Read this:

Gold and silver slightly firmer in Europe
LONDON, Dec 1 (Reuters) - Gold firmed during early European trade on Tuesday as the effects of Monday's fund-led sell-off in New York faded, dealers said.

London gold fixed at $293.35 a troy ounce in the morning, down on Monday afternoon's $294.70 but above the late U.S. lows underneath $292.00.

Spot prices held steady through overnight trade in Asia before nudging higher again in Europe.

"We are still tending to be slightly positive on gold," said one London dealer.

"We do not expect large central bank sales next year which should help," she said, adding that the market was focused on Tuesday's European Central Bank meeting in Frankfurt.

Top of the ECB agenda were negotiations on the continent's economic outlook and money supply definitions for the euro.

Of more direct interest to bullion was whether the meeting would decide, and more importantly publish, rules intended to govern the handling of any future reserve gold sales by the eleven national central banks (NCBs) taking part in the euro.

Dutch Central Bank President Arnout Wellink told Reuters last week the ECB had decided to value its gold reserves at market prices, contradicting earlier remarks by ECB President Wim Duisenberg in Brussels that no decision had been taken.

Euro-zone NCBs currently use different methods to value their gold reserves, ranging from market levels to the historical low price used by the Bundesbank.

In industry news, Union Bank of Switzerland (UBS) said earlier on Tuesday it was closing its energy, base metals, and electricity departments and merged precious metals trading with foreign exchange.

"We are going to be exiting the commercial derivatives business," a spokesman told Reuters, adding that this was effective immediately.

"We are going to be strengthening our commitment to the precious metals business by having a deeper cooperation with the forex department," the spokesman said.

Union Bank of Switzerland merged with Swiss Bank Corp earlier this year to form UBS AG.

Spot gold was last at $293.15/$293.55, 45 cents up on its previous New York close.

Silver was also higher at $4.87/$4.89, up two cents on New York, platinum was last $3.00 down at $350.00/$352.00.

Palladium was up $1.00 at $271.00/$276.00.

Anybody else home??

Reminds me of the person who bought the first radio. Need two or more to chat.

...up about $1.00 in last couple of hours.

The markets are reading a deflation scenario connected to the Boeing situation. Some fear the Asian contagion has hit U.S. shores. These sell-offs in platinum (down $5.40) and silver (down 18�) have to do with market participants, primarily hedge funds, betting that the weakness in manufacturing will translate to lower prices in these industrial precious metals. Copper and oil are experiencing the same problems. Whether or not those betting against these commodities are correct remains to be seen. At the moment, it looks premature and an over-reaction. The Boeing situation came out of the clear blue and could be Boeing specific -- in fact we see no reason to read it any other way. Let's see what happens before we start talking recession though we do have to say that the United States has been lucky to escape the Asian contagion thus far and it might be asking too much to think that we won't be affected at some point.

This is the sort of thing we have come to expect. The herd thunders in one direction one day and in another direction the next. The investments markets are awash in money not knowing which way to go from day to day...make that hour to hour...scratch that -- moment to moment. More and more these activities are remindful of the stories we have come to associate with the Nightmare German Inflation. Stocks that go up 10 times in a matter of days. Radical shifts in market sentiment from one day to the next. Fear one day. Euphoria the next. Loathing the day after that. Speculative frenzy every where you turn. One week the pundits and analysts scream inflation. The next week the same pundits and analysts scream deflation. All the while the public is batted back and forth across the net hoping it won't really have to land. We do not live in interesting times; we live in unpredictable times tinged with madness. And I do not consider that statement an exaggeration.

So where is everybody these days? Here we are less than 30 days from what could be an extraordinary year and no one has anything to say? I don't get it. I know the goldmeisters are out there because the phones are ringing away at Centennial and not much has changed in the way of investor activity although we would have to say we have slowed from the September thru mid November gold buying frenzy -- best three months in a decade ( as I reviewed our stats today)

So what's up, fellow meisters? Let's get things up and running here.

I want to thank TYoung for running the oldies but goodies show with the past posts by ANOTHER. I think its a good idea. Let's face it most of ANOTHER's thinking is timeless.
I also want to thank PH in LA, Steve H and all the rest who have made an effort to keep these pages alive and well...Your efforts are greatly appreciated. Please continue. I will keep the light burning no matter what.

To All: I'll answer the obvious question everybody has: I'm sorry but I don't know where FOA and ANOTHER have gone. And, yes, I miss them as much as you do.

On to the business at hand:

Will gold move upon euro introduction? Yes. I think euro introduction will turn out to be the most important monetary event since Nixon devalued the dollar in the early 1970s. We all know what that did to the gold price. And yes. I think it will move the price of gold substantially higher (though I would be surprised if the movement was immediate). Why? Because it will no longer be necessary to defend the dollar, or accede to the dollar, with a viable alternative available to anyone who would want to use it. I think that's why the euro was introduced in the first place. Let me put it this way: If the world financial community and central bankers, particularly of the European variety, were satisfied to live with the dollar, why would they bother introducing a new currency in the first place?........ In the upcoming issue of News & Views (about ready to go to the printer) I liken euro introduction to the Trojan Horse. While our illustrious leaders tell us ad infinitum that somehow the euro is going to be good for us and the dollar, many of us wonder with what understandings these statements are being made. In looking up the passage in The Oddyssey about the wooden horse, I was interested to see that Homer is very specific that the Tojans themselves wheeled the horse within the walls of Troy.

What is the most often mentioned reason for purchasing gold these days:

1. Euro introduction
2. Y2K
3. Stock market over-valuation
4. Economic breakdown (Asia contagion)

Everybody gets to take a crack at the answer, but we need some reasons why as well.

The best answer gets a one-tenth ounce Philharmonic. The contest goes through the Friday midnight.

Here's your chance if you won one of these goodies last time to win another one. If you haven't won one, well....

All first time poster will get a free book...your choice The ABCs of Gold Investing or In the Footsteps of Giants. You must have a decent post up by Friday midnight.

All who have been waiting for me to this again can pull those well-constructed posts out of desktop file, dust it off and get it on here.

I hope you guys don't mind if I spend a couple days here. If you have something to say to ANOTHER or FOA I would like to see that too. FOA said he would be monitoring the FORUM and at some point I think he will go to the archives and have a look. No prize for this though.

OK. Ladies and Gentlemen....START YOUR ENGINES.......

By the way...I got off to a good start...there's only one "d" in Odyssey

I haven't posted much at all lately, and I've felt a bit out of touch, but this sounds like something I can tackle. Personally I think that the strongest reason used for the rise in the price of gold is between the Euro Introduction and Economic breakdown. I think the two are fairly well linked really. The Asian contagion, is setting off a wave of currency troubles and devaluations. It is also setting off a wave of economic troubles due to trade balances and inbalances and commodity pricings. That's a very short summation, and overly brief I know. The US dollar as the last bastion of currency safety doesn't look too stable when you pick apart the economy, the ridiculously overvalued market, and paramount, the over-time rolling of the printing presses (again very brief). So as this happiness is all hitting the fan, along comes the Euro (in like a month!!). Well now what happens. If people flock to the Euro, down goes the dollar, and up goes the price of gold. Definately central banks are going to hold some Euro in reserves. I see selling of American dollars to do so. None of this is going to be smooth. Enter some extra confusion and turmoil....enter gold. Now I know that Another could (and I wish would) go into incredible depth about these balances, he/she is great at it. THere is no way that the Euro introduction will be easy and flawless (humans are involved) and already too many doubt that it'll survive anyways. Also with world trade, certainly with commodities and oil priced in US dollars, there's got to be incredible turbulence with the Euro's introduction, and this will hit the dollar. The dollar has been that last strength for so long now, that I believe to hold value, buy financial insurance, and level off massive fluctuations, that then people will go back to gold. Now maybe these are the arguments that I hear the most, because I tune into them, and maybe they are two entirely separate issues (#s 1 and 4) but that's the way I hear/see it anyways.
Hey it felt great to post again. Thanks USA Gold for asking the right question!!!

I would have to say,the some of the reasons our family is presently buying physical gold,are the least mentioned,here goes; Gradual ownership of physical gold over a long period of time,builds not only the total wealth of you and your family,it creates a higher selfesteem.Just the fact that you and your loved ones are worth a little more after your purchase than before'should justify your purchase.Physical gold ownership is unlike the ownership of any thing else you may own because of the induring qualities of gold.Look at you and your loved ones as a royal family,what better way to achieve Royality status,than the slow and gradual accumulation of GOLD.As a goldbug of 30 years,and a lifetime dreamer I cannot think of a better way to make dreams of gold and riches come true.My advice to all is;keep a low profile for security reasons'stash your hoard in the safest possible place,thumb your nose at the rest of society,and try to be a benevolent ruler of your own domain,or Kingdom whichever term suits you..............beesting

YOu know, I find it really strange that with gold demand up, and China's central Bank stating that it needs to hold more gold in it's reserves, and Poland as well on a gold buying spree, that the POG is still range bound. Granted that until there is an actual shortage of the metal, the price will not move up a lot, but market forces are based upon perception.
I understand that economically the POG rising significantly is the death of the bull, and the US dollar, but how much more manipulation can there be left to come, especially when the Euro comes into play in less than a month and other currencies and countries in serious trouble?

Your statement: "The US dollar as the last bastion of currency safety doesn't look too stable when you pick apart the economy, the ridiculously overvalued market, and paramount, the over-time rolling of the printing presses (again very brief)."

