC. When you expressed fear that the CBs were losing control, was it because of the massive deflations in most commodities and the resultant chaos created by this uncontrolled policy?......A plan by CBs to depress commodities by controlling the price of the one true MONEY, GOLD that was formulated with original good intentions, which is now biting them you know where. Many on the inside knew of this plan and played the short end beyond what was expected by CBs.....The hedge funds, producers and other banking elites through their excessive greed pushed prices so low that a majority of producing nations began to suffer inordinantly. These actions had an inevitable cause and effect; namely a crisis was created that was the doom of those leveraged on derivitives that could no longer be maintained without a total world wide economic collapse.....The recent reversal of policy by CBs to reinflate these commodities will have dire implications for the USD....ARE THE SHARKS READY FOR THE FINAL COUP DE TAT?...Have the BIS and member banks been repatriating the Euro Dollar by purchasing gold in a slow and orderly manner over many years at basement bargain prices among many other options?.....Is his is how the coming EC could finally rid itself from the yoke of the USD?....If this is the case then,.....HE WHO OWNS THE GOLD RULES.........THIS IS WHY I THINK THE COMING EC WILL BE A SUCCESS. Thank you, Pete

I had followed Mr. Armstrong's analysis several years ago. Although I believe Marten is well researched and sometimes very right, it also became apparent to me that he could be very wrong. I believe that the exact opposite of his quoted scenario is the most likely outcome (ie Europe & Asia repatriating their capital). Which brings me to the next thought.

It seems to me that gold appreciates the strongest when it's movement coincides with rising interest rates (therefore falling bonds). To this end I have been waiting patiently for a topping signal from the Us 30yr long bond. Maybe the action of this short sqeeze over the past week has finally ushered in a major long term top. If, as & when the bottom of US rates is in place then the real bull action in gold can get underway! Time will tell.

I believe that Mr. Armstrong is right about one thing, history demonstrates that in the end Governments can be the most unreliable creditors! When will we ever learn.

test

I seem to be a day behind in my thoughts!! I should have said this last night. The way I see it (and please correct,or comment with whatever you see fit to), Japan and the US made a deal. Japan would buy US Treasuries (ie support the debt), and in return the US would keep the yen lower against the USD to help Japan out of their economic slowdown. Technically, Japan was not supposed to 'export' it's way out of the problem, but in effect what else could really happen with that plan. Well Japan lately has had little problem exporting at all, although the US sure has. Well now the US isn't in such a great position. You said it last night- why would Japan (the creditor) be happy listening to the US (the debtor ) call the shots? Well OK a strong dollar has meant that the world wants it's paper, but that also means that the US debt is far too high and totally unmanageable. Now what can the US do? Bring the dollar down, and maybe they can export some more, but as we witnessed today, the bonds sell off. I believe that Japan is the largest single holder of US debt. Sounds to me like they really can call the shots. Power is made up of three things. Mentality, military and money. The theory goes that two of the three will result in the third anyways. We know where the money is anyways to start the equation. Point is, if Japan does start to sell Treasuries (and whoever it was that said they wouldn't, please jump in), the US is in enormous trouble. You're right, there's no need for Japan to listen to the US. And hey, those bonds have been very profitable over the last while. Never hurts to take profit. That 'deal' was never meant to be perminent- it was a temporary measure. The way I see it, it may have backfired on the US. Being the world saviour is a great idea, but it doesn't work with debt. I can't wait to see the bandaids they try to use for this one. I'm sure I've missed something, which I'll add when I remember.

By the way, I just finished a terrific book about gold.

And I appreciate it. I wonder if its all that profitable to be at the center of the world economy. It gets down to the yin and yang of things. "He who is first would be last" and all that. Britain and the pound did not do well "there" and frankly the U.S. and the dollar is not doing well "there" either. In my view, if the Europeans and the euro want to step to the plate, so be it. Frankly, I do not like my country being the world's last super power. This hill is getting progressively difficult to hold. In fact, I sometimes wonder if its worth the hassle. I've never bought this argument that America should do this, that or the other thing because it is our "responsibility" as the leader of the free world, or the world's last super power, or some such other nonsense. For all of that, I have to question if the world's a better place? (Sorry for the pessimism) When the discussion gets around to Kosovo, the Balkans and all that, I say "why should the United States worry itself about that mess?" Because the Europeans want us to? All the while our competitors, including Japan and Europe, enhance their economic position while we do the "right thing." A friend of mine (ex-Wall Streeter) said it long before Japan made its most recent move: "Japan holds all the cards." We do not know the future, but we do know that Japan holds a huge position in U.S. treasuries as you, bmacd, point out. That is the crucial factor that makes all the other talk about where this world economy is going pale in comparison. This cannot end well for the United States. And it cannot end well because we succumbed to the temptations of paper money in the first instance -- and the attendant economic excesses...kind of an economic Monica Lewinsky if you understand where I'm coming from, bmacd..........Japan is simply captalizing on our mistakes. I appreciate your discussion, lion-hearted one, and look forward to future exchanges. As ANOTHER says, "We watch this gold market together, yes?"

Yes indeed we do, and tonight it seems good to watch! Gold up now $1.20. Japan is slightly down, 25 points or so, after being up 150, after being down.......Sounds decisive to me, sort of like Wall St today (what was that all about).
Japan definately has the cards now, you're right USAGold. On a less political note, your post made me think. You didn't sound so much pessimistic, as realistic. THe thing is, saving everyone at the expense of yourself is hardly rational-it's downright stupid. Now turn that into the US going broke trying to be big brother (although the motive may have been more one of control), among other spending problems, and it comes down to saying the rational argument makes one the 'bad guy'. I don't believe in all these bail outs. In the long run, they won't work. Let the chips fall where they may, and let the market sort it out. But that makes me and anyone who agrees with me cruel and heartless. Like all the funds and bailouts help the starving masses anyways. They go right into the pockets of corrupt governments, or get shipped offshore (like in Russia's case) or go into paying off debts which in turn only bails out Wall St. Brazil is getting a bailout. Mexico is going to need money soon. Where I ask, does it all end. I guess when US needs a bailout. Let's think, who's going to be there for that? ( I think I'm in a rather cynical mood, but I mean what I say) As this currency collapse plays out, powers will shift.

There is a question as to how far a society should go to save its institutions. I remember reading an analysis on the failure of the Roman empire. After checking all the reasons why the empire failed -- everything from destruction of the denarius to lead in the wine and drinking water -- the analyst came to the conclusion that those in a position to save the empire simply came to the conclusion that it wasn't worth saving. I cannot remember the source of that reference though, as we go along in this current situation, I wish I could.

I just went back and read my previous post (#449) and realized that I had made a mistake. I meant to say that "Goverments can be the most unreliable debtors" (ie the European defaults of the 1920's etc.) But after reading your posts USAGOLD & bmacd (451,2,3) the "unreliable creditor" concept (ie Japan (maybe unpredictable, unmerciful, unrelenting will become better adjectives with time) also has some merit.

We now have the headlines full of "hedgefund failures", when should we expect to see the "mutual fund redemption" problems begin to surface? The common equity mutual fund has been promoted so thoroughly and as such a "safe" way to build wealth that if this market unwinds 1929 style............. oh!.... I don't want to consider the resultant social anguish. Keep Well

I did not get all the numbers tonight, but didn't the NASDAQ finish down 40? The point being this: Some are saying that today's Dow action...down 25O then almost closing even....was "The Fix"... and there could be no better reason to put in "The Fix" than to quell the potention for redemptions. You are on to something...Buena Fe. Did you know that mutual fund are not obligated to take you out of the market when you "redeem"? That's right...than can send whatever stock certificates they choose and they have met their legal obligation. Most mutual fund holders are unaware of this.

at 0433 EST Dec. gold futures traded at $301US in overnight trading. Having reached a high for the night of just under $303.50, it settled lower before the sun rise in NY. In late evening trading on the 8th of October it trades as high as $303.80. New York open will be interesting as yesterday it knocked the wind from the overnight near $307.00 high by about $3.00.

Thanks for replying Dan. Mirandor (MIQ) trades are certainly interesting. Support seemed to hold at .13, with the bulk of trades at .145 and .16. Drilling is proceeding but result are for some reason not forthcoming. It is hard to figure why not. It would seem there is a news black out. This is hopefully a good thing (no news is good news). On the broad side of the junior gold issue (thanks for the tip on the vancouver gold junior, btw). Senior gold stocks seem to have enjoyed a strong run up of late with Newmont leading the pack by more than a double in five weeks. I have read that juniors follow seniors. Well let the games begin. My guess is that the price of gold needs to hit $315, seniors need to become overbought, then juniors will become the oversold gems waiting to be discovered as gold investments will still look strong but an alternative undervalued situation will be sought out. IMO. Thoughts?

December gold now $300.80US.

I forgot to pass this along from a friend who closely follows MIQ.M. He did some research and put this together. I thought you might be interested in it (I did not write this):

here is my pick for a
Junior which I think will do outstanding with
continued good results and a sharp increase in the POG. The
company is MIQ (Mirandor Explorations) on
Montreal. First if you'll allow me to tell you a brief story which
will put into context the reason I now hold a
substantial position in this little company. Back in the mid-80's
I got into Barrick gold early and made a killing,
basically I was in when it was meare pennies. I swore if I was
ever to find another story like that of Barrick I
would again hold a substantial position in the company, but it had
to have a similar property. Over the years I have
made some exceptional money in the Junior golds, but it is MIQ
that has me very excited about what they may do
in the months to come. My research into MIQ lead me to Peter
Munk's biography where I picked up the
following information along with my own investment horizon in the
mid-80's:

Presently MIQ's story is similar to that of Barrick Gold when it
first started it's project in the Carlin Trend (in
term's of location and composition of the property). This is due
to location of the property in the Carlin and the
location of a Carlin "GOLD WINDOW" on the property. Anyhow, back
in 1983 Barrick was an oil exploration
company. Barrick didn't even own their Goldstrike property (in the
Carlin Trend) in 1983, they were still looking
for oil under the name of Barrick Explorations. In fact, it wasn't
until 1986 that Barrick got involved in negotiating
for the rights to the 6900 acres of Goldstrike. At the time
Newmont was sitting on 250,000 acres in eastern
Nevada, much of it with promising gold deposits. It had enough to
keep it busy for many years to come, so going
after Goldstrike wouldn't make much of a difference, so they
thought at the time. They felt that the geophysical
makeup wouldn't allow for an economic find and at the time they
knew the area better than anyone else. At the
time of negotiations, Barrick, or rather Munk did not want part
ownership of Goldstrike. The two owners were
Western States and Pan Cana and he got both of them to sell their
shares to him. The deal actually closed on
December 31, 1986. It was considered a small gold mine at the time
and difficult to unload overall. While in the
hands of it's pre-Barrick owners they did drill one hole down to
391 feet and found high-grade ore, indicating
significant reserves. However, the reserves were all refractory
ore, which was at the time extremely difficult to
extract. In fact the funny part is one of the owner's of
Goldstrike, had to make a choice to either sell a horse farm
in southern Kentucky or the Goldstrike mine (can you say ooops).

When Barrick initially started looking at the property a guy by
the name of Smith, who was with Barrick, went
down to Elko, Nevada, to take a look at the property. They found
that the operators were not exploiting the
orebody to maximum advantage. Smith and his team were confident
that by spending a little money and using a
variety of recover methods, they could increase the recoverable
reserves to 1.2 million ounces. This is when they
decided to buy it. This is where it gets interesting, while they
were checking the property after the December 31,
1986 purchase of Goldstrike, when Smith and the crew were up
there, Brian Meikle had stood at the lip of the
open pit one day and said to his colleagues, "You know, we've got
Genesis a few miles to the south (3 million to 4
million ounces of reserves owned by Newmont), we've got Bootstrap
and Dee a few more miles to the
north-west, that's another 2 million ounces, and there's all these
little small pits, scattered all over the place. I
wonder if all these pits represent a leakage from something major,
at depth." No one took it any further, but they
all knew it was a possibility.

The reason I say this is interesting is that it seem's the
situation on MIQ's Railroad project is similar to what
happened at Barrick. With gold having been proven all over the
Railroad project, including, Elliot High Ranch/LT
East/Darkstar/DikeSwarm/POD/Bunker Hill etc. It appears that MIQ
is doing the same thing. They are putting
together strong shallow results for an open pit mine leading to a
a leakage which could be something major,
deeper down???? Just speculation on my part, but I have inquired
with my geologist contacts and there is nothing
else that would make sense otherwise.

Anyway back to the story, a couple of months into 1987 and Brian
Meikle called Smith telling him the core from
their first exploratory drill hole was showing 0.36 ounces per ton
for a depth of 330 feet. At first they actually
thought someone had salted the core, that it was too good to be
true. They immediately drilled a hole 10 feet
away. They didn't even tell Munk. Meikle did the drilling and got
even better results. Other holes were ordered
drilled further and further away and gradually it dawned on them
that the orebody was just what Meikle had
speculated it might be...a massive gold-bearing deposit deep
underground that spread its tentacles all around the
area. Jackpot! Basically, that's the story of Barrick's find in
the Carlin Trend. After adjusting for stock splits ,
Barrick's shares rose from $1.90 at the end of 1986 to $5.20 a
year later, then $10.87 three years later, and
$15.50 two years after that, in December 1992. Then in 1993, it
almost doubled to $28.50 (note: Barrick split 2
for 1 three times in 1987, 1989 and 1992) and the rest is history.
Anyway thought you might like to here some
facts of Barrick's find, since it has been mentioned with RELATION
TO MIQ. Note the first drill hole, .36 opt at
330 feet.

� that was a nice story and I wish they could all turn
out like that. However, it appear's to me that MIQ is
the closest to mirroring this Barrick story and here's why.
Keeping in mind the above events for Barrick Gold, the
following points now relate to MIQ.

1) MIQ's Railroad Project is about 30 miles southeast of
Goldstrike. MIQ has the second largest gold window in
the Carlin Trend located on it's property. The largest is
Barrick's Goldstrike property with 26 million+ ounces and
the third largest it Newmont's propety with 10 million+ ounces. A
gold window is an anomoly where platlettes
have been pushed up within the earth and mineralization is evident
at shallower depths.

2) MIQ has already hit gold reading in 6 zones POD/Bunker Hill/LT
East/EHR/Darkstar, plus there are still a
number of wildcat deposits. The results are fantastic, you can see
them at their website www.mirandor.com. It
appears as if there are tentacles spreading all over the property.
The strongest results are from the POD zone and
the newly encountered Bunker Hill zone, with continued drilling to
come from both of these this year.

3) During the depths of the gold market in Nov/Dec of 1997.,
Kinross Gold agressively sought out MIQ and
signed a JV deal with MIQ. Providing a minimum of $17 million US
over the next 4 years, to develop the
property. MIQ had 6 other interested parties, but decided to go
with Kinross since they would not shelve the
project and results are now beginning to come out for this years
drilling.

4) Their primary targets are POD and Bunker Hill, both sit on the
Carlin Trend Axis (where there are numerous
gold deposits throughout). In addition, these two zones are
intersected North- South by the Pinon-Anticlie axis
which also has great gold deposits throughout. As a mining
professional friend of mine said,"mother nature doesn't
put gold in just one spot and goes away. The fact that they are
locating many zone with stunning grades, makes for
some potential fireworks to come."

5) MIQ outbid numerous major's for the property and paid
approximetly $2 million for it.

6) The Railroad project is I believe historically knows as the
"Circle of Death"., essentially because there have
been a lot of players interested in it, but no one has been able
to put the project together. According to my
sources and rock hounds, Kinross is ecstatic over the project and
in particular the POD and Bunker Hill zones.

At risk of sounding plaintive, didn't FOA yesterday say something about some word from Another?
Also, a rather interesting editorial at gold-eagle reprinted a letter from a Mr.Johnston to his sons a year ago that seems to corroborate a lot of what Another and FOA have been saying--sorry to be tiresome if I am the only one not to have known about it. A/FOA I don't think have mentioned the Japanese in this way but a French editorial in either Le Monde or Le Nouvel Observateur recently hinted darkly that Japan (along with Russia) has in the past several hundred years allowed the West in, learned what they had to offer, and then "thrown the baggage out" so to speak.
Finally, to whomever mentioned it, I haven't been around long enough to have noticed it before, but the timing of FOA's departure and re-arrival and also the mention of word from Another did seem rather interesting along with the IMF and World Bank meetings etc.

Turtle:

Is the editorial at Gold-Eagle titled "The Sting". If not, could you post a URL for the Gold-Eagle piece. I find it virtually impossible to find anything over there...so many pages...so slow to load.

Again, if it is indeed not the same article, let me know and I will post a URL to "The Sting", also very much in line with ANOTHER's analysis; it first appeared in late February, 98. Or should I post the entire essay, here? It is rather long. Let me know.

Just out of curosity, I went back and reread "the Sting". I remember being struck then by how closely it mirrored ANOTHER's thoughts at that time. Upon rereading it now, it am even more struck by how it mirrors what is happening now! For the curious, it can be found at:

http://www.kitcomm.com/comments/gold/1998q1/1998_02/980225.015449.sharefine.html

URL did not work last time. Is this the same one? Maybe it only works from within Kitco.

http://www.kitcomm.com/comments/gold/1998q1/1998_02/980225.015449.sharefine.htm

If this one doesn't work either, I'll post the whole article (if anyone is interested).

yes, it is the same and is at www.gold-eagle.com/editorials_98/birch030498.html
(I have more trouble with the Kitco website).
Dear USAgold,
Any word on Another?

REPOST.........
"Friend of Another (10/8/98; 07:24:37MDT - Msg ID:443)
Is the position of LTCM in the clear?
ALL: A quick note for today. There are several stories that LTCM (and most
other hedge funds) are covering their short positions. They are not! What they
are doing (as the NY
Post article below shows) is further hedging in the paper gold markets to
attempt to control the coming (huge) loses! That will not work as the BIS has
changed the rules".
------------------------------------
COMMENTS: THE ARTICLE BY JOHN DIZARD STATES THAT THEY(LTCM) ARE HEDGING THEIR BETS BY BUYING OUT OF THE MONEY CALLS ON GOLD.....EXCERPT:...."Now apparently LTCM bought
out-of-the-money calls to hedge their
short position, which means that if the
gold price went up a lot, then they had
the right to limit their losses. But it didn't eliminate all their risk.

I understand that J. Aron, the gold
trading arm of Goldman, Sachs, has
been able to cover all or most of the
LTCM short in private transactions, with the intention of limiting the effect on
the already stronger gold market.

So the Long-Term gold episode may
be drawing to a close.

What market participants have begun to
learn, though, is that the real danger to the system doesn't come from the
relative value hedge funds themselves,
which are in truth a very very small part of the financial system, but the banks
and brokers who have been playing
hedge fund on a much bigger scale.

That's why the prices of companies
such as Bankers Trust, J.P. Morgan,
Merrill and Lehman have been marked
down so far.

How many of them have been doing
what is known as the gold carry trade?"
............................................................
PROBABLY MANY AND THEY HAD TO CONTROL THE FALLOUT FROM LTCM,
WHICH IS ONLY A SMALL PORTION OF THE GOLD-CARRY TRADE IN ORDER TO CONTAIN THE DAMAGE. FOA SAYS THIS WILL NOT WORK AS BIS HAS CHANGED THE RULES. "The change in motion by the BIS, concerning gold and the Euro is going to play
them right into the European game plan! Read a few of the last (Thoughts!)
archives at USAGOLD. I may reprint some of the things written here the last".
.........................................................
NOW I UNDERSTAND WHY FOA SAID THAT LTCM IS "ONLY A VERY SMALL TIP OF THE ICEBERG". IF LTCM'S PROBLEMS COULD ROIL THE MARKET, IMAGINE WHAT COULD HAPPEN IF WIND OF MUCH GREATER POSITIONS BY BIG BANKS AND BROKERAGES HIT THE MARKET. NOW IT IS CLEAR WHY THE FRB GOT INVOLVED. WHAT IS THE GAME PLAN?.....MAYBE GIVING GREATER STATUS TO THE EMU BY A STRONGER GOLD BACKING IN JAN. 99 THEREBY A HUGE FLIGHT OUT OF USD TO EMU?.......I DON'T KNOW FOR SURE, WISH I DID. SOMETHING BIG IS IN THE MAKING....TWO ITEMS HAVE TO HAPPEN; (1) DOLLAR HAS TO START TANKING(ALREADY BEGINING)....(2) PRICE OF GOLD IN USD HAS TO RISE BEYOND THEIR CONTROL....ANYONE ELSE HAVE ANY IDEAS AS TO WHAT THEIR GAME PLAN IS OR MIGHT BE? Thank you, Pete
.........................................................
P.S...HOW DO INTEREST RATES PLAY INTO THIS GAME AND WHAT EFFECT WILL THEY HAVE ON GOLD-CARRY TRADE? CAN THEY LOWER LEASE RATES ANYMORE? SEEMS THAT INTEREST RATES ARE GETTING TO THE POINT THAT THE GOLD-CARRY TRADE WILL BE DESTROYED. COME ON GUYS AND GALS(If any), LET'S DISSECT THIS SITUATION...OUR FINANCIAL HEALTH MAY DEPEND UPON IT! WOW!!!!, CAN ANYONE IMAGINE DEFAULTS BY BANKS AND BROKERAGES AND THE ENSUING FALLOUT?

IS THIS THE GAME PLAN?

We all know that there is a JY and a gold carry trade made possible by low Japanese interest rates and low gold lease rates. These rates are still in place. US interest rates , which are the other side of the "carry", are still high enough to continue the carry unless the JY and gold rise in value. The JY has already risen in value. WHY? They are selling the US debt. Convert the debt to US$'s and then to JY...i.e., demand for JY.

Now on the gold side...no rise in price enough to unwind the carry...yet. Bide your time. You can not will this to happen. Maybe the BIS will cause this to occur now...maybe later. I suggest later after Jan. '99.

In the fullness of time...not yours or mine...golds. Relax and enjoy gold at bargain prices. Perhaps it will be your children who watch the new gold market and not you. At least they will have gold...which you have provided by your wisdom. Just as you can never regain your youth...you can not make gold rise.

Tom

PMSP, may God bless your mother. Tom, could it be that the BIS and associates may have been waiting for a crack in the dike(LTCM) to indicate that the stresses were about to collapse the dam? With the advent of the birth of the EMU in Jan, 99, why not give impetus and strength to this birth by changing the rules of this birth with a greater % of gold backing? The BIS and others have the resources to do this. How many nations would flock to convert dollars to EMUs? I would say many as the USAs public relations are loathed by many. This action would have a chilling effect on the $. Is it a coincidence or syncroncity that events are unfolding prior to this birth? I think we have a short window of opportunity to protect our assets, many of which are dollar denominated. Besides physical gold, what other methods would you employ? Thank you for your input, Pete

PS. For those unaware of Toms adage, PMSP, it means "patience my son patience".

If you read and reread ANOTHER and FOAs last 2 posts in ANOTHER's archive, the picture becomes clearer. Hardly anyone at Kitco has the slightest idea of what is unraveling and the causes behind them. I am so convinced of ANOTHERs and FOAs prognostations that I'm willing to bet the farm on them. These are interesting times, yes indeedy. Pete

Pete, TYoung, FOA, Anyone:
It has become almost a mantra among us (Where is Farfel when we need him?) that we wait for the inauguration of the Euro on January 1, 1999 for the real move in gold prices. I seem to recall ANOTHER implying that the European CBs would consider an unwinding of the gold short overhang before then an unmitigated disaster in their gameplan.

I always assumed that was because of some sort of declarations requirement or reserves requirement written into the Maastrict Treaty that makes this so. Or that starting with a dollar strong in gold and bringing about a revaluation would give the appearance of a strong Euro with momentum (as they say in the trade).

Is there some other obvious reason that I am missing here? Would a huge restructuring of CB reserves (in US Dollar terms) that a complete loss of control in the gold market would signify be somehow serious enough to affect the Euro launch? What effect would such an occurance actually have on the Euro's future?

These look like very pertinent questions at this point. At the very lease, a really carefull and detailed explanation would go far in answering the big question troubling us all: "If not now, then WHEN?"

Next up? (To the plate, that is)

Cherished friends, I have several questions that have been bugging me for some time now. (1) Will producers who have their liquid assets in dollars be destroyed by a massive dollar collapse? (2) Will SAfrican producers convert to EMU thereby protecting themselves and be more viable than NAmerican & SAmerican producers? I think you have answered these questions previously and just want to confirm your THOUGHTS. Thank you, Pete

Don't know if the BIS will ever take action. Don't know if shorts will ever be forced to cover. Just know gold is a currency and a lousy investment when paper rules. On the other hand....well you know.

On protecting ones assets...I could employ puts and calls on a straddle, futures contracts with close stops or funds to cover margin calls, gold mining shares beyond a hedge position or Euro denominated bonds. Actually, beyond my physical right now I'm a cash king. Sold my gold mining share hedge on Tuesday...a day early but a good gain. Since I know not if gold will really take off in my lifetime I am content with the physical.

On futures contracts I think any contract is ok, even Dec. ,right now, based on spot @ $305...an order to buy if the contact reaches a certain price means you don't have to watch the market so close and you'll catch the upswing. Also if spot dips again to the $270-280 area hard to go wrong with close stops.

What are my plans...a little futures action preset, buy gold mining shares if spot goes to $280's or $305 and have a preset line to buy physical with a phone call...no questions asked and no waiting. A letter of credit and a good dealer hopefully will work out.

Please remember, I'm not much of a follower, as you know, but being prepared is my nature. If the world solves the current currency crisis...I'm back the stock market. Which I expect to find at much lower prices. Still got my gold no matter what. Yes!

Standard disclaimer...I've been wrong before and will again. Mother was right...PMSP...this gold market can eat you alive if your greedy. Only buy when most others say sell.

Tom

My interpretation of FOA's remark, "That (further hedging in the paper gold markets to attempt to control the coming (huge) loses!) will not work as the BIS has changed the rules" was that the BIS is now buying at $280. This effectively closes the door on the shorts as they cannot cover below that price, which means that they must unwind (eventually) at a loss. Derivitives @ 97:1 mean BIG losses with rising prices as they buy to cover...the rest shall one day be history.

Now that FOA has returned, maybe he will confirm and/or clarify this point.

That makes it clearer yet. Thank you PH, Pete

Is there a list of acronyms I can review?
I'm new to this site.

What does BIS and FOA stand for?

That is indeed a good idea as more and more of "newbies" shall be in need of this education that is so common in this train of discussion. I would be willing to start one if MK thinks that could be posted and of value.
FYI FOA relates to a schollarly and "connected" poster that goes under the handle of "Friend of Another"
Whereas BIS stands for the Bank of International Settlement
I await your instructions, all.
GW

Please be at liberty, my friend. I am happy to see you here, o wizard of cyberland. I will not be here long tonight. Just dropped by and saw my name mentioned. Now I am gone.......vanished in a blink. You do not need my permission to provide much needed potions and cures. The group appreciates your ministrations, as do I. But please no tricks, as we have not defence for a wizard's charms. MK

ALL:
I will (all things willing) be posting and joining the discussion on Sat. 10. Perhaps starting during your 17:00 MST.. The days have been busy with thought. It is my loss that I have not had time to read your posts, but I will before then.
Regards FOA

The posts in this forum are excellent ... quite thought provoking. While a long term bull on gold myself, I have some concerns about the shorter term, similar to those expressed by TYoung the other day.

Consider this: while the US dollar is strewn about the world and the prospect of those dollars rushing home is cause for concern, the amount of debt outstanding is absolutely absurd. Off the top of my head, I believe the numbers run about like this ... US currency in circulation (>50% overseas) - $450 Billion, US govt debt (on and off the books) - $20 Trillion, nominal value of outstanding global derivative positions - $40 Trillion, US consumer debt - don't know a figure but, as I believe MK recently noted in his daily Digest, isn't it odd that personal bankruptcies have recently been at record numbers in this booming New Era (New Error ??) economy.

Now what is the US worth ... if we sold it all ?? The figure I've seen - $20 Trillion.

Folks, we're set up for a serious cash crunch. When this huge debt bubble pops, and it appears to now be happening, the economy will slow ... if not grind to halt. As people are laid off and credit contracts, they are going to have a hard time paying off those 18% credit cards and 125% of equity mortgages. With much of the little savings that exist having evaporated in the stock market, there will be a fire sale on real assets, including gold most likely, as people struggle to raise cash.

On top of this, potential Y2K fears (Y99 actually) may exacerbate the pressure on banks to provide this cash, and they are cash poor, having to hold only about 10% of deposits on reserve. (As Murray Rothbard said, this is fraud, legitimized by govt)

European stock markets are falling harder than ours, so economic troubles lie directly ahead there. With the economy declining and with some tension already existing among the people in these countries over the euro, I'm not too sure other countries are going to have the confidence to load up on this new currency.

My conclusion: it's going to be tricky ... individuals should think hard about what's happening ... to me, it seems prudent to have a healthy amount of cash on hand, with some gold as insurance. If cash does become king for awhile, you can buy gold (and everything else) at rock bottom prices ... if our paper currency crashes and burns, you have your insurance.

I stayed up late last night reading the above. Pumping petro into my car today was an entirely NEW experience. I think I grasp the basic concepts, but I have a couple of nuts and bolts questions:

Who (besides Saudi Arabia- obviously) is collecting on the gold payments? Another said that only some oil producers are in on the 'Deal'. Saudi's neighbors must be, we wouldn't want to ruffle any feathers. But what nations are getting shorted? How could OPEC countries agree on anything if "the cat is out of the bag"?

Who is PAYING this gold co-payment? I mean, does it apply to everybody? Is the US in on this 'Deal'? Is the gold payable on every barrel, or just those sold to particular markets?

When the oil/gold relationship hits the markets, wouldn't all bets be off? Won't the competition for gold have oil producers cutting each others throats? (Thereby lowering the relative price of oil?) Also, what if at this point the oil consumers say "Forget this, we won't play the gold game anymore." The price of oil could go up enough for production of oil in Texas (and others) to be profitable again, but the payment wouldn't have to be in gold. Is this a possibility?

In the book Another says when Japan starts selling US notes, that is the sign that we've reached the critical point in the currency meltdown. I heard that the it was indeed the Japanese who were selling off this week, but it seemed like rumours. Does anybody have hard figures on this?

Best line of the book: "When a thousand hungry lions are fighting for one scrap of food, it is best for small dogs to go hide with what is in their bellies."

Woof.

-GF

TEST

**WELCOME: I would like to welcome all to this FORUM! on gold. I have found the discussion enlightening and challenging. I would like to invite our regular posters to continue their search for the truth on these pages.**

**FIRST-TIME POSTERS: I would like to also encourage observers who would like to become posters to do so today. As an incentive, all first time posters today will receive a book of your choice --either Footsteps or ABCs. Post and claim your prize. Just e-mail us with your choice. This offer is good until midnight tonight. With FOA here at 5 pm Mountain, it should add up to an interesting evening. If you've wanted to ask FOA questions, here's your chance.**

**REGISTRATION: We have had a large number of registrations but there is always room for more. I will be checking the mail box from time to time today and sending back passwords for those who would like to try to get their first post on the boards today.**

**Paragraphs: We now have "paragraphs" to make your words of gold even more communicative.**

**WEB LOG REPORT: We are now over 8000 visits per day at USAGOLD -- up from roughly 3500 just a couple months ago. The visitors and registrations are coming from all over the world. We now have more visitors to the FORUM than the Daily Report which leads me to my final request......**

**NEWS: I believe that a large number of people visit the site to find the latest news on gold as well as world events as they relate to gold. The one thing I find lacking at the site is the posting of news and news sources as events break. If any of our potential posters would like to take upon themselves to get some of the news on the site, it would be greatly appreciated by me, and I am sure the
other posters and observers. The gold market hinges on events. And we need it at the FORUM! Can anybody help us out on this??? It will take more than one.**

Have fun and Thank you. The Management.

"Gold has walked this path before, many times. Now, the way home is blocked. All watch and ask, who are these that must follow a yellow guide? "

The G-7 have closed the Yen carry trade. Think you now, long and hard! To close a contract in Yen, it does create the loss, yes? Yet, a close with gold requires the supplier.
In which direction will the billions move? Free money was supplied to the greedy by nature. Now these gentlemen will perform a task written by others. Truly, only fools would think gold is offered without purpose. For the price of free paper currency be high when returned as real gold! We watch this new gold market together, yes?
Another

Jayne (10/1/98; 07:35:38MDT - Msg ID:300)

Your question:

"To Another:
The NY Times and other papers ran an article on S.A calling on US oil co. to help them develop the kingdom's vast energy reserves. Saudis "desperately need capital to invest in their oil sector to keep the oil flowing" etc. How does this fit into your postings. On 10/19/97 part of the post Only one oil state counts, Gold very important to them, etc... Of course, I am assuming that S.A was the one oil state. Also, I believe you posted S.A. has enough oil for our parents, parents, grandparents. etc.. What is the real story behind this article. What and why does S. A. need US Oil Companys help. How does this fit into the US economy today with the oil for gold deal thats soon to end. Thanks by the way to Another, USA Gold for "book on Another" forum, etc. I've learned so much in such a short period of time."

Jayne,
You have seen the "business of oil" continue all of your days. It will also continue for all the lifetimes of those that follow you. This "business of oil" will always search for capital and expertise for it is this constant search that brings the results of "oil flow". However, we do not confuse the "conducting of business" with the "need for stable currency"!

Oil in the ground walks the quiet path and speaks with the modest voice. The power of this wealth brings not the need for confrontation, as all know this commodity could become a "currency" in and of itself, if needed.

The troubles we find today are troubles of a "paper currency nature" that brings to the forefront the need for low priced oil. Yes, you may extrapolate the order of confluence in this way; "paper currency created thru the creation of debt" then "always the continuation of more debt to expand business and commerce" then " the limits are reached for world trade to repay this paper debt" then "a further creation of debt for the creation of paper money with purpose only to save banks and governments" then "the need for raw commodities (oil and others) to be priced unfairly low for the continuation of business and debt payment"! Today, if oil was priced fairly, in real terms, the dollar/IMF currency structure would not stand.

The basic engine for Western commerce is run with energy, energy from oil! The "wealth of nations" is based on the continuation of business, for it is this commerce that
makes valuable the paper assets (currencies included) held by citizens. This is a common knowledge, little held by western thinkers. They say that it be the paper assets that give value for the purpose of trade. I say, a simple person does stand at the river edge and know from where the waters flow! If the current paper economy does destroy "the business of oil" then, this currency system will destroy itself. It does so today, as a low gold price in dollar terms does balance the value of reserves in ground, but the promise of good "future oil flow" is questioned if paid for in more debt. For as before, when this currency was expanded with "business as backing", today, the lack of alternatives forces the creation of dollars in the gamblers house! I will not hold the notes of a fool for the future of my country. I see our future with a currency from the "House of Europe" that will be used in payment for this future search for oil! You see, this "business of oil" it does continue, yes? Thank You
Another

online.

Goldfly: Hello!
Your question:
Who (besides Saudi Arabia- obviously) is collecting on the gold payments? I don't think we should look at these as payments. Because it is a free open market, anyone can
collect, that's true. But, most don't, not yet! If any large buyer began buying outright, the market would rocket. I think, much of the gold is contained in the form of paper
commitments. The actual gold still rests in the CB vaults. If it was ever officially signed over it would show up on the asset statements of the Euro CBs. (the answer to your "who is supplying gold) That's one of the reasons they don't want gold to rise yet, as the Euro is not available to offer as a repurchase vehicle.
This arrangement is most likely the main reason that the Euro will be a success, no matter what. Without a new reserve currency, the one major oil producer would
immediately reprice oil in terms of a small fraction of gold plus payment in ANY major currency. The ensuing run on gold would cause every world oil producer to join in on this
price set. Only fools would step back and watch their oil sold off for (at the then existing exchange rates) virtually nothing.
We shall see! FOA

is why the metals' response was a non-event. Shouldn't silver and gold both moved significantly higher? I know Gold is manipulated continuously, but even still, shouldn't silver and Gold have moved up strongly? A or FOA, your comments please. Virginian

Hedge Fund Denies Picture Worsens ------NEW YORK (AP) -- The consortium of banks overseeing Long-Term Capital Management took the unusual step Friday of denying reports that the financial condition of the hedge fund it rescued from near-bankruptcy has severely deteriorated.

While the consortium rebuffed reports that Long-Term Capital had depleted almost two-thirds of the $3.6 billion bailout it received from the 14 banks to stay afloat, some financial analysts said it was quite possible that the fund could be facing more problems because of the recent market turmoil.

David Linkley comment: Deny. Deny. Deny. Then deny again.
---------------------------------------------

Russia might aid Belgrade if NATO strikes-general -------MOSCOW, Oct 10 (Reuters) - A Russian general said on Saturday Russia might consider military cooperation with Yugoslavia if NATO went ahead with air strikes over the Kosovo crisis.

"In this case, I think Russia would have the right to full-scale military cooperation with the Federal Republic of Yugoslavia. You cannot abandon a brotherly nation in such a crisis," Leonid Ivashov, head of the Defence Ministry's main directorate for International Military Cooperation, told NTV television. He gave no details.

David Linkley comment: The Second Cold War?
---------------------------------------------
CHICAGO, Oct. 9 (Reuters) - A former Soros Fund managing director said on Friday
that the troubled hedge fund Long-Term Capital Management (LTCM) hurt the United States by raising doubts about the country's
financial market system.

"(LTCM founder) John Meriwether did the United States a real disservice," Robert Johnson told a conference on the Asia crisis organized by the Federal Reserve Bank of Chicago. "The scale (of the damage) to the U.S. and U.S.-type system is very, very large."
-----------------------------------------------
NOTHING IN HIS NAME
By PAUL THARP
(New York Post) Flopped hedge fund boss John Meriwether switched valuable real estate from his name into his wife's just as his Long-Term Capital Management was collapsing.
------------------------------------------------

Goldfly,
The rest of your questions are good, but they are asked outside the context of what will be occurring during that time. A poster on Kitco (I think his handle was AllenUSA) once did a superb job of explaining the dynamics of oil pricing during a currency collapse and gold revaluation. I'll see if I can find it so as to offer it in his words.
thanks FOA

Virginian,
Welcome! Your observation of gold shows how different the market is today from the past. That's one of the reasons we cannot expect the past history of gold (from 1970s to
present) to be a guide for the future. Truly, that era was very good for an investment in gold and the business of gold mining. Today, gold should not be an investment. History
shows that stock equities (gold mining included) or any form of paper wealth do very poorly during massive currency destruction. I think, gold bullion should be purchased as a
currency only!
Yes, gold stocks will move up and down in a tradable fashion for the time being. However, when the real currency wars start, much of the current trading arena will close
from default. During these extreme times, FXC (foreign exchange controls) will no doubt, include gold as a currency alternative. Physical gold purchase, contrary to most analysis, will be encouraged in America as an alternate form of wealth (401-K or retirement savings) because it will redirect money from going into the Euro. It will, of course be at a much different dollar price from today!
I hope gold does not go up until the Euro arrives. To date it is still in control. But, the Asian (and China) problem have come onto the stage much more quickly than anticipated. I expect it will rise through $320 in a week or so, but $360+ would be a disaster. We shall
see. Thanks for the thoughts. FOA

Cold war? HELL NO!!!!

THIS IS WAR brother.

If the Russians move in with even just some anti-aircraft units they will effectively be at WAR with NATO. If it doesn't go beyond that level, then it can be contained. Even if a couple of planes get shot down and all that. But this is REAL SCARY......How do you feel about the smell of Napalm in the morning? What do you think about the POG the next morning?

Woof -GF

Friend of Another: Welcome back!

Your remark: "I hope gold does not go up until the Euro arrives....it will rise through $320 in a week or so, but $360+ would be a disaster" is a thought I remember also from the thoughts of ANOTHER.

Would you mind enlarging on it enough to explain why a rise beyond $360 "would be a disaster"? A disaster for whom? What would be lost in such a disaster? And by whom? Anything you could say about this matter would be enlightening.

Thank you for considering this question from one of "far simpler thought" who grapples with these questions without proper foundation and understanding of financial matters.

Thanks for the replies. I have to admit: I'm on the outside looking in. I do try to comprehend the end game senario, but honestly, I can't take the time encompass it in my mind.

I'm a computer geek. I use to look at Y2K and be nervous. Now I look at the Euro and shake my head. Then I look at oil/gold and wonder.....

And again that line comes back to me:

"When a thousand hungry lions are fighting for one scrap of food, it is best for small dogs to go hide with what is in their bellies."

Woof.

-GF

Another: Thank you for responding to my question but.... I found the answer to be "over my head". As just a layman who wandered onto this site and one who is just beginning to understand all that you have written in (book), hedge funds, gold, its very difficult to digest and decipher. I'm sure many are "lurking" and not posting due to the in-depth and heaviness of the discussions. But then again this economy in itself is a heavy mess. My beliefs are "No question is a stupid question" and continue to ask until you understand it in "simple terms". Please keep posting,eventually I will understand it. Thank goodness for the Webster dict. I have put your answer into my thoughts of what you said. Please correct me where I am wrong.
Paragraph one: "business of oil" As in any type of business
(country does not matter) such as article said S.A., owners of businesses seek back up, capital for their ventures, etc
to keep the business running and eventually obtain a profit
Oil being no different, drilling, etc.
Par. two: Oil in ground: sitting in the background "gold for
oil deal" as explained in book. "I think I get it".
Par. three: Paper currency... Countries buy US$; buy more debt, US$, to expand their countries. Countries must pay back the debt to US. Purchase more debt, us$, to save the
worlds banks and governments.
ARE YOU SAYING S.A. and/or other oil states choose not to be
paid by US Treasuries, bonds, dollars, gold leases, etc. You
choose to go with the Euro come 1/1/99. How long after that
do you see the US in major trouble? What do you choose for
payment from the US for the purchase of Oil come 1/1/99?
Now on to a totally different subject. Upon reading all the
postings many individuals are so concerned as to where to put their money. What to buy? gold coins, bullions, options, futures, long or short it. Don't you feel that as
Americans we should be looking at other ways of survival besides buying gold (which I agree upon).
From what you say, the US could be in major trouble. Why not invest part of an individuals money into foods, and other commodities to survive. Look at Russia. Could the
US get that bad? To all, thanks for this site, and your thoughts, I'm addicted every a.m and p.m. I WILL understand all of this.

Michael (USAGOLD),

I saw your Market report on 10-08-98 with the reprint of Reuters "Dollar could followFootsteps of emerging countries". Alfons Verplaetse (BIS) told it as he saw it. Isn't it strange how the perception of an alternative currency has moved so slowly for so long. Now every investor is trying to access the impact on their assets. We have never in modern history seen a move from one currency system to another. The rush to establish a Euro position will shock the financial system far more than the oil embargo ever did.
Because the majority of wealth is still held in dollar terms, the loss in dollar assets may prove to be The Event of the next 100 years! I think, with the support of oil producers, Europe may become an island of economic prosperity, even greater than the American experience. The next several years will prove the value of real assets for anyone outside the Euro arena. It will appear much to the typical American, looking in as it appears to the
typical Mexican looking across your Rio Grand border. Many analysis think this could never happen! The same was said of Russia, Korea, Asia and even Japan in the late 1980s.
A dynamic period lies before us! FOA

I have to admit, I love this phrase. ASB...NASB...? We wait and watch.

Heck, I'd like an idea of what to do other than cash and physical...can't bet the whole farm on any outcome. Gold is beautiful...Yes!

Back into RSA shares next week.

Tom

Aren't we the Humble Bunch? Well it's true, nothing wrong with a little self-effacement.

Bear with us Another and Friend!

Woof. -GF

AN INCREDIBLE ANALYSIS FROM JAPAN�S "THE WEEKLY POST"

TITLE: FINANCIAL WAR BETWEEN U.S. AND JAPAN

Japan and the US seem to be in World War III. The US won the Pacific War, Japan won the industrial war of the 1970's and 1980's, and the US is winning the financial war of the 1990's using new weapons in the financial markets. Will Japan lose?

The Weekly Post Special 2: Financial War Between US and Japan

1. Morgan Stanley's Internal Document Reveals Scary Situation

The Weekly Post obtained a surprising document on the situation facing Japanese financial institutions from Morgan Stanley in Tokyo.

The Morgan Stanley document of September said:

-- The Japanese government is trying to avoid admitting that LTCB is bankrupt and they are trying to bury the issue through mergers and by transferring its operations. If they admit to its bankruptcy, it will generate a huge loss.

-- The total bad debt of 19 banks has reached $536 billion.

-- If the Nikkei Average hits 14,000 yen, 17 banks other than Tokyo Mitsubishi Bank will generate losses in latent profit and at 13,000 yen, all 19 banks will show losses in latent profit.

2. Morgan Stanley's List of Banks That Will Go Bankrupt

If banks have to allocate a 40-percent allowance for default, which is estimated to be reasonable for covering bad debts, 12 banks will face bankruptcy and 7 banks
will survive. The banks that will survive include: Industrial Bank of Japan, Daiichi Kangyo Bank, Tokyo-Mitsubishi Bank, Sumitomo Bank, Sanwa Bank, Tokai
Bank and Mitsubishi Trust Bank.

The twelve banks expected to go bankrupt include: Long-Term Credit Bank of Japan, Japan Credit Bank, Sakura Bank, Fuji Bank, Daiwa Bank, Asahi Bank, Mitsui Trust Bank, Sumitomo Trust Bank, Yasuda Trust Bank, Nippon Trust Bank, Toyo Trust Bank and Chuo Trust Bank.

David Linkley comment. Huh? World War III?

So do you think it reasonable for non-Europeans to establish a position in Eurocash (Is this possible? I guess I could hold Dmarks or something) or futures perhaps?

But then the USG would likely move to take that away too, wouldn't they?

Everywhere I look I see hungy lions.....

Woof -GF

all of this...you seek to understand the future...that which is not yet in being can not be understood. Ain't no harm in trying ...do not feel alone, I'm guessing just like you.

Could it get that bad...yes. Not something the USA has seen since the 1770's and the civil war. Let's see 1770's...1860's...1990's???? As is said in other places...got g,g,g and ammo. Not pretty thoughts.

Perhaps all will be well...just in case, buy some gold.

Tom

That was very Anotheresque! Bravo!

TYoung: Thanks for responding! But and I mean but, did you
understand all of what Another responded? If yes, please explain to me. My background is not economics or finance!
I am really trying to understand all of this. Can't remember who just responded to your answer to me. Bravo...
I would love a response from you as to anothers answer to me
as well as maybe from FOA or Michael. Thanks

PH in LA , Hello!
The $360 question is a difficult one to explain. I'll try. If you remember, after the Gulf War, gold began a strange (not understood) drop through the first part of 1993. About mid to late 1993 a group out of Asia began buying gold, real gold. It may have been a legendary trader out of Hong Kong or some other group in China. It was thought that they had understood the implications and reasons for the falling dollar price of gold. Their
buying drove the price into a range of approximately $365 to $390 for several years. At one point this buying of physical and paper had leveraged them into a cornering of the
market to some extent! The offtake was incredible. This is where the political intrigue comes in that I am unsure of? This buying (and leveraging) threatened to unhinge the
delicate balance of valuing oil in dollars, through gold. Even though the buying was done with real money (paper not credit) and much of it was based in the hand over of HK to
China, if allowed to continue, it would have driven gold sky high. With the EMU still in trouble with no commitment to price oil in Euros, a run of gold could have evoked a
reprise of oil in gold terms. In early 1997, the BIS (the Euro group portion) came to some agreement about the Euro and oil. In return, the BIS smashed the Asian economy and
unleashed much of that gold. Few people grasp this, but I offer that if the BIS could take down Russia, a world nuclear superpower, Asia was no problem. It is at this point that we begin to understand the real power of a union of oil and the Euro (BIS).
To answer your question, a run in gold past $360 would mean this union has split and a firestorm of economic destruction was at the door. After all, it is oil that has backed the dollar these last many years, waiting for an alternative reserve!
PH, I cannot possibly begin to discuss this in one day, so I hope this helps. Thanks FOA

Pretty simple...the West believes our currency is the basis for our prosperity. The oil states do not find favor with the debt-based currency since it is not wealth but an illusion. Simply put, it is not a stable currency. Oil producers will seek a currency with gold as its basis, not debt. Duck if you live in the USA.

Tom

If the stock market/credit bubble pops and the world economy falls into a depression, who are the oil countries going to be selling their oil to ??

Some oil countries, Mexico for instance, are dependent on selling oil ... they have to produce to survive ... if demand collapses worldwide in the way it has in Asia, there will be a tremendous glut, driving prices down much further, in US$ or any other currency. Or am I missing something ??

Jayne, Hello to you, also!
I must address something here. The book, "In The Footsteps" was written by Mr. Michael Kosares, not Another. I have seen only minor parts of it, sent to me by others. I
am also 95% sure Another has not seen it, but I cannot be sure. Michael has used his many years of experience to interpret the Thoughts! message and I am told it was done very well. As time marches on, no doubt world events will make it a worthy reference.
Your question of payment for oil, in what? I don't think that the exact day of Jan 01,1999 and the official start of the Euro will change all things. We will more likely see the
beginnings of a progression of events, moving the world economy away from US$ based settlement. A good many analysis have picked up on the Another line of reasoning and are
predicting a rise in gold for 1999. I don't think they understand what is before us as they are advising clients to hold US treasury bonds and gold stocks. That should prove to be a confounding combination for anyone looking for safety. In much the same way as investors invested in gold for a trade, then found that the markets did not move with
historic supply and demand features.
Even Pete (a poster here), may bet the farm on a Euro proposition. Pete, please, allow only ten or twenty percent of your acres of corn for gold, it will be enough!
Jayne, if you have gold bullion, then do as TYoung, watch and learn. Even the strong Mr, Young will swim with a strong ocean tide, as will we all! Thanks for your thoughts!
FOA

Hi Jayne. My post congradulating TYoung was a bit of a spoof. But what he is saying is correct. You can't understand what doesn't exist -the future. Another is given to using aphorisms and even some mystical dialogue to make his point, thus my post.

TYoungs succinct synopsis of post #508 is good too. As for the rest: don't try to hard to understand. This is a great practice of eastern mysticism- even in Christianity. Let go and flow with instruction. Absorb what you can and let the rest go by. Come back to it later and read it again. Realizing all the time you will never, in this life, completly understand _anything_. If you think you do, well...... you're going to be suprised!

(Uhmm- back to the topic.)

Also following some of the acronyms can be hard. Excuse me, trying to get someone's attention...... GANDOLF!!! YO!! WHERE'S THE LIST????

Anyway, I could also recommend In the Footsteps of Giants. Michael does a commentary interspersed throughout the posts of Another. Maybe you could start by reading Michael's commentary on a section and then go back and read the related posts.

Hope this helps

-GF

Turbo, what if the leading (and "only important")producer decides to take all his barrels home and not come out to play? Does the glut go away? In spades?

-GF

I hate typos.

Turbohawg: Re Your Question (10/10/98; 21:06:04MDT - Msg ID:509)
"If the stock market/credit bubble pops and the world economy falls into a depression, who are the oil countries going to be selling their oil to ??"

I'm back at the discussion, now, after a trip to the grocery store to buy provisions for a three-day sail tomorrow to the Island of Catalina, off the California coast. I went to the store by car, which is how we here in Southern California go everywhere. There will always be demand for oil (gasoline) here. No one here ever goes anywhere unless it is by car. I offer this little anecdote as illustration of ANOTHER's remark tonight "The basic engine for Western commerce is run with energy, energy from oil! The �wealth of nations� is based on the continuation of business, for it is this commerce that makes valuable the paper assets (currencies included) held by citizens."

Thus, in a very real sense, oil is everything to our western civilization.

There will always be demand for oil, here. Sometimes a little more demand. Sometimes a little less. But as long as we have civilization (as we currently know it) we will need/use oil.

Taking the pricing of oil out of dollars will help insulate the producers from the instability in pricing that is the result of our currency system. I imagine that to the producers (who think like ANOTHER) a depression or world economic slowdown would seem a very temporary event in the wide scope of history.

Another- Post:488
"I will not hold the notes of a fool for the future of my country."

I will not.....

-GF

turbohawg, Welcome!
I would like to build on Goldfly's and PH's posts.

Much of the oil produced today is high cost in dollar terms. Even now many producers make little profit. This fact is not lost to the middle eastern suppliers as they are able to pump today with large profits. True, they posture their loss of market share and show how they are going broke, but they have reserves that can supply twice the current daily
amount if needed!
To understand what is about to happen, one must see that in hard currency Euro terms, oil is going to drop in price (economic depression or not)! Yes, far below what the
marginal producers can supply for. They will indeed have a choice, sell oil in plunging US dollars, or not sell at all in Euro terms as it will be below their high dollar production cost! Much of the worlds inefficient goods production is a result of maintaining the high dollar production cost oil supply. This is retained for the purpose of creating a strategic oil supply for the benefit of American Dollar stature.
You see, the eastern producers always could supply the world, if only the world would pay in an honest currency! Falling oil prices in Euros will create a tremendous need for the world to sell goods to Europe to receive Euros. Oil purchased with Euros as a result of commerce and trade will drive the world economy in a way few envision.
America will find that they must trade with Europe as only oil purchased in Euros will allow for competitive pricing of goods and services. You will see a hyperinflation of the
dollar standing next to a full deflation of production costs in Euro/Gold terms. A new world indeed! FOA

FOA:
Fascinating reading, your answer of (19:17:02MDT - Msg ID:496). I'm sure many others in addition to myself would look forward to returning to it another day when we have more time.

Your very brief specific answer to my question, "a run in gold past $360 would mean (that) the union of oil and the Euro (BIS) union has split..." reminds me that someone returning to the US from vacation mentioned that their Italian waiter had remarked in passing on the commitment of oil to the Euro as a commonly-held belief in that country. It strikes me that knowledge of this is very restricted here in the streets of the US. In fact, even among those who one supposes think of such matters, such a concept would by no means be accepted without serious reservations. Can you comment further on this commitment by the oil producers to price their product in Euros? To what extent is it known to be a formalized agreement? Or is your knowledge of it more on the level of supposition?

At another moment, you mention in passing "if the BIS could take down Russia, a world nuclear superpower, Asia was no problem". Your perception of the BIS taking down Russia is another that is not widely understood here in the US. You may have noticed in reading through the posts here at the USAGold Forum while you were absent, that we revisited the essay "The Sting" in which it is asserted that the BIS did indeed bring down the Soviet Union. To what extent would you agree with the other theories described in that essay? And is it really established that it is the BIS that has smashed the Asian economies? This also would be another fascinating topic for another day's discussion.

I hope you are preparing and planning to write a book on all this sometime soon, when everything has finally played out. It appears that you are aware of very many undercurrents that are not well-understood here in the US and that are probably not intended to be ever well-understood by us on the part of principals in the drama.

Thanks for the discussion. I will be back to read everyone's posts at another time. Good Day All

On the one hand you say that the Asians were purchasing gold in amounts that were disrupting the price beyond what someone expected thereby the BIS destroyed their economy so that they were forced to sell the gold they had been accumulating and to put a stop to the acceleration of price above $360/oz. On the other hand you have been stating that recently the price has been plunging below production costs and BIS reserve valuations by the actions of the iceberg(Banks, brokers, funds) use of derivitives. This is where I get confused. Many times you have stated that the price of gold should be held between the $320-$360 range and when it moves either lower or higher than this range that the powers that be are losing control; that the Eastern oil interests were willing to accept the US$ as the oil currency of choice if they could maintain this range. Now you state that the oil interests are going to support the Euro as the currency of choice for oil because the US$ powers cannot control the price of gold within an acceptable range. Can I assume this is because massive defaults by paper traders(ICEBERGS) is bound to happen if the price moves under or over the range thereby threatening the oil interests ability to claim their rights to gold? I have many other questions bugging my simple mind and will ask later. Thank you for putting up with my questions and for your answers. P.S. I was just using the phrase "BET THE FARM" as a colloquial. I am too conservative and chicken to go that far. Besides I am not a greedy person, just trying to protect what I have worked for, for a lifetime, for my family and myself. Pete

I guess I'm taking the devil's advocate role here. As I said in my first post today, which seems to have disappeared as more and more posts came in, I'm a gold bull for the long term. However, I think there's a pretty good chance that it will go lower before it goes SIGNIFICANTLY higher.

Given the outstanding debt in the world and especially in the US, and given that the US is by far the primary consumer of oil, those numbers I posted suggest to me a historic cash crunch on the horizon. And whether you're selling oil or anything else, well, you can't get blood out of a turnip.


Turobhawg
Turbo, what if the leading (and "only important")producer decides to
take all his barrels home and not come out to play? Does the glut go
away? In spades?

Goldfly, what do you think the other producers would do ?? They, of course, would be ramping up production to meet a falling demand. What if Microsoft decides not to play ?? Do you think other software makers would rapidly increase production and increase market share ?? And this is in the context of a collapsed economic system ... where demand for everything falls as people lose their jobs and money gets held for the most basic needs. How much gas is a person going to consume to drive to a job he no longer has ??

Oil demand in a depression.

I imagine that to the producers (who think like ANOTHER) a depression or
world economic slowdown would seem a very temporary event in the wide
scope of history.

I agree ... and it's during this time that one should be able to back up the truck and shovel in the gold.

turbohawg (10/10/98; 21:06:04MDT - Msg ID:509)

Much of the worlds inefficient goods production is a result of
maintaining the high dollar production cost oil supply.

Yes, and much of the world's inefficient goods production is also due to malinvestment as a result of crony capitalism. The US has led the way with govt subsidies and a convoluted tax system spliced together to dole out favors, and we have the debt to show for it. The Asians learned well.

in Euros will allow for competitive pricing of goods and services. You
will see a hyperinflation of the
dollar standing next to a full deflation of production costs in Euro/Gold terms. A new world indeed! FOA


Very possibly the end result ...

Pete,
What is shown here is the blueprint or chart of intentions. The changing of a world currency system is a tremendous political event. I offer the course and bearing that was set. It will be the captains of state that must sail the ship. The winds and currents may blow us far from the plotted journey, but the port of call remains the same.

I will use your questions in parts to explain.
Your words: --------"On the one hand you say that the Asians were purchasing gold in amounts that were disrupting the price beyond what someone expected thereby the BIS
destroyed their economy so that they were forced to sell the gold they had been accumulating and to put a stop to the acceleration of price above $360/oz. On the other hand you have been stating that recently the price has been plunging below production costs and BIS reserve valuations by the actions of the iceberg(Banks, brokers, funds) use of derivatives. "
Pete, In the currency world everything moves on perceptions of how current events will impact future flows. The same was happening back then. The Euro Group had never
thought that Asia would become such consumers of gold. They had always brought throughout the years, but never in these amounts. Something had changed. The Euro CBs had wanted to bring gold into the $320 - $360 range and keep it there until the new currency arrived. Remember this was the range they brought it to by early 1993 (check your charts for clarity). In this range the dollar looked good (gold could be purchased in long term commitments) and most importantly, much of the world production was still online. Mine production was important as that (in theory anyway) was what fed the replacement of loaned out CB gold.
You had on one side Super rich Asians (including the Central Bank of China) buying gold because they didn't want to be caught in a Euro world holding Dollars. On the other
side we found oil money that were waiting for a clarification of Euro policy, regarding gold. Any rise above $360 (prior to Euro launch) was seen as a loss of control that would create an every man for himself atmosphere.
That was then, a period from mid 1993 to late 1996. In early 1997 the Euro CBs attempted to lower gold and it touched off a buying spree that was unheard of! The lower
it was sent the greater the buying. Even LBMA had to openly show what was happening. Eventually, the BIS worked with China to control Asia by including them in on the Euro sphere. China had / has little use for it's Asian neighbors and the American Political / Dollar influence on the region. Besides, all of Asia was long sense hooked on a US trading partnership. You remember the APEC conference in Seattle. The American economy had "bet the farm" on the Pacific rim and turned a cold shoulder to Europe. Jump to the present and we witness the "Master Plan", as Another calls it. The BIS smashed Japan and it's neighbors and has left them holding a ship load of Dollar assets only months before a Euro launch!
That sector of the competition is done for. Now all that remains is to control the traders and speculators that have jumped onto the "Yen carry / Gold carry trade in the mistaken notion that gold is about be phased out of international finance. Well, you can see the results. They forced Mr. Greenspan's hand into crushing these players. I can tell you he never, ever wanted to lower rates as a dollar crush will be the result (it has started)!
I have jumped around a lot here, but I think you see why the influences on gold creates an atmosphere of confusion regarding "intent". Actually, some other things have happened in the last few days that will come out soon. I hope Another will lead the way on this in that I may commit on them. It's extremely interesting. Thanks Pete, I will be watching and posting here. FOA

So we have physical gold and a bunch of "cash"...actually numbers on our account statemnts. I've been just as concerned as you, especially since I sold my gold mining share hege last week.

It seems to me that I need to turn the numbers on my bank and brokerage statements into other "assets". Now what are my options? Physical PM's...already got those and can't put all your eggs in one basket. Short term treasuries and money market accounts...perhaps a little in short term treasuries. What about the rest? Got me but I think RSA mining shares are where I'm going...for more than a hedge. Staying away from the regular stock market for now...looks like further downside after a rally early this week.

Frankly, I'm at a loss to predict which way is best. Might even buy more CEF for the IRA even though the NAV is well below current price. When I bought it this was reversed. Maybe that is more telling than anything.

BTW...do you get Buckler's Privateer? His annalysis seems really on point. Unfortunately, he does not "do" investment alternative advice...wisely.

Tom

From the esteemed "Donald" at Kitco...what a find...and the first country to turn to gold shall be saved...IMHO.

Here is the URL http://www.russiatoday.com:80/rtoday/business/news/98100906.html


Tom

MOSCOW, Oct 11 (Reuters) - Russian Foreign Minister Igor Ivanov played down any suggestion that a NATO attack on Yugoslavia could renew the Cold War, but said in an interview aired on Sunday such action could lead to
international chaos.

"The Cold War then was separation of the world into two blocs, into two military-political aliances or blocs, confronting each other," Ivanov told Russian Television in an interview recorded on Saturday. "Today there will be no division of the world into two or three blocs as a result of the act."

Defence Minister Igor Sergeyev warned a week ago that NATO military intervention would mean a return to the Cold War,
and other Russian officials have also stepped up their warnings about such action.

"What can happen and what is very serious will be the violation of the legal basis on which (world) peace rests," Ivanov said in the Sunday interview. "It is very dangerous as we can enter a period of international chaos, states will solve border contradictions with force."

"The consequences for everybody can be very difficult," he said.

Russia has said any use of force against Yugoslavia would violate international law if it was carried out without the
approval of the United Nations Security Council. It has also said it would use its right of veto to oppose any moves at the U.N. to authorise military strikes.

David Linkley comment: NATO attack = Huge future budget deficits

The theory that Saudi Arabia and other mideastern oil producers will base their product on the Euro dollar is interesting, but fraught with possibilities of failure. The Euro dollar at this point in time is unproven and may have no more cohesion than OPEC. I submit that to put us greedy U.S. consumers at risk is dangerous. Suppose we decide to drop a few hundred megatons on the mideast to get their attention. Who is going to defend them? A bunch of broken Soviet satellites run by alcoholic thugs? No, I imagine the "Royal Criminals" running Saudi Arabia and other oil producers will stay in bed with the U.S. out of necessity of retaining their stranglehold over the masses. Never forget that the U.S. was founded on genocide and we were the first to use nukes and would not hesitate to do it again.

I hope RSA mining shares are a better bet than NA shares. I just acquired some sgoly and rangy. The Rand has already taken a hit whereas the USD might be due for a further substantial devaluation. FOA indicates a squeeze on the USD is in the making and current events seem to validate his thoughts. If a 1/4 drop could cause such a drop in the dollar, imagine what could happen if AG is forced to make another more substantial cut. PMSP, time will tell. BTW, maybe this whole scenario is a fake like the Moon landing. He He. Pete

I think that the oil producers will hedge their bets and carry both ; at least until either the dollar or the euro appears stronger. At first, I believe that they will be forced (by the Europeans) to transact in Euros. The Europeans will want to show legitimacy of their currency as soon as possible; as they are trying to do in their own markets now. It's likely that the dollar will be retained as a safe haven but the Euro will begin to take on a lot of the weight as a transactional currency. The use of nuclear weapons by the US on the Mideast is pure folly and to equate the present day with WWII is not reasonable. If the dollar does go the way of Thailand than oil could become a defacto currency. I would expect that the fall of the dollar will have an extreme effect on the Europeans as they currently use it as collateral. Does that mean that they will dump Treasuries soon? Any such thing would have to be done gently. The US is still the biggest consumer of the world and it does the Mideast and Europe no good if they don't have a market for their goods.

Australian Financial Review reports:

"A secret agreement between the world's two economic superpowers, Japan and the US, lay behind the sudden dumping of the US dollar. The 15 per cent free-fall in the dollar against the Japanese yen over the past week has opened the way for the Bank of Japan to begin a massive money-printing exercise to rescue the nearly insolvent Japanese banking
system. But it is a high-risk strategy that could threaten the US role as the engine of economic growth and kill any chance of a recovery in the Japanese economy. It may also threaten a new wave of financial contagion triggered by the
sudden dramatic unwinding of highly leveraged positions in world capital markets by hedge funds."

Full story at http://www.afr.com.au/content/981010/index.htm

David Linkley comment: I knew it!

A tie in with the Australian Financial Review revelation is FOA's post early this morning:

***Eventually, the BIS worked with China to control Asia by including them in on the Euro sphere. China had / has little use for it's Asian neighbors and the American Political /Dollar influence on the region. Besides, all of Asia was long sense hooked on a US trading partnership. You remember the APEC conference in Seattle. The American economy had "bet the farm" on the Pacific rim and turned a cold shoulder to Europe. Jump to the present and we witness the "Master Plan", as Another calls it. The BIS smashed Japan and it's neighbors and has left them holding a ship load of Dollar assets only months before a Euro launch!***

There is a complexity here that stretches the imagination.
That early morning post by FOA in response to Pete may have been the most important in what turned out to be an interesting SATURDAY NIGHT at the FORUM! I would assume under the circumstances that we will see futher Treasuries dumping next week??

At all previous financial crises a war has occurred which then pulled the various combatants back into a stable configuration. Its not being planned , its just natures way of applying the laws of complexity theory to us irrational humans. Seems that Kosovo is shaping up to be the fuse for the next conflict. Chaos theory also shows that having a two superpower at loggerheads configuration is much more stable than one. When all is said and done the only store of wealth that has and ever will continue to be accepted is GOLD !! .
It just takes time for the population to run out of options.

$299.00US. US Stock market open in the AM, looks like bonds are shut down for the day. Canadian's celebrate Thanksgiving, so their markets are closed. Looks like postings picked up in the PM today. No clear trend in December gold for now, just trading level for now. This is a good consolidation level for future rebound higher. Let us see if it holds for a few days.

David Linkley,
The drop in the dollar against the Yen does make one wonder what happened? We had almost every Major hedge fund in the world positioning into derivatives trades that would benefit from a rise in US rates and a further fall in the Yen. Billions (some say trillions) placed on bets that used low cost ( almost free?) gold and / or low cost (almost
free?) Yen to raise the gambling money. Speculation in the American markets had reached a level equal to the Japan bubble and the Fed lowers rates?? Yet the Yen carries rates of .25% +/- with it's banks going under and every investor worldwide runs into this currency in TWO DAYS to drive it up???
It makes one think that a door needed to be shut very fast so as not to let something out?? Well, the somethings are now locked in nice and tight with a lot of wealth needing to change hands to close the bets made with that, free money! You know, LTCM was a well connected group that many others emulated for the very reason that they were, well connected. Now, it first appeared that these gentlemen were reprimanded with lower US rates because they acted so boldly. In some quiet circles it is still seen this way. But the speed of the event makes me think that the Hedge funds positions were correct as was the information they acted on. Was some leverage applied to Mr. Greenspan and Mr.Yen to
force a quick resolution of their problem? Perhaps a problem of larger scope and importance was seen over the horizon?
This I do know. To cover the open gold positions will require far more than simple option strategies as loss hedges! We may enter a pricing storm for gold that will see it's value literally all over the map! The possibility of the large up and down moves may wreck many portfolios that have strayed from the simple action of buying plain physical bullion, without leverage. I offer this as a fair consideration for the simple investor / saver. We shall see. FOA

Thank you for your response. Asia being smashed as you say and being out of the equation, then the master plan I assume is to smash the USD prior to the EMU launch. Does this mean that major players(Japanese, Europe, Chinese, etc.) will be dumping the USD for EMUs? That the Western Alliance is due for a rude awakening shortly where the USD will have to be defended with higher rates? Can it be possible that we(USA) will be denigrated to the position of peons by an upcoming massive devaluation of the USD? Will the crazies resort to war before this happens or is it a lost cause because we no longer can wage war as we will have lost to many gold reserves already (or will they renege on their committments throwing the world into chaos)? What a dreadful thought. THE SINS OF THE FATHER(GOV'T, POLITICIANS) ARE VISITED UPON THEIR SON(THE PEOPLE). Thank you again and my best regards to ANOTHER. Pete

I've been away for a couple of days, there sure has been some heavy discussions going on! BIS bashing goverments and all. It'll take awhile for all this to sink in.

Most analysts seem to think that the big hedge funds (LTCM etc.) are/were short US treasuries & gold at the same time. This does not make sense to me because the historical evidence (charts etc.) seems to show that gold rises as bonds fall. So if they (the hedgys) were expecting US rates to rise (ie bonds to fall) why would they be short gold? Maybe they believed the promoted line that gold had become impotent and needed a shot of Viagra ( I have no idea if I spelled Viagra right but it made me laugh when I first thought it!)

...December gold sets a trend going into a short trading week for US bonds. Could this be the weeks trend? This is a positive to enter a new week.

Bonds closed today. US stocks open. Canadians closed. Overnight Dec. gold now $298.80.

Street rumours saying US stocks up today, gold stocks maybe down. Yen stronger. Japanese shopping day (whatever that means). Some analysts figure that earning forcasts are already factored into the market. Today's unbalanced trading day with bonds closed could prove interesting. No chaos theory events known at this time.

Note: This is part of an article about Russian imports. It also has a bit about the new gold coin. I place it here as a thought about how gold can take the place of other metals (silver) as money. The new Russian coin will have a gold content of about $6.00 US. As we see here they did not use silver for there was no need to do so. Gold can be placed into coins in amounts of a few cents US if needed for small exchange. Food for thought?
-----------------------------------------------------------

October 10, 1998
Russian imports plunge
Financial crisis means consumers can't afford most imported goods!
Leslie Shepherd - Associated Press

(partial reprint)

"The Kommersant business newspaper said Friday it had learned one proposal under consideration: minting a gold coin to raise money to pay overdue wages and pensions, as well as debts on government bonds.
Kommersant said 22 tons of the Central Bank's 550 tons of gold reserves would be used to raise 5 billion rubles, or about $316 million.
The coins would have a face value of 1,000 rubles, or about $63, and 5,000 rubles. But they would contain only 10 rubles (63 cents) and 100 rubles($6.30) worth of gold respectively, the newspaper said."

--------------------------------------------------------

Hey, me too w/ the DA stuff. If you saw my question to FOA earlier on Saturday, I was talking about production in Texas ramping up again. But really, Saudi is THE major player here and other countries couldn't just build the needed facilities overnight.

Software as an example doesn't really work. I could write a program today and replicate instantly and boom, MS is out of business. But w/ oil production your talking months and years to plan and build. This is true of any large-scale industrial enterprise.

As for consumption, surely there will be a decline in demand but the wheel of industry will roll on. I think employment in the US was at 75% even during the Great Depression. There won't be complete malaise in every sector. If there is then we're all dead and it won't matter. Of course Y2K could do it to us, but that's another issue. (I keep getting images of 'Mad Max' in my head- empty desert highway, a lone car......)

Keep the ideas coming. If one of us happens to hit on the right scenario, in a few years we can tell everybody else: "I TOLD YOU SO!"

-GF

<>

Is this so? Maybe it's just me, but I wouldn't care for a coin that was one part gold and 999 parts cheap alloy. It wouldn't be worth the effort to melt down for retrieval of the gold content. If the gold isn't reasonably accessible, what good is it?

I know there has been a big discussion on minting small gold coins at Kitco, but I haven't been paying close attention. Can anyone set me straight on this?

-GF

Look to the U.S. junk silver coins for your answer. When the gold and alloy value of small percentage gold coins are worth more than face value they will be hoarded out of circulation, and traded like junk silver coins.
If you want pure gold you buy it with your coins, or trade for it with your out of circulation alloy coins.
I would welcome coins with a small amount of gold, would have to be better than the slugs in my pocket.

Look to the U.S. junk silver coins for your answer. When the gold and alloy value of small percentage gold coins are worth more than face value they will be hoarded out of circulation, and traded like junk silver coins.
If you want pure gold you buy it with your coins, or trade for it with your out of circulation alloy coins.
I would welcome coins with a small amount of gold, would have to be better than the slugs in my pocket.

Look to the U.S. junk silver coins for your answer. When the gold and alloy value of small percentage gold coins are worth more than face value they will be hoarded out of circulation, and traded like junk silver coins.
If you want pure gold you buy it with your coins, or trade for it with your out of circulation alloy coins.
I would welcome coins with a small amount of gold, would have to be better than the slugs in my pocket.

Test

ALL
Can anyone help me understand how Foreign Exchange rates are determined? Recently the $US fell heavily against the Yen, which looked suspiciously like it was agreed upon between Rubin and his counterpart. This then seemed to have an influence on the price of gold in $US. If it were an agreement between those two guys, mechanically how was this done? By ageeing to let the Japanese sell a bunch of US bonds? I can see it if that is how it is done. However, then the DM changes also with respect to these two currencies as well as most others. It seems terribly complex. Does anyone know who does the new calculations and does it start off by Rubin and his counterpart making a deal? If not, how? Thanks for any enlightenment!!!

Hello Mr Goldfly, my motive in trying to figure all this out is primarily preservation of capital, but it would be nice to use it to catapult myself to more than modest means. I've still got lots of livin' to do !!!!

Given all the currency turmoil, it seems prudent to have some physical on hand. But I just can't see a new bull market in gold until there is a washout of all the debt ... and that means a washout of the US financial markets, the blue chip markets of the world, the last to go. (Maybe I won't get banned from the Forum for such blasphemous thoughts.) It's during this washout that everything's going to be put on the table ... anything that can be sold will be sold in order to raise cash. So the person holding cash is going to find a lot of good deals. That's the positive ... the negative is that this time around could be worse than the Great Depression because this time we're going into it with mountains of debt and an unsound currency, plus an economy with a lot of socialism already built into it.

I find the gold/oil conspiracy advanced by Another and FOA very compelling and have no reason to doubt it. However, the suggestion that it will lead to skyrocketing gold prices seems to be built along the oil supply/gold supply/gold demand equation ... missing is the very important fourth variable - oil DEMAND. If we do have a climatic debt collapse, and the Fed has been pumping up the money supply in almost a panic frenzy to prevent it (can they ??), then oil demand will plummet. SA could stop pumping and no one would probably notice. But that's not realistic ... total world oil production might even increase short term as the oil producing countries would desparately try to sell more to bring in the same amount of income, which would drive prices still lower. Hell, before it's over they may have to use all that gold to buy food for the restless natives ... and then farmers would be the goldmeisters !!!

Well, that's my best guess. With all the crossing vectors, it's impossible to predict how events are going to play out or the timing. It sure is fun, though ... I just hope we're still standing when the smoke clears.

This forms a good base to build a rally from. Let us see what happens. The DOW closed up higher by around 100 or so points. Most of the gain was at open. Bonds were closed. Canadians were closed.

Date: Mon Oct 12 1998 19:23
SDRer (Copernican System of Currencies: The Earthy Dollar is not the
Stellar-Center�) ID#290172:
Copyright � 1998 SDRer/Kitco Inc. All rights reserved

Gollum oft refers to folks who see a "currency/gold conspiracy". Speaking
only for SDRer, the following is offered.

The "Gold Box" is a matter of strategic planning. One tends to forget, if
one is American, that Europe has been pregnant with the Euro for a very
long time. Even before Nixon abandoned gold, the European Union had
established its first trade agreement in which the unit of account was a
specific measure of gold [w/Turkey]. After that fateful Camp David
weekend, Europe set about establishing trade agreements with countries
that would, at some point down the road, become part of the Union. Each
of these trade agreements clearly defined a unit of account that was a
specific measure of gold. Gold as a unit of account has been 'field tested'
by the Union for over twenty years.

2. To these strategic planners, the gold conundrum presented a core--if
ironic--planning contretemps: gold, the stabilizer, their rudder, had to be
discredited for any new currency to successfully be brought forward. Were
gold to retain its historical "safe-haven" status, assets would flee fiat and
flock to gold. Even if limited to affected Europeans-say the Germans and
the French ( all of whom can't hide in the small Swissie closet ) - flight to
gold would present severe operational difficulties. If the Euro were to be
successful it had to appear to be a logical, sensible and potentially
rewarding choice. It must appear, for Europeans at least, the only choice.

So, step one, central to all, was to publicly discredit gold as a monetary
asset--incidentally protecting all fiats and happily dovetailing with USG
policy--but, more specifically to allow for the Euro's debut. From the
Jamaica Accords in 1976 [which prohibit the PUBLIC linking of a currency
to gold], to the Reserve Bank of South Africa's sponsorship of gold
producer hedging, to the "bright young things" at Central Banks deriding
gold as a "non-productive asset" not worth digging out of the ground to
bury in the vault ( S. Salvant, e.g. ) there has been concentrated purpose
over decades: keep a nervous public firmly committed to paper and--as
Springtime for the Euro approached--out of gold.

It has been a policy that has, in the mysterious way of Life, linked
disparate players with disparate goals. It has been successful. That its
success has caused grievous wounds to the financial system that "They"
seek to repair is a logical consequence of the policy followed. Lack of a
stable key currency lead to currency instability; currency instability lead
to derivatives; derivatives lead to currency chaos. Currency chaos leads
to gold. It just makes Strategic Operations more difficult. But not
impossible.

3. It is easy to become addicted to TA, a useful and powerful market tool.
Our 'addiction' makes it [TA] a useful and powerful tool for strategic
planners whose purpose is NOT TO MAKE MONEY but rather to
successfully execute strategic plans. Even folks who are not TA devotees
are familiar with 'resistance level', 'support line, on ad infinitum. The gold
market is a very small market to 'influence', particularly when the goal is
simply containment, not profit.

4. Have monkey wrenches been flung into the works? Indeed yes. But be
not mistaken about the talents of power. We who have lived only with
peace forget the extraordinary achievements of misdirection and secrecy
accomplished during the Second War World. From D-Day ( a project
millions "knew" about but were ignorant of ) to simpler secrets like
Enigma and Churchill's 'Canterbury Choice', successful governments [i.e.,
those that hold on to their power] are weaned on the liquor of lies. All told
in pursuit of noble purposes, of course.

5. It seems probable and plausible, barring an absolute liquidity
meltdown, that EU will successfully conclude gold operations in late
January, early February 1999. As Eur-Lex clearly states EU gold holdings
will be marked to market, it may be plausibly argued that gold, the
financial asset sans liability, will then reassume its place as the
Acknowledged financial Sun. Just in time for Y2K.

Return to Kitco Homepage

I had the opportunity to have an extensive conversation this afternoon with one of the top gold analysts in the United States -- James Turk, editor of the Freemarket Gold & Money Report and advisor to the well-known Midas Fund. I was asking his permission (which he graciously granted) to publish his interesting and timely analysis of the LTCM situation titled "The So-Called Masters of the Universe" which appeared in his latest newsletter, and now appears here at USAGOLD at The Gilded Opinion page. In the course of our conversation the subject of LTCM's gold short position came up and he said in his understated, scholarly way that if LTCM's 400 ton loan position were defaulted on that the central bank or banks which made the loan would have to consider the loan "a sale into the market" since they are unlikely to get their gold back. This raised the further question that if the bank(s) were Europeon what effect would this have on EU reserve requirements and the launch of the euro. I asked Mr. Turk the same question I asked ANOTHER a while back. "If you are a central banker lending gold, what do you take as collateral (since gold is the ultimate collateral, all other collateral is inferior.)" Turk answered."You take nothing. It is an unsecured loan." There was a report that he told me about in Financial Times which points to the possibility that eight major central banks are involved in the lending activity to the hedge funds and that it could be 1200 tons or more. Marie is tracking down a copy of Financial Times tonight for me, and I will be back to you tomorrow on the details either here or in the Daily Report. If any of you have seen anything on this, please post it. These are important developments. FOA, have you heard anything about this?

Note: Will India and China become the next major consumers of energy?

------------------------------------------------------------
Tuesday, October 13, 1998 Bahrain Local Time 5:46:23 AM

Gas producers pin hope on India and China

Gulf gas producers have seen their traditional markets eroded by economic turmoil in Asia and hopes for a recovery in the next decade are pinned on India and China. Asia was until last year seen as the major market for Gulf liquefied natural gas (LNG) producers like Qatar and Oman. But most Asian clients have since been hit by economic crises that have stalled or even reversed growth.
Expectations that demand for gas from these markets would absorb increased output from Gulf states have not materialised, said analysts at a Middle East gas summit which opened in Abu Dhabi yesterday.
"The industry has turned upside down as the effect of Asia's economic and financial crisis have filtered through the energy sector ... "The list of potential new buyers is now effectively reduced to two: India and China," said Chris Holmes, senior downstream and gas consultant
with Gaffney, Cline and Associates' office in Singapore. South Korea, Thailand, Japan, Taiwan, Singapore and the Philippines have all experienced slowdowns in demand that range from slight growth in the case of Taiwan to negative
demand for South Korea. Middle East gas producers, which account for a third of the world's proven natural gas reserves, are also facing stiff competition from Asian producers like Indonesia, Malaysia and Australia.
"Demand growth in traditional LNG has all but stalled and exploitation of new markets has been painfully slow ... The industry faces a somewhat uncertain future," Holmes said.
Amid the gloom, Korea in particular is of concern to Gulf LNG producers.
Oman has agreed to supply Korea Gas Corp. (Kogas) with 4.1 million tonnes a year (mty) for 25 years from 2000, while Qatar's Rasgas has a 4.8 mty sales commitment to Kogas from 1999. But further deals may be a long way off. Korean LNG imports have risen from 1.7 mty in 1987 to 11.6 mty in 1997 and some were predicting a further growth to 30 mty by 2010. � AFP

USAGOLD,
Yes, I will have some words about LTCM as seen by Mr. Turk. His analysis brings up a point for discussion. More in the AM of CST. FOA

couldn't sleep (too exciting to watch this gold market). Back to bed but gold is holding. This is good. Seems that even though it don't hold on the high end, maybe the battle will be fought on the low.

...eom

Tokyo profit-takers ignore bank rescue

by LACHLAN COLQUHOUN in Hong Kong

MORE progress on Japan's bank rescue plan went
largely unnoticed by investors today as they took
profits after yesterday's strong rally among Tokyo
stocks.

An announcement from Finance Minister Kiichi
Miyazawa that a new bank recapitalisation Bill
would inject 43 trillion yen into weak but viable
banks, in addition to the 17 trillion yen already
planned to protect depositors, kept the bank
rescue on track, but the fragility of the market was
emphasised by the profit taking.

Having seemingly won Opposition support to inject
public funds into ailing banks, leading figures from
the ruling Liberal Democratic Party said the
government is now pondering injecting money into
healthy banks.

On the market, firmer bank shares could not stop
the benchmark Nikkei from dipping around 2% in
the morning, but although the losses were pared
the index was still in negative territory, falling 312
points, or 2.3%, to stand at 13,243. The index
spiked more than 5% yesterday in one of the best
days' trading this year.

Some brokers attributed the profit taking to
investors raising cash to fund shares in the �10
billion float of mobile phones operator DoCoMo,
which makes its debut on 22 October. Among
active stocks, shares in Daiwa House fell around
2% after the company said it expected to post a 10
billion yen first-half loss, compared with a 14 billion
yen profit last year. Canon made sharp gains,
adding 5% on reports it had won a new printer
contract with Hewlett-Packard. Exporting blue
chips, such as entertainment giant Sony, were
clipped back after yesterday's gains.

In Hong Kong early gains were erased by profit
taking after a four-day rally saw the Hang Seng
index breach the 9000-points level yesterday for
the first time in months. Easier local interest rates
and Wall Street's resilience helped sentiment at the
outset, but nervousness over the poor economic
outlook capped any continuation of the rally. By the
mid-session break, the Hang Seng had fallen 1%,
or 89 points, to 8944.

Market leader HSBC held on to its gains, however,
staying unchanged at HK$156.50, while the rally on
property counters ran out of momentum. In
company news, conglomerate First Pacific denied
media reports it was pondering the sale of its
banking subsidiary FPB Banking.

Elsewhere, markets moved in a narrow range with
a lack of direction from Japan and Hong Kong. In
Seoul, the Kospi added just over a point to 353,
with bank counters Korea First and Seoulbank
going limit-up, or 8% higher, after the government
said it would buy most of the banks' bad debts. In a
sombre warning, credit rating agency Moody's
described the country's bank system as "technically
insolvent". Shares gained ground in Taiwan, the
Composite adding 50 to 6971 on the back of
firmer hi-tech shares on the US Nasdaq market.

Thailand's SET was barely a point firmer at 291,
while Jakarta's Composite was virtually unchanged
at 308. Singapore's Straits Times was 0.7%, or
eight, down at 1009, while Malaysia's Composite
fell three to 386.

Reassuring comments about financial caution from
News Corp chief Rupert Murdoch at the company's
annual meeting today saw the shares put on 1.3%
in Australia. The All Ordinaries edged 12 points
lower to 2488.

� Associated Newspapers Ltd., 13 October 1998
This Is London
-------------------------------------------------------
Russian losses hit Frenchbank jobs in London

Boris Yeltsin has joined the list of those including
Robert Maxwell, the Italian fraudster Giancarlo
Paretti and two shareholders in the ill-fated
Long-Term Capital Management hedge fund, who
have caused France's Credit Lyonnais to lose
money by the truckload.

The state-owned bank has confirmed that its
Central and East European fixed-income desk in
London has been shut down, with the loss of
around 30 jobs. A spokesman would not deny
reports that this was linked to losses on Russian
GKOs, which collapsed in value when Moscow
defaulted.

Previously, Credit Lyonnais chairman Jean
Peyrelevade has said that provisions of Ffr4.2
billion (�450 million) for the first half were
due to the Russian and Asian crises, and that
apart from GKOs, the bank held practically no
emerging market debt securities.

Credit Lyonnais representatives head the French
delegation negotiating with Russia over GKO
restructuring, usually a sign that a bank has a great
deal at stake in the talks.

Credit Lyonnais would not comment on whether
further redundancies were planned in London.

The French government won a special ex-emption
from Brussels subsidy rules to allow it to prop up
the bank with a �13 billion rescue package. The
quid pro quo was that the bank would be almost
en-tirely privatised less than a year from now.
However, that timetable now looks hard to meet.

� Associated Newspapers Ltd., 13 October 1998
This Is London

This excerpt comes from the Contrarian, William Fleckenstein. He posts weeknights at http://www.stocksite.com/features/contrarian/rap/


Inside information doesn't always work. I would like to share an article that was in this weekend's Financial Times. It was talking about the Long-Term Capital's document, held by USB Bank, which made it feel good about its investment. The document said that LTCM had eight strategic
investors - "Generally government-owned banks in major markets" - which then owned 30.9 percent of its capital. They gave LTCM "a window to see the structural changes occurring in these markets to which the strategic
investors belong."

Translation: UBS made what it knew to be a ridiculously leveraged and outsized investment in Long-Term Capital because LTCM itself was being funded by certain central banks around the world. UBS thought that funding was going to give LTCM an edge, so even though it was imprudently leveraged, LTCM would get away with it and it would be a
good credit risk. Even though you get inside information from a master of the universe, it doesn't necessarily work.

Seems you beat me to the punch on UBS, LTCM et al. I like your read on the situation as well. When we realize that the Masters of the Universe who run our central banks and top financial firms are subject to the same human frailties that beset the rest of us, our thinking becomes much clearer. What is happening with respect to LTCM -- Substantial lapses of judgement by Nobel Prize winners... computers that lead to a false sense of security but don't provide the answers (Remember GIGO?)......the hubris of the people running these highly unrealistic operations -- we should not be surprised at the outcome. What should concern though us is the lack of discipline with respect to the old investment rules of prudence and conservative money management that used to permeate these institutions. The fact that they have been abandoned is not only frightening from a portfolio point of view (because it will affect us all), it tells us that there is likely to be considerably more of this sort of thing in the future. The essential mistake was the unjustified, untested belief in a new paradigm and a new world order -- both of which are figments of the new Wall Street's imagination. Thank you, Turbohawg. You saved me the trouble of writing about LTCM/UBS, et al. Good coverage.

USAGOLD,
I read Mr. Turk's article posted on your The Gilded Opinion page. It is a fine work of analysis of the gold market. If I may, a point of discussion can be brought up by viewing his thoughts from a different perspective.
Michael, from your earlier post this was pulled:
"In the course of our conversation the subject of LTCM's gold short position came up and he said in his understated, scholarly way that if LTCM's 400 ton loan position were
defaulted on that the central bank or banks which made the loan would have to consider the loan "a sale into the market" since they are unlikely to get their gold back. I asked Mr. Turk the same question I asked ANOTHER a while back. "If you are a central banker lending gold, what do you take as collateral (since gold is the ultimate collateral, all other collateral is inferior.)" Turk answered. "You take nothing. It is an unsecured loan."

"You take nothing. It is an unsecured loan." ! With this statement in mind, I begin.

As Mr. James Turk stated, " like big tail-fins on 1950's Cadillacs. An era has passed"!
Yes, I agree entirely. We now swiftly come to the conclusion of an era that has brought gold into the monetary forefront as never before. Gold has been fought over, pushed, shoved and manipulated in the 90s the same way as most major currencies. The only items missing during this quiet war was the an extreme increase in value that the investing public
must have to validate that gold is in use! As often quoted, "If the price isn't rising, no one must want it or need it". Truly a paradox of thinking in our time.
The facts, as presented by the World Gold Council (WGC) show that in 1997 only 406 tonnes of gold were actually sold from the vaults of the world Central Banks. This amounts to only 1% of all the gold reserves held in reserve. It is very important to note that the major countries that sold gold (Canada, Belgium, Holland, Portugal and a few others) made up the majority of this 1% reduction, if not all of it! They also are the source of most of the 5% of the Central Bank reduction in holdings during the last 10 (ten)Years!
To better place that last sentence in correlation with the current gold lease / lending market is to grasp that these banks, Canada, Holland and the lot, did actually sell their gold, not lend it. They don't want it back! Using this line of reasoning, then, if these countries made up the bulk of gold sales that represented the total reduction in Central Bank reserves, what gold was sold that represented the lease / lend deals?
Much of the conjecture amongst analysis in banking circles seems to center around one major point. A point that without acceptance, destroys the entire argument that gold
leasing sales are what have destroyed the market. That point is: "of the gold still held in the Central Bank vaults and carried on the books as reserve assets, some it was has sold
off and replaced with leasing paper"! Please correct me, but a bank may mobilize any asset for return and list it that way on the balance sheet. However, to list Physical Gold, that is not a paper asset, as present when it is not is "Fraud"! To do this on a scale that the present gold leasing market suggest is happening, would amount to a gross violation of BIS accounting standards. To view this in a better light I will use a phrase that Another has posted here:
"a simple person does stand at the river edge and know from where the waters flow".
To continue: The central purpose behind the Yen Carry trade and the Gold Carry trade is to place liquidity into the world financial structure. This action was made
necessary by the failure of the US dollar to function any further as a money creation vehicle. In these last days of the dollar, worldwide debt as denominated in dollars has
ceased to expand and is indeed contracting. This is a natural event that occurs in the latter time cycle of un-backed paper currencies. This contraction was expected to complete the fiat money cycle back in the late 1980s. It has been the Central Banks, lead by the BIS that created ingenious ways to expand liquidity until another currency system could be introduced. In these 1990s, the Yen / Gold Carry was one of those ways.
Much of the Gold lending dealings is more a function of paper contracts than actual gold sales. Using my "water flow" point above, if that much gold was actually sold out
into the industry, we would have seen major reductions from the gold asset side of the Central Banks. The true purpose of the leasing (not all of it , just most of it) was to create cheap money that could flow into other aspects of the economy and help perpetuate a boom, worldwide. As seen in the LTCM debacle, a little money in the right hands can be
multiplied into billions of new found liquidity. Now consider that some have stated that the gold loan contracts amount to 8,000 tonnes or more! Another has said that they, if actually closed out as gold deliveries would amount to over 14,000 tonnes! Suddenly we see where the money has come from to gun the world asset markets. A market of
trillions!
So, why are they called gold loans if the gold isn't used? The point is the gold is used. It is the final commitment or backup if the deals fail. When a hedge fund (or mine) cannot repay the "cash equivalent" of the gold or "the gold itself", then the Central Bank, as the
originator of the deal must deliver Real Gold or PAY IN A HARD CURRENCY!
One of the things that Another has been guiding us to for over a year is that the current gold deals amount to an all out corner on the CB gold supply. The major people that are on the other side of these Gold Loans (lets call them what they really are: currency loans on a worldwide scope that is backed, ultimately with much of the CB gold) will call for this gold that was already paid for over many years! The intent of the Euro Group CBs was to have these loans self liquidate in a normal fashion. If they did not them they would pay the equivalent of the gold owed in Euros! A function, in actually, of issuing Euros for
already sold gold! Furthering a pending proposition between the ECB and it's EMCBs.
Now, my friends, you understand why a Euro price for gold of $6,000+ (current rate), if in effect a year or so after that currency debuts will create a reserve currency of
tremendious debth and holdings worldwide. It will be a welcome development. With the dollar falling from reserve status and the total default of dollar based gold contracts,
physical gold will be an "investment for a lifetime" as Another has said! The demand for gold as a currency reserve by governments and as a currency alternative by citizens, will amount to more metal than exists.