This is the paramount issue of the time. There is not a day goes by that the Fed is not adding reserves to the system. Why is that? My friends think it is because the Fed is printing money to buy up U.S. Treasuries. The money supply skyrockets as a result and this is where all the money is coming from to speculate in the equities markets.

Adrian van Eck, the best of the Fed watchers in my opinion, points out that the St. Louis Fed recently reported that the recent 5% to 7% growth in M2 could auger an inflation rate of 2.5% to 4.5% and that since they are among the most prestigious of monetary analysts that we should take note. But guess what the monetary growth rate is not 5% to 7%.....IT IS 14.5%!!! Says the honorable and prestigious Mr. van Eck: "...Japan is selling significant quantities of American T-bond holdings moving some of the proceeds into Gold, which priced in yen has gone up 25% in Japan since earlier this year...Without short selling as a weapon to counter growing public buying of gold coins, bars and stocks, the Gold bears would not have a chance of preventing Gold from rising naturally to its current intrinsic value, which we estimate to be between $500 and $600 an ounce and rising. We get a kick out of watching the bears squirm and gripe about Gold is now an anachronism...that it is dead and buried...a relic of days long gone. That kind of talk was heard way back in the days of the Roman Emperors...GOLD stayed GOLD and its staying GOLD today. When all the paper money and all the World's central bankers and all the IMF economists have turned to dust, Gold will be shining like the Sun -- giving its holders protection against government sponsored inflation."

So there it is, bmacd. I love the way these old-time gold advocates like Adrian van Eck always capitalize "Gold." The respect of one who has fought many intellectual wars over many years and a man who has my deep respect. Your lion-heart will be vindicated, friend. Thank you for your "Thoughts" to borrow the words of a friend of mine.

No doubt, your friends are dead on right that the Fed is printing like crazy to buy back the flood of US Treasuries coming back into the market. But here's the paradox (keeping in mind that I'm no genius, nor do I have Alan Greenspan's job, but sometimes things seem too obvious not to comment on). So they manage to buy back the debt being sold into the market. In doing so, the world markets are now awash in US dollars. What has really been accomplished? Central banks and investors have been holding US dollars as well as US Treasuries for security. So one has been replaced for another. Seems pretty useless to me, especially when in 29 days and counting there's a new currency (a major currency I might add) to give the oversupplied US dollar some competition. Fill me in- is there a method to this madness? To boot, some central banks will sell US dollars, as well as US Treasuries to buy Euros. I'm not clear on how simply buying time, isn't going to backfire really badly. The last thing I'ld be happy with is hard currency right now.
Hey, I really missed this!!!!

something to be taken very seriously. I too think that we should do the best we can in the business or job we perform and then save the fruits of our labor in a way that cannot be taken from us by government fiat. We should do this for our own benefit and the benefit of our families -- with God's money....as some call it. I have some very good friends and clients who have come to the very same conclusion you have. They own substantial businesses and see gold in a very simple way: As a form of saving money wherein they don't have to worry about how much paper the government is printing. They feel very good about themselves and what they are doing. Gold is simply a form of money, as bmacd has said tonight, and the best form all things considered. Continue with your plan, my philosophical friend. This is not the best of all possible worlds, nor is it the most attuned to the principles that people like you and I live by. Gold, in the end, is the great equalizer no matter what its critics say about it, and the best way to ultimately preserve the benefits of our labors. We may not see those benefits on a day to day basis because of the power of those aligned against it, but ultimately gold will win this war....as Mr. van Eck so aptly pointed out and I passed along in the post to bmacd.

What has been accomplished is inflation -- beyond anything that we already understand. The floodgates are open. What is astonishing is that a man of Greenspan's character and understandings would be a party to it. Few people know that Greenspan started as a gold bug (he used to address our conventions before going over to the Fed). He learned his economics at the knee of Ayn Rand. His deep-seated concern about inflation stems from the fact that his family lost its wealth in the Nightmare German Inflation (at least that's the story I've been told.) The name of the game for many years for the U.S. government and the Federal Reserve has been to buy time. Like the characters in Ayn Rand's novels, Greenspan perhaps sees himself as the heroic figure who with the full impact of his intellect and will stands against the gathering tide. bmacd, I have puzzled about this for many months. I do not know if the U.S. Federal Reserve's position is to fight the euro in behalf of the United States or succumb to it in the full bloom of a new world order. This is the question on the table, and the one for which I greatly anticipate an answer in 1999. Your question and concern is a good (valid) one but at the moment it cannot be answered. This dovetails into the timing question on the future price of gold. If American decides to fight for the dollar, this battle could stretch on. If America is throwing in the towel on the dollar, the market's retribution could be quick and deadly, like it was in the early 1970s when gold rose fivefold in less than 24 months. This is where Another's argument finds application.

As you can see, I have no answers only a framework within which perhaps we can all consider what we are really facing here.

Forum Business:
Thanks MK for tossing a little fuel on the fire here. This forum is unique in that there is already a tradition of extremely well-thought-out posts (from Another and FOA to Aragorn and all the other thinkers who have graced these pages) that are not easy to just toss off. Much thought goes into them and it helps motivate us knowing that someone will read them. It would be interesting to have an idea of traffic on the site even on days when there is little (or no) posting activity. In any case, it is great to see a little life here again on one of the (potentially) most important sites on the web.

Reasons for gold purchase:
As for the questions before us, I like bmacd's point that the Economic Breakdown in Asia is Euro related. This has been discussed by Another and I even recall his (or FOA's) assertion that Asia was smashed by the BIS to forestall a pre-euro rally in gold. Furthermore, inasmuch as the gold and yen carry trades have been encouraged by the BIS (and other European CBs) to provide international liquidity until the Euro becomes reality, the over-valuation (#3) of the stock market is also part of the same big picture. The strength of the dollar shows that international investment funds have flowed into US equities (and bonds) which has added fuel to the US markets. And it has often been pointed out that the introduction of the Euro just at this time was done to take advantage of financial chaos, offering a whole new financial system that it would appear will come complete with new computers, software, etc. However, this theory does seem like a bit of a stretch since the Euro has been in development for decades...more than long enough to have fixed the Y2K computer problems, as should have been done long ago. In any case, it would seem like the Euro WILL get some added impetus from financial choas in the dollar-denominated world, should that actually materialize as predicted (by some). Just the mere perception of this should be a tangible factor.

So, my thinking is that the financial turmoil headed our way is in many ways a combination of all of the reasons set forth. Not very original inasmuch as all this has been discussed at length here with Another and FOA, but that's the way I see it.

News
I was working on a post consisting of a translation of a newspaper story clipped from the Spanish press in October that was lost during a power interuption yesterday. Rather than slog through it all again I will sumerize:

Until now, gold purchases in Spain have been subject to the Value Added Tax (VAT) regardless of whether the purchase was for investment purposes or for industrial usage. The European Commission has now determined that the application of this tax creates inequallities between countries and could serve to encourage or discourage investment in gold from one country to another. Therefore, it has decreed that the VAT tax will no longer be applicable in any of the Euro countries. The effect is expected to stimulate gold purchases in Spain. The question of privacy was also behind the new regulations, since the paperwork involved in administering the tax could be utilized in tracking private gold movements, something that would not be seen as liberalizing the flow of investment in gold.

There was also a story this morning on "All Things Considered" (National Public Radio) about efforts within the European Union to equalize tax laws and eventually criminal laws to further homogenize conditions throughout Europe. The focus of the story was on the reaction to these trends in England, where popular opinion has precluded (for the moment) England's participation in the Euro. Prominent mention was made of the politicians' support for English membership in spite of popular resistence, etc. Mention was also made of a growing awareness that the Euro is expected to bring economic benefits to participating countries, something that English leaders are reluctant to renounce.

Did anyone else hear the story? It would be interesting to hear FOA's take on this one. In any case, an important implication of both items is the progress already being made towards the momumental task of creating a single European currency. Also, how the currency is but another step towards the overall goal of European unification, which will ultimitely even include standardization of the various legal and tax systems from one country to another. The implications of this story just keep getting bigger and bigger. Michael Kosares is right on when he says that the Euro is argueably the biggest story for gold in the whole 20th century (and beyond).

THe New World Order...interesting. This is the only way I can see the Fed letting the dollar go, that is if there really is a NWO and the time is up. Otherwise, does this over printing of the dollar sound defensive at all? Not to mention that over all the US is the biggest debtor nation in the world. That alone, makes me sceptical that the dollar can fight to keep it's supreme strength. This is all so interesting, and so many factors come into play. I am a believer in the NWO, limited as my knowledge may be on it. I do see a huge power shift emerging from these past few years. I always thought I saw the world divided into three main super powers-Europe, North America (led by the US, but I believe it will absorb Canada once it breaks up, and Mexico from need) and Japan (I'm a little unsure of where China fits in, but it's not my plan anyways!). No doubt, the Euro sets this off beautifully. I guess the fly in the ointment above all, is the massive amount of debt for the US, and how the currency representing the debt, (and as you pointed out, the printing of which ignites inflation) stands to hold the US dollar as a bastion of safety. Assuming the Fed decides to fight to hold the dollar's strength, exactly how much manipulation are they capable of when it may no longer be in the best interests of Japan and the new Europe to keep it (the USD) strong. Games don't go on forever when the rule makers change position.

Did that make any sense, or was I really rambling!!! Long day, but thanks all, I had a great time tonight.

USAGold:
In addition to your mention of Alan Greenspan's previous incarnation as a gold bug is the equally little-known fact that he is a full-blown member of the board of directors of the BIS. I have commented on this before, and recall also that Another replied to my comment.