I credit Another with most of this input. It is his wish that these thoughts be discussed by all, for all to see.
Thanks FOA

FOA or Mike - I have always heard that in the 1800's you could buy a decent suit of clothing for $20 or a $20 dollar piece and in the 1990's you could buy a decent suit for $300 or a $20 dollar gold piece. In other words the value of gold has been maintained over the years relative to its purchasing power. When the price of gold hits $6000 or thereabouts will not the devaluation of the dollar dictate that a suit of clothes will cost $6000 or a $20 gold piece? Just wondering about your perspective on this.
-Regards

PS- Mike- Thanks for "In the Footsteps of Giants". Talk about sticking to your word (and timeliness)! Received the book today only four days after your offer for first time posters. You are a gentleman and a scholar.

Michael, that analysis I posted was entirely Fleckenstein's ... I should have made that more clear ... sorry about that.

Anyway, his nightly commentary is pretty good and I think most perusers of the Forum would enjoy it.

test

Everything you and Another say sound like they could by the truth. If Gold goes to $6,000, there are going to be a lot of happy people from this forum. Questions!

Why is this the only place were this theory is being discussed? Wouldn't many more know the same as you and another?

I saw you once wrote not to bet the farm on this. More like 10% or so. If you are as sure as you say, why not bet the farm, the stock market doesn't have much upside, the bond market doesn't have much upside?

Dallas Gunns (Is Another going to be around soon?)

The following is a summary from a publication my boss shared with me. The Publication is called Basic Points and is prepared by Donald Coxe of Harris Investment Management. His title is Chairman and Chief Strategist, I think it's a subsidary of Harris Trust & Savings Bank. Not where you would normally find a gold bug.

Summary of a 17 page article is as follows:

1. A Global banking crisis looms on the horizon.

2. The only way to reliquify Asia, Latin America and Eastern europe is to lower global interest rates and lower the value of the dollar. Had that course been followed in 1929, the Depression could have been averted.

3. Japan's cut in its overnight rate is surely the start of coordinated easing among the leading central banks.

Gold will hold its value against a basket of the leading currencies as the dollar falls. The dollar is overvalued, given the horrendous and growing US Current Account deficit. It is high because:

* distressed debtors are scrambling to buy dollars to service their debts;

* in global turmoil, the dollar is a haven;

* global investors committed record funds to the US stock market this year, creating the top;

*hedge funds borrowed heavily in yen and invested in Treasurys and Eurodollars to take advantage of the record interest-rate spread.

As the Fed lowers dollar rates, and the US Current Account continues to deteriorate, and foreign investors vacate the falling stock market, the dollar will continue to fall against the leading currencies, including the yen.

A bear market for the dollar and a bear market for stocks should mean a bull market for gold.

Just a short note: When I was a child in the thirties an ounce of gold paid the rent for a small house or apartment in the Detroit area. In recent years that has been a guideline except for the 'one big swing '. Now , slowly , Gold has been undervalued so that it takes about two ounces to pay such a rent. Can you think of a better buy signal?
Newt

I got my "In the Footsteps of Giants."

I had followed another I thought from the beginning. I was wrong. I missed his or her first posts. For that reason alone is worth getting the book. How clearly spelled out it is. I was surprised that he (or she...next time dropping to spare the time) called the recent drop in interest rate and the run up in the dollar against the yen. In fact, I would say that we are on track still. I figured that we are at the sstage in world events that Another mentions to be about where the price of oil and gold start to rise and the CB's are phasing out leasing AND the drying up of physical gold in the market place. You could actually create a ghant chart or histogram from his predictions and that is where I would say we would find ourselves. In retrospect the writings have a frightful hook into reality as it since played out.

I also came to a realization that Another only had one or both of these motives. Keep in mind that Another, IMO, knew that the Internet pen is mightier than the sword. For that reason and with conviction of purpose, he wrote on Kitco and now here. I propose that the reasons were as follows (either one or the other or both):

-- To catapult the masses into the buying of physical, or
-- To alert the masses that the buying of physical in a grand scale was taking place and about completed.

If successful, which I believe he was, then the word would get out and it has.

Now for a more serious discussion. Quote.com at http://www.quote.com/layout/index.frames.html has JUST added features to their charting program that makes it the premier spot to track realtime or delayed (if you aren't subscribed) bollinger bands, stochastics and the like. I am not saying that other sites don't have this feature, but I am saying that quote.com has made their reliable chart program significantly more useful. For example, by putting the upper portion on realtime, candles, with the bottom portion on bollinger bands you can play with the time measurement function and glean that the trading range of gold on a daily bbasis appears to be $292 through $304. On a shorter term it would seem to be for the moment trading from $297.50 to $298.80. In that it is currently $297.70 you can see that it is on the low end of the scale and would more likely move towards $298.80 before dropping further. Bollingers seem to use a standard deviation that is put in track form surrounding the measured unit. They are extremely useful tools.

There are other indicators too, such as, Stochastics, moving averages and more. Check it out.

Wednesday 14 October, 1998


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Hedge funds : The US doublespeak

--------------------------------------------------------------------------------

While the US Federal Reserve has bailed out its own hedge fund, the American gurus have always advised the rest of the world against such bail-outs
There is a delicious irony in the rescue by the US authorities of one of their major hedge funds, which is lost nearly $ 3.5 bn in recent weeks. US Federal Reserve was doing exactly the opposite of what it was advising the rest of the world against.

The hedge fund known as Long-Term Capital Management had made wrong bets and lost all its capital. The Federal Reserve realised that letting the fund go into liquidation would lead to many serious consequences. The machinery of the Fed swung into action and organised a rescue of the LTCM.

True, the rescue was not by directly using pubic funds, but by "persuading" larger players in the New York Money market to put in funds to the equivalent of the loss. The names brought in included Bankers Trust, Barclays, Chase, J P Morgan, Goldman Sachs,Merril Lynch,Salomon Brothers. It also involved the foreign players like Credit Agricole, Duetsche Bank, UBS, Societe General.

The American authorities have been lecturing the rest of the world on how to avoid bailing out the banks that fail. "Let those who make mistakes suffer" is the American mantra. The US experts even counselled Japan that its "convoy" system, whereby the bigger banks helped out the losing ones, was full of moral hazard. The crux of the US message was that there was no sanctity in the slogan "Too big to fail". This was why Hongkong was extolled for allowing Peregrine to fold up and UK authorities for letting Baring go under. The US gurus felt that this was the only way to go.

All this changed when the hedge fund, Long-Term Capital Management (Limited Partnership) hit the lows. It is interesting to note that actors in the drama. The leader was Mr John Meriwether, a former player in the markets for Salomon Brothers, known both for his daring and cutting corners. In the early nineties, he had come to notice when he was dealing with US gilts market.

David Mullins, the vice-chairman of Federal Reserve, had looked into his flawed transactions and reportedly let off Salomon Brothers with a fine. He is now a partner of LTCM. We have also to mention that two brilliant Nobel Laureates, Myron Scholes and Robert Marton, who had done pioneering mathematical work on models of derivatives and how to make "informed bets". LTCM was thus a blend of brainpower and gambling skills, coming on top of close connections. Can there be a better definition of crony capitalism? No wonder, the US financial powerhouse had to come to the rescue of its cronies.

At this stage, let us step aside for a while and ask, "What,indeed, are hedge funds?" One US definition says, "Hedge funds are private investment pools often domiciled offshore to capitalise on tax and regulatory advantage. They operate on the basis of private placement. Each fund has to have less than 100 high networth investors, in order that exemptions in the various regulations and legislations are availed of. Hedge funds are managed on a fee for performance basis. The first hedge fund is credited to have been established by a sociologist and financial journalist (Note - not an economist), Mr Alfred Winston Jones in 1949.

Typically, a hedge fund combines two features - These are short sales and leverage. Short sales involve the fund's borrowing as security and selling it in anticipation of being able to repurchase it later at a lower price in the market, before it has to be returned to the lender. Leverage is the well-known practice of using borrowed funds, leveraging one's own equity. Lones' special contribution in his Fund was to "hedge" or insulate the Fund's returns by combining short sales of some securities with long exposure in some other. "Long" exposure means betting that the prices would go up. "Shorting" means betting that prices would go down. By a suitable mix of long and short sales, the hedge fund s planned to get overall good returns, much higher than the market. Over time, hedge funds ceased being simple hedges in stocks. They entered new areas like currency transactions, as the prospects in the stock market diminished. They also used derivatives.

Perhaps, with their new enlarged band of operations, it is a minomer to call them hedge funds. No longer adhering to the simple concept of Jones, they have often become loaded missiles against financial stability.

The hedge fund had used not only its equity but also leveraged large resources from the banks. Estimates of the total involvement of LTCM went as high as $ 200 bn. They had borrowed these funds form the major banks, at relatively low costs, because of their connections. These were invested in complex bets, which unfortunately failed. The margin calls came and the day of reckoning had arrived. In better days,LTCM had turned in huge profits. The losses, when they came, were equally mind-boggling.

"What is so sanctified about a hedge fund that none of the lenders had bothered to ask detailed questions of what and where they invested?" They are expected to do due diligence in their credit decisions. Indeed, the reputation of LTCM for taking the right decision was so awesome that any lender who dared to ask too many questions of them was denied the business, which was so prestigious. Thus, the hedge fund became a closed secret society, which commanded respect and demanded resources, although refusing to share full information with its lenders. The combination of secrecy and arrogance led to a dire situation in which its problem came to the notice of lenders only when the haemorrhage started.

The US gurus had all along been proclaiming from the house-tops how transparent the US system is compared to that of Asian nations. It is, therefore, ironic that the regualtors are still to find out where all the money lent by LTCM has gone. Increasingly disturbing disclosures lead us to ask USA, "What about a dose of transparency in your own backyard?"

The issue, however, goes beyond the collapse of just one hedge fund. We have also to link this to the broader question of how the wild beast of derivatives as a whole is to be controlled. Hedge funds got into greater difficulties not only because of their gambling with their own funds, but also because they were able to raise more resources and play the game of derivatives.

The experience of USA with Long-Term Capital Management LP is a warning to the rest of the world. Apart from showing up USA's hypocrisy, it also reaffirms the need for global action to master the wild behaviour of hedge funds in particular, and the financial flows in general.

I HIGHLY recommend reading this article by Martin Armstrong of the Princeton Economic Institute on the effect of leverage on the world financial system, and the consequences for stocks, gold, and the euro. It's probably a little long to post here.

http://www.princetoneconomics.com/TOPICS/LEVERAGE.HTM

Euro signals new life in bond market

by ANTONIA FEUCHTWANGER

With the birth of the single currency less
than three months away, the
euro-denominated Eurobond market is
showing signs of activity after the
summer's turmoil interrupted its
expansion.

Investor presentations begin today in Paris for
Mediocredito Centrale, the development bank of
Italy, which plans a debut issue in euro, while
Daiwa Securities has taken advantage of an
apparent vogue for the euro in Japan.

Daiwa's 100 million euro bond, denominated in the
ecu basket currency until one-for-one conversion to
euro on 1 January, was for the Kingdom of
Denmark. It was announced earlier this week but
according to the International Insider service was
sold by Daiwa the previous week. Daiwa, which
has just refocused its London operations mainly on
Japan-related activities, underwrote and sold the
entire deal itself.

Carol Hird, syndicate manager at Paribas, which
has a strong presence in euro Eurobonds,
commented: "Some Japanese institutions are very
concerned about how to account for the legacy
currencies (such as the French franc and
Deutschmark which are joining the euro). They
would like to go straight to the euro."

She added: "A lot of reports about the euro have
got through to savers on the street in Japan, who
are now very interested. At the beginning of this
year the market for ecu/euro bonds was very small
but it has grown fast." The yen's bounce back last
week has helped make the euro relatively cheap.
Warburg Dillon Read this week increased its 100
million euro issue for America's GECC to 200
million while the bank is currently making
presentations for a 175 million euro issue for
Generalitat de Catalunya, a Spanish regional
authority.

Paribas itself is advising Mediocredito Centrale on
its still unformed plans to issue bonds in Europe's
new single currency. The Italian bank is effectively
State-guaranteed but its rating is A1-/A. In most
European countries, according to Paribas, its debt
is zero-weighted for capital adequacy purposes,
which is attractive for bank investors. The bonds
could be fixed or floating rate. Mediocredito lends
to small businessses and development projects,
sometimes subsidising other banks' loans to
growing companies. It has a 41% stake in Sicily's
largest bank, which has depressed its rating thanks
to worries about credit quality in a relatively poor
part of Italy.

� Associated Newspapers Ltd., 14 October 1998
This Is London

ALL:
I must apologize for the poor placement of some wording in my post MSG: 556. My time was in short supply.
------------------------------------------------------------
Also: Someone (perhaps PH in LA) asked about Mr. M. A. Armstrong's various reports and my thoughts on them. I think we will see the many of the world economies that base
their future on a trading relationship with the USA fall into a major depression. Perhaps much as MA suggests?? As for his views on gold and the Euro:
I add that the nations that have created this new currency have been around far longer than the thoughts of any analysis. The gold market will also outlive the negative
predictions put forth by some.
The latest Oct. 9th work offered by MA has this statement: "The Euro has effectively been wiped off the face of the earth." I direct you to my last news post of Msg #556. If the Euro is wiped out then someone did not tell Japan!
Mr. Dallas Guns Msg #560:
You write: " Why is this the only place were this theory is being discussed? Wouldn't many more know the same as you and another?"
Dallas, in the 1970s few thought that gold would go to $800+ US and it was discussed openly by how many? Even less saw oil at $40+US or a Dow of 8,000+. The history of
world major events are filled with actions that were impossible to foresee, yet some record was always found of people that did not discuss the event but did anticipate and prepare for it. Today we see the birth of a new currency that was thought to be dead (and openly discussed as finished) yet somewhere, somehow a very large group of people were working diligently to create it. Don't assume
that your media and elected officials will always keep the public informed of impending events. Especially if those events could undermine their power.
You write: "If you are as sure as you say, why not bet the farm"?
I have learned a great deal about conservative living. And I learned it from some world class wealthy people. It was put to me this way:
"If you have a nature to bet the farm and you win, the winning will not change your basic negative character of farm betting. In time, you will bet all of it again! Conversely, if you do very well with an appropriate investment decision (with your family in mind), the
winning will reinforce a positive character of prudent wealth building. This you will carry for all your days."
Dallas, trading some of your currency (yen? mark? dollars?) for another currency (gold)is not investing! It is the prudent use of playing the history of gold against the history of paper money. It has worked for others for thousands of years and will work for you.
Thanks for the consideration. May we will continue this as time allows? FOA

I am hopeful that you can clear up some confusion on my part. I read your post yesterday with interest. My confusion arises from quoting Mr. Turk: "You take nothing. It is an unsecured loan." The following appears later in that same post: "When a hedge fund (or mine) cannot repay the "cash equivalent" of the gold or "the gold itself", then the Central Bank, as the originator of the deal must deliver Real Gold or PAY IN A HARD CURRENCY!"

That makes it appear that the Central Bank was underwriting the loan. Since the Central Bank was the lender, how could they be expected to deliver Real Gold or pay in a hard currency? And to whom would they pay?

Thanks for any help you can give me on this.

When the price of gold reaches $6000 or thereabout, will those of us in America who hold gold be increasing our net worth or merely protecting our current net worth? Will the falling dollar create so much inflation as to only "keep us even" with regard to our personal asset value as holders of gold? Thanks, B$

Tyler Rose and Bottom$, I will reply later during the Noon - Midnight section when I have more time . Thanks
---------------------------------------------------------
Also: correction to my last post: "I direct you to my last news post of Msg #556" should be #566! FOA

Thanks for your comments regarding Martin Armstrong's Oct 9 article. One can't have too much information or view things from too many angles. I hold suspect the analysis of any 'expert', particularly those associated with educational institutions. The trick is to sort through it all and decide the best course of action.

Keep it coming ...

FOA: Your post yesterday (10/13/98; 10:51:03MDT - Msg ID:556--My Thoughts!) included the phrase: "the Central Bank, as the originator of the deal must deliver Real Gold or PAY IN A HARD CURRENCY!"

It is curious that for many years, "hard currency" meant "Dollar-based" or "western" currency as opposed to the easterm-bloc soviet-based ruble, etc (which was not freely-exchangeable). Obviously, you are now referring to the Euro as the "hard currency" to the exclusion of the dollar. Would you mind speaking of this? Does being the "originator of the deal" give the CB the right to define what constitutes "hard currency"? Specifying Euros, for example? As long as the dollar trades freely and is exchangeable for Euros, wouldn't it remain a "hard currency" albeit at a new rate of exchange?

One other specific question: You seem quite comfortable speaking in terms of $6000+/ounce of gold, but how do you feel in terms of the ratio of Euro to gold in those post-Euro times little more than one year hence? It should be easy to see that I am really looking for some direction for Euro/Dollar, too...one would seem to imply the other, assuming the continuation of a freely-traded market, of course.

The following is speculation only.
How Hedge Funds in cooperation with governments create money
out of thin air.
1. get well healed investors[banks,mutual funds,etc.]to
invest large sums.[seed money]
2. borrow gold,on paper only say 1 ton=32,000oz from a central bank at almost no interest say 1/2%. The physical
gold never leaves the CB vault.
3. Use the paper gold asset as collateral to buy a short
futures contract on gold at a cheaper price.
example:cost of 32,oooOz.at$3oo=$9,6oo,ooo loan price.
buy a short futures contract on 1 ton of gold at
$29o than buy your own contract. Price $9,28o,ooo take
$32o,ooo profit pay CB $12,ooo after cost profit roughly
$3o8,ooo.Since you have no shareholders and no government
interference[offshore limited partnership]no audits and in
house accounting you bought the gold futures contract from
yourself and your books show $3o8,ooo profit[asset]and
$12,oooloss[liability].Take the $3o8,ooo asset to buy U.S.
gvt. bonds,then sell bonds to large sellers of physical
gold,Canada,Belgium,Austraila,etc. at a discount in exchange
for physical gold. Then start again.
IMVHO this or a similar scenario is being played out with
all commodities

The following is speculation only.
How Hedge Funds in cooperation with governments create money
out of thin air.
1. get well healed investors[banks,mutual funds,etc.]to
invest large sums.[seed money]
2. borrow gold,on paper only say 1 ton=32,000oz from a central bank at almost no interest say 1/2%. The physical
gold never leaves the CB vault.
3. Use the paper gold asset as collateral to buy a short
futures contract on gold at a cheaper price.
example:cost of 32,oooOz.at$3oo=$9,6oo,ooo loan price.
buy a short futures contract on 1 ton of gold at
$29o than buy your own contract. Price $9,28o,ooo take
$32o,ooo profit pay CB $12,ooo after cost profit roughly
$3o8,ooo.Since you have no shareholders and no government
interference[offshore limited partnership]no audits and in
house accounting you bought the gold futures contract from
yourself and your books show $3o8,ooo profit[asset]and
$12,oooloss[liability].Take the $3o8,ooo asset to buy U.S.
gvt. bonds,then sell bonds to large sellers of physical
gold,Canada,Belgium,Austraila,etc. at a discount in exchange
for physical gold. Then start again.
IMVHO this or a similar scenario is being played out with
all commodities-oil'silver,gold,etc. worldwide.
The money that was created goes back into stocks bonds
mutual funds pension funds,etc therefore inflation is stopped two ways lower commodity prices and investment into
passive income producing assets only. FWIW beesting

This is a test. I have no posts for the past 4 hours or so. Where is everyone?

Tyler Rose,
To answer your question we must travel a distance. -------------------------------------------------------
Some of the confusion with gold loans in general stems from the fact that there are thousands of them. They exist in every shape and fashion. The terms Gold Loan or Gold
Lease are generic. Just as when we speak of an automobile in public, it is of little use without knowing the make and model. The term Car covers a broad means of transportation.
Some gold deals are real in that the gold is sold and transported to a new owner. The borrower must literally pay back gold to the lender. However, as you may know, a
contract between parties can be written in any matter that is agreeable. In a gold deal, a lender may ask to be paid back in the cash equivalent of gold in any specified currency.---------------------------------------------
Some deals do not even involve central banks, as they are written by private holders of gold. In these transactions, currency profit may not be the purpose. My point is only to
show that there are many variables. ---------------------
Another has written before of the absurdity of Central Banks lending gold at a few percent. They stand on the roof tops to proclaim how smart they are to receive a return on
an otherwise sterile investment. Yet, any fool can see that it is not a true business transaction in the usual sense. The point of my post was to show that by using official
statistic on Central Bank gold holdings, the majority of the time they have not sold the gold involved in lending deals. If it was sold, it would have been removed or the title to it transferred. Therefore, the lending deals are only currency loans denominated in gold. The money actually generated in these deals is created by the Bullion Bank or another entity has supplied it. In this matter the CBs have used their gold as leverage many times over to create a massive new money supply. In reality, if the Hedge Fund / Leverage Community ever started to fall apart, a huge portion of the CB gold would be termed "deliverable"
from default. -----------------------------------------
Tyler, you know and I know that the world gold market would be shut down long before they ever, ever deliver that much gold. What will happen is that much of the current financial leverage, that is heading into it's last days, will be covered by delivering Euros as partial payment. When gold begins trading again at a new value (of perhaps
$6,000 US present buying power) in Euros, it will be easy for some of the defaulted holders of loans (oil and others) to be made whole in currency. With this in mind, some
entities with huge natural resource reserves have used them as collateral to originate the money used in a 1% CB gold loan. It is almost like selling oil for gold, don't you think?
With a gold valuation that high, the Euro will become The Hard Currency for the 21st century.
Now, to your question: A gold loan by a Central Bank to a "Financial Operator" (hedge fund and others) in indeed an unsecured loan! They have loaned their gold as "backing for
the deal" and must supply it if a default occurs. If they have loaned it to a Mine entity, they will have a right to claim the mine assets in a default. Therefore, a mine loan is not unsecured. Not a pleasant thought for the holders of gold stocks during a worldwide currency crisis!
Much more to it than this. I hope others will write their thoughts on the oil / gold /leasing markets. There is a lot of room and tremendous tolerance for diverse views.
Thanks FOA

Bottom$,
Hello! ------------------------------------------
Do you remember when gold jumped from $40+ to $800+ in a decade or so? Prior to that the world monetary authorities had enough gold in relation to circulating currencies that they could control it's price by actually selling it into the market. (why they didn't just revalue it's price to $1,000+ and continue on is another story we will cover
here some day)(it covers why they took the dollar off the gold standard to raise the price of oil). When they stopped selling gold's price jumped. Today, they don't have that much gold in relation to the incredible amount of money and leverage out there. In fact, as I just discussed with Tyler Rose, instead of selling they are using it to build onto the money supply. Few understand that the price of gold is dropping during this era for
several reasons. Besides being used to offer gold cheaply in dollar terms. it is being used to make the dollar strong by creating liquidity. A function the dollar stopped performing
five or six years ago. They can never sell gold into the market again as a means of controlling the price the way they did in the 70s. --------------------------
Another sent in a fine piece once explaining how the the currency inflation in dollars was already present. More than enough to drive gold sky high. Just because the goods
prices don't reflect currency printing doesn't mean it isn't already present. He said something to the effect, " your chickens have already rousted, only now you find they
have come home"! When the dollar is removed from reserve status, the American economy with all it's deficit problems will be subject to all the troubles other nations now
have. In this atmosphere gold will increase in real term value many times over. You may also add any amount to that figure for future price inflation. Thanks FOA

Seeing as my gold holdings are gold stocks, I think I should do some research. I've generally been of the belief that the large 'blue chippish' gold companies were pretty safe, only as volatile as the price of gold. Hmmmmm...

On another note, Japan is now under 13000 (12950 or so). Sooner or later they're going to bring their money home.

Ph,
Please read my post to Tyler Rose and Bottom$. It may cover some of the things you bring up. I think, the term hard currency has been convoluted during this era of fiat
currencies. You are right in that many refer to any currency as hard if it can be traded in the open market. In the future the Euro / Dollar conversion rate may be so far from
today's reality that trying to price it now is out of the question. You mentioned in another post that real assets will always be worth something, somewhere. True for the USA but they have so much currency represented worldwide as debt that even without the adverse effects of Foreign Exchange Controls, evaluating real assets in dollars will be, at best a computer's job.
Did you see my News post about the interest by Japanese in the Euro. The times are indeed changing. Thanks FOA

Thank you for your response, I feel that I am getting closer to understanding this scenario. You say:

Now, to your question: A gold loan by a Central Bank to a "Financial Operator" (hedge fund and others) in indeed an
unsecured loan! They have loaned their gold as "backing for
the deal" and must supply it if a default occurs.

This is where I am breaking down: "They have loaned their gold as 'backing for the deal' and must supply it if a default occurs."

Loaning gold as backing for a deal implies that there is a third party in this transaction - who is the 3rd party?

I believe I followed your car analogies, but who, in this instance is the 3rd party? If the central bank is interested in injecting money into the system, they tell someone (who?) that they are willing to loan their gold (to who?) and they will make the intermediate party (who?) whole in the event that the deal sours.

This IS complicated! TY, TR

BMACD,
Do you own ABX? I remember when they were nothing back in the 80s. Then they and NEM started the revolution of gold loans! In 1995 or so everybody loved ABX as they were hedged. You were protected if the gold price dropped, so they thought. Today, many investors use the notion that Barrick has fallen less than others as a good reason for
them to have bought the stock. Nice thoughts but that was not the original premise for buying it. ------------------------------------------------------------
Here we have the top gold mining company in the USA, with an operating cost at rock bottom in some of their holdings and hedged for years with high priced gold. All of this
and it's stock falls! What is going to happen to the regular mines when the gold price goes up only a few hundred dollars before the market is shut down and a full scale currency war
destroys all equity markets? Sure, OTC gold may trade, but will these mines be selling gold out into the public when the governments are shutting down for lack of treasury
funding? BMAC, I don't think brokers sell these securities as investments in the context of future times. Mines are sold today as regular business ventures with a view that the past 20 years offers a framework for the future. The true facts are that even the last 60 years doesn't offer a historical example for the gold finding business. It's present structure is but a new niche in an evolving financial landscape. A landscape that may cascade onto the
dreams of many mine investors that thought they were gold investors.
Having said all of this gold stocks will, no doubt go up 600% next week. My loss Bmacd, hopefully not yours! Thanks FOA

Well, no I don't own ABX-never been a big Peter Munk fam. I do own PDG among a few others, oh and TVX who I feel just gor shafted in a court ruling. Glad they're appealing.(For anyone interested, the Ontario court ruled that the Alpha Group has a 12% interst in the Greek properties with a further right to purchase another 12-give me a break. I say zero% is fair, but I'm not a high paid judge.) Off track as usual.

I meant to comment further on the gold stocks and loans issue. Here I am speaking of the big ones in general too. Most of these loans are long term in nature, so as long as interest is being paid, and balance sheets look good, there will be no calling in of loans. Now if the loan were of a Line of Credit nature, that's different- yes it could be called. But...if there's a currency crisis of massive proportions, gold will be worth a lot. So wouldn't most companies be able afford the loan payments then anyways? And if the note were called, again a large producing company would very likely be able to refinance the loan. Credit would be in crisis too, I agree, but with gold worth (well pick a big price), the mining company would be able to secure further credit to roll the note. Again, this assumes, that the loan runs due or gets called at all.

Sorry for the typos-I'm tired. Gee I hope gold stocks do go up 600% next week!! But they won't until the bullion moves to. I sincerely believe that in an initial upswing in the price of gold, the stocks will move faster. Gold at $400, is roughly 33% above it's price now (in USD). The stocks will easily be double todays prices.( I can not comment on small speculative mines) At some point, this levels out, and then bullion moves well past the stocks. I hope I'm right. See in my scenario, we're all happy!!

FOA & Tyler Rose I have been following your exchange with interest. Some questions.

1 Who sold most of the actual physical gold? (I'll answer part of this one cause I think it is the easist - mining co's, some CBs (ie Canada, Australia, Belgium), private hoards?)

2 Who loaned &/or leased all this gold that makes up this big hedgy short position? (If I follow correctly these lenders or leasors have unsecured loans and may experience calls on thier positions).

3 Who bought all this gold over the last several years (decades)? Are they leveraged as far as the sellers are reported to be, or are they private parties with a lot of patience and a thorough understanding of history who live buy the golden rule ("He who owns all the gold makes the Rules!")?

Keep Well

PS Just watching Brian Williams on MSNBC News and he is reporting on the shock that the average mutual fund investor might have when they recieve thier end of quarter account statement!!! Ack! (It's an old Bill the Cat response.) My guess - within 20 days the second leg of this new trend (stocks, bonds, us$-down/gold-up) will begin. Hee Hee! Fear Not

Tyler Rose,
The "3rd party Who" that you refer to is indeed the billion marks question! Ever notice how all of the gold sales often state who sold the gold. The public statement deliberately poses the sell side of the equation because the seller can be known. If they printed it as a gold buy, then the buyer would be listed and the public left in the dark about the seller.------------------------------------
They do the same thing with the gold lending markets. -------Think about it.-------When the Dutch sell gold, we know it because their vaults have less gold to be reported. But when they lease gold, nothing ever leaves the vault?? Example: We know that in a gold lending deal, say, $300 million dollars are created and given to someone to play with. Party #1. We know that a Bullion Bank obtained $300m but don't know where? If no CB vault had $300m in gold (one million ounces) removed then the money didn't come from a
gold sale. Now the contract can still be called a gold loan because it requires one million ounces of gold to be repaid. It didn't require that one million ounces be sold to create the money! Now, don't you think that a bank , operating in a fractional reserve environment, would be willing to create capitol by holding any 3rd parties collateral (in this case even dirt would due) for 1/2% to 1% plus fees and no risk whatsoever? You see, the CB gold only backs the deal. It's not sold in the event of default, it's delivered! Using fractional reserve banking, I wonder how many loans could be made with the same million ounces of gold? As to who are the 3rd party investors that helping to expand liquidity by really buying gold with in-ground reserves at a cheap price? When the dollar starts to come off the oil reserve standard, we will all find out. I have to go now. Be back to read the
thoughts of others.
Thanks FOA

Regarding this excerpt from one of your previous posts:

>In this matter the CBs have used their gold as leverage many times over to create a massive new money supply. In reality, if the Hedge Fund / Leverage Community ever started to fall apart, a huge portion of the CB gold would be termed "deliverable" from default. -----------------------------------------
Tyler, you know and I know that the world gold market would be shut down long before they ever, ever deliver that much gold. What will happen is that much of the current financial leverage, that is heading into it's last days, will be covered by delivering Euros as partial payment. When gold begins trading again at a new value (of perhaps $6,000 US present buying power) in Euros, it will be easy for some of
the defaulted holders of loans (oil and others) to be made whole in currency. <

When the Dow recently dipped to about 7400, we saw through LTCM the leverage problems that exist. The Fed organized a bailout because the entire financial system was threatened with collapse. When the Dow goes below 7400, a whole new round of leverage problems are apt to be exposed. (Incidentally, the Dow will have to go to about 3500 just to get back to its historical valuation.) Suppose this happens before Jan 1, before the introduction of the euro. Could you speculate on what you see as the ramifications to the currency/gold market ?? Thanks

eom

NOTE: The last sentence shows that the Japanese view
Europe as a stable enviorment.
------------------------------------------------------
Japanese restructuring 'crucial to end Southeast Asian turmoil'
-------------------------------------------------------
MANAMA: The Japanese economy is likely to remain sluggish during the next year, although prospects of recovery look good after that, according to a leading Japanese economist.

The Asian financial crisis will widen the US trade deficit, causing lower growth over the next two years, said economic adviser to the president of the Bank of Tokyo-Mitsubishi Kazuteru Tanaka.

He was the speaker yesterday at a luncheon-talk organised by the Bankers Society of Bahrain.

The event was held at the Regency Inter-Continental Hotel.

"Most of the Asian countries have been struggling very hard to regain a growth path," said Mr Tanaka.

"This will depend on how quickly Japan is able to achieve a growth path and
Japanese recovery depends on stimulation of domestic de-mand."

However, the Japanese economy continues to remain sluggish, with
Government projections at a negative gro-wth rate of 1.8 per cent for the
current fiscal year, ending March 1999.

This would mean two consecutive years of negative growth, with the previous
fiscal year recording a negative growth of 0.7pc.

"It is apparent that the Japanese economy is still in recession," said Mr
Tanaka.

"The sentiment of consumers and corporates is defensive yet, so it is really
the government's responsibility to change that sentiment.

"This is not going to be easy because of two big burdens in the form of the
bad debt problem with the banking industry and the need for restructuring
industry, both of which are connected very closely."

Accumulated bad debts have eroded assets of individual banks and, despite
their setting aside 40 trillion yen to combat this, the economy remains
sluggish.

However, the current Japanese government had brought in new rules and
regulations to tackle systemic problems and these should bear result in the
future, said Mr Tanaka.

The policies, supported by continued fiscal help from the government could
mean a return to positive growth after the next fiscal year.

However, Japan would not need to go into the market to finance the banking
industry's problems.

"We are the biggest net asset holding country in the world, with $1 trillion in
assets," said Mr Tanaka.

"Our GDP totals $4 trillion a year, second only to the US which is $8 trillion."

On the effect of the Asian crisis on the world economy, Mr Tanaka said the
US economy would see lower growth rates for the next two years.

"Until recently, the US economy was the anchor of the world economy," he
said.

"The US has enjoyed several years of positive growth with low inflation, better
corporate profits and full employment.

"But something is changing and the US economy could have a soft landing."

The European economies would remain stable, despite the German exposure
to the Russian crisis.

By INDIRACHAND

S African gold empire in �6bn London move
---------------------------------------------------

by PATRICK HOSKING

THE sprawling mining empire of South Africa's
super-rich Oppenheimer family is moving to the
London stock market with a planned �6 billion
listing early next year.

In a painful blow for the Johannesburg Stock
Exchange and a coup for London, Anglo American
Corporation said today it was taking over its sister
company Minorco and listing the combined group
in London, where it will immediately enter the
exclusive FT-SE 100 club of blue-chip companies.

Anglo American plc, as it will be called, is also
moving its head office from Johannesburg to
London.

It will be a mining colossus - the biggest producer
of gold in the world and a major force in diamonds,
platinum and coal, as well as holding a 21% stake
in FirstRand, South Africa's largest banking group.

In a dramatic bid to simplify its cat's cradle of
cross-shareholdings, AAC said it was taking
operational control of a host of subsidiaries where
it has only minority control, buying assets from
another Oppenheimer vehicle, the De Beers
diamonds business. The restructuring goes much
further than anticipated and gives the new AA full
access to the international capital markets as well
as the prospect of a flood of new shareholders,
who until now have shunned it as a South African
company.

"It's a huge step away from the old conglomerate
thinking," said one adviser on the deals.

AAC, which has been hit by the savage downturn in
the commodities market, said it hoped the deal
would narrow the discount to net asset value at
which its shares trade. However, in early trading in
Johannesburg, AAC shares were marked down
1.5% to 194 rand.

Under a scheme of arrangement, AAC
shareholders will be offered one new AA share for
every AAC share they own.

Shareholders in Minorco, the Luxembourg-based
AAC subsidiary which owns non-African mining
assets and industrial businesses, will be offered
one new AA share for every two Minorco shares.
There is also a cash alternative of $16 a share,
which compares with a price of around $13 before
the bid was tabled.

The Oppenheimer family, which owns 8% of AAC
and a controlling interest in De Beers, supports the
restructuring.

Cazenove and Warburg Dillon Read are advising
on the London listing and restructuring, while
Morgan Stanley is providing advice to the
independent directors of Minorco.

Although its primary listing will be in London, AA
will have secondary listings in Johannesburg and
other markets.

Many of its largest businesses will continue to be
run out of South Africa, but main board functions
will take place in London.

Advisers to AAC, which is chaired by Julian Ogilvie
Thompson, distanced the deal from the move to
London of another South African miner, Billiton,
whose share price has halved in the past year.
They stressed that unlike Billiton, AAC was raising
no new fresh capital."

"Dramatic political change in South Africa, together
with an easing of controls on capital, has led to this
major step in bringing together the assets and
resources of AAC and Minorco," the two
companies said.

Among the side deals, AAC is acquiring the 43%
of Amcoal it does not already own and is tabling an
offer for the 48% of industrial holding company
Amic it does not already own.

� Associated Newspapers Ltd., 15 October 1998
This Is London

NOTE: This is old news but in light of the Hedge Fund problems I ask; "if these people start buying gold, how in the world will anyone else be able to cover at today's prices"?
-------------------------------------------------------
Liu Shanen, vice director of the
Gold Economic Development and Research
Institute of the State Metallurgical Industry Bureau,
recommended that the People's Republic should
increase its gold reserves from the current level of
397 tonnes or 3% of total foreign exchange
reserves of $140.5 billion to between 1,000 and
1,500 tonnes, between 6% and 8% of external
reserves, "to prevent financial risk." The reasoning
behind this recommendation is apparently the
belief that China should cut its holdings of
dollar-denominated foreign reserves to guard
against a possible fall in the dollar on the
introduction of the Euro, the single European
currency, at the beginning of next year. China
currently holds about 60% of its external reserves
in US dollar-denominated assets, including about
$60 billion in US Treasury bonds. "Compared with
cash, gold is stable and safe," Liu Shanen said.
He also recommended that the Chinese
government should ease controls on buying and
selling by individuals in a bid to boost what he
described as "non-governmental" reserves. Liu
Shanen pointed out that China ranks third in
global consumption of gold and fifth in mine
production, but only twelfth in terms of its official
reserves in gold.

NOTE: A very good article that we should discuss! I thank the Fiend's Superbear site for this.
http://www.fiendbear.com/



U.S. News 10/19/98
Does the buck stop here?
A falling dollar signals new danger
for the U.S. economy

BY PHILLIP J. LONGMAN AND JACK EGAN

Whether you were a middle-class investor trying to
preserve the value of your 401(k) or the world's most
powerful central banker trying to forestall global
depression, reading the financial pages last week
was often a disorienting experience. "It's probably
wise to put your newspapers in your in-box and
leave them there for about a week," Federal
Reserve Board Chairman Alan Greenspan
suggested in a speech to a group of business
economists.

Yet Greenspan could hardly fault the press for the
worried headlines he himself was helping to write. In
the very same speech, he warned: "We are clearly
facing a set of forces that should dampen demand
to an unknown extent in the months ahead. We do
not know how far it will go or how much it will affect
consumer spending. It's a time for monetary policy
to be especially alert."

In times past, even a hint of pessimism from
Greenspan has often bolstered financial markets,
as investors surmised that a gloomy Fed chairman
would surely want to lower interest rates to
stimulate the economy. But adding to last week's
confusing headlines, this time Greenspan's gloom
created nothing but more gloom, as investors
focused on mysterious new forces that seem to be
undermining all conventional wisdom about how the
global economy works.

The yen also rises. The most dramatic case was
the news out of Japan. For more than a year, the
consensus view has been that the main culprit in
the worsening Asian crisis is Japan's banking
sector. In recent weeks, fears about the contagious
effects of Japan's banking mess became so acute
that American Embassy officials in Tokyo
characterized the problem as a national-security
threat to the United States.

Then last Wednesday, Japan's ruling Liberal
Democratic Party submitted long-awaited bills that
would provide 10 trillion yen ($85.5 billion) to
recapitalize the country's banks. The proposed
bailout would be hard on Japanese taxpayers, but
it's just what the doctor ordered. The Japanese
stock market skyrocketed 6 percent, and the value
of the yen appreciated by a stunning 17 percent
against the dollar. But within a day this tonic would
create weird and debilitating side effects on the
world economy's tattered nervous system.

It turns out the hedge fund boys, those secretive
tycoons of the new economic order whose bets on
currency fluctuations increasingly determine the
fate of nations, have been wagering big time on an
ever weaker yen, which until last week seemed like
a no-lose proposition. The idea was to borrow yen
at low interest rates (less than 1 percent) in Japan,
convert them into dollars, and then lend the
proceeds out at higher interest rates elsewhere. So
long as the Japanese economy kept faltering and
the yen kept falling, these "yen carry" deals were
immensely profitable, since the loans could be
repaid with ever cheaper yen. But when the yen
started to strengthen on the supposedly good news
that Japan was finally getting on top of its banking
crisis, these highly leveraged deals began to
unwind, creating widespread panic.

A bad bond bet? It remains to be seen whether
the sudden fall in the value of the dollar against the
yen will be enough to cause a hedge fund or two to
collapse the way Long-Term Capital Management
nearly did two weeks ago. Julian Robertson's Tiger
Management, which has one of the biggest bets
against Japan, has lost about $1.8 billion, or 9.2
percent of its value, so far this month. Meanwhile,
many banks and even some industrial companies
are vulnerable as a result of their own yen carry
deals. And because of the size of all these lost
wagers, even unsuspecting homebuyers and
conservative investors in Treasury bills will soon be
feeling the aftershocks.

Last week, long-term U.S. Treasury bonds started
to plunge in price as their yields climbed back to
over 5 percent from recent lows of around 4.69
percent. The weakening dollar was a major reason.
Until recently, the Japanese in particular had been
huge buyers of U.S. Treasury notes, and a good
thing, too: With the U.S. savings rate now a
microscopic 0.2 percent, the American economy
desperately needs such capital from abroad. But as
the dollar weakens against the yen, U.S. financial
assets suddenly are worth a lot less in yen and
therefore far less attractive to Japanese investors.

Before, the greatest threat posed to the United
States by the Asian crisis was thought to be lost
exports; now it's clear that the agent of contagion
can come directly through the world's deeply
intertwined financial system. Last week, the U.S.
dollar also reached a 21-month low against the
German mark. The modest drop in short-term U.S.
interest rates announced by the Fed on September
29 and the expectation that further reductions are
coming were the main reasons for the greenback's
decline. Lower U.S. interest rates tend to reduce
the appeal of U.S. bonds to foreigners, who are able
to earn higher returns elsewhere.

This reality highlights another assault to the
conventional wisdom that occurred last week. The
more volatile world markets have become, the
louder the cry has been for the Fed to cut
short-term interest rates to keep the U.S. economy
humming along. Yet a new dynamic now seems to
be appearing whereby a cut in short-term interest
rates, to the extent it leads to expectations of a
weakening dollar and a corresponding fall-off in
foreign investment, creates higher long-term interest
rates.

Cash is king. Reinforcing this trend was a huge
increase in risk aversion among investors.
Suddenly, even long-term Treasury notes no longer
seem a safe enough investment, and more and
more investors are moving into short-term notes or
even cash. "This wasn't just a flight but a fright into
cash," declares John Krey, senior currency analyst
for Standard & Poor's MMS unit. According to
Morgan Stanley Dean Witter economist Stephen
Roach, "Lenders across the board are risk averse,
more so than anytime in this decade. The change
in the last month, and especially in the last two
weeks, has been as dramatic a shift" as any he
can recall. In Roach's view, "A credit crunch is
where we're headed."

If this dynamic continues in coming weeks, it could
create the same vicious cycle in the United States
that has undone so many other nations since the
Asian crisis began. At the very least, mortgage
rates, which are pegged to long-term rates, might
not keep dropping if foreign investors continue to be
scared off by the prospect of a falling dollar.
Refinancings to take advantage of lower rates would
also dry up. "So far a silver lining for many
individuals has been the money put into their
pockets when they have refinanced their
mortgages," notes Henry Willmore, chief economist
for Barclays Capital in New York. "A continuing fall
in the dollar and a backup in long-term yields might
take the bloom off that source of prosperity."

To Robert Brusca, the chief economist for Nikko
Securities, the New York-based division of the
Japanese brokerage, the fall in the dollar presents
the Fed with a "two-edged sword," making it harder
to pursue a policy of lowering interest rates to
stimulate the U.S. economy because it risks driving
the dollar lower. And at a time when the United
States is faced with record trade imbalances (on
the order of $15 billion to $20 billion a month), a
lower dollar could scare off foreign investors,
making it harder to finance those trade deficits.
"The U.S. is not in a position to be savior to the
world," notes Brusca. "What we're seeing is that
the U.S. economy has its limits."

A cheaper dollar does have a bright side, to be
sure. As President Clinton pointed out last week, at
least it will give U.S. steelworkers some relief by
raising the price of imported steel. And a cheaper
dollar also makes the dollar-denominated debts of
hard-pressed countries like Thailand and South
Korea easier to repay and relieves pressure on
such troubled currencies as the Brazilian real. But
as the dollar weakens, foreign countries have a
harder time exporting to the United States, as their
goods becomes more expensive to Americans.
That's one reason Japan's Nikkei average closed at
another 13-year low last Thursday following a huge
surge earlier in the week, with the loses
concentrated now among such major exporters as
Toyota. And to the extent that the weaker dollar is
symptomatic of a weakening U.S. economy that
requires more and more easy money to keep
growing, the development is decidedly bearish.

All these trends were enough to prompt J. P.
Morgan to issue the first forecast by a major
financial institution of a U.S. recession in 1999. If
that proves true, Greenspan may want to put off
reading his newspapers for more than just a week
or so.

With Matthew Miller and Steven Butler in Tokyo

eom

turbohawg,-------------------------------------------------
I hope the Dow doesn't fall any further. At this moment there is a whole group of not
only Hedge Funds, but major international banks that are even or just under water. Look
at my News post #591 and see the part: -------------------------------------------------
"Yet a new dynamic now seems to be appearing whereby a cut in short-term interest
rates, to the extent it leads to expectations of a weakening dollar and a corresponding
fall-off in foreign investment, creates higher long-term interest rates."---------------------
This kind of unconventional market action is going to undo even the conservative
financial players. As I said before, it is going to drive a large contingent of the world
capitol into "Euro Assets". If the Dow does fall before the Euro launch, much of this
money will go into the EMU basket of eleven currencies regardless of the perceived risk. It will
be the lesser of the two evils. As the dollar falls, gold will unfold into it's new image as a
Euro proxy whereby the Euro becomes the transactional currency for gold settlement, not
the current dollar. It should be an unfolding event, not a crisis run into metal. However, if
the current leverage crisis forces the default of much of the gold carry trade, the spike in
gold that closes the market will ensue. That's the part of Another's Thoughts I don't like.
We will see. Thanks

The Federal Reserve cut rates! I think we can now truly say goodbye to the dollar! This
move should begin an extended period of dollar weakness. After the initial positive shock
of this action passes, the world currency system will be faced with few alternatives for
safety. BMACD, your gold stocks must be going up. Good luck . FOA

The dollar will soon tank...long bonds will be sold off...a sudden rush of gold will hit the market or gold will rocket. I vote for CB gold "sales" or other such action. You'll know when gold either drops or is flying past $305.