Is this a clue to the direction the Fed plans for defense of the dollar versus the Euro? In many ways, it almost seems like the Fed has aided and abetted in the creation of the Euro. For example, their maintenance of the high interest rates that nourished the yen and gold-carry trades for so many years.

USAGold:
In addition to your mention of Alan Greenspan's previous incarnation as a gold bug is the equally little-known fact that he is a full-blown member of the board of directors of the BIS. I have commented on this before, and recall also that Another replied to my comment.

Is this a clue to the direction the Fed plans for defense of the dollar versus the Euro? In many ways, it almost seems like the Fed has aided and abetted in the creation of the Euro. For example, their maintenance of the high interest rates that nourished the yen and gold-carry trades for so many years.

I want to say how much I appreciate your kind words with respect to me and the FORUM.

As I understand it, Greenspan is not a full fledged voting member of BIS' board, but an observer. Is this right? I think that the Europeans have seen the handwriting on the wall for some time with respect to the dollar's overproduction and are simply taking advantage of a bad situation for the United States to free themselves of long-standing dollar hegemony.

Greenspan's motives are another thing. This massive printing of money that is going on today and distributed worldwide might be the dollar's swan song. Mr. Greenspan should be questioned rigorously about gearing up the printing presses "to save the world." I am sure he understands what this will mean to the American people in the years to come especially when the euro comes on line to make the dollar "honest" so to speak. He surely knows that the United States will be unable to keep the paper dollar game afloat when the world has a better alternative, yet he prints money like there's no tomorrow. This is being done by an individual who should know better ( as alluded to earlier.)

In the past we could export our inflation and keep prices down in the U.S. by keeping the dollars, by one machination or another, overseas. At least as chairman of the Fed he could intellectually justify his actions to some degree by assuring himself that the dollar reserve advantage made inflation possible without damaging the U.S. economy. Soon we will be unable to do that. Then what? Are we to endure hyperinflation in this country in order to save the world?

The great compromise of values engendered by the current Greenspan policy, as we grow to understand it, could mean the final betrayal of the dollar.

More on this in time. The hour is late and this meister has had it for the day.

Thanks to all for coming back to the FORUM tonight. I will try to be here tomorrow, my friends. See you then.

I know we have some Aussie and European posters. Could you throw a log on the fire occassionally while we get some sleep? As you know we have some strong interest here in what is happening in your part of the world and one of the nice things about this venue is that we Americans and Canadians can come back here tomorrow AM and see how you interpret events.

I would like to encourage all to post news events as you find them for all to see. Thanks Good evening.

Great to see the board light up again ! Why buy gold ?
I see the reason in the area of the "Lazy B" and MSFTville as FEAR ! Wow, have things changed in the last few weeks! People are starting to have real thoughts of maybe things are not as good as they were in the middle of the year. AND when the "Lazy B" doubles the 20K + plans for reduction in labor force for the next two years, it has an impact on the rest of the folks in the area. OK, it will not be as bad as the layoffs in the 70's where the last engineer from Boeing was to turn off the lights as he/she left the Seattle area, BUT this is a BIG surprise to the businesses and I am sure that the cash will not be flowing as much as was planned. Companies will be holding on the that dollar a little tighter and delaying decisions until the smoke clears in the Y2K period. Does it not seem that merger is the way that the large companies see to reduce costs and become stronger. Along with laying off the most highly paid employees also. The VIX.X has not shown the increase of FEAR YET, but my crystal ball is getting dark clouds and protends that the ballon equity market is nearing the BURST point. This may be temporarily good for us goldbugs as the POG and mining stocks may have another low point that will allow for buying that yellow stuff that no one wants at prices that will not ever be seen again. I look forward to the start of this adventure, and I believe that it will start TOMORROW ! As the GREAT ONE says: We shall watch together,YES ?
<;-)

When times are stable, go with the flow, play the financial games of the time.When history reaches it's uncertain, chaotic time, buy gold.Many a persons life was saved by the use of gold as a bribe.Don't look on it as a vehicle for instant profit,rather a means of securing what you have, & a
foundation for the future, when the storm passes

Pundits (gold biased ones anyway) saying that gold is strengthening, silver is set to move lower before it is read to move higher. February gold now $294.90.

John Doody's monthly newletter-Gold Stock Analyst-carries VGB as a Tier II gold stock, used to be Hycroft Gold. Many cheap gold and exploration plays in today's market, the task is to pick the wheat from the chaff. I suggest you look at Bill Murphy's www.lemetropolecafe.com for a broad potpouri of economic ideas as well as selected stocks. Another source of ideas is www.bostonmining.com. A little of the real metal that they all look for is a good idea,too. Good luck, Woodsman.

What is the most often mentioned reason for purchasing gold these days:

1. Euro introduction
2. Y2K
3. Stock market over-valuation
4. Economic breakdown (Asia contagion)

Everybody gets to take a crack at the answer, but we need some reasons why as well.

The best answer gets a one-tenth ounce Philharmonic. The contest goes through the Friday midnight.

Here's your chance if you won one of these goodies last time to win another one. If you haven't won one, well....

All first time posters will get a free book...your choice The ABCs of Gold Investing or In the Footsteps of Giants. You must have a decent post up by Friday midnight. Please contact us once you've posted to let us know which book you want. Either e mail us or call Marie at 1-800-869-5115.

All who have been waiting for me to this again can pull those well-constructed posts out of desktop file, dust it off and get it on here.

I'll try to be back here later in the day. If you have something to say to ANOTHER or FOA I would like to see that too. FOA said he would be monitoring the FORUM and at some point I think he will go to the archives and have a look. No prize for this though.

OK. Ladies and Gentlemen....START YOUR ENGINES.......

Last night was a decent start but I know we can do better than this...much better. Everybody wants to read everybody else's posts but I got news for you, if this room is empty nobody wants to post. See what I mean? If you want to read the thoughts of others you have to be willing to post thoughts of your own. Otherwise, this FORUM sits empty, lonely, uninhabited, devoid of thought....a non-functioning entity as we have seen in recent weeks..........Let's keep the light burning!!

I neglected to mention that if you are new to the FORUM and would like to get in on the action, send in your registration and we will get a password to you ASAP.

Following are my thoughts on a probable scenario regarding the year 2000 computer problem and its effects on the U.S. economy and the price of gold.

Many economists are now predicting that the world is entering a deflationary period. This seems accurate today with the across the board drop in commodity prices and fall in commodity indexes such as the CRB. However, I believe that by 13 months from now the U.S. will be experiencing significant stagflaion; rapidly rising prices combined with high unemployment.

This will occur because of problems caused by y2k. For example, if GM can not produce cars, what will be the price of a new car? If oil companies cannot pump oil, shippers cannot transport it, and refiners are unable to refine it, what would be the price of a gallon of gasoline? Demand will drop because people will have les money because of the unemployment, but the supply of goods will significantly be reduced. the net effect will be rising prices combined with high unemployment. This scenario will be played out in most industries, the price of everthing is going to go up, food, clothing, computers, cigarettes, toilet paper, ect. The prices will rise because companies will be unable to produce goods and ship them to stores.

The price of gold will most likely rise significantly. This will proably occur after the bank runs start. If the government restricts the amount of cash and individual can withdrawal from their bank acounts, and if a lot of people are concerned that their money will not be safe in their checking accounts or stock accounts, they will try to purchase goods with checks and credit cards to convert their digital accounts to valuable goods. People will want to buy gold. In fact, by November of 99, we will probably see panic buying of gold. Real estate may also boom during 99. If this scenario unfolds, there will be few sellers of gold, which will further cause its rapid price rise.

Recently the New York Post interviewed a gold options trader who stated that he was not concerned about selling December 99 390 calls because central banks were heavy sellers of 340 and 350 calls. He emplied that the central banks would never let the price of gold hit 350. Probably the managers of Long Term Capital Management had similar thoughts when they decided to leverage their money 100 to 1, thinking that their investments were without risk because the IMF or a central bank would prevent a bad outcome. Do these options traders really believe that the central banks will watch their gold reserves be depleted in order to keep the price of gold from surpassing 350? Once the panic starts, central banks will not be sellers of gold for the same reason that people will want to buy it, in order to preserve wealth.

The real concern I have about gold call options is that if the price of gold does rise significantly, there is a good chance that the sellers of the options will either go bankrupt, or will argue that the price increase was an act of god, or not predictable, and therefore will not honor the contracts.

I have simiar concerns regarding shares in gold mining companies, If the price of gold would rise to $1000 or $2000 an ounce, but gold mining companies have suspended mining operations because of y2k problems, their earnings will drop significantly, the share prices may stil continue to rise, but maybe not. Also stock trading will most likely be significantly disrupted throughout the year 2000.

I believe that the best way to speculate on the y2k issue regarding the price of gold is to hold bullion and take delivery of it. This should provide a good rate of return as the price of gold rises, as well as preserving wealth and providing liquidity.

In the short term cash may increase in value as it will be in limited supply, but as the y2k crisis unfolds, the dollar will drop in value, probably very significantly. The head of the IRS publically stated that the IRS computers are not y2k compliant and they will miss the Januaray 1, 2000 deadline. He made this statement last April. By January 2000, the U.S. government is going to face a major liquidity crisis very similar to what is happening in Russia today. The IRS will be unable to collect taxes. This will occur at a time when the demand for government assistance will be at extremely high levels because of the massive unemployment y2k will produce. The government will be facing huge deficits and will have to produce more dollars to meet its commitments thereby contributing to inflation. Interest rates will be very volatile.

My investment recommendations are to have the bulk on ones investments in gold bullion, plus smaller percentages in gold calls, gold mining shares, and crude oil and gasoline/heating oil calls.