Gamblers R US.

Tom

There may now be 2 perverse impacts from today's rate cut.

The first, as pointed out in the article posted by FOA earlier, is that a weakening dollar may cause interest rates to go up as foreign investors sell their Treasuries and pull out of our markets.

The second is that a lot of shorts likely got took out today. Declining markets need shorts in order to make a more orderly retreat. We may now be set up for a more dramatic crash.

Then again, maybe I'm delirious ... my puts got killed ...

There is a Bulletin with a couple interesting stories at the Daily Report page. Buckle you seat belts, fellow goldmeisters.

BULLETIN

The bulletin that we have to share with you is not to tell you about the Federal Reserve cutting the its fed fund and
discount rates by a quarter point. We are sure you know about that by now. It does demonstrate however, how precarious the financial situation is in the world. Alan Greenspan does not normally react like this. As we have alluded to in the past, the hedge fund problem positions are enormous and he knows that further blows ups could jeopardize the entire world financial system. The Chairman of Merrill Lynch said he thought it would take two years for Long Term Capital Management to successfully solve its problems. Two years!. Not two weeks or two months. And that is just one hedge fund.

Mr. Greenspan has cut our interest rates because these are desperate times and he is taking desperate measures. Of course, all this is very bullish for gold. The interest rate cuts further reduces the contango ( reducing forward selling incentives by producers ) and makes gold a more attractive investment vehicle versus interest yielding
investments. But the real story here is the fear about what could happen to financial markets around the world and
that fear is going around at the highest levels. When word of this gets out, and that type of real fear reaches the
likes of you and me ( the public ) the desire to own gold will skyrocket from all sectors.

Here is what we found out regarding the gold part of the fear. In essence, all that we have been telling you since
lemetropolecafe.com opened is on the money. When Long Term Capital blew up, an immediate review of
investments and lending practices of all financial institutions was undertaken by our government and senior
management officials of all kinds. They found out that many of these institutions have borrowed massive amounts
of gold as a cheap borrowing source of capital and they are exposed financially because they have lent out
massive amounts of gold. This is in addition to the thousands of tonnes that they have lent gold producers to sell
forward and also lent our to jewelry fabricators, etc. Our government knows now that there is no way this amount
of gold can be bought back in a short period of time without the price of gold going ballistic. It could easily go to
$375 to $400 overnite in this type of situation ( if a buying panic starts and the gold loans are called in ) .

Our government is trying to buy some time here to solve other aspects of the financial crises before they deal with
gold. We received confirmation again that they are using arm twisting and cajoling of the strongest kind to keep
the price down. We were told that the bears gave it all they had last week and tried to really break the market. It
did not work.

And this is what our bulletin is about. It did not work and will not work because the Japanese and Chinese are
buying gold and have been buying for 3 months now. Our government is so scared about what could happen, they
have asked the Chinese and Japanese not to push the price of gold up. We do not know what was agree to, but
we heard they said absolutely nothing when queried whether they would continue to buy gold.

There is a reason they are buying gold. It is our understanding that the China, Japanese, Tawain, and Singapore
are in the process of structuring an IMF type of banking institution that will have the yen as the reserve currency
and this new institution will also include gold as part of its holdings. The yen will compete against the ecu and the
dollar as a reserve currency. This is very bullish news for the gold market and not so hot news for the almighty
dollar.

There is something else. Word is spreading in the bullion banking community that many of the other merchant
banks have written massive amounts of calls. As long as the price of gold stays down, they earn nice money with
this call writing business, but if the price of gold explodes, they will too will have to buy gold to honor their
commitments. That is why there is such a battle going when gold rises above $300 and stretches out to $305. It is
only a matter of time that Murphy's Law finds it way into this situation and the gold shorts are blown up. Good old
gold will be that once again. Good old reliable gold. And those that disdained its relevence in modern day society
and mocked those of us that know better, will rue the day they felt that way.

I found the article interesting reading, but vague statements with no footnotes or quoted sources certainly add no credence to the aledged presented facts. I refer to phrases such as: "We heard", "Word is spreading", "We received confirmation", "We were told", etc. Please don't take offense, but it sounds like a Canadian junior gold mining company annual report :-)

Thanks for the wishes. I wish us all (us goldbugs) good luck. We deserve it.
Was I dreaming, or after their close did Japan not announce another major financial institution going bad? I really figured they'ld be down tonight. Guess everyone's still thrilled with Greenspan's surprise cut. He must be scared to death.

I was thinking of Nomura reporting staggering losses. Along with it were also Kokusai, Daiwa and Nikko- all huge losses.

Mr. Kosares, The new day we begin from a dark long night. The Greenspan, he has seen the end of his dollar as king! See now, how the assets are removed from the back of this
weak beast. It was planned for this time, from years that have passed, how these last days will show a new direction. Your Federal Reserve does now see this new war as a "battle
fought while in retreat"! Indeed, this retreat will become evident as "rates that rise" over a dollar "that does fall"! Gold? You have seen the small sales from small countries? I have waited, with patients, for large sales as some say would surely come. From the time of the Belgium deal, this year early, gold is offered no more. A US dollar price below $280 held the BIS as "the bank with no teeth"! A "one tooth cat" they are not, as this bank does mate with the great tiger of the orient. The last meeting in Hong Kong did
change that world. Both now have the large hunger for gold and consume it as I write. In Europe, my friends the Swiss, they speak of selling yet buy with both hands and both feet!
This new day for gold, it be right indeed!----------- --------------------- " the world does float upon
the ocean of dreams, when the wind of our mind blows full with a truth redeemed" Another

$301.20.

Gold was indeed fighting the battle at the low end. Now it is time to test the recent highs. Can it do it?

IMO, yes.

Having not seen a post by your associate, ANOTHER, I'd like to know if condolences are in order upon the untimely demise of ANOTHER. If so, consider them so proferred, and gratitude expressed for your continued posting on USA gold forum.

Positioned for a run, don't you think?

Dec. gold is tracking UP its upper bollinger that now stands at $305.00. Short term intermediary spike likely at $306 with a twist down to possibly $299 to $301. Patter shows a short-cycle ocillation that creates a trading channel at a 40 degree upwards slope since September 29th. Upward days appear to be using a four trading-day up swing followed by a five-day downward pattern. Today will be day four. Current pattern shows a steady climb in price since the 29th in this current channel that has one day with a $9.00 rise, all others are lower than that by half except one possibly two days. It is has often been said that we should excpect a one day rise of around $10.00 to $15.00 to mark the bull. This is still possible if the short term oscillation patterns continues. Reason is the momentum and force that could build while is upswings again. That $10-15 jumb might result as an offshoot of hitting $306. More likely however it would seem that a steady climb after four or five down days after hitting $306 will be the more likely cycle period for this leap. For what is or isn't worty, my $.02US.

I am confused. Bugsy Malone says no posts from another. I just read a post hear from Another yesterday. As a courtesy for those who missed it:

ANOTHER (10/15/98; 22:06:54MDT - Msg ID:602)
Thoughts!
Mr. Kosares, The new day we begin from a dark long night. The Greenspan, he has seen the end of his dollar as king! See now, how the assets are removed from the back of this
weak beast. It was planned for this time, from years that have passed, how these last days will show a new direction. Your Federal Reserve does now see this new war as a "battle
fought while in retreat"! Indeed, this retreat will become evident as "rates that rise" over a dollar "that does fall"! Gold? You have seen the small sales from small countries? I have waited, with patients, for large sales as some say would surely come. From the time of the Belgium deal, this year early, gold is offered no more. A US dollar price below $280 held the BIS as "the bank with no teeth"! A "one tooth cat" they are not, as this bank does mate with the great tiger of the orient. The last meeting in Hong Kong did
change that world. Both now have the large hunger for gold and consume it as I write. In Europe, my friends the Swiss, they speak of selling yet buy with both hands and both feet!
This new day for gold, it be right indeed!----------- --------------------- " the world does float upon
the ocean of dreams, when the wind of our mind blows full with a truth redeemed" Another

The board is messed up Steve. It is using yesterdays board for today's posts. Bugsy looked at today's/yesterday's board and didn't see the PM post of ANOTHER.

GF

The archives are not functioning properly. Today's posts are being added to yesterday's. And noon to midnight discussion for today contains yesterday's posts. Confused yet? I have a message into the tech people. Hopefully we will get this fixed once and for all. I know the're doing their best. Our apologies. MK

Thanks for re-posting ANOTHER's important comments from last night.

Business as usual.

Got home from work expecting to find gold at $400,the Dow at $7200, and what do I find? My dog threw up three times, the dDOW closed at a high for the day and up 107, and Dec. gold is where it left off minus a few cents ($301.70). At least the site is unstuck.

Michael...excellent Market Update on USAGold today. It is good to be reading your site again.

PH in LA...I went offshore following my Oct. 6, 14:01 MsgID: 405 post, and have only now returned. Scanning through the archives I saw your following comments and questions. Further scanning revealed that these were later resolved, hopefully to your satisfaction. Thanks to jinx for adding to my explanation of the relationship of Treasury Notes and Federal Reserve Notes regarding the "vanishing act" depending upon who holds the Treasury note--the FED or else another party. Sometimes I do not express myself as clearly as I should like to.

Friend of Another...reading your MsgID: 556 from Oct. 13 at 10:51 was a real treat. I cannot emphasize strongly enough that everyone should read it if they haven't already. In it you managed to lay open the nature of the beast for all eyes to see clearly. The experience reading it was an example of truth coming home to the mind so naturally it was as though a distant memory were being recalled. Thank you. I was glad to see that many of your posts over the past week more fully developed and gave support to my latest thoughts.

A final thought for all...on the notion of gold value over time relative to all things--particularly a fine suit for a man equating with one ounce. Just let it go. While some things do correlate well for periods of time, history may bear false witness when looking toward things to come. This is a world not as before. I offer this simple, real-world example. There was a time, not long ago, when gold panners in Columbia were frustrated with the abundance of hard grey "pebbles" that would litter the final washings of their gold. They heavy nuisances were discarded with disdain. Today we value platinum a bit higher than they would have imagined. The modern use redefined the value accordingly.

So it will be with gold. It is very important to remember that these are not the days of the pharaohs, the kings, or the czars. There are more people ALIVE today than the sum total of all who have lived and died before us. Economies have grown geometrically while the supply of real money (gold) has failed to keep pace. The price of everything in terms of gold actually decline over time. This has been obscured during the modern geometric growth of economies because the world has been detatched from a gold standard for the casual observer. As the pendulum swings its return, many will indeed be surprised that all things priced in gold have become so very much cheaper. This is good. The excess production of your youth (measured in gold) will not abandon you in your old age as a fiat currency is want to do. To express this in dollar terms for those who cannot detach their view from this measuring standard--if the U.S. reacted intelligently, naturally, and did not cling tenaciously to the current structure, they would peg the dollar to gold. Under this arrangement an ounce of gold would be priced at many thousands of dollars while a gallon of milk would remain at only two dollars. If the U.S. does not peg to gold, and they fight the stubborn fight, the dollar would be worthless relative to all things. Gold would be priced at many thousands and food would be priced beyond your best guesses.

The choices seem clear. Is there a clear-thinking mind to be found withing the halls of the U.S. Govt.? Let us hope so.

From Australian Financial Review about fund managers of National Mutual:

"If Corby and Purchase are right, the conditions are in place for the worst global recession in 60 years. If they are too optimistic, the world will enter a depression to rival the Great one."

http://www.afr.com.au/content/981017/perspective/perspective4.html

By the way, shouldn't coordinated interest rate cuts leave all nations in the same place in their efforts to improve
exports while sustaining over capacities in production?

Co-ordinated rate cuts would leave everyone in the same place, yes. But the idea of the rate cuts is to provide liquidity and prevent a credit crisis. If money is tight, then no one will (or will be able to) borrow to invest or even spend. Not that I'm any great thinking wizard, but I would be very suspicious of these Fed rate cuts. The first one came just in time buffer the LCTM crisis, and this last one just before the major banks all announce earnongs. BankAmerica did, and it wasn't pretty. The drop in interest rates gave the market a reason to think all is well, Captain Fed to the rescue so to speak, and prop up prices so that when some of these positions need to unwind in the very immediate future, it won't wipe them out. It's yet another band-aid. Greenspan would call it fine tuning, others perhaps...manipulation

ALL: Gold looked as if it would drop last week, but it didn't! I think it even bounced off
it's 220 day moving average (a good sign for Technical Analysis) on Friday. Why is it
starting to move up now, at the end of this year? This night (MST) I will offer further
reasoning to go with my earlier posts. Those writings dealt with how the Central Banks
lent gold but never sold it! Now Another has opened the door (in his last post) for some
analysis as to where gold is going and how soon. It should be interesting. Thanks FOA

testing

Colin Seymour's Financial Pages publishes the following interesting analysis at

http://www.users.dircon.co.uk/~netking/finan.htm

Thought it might generate some interest here.

################################################
by Colin Seymour

These few verses are excerpted from Jean-Charles de Fontbrune's book, Nostradamus 1: Countdown to Apocalypse, Pan Books, 1984. ISBN 0330 28062 7. Current events make these verses stand out in a remarkable way, I think you will find.

The quatrain in Old French is presented first, then the English interpretation by Fontbrune, then my additional comments on possible interpretations linked to current events. These are perhaps best thought of as "what ifs", to reflect on potential outcomes depending on how forthcoming events are managed.

Des Roys et princes dresseront simulachres,
Augures, creux eslevez aruspices:
Corne victime dor�e, et d'azur, d'acres
Interpretez seront les exstipices.
CIII,Q26

The heads of states and governments will fabricate imitations [of gold: excess of paper money];
prophets will make forecasts devoid of sense [speeches of politicians and economists].
The horn of plenty [consumer society] will fall victim to them and violence will follow peace.
The prophecies will be fulfilled.

Fiat money- pale imitations of "real money"- abounds; no longer constrained by the requirement for gold backing, the heads of state can print as much money as they wish and fund economies through sales of government bonds. As Alan Greenspan once said, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation". Politicians will be forced to make optimistic speeches to talk up the economy, and bull-market proponents will continue to predict stock market recovery as the nascent bear market continues to make lower
highs. As economic prosperity decays for many, as in East Asia, things start to turn nasty...

Le grand cr�dit, d'or d'argent l'abondance
Aveuglera par libide l'honneur:
Cogneu sera l'adult�re l'offence,
Qui parviendra a son grand deshoneur.
CVIII,Q14

The importance of credit and the abundance of gold and silver will blind men greedy for honour.
The offence of deception will be known by him who attains his own great dishonour.

Mountains of consumer debt, government bond financing, and great apparent prosperity as symbolised by gold and silver (or could this be a reference to the flood of Central Bank gold sales and loans for short selling that discredits gold as a store of value and keeps faith in debt instruments such as the fiat-currency dollar and government bonds as safe havens) supports confidence in personal advancement in the "new economic paradigm" of low inflation, sound economic fundamentals, and bull-market advocacy. Meanwhile, someone is accused of dishonourable acts and deception- now who could that be?

Les simulachres d'or et d'argent enflez,
Qu'apr�s le rapt lac au feu furent jettez,
Au descouvert estaincts tous et troublez,
Au marbre escripts, perscripts interjettez.
CVIII, Q28

Images produced in gold and silver,
victims of inflation, after the theft of prosperity,
will be thrown into the fire in anger;
exhausted and disturbed by the public debt paper and coin will be pulped.

"Paper gold", which is to say certificated forms of gold trading, such as is carried on at the LBMA, which does not involve taking delivery of physical metal, will be tarnished by loss of confidence. This could possibly be as a result of alleged "fractional reserve gold", a re-run of the 17th century's invention of paper money as certificates against gold deposited with goldsmiths, which began to circulate as currency in its own right and ultimately tempted the goldsmiths into issuing more paper certificates than there existed gold to redeem against them. Ultimately the "Paper
gold" will be devalued by investors stampeding to take delivery. Inflation will devalue ordinary paper and coin currency until it may as well be thrown on the fire. The world's greatest debtor nation is the US, as Japanese politicians have been reminding us lately. Inflation and a rise in interest rates would cause the debt service costs to skyrocket, with sovereign debt default at risk, the currency would lose its value and, if hyperinflation ensues, notes and coins would have to be reissued with zeroes lopped off, the previous issues being pulped and melted down.
Alan Greenspan has just commanded a second interest rate reduction. How then could there be interest rate rises? When the markets collapse, the "missing inflation" which is hiding in money measures (i.e. M1, M2, M3), bonds, and the stock markets will be released as "real inflation". When the dollar collapses and money flows overseas, interest rates will have to go up again just as they have in parts of Asia and Latin America.

Despit de r�gne nunismes descri�s,
Et seront peuples esmeus contre leur Roy:
Paix, fait nouveau, sainctes loix empir�es
RAPIS onc fut en si tresdur arroy.
CVI,Q23

Power will be despised because of the currency devaluation
and the people will rebel against the head of state.
Peace will be proclaimed; through a new fact, sacred laws will be corrupted.
Never was Paris in such dire disarray.

When markets collapse and the good times end, prosperity falls and unemployment rises, any politician in power falls out of favour, regardless of their merits. This tendency is well documented in various works on long wave economic cycles. Several heads of state have already fallen; e.g. Japan's Hashimoto, Germany's Kohl, Indonesia's Suharto. The new incumbents will claim that the turmoil has ended, but there will be new corruption and overthrow of cherished institutions, principles and traditions, such as has been asserted by some as the depredation of America's constitutional rights. Paris is often mentioned by Nostradamus as the centre of his own country, but also as a symbol for the West, caught up in the global financial turmoil.

La grande poche viendra plaindre pleurer,
D'avoir esleu: trompez seront en l'aage.
Gui�re avec eux ne voudra demeurer,
Deceu sera par ceux de son langage.
CVII,Q35

They will complain of lost wealth and weep over choosing [responsible politicians]
who will make mistakes from time to time.
Very few men will want to follow them,
deceived as they will be by their speeches.

People whose investments have fallen in value will not want to blame impersonal market forces or long wave economic cycles- they will blame the politicians and stockbrokers who cheered on the bull market, before it turned into a bear. The smallest mistake will be siezed upon as evidence against them and on losing office they will remain discredited, their reputations tarnished for ever.

Pr�s loing defaut de deux grands luminaires,
Qui surviendra entra l'Avril et Mars:
O quel chert�! Mais deux grands d�bonnaires
Par terre et mer secourront toutes pars.
CIII,Q5

Shortly after the shortage of the two metals [gold and silver]
which will occur between April and March,
how expensive life will become!
But two heads of state of noble birth will bring help by land and sea.

Precious metals- which have thousands of years of history as currency- become so much in demand for investment purposes, as the ultimate 'safe haven', and the debt obligation of nobody, that to all extents and purposes their physical trading ceases. There is currently reported a shortage of bullion coins and prices rising for the popular American 'Saints' in collectors' grades. What could the bit about heads of state be about? Could 'noble birth' be a reference to European traditions; in which case this could be implying aid from Europe to America?

We should hope and pray that these prophecies are nothing more than an interesting resonance with current events.
################################################

I have been reading a lot about the spike up in the paper markets this past week. There is a lot of euphoria which is in my mind misplaced. The things that interests me is that gold remains strong and near the $300/ounce level. I do not believe that the lowering of interest rates will give the paper market a permanent boost but I believe that it will give gold a long-term boost in that it is cheaper to hold gold and it makes the fixed income investments less attractive. If the paper investments began to deteriorate in value as they are then perhaps investors fleeing paper will turn to gold, something which since biblical times has intrinsically been a perceived store of value. After all we have golden oldies, not paper oldies. Midas had the golden touch, not the paper touch and Jesus taught the Golden Rule, not the paper rule.

Published Saturday, October 17, 1998


Russian government to take control of gold industry

MOSCOW -- The Russian government plans to retake control of the nation's gold industry, the world's sixth-largest producer, to boost its foreign exchange and gold reserves and help finance ailing mining companies.



The government will buy almost the entire output of the Russian gold industry next year, taking 50 tons of gold in exchange for state gold certificates that mining companies will sell to finance output and buying another 50 tons for cash.

The move returns control of gold exports to the government just six months after private banks in Russia had started exporting gold and helping finance the industry. In August, the government defaulted on its ruble debt and devalued the ruble, causing the banking system to collapse and leaving gold mines with few options for financing.

"Big banks, hit by the crisis, don't have enough money to sort out troubles of their own, let alone the gold industry," said Dmitry Ignatiev, deputy head of the State Precious Metals Reserve. "And the central bank will just print the needed amount, and that won't be an inflationary move because this money will be backed by gold."

The additional gold will allow the central bank to increase its $13.3 billion of foreign exchange and gold reserves by about $932 million, at current gold prices, which the state says will let it print money without fueling inflation.

Spot gold rose as much as $3.20, or 1 percent, to $300.95 a troy ounce in London on Friday.

-- Bloomberg News � Copyright 1998 Star Tribune. All rights reserved.

The following found on Prudential's client disclosure statement. Posted at the Kitco site by High Rise:
###########################
Have you read the disclaimers in their (Prudential's) most recent statements. They are very bluntly stating that their trading partners may default on them.

"The majority of the Company's derivative transactions are short-term in duration, with approximately $67.1 Billion of notional or contract amounts maturing within one year of which approximately $64 Billion mature within three months."

".....which may impair the counterparties' ability to satisfy their obligations to the company"

"...may require the Company to pledge client securities as collateral in support of various secured financing sources such as bank loans, securities loaned and..."

"..these activities may expose the Company to off-balance sheet risk in the event a client is unable to fullfill its contractual obligations."

No wonder Ralph Ackempora looked like he had a load in his pants the last few weeks.

From Prudential Securities Consolidated Statement.

If you read the SEC disclosure information for just about all of the Banks, Brokers, Insurance cos. etc. you will see that they are all over leveraged in the Derivative markets and are cross invested with each other, therefore no one has any idea of how severe the problem is.

HighRise
#############################

FOA I would like to get your response to this. TIA Unomas

[The Euro has blown up in this debacle as well. The miracle convergence of the Euro interest rates was accomplished by the hedge funds and convergence traders like LTCM. We have seen the fixed income market destroyed. There is NO WAY Europe can now possibly implement the Euro currency at current levels without some white knight with a few trillion dollars to bet on convergence, or a surprise readjustment in currencies on Thursday night, December 31st, 1998. Given the fact that the driving force behind the Euro is political and NOT economic, we see little hope that the politicians will back off. It is more likely that we will now see a readjustment by December 31st and the launch of the Euro regardless of market conditions. This CANNOT possibly help stability next year. Each economy will be watched closely and at the first sign of trouble the ECB (European Central Bank) will be forced to pour in reserves from the stronger economies to support the weaker ones. This is Asia all over again � another fixed exchange rate mechanism that is politically driven.

There appears to be no "rabbit coming out of the hat". We are not even sure the rabbit is still alive and as for the hat, it too might be missing for the moment. We need ABOVE all, transparency right now. We need to bring the cash OTC market into a central clearing organization or risk seriously damaging world trade flows as a victim in this liquidity crisis. To all treasuries we say this:

The time to act is NOW. If we wait to study such a proposal, time will NOT be on our side. The technology is there to do the job. We already have electronic systems such as EBS. Moving from that environment to a clearinghouse structure is not that hard today. To the Fed we say; Thanks for the rate cut, but we know you wouldn't have acted unless there was a very serious problem in the wings. So let's get down to fixing the problems rather than treating the symptoms. Lower rates too far, and you will spark foreign capital repatriation, more damage among convergence and fixed income positions, while raising the stakes in overall volatility.]

Article from the "Ides of October"

http://www.pei-intl.com/HMEFRAME.HTM

FOA: Your thoughts of the last week or so have been thoroughly original and thought-provoking and at the same time overwhelming in their internally-consistent logic. Aragorn III expresses better than I: "The experience reading (them) was an example of truth coming home to the mind so naturally it was as though a distant memory were being recalled". It has taken many hours of thinking long and hard to begin integrating them into a more profound understanding of how the world in 1998 works. My heart-felt thanks for your help.

Especially illuminating was your comment that "In these last days of the dollar, worldwide debt as denominated in dollars has ceased to expand and is indeed contracting. This is a natural event that occurs in the latter time cycle of un-backed paper currencies. This contraction was expected to complete the fiat money cycle back in the late 1980s. It has been the Central Banks, led by the BIS that created ingenious ways to expand liquidity until another currency system could be introduced. In these 1990s, the Yen / Gold Carry was one of those ways." (10/13/98; 10:51:03MDT - Msg ID:556) One or two observations spring to mind.

The idea that "worldwide debt...has ceased to expand and is contracting" is one that I have seen proposed by others. (Often termed "deflationists".) Certainly, the situation in Japan, with the collapse of their real estate bubble which led to insolvencies throughout their economy since the early 90s resembles a giagantic debt contraction, as does the implosion of the "Asian Tiger" (loosely termed "Asian Contagion") which began about a year ago in the rest of Asia. Yet there is considerable discussion and but little undestanding as to the actual causes of these catastrophies. Alan Greenspan has even suggested that it can all be kept from affecting the US Economy. (More disagreement as to whether that would be possible to do, etc.)

Would you care to comment as to why the worldwide debt as denominated in dollars was allowed to cease to expand at this time (late 1980s)?

Also, can you corroberate something that I have heard asserted more than once; namely that one of the members of the board of the BIS is our own Fed Chairman, Alan Greenspan? In other words, something that keeps occurring to me while contemplating all this: To what extent is the coming new monetary system being forseen and santioned by the Fed? Certainly, they must understand what is about to happen. Haven't they also contributed to the preparations? The gold-carry and the yen-carry trades were only viable while US interest rates were kept high enough these many years. Why would the Fed allow this"ingenious way to expand liquidity until another currency system could be introduced" rather than supplying the liquidity themselves in other less-"ingenious" ways unless it was to prepare the world financial system for the new currency of the Euro?

It does begin to look like the Fed has collaborated hand in hand with the BIS and the other CBs; operating as a willing partner in this grand plan to retire the dollar from its role as world's reserve currency.

One of my broker's told me this yesterday, he said," I am suprised how many of my clients are taking down second mortages and borrowing from the bank this month. They are not selling their stocks and mutual funds as they are down too low."

Imagine how perilous this is when you consider the capital gains tax implications from their fund holdings.

I received this by email from another investor, he subscribes to a newsletter who wrote this...
"One broker told us that out of 350 clients he serves, not one person
wished to move money from the stock market into the safefty of a money
market fund. NOT ONE! If you consider yourself contrarian (which of
course everyone does), what does that tell you???"

Times this by millions of investors who feel that they are in the dreaded locked-in position and you have the formula for imminent disaster. Unomas

Another...Would you bet your life, not your childrens, but yours, on your predictions! projected wisdom! Thoughts that you portray!

Not trying to put you on the spot, but trying to feel you out as to how strongly you feel about your beliefs??

I love everything you have written and believe wholeheartedly what you say but... the truth is in the test of the fire!!

Not a fair question, IMHO.

TR

The normal trading range for spot gold this week is from 291 to 307. A critical level is located at 300.8 - 302.3 and if the market momentum is strong enough to overcome the critical resistance point at 307, spot gold may have a chance to tackle 311.6, see details at http://www.comcen.com.au/~qindex/gold.html

Weekly chart points and probability of occurrence on closing basis:-
285.5(2%), 288.5(11%).
291.6(10%), 296.2(21%), 300.8(14%), 302.3(%), 306.95(%).
311.6(6%), 317.7(-), 323.8(-).

All chart points are interrelated and is separated by a multiple of 1.53.
The forecast is based on quantum index analysis system and may or may not predict the market movement accurately.

Albert Cheung

The normal trading range for spot gold this week is from 291 to 307. A critical level is located at 300.8 - 302.3 and if the market momentum is strong enough to overcome the critical resistance point at 307, spot gold may have a chance to tackle 311.6, see details at http://www.comcen.com.au/~qindex/gold.html

Weekly chart points and probability of occurrence on closing basis:-
285.5(2%), 288.5(11%).
291.6(10%), 296.2(21%), 300.8(14%), 302.3(%), 306.95(%).
311.6(6%), 317.7(-), 323.8(-).

All chart points are interrelated and is separated by a multiple of 1.53.
The forecast is based on quantum index analysis system and may or may not predict the market movement accurately.

Albert Cheung

Tyler Rose, I think it is a fair question!!! I did say I
believe him. I want to know does he truly believe in himself, and what he projects to all of us at the forum.
He comes from a different background and it is apparent that
he knows more than the rest of us. How much more? He speaks
in rhyme for all of us to decipher. I'm not putting him down. I don't bet often, but I have bet when and only when I
truly believe I am right. Another (as a verb or what-ever)
way of saying it, how strong is Anothers belief that what he
says will take place in his lifetime ( not his childrens, or childrens children!

You didn't say within his lifetime. You asked if he would be willing to bet his LIFE!!!!

That's unfair, IMHO

Tyler, I did say would he bet his life!!! And that is my question whether it is a fair question or not! I would like
to really find out what Another believes wholeheartedly!
Sorry you do not agree, but that is life! Just as I may not
agree or understand the response I receive from Another, it is my question to him. He seems to know so much...........
I am trying to dig further into his mysterious thoughts...
belief in himself... It's a scary world out there!!!
It's amazing what some people would follow, cults, etc.
Would Another bet his life that Greenspan has seen the end of his dollar as king?... His statement not mine! He knows
more than you or I and the rest of us at the forum. I wouldn't bet my life that the dollar is at the end because I
know so little about it, but I also wouldn't make the statement unless I was 99.9% sure! He made the statement,and/or gave his thoughts, does he feel he is
99.9% right. Would he bet his life? Okay, does he feel he is 99.9% right. God, is this a commericial for Ivory Soap! Or was that 99.6% pure. I wasn't trying to put Another on the spot, nor to give up his life on a statement!!!!!!!!!!!!!!!!!

I just don't think it would be fair for anyone to ask another person to bet his life on a future outcome that is completely unknown, and beyond his control. You can ask if that is his best opinion, but no one should be asked to sacrifice his life (literally) on the basis of an outcome as yet unknown. As always, IMHO.

All: If we step back to review the gold market throughout this last year, it offers a
surprising glimpse into an orderly process few thought possible. We have read many times
how this market was in a supply and demand deficit and it was the Central Banks that
were filling the void of un-supplied gold. Some reasoned that if it wasn't for this new
supply the markets would have been much higher by now. No my friends, that just is not
correct! Granted, there is much more gold being consumed than is being mined, but it
wasn't the CB that were supplying most of it. Yes, last year (1997) all the CBs on average
did actually sell off some 400 tonnes +/-, and that was NET sales, not leases. But the
question remains, who supplied the other 700+/- tonnes that made up the total deficit? If
the CB vaults lost only 400 then how could their lending action be identified as the source
of the new supply?? The answer is, it didn't! But I have gone to far, let us back up.
By far, the largest amount of gold lending / leasing is a paper product made possible
through the LBMA. This group of Bullion Banks and brokers (perhaps the Bank of
England also) trades some 30 +/- million ounces of gold a day. A day! Some of it may be
physical and some of it paper, but all of it Very Liquid! With a ready Gold CURENCY
market of this size, there is simply no problem raising paper currency capitol by shorting
paper gold. If you have the correct backing. I am assuming the reader has read my posts
#556 and #585 and much of the Thoughts! of Another.
If an entity can produce some form of collateral along with a Central Banks agreement
to back the gold loan with gold, then a Bullion Bank has little problem supplying cash by
shorting paper gold. The CB does not have to move or sell his gold and receives 1% or
2% for a signature on the general agreement. The BB collects fees and any arbitrage that
may result. The "entity" ( for poster Tyler Rose, that's the 3rd party) obtains little in the
way of return on this investment except for one obvious point. That being, that they will
receive the benefit of any net gains on the repayment of the gold loan, in physical gold,
after the financing is paid. This works because all of the risk is upon the middleman, the
Bullion Bank. Now considering that the BB hedges it's part of any gold risk (increase in
price) in the derivatives market so that in the completion of the deal if gold rises in price
this increase is, as stated above, delivered! As one might reason, the 3rd parties in these
contracts (the buyers that are never reported by the media) are banking on but one thing, a
huge increase in the dollar price of gold! In the event that the BBs are defaulted by current
events or total market failure, it will then be the Central Banks (as ultimate signers of the
General Agreement) that will deliver Real Gold from their vaults!
Now, back to my original point: Much of the extra gold that has been supplied to the
physical markets to cover the supply deficit has come from private holdings. Truly, gold
doesn't come out of thin air and neither the CBs or the mines were offering enough of it to
satisfy demand. Yes, as much as that flies into the face of accepted analysis, these private
Western Holdings were being sold even as the total gold market, including CB holdings
was being cornered by a market that, as Another said long ago "is not as before!
Not all of these maneuverings are done by major 3rd parties. Lately, a good deal of it is
done by traders and financial operators that are naturally attracted to action. These people
will get cleaned out by defaults simply because they don't have anything to offer the world
as a means to force delivery. I think it's called "no ace in the hole". However, any financial
power that has reserves that the economy needs will be supplied or paid in an acceptable
currency if necessary. If we think long enough on this we can see that perhaps next year,
much of the derivatives carry trade will be forced into default. In this meaning, default is
having to pay, not in kind, but in Euros.
But what will trigger this major break in the action, so as to start the ball rolling? It has
already happened. When Asia started to fall many, many months ago, that was the signal
that the first domino was falling. With the Euro expected to arrive in1999, it was time to
break the Asian gold buying (this does not include China as they will be part of Euroland)
and at the same time begin a long term breakdown of the dollar. A destruction that would
carry on for several years. Most of those years have passed.
What of tomorrow? The gold loans will now become harder to repay as the money that
the loans created is destroyed. The Central Banks, that largely stopped backing new loans
earlier this year, have now completely stopped for fear of having to deliver their gold
before the Euro is available. This time period for them has been one of also having no ace
in the hole. From now till the end of the year, they will begin calling in loans (pulling their
signatures) that are now seen as unnecessary. As England is not part of the eleven EMU
nations, look for the LBMA to be seen as carrying heavy risk from default. If the
derivatives markets fail, they will lose what risk hedges they have. This risk should begin
showing itself in the dollar price of gold anytime. With China buying to rid themselves of
dollars preEuro and the Swiss now buying to cover a huge mistake, the market should be
bumping up to $350/$360 by year end! Remember, the Swiss are also a nonEMU
country! thanks FOA

I am sitting in front of my Sony monitor trying to stay awake and alert waiting for your scheduled PM elucidations as eduded to in your AM post, FOA. So, while I await your words of wisdom, I'll pull out my recently received copy of "In the Footsteps of Giants" and wile away the time and maybe learn something for the time expended reading. Hope it's not too long, though. YAAAAWN!

--and embarrassing! I need to be a little quicker with my posting finger. (Had to run out to get a bowl of munchies!)

Best line from the movie Excalibur from the 80's:

Merlin and Arthur are sitting at a table after Maid Marian gives Arthur a "cake" and dances away.

Arthur: "What do you think is in the cake?"

Merlin: "Looking at the cake is like looking at life: What do you know about it, until you've tasted it?....and then- it's too late!" (Merlin then looks over and says in disgust, as love-struck, Arthur bites the cake:) "Too late!"

Jayne,----------------------------------------------------------------------------
My wisdom? It is but a small part of a large life. One should not offer to lose so much for so little. Your words consider not that life is more the value than wealth! The thoughts of all persons come and go with the morning air. Yet, one must breath the wind to live a full life. I offer you the air of history that proves the corruption of men. A corruption you will partake in, with or without a bet of life. Thank You

Mr. PH,--------------------------------------------------
The Greenspan is of the BIS in spirit by day and silent by night. For many days have passed from the time that this bank was of one mind! Two factions are they that hold for
control. The Euro Group is the stronger hold now. The Federal Reserve does fight "the preparations" you speak of. It is to no avail. It was said before, this money war is for the American world a "fight in retreat". In my time I have not seen the USA as on the "Level eye" with the BIS. Perhaps they worked together during the war (ww2), but that was
then. This dollar, it will not die the easy death for many a strong person does still stand for this country. This is as it should be. We watch this new gold market together, Yes?
Thank You

Mr. Unomas,
It is unfortunate for such persons to hold the "paper stocks" during this time of history! Always the "good investment" for "the good times" they are. The future before us will change this thought for many the children of children. Every season has the special feel to the skin and this winter will bring the sand storm as not before. It is not our place to change this weather, rather to wear the correct garments. I have always found the winter,
it does change much to quickly for the traveler with all clothes. These traders will not move with the speed of sand and will find no shelter in paper skins. If the gods be
gracious, these seasons will change slowly, yes? Thank You

Mr. Aragorn, I read your write and this you say: "The modern use redefined the value accordingly". I can add not a word to this post. Your age is 100+, yes? Perhaps I am wrong, your wisdom, it is to die for!
Are you of the world that will use the Euro soon? I think this dollar and Euro will also find the value "redefined"!

I will be gone for a time.
Thank You

Touche, Touche, TOUCHE

Thanks for post on NOSTRADAMUS. How long ago were these original lines written? el

The normal trading range for spot gold this week is from 291 to 307. A critical level is located at 300.8 - 302.3 and if the market momentum is strong enough to overcome the critical resistance point at 307, spot gold may have a chance to tackle 311.6, see details at http://www.comcen.com.au/~qindex/gold.html

Weekly chart points and probability of occurrence on closing basis:-
285.5(2%), 288.5(11%).
291.6(10%), 296.2(21%), 300.8(14%), 302.3(%), 306.95(%).
311.6(6%), 317.7(-), 323.8(-).

All chart points are interrelated and is separated by a multiple of 1.53.
The forecast is based on quantum index analysis system and may or may not predict the market movement accurately.

Albert Cheung

Nostradamus: the 16th century French-Jewish clairvoyant had an impressive clientele... dukes, generals, kings, even the pope pondered his poetry. Needless to say, no one survived.....just us gold bugs.

Thank you Another ... Unomas

Bangladesh devalues taka 3% raising the spectre of competitive devaluations in East Asia.

New York Times says "As election nears, landslide by GOP appears unlikely..."

U.S. President Bill Clinton aims to put pressure on Israel by threatening to recognize a Palestinian state this spring if the two sides don't reach an agreement at the Mideast summit outside Washington, Israel's army radio reported Sunday. (Associated Press)

The New York Post's John Dizard says, "You are still well advised to wait for the correction in the gold price to continue. The real bull market in gold is still just over the horizon. The last short covering runup, it seems, did come from speculators who followed Long-Term Capital into the gold carry trade. That involved borrowing gold at less than 2 percent a year, selling it, and speculating with the proceeds. It was a cheap way to fund yourself, but that game doesn't look so risk-free as it did when the gold price was reliably declining..........."

The Washington Post: "Nearly 18 months after a currency crisis began in Thailand, the U.S. economy is starting to display the first tangible effects of the worldwide economic slowdown that is rattling the financial markets, reducing goods, and unnerving government policymakers."


Congressional Republicans: Peasants Who Just Fell Off the Turnip Truck?
BY ROBERT NOVAK
The first consecutive four years of Republican control in Congress since 1930, which began with a bang, are ending this week with a whimper as GOP leaders succumb to White House mastery. But more than tactical ineptitude, the Republican surrender on Capitol Hill suggests a deeper malaise.One biting critique: "Today, the Republican Party is adrift, without an agenda and without purpose beyond its seeming preoccupation with saving the congressional seats of its incumbents." The mean-spirited ravings of some pundit? No, this was a statement from the party's normally positive-minded 1996 vice presidential candidate, Jack Kemp, on Oct. 8, before the full congressional capitulation. Having long since abandoned the priorities of governmental downsizing and deregulation they professed when taking control of Congress in 1995, Republican leaders months ago gave up on tax reduction. The further retreat came last week when they gave President Clinton nearly everything he wanted in order to wind up the 105th Congress and get home three weeks before the election.That House Speaker Newt Gingrich and Senate Majority Leader Trent Lott had the white flag readyto wave was no surprise. What stunned some of their compatriots was that they were not prepared for the Democratic end game. "Our side looked like a bunch of peasants who just fell off the turnip truck," grumbled one veteran Senate Republican...

David Linkley comment: This be a Washington tale told by peasants and lechers?

I am making a request in obtaining a few facts
Could someone supply me , or give me a site where I could find out the following:
Total above ground gold supply
Breakdown of holdings by CB`s, jewellery,investors etc.
Gold held by Catholic Church
Total of tonnes which could be sold into the market , under a situation where someone was willing to purchase everything until there price was achieved.
thankyou, sourdough

Often in my life I have had to just sit down on God's green earth and wonder, "Where do these thoughts come from?" It is a lonely place, encircled by ostrich type family and friends complete with backs turned and heads deep in the sand. Not a pretty sight if you know what I mean. No one can hear or see in that position but they can give off their opinions in a most unpleasant way. At my first awakening, after pulling my own head out of the sand, I kicked their behinds with these new thoughts hoping to "force" them to raise their point of views so we could at least look around and talk on the same plane together about what we see. But no takers. I admit now to feeling panic, thinking, that without their approval and participation in getting our heads out of the sand at the same time, I must be crazy, just like they say I am. So I "assumed the sandy position again too"......for awhile. It was less stressful that way.
But the thoughts come anyway, don't they?...even underneath all the sand. So, mustering up the courage to "leave the circle," I hope there are others "out there on this journey" too. But most of all I hope to find mentors who will show me the "big picture." I am comforted with your "thoughts to others." Thank you.
I have found answers to some of my questions at this forum so could I talk with you about some concerns I have? Please forgive me if I repeat others before me who may have asked the same ones. I do look forward to your thoughts. My personal concern about y2k plus the fragmented bits and pieces of the "big picture" caused me to leave the stock market in August for the money market. I've come close to investing in a gold mining stock or two but just haven't been comfortable to be in any stocks. My plan has been to buy gold and silver coins but how much % of my investment portfolio? Do I plan to have any US$ under the mattress at all? Is there any reason to purchase Euros instead even if I live in the US? I'd have to go to Europe to buy anything with them, right?
The y2k problem gives me the "willies" when I think about candlelight, bottled water, cooking on the fire and Trivia Pursuit for more than a few days so I want to invest in a contingency plan. But the length of time to provide for? I must decide this too and have it in place this year.
Your thoughts?
Thank you. Yellowbird

Munk, Soros or Buffet?
Munk reminds me of a hedge fund manager aspiring to be a mining executive turned real estate tycoon. Soros has made some brilliant moves over the last 2 decades...then he made a bad move in Russia. He may have more hedge problems soon. Buffet is a long term holder, which may work out better in silver than equities.

It's amazing how ABX made billions on gold during a period of time when it dropped over 500 dollars.Was he just lucky or did he get good advice from Kashogiand his associates in the early days? I know how you feel about mining companies that are hedged, so I can't use the argument that many mining stocks did very well, post 1929. I believe that Munk has some sort of bail out plan if/when gold moves higher, that he can pay back through production over a 10 year period.

Now he owns some of North America's most prestigious real estate and is positioning for massive expansion in Europe. Will the strong Euro shelter land prices there?

I hear that Munk is within shouting distance of Soros in the Swiss Alps and wonder if he heard Munk say this:
[ "George was pitching the (United States) Congress to step in and help Russia," scoffed Munk. "He was talking his book. He has billions of dollars of investments. If I had that I would also threaten and cajole and use all my power to persuade the Congress to step in there. Who wouldn't?"]

Now last week Soros had this to say:
[If I'm saying that markets are inherently unstable, I'm also saying that imposing market discipline means imposing instability. Markets are imperfect, but regulations are even more imperfect, so we have to be very careful what kind of regulations we introduce. Some restraints on capital movements would have been very useful in protecting countries against the onslaught of the attacking world.]

In the same interview he was asked about Hong Kong's recent intervention in the stock market, and answered by saying:
[I think that they managed to dissuade speculators from being in the Hong Kong market because they managed to inflict some losses. Did they do the right thing? That is very questionable, but I can't really disapprove of what they did.]

One would get the feeling that Soros is starting to squirm. Meanwhile, Mr. Longevity(Buffet) was considering the takeover of LTCM.Talk about guts! How do you feel about Buffet's silver position?

Yes, there is a big transfer of wealth coming. Hopefully, oil does not become too expensive...the last thing we need is to fight "Mad Max" over a gallon of gas!

Unomas

Seems when I bring up USA gold I find myself in an earlier day. I have to hit previous day, then current day, then midnight to noon and then I might just get into the current day. Anybody else having this problem.

My recollection only:

132,000 tons of gold total in existence.
Central banks hold 32,000 tons (14k tons leased).
Lots is jewelry.
Rest unknown.

These are ball park off the top of my head just like my hair.

If you are using Netscape try to set your cache to check document evrytime...
Select: edit ; preferences ; advanced ; cache
See: "Document in cache is compared to document"
Select EVERY TIME.
Good Luck.
If you are using Explorer...I'm sorry.

According to Bobby Godsell CEO of Anglogold
HTTP://196.33.161.105/default.asp
In a speach to shareholders on 6/26/98 he stated:
134,800 tonnes above ground in the world.
31,900 tonnes held by CBs.
62,600 tonnes in jewelery.
24,200 tonnes in private hands.
1,300 tonnes unaccounted for.
I know these figures don't come out right but it's a ballpark figure. Anglogold claims to be currently the worlds
largest gold producing company owning several large South
Aferican gold mines,and expanding their operations globally.
listed on the NYSX as AU.
Please excuse the spelling. beesting

The normal trading range for spot gold this week is from 291 to 307. A critical level is located at 300.8 - 302.3 and if the market momentum is strong enough to overcome the critical resistance point at 307, spot gold may have a chance to tackle 311.6, see details at
http://www.comcen.com.au/~qindex/gold.html

Weekly chart points and probability of occurrence on closing basis:- 285.5(2%), 288.5(11%).
291.6(10%), 296.2(21%), 300.8(14%), 302.3(14%), 306.95(22%). 311.6(6%), 317.7(-), 323.8(-).

All chart points are interrelated and is separated by a multiple of 1.53. The forecast is based on quantum index analysis system and may or may not predict the market movement accurately.

Albert Cheung

Down a few dollars in overnight trading.

I noticed on an earlier post that you offer a copy of Footsteps of a Giant to first time posters? Would it be possible for me to get one of those?

Rate-cut uncertainty
undermines pound

by BEN LEAPMAN

THE Bank of England will wait two more weeks
before deciding whether to make a further cut in
interest rates despite feverish City speculation
about emergency measures.

The prospect of an unscheduled rate cut was today
continuing to undermine the pound, after weekend
Press reports suggested that the Bank's monetary
policy committee was about to go into emergency
session. However, the MPC is understood to be
sticking to its timetable on which the next rates
decision is due on 5 November. On Friday a Bank
spokesman denied that an emergency meeting
was taking place that day. The nine members of
the MPC are all in regular contact because they are
overseeing the creation of the Bank's quarterly
Inflation Report and forecasts, due to be published
on 11 November.

Sterling today fell half a pfennig to Dm2.757, barely
above its 18-month low, although it rose a third of a
cent to $1.705 versus a slumping dollar. Attention
was focused on the Bundesbank, which will decide
on Thursday whether to cut German interest rates
following cuts in America, Canada and Britain.

The Bundesbank is thought likely to resist pressure
to cut, but it could change its mind if the mark rises
sharply enough to hurt German exporters. Today
the dollar fell three-quarters of a pfennig to
Dm1.6165, threatening to fall below 1.60 for the
first time since January 1997.

� Associated Newspapers Ltd., 19 October 1998
This Is London

ALL: Prior to the USAGOLD Forum we had posted an excerpt from another meeting of
the American Enterprise Institute. They are located in Washington D.C. and are very
active in discussing world affairs, including a separate section devoted to New Atlantic
Initiative (NAI). This is a brief introduction to a meeting held in Istanbul, May 1-3, 1998.
Please read all of the preamble to this speech given by Mr. Michael Portillo. The speech
also follows and is extremely timely to your investments decisions if your thinking involves
politics. They are located at http://www.aei.org/start.htm
------------------------------------------------------------------------------------------------------------------------

� NAI holds annual congress in Istanbul, May 1-3, 1998.
-----------------------------------------------------------
On Thursday, April 30, 1998, the United States Senate voted 80 to 19 (with one
abstention) to ratify an amendment to the North Atlantic Treaty that will allow Poland,
Hungary, and the Czech Republic to join NATO. The following day, the European
Parliament met to decide which member-countries would qualify to join the European
Monetary Union on January 1, 1999.

The same weekend the New Atlantic Initiative, headquartered at the American
Enterprise Institute in Washington, D.C., in association with the Turkish American
Association in Ankara, held its annual congress in Istanbul. Turkey, a NATO member,
is a country of "vital interest and concern," NAI executive director Jeffrey Gedmin
remarked, "and we wanted to underscore Turkey's importance as a valuable member
of the Atlantic community."

More than 400 distinguished political, intellectual, and business leaders from more than
twenty countries participated in the Congress of Istanbul. In plenary and breakout
sessions, speakers and delegates tackled issues of democracy and Islam, European
Monetary Union, NATO enlargement, free trade and the transatlantic marketplace, and
security in the Balkans and the Middle East, among others. Delegates received written
greetings and words of support from British Prime Minister Tony Blair, U.S. Secretary
of State Madeleine Albright, former British prime minister Margaret Thatcher, Polish
Deputy Prime Minister and Minister of Finance Leszek Balcerowicz, former U.S.
secretary of state Henry Kissinger, U.S. Senate Majority Leader Trent Lott, and
Speaker of the U.S. House of Representatives Newt Gingrich.
------------------------------------------------------------
� NAI hosts Michael Portillo ------------------------------ Will European Monetary Union Fracture the
Atlantic Alliance?
----------------------------------------------------------
Former British defense minister Michael Portillo unwaveringly answered yes. In
keynote remarks delivered Wednesday, May 27, at the American Enterprise Institute,
Mr. Portillo argued that the single European currency has nothing to do with
economics. Rather, it is an essential part of a new European state�one that is
potentially less democratic, more hostile to the Anglo-Saxon economic model, and
decidedly at odds with America over matters of security and foreign policy. Speaking
at the NAI's annual congress in Istanbul, Mr. Portillo warned that "it would seem to me
foolhardy to abandon our very long-established alliance with America, in the visionary
hope that Europeans can find a satisfactory common outlook which has eluded them
until now." Jeane Kirkpatrick, director of foreign and defense policy studies at AEI and
former U.S. ambassador to the United Nations, and Richard Perle, a resident fellow at
AEI and former U.S. assistant secretary of defense, also spoke at the May 27 lecture.
-----------------------------------------------------------------------------------------------------------------------
Extract from remarks made by the Rt. Hon. Michael Portillo to the-----------------------------------------------------
---- New Atlantic Initiative Congress of Istanbul--
---------------------- May 2, 1998------------------------------------

Speaker Gingrich was not the first, but he is the most recent, to point out that Europe's
headlong rush to monetary union looks perilous. Processes that took more than a
century in the development of the United States are being squeezed into a few brief
years. In America a nation was created, with much discussion of what should be the
balance of powers between states and union. In Europe we have reversed the logical
order of nation building, and the visionaries are trying to create a European state by
creating first the attributes of a state, such as a single currency, long before the
balancing competences of Europe and its member states have been defined.

As Mr. Gingrich has pointed out, a single currency where we do not have a single labor
market brings particular dangers. Europe contains many different economies, with
different cycles and varying speeds. Any one of them is prone to recession, but in a
Europe where there are different currencies, any state can, by adjusting its currency and
interest rates, provide itself with a natural stabilizer. The idea of applying a single
exchange rate and a single interest rate to such diverse economies is economic
madness.

But there is a simple explanation. The justification for the single currency has almost
nothing to do with economics. It is the essential foundation for a new European state.
In fourteen member states that logic and ambition are openly avowed and applauded.
Only in Britain, where the idea of a single European state is viewed with widespread
public hostility, do politicians pretend that the single currency is about completing the
European single market, with virtually no political implications at all.

Fortunately, Dr. Helmut Hesse, a member of the directorate of the Bundesbank is more
honest and tells us straightforwardly that "monetary union is the last step in a process of
integration that began only a few years after the second world war in order to bring
peace and prosperity to Europe." Of course it is, and that is why any querying of the
pace of monetary union or the validity of the convergence process strikes Britain's
European partners as mere pedantry and obscurantism. Our partners are on their way
to their federal destiny and nothing can stop them.

You have to take seriously their visionary idealism. Nationalism, they argue, caused the
wars of the past in which millions of European and thousands of Americans have died.
Abolish the nation states and you have eradicated the cause of conflict. You have to
take it seriously, but you are not obliged to agree with it.

It is true that extremist nationalism has been a root cause of past wars. But there is no
reason to believe that abolishing the nation states, by creating a European state to
replace them, will do away with nationalism. Yugoslavia and the Soviet Union should
sufficiently tell us that. In any case, past wars had complex causes. They were started
by tyrants who capitalized upon a sense of national grievance � some piece of territory
or some population that yearned to be reunited with the motherland.

One of the worries about the single currency is precisely that it will lead to less
democracy and new causes of grievance. The central European Bank will make
decisions on interest rates for all countries participating in EMU. As Dr. Tietmeyer, the
Bundesbank President, has remarked candidly, it is an illusion to think that member
countries could then retain national autonomy over taxation and labor market issues.
So the political decisions most critical to the economic life of people in the member
states, decisions affecting their wealth and the rate of unemployment, will be in the
hands of the ECB. But of course that body is not democratically accountable. No one
will vote for it, and it will not be under governmental or parliamentary control in the way
that national central banks normally are.

Imagine what might be the impact, once we have a single currency, on people in a part
of Europe suffering from recession. The substantial barriers to free movement of labor
prevent them from seeking work elsewhere in Europe. They cannot vote to change the
policies that have made them jobless, because those policies are made above the
level of national government and beyond democratic control. They will be able to see
that other countries are faring better, and that whilst the single exchange rate and
interest rate may suit their neighbors, it is crippling job opportunities at home. That will
produce a sense of grievance, a source of bitterness between peoples in Europe, and
a sharp reduction in democracy.

Of course, in theory the democratic deficit can be filled by boosting the status and
power of the European parliament. In my view that will not do. Democracy has to
operate within a society of shared values and experience, otherwise people will not feel
that the parliament for which they vote is representative of their interests. The United
States, despite its size and ethnic diversity and thanks to its historical experience, has
such a shared set of values, and they are regularly articulated by politicians and by the
people. Europeans evidently do not share a set of values, and you will not be able
simultaneously to convince Greeks and Irish and Swedes that they are adequately
represented in a body drawn from such politically diverse places.

Some of the differences show up in the very dissimilar national approaches to foreign
policy. To the frustration of America, European nations have disagreed sharply on
most critical issues in recent years: the Falklands War, South African apartheid, the
Gulf War, subsequent policy towards Iraq, Bosnia and the Great Lakes area of Africa.
Now it is proposed that Europe should have a common foreign and security policy, and
one can imagine a cheer going up in Washington at the prospect of at last hearing
Europe speak with one voice.

That might be the wrong reaction. America needs to consider what such a common
policy might look like, and all the evidence so far is that is would not be pro-American,
and indeed might be anti.

For those intent on building the new European state, the creation of a common foreign
and security policy is essential. Along with EMU and a common border, it represents a
critical attribute of a sovereign state. Given the diversity of actual views in Europe,
common positions could only be arrived at by majority voting. So far only actions in
pursuit of positions already arrived at by consensus are to be subject to majority voting.
But it is the clear intention to move further.

Those European countries offering support to the United States in recent times, over
Libya or Iraq for example, have been in a small minority. Under a common foreign
policy decided by majority voting, they could be outvoted, and they would have
surrendered the option of adopting an independent national position.

For the United Kingdom, and maybe others, that is a dismal prospect. The UK has a
long history of joint work and action with the U.S. in diplomacy and military action. We
share many values in common and agree on foreign policy stances much more often
than not. Demonstrably, we have agreed rather less with our close European
neighbors. It would seem to me foolhardy to abandon our very long-established alliance
with America, in the visionary hope that Europeans can find a satisfactory common
outlook which has eluded them until now.

Frequently, the only policy position on which it might be possible to achieve a majority in
Europe, would be inaction. The policy paralysis that has gripped Europe in the past
would be institutionalized, and America would lose any European voice of support in its
global role of combating tyranny.

Bad though that seems, things could actually be worse. Those who look forward to
European political union tend to favor the prospect of a European political bloc which
follows policies which are distinctive from America's Some of those who promote the
idea of a common European foreign and security policy undoubtedly wish to see a
reduction in American influence in Europe. That has been a recurring theme in the
decades following the last war. There have been calls to replace NATO or reduce
American influence within it. The more America has been needed, the more that
dependency has been resented.

Those who dream of a Europe free from American influence and rid of U.S. forces also
look forward to the emergence of Europe as a new power in world affairs that can be a
counter-balance to America. For those reasons I would expect a common European
policy to veer between being un-American and anti-American.

I fear that there are those building the European state who hope also that it can offer an
alternative economic model to the Anglo-Saxon world. There is much talk of social
Europe. It is a code for maintaining much higher levels of public spending and a much
bigger role for the state than has become the norm in today's world. European
governments tend to be much more statist and corporatist, and they feel unable to
adjust to a competitive world which tends to place more emphasis on the
encouragement of enterprise and a reduced role for government in the economy. They
cherish the hope of building a Europe big enough to resist the competitive pressures of
the outside world.

In Britain, and a number of countries in Europe, large parts of public opinion are
unconvinced by the arguments for political union. But a lethargy is undermining them.
The most effective argument which is wearing down their resistance is that European
political integration is inevitable, and cannot and should not be resisted.

What is needed is an alternative. We must explain that countries need not travel down
the route to the extinction of the nation states of Europe. People in Europe are being
led to believe that the only alternative to political union is isolation. This is absurd in a
world where the nations of the world are increasingly united in their approaches, with an
ever-larger number of liberal democracies, an increasing acceptance of liberal
economics and with technology linking our peoples ever close together.

MANAMA: Gold hallmarking figures have dramatically increased this year, as
compared with the past two years, it was announced yesterday.
----------------------------------
Bahrain Assay Section head Abdul Khaliq Al Bosta said 1,018,493 individual
gold pieces, weighing 7,295,352gm, were hallmarked from January to
September this year.
----------------------------
This figure, he said, showed an increase of nearly 10 per cent when compared
with the same period in 1996.

"This March we recorded an all time high of hallmarking over a million grams
of 140,943 individual pieces, which is a growth of 31.3pc when compared with
the same period last year," said Mr Al Bosta.

"Over the last month, in preparation for the Wonders of Gold Exhibition, the
Assay Section has been busy, working extra hours to cope with the influx of
Bahraini gold. We anticipate figures for gold hallmarking this month to be the
highest yet," he said.

The Wonders of Gold '98 Exhibition, under the patronage of Prime Minister
Shaikh Khalifa bin Sulman Al Khalifa, is due to take place at the Le Royal
Meridien Hotel from October 28 to November 2.

It is being organised by the BPMB, in co-operation with Bahrain International
Exhibition Centre.

Bahrain Promotions and Marketing Board (BPMB) acting chief executive
Robin Marriott said the rise proved that jewellers were working very hard and
looking forward to booming sales during the upcoming exhibition.

"The increase in figures is largely due to the success of the gold exhibition
and the high standards of Bahrain's gold hallmarking legislation.

"Bahraini hallmarked gold serves as a guarantee to shoppers, that what they
are buying is genuine quality. All jewellery on display at the exhibition and
sold in Bahrain has to be hallmarked," he said.
-----------------------------------------------------------------
Copyright � Gulf Daily News, All Rights Reserved.
WWW by Arabian Net

Bahrain studies pacts to bolster South Africa ties

MANAMA: Bahrain and other GCC states are exploring the possibility of
signing agreements with South Africa, to promote bilateral trade and
investment.

South Africa is keen to forge ties with new partners, in a bid to become a
major player in international trade and investment, said Counsellor, political, at
the South African Embassy in Riyadh Ashraf Suliman.

He was speaking on the sidelines of a seminar on South African-Gulf
Connection: Investing towards a new millennium, held yesterday at the
Bahrain Chamber of Commerce and Industry.

The event was organised by the South African Embassy in Riyadh, in
conjunction with the chamber.

Chamber president Ali bin Yousuf Fakhro said he hoped the event would be
the start of a series of similar events in Bahrain and South Africa, to promote
bilateral trade and investment.

"Our relations with the Gulf have been booming since 1994, when the African
National Congress (ANC) government came into power," said Mr Suliman.

Gulf states and South Africa recognise a need to enter into an equal
partnership, which would benefit all concerned.

"With Bahrain and Kuwait, we are discussing a treaty for avoidance of double
taxation and for investment protection," said Mr Suliman.

He said draft treaties had been exchanged with both countries and
negotiations were currently underway.

With Saudi Arabia, South Africa is set to sign several treaties later this year.

Two-way trade between South Africa and Saudi Arabia had reached one billion
Saudi riyal (BD10 million) and the country was South Africa's biggest trading
partner in the region.

The agreements to be signed, during a visit to Saudi Arabia by South African
deputy president Thabo Mbeki, will include an overall co-operation agreement,
a memorandum of understanding (MoU) on oil, a defence co-operation
agreement, a trade and investment agreement and a sports and culture
agreement.

In addition, the chambers of commerce of the two countries will also sign a
co-operation protocol.

Chief executive of the Government-owned promotion body Investment South
Africa Rafiq Bagus said South Africa was a member of the World Trade
Organisation (WTO) and was committed to international trade practices.

Objectives of the government's economic strategy was to achieve a growth
rate of six per cent and create 400,000 jobs per annum.

This would be done through deficit reduction, phasing out of exchange
controls, reducing inflation, rationalisation of tariffs, restructuring of state
assets, reduction of corporate and personal tax and enhancing global
competitiveness.

Inflation was currently hovering at 8pc to 10pc and the budgeratry deficit had
been reduced to 10pc of gross domestic product (GDP), said Mr Bagus.

He said the country's economy, which was in the past focused on import
substitution, was being re-oriented towards an export economy.

Mr Bagus said crime in South Africa was being adequately dealt with and the
Government was committed to eradicating crime.

The two areas in which crime has increased is crime against women and
crime against children, he said.

By INDIRACHAND








Copyright � Gulf Daily News, All Rights Reserved.
WWW by Arabian Net

The normal trading range for spot gold this week is from 291 to 307. A critical level is located at 300.8 - 302.3 and if the market momentum is strong enough to overcome the critical resistance point at 307, spot gold may have a chance to tackle 311.6, see details at
http://www.comcen.com.au/~qindex/gold.html

Weekly chart points and probability of occurrence on closing basis:- 285.5(2%), 288.5(11%).
291.6(10%), 296.2(21%), 300.8(14%), 302.3(14%), 306.95(22%). 311.6(6%), 317.7(-), 323.8(-).

All chart points are interrelated and is separated by a multiple of 1.53. The forecast is based on quantum index analysis system and it may or may not predict the market movement accurately.

Albert Cheung

TEST TO GET TO TODAYS FORUM

FOA:

In your suggested reading excerpt "from remarks made by the Rt. Hon. Michael Portillo to the New Atlantic Initiative Congress of Istanbul on May 2, 1998" we read: "As Mr. Gingrich has pointed out, a single currency where we do not have a single labor market brings particular dangers....The substantial barriers to free movement of labor prevent them (laborers) from seeking work elsewhere in Europe."

This is simply not true! From my contact with Spain I know that holders of Spanish passports have long since been issued a European Economic Cummunity passport that gives them the legal right to seek lawful employment in any other EEC country. I am unclear on the details of how this works, perhaps the full implementation of the concept is not presently in effect, but for sure, it is forseen for the near future. Of course, the normal impediments; such as language, housing etc. would remain, but always manageable for determined immigrants. Even in the United States, a move from one coast to another for a working family is an undertaking not to be taken lightly. Yet it is accomplished every day.

We also read, from the same speech: "Those who look forward to European political union tend to favor the prospect of a European political bloc which follows policies which are distinctive from America's. Some of those who promote the idea of a common European foreign and security policy undoubtedly wish to see a reduction in American influence in Europe.... There have been calls to replace NATO or reduce American influence within it. The more America has been needed, the more that dependency has been resented."

This preceding comment seems a bit reactionary in today's world. With the fall of the Soviet empire, the world is left with but one superpower. It should not be viewed as surprising to see other societies questioning the wisdom and/or need for this state of affairs.

Differing economic conditions within Europe are fostered by differing economic policies (interest rates, currencies, etc) from one region of Europe to another that Portillo imagines will derail the unified currency rather than the reason/need for their continued existence. This looks like a "Which-came-first-chicken-or-egg" type of argument that the speaker fails to address. It may well be one of those unknowable factors that only experiment will clarify.

As far as the unviability of political union between diverse states, there will certainly be a long road to travel in this direction. The Europeans hope that their first step down that road, ie. a unified currency, will lead to a successful journey in the decades to come. Pointing out the rigors of the journey is a coward's argument against embarking on the journey altogether.

Just wanted to mention to all FORUM! observers that ANOTHER and FOA will take questions and comments from those who do not want/like to post. Just e-mail your THOUGHTS! to USAGOLD and we will pass them along. ANOTHER & FOA offered this popular service in connection with their page before we went to the FORUM and, at my request, have graciously decided to renew this connection with their audience. The down-time this AM was due to phone company problems. I want to thank our current posters for the high level of discussion that has been of significant benefit to us all. I also see that we are getting some news now and then. Keep up the good work. My best to all. MK

This afternoon Argentina announced a sale of its remaining gold, according to a report by Bloomberg. There were no details though we will likely hear more as the day goes on. Let me first of all say that Argentina just recently received the plaudits of the International Monetary Fund because it met the deficit guidlelines laid down by that international organization with respect to its deficits. Meeting the IMF criteria no doubt played a positive role in Argentina's successful bond float today on Wall Street today handled by Goldman Sachs & Co. The Argentine debt offering was the first major offering by an emerging market since July and went out the door at nearly 11.5% annualized. It was sold to a small group of institutional investors. If there was a gold sale in advance of the bond issue, it appears, at least on the surface, that the sale was attached to the bond offering and played a role in holding down the deficit and make Argentina look like it had it house in order. I have no way of knowing for sure that this is the case, let's just call it a hunch. Argentina has (had) 360,000 ounces of gold according to IMF figures recently released -- about $108 million at $300 per ounce. As late as 1996 Argentina had 4.36 million ounces of gold, but sold most of that off no doubt to pay down past debt requirements or reduce new exposure. Argentina experience hyperinflation that ended through 1990 when their consumer price index hit 100,000. Since then Argentina started out again at 100 for its consumer price index and it stood at 407 at 1997 year end according to IMF statistics. Since 1991, the Argentine currency, if I am reading the IMF tables correctly, has attempted to hold a peg against the U.S. dollar despite the horrendous inflation rate. In other words, fellow goldmeisters, Argentina could be preparing for a devaluation and all the foregoing is merely an attempt, futile as it appears to be, to ward it off. So far, as I have said, we have seen no details. We have said many times on these pages that strong countries do not sell their gold, weak countries do. Prepare for an Argentine devaluation that could send shudders through Latin America and the New York financial institutions with loans there. Gold was down $4 today purportedly because of the Argentine sale. That $4 will be small potatoes compared to what will occur to the price of gold if and when an Argentine devaluation is announced.

"That $4 will be small potatoes compared to what will occur to the price of gold if and when an Argentine devaluation is announced."

Michael:
Did you mean that an Argentine devaluation will cause a larger potato in the form of a bigger fall in the POG or the opposite; a large increase?

Anyone know if the gold is already sold...I'll make a bit if possible.;-)

What do you know...a CB "sale" of gold...how amazing...NOT.
A rising gold price would tank the dollar...we watch and wait.

Tom

Tom

To BEESTING AND STEVE
Thankyou for the numbers-Sourdough

They are going up...way up. I wrote that in haste on the way out the door to watch my daughter run in the final cross country meet of the season. I'm sure it has gaps. If you think the exposure and problems caused by LTCM, Russia, et al was bad for the international banks, wait until you see what an Argentine collapse will do to them. I do not think $250 million is going to buy all that much time. Gold? It would be hard to imagine gold going down in such a scenario. I still have not seen any details on the Argentine sale, though Bloomberg really did report it. Does anybody have any news on this? This may turn out to be one of those one day wonders, but the deeper implications of the Argentine situation will stay with us. Any country that floats 11.38% bonds can't be healthy. Perhaps they should contact one of the credit card companies. They aren't all that far from the rate on plastic.

I think they already sold it. It's gone. Next time we'll call you. As somebody at the office asked: Is this a buy signal? Good question. We watch and wait...........A bigger impact on investors today was the effect of quarterly account statements hitting America's mailboxes. Not pretty...

$297.80us.

Steve H, both of my sources show gold unchanged in overnight trading. Where are you looking to show gold down $1.50?

PH, I'm glad you read the article from AEI presented in my #656 post. I like your last sentence "Pointing out the rigors of the journey is a coward's argument against embarking on the journey altogether."
------------------------------------------------------------------
That is so true! Has no one studied world history? It seems that every country has traveled
a difficult road during their creation. Need we use American History as an example? Also,
every one of them have experienced turmoil during their existence. Why then, do the
analysis see that the rocky road ahead for Europe as a prelude to failure? If every country
that experienced political, labor and financial troubles failed because of them, no nation
would exist! -----------------------------Some how, I feel that Mr. Portillo is trying to show
that the EMU will come about in spite of all of the obstacles, because it is more a
political / nationalist union than financial! I say nationalist in respect to the European
urge to go their own way and not be part of the United States as a monetary offspring. I
agree that it will fracture the Atlantic alliance. It is this fracture that so impacts the middle
east oil interest if only because Europe is closer and where America is an ocean away.
------------------ One can see that much of his speech is from an English vantage point
knowing full well that England may never enter the EMU / Euro world. However, reading
closely we see the very European notions being analyzed. Those notions are real and
projected outright in Europe today. If they produce a solid Euro it will pull in China, India
and the Middle East (oil). With Asia, South America, Canada and Mexico headed for
total breakdown, the impact of a new European Powerhouse upon the US dollar would be
colossal! While traders worry about a few dollar change in gold, they lose sight of the
financial missile coming straight at them. FOA

As Another suggested, Mr. Al G. is now fighting a losing battle over the US$ while in full retreat! Therefore:
1) Call in favors from all remaining allies.
2) Argentina's currency is pegged to the $. They lose if the US loses.
3) Al G. calls up in a panic and suggests that it would help if they could sell some yellow stuff, for the sake of the Western Alliance!
4) And of course we'll help you with that bond issue you so desperately want to place to an unsuspecting (dare I say gullible) investment community. ACK!!!

Please excuse my satire, I'm a little bored. I'm salivating for the first limit up day in gold since?????? Keep Well

Master Luke, the dark side has been held off. The lowering has stopped. Trust the force Luke, listen to you inner voice. The lowering was a v-spike lower, now awaiting the gathering voice of the force. Your confidence builds, and so does the force.

Check this site out:

http://www.quote.com/layout/index.frames.html

Put in GC98Z.

Put in candles, all sessions.

Then you should get overnight gold at the "g."

HTH (hope that helps)

bidding $297.30, asking $298.00.

Another,
You said on July 19,1998, "The US Federal Reserve will now have little
choice but to raise interest rates as the dollar currency inflation of past years moves from
"paper assets" into real things."
----------------------------------------
We hardly see this to be the case in recent weeks. Would you please care to comment.
---------------------------------------------------------
David L.B.
-----------------------------------------------------------
David,------------------ I would like to comment on this. You may already well know that
currency inflation and price inflation are two different things. If your statement of "We
hardly see this" is applied to price inflation in the USA today, then I totally agree. In years
past the great inflations that occurred in nations with dominant currencies were not subject
to markets that were worldwide in scope. Those inflations (currency inflation and the
resulting price rise) were played out in a more local arena. Even the most recent example,
the German inflation, did not have the moderating influence of a world economy
marketplace as today. In that time, large increases in money assets were quickly followed
by increases in the prices of goods and services. They had no real means of exporting their
money asset inflation to other countries (sending currency out of the nation to be held as
asset reserves or to buy goods for import) in order to negate a domestic price rise. Gold,
as part of the world monetary settlement system helped to block that path.
-------------------------Current examples of money inflation and the resulting price inflation
such as in Mexico, Brazil, Korea, etc., all have resulted because they too can not export
their money assets on par with other currencies. The exchange rates, almost like gold,
block their path. However, we must understand that these are not major currencies much
less world reserve currencies. The dollar of present operates in a world currency system
without gold, that allows this currency to be exported without restraint. Any attempted
exchange rate adjustments implemented to block this movement (dollar falls and the Mark,
Yen, etc. rise) runs head on into a loss of trade with the America. The result is a dirty float
of exchange rates in that most Central Banks artificially keep the dollar flowing out of the
US because they have on viable alternative vehicle to base trade values on.
------------------------------------------------ Using this line of reasoning, we can see how a
massive inflation of dollars over many years has built up. When something does come
along that blocks that outflow of dollars and even causes it to reverse, the dollar will
plunge on exchange rates and bring home all of the past buildup of price inflation. Indeed,
the dollar and it's price inflation will look much like Mexico and the lot. As you have seen
lately, they always raise interest rates in Mexico and Brazil in an effort just to keep the
currency in use. In like mind, so will the Federal Reserve raise rates as needed with little
regard for local economic conditions. If the Fed can lower rates, as they just did, for a
non-economic purpose (to kill off several Hedge Funds and save several banks) so to will
they raise rates to save the dollar!-----------------------David, it's important to understand
that Another must think with a view for the world financial framework, not just the USA.
I agree that US rates will be rising soon as the dollar is severally challenged by the Euro.
Thanks FOA

Buena FE,---------------------Hello! Yes, I agree that the Argentina gold sale announcement (see USAGOLD MK post) is no less than market posturing. The same thing happened with the Russian gold sale speculation. They did, by the way, sell some gold, but as soon as it hit the market it was picked up with ease. The media and short brokers made a big deal of it. After selling a small amount (one tonne) the Russians
stopped? --------------
It's the paper gold and derivative gold markets that make move on these normal events than needed. They are so leveraged that any news at all sends them off. But, notice over the last weeks and months how these sale stories have lost impact on the gold price. It comes right back after a few days. That's because the paper markets brace for an
onslaught of new paper supply that doesn't come. Lease rates are on rock bottom as only a few lenders are trying to manipulate a market that has even fewer "Qualified" players. I add that they are not Qualified because the Major CBs are not signing on anymore! Truth be told, they started slowing down the leasing game just as soon as the Euro had gained
the eye producers to become an oil settlement vehicle. And no doubt that was prompted by the use of gold in it's reserve mix! --------------------------------Look for these down drafts in gold to be shallow. I think it will trade up back into the range that the Euro Group CBs wanted it be in, $320 / $360 and no higher. At least until year end.
thanks FOA

The Fed is taking the same actions today as they did after
the '87 crash. I don't believe it will work. I believe that in '87 the world embarked on a dollar rescue mission after the crash that allowed US rates to come down without consequences. Is this not correct? Also.... could you add any other thoughts as to why a strategy that rekindled the boom in '87 will not work today?


thank you

I thank you for your thoughts and for your kind words in your message #639 October 17.
For wisdom a dear price is sometimes paid. As a person lives, in attempting to establish his individuality through life's words and actions, it is his mistakes that uniquely define him. To live the long life (making all possible mistakes) is indeed a manner to gain much knowledge--and have an interesting life, though with an appearance as a bungling fool. In a quest for wisdom, the direct path is to relinquish one's own desire for individuality and egotism. Mistakes in one's own life are foregone, replaced instead with learning by the mistakes of others, past and present. Such is the path I have chosen. I shall never be "the life of the party", yet the potential for wisdom shall remain bounded only by the precedents of all human history.
To answer your question, it is in this youngest of countries, USA, that I live. Pursuit of wisdom, if I have succeeded in small measure, has helped remove any nationalistic bias in my outlook toward currencies and economic developments.
The golden path often leads not to wisdom; but I have found that the path to wisdom does lead one to gold this day.
We SHALL watch this new gold market together, and be neither surprised nor disappointed by the outcome...a fine time in history to recognize gold for what it is!

I would simply like to underscore the point that not all truth can be revealed through charts and Technical Analysis when one considers the gold market these days. Look away from your straight-edges and you will know what decision is prudent and compelling. Not all decisions should balanced upon the test: "Will this choice make my money grow more than the other choice?" There is more to life than money...there is wealth. Wealth is your servant, standing ever ready to be expeded in your time of need. Modern money as we know it is no more than a political contrivance--albeit some are better than others. TRUE wealth needs no pedigree; gold needs no introduction.

got gold?

DOW looses steam at the end of the day while trading higher. Gold seems to be holding its strength.

FOA, the following url:

http://www.standbyloc.com/syndication.html

goes to a site that talks about structuring loans so as to have them be off the balance sheet of the Bank. It involves a third party that would actually be making the loan. In view of our prior messages regarding a third party being involved in lending gold, etc., I thought this location could possibly shed some light on that transaction. I was hesitant to copy and post it here, as it is an advertisement for a professional consultant. (I found the url on Kitco). I would be interested in your reaction to this information.

Thank You, TR

NEW YORK, Oct 20 (Reuters) - Talk that another hedge fund, this time Paloma Partners Management Co., had hit hard times contributed to a late sell-off in stocks on Tuesday, traders said.

The fund declined to comment on losses, but hedge fund sources said rumors that Paloma is in trouble have been circulating recently. One fund manager said word around the hedge fund industry was that Paloma had lost 20 percent in August and September.

The Dow Jones industrial average, which reached as high as 8652 earlier in the day, up 186 points, sheared its gains late in the session to close a paltry 39 points up at 8505. Some traders said that, in addition to a late slide in technology stocks, the hedge fund talk might have worried Wall Street...

The rumors of trouble at Paloma could just mean an unusually big loss, or worse, that its banks and brokers are forcing it to liquidate some positions, another industry insider said. The fund could have as much as $4 billion under management, he said, although that figure could include some leverage, or borrowed money.

Banks have started to ask hedge funds for additional capital, or margin, in the wake of the loss posted by Long-Term Capital Management. Like Long-Term Capital, Paloma, uses a variety of bond arbitrage strategies, keeps a low-profile, and has billions of dollars under management.

"It's possible that Paloma, with an excess of hubris, used too much leverage," the industry insider said. On the other hand, the source doubted Paloma's long-time chief executive, Donald Sussman, would over extend himself. "He is a very conservative...individual," the source said. "It would be very surprising if he took a lot of risk." Paloma has its own traders, but also places money with traders outside the firm, the industry source said.

David Linkley comment: Hubris. Again.

I can't see why the US market was up at all, after the release of the trade figures this morning. The gap widened way more than expected. I thought that just might be a bit of bad news. Oh well, shows how much I know.

BUENOS AIRES, Oct 20 (Reuters) - Argentina's Central Bank will sell 1.54 million gold coins, all of its remaining stock of the metal except for 40,000 Argentine coins of historic value, the Bank said Tuesday.

The coins will be offered for sale and melted down to gold bullion for disposal on international markets if there are insufficient buyers, the Bank said in a news release.

A Central Bank spokesman said he did not know how much the 1.54 million coins were worth, but the Clarin newspaper reported the sale should bring in more than $100 million.

The Argentine Central Bank said last December that it had secretly sold four million ounces of gold -- its entire bullion stock -- in the first seven months of 1997 for $1.46 billion.

Many Central Banks around the world have recently reduced their gold holdings.

David Linkley comment: The cupboard is bare. Now what, Goldman Sachs?

eom

...shares a property with MIQ.Montreal. Lots of speculation as to why this sister company was halted pending news. Some think that the shared property called the POD will have great results. I am waiting to hear. Fun to follow the action though. (I am shareholder of MIQ and consider this junior one of the better ones, so forgive the ocassional post). MIQ has not reflected the news (whatever it is) in its own share price.

...shares a property with MIQ.Montreal. Lots of speculation as to why this sister company was halted pending news. Some think that the shared property called the POD will have great results. I am waiting to hear. Fun to follow the action though. (I am shareholder of MIQ and consider this junior one of the better ones, so forgive the ocassional post). MIQ has not reflected the news (whatever it is) in its own share price.

The early 20th century Argentine coins depict ideals with which Americans are familiar since they are manifestations of the Argentine republic period. The Argentino is well known at .2304 ounces pure per coin (though at this point we are in the dark what all will be included in the offering). They are pre-1933 and very merchandisable. My hope is that they will be offered at acceptable premiums and it is my hunch that this will be the case, since melt-down looms as an alternative. Though 1.54 million coins seems like a big figure at first blush, when you figure that an organization like Centennial Precious Metals is capable of moving roughly 20,000 per month and some of the bigger organizations 100,000 or more a month, then you realize they won't be around long. Sorry that Argentina is forced to sell off its heritage like this. Hope it never happens to Americans. But in a market where pre-1933 availability gets tighter by the day, most investors will view this as an opportunity, not a threat. My hope is that Argentina has some time. It would be a shame if these treasures were melted like so much pawn...........Centennial Precious Metals will be looking to be involved in this liquidation starting tomorrow morning.

TOKYO (Reuters) - Tokyo stocks powered
ahead at the opening of trade Wednesday, solidly
adding to their already significant gains this week.
The benchmark Nikkei average soared
296.66 points, or 2.15 percent, to 14,104.71 in
the first 10 minutes of trading.
It was the first time since Sept. 28 that index
rose above the psychologically important 14,000
level.
Traders said they expect stocks on the
Japanese exchange to enjoy support on the back
of U.S. stocks' winning streak, stability in the
dollar/yen rate and relief that Japan may have
avoided a financial meltdown.
"The investment environment surrounding the
Tokyo market is getting better now," said Yutaka
Miura, a market analyst at New Japan Securities
Co. Ltd.
"But the Nikkei 225's rise over the past three
sessions has been overdone and people will be a
little bit cautious above 14,000," he said.
Yasuo Ueki, general manager at Nikko
Securities Co. Ltd., said buying in the futures,
which pushed up the Nikkei 225 on Tuesday,
would continue amid hopes for reduced risks in
Japan's financial system and for new economic
stimulus steps by the government.
Bank shares will be closely watched after the
Japanese financial daily Nihon Keizai Shimbun
said on Wednesday that the Industrial Bank of
Japan had became the first large Japanese bank
to show its willingness to accept public funds
under a government bank recapitalization scheme.

Australian stocks edged up slightly after the
opening of trade.
The All Ordinaries index rose 11.2 points, or
0.44 percent, to 2528.1 in early morning activity.

Seems as gold is fighting its battle at the low end. Since it is held back on the high, why not consolidate just under $300US?

Early morning blitz-thought leads me to believe that BX.V news might just be a Kinross JV announcement regarding the POD property. Makes sense as MIQ.M already has a $10M four year deal with Kinross. Why not pull BX.V into the fold? Let see if I am a good guesser.

Found on the web:


Asia Precious Metals Review
CnnFn - Buying from Japan at the US $296 levels supported the
spot gold prices today, but a lack of follow-through buys kept the
price from rising to $297 levels, dealers said. Long liquidation
on the Tokyo Commodity Exchange depressed spot platinum
and palladium in the afternoon, dealers said.

October 20, 1998 Nikkei leaps 2.2 pct. at open
October 20, 1998 Profits keep Dow afloat
October 20, 1998 Dow climb almost ends
October 20, 1998 Cohen invited to join GS elite
October 20, 1998 Stocks start to cool off
October 20, 1998 BankAmerica president quits
October 20, 1998 Dow rally hits bond on chin
October 20, 1998 CNNfn market movers
October 20, 1998 Strong profits lift stocks
October 20, 1998 Rally on Wall St. heats up
October 20, 1998 High spirits in Europe
October 20, 1998 CNNfn market movers
October 20, 1998 Bulls take care of U.S. stocks
October 20, 1998 Dollar jumps but bond slips
October 20, 1998 Bad market? Switch to Roth
October 20, 1998 Wall St. to build on gains
October 20, 1998 Europe heads higher
October 20, 1998 Nikkei up almost 2 percent
October 19, 1998 Asian stocks edge higher
October 19, 1998 Tokyo stocks see early rise
October 19, 1998 Oil tanks as taps open up
October 19, 1998 Western posts hefty loss
October 19, 1998 CNNfn tech stock report
October 19, 1998 Mergers heat up Wall Street
October 19, 1998 Bulls prevail on Wall St.
October 19, 1998 Uncle Sam's bonds lure few
October 19, 1998 Stocks on higher ground
October 19, 1998 CNNfn market movers
October 19, 1998 Wall St. merger mesmerized
October 19, 1998 Stocks in good spirits
October 19, 1998 Bourses show slight losses
October 19, 1998 Battipaglia is upbeat
October 19, 1998 CNNfn market movers
October 19, 1998 Dow wakes up in good mood
October 19, 1998 IPOs seek star quality
October 19, 1998 Bond looks for direction
October 19, 1998 Stocks losing some steam?
October 19, 1998 Europe opens with a whimper
October 19, 1998 Hong Kong slips, Tokyo gains
October 19, 1998 Nikkei rallies strongly
October 18, 1998 Rally carries over to Tokyo
October 16, 1998 Is bond haven still there?
October 16, 1998 Next week: relief for stocks?
October 16, 1998 A Fed gift, a Dow lift
October 16, 1998 Are the good times back?

It is becoming increasing obvious that the latest paper rally around the world (except for Japan) is fizzling quickly. I am looking for the euphoria which hit when the USA agreed to give $18 billion to the IMF to vanish quickly replaced by more doom and gloom and the advent of the long-term bear. I believe that gold has bottomed and that this may be the last chance for some time to get gold at this price. I can see no reason for the increase in stock prices as the fundamentals remain the same. Also we have KY2 just around the corner. I'm in gold, silver and gold stocks. I have lost a lot of money on paper the last two years but think that my patience will be rewarded before the end of 1999.

David Linkley (10/20/98; 18:39:57MDT - Msg ID:686)
------------------------------------
Thanks for the post about the Argentine coin sale. Why would they offer to melt the coins
for sale? Everyone on the planet knows that gold in recognized coin form can be readily
used to pay off debts, even large ones. My observations are: They will do the same as
Russia and sell only 30 or 40 thousand ounces (perhaps 100,000 coins?) then stop the
sales. OR They will melt them down anyway (without offering them in coin form) because
someone is pressuring them to fill a physical void of bullion bars.
------------------------------------USAGOLD: It will be very interesting to see just how
many of these coins Do end up on inventory with precious metal dealers in the USA, or
anywhere. I have heard nothing about it being offered as a package to the investment
community? -----------------------------------------ALL: If this is a true sale (not just market
posturing) then it may be viewed as the most bullish conformation of an impending gold
crisis the world has had. It's one thing for a national Central Bank to sell gold bullion and
quite another to sell it's last pre-minted (old) coins in large amounts. We truly may be
entering the beginning of gold bull market brought about the relentless selling of gold that
hasn't been delivered to date. If the financial operators (hedge funds) are shut off from
borrowing gold (even with low rates) because of performance problems, the game is
winding down! When the flash point is reached, we should quickly move back to the $320
/ $360 area with an over run of, perhaps $50 above that. For investors that gamble, the
gamble today will be timing the purchase of gold. If the market runs far above accepted
levels, before the end of the year, massive default could occur. In that climate, no one will
buy or sell gold. Dynamic time lie just ahead! FOA

I agree MIQ is an excellent buy at these prices. It is only a matter of time before we will be rewarded. Once gold punches through this resistence the supply of stock for these small caps will dry up and the prices will rally very very quickly. Have you had a chance to check out EAG-v. This is at least as good if not slightly better. Its worth some investigation if nothing else.

THE Japanese government today made a
breakthrough in its drive to shore up the banking
sector as a major solvent bank stepped forward to
accept public funding.

Industrial Bank of Japan, the country's
seventh-biggest lender, stressed it was accepting
taxpayers' money for the good of the nation and the
financial system, not because it needed extra
capital.

Tokyo has defied international critics by finalising a
60 trillion yen (�303 billion) package of State
funding to tackle the bad-debt crisis.

However, analysts feared the rescue plan would
founder because no healthy bank would want to be
seen to accept public funding. the Nikkei 225
Average closed 408 points up at 14,216, led by
banking shares.

� Associated Newspapers Ltd., 21 October 1998
This Is London







http://www.thisislondon.co.uk/dynamic/index.html

Thank you for your comments on the Argentine gold coin sale and the importance of this CB effort. You state that in your opinion that soon the POG should move into the $320 -- $360 range (that is desired by the ECB's for the launch of the new Euro) and "perhaps $50 above that." But you end with the comment that "If the market runs far above accepted levels, before the end of the year, massive default could occur. In that climate, no one will buy or sell gold."
My questions are:
Who sets the "accepted levels" ? The ECB's?
Who will default and why ?
AND then, Why will not anyone buy or sell gold ?
and please explain "anyone".

Thanks for your postings but us dumb common folk have a saying --- "KISS" which translates to "Keep It Simple Stupid" like "betting the farm" has much to say about us simple stupid folks.

Thanks in advance.
GW

A parable that might be helpful in light of Russia's current monetary plight. I wrote this two month's ago, and Russian talk of gold and silver coins lately show's them to be perhaps on the right track...

You can't simply and easily walk around with a fully grown bull on your shoulders...you don't have the strength, and the bull doesn't cooperate. I'll use this to make a point later.

Once a country experiences lost confidence in their fiat currency, they cannot directly start with a clean slate and resume using a "new" fiat currency. A certain "proving" process is required. They must follow a specific economic evolution for their money to attain the lofty and ultimate goal of money by decree. (Though this is doomed to be a losing and temporary state of affairs.)

Perhaps we know a friend or relative who, starting with a newborn calf, would walk around with the calf draped over his shoulders. The calf was young, light, and weak, so this was easily done. As the calf aged, our friend became stronger through this regimen, and the growing calf became accustomed to this routine to the point where it had no need to walk on its own. In time, our friend would be found with a grown bull on his shoulders, and the relationship seemed perfectly natural as the bull had legs that were now too weak and untrained to walk. Our friend would be seen as very capable and kind and generous to be helping this bull travel about.

So it is with money. When man decided to take an active and manipulative part in an otherwise natural system, constant attention was required to successfully reach the end result of a fully functioning fiat currency.
Simply review the 200 year history of the American dollar and its slow (and forced) evolution/manipulation from silver and gold, to paper backed by silver and gold, to paper with an empty assurance of gold backing, to paper alone. This progression was vital. Without following the necessary progression, the people will not "carry the bull", and they would not accept paper as money.
When a currency fails, the telling signs are plunging exchange rates on the world currency market. The bull has died, and the man vows never again to become so attached. It is not possible to immediately replace this system similarly with a new man and a fully grown bull. I repeat...the new man is too weak (plus he knows better) and the new bull simply won't stand for these shenanigans. You must start it all over from the beginning. Or... let the young calf grow wild and free, and let the man tend to his business, and money will naturally be what money will naturally be. And we all know what history and natural selection has concluded in that regard...
got gold?

We are at a point where too many currencies have failed or else suffered drastic loss in confidence. They must either restart the fiat-evolution from the beginning (back to gold!), or else gravitate toward a fiat system that has not yet failed.
The risk to the USDollar, as the last man standing, is that should any country try to properly reestablish their OWN currency, the starting point would be gold. And everyone would IMMEDIATELY see "the young calf running free with an unburdened man" as a system superior to "man forever burdened with crippled bull".
got bull?
got gold?!

In our opinion, the auction described below will have little effect on the gold price.

From Bridge News:

"Buenos Aires--Oct 20--Argentina's Central Bank will auction most of its pre-1900 gold coins through Sotheby's in New York and London, and hopes to obtain at least $100 million, a bank official told Bridge News. The date of the sale will be decided later this year. If demand from international
collectors is less than expected, the coins will be melted down and resulting ingots sold, the official said."