I also believe that the next year will bring radical change to the world. Since events run in cycles, I expect that the current lows in the CRB related commodities presage a rapid increase in their value in the near future. With the quickening trend in governmental moves towards authoritarianism, I can only expect a drop in personal privacy and rights in the coming new millenium. My strong personal feeling is that a modest rural home that is self-sufficient in water, food and "concealment", plus real assets like seed, hand-tools, solar power generating capabilities, etc., and the bulk of remaining assets in gold and silver are perhaps the only safety in a dangerous world. If you are a rich elite like Soros, Rubin, et. al., you need not worry. If you are worker bee, a goyim, a bourgeois entrepreneur, you are on the radar screen and will continue to be squeezed for the profit of the corporate state.
Sadly, (or not) I am resigned to the fact that voting and involvement in the affairs of the public are completely useless. I also have come to believe that paying taxes only furthers the ability of the state to oppress us and waste our stolen resources on unproductive and treasonous ventures. This is not the country that my ancestors fought to free. They would be angry and ashamed to know how we have betrayed their honor and trust. Quite possibly, they would condemn us to the prison we have paid to be constructed around us by our own government. I don't think they would have much sympathy for our vain weaknesses, our desire for 'someone else�(government) to look after our affairs and keep us safe. We have sold ourselves to the lowest bidder and have no recourse. Eschew the system and refuse to participate on pain of death. Where do we go from here?

I have often wondered what Thomas Jefferson and Benjamin Franklin, the founders of the American Philosophical Society, would have said about American society today. Both I am sure would have fought the imposition of a central bank. Jefferson spent a good portion of his life fighting the the first attempts in the early 19th century. Franklin, I am sure, would have a great deal to say about the present speculative frenzy and its moral aspects. Unfortunately, there is not a voice on the political scene today that could carry the shoes of either one of these gentlemen. I got a chuckle over the politicians talking about "profiles in courage" surrounding decisions they would have to make. I am sorry to say that there is not a political figure in Washington today whose name I would put in the same sentence with the words "political courage" -- except maybe Pat Buchanan.

I think you would be hard pressed as it stands to find an individual willing to sell their gold now let alone at in the chaotic times you describe. I also agree with you on the options situation. No way to play this market. Only the physical metal, and perhaps gold stocks, will do the trick -- the physical as ultimate money and the stocks as representations of the source of future money supply. In this way I disagree with ANOTHER (for all you who seriously believe that I am that knowledgeable and perspicacious individual).

DOW and Nasdaq plummet near the close on worries that Brazil might devalue. Financial stocks led the avalanche. If Brazil goes Mexico and Argentina will likely follow. Didn't we just bail out Brazil or did I dream that?............Just what happened to that $41 billion?

"Also hurting the U.S. currency was widespread talk in the markets that the new European Central Bank, which will manage monetary policy for the 11 countries adopting a single currency next year, might sell billions of dollars as it looks to beef up its yen reserves."

Such sleight of hand....with one hand you lower interest rates to support the dollar, while you sell your dollar holdings with the other.

By the way, the dollar is taking a hit in the overnight market.

Perhaps you didn't realize that last night you were foreshadowing today's action:
"Assuming the Fed decides to fight to hold the dollar's strength, exactly how much manipulation are they capable of when it may no longer be in the best interests of Japan and the new Europe to keep it (the USD) strong.

Seems like the European Union was fired a warning shot across the bow today. What do you think?

Good call on the market BURST! today. Why do you not post more? I've always enjoyed your words of wisdom. Since it appears you are from the Seattle area, do you have an inside track on whether or not this is Boeing specific or do you think its part of a larger trend?

I am new to this forum, I read and sometimes post at other forums. I am sorry to say, I did not get to read much of Another's thoughts, nor FOA's either. Perhaps as I check in from day to day, I will get to see them from time to time in the archives.
My readings are bring me to a conclusion which I am not too comfortable with. Being a US resident, my currency is the US dollar. It appears that the US dollar is not going to be carrying as much weight and prestigue (sp) as it has since the end of WWII. First the Euro appears in the financial world in January, and now I read that the pacific rim and eastern countries are going to form their own type of 'IMF' organization with the Yen as the reserve currency. For the last 50+ years, the US $ has been the reserve currency of the world, everyone traded in dollars, wanted to own dollars, bought dollar securities (treasuries), and ran to the dollar when their respective currency de-valued. What will happen when there are other reserve currencies to choose from? Especially those WITHOUT the debt attached to the US dollar. I could go on and on, but I think we all know where this will lead. My unconfortable conclusion is that starting in 1999, and into the next century, those of us who hold dollars will see a devaluing in our currency and a lowering of its stability. For this reason, I believe that ownership of both gold and mining stocks is a wise investment. To the leadership if this forum, this is my entry in the contest mentioned, and thank you for having the forum available to read and learn from, as well as to contribute to. regards, gold2000

Always some expert willing to go out on a limb!


http://www.newsday.com/ap/rnmpfn0e.htm

Silver Prices Predicted to Improve

By NICHOLAS K. GERANIOS Associated Press Writer

SPOKANE, Wash. (AP) -- Silver prices could more than double inthe next year, but gold will likely stay low, financial experts told the Northwest Mining Association convention on Thursday.

Precious metals prices have been hurt by the same economic forces that hammered the Asian and Russian economies, but things are looking up, some experts contend.

"We are at the bottom of a depressing run," said Douglas Silver, an analyst for Balfour Holdings. "Things are changing."

He pointed to the recent merger of Mobil and Exxon, indicatingbusiness confidence, plus low unemployment in the United States, lack of inflation and good retail sales so far for the Christmas season.

Mining companies require large investments, and a strong U.S. will provide money for investors, Silver said.

Silver said the price of silver, which is around $4.60 per ounce, is too low given the worldwide supply and demand. Silver approached $7 an ounce earlier this year.

"It's going to double or triple in the next 24 months," Silver said. That echoed predictions by other analysts.

But gold prices of around $290 per ounce are likely to keep dropping, Silver predicted. Mining companies should resist the urge to increase production, and instead look for new large deposits, he said.

Well, that pretty well sums it up!!

Well, I've had to ponder that one. All I know is that interest rates dropped in Europe (en masse), but hey, wasn;t that about time. Seems like about a month, maybe two ago, that it was announced that the central interest rate for the European union/ was going to be like 3.5-4% (memory fails me at times)?. It was low enough that I remember thinking hmmm Spain's at like 8%, well they'll love this. Mind you Spain I'm not entirely positive maybe isn't in the first round, but still will have to align itself, and the difference was large. So the US dollar shot up. Didn't help the DOW though.
Europe doesn't really hate a strong US dollar, because it makes their exports cheaper, and the oil they buy is cheaper, as long as it trades in US dollars. The US I guess will have to lower rates again. It is in the US interest to lower the dollar, so that they can export, but then commodity prices will rise. Seems to me that the only reason inflation hasn't kicked in, is because commodity prices are so low (if oil were at $20USD I doubt the CPI, or the PPI would be so low). But cheap oil is making a mess of Saudi Arabia, and Mexico.
I haven't answered your quesion Michael, I know, but all these things are going through my brain.
You mentionned Brazil. Actually I don't think they got all the money yet (yet being the key), but even if they did, this bailout was supposed to work (here I must choke) because, there were supposed to be all these great reforms. Well some of the majors, like higher payroll taxes (isn't their civil service huge?!) were voted down. So out go the reforms...oops thanks for the money anyways, but guess the criteria can't be met ( I'm not the biggest fan of bailouts-they only stall the inevitable). Brazil is very productive, but it's currency may be overvalued. Brazil can devalue.
This whole world is a mess. What if Brazil does devalue? It's currency is not pegged to the US dollar. But what about Argentina then-it's currency is.
And back two months to......Russia. That was the catasrophe du jour. Is Russia in any better shape?
The DOW apparently sank today because of Brazil (this is why I ask about Russia).
Again. I know I didn't answer the question, the answer is, I really can't other than to say what I just did.
Own gold

Michael, since you asked yesterday........

If you're really interested in where I've been, for six weeks my wife was in the hospital on bed rest due to pregnancy complications. Watching my other three kids, running to the hospital every day, and trying to get in some work have kept me pretty busy. But last week they delivered my third son, Aaron Francis. My wife and baby came home two days later on Thanksgiving day! A memorable occasion, celebrated with Hungry-Man turkey TV dinners.

Anyway, enough about me�.. (you did ask though!)

Since we have your presence here......

1. I see in the Nov. newsletter that you think the Philharmonikers are the best bullion coin. Why? Sure they're pretty, but what makes them better?

2. Also, can you explain in 50 words or less, what IS gold leasing? How can you lease something that stays in your vault? How does the leasee then sell it? How does it drive down the price of gold? I mean, how can it, if it doesn't truly move to market? The explanations I've seen make sense to the writers, but I don't really get it. Are they actually doing a fractional reserve system on gold? How can this be? Keep it as simple as possible please��

Thanks-GF

"The most likely way for the world to be destroyed, most experts agree, is by accident. That's where we come in; we're computer professionals. We cause accidents."

-Nathaniel Borenstein


Y2K is it friends. If in 13 months a quarter of what could go wrong does, then all the twaddle about Euros and inflation vs. deflation and gold carry and 30:1 ratios will be vapor. We would have a first rate economic and social morass. I won't go into the gory details about embedded chips and power outages and all��. There are plenty of places to get that info and it's all been hashed out ad nauseum.