USAGOLD: "Little effect on the price of gold"? I'm sure you expect no downside
pressure from this sale. Michael, I bet a gold auction is the last thing the US treasury
wants! It wouldn't surprise me if we hear them change this to an outright gold sale. I say
this because the last time open free market auctioning of gold took place was in the late
70s when the USA sold one million a month. These types of sales tend to raise public
attention about gold and usually increase the bidding! ------------------------------------ I
have to say again, for them to offer pre-1900 coins as an obvious type of bullion-for-debt-
retirement sale must be the absolute most bullish development in the gold market. When
this market does turn, it will be after every last possible ounce of physical has been
offered, leaving nothing but the trading of paper gold debt. Some replies, then more on
this later. I want to check on something. FOA

Gandalf, -------------- In your post you mention "us simple stupid folks". Well, there are
more than a few people that are "simple" and a number of them are even "folks". I have
known and do presently know these types of people. Many of them have a way of
expressing thoughts and aspirations about life and wealth with such logic that it usually
leaves me feeling "stupid"! ---------------------------------------------------Your question:
"Who sets the "accepted levels" ? The ECB's? ------------- Much of the large scale gold
leasing began with the same group of Central Banks that will be part of the EMU. The
leasing expanded with the idea that the dollar price of gold could be lowered without
having to put actual physical gold, from the vaults, on the market. As much as the world
financial analysis hate to say it, gold is still the measuring stick for currencies. Many paper
currencies are valued mostly by their exchange rates against the dollar, so the gold price in
their terms is not as important. However, in order to increase the prestige of the dollar, the
world reserve currency, gold (the currency) had to be devalued in dollar terms. This type
of nonphysical gold manipulation could only work during the end time for the dollar. With
the dollar reaching the end of it's paper currency life cycle, most nations and national
Central Banks do not actually hold enough physical gold (in amounts that are relative to
circulating currencies). They hold some gold, but mostly rely on the public gold markets
to judge how acceptable currencies are. ---------------------------- The post of :Aragorn III
(10/21/98; 11:10:08MDT - Msg ID:700) -- gives an excellent feel for the fiat money
cycle.--------------
The Euro was taking much longer to create than once thought, and the 90s were about to
see the dollar dropped from settlement standards. More on this in a minute. ------ In order
to retain the dollar as the leading currency, it's gold price was lowered by allowing certain
investors (3rd parties?) to use collateral to finance the purchase of leased gold from CBs.
The gold was left in the vaults as leased assets and the cash created by the sale was used
to add liquidity to the world financial structure. In return for this sale of gold, certain
commodities were supplied in such quantities as to keep their price low in dollar terms
(oil). Because oil is settled in dollars, and because it is a far larger and visible market than
gold, in this action. the dollar was also further enhanced as a reserve
currency.-------------------------This process alone, the falling prices of oil and gold, was
enough to set off a world liquidity expansion as never seen before. This was needed
because the dollar, in the early 90s had stopped expanding (read that as debt was
contracting) and threatened the world with a financial crisis. A crisis that would occur
without an alternative currency system. In many ways this seed was planted in the 1987
crash-----------see this as a partial reply to-- (scp (10/20/98; 11:24:55MDT - Msg
ID:679).---------------------------------------------As you may now see, the original purpose
of leasing gold was not to put the gold on the street, but to use it as a leverage to raise the
dollar value and in turn increase liquidity, they were buying time. Many of these loans
were indeed for the expansion of mining with the intention of physical gold being used for
repayment. Everyone always assumed that the gold from the mines was going to flow
back into the CB vaults. But, what no one questioned, was, if the gold never left the CB
vaults (see my other posts) why would it go back there? No, a good deal of this gold
repayment will flow through the Bullion Banks and arrive in Another account! But don't
look for a road map showing the world the path, it will not be discussed! ---------------
As for the gold loans that went to expand financial (paper) dealings (hedge funds and
countless others) they were to be self liquidating. If the loans blew up then the CB vault
gold would be delivered (again see my other posts). The escape route, in this
circumstance, for the CBs was to be the Euro. If it became strong and replaced the dollar
for oil settlement, among others, then the Euro could actually be printed and delivered for
oil, in affect, buying gold! An action that the new ECB will conduct with it's new EMCBs.
----------------------------------- Again, your other question: Who will default and why ?
------------- With the leasing market expanding, along with stock, bond, derivatives and
currencies markets, financial operators jumped into the game (LTCM) mostly because
they read it wrong. These people (Andy Smith??) are the ones that helped send the gold
market much lower than it's original simple purpose intended. No entity was ever
dumping enough gold onto the market to drive it that low (below $320??). The leverage
paper boys had figured out the game and were exploiting it. It was the Euro bickering that
delayed it's debut long enough for the Shorts to get a foothold into the market and drive
the paper price down. This is one of the major reasons that some CBs actually did SELL
some gold. To keep the market from exploding. (see my other posts) Add to this that the
Asians had started buying actual physical at these low prices and you had the makings of a
disaster. A disaster in that the CBs may have to deliver more gold than they had!
------------------------------- This is the flash point that Another has described as being "at
the door" today. If the Shorts ever have to start covering, the entire market, as we know it
will stop functioning. --------------------- As for the "anyone" in your question: "Why will
not anyone buy or sell gold ? please explain "anyone"------------- It's you my friend, and
me, and everyone that reads this post. Look back in history and you will see that when the
gold price, on and off the market, is soaring, NO ONE will SELL to ANYONE!!
Especially if the world reserve currency is being destroyed. --------------I think I have said
enough for now. More replies later.--- Thanks --- FOA

This "simple and stupid folk" thanks you, friend, for your enlightenment.
GW

Note: Mr. TYoung, is this the start of a trend that changes the political direction in South Africa?

21 October 1998
Govt to take
unexploited mining
rights

Stephan� Bothma and David McKay

PRETORIA - Government intends to nationalise
SA's unexploited mineral rights in the next 20
years to give black companies greater access to
them.

Releasing a policy white paper and draft
legislation for SA's new mining and minerals
policy yesterday, Minerals and Energy Minister
Penuell Maduna said it was unacceptable to
government that two-thirds of private ownership of
mineral rights was in white hands. However
Maduna said current mining operations and bona
fide intended operations would be allowed to
continue and would not be tampered with by
government.

This did little to ease the fears of SA's mining
industry which believes that government
proposals could lower the value of mining
companies' shares.

SA mining industry's umbrella organisation, the
Chamber of Mines, said that while the state must
be the custodian of SA's mineral resources, a
system of state regulation could not infringe on the
property rights of private mineral rights holders.

It said government's white paper was the most
significant indication of government policy
towards the mining industry since it came to office
in 1994.

Maduna expressed great concern about the
downscaling of the industry and said the white
paper was an important policy indicator for the
short and medium term.

"In a nutshell, the department will facilitate the
establishment of institutional support structures to
alleviate the devastating social costs of the
downscaling process," he said.

"While we want to prevent the hoarding of mineral
rights and the sterilisation of mineral resources,
there must be no doubt that security of tenure will
be guaranteed. We do not want the industry to
operate under a cloud of uncertainty," he said.

Government's long-term objective was for all
mineral rights to vest in the state, but as a
transitional measure, a new system for granting
access to mineral rights would apply.

The new system's main aspect would be that the
right to prospect for and to mine all minerals
would vest in the state without infringing on the
rights of existing mining rights holders. Maduna
said the white paper mentioned no specific
transition period, but he expected it to be about
20 years.

"Security of tenure will be ensured by granting
prospecting and mining rights for specific
periods, which are capable of cancellation or
revocation only for material breach of the terms
and conditions of the rights.

"The holder of a prospecting right will be entitled
to progress to a mining right on compliance with
prescribed criteria and commitments."

Maduna said the "use it and keep it" principle
would be introduced to discourage unproductive
holding of rights and also to ensure retention
where exploitation might not be economic or
might disrupt markets.

"Royalties will be payable by the holder of a
mining right to the registered holder of the mineral
rights."

He said the policy sought to ensure stability and
continuity of current prospecting and mining
operations through statutory provisions such as:

� The "use it and keep it" principle;

� A transitional period to allow the holders of
prospecting, mining and mineral rights to license
their operations in terms of the new system;

� Allowing the holders of prospecting, mining and
mineral rights to license bona fide intended
prospecting and mining operations; and

� Giving the holders of prospecting, mining and
mineral rights the opportunity to substantiate why
areas which were not utilised should not be
granted to another party.

Maduna said all information from prospecting
would be submitted to the state after completion
or abandonment of a particular prospecting
activity and unless the prospector retained a
prospecting or mining right, the data would be
released to the public. "The freeing of mineral
rights will facilitate greater investment in the
mineral industry, also by small-scale miners." Well
managed small-scale mining had the potential to
take over and mine economically where
large-scale mining was unable to operate
profitably.

Maduna said government was committed to
expedite the full implementation of the Mine
Health and Safety Act which placed the
responsibility for health and safety on the
shoulders of the employer.

With the release of the white paper and the
legislation which would follow, probably only after
next year's general elections, mining no longer
needed to be the domain of the rich and powerful.

"We as government, through the process outlined
in the paper, have made mining accessible to all."

http://www.bday.co.za/98/1021/news/news1.htm

It looks like gold is tanking in the East; down over a dollar. This market is indeed irritating to a confirmed goldbug. Platinum though seems to be rebounding nicely. what we need is about a $20.00 spike up in gold and platinum prices.

Yes, I saw that report. I'm still out of almost all mining shares waiting for a pull back in gold price. Gee, seems bad news is everywhere.

I'll quiz Disney on this one. OTOH...RSA has embraced the Euro. See it was in the Euro bond market...along with a certain asian country...that had some floods?

Still plan to buy RSA gold mining shares at some point...better than NA like Barrick.

Thanks for the thoughts.

Tom

...."this gold repayment will flow through the Bullion Banks and arrive in Another account!" ........ Another? You did intend to captilize this. Yes?

Anyway,toward the end of your post you said: "when the
gold price, on and off the market, is soaring, NO ONE will SELL to ANYONE!!"....I'll go with that. But what happens when the pressures driving it up disapate? Meaning all those shorts that are going to default. After they've defaulted, what keeps the POG up?

An answer!-----Financial chaos!

Let me see if I've got this straight....


The world looks on. At the far end of the tent, a single spotlight shines, a typical American speaks:

For my whole life, I have not understood that those Dead Presidents in my wallet are not money. I've used them as though they were, and I've accepted them in return for my services and goods; but truly, they don't store much value. Not only that, but the number of dollars has grown to were if they all came home (the U.S.) to be redeemed for something, there wouldn't be enough of any sort of valuble goods to go around. As the culture of debt has come unraveled around the world, the dollar's markets are coming to be shambles. So dollars have actually become worthless......(The crowd stares dumbfounded.)

Enter Gold. Humbled and stooped. Maligned of late. Misunderstood by analyst. Spurned by investors. Despised by paper-mongering governments. Attacked by central bankers and short-sellers. But still, a (THE!) true store of value. (The crowd looks on without pity.)

And in ring number three: THE EURO!! The new Paper. Full of promise. Tabula Rasa. No debt. No inflation. No Alan Greenspan. (Yet!) Quick all you dollar-holders! Buy something now with which to trade for EUROs! Because soon oil producers will not accept your stacks of greenbacks. And if the basic commodity that drives the engine of commerce is dealing in EUROs!, who could soon be using anything else? (The crowd gasps!)

Suddenly a stampede erupts. Everyone to the exits! All whipping out their wallets and scribbling in their checkbooks. Yelling and screaming. Trying to buy something -ANYTHING! that will hold their earnings, savings, and equity with safety and liquidity.....

Then the spotlights all swing to the center ring, and the people stop in dead silence. They stare about them at the radiance filling the tent. And there stands GOLD!! Now holding the whips and leashes of those who had oppressed it. Gleaming and bright, no longer covered with the shame of irrelevance. Gold spreads it's wings, bouyed by the influx of cash as governments scramble lay prostrate at it's feet, and the people throw their life savings at it. Gold is free to soar the heavens and shine on those that have had the foresight to take it into their bosoms.......


OK. I know I'm leaving stuff out like the oil/gold connection, but that doesn't seem important. Except for two points:

1. Why would oil commit to a new PAPER? Do we want to go through this again?

2. I have to admit I can see it, but I still have trouble understanding it. WHAT -other than supply and demand- MAKES GOLD VALUABLE? What is so great about gold?

GF

BRUSSELS, Belgium (October 21, 1998 10:03 a.m. EDT http://www.nandotimes.com) -- The
European Union economy remains an "island of stability" in a turbulent financial world
but will nevertheless expand more slowly than expected next year, the EU said
Wednesday.

The predicted slowdown is likely to increase calls for European nations to boost their
economies by increasing investment or cutting interest rates, already at record lows.
EU leaders are expected to discuss their response at a weekend summit in the
Austrian lakeside resort of Poertschach.

The 15-nation bloc is enjoying its greatest economic growth in a decade, 2.9 percent,
and will continue to do so until the end of the year, the EU said.

But then the financial instability in other parts of the world, especially Russia and Asia,
will kick in, narrowing the EU expansion to 2.4 percent next year. That's down from the 3
percent predicted in March, the EU's last forecast.

"In 1999, the international crisis will take a toll, albeit limited," the EU said in a
statement. "With the renewed pickup of growth and trade at the world level in 2000,
there is again scope for a reacceleration of economic expansion in the EU."

Assuming the world economy bounces back in 2000, the EU said its economic growth
should then recover to 2.8 percent.

"The overall picture is favorable. Economic growth in the EU is expected to remain
strong ... driven essentially by internal consumption and investment," said the report
from the EU's executive body, the European Commission.

The forecast showed Europe's stubbornly high unemployment falling slightly faster than
predicted in March. The jobless rate is seen at 9.5 percent next year, dipping below 10
percent for the first time in the 1990s.

The EU said tough budgetary policies imposed in recent years to prepare for the launch
of the euro as the common currency of 11 EU nations helped protect the bloc from the
turmoil abroad.

"The euro zone forms an island of stability." Interest rates are already at record low
levels and inflation, at 1.6 percent this year and 1.7 percent next year, is "historically
low."

Among the 11 nations that plan to switch to the euro on New Year's Day, growth is seen
at 3 percent this year slowing to 2.6 percent in 1999.

In Germany, the EU's largest economy, growth is expected seen peaking at 2.8 percent
this year then dipping to 2.2 percent in 1999 and 2.6 percent in 2000.

Ireland is set to continue as the EU's fastest-expanding economy with growth at 11.4
percent this year, almost four-times the EU average, before slowing to 8.2 percent next
year.

By PAUL AMES, The Associated Press

THE AUTHOR

Peter Ludlow is Director of the Centre for European Policy Studies, Brussels. http://www.euro-emu.co.uk/aboutus/thinktanks.shtml#ceps

In T.S. Eliot's poem, The Journey of the Magi, the wise
men asked about the journey that they had undertaken
together:

were we led all that way for Birth or Death?

To judge by much of the comment that has appeared on
EMU in the last few weeks and more particularly over the
last weekend, many of those best placed to know seem
similarly confused about what it is that is happening.

The pessimists come in various shapes and colours. They include City of London
pundits, German professors and, by no means least, ardent Europeans. Despite the
very different motives of those involved, their message is remarkably similar. Unless
the European Union does not rapidly cobble together a Political Union, EMU can
only end in disaster.

Who then is to be believed- those who rejoice at a birth, or those who prophesy
death?

It would be tempting simply to dismiss the sceptics with the observation that those
who have been so often wrong about EMU in the past have little claim to credence
when they pronounce on the future. Contrary to their expectations EMU is being
launched on time and with a broad membership. Although, however, a little more
humility would not be inappropriate on the part of those who have been proved so
spectacularly wrong, it would be mistaken for those of us who always argued that
success was likelier than failure to crow too soon or too loudly. The fact is that EMU
is itself a journey into the unknown.

That said, there are important clues which point to what it might mean- and, with still
more strength, to what it does not mean. To begin with the latter. One of the more
obvious explanations of the errors of those who have said that EMU would not
happen - and who now say that it cannot last-is that they have looked at Europe with
eyes conditioned by the experience of mature nation states, and more particularly
the United States of America. Hence the dreary incantation time after time of the
phrase 'history shows'. The past that we need to look at as a guide to the future is
not however the history of America or even Germany, but the history of the EU itself.
The future will doubtless hold many surprises as EMU takes root, but the political
and economic parameters in which the experiment will be worked out are relatively
well defined.

In economic terms, the basic point of reference is the Single Market, which though
by no means perfect, is a reality of growing- and irreversible- significance to
governments, business and private individuals alike. Monetary Union may not be a
necessary corollary of the Single Market, but it is certainly a logical one. Almost
every sensible list of what EMU is likely to entail in economic terms turns out on
closer inspection to be made up of developments which the Single Market already
implies. The Monti initiative on the need for greater coordination and cooperation in
tax matters is a case in point, increased transparency in pricing another.

EMU will undoubtedly have an important economic impact in area after area, and
there may well be - indeed there certainly will be- important policy initiatives to meet
unexpected situations. The policies in question will however work with rather than
against the grain already established in decades of experience with a Customs
Union and, more recently, a Single Market.

A similar line of argument is germane when we try to assess the likely impact of
EMU on the EU's system of government. The first point to emphasise is of course
that it is a system of government, even if it is very different in character from
government systems at national level.For the purposes of the present discussion its
most important features are three. Firstly, it is highly decentralised. Most policies
and laws are implemented through national administrations,who are also the key
decisionmakers at the 'supranational' level.

Secondly, its central institutions dispose of a budget which is minute compared with
those of other 'central' governments, and of no significance in macroeconomic terms,
except for some of the smaller, poorer countries who are amongst its principal
beneficiaries. Thirdly, to achieve its ends European government relies principally on
rules, whether in the form of laws, which have primacy over national law, or
discretionary codes of conduct, which because they are jointly adopted and
supervised, bind member states to certain standards of behaviour.

The making of EMU is a striking example of the adaptation of a major new project to
the underlying realities of this well-established system.

Monetary policy is single and central. The key decisions will however be taken by a
Council in which the governors of the national central banks far outnumber members
of the permanent executive.

Fiscal policy remains firmly in the hands of the member states with the result that
with the exception of a relatively minor sop to Spain in the form of the Maastrict
created Cohesion Fund, the size of the EU's central budget has not been altered with
the approach of Monetary Union. The buck stops therefore with the member states,
which is where, by common consent, the member states want it to stop.

Rules, and more specifically the Stability Pact, will do for EMU what big government
does in the nation states.

If therefore we ask what the impact of EMU will be on the EU's political and
governmental system, the most reasonable expectation must be that the institutions
that we currently have will adapt to the new reality in ways that are consistent with
their present ways of operating. They have indeed already begun to do so.

Politically therefore, as economically, EMU seems likely to mean more of the same
rather than a revolution. All of which is highly relevant to the question concerning its
durability. EMU fits well into the overall political design of the new Europe .This is not
the creation of one, two or even three men. Political leaders played their part. But the
dynamics- and therefore the inherent strengths- of the enterprise are not dependent
on the survival of a few outstanding figures. Every participating state, and even those
that are not yet members, has an immense stake in its survival. The chances are
therefore that it will survive, even if, like every political arrangement, it has to be
adapted to unexpected developments.

Where then, finally, does this leave the British, the Danes and the Swedes who,
unlike the other outsiders, the Greeks, had not made any firm commitment on EMU
membership. The answer is more complex than is sometimes suggested. EMU is,
as this note has argued, so solidly grafted on to an economic and political system of
which the reluctant three are effective and valuable members, that the danger of a
major split in the EU in the short term should not be exaggerated. The outsiders will
not be part of the new EU-11 caucus. They will however be in ECOFIN. Still more to
the point, the insiders have absolutely no interest in pushing, or even allowing, them
to pursue policies that diverge from Euro-norms. In the short term, therefore, the
British and the others will probably suffer no more inconvenience than a small
interest rate premium and the uncomfortable awareness that if they do make
mistakes in macroeconomic management, they are now more directly exposed to
market discipline than any of their EU partners.

So far so good. More significant problems could emerge if entry was postponed
indefinitely. EMU is bound to change the way in which its members view each other
and the outside world. Once Euro coins circulate there will also be an important
psychological impact on the citizens of EMU states. Finally, and by no means least,
EMU is yet another stage in the transformation of power politics within Europe and
beyond. Over time, therefore, the dangers of remaining outsiders will grow rather than
diminish.

These dangers are particularly important for the British, who because of their size
and continuing importance in international relations, have always been more
vulnerable to the political revolution that started in Europe almost fifty years ago. The
events of this week-end demonstrated yet again how far even the pro-EU British
administration of Tony Blair is from understanding EU politics. President Chirac was,
needless to say, the chief culprit. The remark of the Austrian Chancellor that he had
just received a very useful lesson in how not to run a European Council is however an
indicator of how far Blair's own reputation suffered. His EU colleagues are still
fascinated by him. As the Prime Minister of the fourth poorest country in the Union
and an EMU outsider, however, he will have a hard task over the coming months and
years to transform admiration for his style into a willingness to regard him as any
more than an exotic and unreliable half-member of the club.

FOA: Is this reference an answer to someone's question? I looked at Amazon.com and there are a number of apparently rather scholarly books on European monetary organization and policy edited by Peter Ludlow but nothing called The Birth of the Euro-- more information please?

Gold opened lower today but is in the green since then, meaning a steady climb -- so far. Dow is down -79.81 so far. Gold contract volume at open was over 200; now much lower.

For Another and FOA. I have read your words. The premise or a priori is "Big money is buying physical gold AND a secret agreement (no longer secret) between one or more oil countries set in motion $$$ and gold (valued at $1K per ounce) in exchange for oil. Further the gold contracts, if they cashed out, have no gold to back them. Further, the Euro will be accepted instead of gold for oil thus boosting the POG and the Euro and the price of oil in dollars." Am I missing anything?

Goldfly, Your Msg. #708 was a great theatrical read! All the components of a good
drama are revealed as the act unfolds in an opulent tent somewhere in the lost desert.
We need no tickets for this play as this road-show is free and coming to every
neighborhood, soon!---------------------------------------------- Your words:
"WHAT -other than supply and demand- MAKES GOLD VALUABLE? What is so great
about gold?"----------- Well, that question goes deep into a human need for wealth that
represents ones life long efforts. We could ask the same question about houses, cars,
clothes, art work and the like. Hell, people work, they produce and in exchange they want
items and things. These possessions, in a surreal way are part of your life experience.
Humans all die, but before that, we want to see our Stuff??!! They lord over it, protect it
and try to keep others from stealing it.-------------------------- Look at what happened in
Paris when in WW2 the Germans came marching in. You didn't see those boys grabbing
any French currency did you? They took art work in the form of paintings, gold,
diamonds, RARE COINS, collectors items of every nature. What made those Things so
valuable? Besides supply and demand. ------------------Around the same time the American
government was moving much of it's art work out of the White House and storing it in the
Biltmore Estate (the Vanderbilt castle) in North Carolina. Why? Just because they thought
that Washington may be attacked and these National Treasures night be lost? Why were
these Treasures in need of saving but the dollar cash that was used to denominate them
was not? ----------------------------------This takes us right to the heart of the question.
What do you, as a real person see as value, the items or the dollar price that represents
their value? Is it the dollar itself that has the value or is it the "Ability Of The Dollar To
Act AS The Denominator Of The Value Of An Item" that creates the need for this
currency? After thinking a while, most people would answer that it is the Denominator
Action that makes this currency Money! ---------------Moving further along this line of
reasoning: I now ask in another context of your question "What makes dollars so special"?
-----------------------If money derives it's value solely by being an asset denominator for
use in commerce and trade, then why not gold? Indeed, in it's purest form money is any
real thing. When individuals are able to trade with each other using actual items they grow
or produce, nothing is lost in the transaction. Commerce is complete and the trade is final.
Goldfly, you already know the reason gold was used for so many centuries as money. It
being a real thing that could be divided into manageable bits for trade. People came to this
conclusion, perhaps a thousand years ago. It's only the last sixty or so years of paper use,
that modern analysts proclaim as the history of money! They delude the public by not
including the fact that our current new form of paper money has precious little historical
precedent. The facts are that gold works as money and it works very well. Unfortunately,
the modern, high speed world we live and trade in requires ink on paper and digital bits to
extract the efficiency of the system. This is truly to everyone's benefit, for as the earth
becomes more crowded, we need to be efficient in commerce. Gold can and will work
very efficiently in the coming financial framework. It is a money function for the 21st
century that will exploit and expose the wasteful ways of the current financial system.
------------------------------ As I mentioned to someone else, I say to you: We will continue
with a paper money system, it's needed for efficiency and it's necessary in complicated
trade. So do the same as others, get past it and get over it. Many world leaders have come
to the same pragmatic conclusion. That does not mean that gold can not be integrated into
the financial landscape, it will. So, the next time you see gold going down in dollars,
remember, it's just a old currency from the past that will devalue any present money that
fails to properly denominate things. --------------- To answer your question: It is the
history of gold being used as money that makes it special, not the current supply and
demand. In the same way that rare paintings have a history of being useful in the life
experience of humans, so too do we hold a life passion for gold. thanks FOA

Sorry Turtle, my mistake. That web site takes you to another (also interesting)place. Go to http://www.euro-emu.co.uk/ then to "Soapbox archive" to find Mr.Ludlow. This site has a world of discussion about the Euro. USAGOLD: Michael, you may find this some very good reading, also.

In an earlier post you said:
with a paper money system, it's needed for efficiency and it's necessary in complicated
trade. So do the same as others, get past it and get over it. Many world leaders have come to the same pragmatic conclusion. That does not mean that gold can not be integrated into the financial landscape, it will. So, the next time you see gold going down in dollars, remember, it's just a old currency from the past that will devalue any present money that
fails to properly denominate things. >

Are you saying that a fiat currency will be used alongside an intrinsic value currency like gold or gold/silver backed money? Or will a fully gold back currency (ie: warehouse receipt) emerge that will be used as a pragmatic tool to facilitate trade?
Also, won't the people follow "good" money and therefore naturally push "bad" money out of the system. Therefore a fiat currency wouldn't be tolerated for long if there was a value-backed alternative. I don't care if it is backed by barrels of oil, salt or gold; if there is an alternative to a pure paper currency it will naturally push out fiat money. We saw Russia's immaturity when they thought that could just crank up the presses, until someone realized that a coin backed by physical assets represents greater stability.
On another tangent, doesn't fiat money represent the loss of the individual to own personal property? Is that why nation-states and socialist individuals like fiat money, because it gives them power over property and makes the individual beholden to government?
Again, on a more basic level. How does leasing gold raise dollar value thereby increasing liquidity?

Thanx

SteveH & Nugget101, I will reply a little later. Have to take care of a few things. Also, have some E-mail replies.
thanks FOA

I remember those U.S. Treasury/IMF auctions of the 1970s. We entered those times very concerned and dreading what the auctions would do to the price, but at each auction the price was higher until by the end we had single bidders trying to buy the entire lot! It was a happy surprise to all of us in the market back then, and a lesson filed for future reference. When it comes to gold sales, the threat has more value than the actual deed, don't you think? It can be raised time and again with appropriate frothing in the press. An actual sale is a one time event that becomes anticipated, planned for and ultimately diluted in effect.

Proposals Hint at Return to Old Standard


------------------------------------------------------------------------
Agence France-Presse
------------------------------------------------------------------------
MOSCOW - With the ruble discredited and vulnerable, Russian authorities have begun to float radical proposals to put gold back at the heart of the national economy, using reserves to underpin and even partly replace the flagging domestic currency.

Well aware that printing rubles to finance a growing budget deficit will further undermine the currency, officials have introduced several ideas, one of which involves minting a bullion coin that would literally be worth its weight in gold.

Some analysts have cautiously welcomed the mobilization of gold to defend the ruble. But others warned that the move would not provide a long-term solution for Russia's predicament.

The problem for the government revolves around the huge discrepancy between the amount it plans to spend and the funds it can realistically bring in. Prime Minister Yevgeni Primakov's government plans to spend 130 billion rubles ($7.67 billion) in the fourth quarter, having pledged to pay off back wages and keep up with foreign-debt repayments. Income, however, is penciled in at just 70 billion rubles.

As Moscow has shattered the trust of borrowers with its debt default in August, its options for financing the deficit are painfully limited. Although an International Monetary Fund mission was in Moscow on Wednesday for talks with government officials, analysts have said further loans are unlikely to emerge, at least this year.

Against this inauspicious background, the government has increasingly referred cryptically to "mobilizing internal reserves" to break its financial vicious circle.

A regional governor suggested early this month that Russia return to the gold standard and reintroduce the 1920s-vintage "golden ruble," under which the Russian currency would be tied to the central bank's gold reserves. Some analysts have scoffed at this option.

"The gold standard went out in the 1930s, and I don't think a single country can go back," said a London-based gold specialist, Tim Green. "It's not a good idea."

But the gold-standard idea has since given birth to another. Last weekend, a senior official from Gokhran, the state precious-metals repository, said plans were advancing to use gold and silver reserves to mint new coins.

The mint, the argument runs, would help authorities pay off the wage backlog without inflationary money-printing and would restore trust in a ruble-denominated store of value. The central bank has yet to declare its position on the coin issue, but many economists are skeptical.


------------------------------------------------------------------------
http://www.iht.com/IHT/TODAY/THU/FIN/gold.html

Unomas

Russia to Mint Gold Coins from Reserves
MOSCOW, Oct. 09, 1998 -- (Reuters) Russia plans to boost its budget and guarantee bank reserves by minting gold coins from central bank reserves, the leading business newspaper Kommersant Daily said on Friday.
The newspaper, which cited unnamed sources in the government and central bank, said that according to a draft government resolution, 20 tonnes of reserves would be used by the end of the year but up to 200 tonnes could be used in all.

The Russian government is scrambling for funds to finance a budget deficit of almost 100 billion rubles planned for the fourth quarter of the year.

The plans call for the issue of coins of six grams of 583 purity with a 10 ruble value as legal tender but a metallic value of 1,000 rubles, and coins of 15 grams of 999 purity with a face value of 100 rubles and a metallic value of 5,000 rubles.
The paper said the first stage of the project would bring the budget 5 billion rubles. Of this, 3 billion would be used to guarantee private bank deposits, 1 billion to pay wage arrears and 1 billion to pay off government GKO t-bill debts.
Kommersant said the decision had been taken as gold was the only item of value in the central bank's reserves.
But it could not be sold abroad for fear of flooding the market and could not be used as loan collateral abroad for fear the gold would be seized to pay debts. The paper added that the chance of the resolution being approved was "extremely high."
Russia in mid-August froze its once booming GKO t-bill and OFZ bond market pending a restructuring and is now more or less shut off from financing via the international capital
markets.
The head of the central bank's precious metals operations said in September that the bank had gold reserves of more than 500 tonnes.

You received an excellent reply from FOA (MsgID: 713) for your question--
"2. I have to admit I can see it, but I still have trouble understanding it. WHAT -other than supply and demand- MAKES GOLD VALUABLE? What is so great about gold?"

The response given by FOA should be more than adequate in addressing this question, but because I see this SAME question asked time and time again, I want to chime in with some additional thoughts from a different angle. Perhaps with enough beatings, this "dead horse" will run again!! I recently offered these thoughts to EJ (at Kitco) in an attempt to distinguish and show platinum, gold, silver, and money for what they are. Clearly, The 713 post by FOA is a vital and helpful element in this discussion. On Tuesday I wrote:
"All commodities ( read "hard assets and things of value" ) float relative to each other as needs and their use changes in importance--whether real or perceived. ("Real" tends to support longer lasting adjustments to the realative value versus all things than "perceived" does.) Supply and demand forces then give rise to additional fluctuations in relative value. Having said that, understand that the real importance of platinum and silver is found in their function as industrial commodities. That dictates their value in today's world beyond any other use for those metals. Platinum is indeed rare, but is no more rare than gold. Some sources indicate equal quantities of each on Earth, while others indicate that the element gold remains a fair bit rarer than platinum. Cause for the misperception: it is that thousands of years of global active mining for gold has resulted in an impressive post-mined stockpile, while platinum has not received this same attention. As utility for platinum was more recently recognized, its mining has increased, yet supply remains tight in relation to demand, so stockpiles remain small and the price is high ( as it should be for such a rare and useful industrial commodity ).

Gold's value is set by its importance as a financial commodity, moreso than its value as an industrial commodity--which by itself would be on par with platinum. But today, as an industrial commodity alone, gold's price would surely fall because, unlike platinum, there is a ready supply of post-mined gold to meet any consuming industrial demand. But the operative word is "UNLIKE (platinum)". Gold's relative value remains high despite this "overhanging stockpile" because this same overhanging stockpile in the vaults of nations and individuals gives unrefutable evidence that gold is used first and foremost as a FINANCIAL commodity. Its widespread occurrance yet overall scarcity, together with its other properties, has made it uniquely suited to play the role as the world's ultimate money."
[Goldfly, this is where FOA's message adds well to my thoughts. And again, you asked the question "WHAT -other than supply and demand- MAKES GOLD VALUABLE? What is so great about gold?"--I continue with my original response to EJ...]
"It does no good to ask, "Why gold?" If there were some other element better suited, we would be having this discussion about IT instead. "It" is not platinum, "it" is not silver, "it" is not sand or tree bark or water. It is what it is, and it needs no introduction.
got gold?"

Does everyone not see that by asking "Why gold?" and "What is so good about gold?" they are essentially asking and not asking the questions "Why money?" and "What is inherently valuable in the paper/fiat dollar?" To understand money is to understand what function it serves and how it might best serve that function. Money must be SOMETHING! The history of man is a tale of utilization of resources and division of labor to enhance our individual and collective odds for survival with time to spare to contemplate our existence and the universe. Money facilitates individual survival as a store of wealth (for "wealth" read "excessive productivity") and also facilitates the division of labor. Thousands of years of human struggle has found that which is uniquely best suited to be the "something" that is money. It HAD to be something...turns out to be gold...for the reasons FOA explained. Modern times will show us how to best utilize gold (again!) to fill its monetary role for modern transactions. We are well beyond the days of gold coins for circulation. Look to the Euro for the answer, and subsequent evolution of the Euro or that of a competitor currency. Gold WILL be the foundation! In the near future I see holding money to be as nearly holding gold. But during this brief transition phase from our current fiat money systems, holding money will be as nearly holding paper, while holding gold will be a joyous education in the meaning of VALUE.

got value?

currently at $294.00.

The Russian talk of returning to a gold standard is extraordinary. The numbers need to be analyzed and I do not see how Tim Green can dismiss it out of hand on a dressed up version of the old barbarous relic argument. Why wouldn't it work? And what better way to break IMF hegemony. I for one do not take this lightly, nor do I have a knee jerk reaction. I would like more information, discussion. It is a grand experiment and I wish the Russians well. Why any hard money advocate would be opposed to it is beyond me. We should not only be cheering the Russians on; we should be offering them whatever support and intellectual assistance we can give them. The problem could be defending the ruble externally against attacks through a raid on the Russian gold reserve. Perhaps Russia will make the ruble exchangeable domestically and not internationally -- at least in the beginning. The Russian Alternative will be interesting to watch. Here we have a laboratory for what may become the new monetary order. It would be interesting to know what somebody like the pestigious Ludwig von Mises Institute views this. I will try to contact them tomorros on this and report back if I can get anything definitive.

I want to thank the posters here who have brought this extraordinary development to the FORUM's attention.

SCP, --------- Your question: "Also.... could you add any other thoughts as to why a
strategy that rekindled the boom in '87 will not work today? ---------------------- Plain and
simple, the dollar is very late in the time cycle of paper currencies. Don't confuse this with
some trading cycles you hear about. Throughout out the history of paper currencies (short
as it may be), the few that became world accepted major reserves (British pound?) all
headed downhill only after they reached the maximum in popularity and convertibility.
Once every nation began to issue debt, settle accounts, create reserves and in general, use
this major currency as a proxy for their own, it had reached it's limit of expansion. It is a
natural decline that occurs in fiat reserve currency monetary systems. As sure as the sun
rises in the East, the world moves on, into another money system. We have reached that
level today with the dollar. Everyone expects the dollar world to deflate this currency and
continue it's use in a depression racked world. No doubt, some of the bets placed today by
short sellers of gold involve a deflation read of the current situation. Indeed, we are seeing
the contraction effects of this in many countries. However, we now live in a much more
advanced economic world than in the past. The history of major currency destruction did
not have these factors to deal with. As Aragorn III wrote about platinum in his #612 post:
"The modern use redefined the value accordingly"! Another sent me a commit on it. "A
stunning statement that in this case can also be applied to the dollar of today." How true!
-------------------------- As the Federal Reserve lowers rates, it will, in time, crush the
dollar if an alternative currency is available. It will be and long bond dollar rates will rise
as the result. The world will move on because: " The modern use redefined the value
accordingly"! Thanks FOA

Tyler Rose, ---------------- I didn't forget about your post, it was a hard one. The URL
you gave me took us to a site that offered a book about: "Every statement made in this
185-page book references either a legal precedent, report or letter issued by a government
agency, trade publication or known entity in banking and finance. " ! I would not even
attempt to go into this area on a forum. -----------------Personally, I do not think anyone
has a true handle on the legal aspects of multinational interbank federal gold loans if they
default. If we place ourselves into context of the events that would accompany such a
period, it would be more likely that armies would be called up before all of the parties are
paid in gold. Some would be paid no matter what, while most would be left to twist in the
wind (I think that is a cowboy / western phrase). Let's wait and read about it in the
papers. Thanks FOA

USAGOLD, ------------------- I also find that the Russian thinking on gold to be an
incredible coincidence. Just as you noted today (msg. #717) about the !970s US treasury
gold auctions creating an atmosphere of attention, so do we also have the Argentine gold
auction. I'm sure that the gold detractors are aware from past results that you don't
auction gold it you want it to go away quietly. If they do influence the Argentine treasury,
then why is this coin auction taking place? And doing so just as the Russians are about to
bring gold back as money! I wonder if the use of gold by the old USSR will bring them
closer to Bonn? Or is it Frankfurt or Berlin? No doubt Russia knows where the ECB and
it's Euros will be located? FOA

ALL: I read this somewhere: "The US is now considering printing the old $500 and
$1000 note of 1934 only using the new currency format." . ------------------ In another
interesting coincidence, the Euro will also be issued in ( I think) 600 Euro notes? It was
noted that these larger bills would make the Euro more useable. Is the US concerned
about this new currency? Just a thought?

FOA:....In the desert -YES! At the edge of an oasis as the sun rises on a cool desert morning- The dawn of a new day!.........I like it.

FOA and A3: Yes indeed post #713 was excellent, as was yours Aragon. They were both very intelligent and instructive. But, I see I didn't phrase the question properly. Because both left me wondering still: Where did the idea that this shiny yellow metal with interesting properties is a suitable representation of the accumulation of wealth? Where? Where, where, where?

What 3000 year old convention of the BIS determined that gold was it? Did a bunch of people tired of trying to haul around sacks of grain get together and say, "Gold!" Did a clan sitting around a campfire say, "If we act like this mushy yellow stuff is Really Important, that clan in the next valley might trade us for something we can eat." Or, better yet, did GOD, while walking the paths of Eden with his creature one evening, turn and say: "Adam,.......got gold?"

I understand, it's like procreation. Incredible value and mystique. And it's been going on for a long time. But the history and meaning of the VALUE of gold is not as easily discerned. Not by me anyway.

If you think I'm getting too far out there, I understand. Perhaps there is no satisfactory answer. Sometimes an innate desire must simply be accepted and then dealt with rationally. But it seems to me Aragon, w/ your argument that money must be SOMETHING, that gold is reduced to the status of a fiat currency. ("It's money because we say it is!")

Sitting down now.....

GF

Oops. Sorry. Aragorn, not Aragon.

I hate typos.

GF

Thursday October 22, 11:30 pm Eastern Time

FX IN EUROPE - Bundesbank stays true to form (RPT)

LONDON, Oct 22 (Reuters) - The mark rose against dollar and yen on Thursday as the Bundesbank acted true to expectations and left interest rates on hold, analysts said.

The interest rate differential going forward favoured the mark, they added.

"It looks unlikely that Germany will cut rates, while it looks like there are going to be further rate cuts in the U.S.," said David Brickman, international economist at PaineWebber.

The Bundesbank left its key Lombard and discount rates unchanged, and fixed its next two securities repurchase tenders at the current 3.30 percent.

The Bank of France also left interest rates steady.

The dollar climbed to three-week highs of 1.6592 marks overnight amid last-minute market jitters about a German rate cut ahead of the Bundesbank's council meeting.

It fell to the day's lows on the steady rate news, to trade at 1.6380/90 marks by 1445 GMT, from 1.6425/28 in late European trade on Wednesday.

Against the yen, the mark built up to a high of 72.05, and was at 71.84/87, from 71.12/17 yen in Europe on Wednesday.

"We are looking at a weaker dollar and stronger euro," said Brickman.

"I would not be surprised if the dollar got below 1.60," Brickman added.

"The collapsing U.S.-German interest rate differential will drive the dollar down against the mark until it reaches that point which provokes the ECB (European Central Bank) into a relaxation of monetary policy," said JP Morgan in a client note.

"We reckon that this point is below 1.50 marks," JP Morgan added.

Brickman said the ECB was likely to kick off in January with a starting repo rate of three percent. The focus now is for rate cuts from peripheral Europe.

The chances of an imminent rate cut in euro-zone member Italy increased, analysts said, after new Prime Minister Massimo D'Alema said on Thursday his top priority was to pass predecessor Romano Prodi's draft 1999 budget.

"Rates will come down by a full point," said Gerard Lyons, chief economist at DKB International. Italy's discount rate curently stands at five percent.

Mark/lira remained steady on Thursday, ahead of Friday's confidence vote on the new Italian government. The mark was trading at 989.25/40 lire at 1507 GMT, from 989.18/23 in late Europe on Wednesday.

Dollar/yen was kicked about in thin trading within a range of less than two yen, dealers said, and took its lead from the dollar/mark and mark/yen exchange rates.

Half-year losses for Japanese brokerage giant Nomura, followed by a Moody's downgrade, provided a negative backdrop for the yen.

The dollar was trading at 118.05/15 yen at 1514 GMT, from 116.78/88 in late European trade on Thursday.

The pound fell against the mark after the Bundesbank kept rates steady. Strong speculation about British interest rate cuts was likely to depress sterling further, analysts said.

A survey by Britain's Engineering Employers Federation forecast 1999 gross domestic product growing by 0.7 percent, below the government's revised forecast of 1.0 percent growth.

The Bank of England's Monetary Policy Committee (MPC) holds its next monthly meeting on November 4 and 5. All but two of 21 London-based economists polled by Reuters on Wednesday expected the MPC to cut rates in November.

The pound was trading at 2.7828/38 marks and $1.6954/60 at 1521 GMT, from 2.7933/35 marks and $1.7004/10 in late Europe on Wednesday.

http://biz.yahoo.com/rf/981022/cne.html

Unomas

I have read in several disparate articles, including USTreas. articles, that the larger $500 and $1000 notes were taken out of circulation due to the USG's concern that it would facilitate the drug trade. If they are truly considering bringing these 'narco-notes' back into circulation they must be really frantic. The Drug War has been such a help to the abrogation of the constitution by the feds that I cannot see how they could go back on their vision of financial enslavement. Then again, with $15Trillion or so of debt, maybe they should consider $100,000 notes too. Hello Weimar Republic?? Besides, it's only paper and ink, guys. 2 1/2 cents worth.

FEDERAL RESERVE OFFICIAL SEES GLOBAL BOOM AFTER CLINTON INQUIRY

A quick resolution of President Clinton's impeachment inquiry would give a boost to the world economy and financial markets, predicts Federal Reserve Vice Chairman Alice Rivlin.

Friday's WASHINGTON TIMES quotes Rivlin, the former Clinton budget director: "I think if we can get this unfortunate incident settled quickly and behind us and get back to the world leadership role that the world needs the U.S. president and the government to play, it will certainly be good for the markets."

[Rivlin did not say if The Fed would reduce interest rates in return for a speedy resolution.]

"Europeans I deal with think this country's gone absolutely mad," said Rivlin. "What are we doing spending our time on the private lives of our leaders when we need leadership in the world? They don't understand it. I don't understand it."

Rivlin's speech at the State University of New York at Brockport echoed views expressed privately by many foreign economic ministers, notes the TIMES.

Goldfly --Consider the following to be of assistance in the understanding of why Gold is such a unique (unmatched and unequaled) valued element. ---
Chemical formula = Au
Atomic Number = 79
Molecular weight = 197.20
Specific Gravity = 19.3 at 20 degrees Cent.
Melting Point = 1,063 degrees Cent.
Boiling Point = 2,600 degrees Cent.
solubility = insoluble in hot or cold water
= soluble in a mixture of one part conc.
nitric acid and three parts of conc.
hydrochloric acid (called "aqua regia"
because it disolves the "King of Metals".
= soluble in cyanide solutions
= insoluble in all other conc. acids

The great specific gravity (Sp.Gr.) allows the yellow metal to be easily separated by gravimetric methods. This metal does not oxidize by burning and is not oxidized by any other substance. (IT DOES NOT RUST.) Gold is the most malleable and ductile metal on Earth. It is so malible that it may be pounded into sheets as thin as one molecule in thickness, about ten Angstroms. (one Angstrom = 10 to the minus eight exponent of a centimeter) Old mining methods utilized the specific gravity to concentrate gold from ore or other metals. Milled Ore or placer material containing Gold particals (Sp. Gr. 19.3) in a slurry or waterborne solution flowing over a "pool" of mercury would separate from the water solution and enter or "almalgamate" with the liquid mercury, as mercury it has a specific gravity of only a little over 13.5 --- this almalgamate would then be heated to a temperature to volatize the mercury leaving a "dore" of gold which would be refined by electrolytic methods. More recent methods also use cyanide solutions to disolve the small particals of gold from "leach pads" of "ore".

So WHY ? Because it is the most unique and useful metal on earth ! It is shiny and sparkles in the sun !
AND in your hand it has a warm and comforting effect.
Female Homo-sapiens seem to desire it as much as those little sparkly rocks that are mined in South Africa and other minor locations.

I sure hope that this meets your desire for a reason.
Sincerely -- Your Bud
GW

Interesting, that our economic health is being put before our moral health. When we know that we have a cancer at the head of this country we should be cutting it out rather than ignoring it and pretending that it doesn't exist. Clinton exists, he is a sorry excuse for a leader and we should not permit him to remain for the sake of our ephemeral financial health. As surely as I am writing this, if we fail to address this issue we will rue that day we did and in years to come we will wish we had not let it pass by for the reason of financial expediency.

That brings it up from its overnight low of $293.80. Seems as the battle of the force and the darkside under the 300 cloud continues in ernest.

Alice Rivlin was until recently, Asst. Sec. of the Treasury. She is a leftist Clinton appointee that can claim nothing. Her best shot at government was to push hard for new taxes on retirement accounts. A one time tax of 10% and then 10% yearly on ALL heretofore exempt retirement savings. She is a shill and as such, I am not surprised that she said things will get better (not for us, but for the left) when Clinton is let off lightly. The FED is now truly a corrupt servant of the executive branch. So sorry. Lock and Load time.

You state, "... the history and meaning of the VALUE of gold is not as easily discerned. Not by me anyway.
But it seems to me Aragorn, w/ your argument that money must be SOMETHING, that gold is reduced to the status of a fiat currency. ("It's money because we say it is!")."

I beleive this statement to be the key in my previous response: "To understand money is to understand what function it serves and how it might best serve that function." Goldfly, surely you don't take exception with the fact that money must be SOMETHING. As a test, let us ASSUME for a moment that money is NOTHING. Allow yourself to think about this for a time...you will soon agree that even paper or electronic digital numbers are at least something. So the next question should be, "Are they the BEST thing, or is there something else better suited to be money?" This question has been asked and resolved time and time again through the history of man. Many different things acted as money from place to place throughout time. Clam shells. Elephant hair. Salt. Metals. Paper. Stones. Something was always found to better serve the function of money, that is, until people used gold, which was unsurpassable. This conclusion was reached independently by millions of people worldwide during our history. Divisibility is a vital feature of money. Metal is better suited than clam shells. Money must be of stable value, resistant to manipulation or fraud via deception and corruption. Paper can be counterfeited, or printed at-will by the ruling powers. Metal cannot be similarly violated so easily. So, your question becomes, "Why gold over any other metal as money?"
Here's why...There are two ways to get gold: 1) from somebody else that has it, and 2) from finding it and extracting it from Earth. Getting if from somebody else is really what money is all about. To entice them to relinquish some of their gold/money, you provide some service or product that they judge as worth X-amount of money. You, having worked for this money, want to make sure it is the REAL THING so that your effort wasn't wasted, allowing you to pass it along to someone else for their product or service (division of labor isn't very feasible without money, you see). Most grey and silver metals look very similar to the untrained eye. Nothing else looks and feels like gold. Further, if (during the days of our past) you found that you were incapable or unwilling to provide needed products or services to your fellow man, you could reasonble scrabble and muck and toil away in the hills and valleys of nearly any landmass on Earth to produce money. The cost to you would be much time and sweat. That labor was the necessary origin of nearly all gold in use today. This labor could justify the exchange of gold for bread. Similarly, a baker who failed to squeeze any gold from the hills has chosen instead to make bread in echange for the gold that he will later use to buy his shoes and wheat and candles, etc.
Gold's physical characteristics filled this role uniquely well. Iron rusts away, and its naturally occurring state does not allow a simple man to find it and mine it on his own. Gold was very scarce, yet what was to be found by these early user's of money was pure gold! Anyone could do it with very much labor. The money of the people!
You miss something important when you jump to the notion that *because money must be something, by saying that it is gold makes gold no different than a fiat currency--"It is because we say it is."* This would be true if a minority of people arbitrarily said gold was money, and then forced it upon the rest of the population who would otherwise see no value in it. This is not the situation with gold. The common man worldwide and throughout time has decreed gold to be money. Therefore it is not fiat! Further, the reason a minority of men desire to implement fiat currency is to use it to their personal advantage...the ability to create something with little to no effort with which they can purchase things of value and the labor of their fellow man. We do see governments create money and with deficit spending entice free citizens to work for them, building highways, or missiles. Don't believe that someone of modern time has selected gold among all things as the money for mankind. That is as saying someone of modern time has selected oxygen among all the gases in the air that we breathe to be the sustaining element for life. Or very nearly so...

I'm going to have to digest this for awhile ......

GF

Alice Rivlin has shown her self to be exactly what she is, a Partisan Hack.
The fact that she implies that the reasons we have had some problems with the ecomomy, (i.e. stock market)are because Kammander Klinton is being persued,is catagorically a Lie.
This Hack obviously believes that most people will believe her pronouncements and we will all live happily ever after.
Unfortunately, there will be those who do believe it and that is indeed worrisome.

The act of asking these questions and pondering the nature of money puts you far beyond most, and you are to be commended. Unfortunately, as with many things, the answer does not easily lend itself to be *handed* to you or anyone else. Each person must give independent thought to their problems (aided with what help may avail) to come to terms with what truth may be found therein. I believe this is why ANOTHER's information is presented as a roadmap rather than the destination itself.
It occurred to me, something that may help you with these gold/money thoughts...In your thinking, think in personal terms, and eliminate all involvement of governments from your thoughts. Governments have not always BEEN. They are not needed for money to BE. What would you trust and accept from me and all others, time and time again, in exchange for the extra products you produce throughout the year? Remember, no government in this example! I'm certain you would not allow me to simply stoop down for a handful of gravel to offer as payment. What would you accept? This same decision has faced each man since hunter/gatherer days. Billions of votes have been cast in answer to this question...each transaction acting as an independent election. No government...what would you accept each time without hesitation? What would become the universal tool of barter? Whatever your answer, that is what money is.

Truly gold is frought in a battle of good and evil, black and white, ying and yang, high and low. Watching the action reminds clearly shows a force that wants gold high. Today they got their jab in at the end. Same as for the close overseas this morning. During the day and evening though the opposing forces step in an slowly ping at the good forces. It reminds me alot of the, I believe, ee cummings poem:

"The rain to the wind said you push and I'll pelt. They so smote the flower bed that all the flowers knelt." (forgive any variation due to my memory)

When the sun shines on gold all the flowers will stand tall again.

Just a short note to say that FOA's post of yesterday morning was deleted by mistake. Our apologies to FOA. If anyone has a record of the post we will attempt to restore it to its proper place. In that post FOA said he would be travelling until the 27th.

Since FOA is going to be gone for the weekend, we need something to liven up this place up.........

So here we go:

***** We will give away a book of choice -- either ABC or Footsteps of Giants -- to all first time posters. It's got to be more than a "test" or a sentence or two. You post, it's out the door to you. Offer good through Sunday, midnight.

***** We will give away a one-tenth ounce gold Austrian Philharmonic to the one post between now and then we feel is of the most enduring benefit to all other posters and observers. Of course, the decision as to the best post will be completely arbirtary, without objective criteria, and based completely on our own subjective standards. Post to win, but don't take it personally if you lose. One last thought: Length will not be a determinant. Quality trumps quantity; a point well-made over rides verbosity (but you are not limited to a single post). The post can be within the subject matter at hand or you can take a flyer.......As always gold has to be the centerpiece.

All are welcome to participate, especially that large group who have registered but have been looking for an excuse to break the ice.

We will be monitoring the FORUM intermittently over the weekend to send out passwords.

Have fun, fellow goldmeisters, and MAY THE BEST POST WIN!

I will try to be around for the switchover to the noon to midnight slot. If I am not, would somebody take it upon themselves to re-post this for me.

Thanks, my friends.

I am a first-time poster, the free book offer was enough to bring me out of the woodwork. I'd like to take this opportunity to thank everyone for the great information I've been gleaning from this forum over the past few months. A bit about myself... I am a software engineer by trade. I've become extremely interested in gold recently because of my concern about the Y2K bugs. (Yes that is plural, as in several billion different bugs which are individually easy to fix, but collectively in a short time frame will cause the collapse of modern civilzation.) I have experienced the bugs firsthand, and I have a few friends who work in Y2K remediation. I can tell you, both from what I've seen and from what I've heard, that this is no joke and if you don't take it seriously yet, it's time to do some research, for the sake of your family. I have recently "bugged out". For those unfamiliar with the vernacular, this means that I have quit my job in Seattle and moved to an undisclosed rural location, where I am storing up food and ammunition. I have avoided discussing this with other people up until now, because I wanted to make sure that my own preparations were set before public panic begins. Prior to bugging out, I stopped into a Seattle-area coin shop to purchase some bullion. The proprieter asked me "Are you another one of those guys from Microsoft?" I replied that I was not. He told me that he's had a deluge of software engineers in the shop lately, one of which recently offered to buy any St. Gaudens he obtained, at his cost plus $20. I suppose it's not surprising. Since I arrived at my undisclosed rural location, I found a coin shop within a reasonable drive and went down there to check it out. They had a few Krugerrands, but (this is strange!) NO SILVER ROUNDS! The lady told me that a computer programmer recently came in and purchased her entire stock of Maple Leaves and silver rounds. (I was actually there to buy all of her silver rounds, so I was quite disappointed.) When realizing the true implications of Y2K, many people immediately purchase gold and silver, after which they start thinking about purchasing a year's supply of food, after which they start getting themselves "right with God". After which we realize that we should have done those things in the opposite order. I do have one question for the wise...if I ever decide to unload my gold, how do I do so without alerting the attention of the government? Your advice would be greatly appreciated. Thank you all for the great information, keep posting it and I'll keep reading. Thanks.

I admit to being a neophite in knowledge about world economics, gold'silver,paper money, euro, the history of our modern currencies, etc. You get the picture,yes?........But I wonder alot about these things and would appreciate any insight on the following questions:....................Let's say for the purpose of conversation, that the Euro is successful. I have read that their new money is, at least in part, backed by gold, yes? Why isn't it backed completely by gold with every new dollar backed by its equivalent of unleveraged gold that is in the Central Bank? ..........If the Euro is successful, in order to defend their own currency, the United States may want their currency to be backed by gold too and again I would think that that would mean every new one dollar bill would then represent a known % of an ounce of gold the US Federal Reserve owns and that gold piece is physically in Fort Knox, or they must purchase more gold, Yes?.................... It is more convenient to carry paper rather than coins so the citizens would continue to accept substitute dollar promissory notes for the gold they trust is in the Fort Knox vault and available should they want the "physical property" at any time,yes? This seems like a sound, stable way to conduct a monetary system for a healthy, economically robust currency where the citizens own something tangible of value and are able to build wealth. What happened to it? Why was this structure abandoned and who did it, when?..... I wonder...... there was once a gold standard, $35.00/ounce wasn't it? If the United States wanted to return to backing their currency fully, with gold, would they have to establish that $35/ounce again? Was that some magic number? Or would they set some other arbitrary price? ........................I wonder, if investors purchased gold today at $300/ounce (for example) and the US reestablishes gold as their standard of value for their currency tomorrow, where does that leave the investors if the Fed sets the standard at $35/ounce again? Did the investors just lose $265/ounce overnight? Can the Fed just arbitrarily pick a $ number or is there something in the free market that would determine the standard?............I wonder, how does this affect the electronic paperless society we are becoming? Y2k may take care of that for awhile, but really, just think of how people of wealth could set themselves up with some gold and get into the business of providing electronic money over the internet with no government manipulation......And I wonder about paper promisory notes like US Savings Bonds. Are they worthless when US fiat money loses its value next to a gold backed Euro?.........I wonder how long this evolution of modern currency change will take. Just wondering.........I look forward to any thoughts on these things. Thank you.

Let me add some verification. By co-incidence yesterday I had the opportunity to talk to one of the top bullion traders in the United States (Wall Street location). There are no silver bags in quantity anywhere and the premium has exploded. No 100 ounce silver bullion bars and a few U.S. silver eagles. Bullion gold is getting difficult to come by. Pre-1933 gold coins are problematic in terms of supply. Twenty dollar gold pieces are very high if you can get them. British sovereigns premiums are rising. We get a hoard of anything pre-1933 and the investors go through in a matter of days. I asked him the obvious question: With what's going on why aren't gold and silver zooming higher? His response: "Wall Street and Main Street are in two different worlds when it comes to gold and silver." I asked him if it was paper keeping the physical down. He said 'yes'.
In other words, there is a two-tier market developing in gold: one for physical with expanding premiums; the other for paper products.

By the way, Sadus, I hope this isn't your last post. That was an extremely important contribution.

I was wondering some more.........Does anyone know who the "Greenbacks" were in the 19th century? It is the name of a group of people but I don't know their significance or purpose. Did they have something to do with gold backed money policies of that era? Thank you.

On the $35 gold question, the monetary authorities would not value the gold at $35 because bad money drives out good. In other words, individuals would see that gold was undervalues and exchange their dollars for gold and store it for future use. This is the problem Russia faces in going back on gold. If they value gold too low and allow covertibility, which they appear to be at least implying in their press resleases, the people will take the gold and let the rubles go.

Many of your questions are the type that FOA and Another are very good at anwering. I would like to ask them to take a look at your excellent series of questions. At the same, I invite the entire USAGOLD think tank in-residence here this afternoon and tonight, to take a look at those questions and provide their astute in-put.

Good post, Yellowbird. Good questions. We need more similar input, please -- time allowing of course.

Just a short note to say that FOA's post of yesterday morning was deleted by mistake. Our apologies to FOA. If anyone has a record of the post we will attempt to restore it to its proper place. In that post FOA said he would be travelling until the 27th.

Since FOA is going to be gone for the weekend, we need something to liven up this place up.........

So here we go:

***** We will give away a book of choice -- either ABC or Footsteps of Giants -- to all first time posters. It's got to be more than a "test" or a sentence or two. You post, it's out the door to you. Offer good through Sunday, midnight.

***** We will give away a one-tenth ounce gold Austrian Philharmonic to the one post between now and then we feel is of the most enduring benefit to all other posters and observers. Of course, the decision as to the best post will be completely arbirtary, without objective criteria, and based completely on our own subjective standards. Post to win, but don't take it personally if you lose. One last thought: Length will not be a determinant. Quality trumps quantity; a point well-made over rides verbosity (but you
are not limited to a single post). The post can be within the subject matter at hand or you can take a flyer.......As always gold has to be the centerpiece.

All are welcome to participate, especially that large group who have registered but have been looking for an excuse to break the ice.

We will be monitoring the FORUM intermittently over the weekend to send out passwords.

Have fun, fellow goldmeisters, and MAY THE BEST POST WIN!

Night owls and Aussies: I know I won't be around for the switchover to the Sunday midnight to noon slot. Would somebody take it upon themselves to re-post this for me.

Thanks, my friends.

Several trillion US Dollars are reaching their kindling point...the heat has melted gold a little...but gold does not suffer entropy... like paper and the rest of us.

Gold is reshaping itself as we speak!

Unomas

Consider this:

You should save money.
It will be another parent in your life
to add to your father and mother.
--- Saikaku

Note: Make that "real" or "gold" money.

In response to your question, paraphrased, "If our currency was originally stable and based on gold, why/how/when did this cease to be the case?" I invite everyone to correct me if/when I'm wrong, but I think these are the facts: the American dollar started out set to a specific number of silver grains (317 or something). The price of gold was then set relative to that by the market. This continued until 1913, when the Federal Reserve Act was passed by Congress and signed by Wilson. I think gold was then set to $20.67 per ounce. But now the Fed had the power to run the printing presses at full speed. You might ask why they would do this, since it's damaging to the economy. The question you should be asking is, was it damaging to the Fed? This went on until the Great Depression, when Roosevelt found it necessary to confiscate all the gold (paying some $15/ounce in return), after which he immediately devalued the dollar by setting the gold price to $35/ounce. He also backed out of the prior commitment of redeeming dollars for gold out of the US Treasury. However, he could only do this within the country, but foreigners still had the capability to trade their dollars for our gold, which they did. I believe that some 2/3rds of our gold had flowed overseas at $35/ounce before Nixon finally closed the gold window and put us on a floating exchange currency system. This caused the dollar/gold price to fluctuate wildly. No longer artificially held down, the POG skyrocketed until its peak (around $800?) in 1980, and then steadily declined to the $300-$400 range that we see today. One question I have though, to anyone who can answer. If the price of gold today is $300 in 1998 dollars, would price would that be in 1980 dollars? And if the price of gold was $800 in 1980, what would that same figure be when adjusted to 1998 dollars? Thanks.

I don't have the numbers for 1998 in my home office but I have them through 1993. Based on the consumer price index, gold should have been trading in the $1400 range in 1993 based on the loss of purchasing power since 1980 when gold was $800. Even if you use the 1980 average price of $615, you end up with a range of $1100 for 1993.

You make an excellent point, Sadus. Just happened to have an easy desk reference handy to answer your question.

This is my first post here, and surprisingly I'll start off by being a little bit of a contrarian by setting out some of my objections to gold as a store of value and as an investment. (Fair disclosure: I'm actually somewhat of a partisan of gold, though not a fanatical goldbug, and have allocated much of my admittedly modest portfolio to gold stocks and mutual funds...but I just want to be difficult today, and to get my book).

1. Gold is no longer legal tender. Unlike previous times, you can't use it to actually buy anything of practical value. In fact, to hold gold is to to incur transaction costs both to acquire gold, and to dispose of it once one requires legal tender.

2. This flows from item 1 above. Gold serves no practical utility, other than perhaps as an ornament and rare industrial or medical uses.

3. Gold has no intrinsic use or value. However, at an early stage of economic development, because of its relative rarity and indestructibility, it may have had value as unit of exchange and a store of wealth. However, it can only serve this function as long as the preponderance of economically relevant humanity agrees to use it as such. Once it ceases to be accorded this role by the majority of economic actors, it becomes relatively and perhaps absolutely worthless. Gold has in fact been stripped of its former role, and the last to realize gold's rejection as a unit of exchange (i.e., those who continue to hold it) will be those who take the biggest loss. In the same vein, gold did serve as a type of wealth insurance in the event of hyperinflation or political revolution leading to the disestablishment of the existing currency. But this role flowed from the then widespread acceptance of gold as a store of value/unit of exchange. Thus, gold was a good form of insurance because it could be converted into another (no pun intended) national currency cum legal tender (if one had to flee) or it would eventually become the basis of the new national currency (if one stayed put, awaiting the new regime).

4. The crux of the matter is gold's rejection by the majority of economic actors. There has been no gold standard or exchange regime of any note since the early 1970's. The world didn't collapse when gold was abandoned, there was no hyperinflation, and the not insignificant price inflation which did arise in the 1970's was beaten back without a readoption of gold. There has been no move to readopt the gold standard since the 1970's, and it is unlikely there will be now. The period since the rejection of gold has witnessed incomparable technological advance and mastery of nature - the true source of wealth and human betterment. The proof: you are reading this message, on the internet, on a computer screen. You are no looking at a reflection in a shiny gold dish.

5. Gold was rejected because it ceased to be desireable method of monetary policy. It did serve a useful function in preventing governments from hyperinflating, and could still serve this function, but generally the gold standard is an ill-advised policy. This was evidence of this in the mid-1800's. The mid-1800's were a period of burgeoning intellectual and technological development, but economic growth and human betterment were inhibited by a deflation flowing from the gold standard coupled with a gold shortage. A "cross of gold" indeed! The bottom line: Gold can serve a useful flow in constraining central bank hyperinflation, but the supply of gold can also be affected by factors unrelated to underlying economic fundamentals, and thus is an unwise regulator of monetary supply, usually by causing deflation and suppressing economic growth. Sometimes, however, gold can cause inflation (16th century Spain), when there is an influx of gold unrelated to underlying economic realities. The value is in the reality the gold or other currency represents, not in the gold or currency itself. What is a paper dollar worth, it's only paper? I reply: What's a gold dollar worth, it's only a piece of yellow metal!

6. The continuing market in gold reflects Plato's theory of knowledge as remembrance. People, particularly older investors and central bankers, recall gold's former role as (for example) a hedge against inflation. Because they expect it to serve this function, based on its former role as the basis of legal tender, their economic decisions caused gold to appear to fulfill this function (i.e., if enough people want to buy a limited supply of gold or pet rocks, gold or pet rocks will increase in value). However, these economic actors and their no longer valid memories are passing from the scene; hence, the decline in gold's value. In the recent market turmoil, gold should have shot to $365, at least, but it couldn't even mount a sustained assault on $300. This, my friends, is true reality.

Well, there was my book-qualifying rant. I realize previous posts have addressed these points, but I look forward to any replies. Prove me wrong, please! I want my stocks to go up.

Thank You.

Congratulations. You win a free appearance on the Louis Ruykeyser Show. No, seriously, we will get you the book pronto -- the need is all too apparent. Let me speak to your views point by point:

1. "Gold is no longer legal tender." And the dollar is no longer money. It fulfills the exchange function, but it no longer fulfills the store of value function. The question is: Which will be the better form of money in the years to come. The government and Wall Street spend an inordinate amount of time trying to prove that gold is not a store of value, but there is a very large segment of the population that doesn't accept this argument. Interesting that upon the collapse of the ruble, the Russians decided that gold money would not be such a bad idea. Interesting too that the Europeans would put gold behind their money to make it an attractive alternative to the dollar. Could we be far behind?

2. Gold serves a long list of practical purposes but its most important is as an immutable store of value. Most of the central banks in the world hold gold as an asset of last resort. Most of the people of the world value it for this purpose as well. That is function enough.

3. It is the dollar that has no intrinsic value except the full faith and credit of the government of the United States -- an entity at $5.5 trillion in debt and getting in deeper by the day. The rest of your statement is not generally accepted even by central bankers....Check the statements of Alan Greenspan and Paul Volcker in this regard. Paper money and central banking are the new, untried kids on the block. Gold has served us well as a standard of value for thousands of years because it cannot be created by political will but only be extracted by the sweat of the brow. In other words, there is a cost to the production of gold money. Not so with paper. That is why gold is referred to as "honest" money.

4. Europe is returning to gold based money; there has been discussion in the Far East of gold money; and there is a strong element in the Republican Party calling for the return to gold money in the United States. I agree. We will not see it soon. We will probably see the total collapse of the dollar first; then we will return to our senses. This is unfortunate.

5. We were on a gold standard in this country in the period you describe as the period of "burgeoning intellectual and technological development." The cross of gold speech by William Jennings Bryan had to do with his support of silver, not paper money. He was financed by silver interests primarily based in Colorado and thus favored a larger role for silver behind the money. Today, gold is opposed by the political and financial interests that benefit from the control of money by politicians and central bankers. Gold is favored by those who wish to see the money controlled by free market factors attached to its extraction, milling, refining, barring, coining, and subsequent exchange, and completely detached from the government except as the coiner (jobber) of money. As for Spanish example, gold does not provide economic heaven on earth; it simply is a better form of management than politically controlled central banks. It provides discipline and counters human error. The booms and busts are less magnified.

6. Knowledge is remembrance? Do you remember the Nightmare German Inflation made possible by the separation of German money from gold? Do you remember the Argentine inflation? And the countless others. I have heard it said that every form of paper money known to man has ultimately met its demise including the first rendering by Ghenghis Khan who made the first paper money out of tree bark. You guessed it -- that ended in hyperinflation. People remember what they want. In the case of politicians they remember what is expedient or what will get them elected. They rarely remember those aspects of history that conflict with their goals -- self-serving or not. By the way, I do not think that most central bankers see gold as an inflation hedge; more they see it as a deterrent to inflationary schemes. Some see this as a positive; some a negative. There is considerable debate as to where Alan Greenspan stands on this issue and that is why he is asked questions about it all the time. Did you know that he was an ardent gold bug not that long ago. Even addressed our conventions at times before he became Chairman of the Board.

Nice post, canamami. I hope you continue to post. Though we disagree, I think it is in good spirit and I appreciate your willingness to express these views...........Thank you. I almost forgot some of the basics myself. You gave me a chance to review them.

I suspect others might want to jump in on this conversation.

First hear is the post from FOA:

Friend of Another (10/23/98; 07:39:46MDT - Msg ID:737)
Reply to: nugget101 (10/22/98; 09:34:18MDT - Msg ID:715)
Nugget101, ------------ I'll take your thoughts one at a time, not necessarily in
order.------Your words: "How does leasing gold raise dollar value thereby
increasing liquidity?"------------ The value of anything is a perception in the human mind.
Through the public markets, we express our worth upon things by showing various levels
of need. These levels of need are expressed in the relative values (shoes worth more than a
belt, car worth more than a television) of real goods as compared to each other. Not in
their denominations in currency. See Aragorn III, #720 for a better explanation.
------------------------- To give the paper markets some form of connection to humans, the
financial markets employ a sophisticated tool that bridges the gap between the mind's
hidden perception of real value and the abstract world of equating paper currency to real
things. That tool is gold. No one will admit to this, but it is used everyday, around the
world. The gold markets make paper currencies real by bidding for them in real earth
money. When one ounce of gold will buy only $100 US$ instead of $500, the dollar is
perceived as strong against things, and therefore price inflation must be low. The
currencies also bid against each other, as seen in the Mark and Yen. But, this perception is
one of the relative value of national money against national money. It relates more to the
condition of the economy in each country. Note: Today the free gold markets are
manipulated for the purpose of controlling public perception about the dollar. Much in the
same way as a pressure meter on a boiler is locked to read 100 lbs of pressure when the
tank relay has 6,000lbs.. The rupture that will come has not, yet. The same way as the
paper currency inflation of the dollar is not seen in the gold meter. However, it will show
up as price inflation and a true gold price reading, once the meter is
fixed.--------------------- Gold leasing, in some forms, adds dollar liquidity in the same way
as the Yen / carry trade. The dollars that are created through this operation filter out into
the financial markets and are multiplied many times by fractional reserve banking. They are
then further expanded through derivatives trading. The actual increase in the dollar's
worth by a lower gold price, also adds to the confidence by building a trust that all
leveraged positions will pay off in a non-inflationary world. ---------------------------- Your
words: "if there is an alternative to a pure paper currency it will naturally push out fiat
money."-------- No, not always. Your conclusion is a result of the study of a history that
occurred under different conditions. It may happen today, or it may not! I think, the Euro
system will evolve into a world class reserve currency that will allow, for the first time, a
true free market for gold to trade side by side with all digital moneys. With the Euro being
controlled by several countries, with different circumstances, it will offer a balance of
political pressures (not the case in the present US$). Add to that, that the ECB will
endeavor to force the Euro to become the only transactional currency for gold, and we
have the potential for a true worldwide hard reserve currency. ---------------- I must stop
here as I will be traveling again for a few days. Hope to be back on Tuesday, 27 with more
replies. Thank you, everyone. FOA

The premise that gold is not a store of value or a currency is false. From the sources that I have read gold is not popular on wall street but it is still popular on main street. The current cross-section of Americans (I can't speak for Europeans and Asians and Africans and South Americans and Pan Americans and Australians and more) view gold as a very valuable asset but not one to go out and buy right now. They would probably admit that gold is low right now. They wouldn't equate it to an investment because they will say that "...as everybody knows it went up to $800 and now look at it down, what? around three something." If you offered the normal car deal 30 ounces in trade for a used car he would say either go get cash for it or "I will have to get it appraised first." He or she probably wouldn't laugh at you just ask you to do the dirty work of "cashing it in."

We all read the newspaper and listen to the news. The news never talks about gold. The price of spot gold is not usually given out on any news shows that I watch. So gold is very much not in the eyes of the average American. They hear that the Suisse are repatriating a lot of it and that the Argentianians are going to sell a lot of it, but they believe it isn't going to be to them so what does it matter.

The kicker is if the price of gold went to $400 or $500 in a hurry then the average American would soon sit up and take notice. The divorced man or woman or dental patient could take their gold ring or tooth to a coin shop and get some "real bucks" for it. They will tell some friends who will tell some friends. That is how it went down in the late 70's and that is how it could go down now.

Currently, the physical is being bought up on an International level and a local level. It isn't being bought by the average Joe and Josephine, rather, the intelligent investor, the Y2K zealot or two, the militia person or three, the businessperson or two, etc. They are buying in droves. The other folks who are buying and this is just a guess would be the folks who lived through and recognize similar circumstance to those in the 70s who missed out because they didn't know what to do but do now. The other person buying right now must be the ones who made gobs of money back then buying and selling during the frenzy. They know and have seen it before and so they are preparing for the shortfall.

The diffence in the market now from the frenzy then is that big money today knows what could happen if the masses began a run on gold. This is why we see no news (just an opinion) on gold in the press or TV. This is why we see disinformational news blitzes on large sales of gold.

In the end, the largest movement in gold prices will be precipitated, caused, formed by the grass root buying that is taking place right now. It will grow and grow until as we are beginning to see now that premiums are being asked for physical gold. When in fact, those premiums aren't premiums they are the actual cost of gold. The paper trade is just a game. It is not based on delivery, it is based on paper sales. The only deliveries of gold are either hidden in the mists of London or being made at the local pawn and gold coin shops of the world. The price of gold will rise from these shops. Soon the word will catch on that the price of gold is set at the local level and not at the Comex or LBMA level.

It will go something like this. "Hey George did you hear that the price of gold is going up at the ABC Coin Shop?"

"No I hadn't heard, how much is it?"

"It is $375 an ounce with the tax and the premium."

"Premium my a.., that IS the price of gold now."

"How do you figure?"

"If you have to pay that much over what the news says the price of gold is then that is the price of gold not what the paper says."

"Good point. I better tell Betty Sue and Martha too to get in on this before it gets to be too pricey."

This is happening right now. It is only a matter of time.

What would happen if you told your neighbor that the price of gold is really $350 not $294.00? Would he laugh? No he would say what do you mean? You would say, well by the time you add in the dealers premium, the scarcity premium, the VAT or tax, it gets right up there. As this diferential grows, the word will go out at Internet speed that the price of gold at the local shop is booming. What is more they can't even get it quick enough. Hey you remember the 70's don't you. Lots of people made a lot of money on gold didn't they?

Well the word is getting out isn't it? Did you tell someone today?

An interesting validation of your point is that most gold veterans who were around for the 1979-80 bull market will admit that they sold more ounces (that's ounces, not dollars worth) of gold between $650 and $800 than they did between $150 and $300.

An interesting article posted as an ad in the Forbes October 19,1998 magazine issue ran under the title of 'Viewpoint' and was sponsored by Germany's Commerzbank.In it Commerzbank suggested that as "Euroland" lurched closer to monetary union,gold would become less of a reserve asset.The article states that the launch of European monetary union could trigger further sales of gold,and that European Monetary System(EMS)countries have deposited 20% of their gold and dollar (doesn't say in what ratio-SIOP)reserves in a joint fund.While the smaller EU countries have sold off roughly 1/2 half of their reserves the larger EU countries (Germany,France,UK,Italy,Spain,Portugal) have maintained their gold stocks.Ironically,the article mentions that Argentina,in 1997,converted "practically all of it's gold reserves into US dollars."They say that the countries mentioned can sell off their excess gold -with the approval of the European Central Bank(ECB),but that sales will be handled "carefully" so as not to plunge the price,moreover gold is at close to production cost already.

Commerzbank also states that the Bundesbank currently holds 95m ounces, shown on the books as worth DM14bn,but is really worth,at $280. an ounce,DM47bn.The current assesment of the eleven "Euroland" countries gold reserves are 320m ounces.

The article also states that the IMF is the second largest holder of gold reserves in the world and that twenty years ago sold 30% of it's stocks-some being returned to member states and some "used to aid especially poor developing countries."


Of course I see this as a continuing plot to keep a lid on gold, vis-a-vis the Swiss recent statements,but I find particularly interesting the comments on the Argentinian gold sales and the IMF distributing gold as aid.

Any thoughts on some of the reserve figures?

I hadn't heard about this. I doubt you would find a great many gold advocates in upper management there or on the board of directors. I have noticed in recent months that sometimes the national governments in Europe have a more pro-gold stance than the central banks or commercial banks attached thereto.....an interesting turn of events. I would also like to see Commerzbank's trading book and would not be surprised to discover that they are short gold, like so many others at this point in time. In other words is Commerzbank tallking economic philosophy or "talking its book?" It is not lost on me that Andy Smith talked the same line the entire time he was at Union Bank Switzerland than turned pro-gold when he moved over to Mitsui. I would say this to Commerzbank: If you want Germany to sell its gold, let's get it on the market and stop talking about it. Now would be good time. We are having trouble meeting investor demand.

By the way, SIOP, that was a good post.

To borrow the phrase of one the great internet posters/philosophers of all time: "I will be gone for a time." And that includes tomorrow which will be devoted to family & golf (the challenge continues), household chores (got to get soome storm windows up) and some catch-up reading -- FT & NYT for sure. Not to speak of the fact that the Broncos have a big game against the Jaguars. I leave things in your capable hands, fellow goldmeisters. I want to see some big time "k" when I pull up this FORUM! I will check from time to time to issue passwords. Mostly though, the contest continues -- a big one-tenth ounce coin to the TOP POST of the WEEKEND. Right now there is no clear leader..... USAGOLD

I was hoping that there might be a new book offer, thanks Michael for the opportunity. I have been following the thoughts of Another and Friend of Another for about a year now, and would first like to thank them and all the others who have posted during that time. I have spent the last few years trying to get an understanding of the current world events and the main players who have the most influence on these events. What Another has to say does certainly seem to have relevance to these times.
The current system came close to collapsing when the debt crisis first hit the Latin Economies, but was able to be salvaged by the IMF bailouts. Capital then expanded
to the South East Asian countries which was sufficient to continue the growth of the global economy . As has been pointed out before, this continued growth has been fueled by a phenomenal growth of debt. Some questions
� Without buying to greatly into conspiracy theories, how many of the current events might be orchestrated moves to gain greater control over the affairs of the world?
� Who might be the main players fighting over this control? Governments appear to be taking the lead, but they are generally influenced by various interests behind the scenes. In this century, oil has been an extremely important commodity influencing the course of events and the rise of power
� If power and control are the motives, is it in order to impose certain beliefs over others, or just the drive for more power.?


I can't see how the world can continue to support the current pace and direction of development and growth. It is mostly influenced by the ability of larger and larger corporations to continue to make more and more profit. The current tools being used for these measurements are no longer adequate and fail to take into account many costs. When the current path collapses, we need to revise the formulas being used to measure corporate success.
We need to examine our "Gods" that we allow to have power over us; Gods such as Science and Technology , Religion, Growth, Power, Profit Gold, Dollars etc.
I ask , as many before have, what are we here for? Why is the world generally in such a sad state? Are we more at peace now than we were in times past? Is there more love? Do we need more and more of less and less?
I have spent little time writing down my thoughts , but much time thinking. Thank you for the opportunity to try and put them in words..

Sadus, Hello. (is that Sad Us, Sad U.S., or something else?)

My interest in gold stems from my musings over Y2K. It really started to click when I read about the CIA report regarding how the infrastructure (and the governments along with them- one might infer) of third world countries would likely evaporate. One ignores the potential risks in the U.S. at ones own peril.

The information I've picked up in the past couple of months regarding dollar/gold/oil/euro has been fascinating and educational, but when compared to Y2K the ebb and flow of international economics pales with what could very well be TEOTWAWKI (for the uninitiated- The End Of The World As We Know IT). On the other hand the bullion coin I purchased is 1/4 oz. Eagles��.This offers some flexibility in spending during crisis and if (BIG if) Y2K turns out to be a speed bump, well you know, they only mint about 15,000 of those bad boys a year.- think of the collector value in 30-40 (or 100) years!

And your right, stockpiling some food/guns/ammo and getting out of harm's way are coming right behind. I went for gold first because I figure the cost of gold will go up faster than the cost of guns and real estate..

As for getting right with God, I'm not bragging mind you, but having right-standing with the Supreme Being has been on my active to do list for a long time. I expect he can see me through what is coming.

Got farmland?

GF

Completly unrelated to your post, but your handle made me think of it. Did you see where some scientist "transported" a beam of light? They're not sure if what they are working is a Star Trek style transportation device or a Star Trek style replicator.

Either way, in a hundred years or so, you might be able to procure all the gold you want.

Got your shields up?

GF

Euro seen sturdy after initial wobbles - traders

MAASTRICHT, Netherlands, Oct 24 (Reuters) - The single european currency may wobble in the first few months after its launch but the euro will soon find its feet, traders at the Benelux forex conference said on Saturday.

"It will be volatile at the start, but once the European Central Bank proves its determination and sets it policy, I expect that volatility to almost disappear," one trader from KBC Bank in Brussels.

While the new president of Forex Belgium, Kris Claes-Werts told Reuters that dealers would try to test the new currency, those present at the conference in Maastricht had their doubts.

"The euro is too huge. We're not talking about the Russian rouble or the Italian lira or even the British pound -- We won't be able to test it," the KBC trader said.

Most delegates said they expected the European repo rate to kick off at 3.30 percent, the rate in Germany now, but saw the ECB shaving that by 30 basis points within six months.

"The rate will likely go lower because of the international deterioration in the economy. People and institutions are much more risk-averse," another trader from a Belgian bank said.

But while economic theory would dictate that lower European rates would result in a softer currency, lower rates in the United States would help shore up the euro.

"We will see some easing in Europe, but not until after the Fed has cut again. That will affect the dollar more than ECB cuts will affect the euro," said a swaps and options trader from Belgium's Generale Bank.

The euro will operate in the 11 member states from January 1 next year, but delegates said it would extend its reach way outside the so-called euro zone.

"Although they are not in the single currency union, Switzerland, Britain and others will actively trade euros," one senior banker from Luxembourg said.

In terms of world currency reserves, it would rival the dollar within two years, he said, adding the EU's economic power would become as great, if not greater, than that of the United States.
------------------------------------------------------------------------
Copyright � 1998 Reuters Limited.

Unomas

EURO-THREAT
FOR most people, the words hostile power these days conjures up an image of some terrorist-sponsoring desert madman, or maybe a Russian coup leader played by Gary Oldman. You don't think of a bunch of bureaucrats in Brussels and Frankfurt, shuttling from one interminable conference to another. But that is the face of a new, and intrinsically hostile, financial power.

The euro, the currency of continental Europe, is coming into being on Jan. 1, and it is becoming clearer that its backers plan to use it to dethrone the dollar from its role as the main global reserve currency. This isn't trivial, since we are now very dependent on rest of the world, and Europe in particular to finance our economy. While the federal deficit has been put off to the future, the U.S. private economy needs a lot of foreign capital. It's a lot easier to get it if we can pay it back in our own money. If the Euros have their way about the euro, we won't.
--------------- John Dizard, New York Post 10/25/98
___________________________________________________

BRAZIL -- CONTAGION FIREBREAK IN WESTERN HEMISPHERE
In Brazil, President Fernando Henrique Cardoso's plan to protect the country's currency with tens of billions of dollars in IMF support could fall apart because of political opposition to drastic budget-cutting. Still, according to a number of specialists and policymakers, the latest news provides at least a basis for hope that the crisis may have passed its most terrifying point...

The IMF and the U.S. Treasury see Brazil as a firebreak, where the battle to keep the crisis from spreading to Latin America - and from there to the rest of the world - could be won or lost. The Fund and the Cardoso administration announced agreement this week on the broad targets for a three-year plan to cut Brazil's large budget deficit, and Mr. Fischer disclosedThursday that the lending organization would contribute approximately $15 billion to a loan package of perhaps $30 billion that will be finalized next week.
-----------International Herald Tribune, 10/25/98
____________________________________________________

MAHATHIR DEFIANT
KUALA LUMPUR - Prime Minister Mahathir bin Mohamad of Malaysia unveiled a 1999 budget Friday that combines increased spending with targeted tax relief in an effort to lift the economy out of crisis. The plan, which is expected to result in a budget deficit, underscores Mr. Mahathir's opposition to the austerity principles imposed on several of Malaysia's neighbors by the International Monetary Fund. Turning his back on such prescriptions, Mr. Mahathir has imposed controls on capital flows in an effort to insulate Malaysia's economy. Defending those controls, Mr. Mahathir predicted that Malaysia would rebound from recession next year with its own growth-oriented measures. "The government and the people must unite in efforts to restore the nation's economic health. Others will not help us," he said.
-----------International Herald Tribune, 10/25/98
_____________________________________________________

MARKET ACTION SUMMARY 10/25/98
Stocks fell Friday on Wall Street ending a seven day uptrend with analysts saying that corporate earnings did not justify the rally. The British and Japaense markets also were down. The dollar finished up against the yen after Moody's placed four Japanese banks on their watch list for possible downgrade. Crude had a decent week, now at 12.76. Bonds finished down on Friday for the sixth straight day ignoring the down day in stocks and still absorbing hedge fund selling. In the LatAm Watch, Brazil stocks Friday finished down 4.4% amidst concern that no accord would be reached with IMF. Gold finished up in a lacklustre week.

I want to thank Steve H. for resurrecting FOA's lost post and reposting it for us. In that post FOA said he would be travelling until the 27th.

Since FOA is going to be gone for the weekend, we need something to liven this place up.........

So here we go:

***** We will give away a book of choice -- either ABC or Footsteps of Giants -- to all first time posters. It's got to be more than a "test" or a sentence or two. You post, it's out the door to you. Offer good through Sunday, midnight.

***** We will give away a one-tenth ounce gold Austrian Philharmonic to the one post between now and then we feel is of the most enduring benefit to all other posters and observers. Of course, the decision as to the best post will be completely arbirtary, without objective criteria,
and based completely on our own subjective standards. Post to win, but don't take it personally if you lose. One last thought: Length will not be a determinant. Quality trumps quantity; a point well-made over rides verbosity (but you
are not limited to a single post). The post can be within the subject matter at hand or you can take a flyer.......As always gold has to be the centerpiece.

All are welcome to participate, especially that large group who have registered but have been looking for an excuse to break the ice.

We will be monitoring the FORUM intermittently over the weekend to send out passwords.

Have fun, fellow goldmeisters, and MAY THE BEST POST WIN!


The contest is in session until midnight tonight. So far we have had some high level discussion and the judging will be difficult.

Thanks for the response. I'm looking forward to a big day at the FORUM!

E- mail us and claim your prize. If you have posted, please let us know which book you would like us to send you.

***The euro, the currency of continental Europe, is coming into being on Jan. 1, and it is becoming clearer that its backers plan to use it to dethrone the dollar from its role as the main global reserve currency.***

EURO'S BACKERS SCHEME

By JOHN DIZARD
------------------------------------------------------------------------
FOR most people, the words hostile power these days conjures up an image of some terrorist-sponsoring desert madman, or maybe a Russian coup leader played by Gary Oldman.

You don't think of a bunch of bureaucrats in Brussels and Frankfurt, shuttling from one interminable conference to another. But that is the face of a new, and intrinsically hostile, financial power.

The euro, the currency of continental Europe, is coming into being on Jan. 1, and it is becoming clearer that its backers plan to use it to dethrone the dollar from its role as the main global reserve currency.

This isn't trivial, since we are now very dependent on rest of the world, and Europe in particular to finance our economy.

While the federal deficit has been put off to the future, the U.S. private economy needs a lot of foreign capital. It's a lot easier to get it if we can pay it back in our own money. If the Euros have their way about the euro, we won't.

I was at a Cato Institute monetary conference in Washington last week to catch up on the debate over the effect of the euro's introduction.

I like these geek-a-thons. IMF officials are offered up for post-speech torture sessions, and there's usually an Administration official or two to practice the latest evasions.

This time it was Larry Summers, the No. 2 person at Treasury, on defense.

The Brazil bailout is the current focus of the global macro set, so I asked him if the Treasury would be prepared to make long-term loans from the Exchange Stabilization Fund as part of the package, and, if it did, whether the Brazilians would pay a penalty rate of interest.

I'm not going to touch that one, he muttered. I'm only going to talk about the 21rst century today.

If Treasury Secretary Robert Rubin and Summers don't use the ESF, which is effectively the private piggy bank of the secretary of the Treasury, then it's hard to see where the Brazilians can raise enough to see them through what they call the transition ahead.

If they do, Congress will likely throw a fit about taxpayer-financed bailouts. It imposed restrictions on the ESF, now expired, after the fund was used for the Mexican bailout. The truth is, any ESF billions may just give a get-out-of-jail-free card to private investors.

The private sector bankers I know are now physically fearful of going down there. It's not just the chance of being brutally murdered for the contents of your wallet.

It's the pervasive sour mood of the country. In the old days, violent or not, there was more of an atmosphere of hope and good times.

But the really big issue among the money geeks is the euro. Robert Mundell, the Columbia economist who proposed the euro back in 1969, and who came up with the theoretical justification for a single European currency, was doing his best to defend the stunted, perverted child of his theory.

The problem is that you can use Mundell's theory, which describes what an optimum currency area should be, to discredit the euro.

Bernard Connally, who worked as a monetary economist at the European Commission until he was fired for publicly opposing monetary union, is now the leading advocate of the anti-euro faction.

The euro, he argues, is shaping up to be a disaster for its member countries and also for the free-market capitalist world order.

The principal problem is that the euro's introduction means that Europe will have a monetary union but a collection of separate fiscal policies.

It's as if we had a Federal Reserve but 50 Treasuries, and Treasuries of highly indebted states whose citizens spoke different languages.

The growth rates of the euro's member states are already diverging. When a recession or unsustainable growth affect some and not others, the strains on the European Central Bank to maintain a one-size-fits-all policy will be unbearable.

Unbearable for the citizens of what is now called Euroland, but an opportunity for the Eurocrats.

There is a hidden agenda here: They know the euro is unworkable with separate, sovereign countries. So when the inevitable monetary management problems plunge the weaker members into recession or budget disasters, the Eurocrats will propose a political union at financial gunpoint. One that would retain capital by force, with exchange controls.

And what are the politics of this kluged-together superstate? The recent elections have brought socialist parties back into power.

These aren't the tamed social democrats of the '60s or '70s, but anti-American ideologues. They have the power under the Euro treaty to impose exchange controls without unanimous consent of member countries.

That means that the value of our European investments would be reduced by force majeure, and that our access to European capital restricted.

This isn't a paranoid nightmare. It is an explicit hope, for example, of Oskar Lafontaine, the new, left-wing German finance minister.

In the protectionist, conflicted world that would result, both Europeans and Americans would suffer from low growth, restricted choices in investments and goods, and social conflict.

While we would be hit harder at first, due to our dependence on foreign capital, the greater efficiency of our system, and our greater military and political security, would mean we would come out ahead.

But in the meantime, the Eurocrats would have commandeered a lot of power, along with the accompanying prerequisites, and insider deals. At their citizens' and allies' expense.

Please send e-mail to

dizard@nypost.com

http://nypostonline.com/business/6908.htm

Unomas

I never saw your post.

Unomas

I'm new to the Forum and thought I'd pose some thoughts. I've read the abc's of gold & found it very informative in several areas. It makes me wonder how we can have so called "freedom" in this country & can't prevent the government from confiscating gold. That's gotta be worse than paying taxes to a government out of control (& not representing me). Was there any money offered to those in the past who had to give up their gold for confiscation? And was it at the going rate. In any case, I'm sure it was robbery no matter how you look at it. Is it because the govt. knows the real value of gold vs. paper money or they just want to show us who's in control (or both?)? To prevent further govt. intrusion into our lives, the book & newsletter advise the pre-33 coins. Is there any solid advise (or formula) about the best MS state to buy these in for the best hedge against the future? How would gold nuggets (from mining or melting down gold pieces or even bullion) fare in the future potential confiscation/ reporting mode of the govt's intrusions? Can anyone recommend some other good books to get a quick education about gold investing techniques (ideas)? Any comments or suggestions are most welcome. Even tho I'm sure many of these thoughts have been expressed before, I just thought I'd throw in my 2 bullion coin's worth. Steve

See what happens when you take a day MK ?
The whole board falls apart.
Was it the conversion from MDT to MST ?
OR were there not any posts on Sunday morn ?
OK so now I shall post my obsevations.
I have been using my "extra" dollars to pick up coins for the last few months. It used to be rather easy to walk into any coin store or hockshop and find numerous coins from which to choose. Am I now dreaming, or has there within the last month been an increasing "RUN" on the small
bullion items ? Small hallmarked bars and gold and silver coins are almost impossible to find. I was looking for an "Au Eagle" for a gift to my grandson for his birthyear (1997) and have looked high and low to no avail. The only coins available are the newly minted 1998's and those are in short supply in my area. The old standard "cheaper" SA Kuggerands which no one chose over the mapleleaf or eagle are totally gone and if one can be found -- IT is the same price as the mableleaf or eagle. My question --- IF at this early date of conceptual feeling that something may not be the rosiest in the future as has been in the past few years, AND THIS is an indication of things to come, WHAT WILL it be like when the truth is known by all ?