I will say that whenever I sit and think about what could transpire, I get scared silly. The question is: How deep do you have to go? Holding a store of food in an urban area makes you a target. Having crops and livestock in a rural area eventually makes you a target. (You don't think the city dwellers are just going to sit around in their apartments and starve, do you?) I know I am not prepared to rough it in the wilderness with my wife and four children ages 0 to 7. Bless you folks that have the resources to make the big move- hope it works out for you.

Jinx44, you depress me. But only because I know what you predict could come true. Those screwballs in D.C. are clueless as to what it takes to be a free individual, let alone how to run a government and defend constitutional liberty. I disagree about voting though: Some Politicos are worse than others and we can at least fight a rearguard action to buy time. Is subjection or revolt inevitable? I truly hope not.

So what to do? Trust in God. (I mean it.) Prepare as I'm able. Keep current with my neighbors who know how to shoot straight. (A number of Sheriff's Dept. people on my street.) And pray this all passes like a dream over a long holiday weekend.

GF

A friend of mine who is a coin dealer and a good one told me that there is no "live" silver.

"What is that," I said.

"You know, physical. The hard stuff."

"Yeah, really? Do you mean from your source?" I said.

"No from all my sources."

I said, "Well how long is your wait to get it?"

"I have to order out three or more weeks and plan on that much to sell to my customers too," he said.

Next he showed me his personal "stash" of gold. It was about 200 ounces of gold of various sizes.

"Would you sell that?" I asked.

"The problem as I see it is if gold goes to $3000 I will have people in here by the droves buying this stuff. If I sell this and I can't get anymore then I am screwed," He said.

I thought he was concerned that the supply would dry up and that was why he didn't want to sell his own personal gold. That got me to thinking, as I have known him for a long time, why was he concerned about being left behind? This guy doesn't get on the Internet, but he knew everything I have read recently about all the reasons to buy gold. He told me recently too that programmers were his best gold customers. I believe he thinks gold is going to go to $3000 an ounce and that is his justification in keeping his hoard and the reason to buy gold and silver. He was a dealer during the 79' gold buying and selling spree. He knows how crazy gold and silver can get.

He said, "Silver will probably go up more than gold."

"You mean silver will appreciate in percentage more."

"Yeah that is what I mean."

He took his calculator and tilted it towards himself. He punched in 800 and divided it by 52. He said those were the highs during 79'. He figured that silver could get as close as 16:1 to gold. In other words, he figured if gold hit $3000 and you divided that by 16.1 that you would get $112 per ounce of silver.

I said, "Makes sense."

Night all.

You make me feel like I am home with all the Hobbits !
The reason that I do not post more to the USAGOLD board is simple ! Lurking is far more rewarding. I restudy the teachings of FOA and ANOTHER from the ARCHIVES. I await the "deep" works of Aragorn III, the forty-second Heir of Isildur. I envy the knowledge of the misnamed schollarly one "PhD of Los Angeles". I look forward to words from Goldfly and others and especially the "newbies" that finally speakout with their first post. I can only see so far into the forest of Ents and the crystal ball is very cloudy. The Nazguls are flying ! FEAR is in the hearts of the thinking person, while the "sheeple" are fed the mistruths of the PR machines. Does not everyone believe the mouths of the likes of CNBC and Merrill Lynch ?

The Boeing layoff is only one of many that I have been hearing of in the last few weeks. I do not think that it will be near the last. Yep, the "Lazy B" leaders made a bunch of errors like other corp. leaders. Take the merger of Nations and BA -- BA takes a hit of $1+ Billion on derivs and the top BA man is the "goat" and uses his GOLDEN parachute ($10+ Mil) and retires. I believe that BA has only covered 1/4 of the loss on the books for last quarter. Will layoffs be far away ? Now for the news of the day. My Au supplier has now informed that he is "out" of stock and his regulars will have to await the next shipment in about two weeks. His buds in the biz are in the same boat but the rate of flow has slowed quite a bit. Maybe not everyone is giving one ounce Panda's or Leaves this year, Ay ? It seems as if some of the top MSFT'ers (locally referred to as "Softies") have developed a craving for the yellow stuff. Local news reports indicate that the Boeing folk that get RIF'ed from the "Lazy B" in the near future may get employment at MSFT, but I do not think that the airplane hardware (Rosie the Riviter) type will like the software Softies rate of pay. Look at it this way --- years ago the PNW was a land of timber, fishing and Boeing. Nowdays we have transplanted Si Valley folk assisting the wizkid Gates. But I am very thankful that we do, even tho there are far too many Beamers on the crowded strips of asphalt. Mo later after I see what Aragorn III and the PhD of LA say next.
<;-)

I have a friend (well maybe a few others) who I am 'working' on, in a sense as I think he would make a decent gold bug but he doesn't seem to get it, yet. He is heavily invested in Cisco, and a number of other high tech stocks. Yesterday when the market went down 184 points he said, "This stock only lost a few cents, that stock lost less then a dollar."

I said, "That's nice."

Earlier in the week in response to a pointed email I had sent him stating that gold was getting ready to explode. He said, "They won't let it, the banks. They have plenty of reserves."

I said, "Wrong, the banks have been leasing there reserves for 20 years to hold gold back. They are about done. They have a total of 32,000 tonnes. They have leased 14,000 tonnes of it out. There isn't any physical gold available to pay them back."

He didn't answer me.

I suspect that the most often mentioned reason for purchasing gold these days has to be Y2K. Of the 4 options listed it is the only event being openly discussed. It was only recently that Y2K started getting coverage on the nightly news. The Economic breakdown is covered, but in the same breath the strengh of the American economy is mentioned. The Euro introduction (and its' esoteric undercurrents) is not a concern of the average American. As long as there are greater fools, the stock market is not overvalued.
I have to vote for Y2K as the most often mentioned reason simply because, I believe the American public knows no other reason.
Scott

He didn't say anything more because he wasn't programmed to say more. Had he been programmed to say more... you would have heard it. Please understand, this is not a failure on the part of your friend. This is a failure on the part of Merrill Lynch, Louise Ruykeyser and the mainstream media in general. They need to provide longer answers. Alas, the world is becoming increasingly complex and I blame venue's like this one for these nasty complications -- complications like the growing nucleus well-informed, not-so-easily propagandized citizen/investors, for example.

It's interesting that the four reasons for buying gold have been listed in what I regard as their order of magnitude.

So, starting with the Euro. Much has been said about the potential of this "composite" currency to compete with the dollar. However, what quacks like the mark and the franc, also quacks like the lira and the peso. The Euro is, by packaging the Common Market, a currency equaling the dollar in its scope. But, the strength of the major currencies converting into it could be weakened by the historical vagaries of the other components. Therefore, the fact of UNPREDICTABILITY could actually drive assets INTO the dollar, and this could even be negative for Gold.

Now, onto playing Devil's Advocate on the Y2K aspect. In a scenario of a financial world in total chaos, the problem will be credibility, not value. It may be that if plastic and checks become useless, cash will be king. I would think that handing the Safeway clerk a couple of Philharmonics or a sovereign would be met with a bit of resistence, because in this situation, they would not be recognized as money. My viewpoint of what to do for Y2K would be to convert long-term funds to hard assets until the system is up and running again, but also to prepare for the time of chaos with a suitcase of twenty-dollar bills.

When it comes to the Stock Market, however, the case for being in Gold is more compelling. As I've said in earlier posts, and as has since then been published in the media, the "public" still considers stocks the place to park their money, regardless of the underlying values. The "Tulip Bulb" phenomena is rampant, and the Ponzi scheme-pyramid game mechanics are the driving force. The Market goes up despite the fundamentals because it is seen as continuously giving far greater return than other "investments." These investors do not comprehend that their money has passed into the hands of the former stockholder, and they now have only paper that they hope will be cashed out by someone else at a higher price. This has been the alchemy of turning investors' "savings" into the sellers spending money, fueling the great economic boom. But, when the "savings" don't get created by jobs and profits, who will the investors sell to? Greenspan and Co. have the tiger by the tail and still manage to chuck another rate cut up front for the tiger to munch on. As long as this game can remain in play, the gold holder will see the profits go by, but when the reality hits, the market won't be at the top, and the exits will already be crowded. So building a Gold position now would be the better part of valor.

This brings us to the fourth reason � economic uncertainty. The manipulators can reduce the cost of debt, but not the quantity. Indeed, as interest rates go down, the amount of debt will probably go up. Borrowed capital has been squandered on derivatives, unneeded real estate and other non-wealth-building endeavors. The stock market has channeled the bulk of excess productivity into the reimbursement of existing stock rather than into expanding the capital base. We will have a global market place which will have to compete by lowering prices to sell into a tapped-out economy. If deflation were driven by assets and productivity in a fantasy economy worthy of Thomas More's Utopia, we would all earn more and purchase goods that cost less. However, diminished earnings and profits vis-a-vis an already unserviceable global debt is a recipe for financial disaster. (Can anyone make an analytical case to the contrary?) In view of this, the historical role of Gold is paramount.

As insurance against Reasons #1 and #2, as a strategy for Reason #3, and as an absolute necessity for Reason #4, Gold's role as "safe haven" is ready to play on Broadway.

Copyright Peter Asher, l998

Another well-thought out post, Peter.

You might be interested to know that we could not buy large quantitites of silver Eagles today. There are none available and will not be until February. The U.S. mint is seriously backlogged and there is a shortage of silver blanks. One source quoted 90% silver bags $300 higher today than yesterday. Another source is trying to hold the price but is nearly out of inventory. When their small stock goes (the last we know of), the price could jump dramatically no matter what the silver price does.