Yesterday I read the notes of a recent Y2K panel discussion held by a thinktank in Washington DC. Persons there included "former Senator Sam", present "Senator Bennett" and a flock of International "experts" related to Y2K.
The discussion start out well with the story of successful changes like at Seattle Airport (SeaTac International) where they have expended mucho funds and effort but have upgraded and tested to assure themselves that everything will work as required in 1/1/2000. However, "Sen Bennett" said what good would it be if a plane tookoff from SeaTac -- if it could not go anywhere and land where it wanted to land !! This was defined as the problem --- each company is looking out for only their internal problems and not seeing the required interactions with all the other necessary components. The Russian speaker to the discussion told of how IBM had left in the 80's and that Russia has been "forced" to make use of PC's instead of Mainframes -- and therefore has a much smaller problem to overcome but they are not there yet. The Japanese speaker wished to correct the erroneus understandin that Japan was behind the US and UK in the preparations for Y2K -- however it sounded like the same old line that I heard for years in the OECD -- so one never really knows what the Japanese are really thinking !! The India Y2K business CEO told of the great number of Indian professionals providing services to numerous nations and chided corporate CEO's of not taking responsibility of leading the necessary effort. Others in the audience, during the Q&A segment, ask about truth and misleading information -- "Sen Bennett" said that this was the most troublesome matter !! --- He said that the parties that testified to his committee were the ones that have done something -- and that only a small majority of questionares are returned in response to requests for information as to the progress in becomeing Y2K compliant.
"Sen Bennett" said that he was proud of the effort that his committee staff had done to get the recently Presidental signed Y2K bill passed in the last three plus months !! THAT was FAST action by the congress and President !!
BUT he ask for someone to start telling the American people and the rest of the world the TRUTH and allow them to start to prepare themselves for the possible problems that may occur. WHY do we not see this in the NEWS ?
IS it really that bad to not be able to discuss Y2K problems in an open forum ?

I am a old simple person and have done many stupid things in my lifetime -- BUT I do not wish to treated like a "mushroom" and "kept in the dark and feed horse manure" !

Please someone -- Tell us the TRUTH !
GW

Finally found the Sunday morning posts.
Darn PC
GW

The New York Times reported this morning that the Clinton administration is gearing up to participate in a $30 billion bail out of Brazil. The funds for the U.S. portion will probably come from the Exchange Stabilization Fund -- the same one tapped in 1995 to bail out Mexico and under the control Treasury Secretary Rubin. Congressional leaders have been alerted that the Administration might have to act while Congress is in recess. If memory serves, the Clinton administration chose a Congressional break to spring the Mexican bailout on an unsuspecting public. There was an avalanche of critism with respect to the way the Clinton administration handled the Mexcian situation. Germany and Japan have expressed a reluctance to take part in the Brazilian bailout according to the article, because they see this as "Washington's problem." This comes just days after Congress approved an $18 billion infusion into the IMF. The administration is pushing the IMF to provide $15 billion of the thirty needed to buy Brazil time.

Will the markets convene Monday to a world on the mend as it thought all last week, or one mired in crisis?

"I have two favorite things," he says, "small cap Japanese stocks and gold... Gold now at 18 year lows, has disappointed more people than the old Brooklyn Dodgers. But I think it be the beneficiary of continued chaos in the credit markets and a worldwide economic slowdown."

When asked about Fed intervention, he said: "By suppressing the volatility of teh credit and business cycle, by trying to head off price inflations and deflations, the Fed has thrown a boomerang in the air, which is the risk tolerance of people who invest money. The Fed ought to be in the business of central banking, not central planning. Alan Greenspan ought to say that people who risk money stand to lose a lot of it. That is in the nature of of cycles and markets."

In other word, let LTCM and the rest of them fail. Come to think of it let Brazil fail. Something I forgot to point out in the previous post: When you count the Congressionally approved funding of IMF ($18 billion) plus what the Clinton crowd will put up out of the ESF, the American taxpayer is bailing our Brazil, and by proxy, the big international banks.

In awhile, I will try to comment on a couple interesting articles in this weekend's London Financial Times.

As a new poster to this forum, I truly hope that as my thoughts continue to form I might be able to add value by my contributions.
I believe I first started being a gold bull/bug about 12 years ago after my first reading of a book entitled "Atlus Shrugged" by Ayn Rand. It opened my eyes and ears to the big picture. Her phylosophy, as set out in her non-fiction works, led me to question everything I had been taught, and in fact, the entire foundation of my limited knowledge. I have been searching for the the truth ever since.
After reading her works, I was hard pressed to find anything worth reading or hearing, as everything seemed to be so concrete based, until I discovered the wonders of the internet and began to search my way through the world wide web looking for anyone who might see the world through similar eyes as my own. This search led me to numerous sites, that I would visit daily, in order to read more "truthful" or "unslanted" views and news, so that I might better cope with a world that seemed exactly opposite of the way that I thought it should be.
Never, in my wildest dreams, did I hope to encounter another writer who would affect me in a similarly profound way as Miss Rand had. But I did. Here, at the USA Gold website I encountered the thoughts of Another and I will always feel a debt of gratitude to this person. In fact, Another's thoughts have had such a profound affect on me that it more than worries me that virtually no-one seems to "get" the big picture. It will be our undoing that we don't.
In today's world of big worries/crises, it seems unfathomable that the players of fiat don't want to play straight. What on earth could they be counting on? It seems to me so obvious that these crises are simply a matter of the lack of explicitly understanding what our phylosophy of life and purpose is, which leads to what we value.
Indeed, if we cannot fundamentally justify our values, we cannot possibly hope to defend them. Such is the case, in my humble opinion, with the currently held belief, by most, that gold holds no meaningful purpose in our lives. Because we did not explicitly state gold's purpose, and teach it to our young, it was easy for those who did to manipulate our thinking with respect to it. In so doing, disarming us and leaving us openly vulnerable to those who know better. When all is said and done it will not be gold that pays the consequences for us not taking our own personal responsibilities seriously. It will be us.
Thank you Another, for once more opening my eyes to the "big picture"
Respectfully, truthseeker

OK Posters...Here's the way I see it: We've got a little over six hours left to get that gold winning post on the FORUM. Right now, I'm going to have to say that SADUS has got the lead with his post on Y2K and gold coin scarcity (#745), though I need to say Truthseeker just got my attention. It's been tough.....so many good posts and only a single one-tenth gold coin. We've still got six hours to go. More than enough time to make your mark in gold history.

By the way, I just took a count. We now have almost 170 registrants signed up to post here. There are thousands watching. We are becoming important....

A great post and I hope the first of many. I share your enthusiasm for Ayn Rand and Atlas Shrugged. It is surprising how often that book comes up in conversation at Centennial Precious Metals. A bigger surprise that it was written in the 1950s and applies in every way to modern life.

I also share your high regard for Another's THOUGHTS!

Last weeks five-day Dow chart of five-minute blips shows a classic bouncing ball, losing its momentum and perhaps breaking through to resume the downtrend of the season. The fundamentals behind this would appear to be (1) hedge funds et al having huge paper "losses" which would result in massive debt if realized, and (2) major institutions conferring with Greenspan and "bailing out" LTCM.

These institutions are not (always) fools. Therefore, the fix is in. A "surprise" interest rate cut creates a psychological rally which now runs out of steam as the funds square off positions, and equities resume their travel toward real value (Dow 5000??).

The true situation propelled gold to $304 before the Fed/banker pep rally got the investing public hyped up again on the impossible dream. The stampede through Dow 8600 threw water on the "safe haven" fire.

My commodity describes the global financial world as a giant parking garage for money, with everyone seeking the best space. He then describes the American pension funds, IRA's etc. as a huge glacier moving massive amounts of money into the garage.

So, for these investors to go for gold, there must be the expectation of profit. For that to occur, there must be a believable uptrend. So what makes gold go up? Supply and Demand of course. However, while gold is a finite resource, it is nevertheless a commodity and does not produce anything. The booming economy of the decade has obviously not created a price-raising demand. That leaves (1) the rush to a safe haven, or (2) the potential for profit from a declining currency value in the country of the gold investor. When and if these factors occur, then the uptrend that will attract the "followers" will be upon us.

In my view the most important articles in this weekend's Financial times have to do with European political economy. In an article entitled Europe's Red October, FT points out that 13 of EU's 15 states have leftist governments ranging from mildly socialist, like Great Britain, to radical socialist, like Italy. And don't forget that Russian made a turn to the left recently with the old communist Primakov on the ascendancy there. The upshot was that these governments, including Germany's (the engine of Europe) favor deficit spending, low unemployment and reduced interest rates. In other words, they want to print money. Wim Duisenberg, in another article in that publication entitled "Duisenberg Warns Over Monetary Union Rules", told these governments not to break agreed upon budget deficit rules for economic and monetary union. In other words, he has already drawn a line in the sand and the Union is only now getting off the dime. His statement raised concerns about the shifting focus in Europe, and highlighted the growing rift between Europe's central banks and the political sector.

Message 744 from STEVE this AM asked some questions on this subject. I believe I am correct in that FDR called in all the gold coins in circulation in l933, redeeming them, dollar value for dollar value, with Federal Reserve Notes. The paper Gold Certificates backed with gold were similarly exchanged. Several years ago I read of someone who found a number of these Gold Certificates in an estate, stashed away by a previous owner who believed in gold and not in banks. Now wasn't he a wise old gent? When presented to a local bank, the person was told that they were worthless and they were not returned to him. Wonder where they went to? All of us may be familiar with the exchange of silver certificates in the early l960's, an option to receive silver at $.90 per oz. from the FR Banks in NY or San Francisco. There was a time limit on this, then the TSY silver hoard was sold off in the open market. Silver certificates today, when found rarely, are still legal tender on a par with FR notes. After l933's gold call in, prompted by financial penalties for non-compliance, gold was revalued upwards to $35 per oz. and the basis was laid for further expansion of the money supply. It was no longer legal for US citizens to own gold until l976, I believe, except for numismatic coins minted prior to l933. In l933, if the government said "jump" the average citizen asked when and how high? What would the answer be of those with a mindset such as would follow this and related websites, should Bill and Hillary at a TV "fireside chat" invite us to again surrender our precious metals in all form "pro publico bono"? Our reaction should be to keep our actions and especially our interests and thoughts on precious metals as descreet as possible, lest we suffer the fate of those suspected of dealing in drugs who find themselves arrested and property and financial assets seized without warrants or specific charges. We all have heard the stories of people in these situations who must prove themselves innocent if they can under really unAmerican circumstances. 'Nuf said.

That is good, tight analysis. The problem from the gold dealers point of view is finding the supply once the "public" gains an interest. Perhaps, that is why the gold chart is historically characterized by the presence of "spikes." Food for thought.......

I am sure FOA will have much to say about developments in Europe over the weekend upon his return. My bet is with Duisenberg and relatively sound money. Herein lies Europe's future.

The head of the World Bank,James D. Wolfensohn,holds 10% of Bankers Trust stock through a family trust that he manages.Mr. Wolfensohn counts among his friends such luminaries as Alan Greenspan,Paul Volcker,Vernon Jordan,and Juergen Shrempp;he was knighted by QEII in 1995.

Mr Wolfensohn is,in fact, so well liked as a shareholder at Bankers Trust that they saw fit to give him stock options valued at $22 million.Of course,why not give stock options to a common shareholder(according to SEC filings)who has the foresight to say,in May 1998,to the Russian legislature,"you are not Indonesia,thank God."

Hey MK - I thought you were taking the day off! Just a few hours left to win the gold and I'll make my shameless effort.

Kudos to Mr. Sadus for mentioning the y2k problem and how it might relate to gold. This question has eluded me for the last three years. During my journey I have read everything I could about y2k and the financial market's response. I've spent the last year and a half participating at comp.software.year-2000 trying to glean the true nature of this problem from programmers themselves. I have learned a great deal. If I might I would like to share my observations with this forum and hopefully continue the discussion of y2k and how it might effect gold, but also our lives.

It appears at this time that y2k is much more serious than has been publicly stated by governments and banks. The world is one gigantic system and this system is threatened by 'a thousand cuts'. Individual failures in key systems that support our standard of living are likely to cause a 'complete systemic failure'. It is my view at this point that this cannot be avoided. The worst case would involve basic utility failure, and at this time it is probably a 2-1 bet against success in this industry. Some, but not enough, electric utility providers are attempting remediation and 'isolation' from major power grids. This is the one problem that must be repaired if modern civilization has even a remote chance. At this time with 14 months left it cannot be said that this effort will likely be successful. I believe individuals need to prepare for the oncoming collapse of the financial system with y2k in mind.

As to what I believe one should do, I will give the example of what I have attempted to do the last two years. Take this for whatever you think it's worth. I believe you hope for the best but prepare for the worst. In that vein, I've moved out of a major population center and have socked away the 'necessities of life'. Water, shelter, food, heat, and security may become dear if the problem proceeds as I suspect it will. The old Boy Scout motto, 'be prepared', should be on everyone's radar screen. At this time, I see no other logical conclusion. Call me a doom and gloomer.

As to gold, I would suspect it will serve it's purpose. With the financial situation in the world as dicey as it appears, gold is the obvious play. Put the y2k problem on top of this and it would appear to be a can't miss investment. It should be noted that governments and banks will do their best to hang on to power, but I believe in the end, the source of their power will be lost with their currencies. As their computer systems fail they will be left with nothing but the gold they may have on hand. I seriously question whether complex organizations such as today's governments can survive y2k. A return to local governance and local economies would seem to be on the horizon. At any rate, I suspect things will be quite different for everyone a couple of years from now.

A few months back MK, you asked ANOTHER what he thought about the 'New World Order'. To paraphase, he stated that the more likely outcome was a return to the 'Old World Order'. I agree with this assessment. The time of big government and bad money is drawing to a close. Keep in mind that this transition is likely to be accompanied by a technological collapse. It seems we are destined to live in interesting times.

ET

sadus - thank you for your response (msg 753.) I feel honored that you would take the time to share such knowledge with me. Clarification, please? How was it damaging to the Fed? How did the president have the right to confiscate the citizens' gold? ...........Did you ever get the answer to your question, "If I ever decide to unload my gold, how do I do so without alerting the attention of the government?" Also, do you ever read Dr Ed Yourdon's web site (http://www.yourdon.com/index.htm)? He is a y2k programmer too who has "bugged out" of New York City and has alot to say about the dangers of y2k. I have taken y2k seriously for a long time but am not in a position to leave where I am right now so we're stocking up with water, food, alternate energy and gold and silver. What I have a hard time deciding is whether or not to hold any of this fiat paper money in any form, like gold stocks, US Savings Bonds or cash. Any thoughts on that?

USAGOLD - I want to thank you for your kind words and encouragement (msg 749.). I anxiously wait to hear Another and Friend of Another's thoughts. I have posted once before on this forum because I could not contain myself any longer after reading Another's Thoughts Archives on your site....After living so long in a circle of ostrich-type, heads in the sand friends and family, it was pure joy to discover these two wonderful minds and sensitive hearts, as well as you and the other ones who speak here, who graciously offer their thoughts about freedom in its purest form.........I look forward to time spent thinking with you and others who journey this way too if only for awhile.....
Clarification please, if Russia (for example) goes back to gold then they would not want to sell their gold, yes? They would want their Rubles to represent their gold? So, if Europe and say the United States go back to gold, the supply to the average person would dry up, yes? No Central Bank would want people to have what they have? So, do you think that other than an end of the world senario, we will ever return to using gold and silver at the grocery store and expect change in gold and silver?.......................Have you ever studied the Elliott Wave Theory? There is a web site that applies it to XAU (http://www.mgl.ca/~yauger/index.html#Home) He has a cycle graph that shows the gold index and he writes commentaries. What do you think about the applicability of these waves in determining the direction you see gold heading? The markets in general,dollars, stocks, silver and gold, seem to me to be too easily manipulated by a few to be able to perform "freely," to be themselves in a free marketplace where the cookie crumbles because it was stale and where the strongest survives because its free to be strong.. But still,even with such knowledge, investments have to be placed somewhere.

Anytime mankind interfers with the free nature of their surroundings or with the lives that walk with them in this time, the ebb and flow of the natural rhythms are distorted and they cause imminent danger to themselves. It is a sign of our times.

All - This has been an interesting weekend on this forum. Each thought shared here has been a gift to me. Thank you.

I do believe that if we are to be a free people we must exercise our freedom of speech. We will not be rewarded for cowering before the likes of those you describe. Call me old-fashioned. If you don't speak up, you'll lose all your rights. They are natural rights, not to be at the discretion of today's 'kings'. Keep up the good fight.

ET

I think I am beginning to understand.

This is war.

In this corner: The Goldbugs. In spite of a cowboy-like appearance, they are actually a staid and conservative lot. No messing with the tried and true. Gold Forever!

And In this corner: The Neo-Economists. Keynesian types. Thousand dollar suits. Wire rim glasses. In spite of the conservative appearance, they are actually radicals bent on economic anarchy. They need those glasses to see past the ends of their noses. Further problem: the glasses are rose-colored.
_______________________

I've re-read Aragorn's posts and FOA's posts and Michael- at last! I wondered when you were going to weigh in on this. (And I'm not forgetting you Gandalf!) As I've tried to piece things together, I was struck by the contrast of the two camps. It finally dawned on me why goldbugs are so utterly contemptuous of modern economic theory. (Besides the fact that the modern economists are wrong.) Their BELIEF SYSTEM is being attacked. Goldbugs hold (with good reason) to the precept that GOLD IS MONEY. Period! My question regarding the TRUTH of gold touched a nerve. (Not that I felt attacked or anything guys, but I could see the hairs rising. Also, I hope I didn't come off as being to strident.)

Now Aragorn in his last post to me asked that I consider a world w/o government. Ok, bear in mind that is one of my first considerations. Y2K might not leave us with no government, but it could very well leave us with a lot less than we are used to. Gold is one of the first things I looked at.

Also as I said in an early post: I don't need to be convinced that this 'Paper House" is sagging of it's own weight and is about to collapse. Hard assets for me, please. But despite all this, I can't say that I'm a True Believer in gold. Now don't get me wrong, you can ask Michael, I've purchased a couple of fistfuls of gold recently, I've cast my lot. Still, something doesn't click when it comes to zeal for gold.

Maybe it's because I spend most of my time thinking about the inside of computers (not the gold that's in them) and I don't have a reason to be dogmatic in my view. I can see the natural relationship of gold/value and I expect that relationship to continue. The fact that I cannot wrap my consciousness around the mystery of gold won't keep me from making use of it.

If Y2K is a speed-bump, I can sell my gold and get cash- Great! If Y2K is the black-hole of civilization, then I'll have some things with which to try and rebuild in my corner of the world. If the economy goes otherwise bonkers, I've built a hedge. In any event I have ballast to help keep my ship sailing smoothly.

So, all I'm trying to say gentlemen, is: I understand. Thank you for the education in this matter. I hope I haven't caused you to much pain.

Eating gold, and bothering people.......

-GF

from the web:

EMPHASIS MAY CAUTIOUSLY TURN TO THE SMALL CAPS SOON


NEW YORK (CNNfn) - Small stocks have been the wallflowers of Wall Street
lately, but some analysts think small caps will start luring investors away
from blue chips and technology stocks as early as next week.

"It's like a car shifting gears," said Lou Ehrenkrantz, president of the
brokerage Ehrenkrantz King Nussbaum in New York. "We're looking at a
massive change in the market. Now, as far as my eye can see, you're going
to see small cap stocks as the way to go."

Small caps started showing signs of life amid seven days of positive runs
for the Dow Jones industrial average, a surprise interest-rate cut and the
peak of third-quarter earnings season.

Yet despite the optimism for selected stocks, analysts are cautious about
a broader rally in the days ahead, pointing to nagging concerns about
global economic markets, the hedge fund crisis and the outlook for the
fourth quarter.

Next week?

Peter Canelo, U.S. investment strategist at Morgan Stanley Dean Witter,
said the market's attention will drift away from third-quarter earnings
news next week.
"We've already seen all the big bad numbers," Canelo said.

Investors instead will be looking for possible interest-rate cuts in
November and December. The Fed last week surprised Wall Street by cutting
two key rates a quarter of a percent each.

Meanwhile, a tentative peace agreement between Israel and the Palestinians
will be among the factors that can calm or unnerve investors next week,
Canelo said. Other influences will be Japan's plan to restructure its
flailing banking industry; and progress on an International Monetary Fund
bailout for Brazil.

Conditions in world markets in Russia, Asia and Latin America will also
continue to influence U.S. stocks in the days ahead, analysts said.

What should investors do?

Ehrenkrantz said the future path of small caps seems clear if you look at
their performance this week. While the Dow amassed double-digit losses
Friday, Aware Inc. (AWRE), gained 4-7/16, or 51.82 percent, to close at 13.

Andrew Abrams, chief investment officer of CWH Associates, said that in
spite of the higher risk, the advantage of small caps is investors can
score huge gains if they buy at the start of an upswing.

"When you're right about a small cap stock, you make a tremendous amount
of money," Abrams said.

Not everyone is so optimistic.

Jeffrey Berman, a senior managing director at Gruntal & Co., thinks the
market could "come back to reality," after recent gains. Given the steep
losses in major market indicators this year that wiped out most gains, he
thinks investors should be cautious.

"You'll see the market under enormous pressure," Berman said.

But small caps are trading at such bargain-basement prices that they can't
help but be appealing, Berman said.

"It's ridiculous -- it's like there's a little sign on the door (of small
caps) saying 'Buy me,' " Berman said.

Satya Pradhuman, director of small cap research at Merrill Lynch, pointed
out that the sector is facing a credit squeeze. The situation in hedge
funds has highlighted the issue of higher-risk lending.

"The point is, we're not out of the woods yet," Pradhuman said. A true
small cap rally is 18 to 24 months away, he said.

Pradhuman said investors should look for small caps where strong earnings
are more of a certainty.

and the new week begins. What will it bring to the gold markets. Any guesses?

I bet gold cross over $300.00 this week and stays over.

Anybody else?

There's a tune that has been kicking around in my head for a few days, and now I'm putting it on...uh....ether. If you are a fan of Johnny Cash (or like me, your parents) you'll probably appreciate this. Elsewise, you still could get a smile out of it........

Sung to the tune of "Five feet high and rising."


How high's the spot price mama?
Three-oh-five and risin�
How high's the spot price papa?
She said it's three-oh-five and risin�

The dollar's weak and the yen is strong
The press is makin� like they knew it all along
Greenspan's singin� his same ol� song
Three-oh-five and risin�

How high's the spot price mama?
Three fifteen and risin�
How high's the spot price papa?
She said it's three fifteen and risin�

Well shorts are choking on the contracts they sold
Can't find enough metal to press into the mold
Looks like a good time to buy and hold
Three fifteen and risin�

How high's the spot price mama?
Three fifty and risin�
How high's the spot price papa?
She said it's three fifty and risin�

Now the paper markets are spinning down
In a sea of debt our economy has drowned
Looks like gold's gonna head for higher ground
Three fifty and risin�

How high's the spot price mama?
Three ninety and risin�
How high's the spot price papa?
She said it's three ninety and risin�

Well the London bankers are crawlin� on their knees
The Fed is crankin� up the money machines
Findin� out those dollars _do_ grow on trees
Three ninety and risin�

Three ninety and risin�......



****Feel free to add new verses as the price rises!****

-GF

Bets on gold? I already made my bets. Wait till next month.

-GF

Regarding my earlier post #785, the word " " got lost (after the word "commodity"). That makes the reading a bit wobbly. Here are some further thoughts on that "glacier." Pension funds, automatically, and IRA's etc., voluntarily keep generating money needing a place to park, so long as the "economy" stays in gear. Now, spending stock market profits is, in effect, spending some of the investment money of the guy you sold it to. He doesn't have it any more. It's not "in the Market." What is "in the Market" is what he gets when he sells it. So, in a sense, stock securities are a global currency like dollars, franks, marks and yen, serving as a storage of value which can go up or down for similar reasons. As currencies are traded like commodities, the dumping of a nation's currency can cause a loss of productivity due to less sales (exports). That's sort of the tail wagging the dog, since in a healthy economic environment, the productivity would determine the value of the currency. Likewise, a recession can curtail the momentum of the investment "glacier". Or the collapse of the value of this stock market currency can create the recession.

Any way it goes down, when the mutual fund redemption stampede heads for the Market exits, a lot of what's still got wheels will be parking in Gold.

A New Gold Bull Market Is Beginning Right in the Midst of Global Deflation



Posted on Thursday, October 22, 1998 at 08:55 AM


by Dan Ascani
The Global Market Strategist
A new bull market in gold stocks is very likely beginning. A new bull market in gold itself appears imminent, as would also be the case with the entire precious metals complex if, in fact, this assessment is correct.

There is no need to again reiterate the many technical and fundamental reasons we expect a precious metals and gold stock bull market. However, we can update the situation as follows:

From a technical standpoint, gold has spent the entire year basing after 18 years of bear market. That basing process is thus far successful, with last month's brief break of the January low not significant and not seeing any follow-through selling. If gold moves above the $317 area significantly, we can conclude that, after nine months of testing, the long-term Fibonacci support level of $281 is, within a normal margin for error, marking the end of the bear market. Additionally, we have observed that historically, after a mega bull market in stocks ends and deflation sets in, gold stocks typically begin a long-term secular bull market. The last time this situation occurred was in 1930 when gold shares launched a five-year bull market, the first nearly three years of it against the general downtrend of the plunging bear market in stocks. Gold later bottomed in the midst of the deflationary depression and launched a multi-year bull market of its own.

Although the fast-moving global environment in the late 20th century is much different than that of the 1930s (especially in the fact that the world is no longer on the gold standard as it was in the 1930s), a similar outlook for the metals and gold stocks after years of washout appears in the cards as we have forecast. Although we cannot rule out another round of gold weakness, it is so-far-so-good for gold's prospects for launching a bull market. This will especially be true if, in fact, the newest bull phase in gold shares is for real as we suspect. Its prospects are perhaps enhanced when one considers a statistic released last year by a market research organization: that the entire valuation of all the gold mining companies in the world total less than the valuation the market places on one major blue chip stock, Pfizer. This, anyone would certainly contend, is an extreme in sentiment that can turn long bear markets into bull markets. Gold appears to have completed a Five-Wave Elliott decline into the late August low, completing the minimum requirements for the bear market from an Elliott Wave standpoint. Those familiar with the esoteric details of the Wave Principle would recall that a Five-Wave decline can extend into a larger one, though, and that is the possibility that would take gold to lower levels, likely below $250 toward $225. However, this has not yet occurred, and with the gold stock sector soaring against the bear market downtrend in the general stock market, this possibility does not carry odds above majority, in our opinion.

A significant move above $317 in spot gold is needed to break the market out and confirm a new bull phase. As I have observed, a new bull market in gold could take gold hundreds of dollars higher, depending on many variables. A movement back to the gold standard by some or all countries of the integrated global economy, for example, would lead to a reaccumulation of gold by world central banks after years of dumping gold onto the market.

The XAU Gold/Silver Index is just beginning a bull market, as we have indicated is likely. Fibonacci resistance levels along the way up are 74.00, 89.71, 101.81, 114.89, and 155.77, the latter of which is the 1996 peak. Even if this peak is not exceeded, the gold stock sector, as measured by the XAU Index, is likely to triple before the bull phase is complete. Bull markets of this type typically last years and, as a result, this is a long-term outlook and buy recommendation.

Silver is under completely different fundamentals than gold, but is still scheduled to participate in a multi-year bull market. Additionally, bull market or not in the gold sector, silvers bearish Wave count from the early 1998 peak at $7.50 implies another round of new lows, likely to the $4.15 area, before it is ready to embark in a bull market.

Source: The Global Market Strategist, P.O. Box 5309, Gainesville, GA 30504.

eom

I want to thank all participants for making this a good weekend at the FORUM. Much good information and well- thought out opinion graced these pages. All first time posters should e-mail your choice of book so that we can get it out to you. The winner of the one-tenth ounce gold coin will be announced later today, after we have had time to review the posts. Thanks again, fellow meisters. There were many good first time posts and our posting veterans made things interesting as usual. I hope the participation of ALL grows here so that ALL might preserve and prosper. We can learn from each other. A thousand eyes and ears out there reporting back to this FORUM will not allow much to escape our common attention. Don't you agree?

I do not want to raise any undue alarm, so I must make a brief comment this morning, having read your recent post in which you paraphrased my recommendation to "consider a world without government." I hope that was not perceived as an eventuality from my post on Friday. Asking you to put aside thoughts of Government was simply a tool to help you "see" money through an undistorted lens. As long as mankind can be found in groups of two or more, there will always be government. I apologize if my post lent itself to any misinterpretation(?). Gold continues to be the only thing that is "good as gold."

Now that we can expect Brazil to have a bailout, new rumours out of Venezuela suggest a +/- 40% devaluation soon after their Presidential elections in early December. ...not sure what effect this will have on the rest of the hemesphire, but maybe the rumours are being used to force the international community to offer the same type of deal to Venezuela as it (we) did to Brazil.

Who's next? Argentina? Mexico (again)? How many nations can be bailed out before cash and credit are streched to the max.? To sustain a continuing stream of such bailouts, the credit markets and monetary printing presses will have to keep working overtime leading to the devaluation/demise (via inflation) of all fiat currencies.

Hi Aragorn. No. No misinterpretation, but the concept fit into the point I was trying to make.

What do think of the rest of that post? Am I on the right track with my assesment of Goldbug mentality?

-GF

DOW falls at end of day. Service interrupted on NYSE for one-half hour for technical problems. San Fransico Exchange was interrupted by fire alarm. Gold trades higher at close in NY.

We have just received an excellent, highly recommended article from Andrew Rothovius on the situation in Asia and Russia. He was among the first to understand the full danger of the Asian problem last summer and he now has some interesting comments on the situation as it stands now. You can enter from the Daily Market Report or go to the Home Page.

After mulling this over for a good part of the afternoon, here's what we've decided. There were four notable, quotable posts which will end up in the annals of gold discussion.....A FINAL FOUR which ended up in a tie. I can't say that one is better than the other. So, all four posters will get a one-tenth ounce Austrian Philharmonic on the house:

Sadus #745.....One of the best Y2K posts we've seen

Truthseeker #779....A coin of gold for a heart of gold

Peter Asher # 785....We would like to see that analysis developed and extended, Peter.

Goldfly #797....Could've also been performed by the Beastie Boys, too, GF...

We'll do it again sometime. A good time was had by all. I want to thank everybody for their efforts and to those who finished runner-up (which was everybody else) better luck next time. My best to all....MK

Wow. That's a scary thought. The Beastie Boys covering the Man in Black. No accounting for taste! That what I always say......

Seriously though, thanks for the perquisite. If you liked that, I'll be ready for next time. How about some Nat King Cole? The Beatles? The Partridge Family? Michael! Where you goin'? Hey, wait!!! I got a million of them!....... It's been kind of slow today; how about some 5th Dimension? (Yeah, that was me over on Kitco.)

And I'd also like to thank all the Big People who laid off and made this all possible.......

-GF

TUESDAY OCTOBER 27 1998� From Financial Times London
�Managed Funds �

Soros fund chief to take break amid shake-up
By William Lewis in New York
Nick Roditi, one of the world's leading hedge fund managers, is to step down from George Soros's Quantum group because of ill-health, prompting a restructuring at the $20bn hedge fund group.


Quantum has been hit by the Russian government's default in August and recent currency volatility, including the yen's surge against the dollar, according to market traders.


Mr Roditi's $1.7bn Quota Fund has performed poorly in recent months. It was 32 per cent ahead at the end of June, but has since fallen to be down 13 per cent for the year to date as of October 22.


In a letter to investors, Mr Soros described Mr Roditi's departure as temporary.


"Nick Roditi has had a previous health issue, and he has asked to take a rest as a precaution against any recurrence. We all hope that his absence will be of short duration," Mr Soros wrote.


He said Mr Roditi's temporary absence had prompted Quantum to merge two funds. In addition, Mr Soros is seeking to close the Quantum Emerging Growth Fund, which is down 31 per cent for the year to date and has a net asset value of $1.5bn. Investors in the QEG fund are to be offered cash or a special class of shares in the Quantum Fund, the group's flagship fund.


Mr Roditi is based in London and is reputedly one of the highest earners in the City of London. One US publication reported that he earned �80m ($136m) in 1996.


Since the Quota Fund's inception in January 1992, investors have enjoyed compound annual growth of 48 per cent, meaning that an initial investment of $100,000 would have been worth more than $1.4m on September 30.


Led by Mr Soros, the Quantum group has gained a reputation for consistently achieving a top level of investment performance. However, in recent months this reputation has taken a battering, with some of the group's highest profile funds suffering significant month-on-month losses.


In August, when the Quantum group disclosed its $2bn of Russian losses, the $8.7bn Quantum fund was up 20 per cent on the year to date. However it has also suffered monthly losses. On October 22 it was up 5 per cent for the year to date.


Together with the Quantum Industrial Holdings fund, QEG took the brunt of the losses - amounting to about $2bn - the Quantum group suffered this year from its Russian investments.


QIH is down 19 per cent for the year to date and as part of what Mr Soros calls a "significant corporate restructuring", it is being merged with Quasar International Fund, a $1bn fund currently managed by Mr Roditi.

...overnight trading. That will show as a gap up in NY trading.

You asked if you were on the right track. Well...there are as many facets as shattered glass, different facets holding the strongest appeal for different people. You touched upon but a few. Nor will I attempt it...BOOKS are written on this. To the limited extent we discussed some of these matters I thoroughly enjoyed the exchange. Thanks for your part. My gold awareness and position has developed as I see through the eyes of an engineer. The world abounds with opportunities for the professional art of applying science to the optimum conversion of resources to benefit mankind. If put to the task, an team of engineers could NOT devise an monetary tool or system nearly as perfectly suited for use as is gold. Economists certainly could not do it. Witness their track record. Any viable monetary system MUST use gold as a fundamental element. Any resistance to using gold could be viewed as a product of intellectual stubbornness and arrogance...or else it must be admitted that the device is crafted for the benefit of the few at the expense of the others. You do not use a screwdriver to drive nails when a hammer is at hand. Similarly, why would you build bridges with paper and imagination when there is a world-class engineering alternative? Beginning with honesty, intregrity, and ethics, you arrive at gold. A different conclusion reveals a different beginning...

I beg your indulgence for my previous post.

Tuesday, October 27, 1998

Bullion may return to its glory days

Intrinsic Value the Key: $2,000 (Us) An Ounce Seen as a Feasible Price

By IAN KARLEFF
The Financial Post
�Economic chaos and international conflict are a boon for gold, that refuge of panic money, so it is no wonder the metal and gold stocks have fared miserably in the face of relative stability and a seemingly unstoppable equity bull.
�The recent reversal of markets' upward trend, emerging market currency devaluations and fears of recession managed to lift the Toronto Stock Exchange gold and precious metals subindex 55% in September. But the metal itself has found it difficult to break through a ceiling of $300 an ounce (all figures in US dollars) .
�"Gold mining shares usually move anticipatory to the price of bullion, on upside or downside, suggesting that the steep rise in gold mining shares may well be anticipatory to a rise in the price of gold bullion," says Philip Spicer, president of Central Fund of Canada Inc. and long-time believer in the monetary importance of gold bullion. "It appears there is a tidal change in the price direction of gold bullion."
�Mr. Spicer says the 18-year equity buying mania and simultaneous gold-selling mania are in the midst of reversing as investors re-establish an interest in fundamentals, return to assets that preserve savings and seek investments rather than other people's liabilities (stocks and bonds).
�"As financial assets become jeopardized and financial asset structures falter, historically people look to put hard savings into something with intrinsic value that won't falter," says Mr. Spicer.
�And he says only two such assets exist - gold and fertile land.
�He believes a feasible price for gold is $2,000 an ounce, taking into account the decline in the U.S. currency's purchasing power since the U.S. Federal Reserve board was created in 1914.
�Many analysts question this forecast, but then he was also called a "gold nut" in 1971 (when the U.S. abandoned the gold standard) for saying the metal should rise from $35 an ounce to $200.
�In mid-January 1980, gold hit a record $835 an ounce, in response to high inflation, rising east-west tensions with the Soviet invasion of Afghanistan, and reports of surplus oil revenues among Organization of Petroleum-Exporting Countries members being used to hoard gold.
�Media reports from late 1979 show gold mania had spread to ordinary investors: people were calling in sick for work to line up to buy gold and brokerage houses were extending their hours to take telephone orders. Since then, however, the metal has lost much of its attraction as a safe haven. Deteriorating Asian demand hasn't helped the metal's prospects.
�But Robert van Doorn, gold analyst at Loewen, Ondaatje, McCutcheon Ltd., says the sentiment is changing again. He says forward selling by producers is holding the gold price down, as is a central banker mentality that assets under management should generate returns and gold reserves should therefore be replaced with investments in interest-bearing bonds.
�"Over the past two years, people have forgotten about risk and said, 'No return, so let's forget about [gold]'," says Mr. van Doorn. He views the metal as insurance, which "has been the counter-cyclical asset that comes in handy when things go wrong."
�Other gold analysts, including Douglas Cohen, of Morgan Stanley Dean Witter & Co., are skeptical about a sustained gold recovery, saying the metal should have reacted more strongly to recent upsets in emerging economies and Russia. One of the reasons gold has not regained its lustre is "the fact that there are other alternatives available for those who want insurance ... many types of derivatives now exist and are popular... Now the world's safe haven is U.S. treasuries," says Mr. Cohen.
�However, in the past two months institutions have started to look at gold and gold stocks, says gold analyst Chad Williams at TD Securities Inc. He says this is a reversal from previous months when short sellers capitalized on the threat of central bank selling, borrowing gold in the hope that the value will fall and it can be replaced at a later date for a lower cost.
�"Short seller and central bank influence has been mitigated ... now credit is more difficult to obtain for shorts so it's difficult for shorts to take their big short positions," says Mr. Williams.
�Since 1980, the Bank of Canada is reported to have slashed its gold reserves by more than 85% to 88 tonnes, followed by similar destabilizing sales by Belgium, Australia, Argentina and the recent proposal by Switzerland to sell up to one-third of its reserves, pending a referendum. Long term, Mr. Williams says, gold would continue to be a monetary asset and the price will rise - producers have cut back on exploration and development; the European central bank reserves will have a 15% gold holding; and countries like Russia are talking about creating gold-backed currency rather than printing more money.
�Patricia Mohr, vice-president economics at Bank of Nova Scotia, the world's largest trader of gold through Scotia Mochatta, says gold has found a bottom and will move slightly higher, averaging $325an ounce in 1999 compared with an expected $298 an ounce this year. She says if the US dollar continues to weaken, investors might start to rethink the value of gold despite the lack of inflation.
�"Supply-demand is actually fairly tight and physical demand for gold is good," says Ms. Mohr.

http://www.canoe.ca/MoneyNP/oct27_bullionmay.html

Unomas
�

The November 2 issue of Forbes Magazine includes an interesting column by Steve H. Hanks, professor of Applied Economics at The John Hopkins University.� Professor Hanks discusses the benefits of purchasing TIPS, or Treasury Inflation Protection Securities.� TIPS offer a lower initial yield than regular 30-year Treasury bonds, but include the
advantage of an inflation adjustment which, over the long term, can result in a return surpassing that of the regular bond.� In support of TIPS, Professor Hanks presents a simple explanation of a measure of inflation which I think valuable to reproduce here:�

"...broad money measured by M2 is growing at 7.3% annually, over 2% above [the Feds] upper target of 5%.� Assuming that real growth would average 3% over the next two years (a generous assumption), M2 money growth of 7.3% implies an annual inflation rate of about 4%, a substantial acceleration from the present rate.� And if real growth
should be lower than 3% over the next two years, implied inflation rates would be even higher than 4%."

Other sources I've read indicate M-2 has recently been growing at a rate approaching 10%. Now, either my figures are erroneous, or Mr. Hanks's 7.3% figure is a bit dated, perhaps even an average figure including a time frame beyond the last few quarters.�

Let's play a game.� If M-2 could be said to be expanding at a 9% annualized rate, and real growth comes in at 2%, then, by Hanks measure, inflation should hit about 7%.� Further if one argues we are entering a deflationary economy while the printing presses operate at current levels, might one guess U.S. inflation could reach some rather surprising levels?

I have read (somewhere, don't remember where) that the Fed has been able to get away with printing more money without causing inflation because of the fact that so much of the money is going overseas via the trade imbalance. Of course, if all of those dollars start coming home, it's possible we could have run-a-way inflation at that point.

TR

The US creates dollars for people to swap with foreigners for real stuff...Hense the hugh trade deficit. As long as the dollar has no competition, they'll hold them. This is why the US fears gold and the coming ECU.

The policy of many producers to forward hedge a large fraction of their reserves is a policy that has worked well in the past, but all good stratagies eventually come to an end. What will the mining companies do when forward hedging is no longer profitable (rising market)? What then? Their stock will suffer as the others, with no hedging, reap all the benefits.

ALL: ----------- I have been reading some of the very interesting posts that were presented
these last few days. Tomorrow I hope to also offer some commits and replies. The world
has created a very active period for everyone's consideration! FOA

FOA NOTE: as written below! ------------ "Britain's decision to drop its long-standing
opposition to giving Europe its own defense capability, so that it
could act independently of the United States in dealing with
security issues in its own area, opens up a whole new area for
debate."
------------------------------------------------------
Paris, Tuesday, October 27, 1998
-----------------------------------------------------
EU Leaders Taking The Activist Route At Summit, New Roles for Community -----------------------------------------


By Barry James International Herald Tribune -----------------------------------------------

BRUSSELS - European leaders had no ready answers on
Monday to the question of how they could bring the European
Union closer to its citizens.

That was supposed to have been the theme of a special summit
meeting in Austria over the weekend, but instead the global
economic crisis dominated the discussions.

Nevertheless, from a meeting that had no formal agenda and
promised no decisions, the conclusion emerged that citizens
expect the EU to do more in some fields, such as creating jobs,
but to interfere less in other areas best left to governments.

Thus a proposal from the president of the European Parliament,
Jose Maria Gil-Robles, for a Europe-wide income tax to pay for
EU institutions went nowhere. Mr. Gil-Robles argued that
Europeans would appreciate Europe more if they paid for it
directly instead of indirectly through their governments and if
they realized that the EU costs each citizen less than the price of
a cup of coffee each day.

But the government heads judged that this was precisely the
kind of idea that was most likely to drive citizens away from the
idea of a united Europe.

The summit meeting opened the way, however, toward closer
economic integration and a more active role for the EU in
common political and security problems, areas where the
leaders judged that Europeans were looking for more decisive
action rather than less. They also decided to work more closely
together in tackling organized crime and illegal immigration,
both issues that were judged of major common interest for
citizens in most European states.

The emergence of a social democrat as chancellor in Germany
and a former Communist as prime minister in Italy was
described by most commentators as a turn to the left. But Prime
Minister Jose Maria Aznar of Spain, one of only two
right-of-center leaders in the EU, saw it differently. He said the
conference had shown that the left had moved toward the
center, and that he did not feel in the least isolated.

Europe has until recently been divided between the demand for
strict fiscal austerity to underpin its imminent single currency and
the call by some other countries for a political counterweight to
the new European Central Bank.

The dogmatism appears to be evaporating now that Germany
has a finance minister, Oskar Lafontaine, who seems equally
attuned to the idea of economic government. Antonio Guterres,
the Portuguese prime minister, said Europe now had a "human
climate" that contrasted with "the experiences of the past."

Some analysts said this development was inevitable. Putting
monetary policy in the hands of the central bank and leaving
fiscal policy in the hands of the governments, they said, was
bound to lead to increasing coordination of economic planning
and perhaps eventually of taxation strategies as well. And the
recessionary wave in much of the world meant that all EU
governments were worried more about deflation than inflation,
they added.

But there are likely to be more questions in future about the
extent to which the bank should operate independently of the
economy. Officials pointed out that even an inflation-fighter like
Alan Greenspan, the chairman of the U.S. Federal Reserve,
took market and economic conditions into account when setting
interest rates.

The leaders also have started to give serious thought to the
question of why Europe is such an economic giant and such a
political pygmy. Britain's decision to drop its long-standing
opposition to giving Europe its own defense capability, so that it
could act independently of the United States in dealing with
security issues in its own area, opens up a whole new area for
debate.

While the Austrian summit issued no documents, it illustrated a
change in thinking that may lead to more specific action on
issues such as job creation, joint public works and the
appointment of a head of foreign and security policy when the
leaders next meet, in Vienna in December. Mr. Gil-Robles
philosophically accepted that it might be many years before his
idea saw the light of day.

Paris, Wednesday, October 28, 1998 -------------------------------------
2 Bundesbank Officials Reject Rate-Cut Calls
---------------------------------------------
By John Schmid International Herald Tribune

FRANKFURT - Escalating a feud that some German central
bankers fear could complicate the introduction of the euro, the
Bundesbank on Tuesday fired more salvos against the growing
political pressure for lower interest rates.

Two Bundesbank officials, one from each side of the political
spectrum, rejected calls to lower interest rates as a way to
stimulate economic growth. They added their weight to the
arguments of the Bundesbank vice president, Juergen Stark,
who Monday decried the developing "climate of conflict"
between politicans and the politically autonomous European
Central Bank, fearing it would damage the Jan. 1 introduction of
the common currency.

Significantly, one of the Bundesbank board members who
played down any chance of cheaper credit this year was
Hans-Juergen Koebnick, who is a member of the Social
Democratic Party. The Social Democrats, who took the oath of
office Tuesday to head the new leftist German government, have
led calls for lower rates as a way to tackle Europe's persistently
high unemployment.

From the other side of the political spectrum, another
Bundesbank board member, Franz-Christoph Zeitler, insisted
that Bonn's new leaders were misguided in advocating lower
interest rates as a painless economic remedy.

Political leaders "should not create the illusion of being able to
overcome and push aside structural problems with forced
interest rate cuts," Mr. Zeitler told a bankers' conference in
Munich. "A historically low rate level places on us the
responsibility of keeping our powder dry for any crisis-like
development, which is not foreseeable but at the same time
cannot be ruled out."

But a rate cut in response to political pressure "would be poor
use of our firearms," he added.

The latest calls for expansionary economic policies came over
the weekend at a summit meeting of European Union leaders,
where 11 member of the 15-nation bloc now have left-leaning
leaders.

Mr. Stark said on Monday, "Recent calls to loosen the reins of
monetary policy in order to promote employment are just like the
call for a more expansionary fiscal policy - neither is helpful nor
appropriate."