The U.S. Mint has said that Dec 9 is the last day they are taking orders on small gold coins -- quarters and tenths. Then we don't know what will happen. The premiums however are likely to go up and the supply of other countries' small gold will come under pressure and could dry up fast as well. One of our chief suppliers says that demand for gold is Y2K related. As for silver, dealers and investors sense the "bathtub is draining" and are loading up.

The premiums on pre-1933 small gold coins continues to rise. These are the items used by investors who want to hedge both economic difficulty and potential confiscation. This has become the primary gold market for many of the top dealers. Can't get Argentinos, German 20 marks, French Angels -- and the premiums have risen substantially over the last few weeks on all these. We have only a handful of Dutch Guilders left. The usually prolific Swiss Helvetia is getting scarce and supply could dry up. Now we can still get British sovereigns, French Roosters (current best buy) and the occassional odd mintage like Belgian 20 francs,etc. but these are hit and miss.

Our chief supplier, who does major business with the European banks, tells us that once the euro is introduced, if the dollar starts sliding, premiums on all these items could go up dramatically as the dollar goes down -- once again no matter what gold does. Supply could tighten even more. He says, "I would hedge my bets and buy at least some portion of my gold nest egg now before January 1, 1999." As most of you already know, $20 gold piece premiums have already gone through the roof. Also, most pre-1933 items come from European hoards. Another concern he had is why would any European take dollars for gold if the dollar goes in the tank. Something worth considering...on a balmy day across the land.

Just found out most of this today and thought it worth a late afternoon post. All of this dovetails nicely with your thinking, Peter. I wish you well, fellow goldmeister, and I wish we could get you to post more often. You are an "asset" to us all.

We made a couple executive decisions here at USAGOLD this afternoon based on the strong response to the big contest:

1. We will extend the deadline to Sunday midnight then announce the winners Monday or Tuesday. Keep in mind you can make more than one entry and to heighten your chances I would suggest either a strong follow up on a previous argument or a try at one of the issues not covered in one of your previous posts....

2. We will be awarding two 1/10th ounce Philharmonics for the two best and two silver Eagles for runner - up entries -- that last despite the burgeoning shortage.

Have fun, meisters. I have some early evening comittments but will be back later at least to read some posts, perhaps even offer something myself.

We know that there are some monster posts waiting for the right moment. Please keep in mind that timing plays no role in how we award prizes. Some who posted early in the contest won last time; some who posted late.

I was first lead to gold by the Y2K situation. Since reading the comments posted here I have expanded by initial interest to include all of the reasons listed in your announcement post.
I think I have learned quite a bit about global economics during the few months. Once I realized that gold, US$, or any exchange substance were only proxies for wealth, the lack of an escalating price of gold in view of the many pressures to drive the price up became evident. During the last 20 years or so the US$ has become the accepted proxy for wealth throughout the globe. Most commodities are measured by it and most nations hold at some of it as a portion of their reserves. It doesn't matter that the US$ has no real backing. It is backed by world confidence in America and its financial system. Gold, being the tradition proxy of wealth, is a threat to the US$. If gold were allowed to increase in value the US$ would be threatened and that cannot be allowed to happen. Thus the value of gold is held down by mechanism I do not fully understand.
I think this system would continue indefinitely unless there were an alternative (possibly the euro) or there were threats to the world confidence in the American financial system (Y2K and global recession). I also sense a global shift back to gold as the traditional proxy for wealth.
These are my thoughts as a novice in this arena. I hope I have learned something these last few months. I welcome comments to help me to continue learning and to correct any misunderstandings I may have. Thank You

Hello everyone...My name is Marie, and I am Mike's assistant here at Centennial. Mike has gone home for the evening. He will be visiting the site over the weekend. I read the Forum daily and find it very interesting. It has been nice to see the participation on this site. Keep up the good work! Good luck to the Winning Post! Have a wonderful weekend.

Most people making the good move to gold these days do so for the wrong reason, but with the right outcome in the end. The only problem in this is chronology.
It is seen that Y2K fears prompts many to seek out gold. This (or any other reason) that brings gold into your home is good, but the element of urgency is absent. While this line of thinking allows a year for acquisition, the watershed event is less than one month distant--the introduction of the euro as a viable world currency.

This euro is not a homogenized manifestation of the mark, franc, or lira of your experience. The euro marks the return of a "gold standard". The quotes are used because this is not the Gold Standard of your father, or of your grandfather. This is YOUR gold standard...a modern treatment for a modern world. History is a wayward teacher, as no two events are alike. There is one lesson, however, that you must not fail to learn. Modern monetary events do not grow from a seed to a mighty oak in the Town Square for all to see. They are instead as lightning in the night. Witness Roosevelt's gold confiscation in 1933, or dollar revaluation 2 years later. Witness Nixon's closure of the "gold window" in 1971. Lightning in the night. While some might stoop about looking for sprouting acorns, I suggest you join me as we watch the storm clouds gather while the sun sets in the west!

Just as "electronically denominated assets" require prudent evaluation and protection against the unknowable impact of Year 2000, likewise, dollar-denominated assets require prudent evaluation and protection in advance of the unknowable Year 1999 return of the euro/"gold standard". It is while crossing such thresholds that gold demonstates its role as money, par excellence. Do not worry that gold does not reveal currency weakness as the threshold draws near--use this to your advantage. Only with hindsight, in the illumination of the lightning flash will the value of gold be seen by one and all.

The reason for gold ownership is a monetary event. This storm will occur in four weeks. The rain and lightning will come from this storm, yet actions of Messrs. Greenspan and Rubin may forestall the thunder. Mark this...the fate of the dollar is nevertheless sealed.

Is the stock-market overvalued? It is in the eye of the beholder...a fair-market re-evaluation takes place every day. Gold is not similarly treated--and to good purpose as you will see. Even the gold held since the high of 1980 will not be scorned as a loser. Gold and the stock market are independent. The fate of one need not imply a given fate to the other. Think of it this way...Many people I talk to refer to the day that "the money comes out of the stock market". I assure you, there IS no money IN the stock market. The stock market exchange is like a screen. Money passes through, but does not linger. A party on one side holds money, while a party on the other side holds company stock. Money passes through in exchange for what is viewed as a fair value of stock. As fewer and fewer shares move in response to the same amount of money, we seem to view this as a strong stock market. Perhaps we view the strongest stock market when all the money moves one stock? At that I see instead a weak money!
Again, this weak money is never "in" the stock market--it only passes through. It is either "in" your hand, or "in" mine, and it stands ready to be exchanged for anything held by a willing seller.

In advance of Y2K, real assets will be favored as superior by many people over assets "in account". Paper money over digital money. Yet, there is only the tiniest fraction of the M2 represented by paper. There is an expectation that the eventual trend to "get real" will result in gold being viewed as a natural choice. The absence of willing sellers will result in a rise in price in a fair market system. If, prior to that, the DOLLAR value is fixed via the "gold standard", there will be no disorderly run-up in gold "price"...Just an opportunity for orderly exchange. To be revealed is the path Messrs. Greenspan and Rubin choose to take; what they prefer to have be perceived as the ultimate cause. The last time I saw Mr. Greenspan, he appeared content and quite calm. Doesn't he nearly always? This has indeed been a long and ultimately satisfying road for a gold bug such as he is.

Whatever your personal justification for obtaining gold might be, use this to your advantage...you do not have a year. Think instead about four weeks. You can already smell the rain.

I welcome your discussion of timing for the release of the POG from the restraints of the moneymangers. I shall heed your warning and lay the yellow coins away as my Xmas present to my future familys. The technical charts that I as a untrained eye attempt to evaluate, also indicate to me that something big is to occur to gold within the next few weeks. This may well start to happen in gold next week. I truly believe that I may never again in my lifetime, see these low prices for gold. Oh, I so wish too that FOA and/or ANOTHER could advise us all, related to the next few weeks. I shall look for the winds of the desert to announce the change in the financial alignments of the "NWO" if that shall be our future. Until then, I wish all the USAGOLD goldbugs and those "newbies" just now catching goldfever, Happy Holidays and I raise my goblet toward all for a rewarding 1999 ! Chok dee Krup !
GW

Believe Logic and Truth

Michael! Thank you for your gracious and validating comments. You sure know how to make a grown man blush.

Just reading your and Aragorn III's posts today is making my head spin. I will try not to ramble.

About the Euro: Michael, you questioned why a European would take dollars for gold if the dollar was going in the tank. Why indeed? We forum folk "believe" that the introduction of the Euro will cause a fall of the dollar. Certain logics predict this. But what is the truth, and furthermore, is that truth to be unfolded or is the script already written. It has been said, in designer circles, that the most powerful man in the world sleeps in a room with floral wallpaper, but they were referring to the President of the United States not of the Federal Reserve!

Possibly not even God knows what the Greenspan Gang is really up to, but if B.G. sat down with all those banks and LTCM, etc., they weren't being speculators!! Now Aragorn III is referring to the Euro as a Gold Standard, but I thought I caught the word "commemorative" in the original announcement. A hundred Euro coin could be five cents of zinc, twenty cents of copper, five dollars of silver, or whatever of gold. (Weren't people turning in pennies for copper in 1979 or so, triggering the zinc alloy of today.) I remember traveling in Italy in 1956 when anything bigger than fifty lira (eight cents American) was paper. You needed a wad of money to go to dinner. However it falls out, the coin would have to have a gold value far enough below its face value to maintain its existence through the highest anticipated (or planned?) price of gold. Otherwise, the old-fashioned meaning "melt down" would come into play. So what would be the point? I think the Euro may be as wild a card as the stock market. "Perceived values" could rule the season, and the trading in the Euro could then create a new set of fundamentals. Whew!

Now onto Y2K again. I read, a few days ago, the comment that everyone who thinks people will take their money out in December will pull theirs out in November. I was going to say that I'd be surprised if there was a dollar left in any bank by Halloween. But Robin (wife, business partner, typist, editor of my posts, and Devil's Advocate of all smug ideas) said "they" can print all the money that is needed for cash in hand. Also, according to Y2K Watch (Weatherman - www.Y2kWatch.com) only 2% of the population will believe and respond to valid warnings of disaster. Maybe this time there will be more, due to the heavy publicity, but the more complacency, the more devastating the event will be. My vision is of a major shutdown of economic function similar to, but greater in magnitude than, a great blizzard or a historic flood, followed by a lot of people dusting off the ability to read, write and count and running around with clipboards, telling others what to cut, fasten, package, and deliver. Simultaneously, every computer programmer in the land would be courted by industry to get things back up to speed.

Going back to the banks. My perception of this mystical world is that the liquid assets of a bank are its deposits and what it borrows from discount windows, minus its outstanding loans. So what happens if everyone on the deposit side of the ledger withdraws? Can the Feds cover it, or do the doors close? If the latter, then things could get real scary.

A related thought, back in the "Old Days", 1961, I believe, a company I knew of had all its account records destroyed in a fire (you know, paper in folders in those sliding drawers). They sent out a letter to all their customers (commercial, these guys were suppliers) pleading for integrity and would they kindly tell what they owned. I think there was about a 10% response and of course they folded.

So what happens if one borrows to the hilt and the system really erases itself, hmmm?

I'll post this now and continue later with the beliefs and logics?? of the Stock Market.

Copyright � 1998 Peter Asher

LINKLEY NOTE: Saw this at another site. Thought there might be some interest here.

By Martin Mann

New York City, New York - The White House is quietly assembling a task force of federal investigators to look
into reports that a back-room syndicate of Wall Street's largest banks and hedge funds has been engaged in vast and risky speculative maneuvers that involved, among other tactics, rigging the market value and global supply of gold.

This vital precious metal has been bought and sold for more than a year in large quantities at unnaturally low and
stagnant price levels in both of the world's principal gold trading centers, London and New York, sources noted.

When Federal Reserve Chairman Alan Greenspan engineered an emergency bailout worth billions last September for a foundering East Coast hedge fund, known as Long Term Capital Management ( LTCM ) , regulators found that this private investment firm had assumed large hidden trading positions in gold.

That was a disturbing discovery, sources say. LTCM was known for wheeling and dealing in the securities and currency markets, but not in commodities.

"They made enormous bets on stocks, bonds and even Asian currencies," says veteran financial analyst Ron Welker. "When they suddenly went bust in late August, they were in danger of defaulting on speculative forward contracts worth a staggering $200 billion. But gold was never supposed to be part of LTCM's portfolio.

"LTCM used gold merely as an instrument to finance its gambles," says Welker. "They found that they could borrow gold in any quantity at dirt-cheap interest rates, often amounting to no more that one and one-half percent. They immediately sold their borrowed bullion, and thus acquired funding on which they paid only minimal interest, far below the prevailing loan rates."

There was a catch, of course. "Gold prices had to be kept stagnant, otherwise LTCM would have incurred a loss, instead of a profit, when its gold-borrowing contracts expired and it had to buy back the bullion it had sold in order to return it to the lenders," Welker explained.

But LTCM was not alone in making mammoth speculative bets in the financial markets, regulators found.

"Wall Street's largest commercial and investment banks are increasingly acting like hedge funds themselves," says Tracy Corrigan, who covers U.S. money markets for The Financial Times, the prestigious business daily based in England.

Behind the scenes were the Rockefeller dynasty's flagship, Chase Manhattan conglomerate, Citigroup, the largest U.S. financial services corporation, and Bankers Trust. They were all found to have turned to the sort of high-risk speculation characteristic of hedge funds.

"They all reported losses running into the billions after LTCM's collapse", says Welker. "Many of these megabanks were apparently also involved in borrowing and manipulating vast amounts of gold to finance their betting streaks."

SPECULATIVE RAIDS?

Was gold used to help fuel the speculative raids that wrecked the economies of half-a-dozen Asian countries last
year? A group of regional leaders, led by Prime Minister Dr. Mahathir Mohamad, Malaysia's long-ruling nationalist strongman, wants to know.

Moreover, as this issue of The Spotlight went to press, it was learned that at the Clinton White House, a recently
formed and mysterious authority known as the President's Working Group on Financial Markets is moving to coordinate its own broad investigation of these speculative excesses that have roiled the worlds financial and commodity markets in recent months.

Exclusive to the Spotlight

I am great impressed with your msg # 1155 and quite frankly can add nothing of substance to something so well done.

The storms clouds do gather...And it does no good to wish for gold when it cannot be had...at any price! Your view of gold, it comes from a hard-won wisdom...I can see. Keep posting, o knowledgeable one, and thank you for taking a seat at this round table of yore. We will fight this battle ahead -- this gathering storm -- as friends and associates.

For quite some time we have alluded to the possibility of a major financial scandal involving gold here at USAGOLD and in NEWS & VIEWS. The signs of manipulation have been around for years and there was a time when we were among a handful of analysts who would even discuss the subject. Now there are a large number of journalists, financial analysts and ordinary people searching for answers. We have waited patiently for the scandal to come to light. Is this it? I think Ron Welker's revelations are at least part of the story. Were the big international banks using LTCM as a cover for their own nefarious activities?

The question remaining is the one that has appeared on these pages often: If LTCM has lost in excess of 400 tons of central bank gold, how are they going to pay it back? I think the Greenspan engineered bailout of LTCM has bought time but not a solution for LTCM. When a country is bailed out, you can at least hope that the nation's population can persuaded to accept austerity measures to pay back the loans. In the case of LTCM how is the bailout going to be repaid? Out of future gambling proceeds? LTCM has no productive future -- no source of profits except through more high risk gambling. This is a very strange situation. It doesn't make sense. Someday that gold will have to be repaid. Where's it going to come from? We would all like to know.

By the way I am having problems with the stories running the internet that the U.S. government is leasing gold. My sources (two different knowledgeable gold advocates) tell me that both leasing and selling gold would take permission from Congress. I have to the leave the door to the possibility of leasing open however since I haven't done the research on it, nor has anybody else I know. Perhaps that would be a good project for some of the more scholarly/research oriented among us. I would suggest starting with those sections of the UCC that followed the confiscation of 1933 and subsequent banking laws then follow the trail from there. I know that Mozel from the Kitco site has registered to post here...perhaps he can help us with this. If so, I invite his post. We would be in gratitude, sir, if you could enlighten us on this important issue. At the moment though I would give gold leasing on the part of the U.S. Treasury only an outside chance of being a reality.

The reference the Martin Mann piece to "this vital precious metal (which) has been and sold for more than a year at unnaturally low and stagnant price levels," caught my eye. We have had both advocates and detractors ask the question why gold has remained stagnant for so long.

Perhaps we are nearing the truth.

First of all, there are two typos in last night's post #1150 . In the paragraph starting "Possibly not even God...", it should read, "the historical meaning OF "melt down". And at the end, in the tale of the destroyed records, it should read, "would they kindly tell what they OWED", not "owned".

I started to write about the stock market, but I can't get my mind off Y2K. I just realized that while "they" can tinker with interest rates and the Euro, kick gold around the block, and manipulate the world's markets, they can't control Y2K. That event is a future unknown and can't even be reliably analyzed. But what's more important IS THE SCENARIO LEADING UP TO IT. The last months of 1999 may be far more significant than January 1st itself.

One advisor is telling people to complete their gold acquisition by the end of March and to start carefully to accumulate banknotes now, lest the government ration cash withdrawals. There is a story out that the FDIC wants to require banks to create profiles of everyone's "normal" deposit and withdrawal activity and to report deviations.

Next year's events will be determined by people's perception of Y2K, or more likely, by what they think all the other people will do about it. It will not be logic, but belief, that will form events. If there are any hidden truths or agendas, they are probably in the area of martial law and standing orders to the National Guard.

So what will it take, beyond the current shortage of precious metal coins, to raise the price of bullion? We don't know if Gold is being held down by behind-the-scenes manipulations of the Central Bank and paper traders or if every rally is being cut short by mining companies rushing to lock in profit guarantees. ( Don't they realize that their forward selling itself keeps the price of their product down?) The disparity between spot Gold and the action of Gold Futures on the one hand vs. the coin shortage on the other becomes more and more mystifying as the gap widens.

Y2K may be the straw that breaks the back of the beast that's been sitting on the price of Gold for the last few years.

So, to mix some historic quotes and metaphors, stay light on your feet, keep your nose to the wind, and be ready to move on a moment's notice. Do NOT wait until you can see the whites of their eyes.

Copyright Peter Asher l998

Your reference to "though gold can be kicked around the block" etc, "but they can't control Y2K." You keep good company. Rush Limbaugh made the same reference on his radio program the other day. I happened to hear it.

Wow! I got myself so worked up on that last post I had to go hang the door on the new bathroom to calm down.

A financially knowledgeable friend said, "If the Market crashes, people will just take their money out and put it in real estate or something." Well, as I pointed out in Friday's and last month's posts, there is no money "in" the market. Six hundred trading days took the Dow from 6000 to 9000. If in sixty days it went back down, then only 10% would "get their money out".
The rest either lost a substantial portion of their investment or are sitting it out, frozen into devalued paper until no one knows when. Quantitatively, if you assume a forty dollar per share average price at a half a billion shares a day, and if you figure that a third of the value was lost on that six hundred days of trading, then four trillion dollars would have passed through the market and gone. There's no telling how much of that money went to goods and services and how much was recycled into other investments. But in either case, the Markets would then be out of favor. And what then? Any new savable income can go to conservative low yield paper or to buy cheap properties or to Gold. The more interest rates are driven down, the more tempting becomes the "no interest" position in Gold. Add to that the desire for a "safe haven" following a monumental market setback, and the demand for gold by the investing public could take off.

Remember these three scenarios in which gold might sell at higher prices (in order of magnitude) 1) your home currency devalues against most others; 2) general demand outstrips supply and then keeps rising, despite the additional supply provided by less profitable mines coming on line. 3) "safe haven" at any price in time of chaos.

Copyright Peter Asher 1998

Just for the record, I didn't hear that program.

I read with "extreme interest" the info on this post. I'm new here and do not have a clear picture of "WHY Gold NOW!" (The four reason listed are great but I get the feeling that a drastic change in the 'World Gold Games' is believed to be, by everyone here, IMMINENT!)

Sooo. . .In the belief's of those here I ask . . .1)WHY gold now? 2)What in about to happen? 3)What form is the best, TODAY?

[I have money in the market that it sounds like I need to move to gold and silver, but with the price fluctuations I've observed over the last year or so, I don't see how the little guy could "make a buck". Silver bags have gone up but how do you make money there after shipping plus other(recounting/inspection) charges?]

Being new, I don't understand all your words and abbreviations, don't use, I call it 'technical talk' for lack of a better name. I appreciate your patience, I'm still learning. Richard, Oregon (P.S. If this message is just too . . dumb, flush it please. I'm just a little guy with a BIG interest.)

It's good to have you here. No need to worry about flushing here. Your questions are appreciated.

I am sure you will get some response from members of this presitigious think tank situated at the outer edge of cyberspace.

If I had money in the market to move into Gold, I would sell out now and find out from Michael what he's got that's closest to bullion value in the quantity you are investing. You mention making money, but right now, I think protecting money is more important. Most likely, you'll do both.

I have been here for about six months and the distillation of what I have garnered from many posters ahead of me can be summed up succinctly; GOLD! the markets are being horribly manipulated by the big boys and gold has been hit very hard. The OPEC nations and Europe are sick of the US$ and the unrestrained printing by the USTreasury. The new Euro has some gold backing it and the ME nations are taking gold in partial payment for oil. When their oil is gone, they only have sand left. If they start to demand gold for oil, they will have an inheritence to give to their posterity. The western nations are afraid that if gold goes up it will expose the rottenness of the entire fiat scheme. The dollar has already fallen in value against most other things-currencies, etc., except gold. This is the true blessing that we few are offered - to buy and hold physical gold with worthless $s/FRNs. Buy gold and hold it. Get cash out of the system for Y2K, get food and defensive 'tools'. Do not tell your friends or neighbors of your plans. When the day comes that people are hungry and scared, you will be hunted by the govt and the neighborhood as a treasonous hoarder. There will be rewards paid to informers who can liberate you from your wealth of food, gold and guns. These situations have happened all over the world in the past, now it is our turn to swing on the gibbot. No one else in the world community will lift a finger to help us. They believe that we have been the global bully and fat boy consumer for so long that it is our turn to feel the pain that we have inflicted on others at our whim. We will be judged with little compassion. Those who cannot or will not see and act on the signs of this coming event will be at the mercy of the people who brought us Waco, Ruby Ridge, Vietnam, FEMA, ATF, IRS, Mt. Weather, HAARP, etc. Two days ago, several green beanies were talking to us about the new joint force of MArine and Army SF units that will be tasked to handle domestic civil insurrection. They are getting ready to go door-to-door. These things are no longer the domain of paranoid fringe types. You can see the hints in major media and USGovt press releases. They are telling us what is coming. Get ready bubba, the next two years will be something to tell the grandkids about.

Sorry, guess that wasn't too succinct. The nurse is here with my medication now.

Test

AEL is having posting problems asked me to put this up for him...............My apologies AEL. I'm turning it over to the tech people.....

This item from the Spotlight was posted recently on Kitco.

Folks, would you believe that the Clinton White House is
looking into this matter of gold market manipulation?!

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

Wall Street's Golden Egg Is Scrambled

Borrowing gold dirt cheap, a leading hedge fund used the gold to
finance its investments. Then the house of cards came tumbling down.

Exclusive to the Spotlight -- By Martin Mann

New York City, New York - The White House is quietly assembling a
task force of federal investigators to look into reports that a
back-room syndicate of Wall Street's largest banks and hedge funds
has been engaged in vast and risky speculative maneuvers that
involved, among other tactics, rigging the market value and global
supply of gold.

This vital precious metal has been bought and sold for more than a
year in large quantities at unnaturally low and stagnant price levels
in both of the world's principal gold trading centers, London and New
York, sources noted.

When Federal Reserve Chairman Alan Greenspan engineered an emergency
bailout worth billions last September for a foundering East Coast
hedge fund, known as Long Term Capital Management ( LTCM ) ,
regulators found that this private investment firm had assumed large
hidden trading positions in gold.

That was a disturbing discovery, sources say. LTCM was known for
wheeling and dealing in the securities and currency markets, but not
in commodities.

"They made enormous bets on stocks, bonds and even Asian currencies,"
says veteran financial analyst Ron Welker. "When they suddenly went
bust in late August, they were in danger of defaulting on speculative
forward contracts worth a staggering $200 billion. But gold was never
supposed to be part of LTCM's portfolio.

"LTCM used gold merely as an instrument to finance its gambles," says
Welker. "They found that they could borrow gold in any quantity at
dirt-cheap interest rates, often amounting to no more that one and
one-half percent. They immediately sold their borrowed bullion, and
thus acquired funding on which they paid only minimal interest, far
below the prevailing loan rates."

There was a catch, of course. "Gold prices had to be kept stagnant,
otherwise LTCM would have incurred a loss, instead of a profit, when
its gold-borrowing contracts expired and it had to buy back the
bullion it had sold in order to return it to the lenders," Welker
explained.

But LTCM was not alone in making mammoth speculative bets in the
financial markets, regulators found.

"Wall Street's largest commercial and investment banks are
increasingly acting like hedge funds themselves," says Tracy
Corrigan, who covers U.S. money markets for The Financial Times, the
prestigious business daily based in England.

Behind the scenes were the Rockefeller dynasty's flagship, Chase
Manhattan conglomerate, Citigroup, the largest U.S. financial
services corporation, and Bankers Trust. They were all found to have
turned to the sort of high-risk speculation characteristic of hedge
funds.

"They all reported losses running into the billions after LTCM's
collapse", says Welker. "Many of these magabanks were apparently also
involved in borrowing and manipulating vast amounts of gold to
finance their betting streaks."

SPECULATIVE RAIDS?

Was gold used to help fuel the speculative raids that wrecked the
economies of half-a-dozen Asian countries last year? A group of
regional leaders, led by Prime Minister Dr. Mahathir Mohamad,
Malaysia's long-ruling nationalist strongman, wants to know.

Moreover, as this issue of The Spotlight went to press, it was
learned that at the Clinton White House, a recently formed and
mysterious authority known as the President's Working Group on
Financial Markets is moving to coordinate its own broad investigation
of these speculative excesses that have roiled the worlds financial
and commodity markets in recent months.

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

PS: Followup post on Kitco, of some interest:

Date: Sat Dec 05 1998 14:15
The Hatt (Watch for gold defaults soon!) ID#294232:
Copyright � 1998 The Hatt/Kitco Inc. All rights reserved
If Clinton and the boys are serious about launching an investigation
and it indeed becomes public I would expect to see major defaults
near term. What a spin Clinton makes himself look like a hero by
uncovering the greatest financial scandal ever. The timing tells me
this is a reactionary move to take the question as to whether the
U.S. government were involved out of the equation. Perhaps Greenspan
and Rubin have alerted Clinton that a bomb is about to go off and
that it will have nasty consequences. This does not come as a
surprise to goldbugs as we have known for a long time that the gold
market has indeed been rigged. Again if this story is true watch for
a sharp rise in lease rates followed by a history making short
squeeze! The game is drawing near an end and the contrarians will be
well rewarded for their refusal to put on rose colored glasses
supplied by the government.

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

PSS: A few of my comments in response to Peter Asher...

Peter Asher: "One advisor is telling people to complete
their gold acquisition by the end of March and to start carefully to
accumulate banknotes now, lest the government ration cash
withdrawals. There is a story out that the FDIC wants to require
banks to create profiles of everyone's "normal" deposit and
withdrawal activity and to report deviations."

Yes. They call it their new "know your customer" program! How's THAT
for a smiley-face euphemism?! Actually, the program is at this moment
a proposal, not a fait accompli. Act now before it becomes the
latter.

Asher again: "I read, a few days ago, the comment that everyone who
thinks people will take their money out in December will pull theirs
out in November ... My perception of this mystical world is that the
liquid assets of a bank are its deposits and what it borrows from
discount windows, minus its outstanding loans. So what happens if
everyone on the deposit side of the ledger withdraws? Can the Feds
cover it, or do the doors close? If the latter, then things could get
real scary."

Yes, real scary. No, the Feds cannot cover it. Bank reserve
requirements and FDIC reserves only amount to a few percent of total
deposits. 5% of depositors demanding their money would bring the
whole system to its knees. See
http://www.y2ksupply.com/bankpetition.htm for details.

The November 10, 1997 issue of The New York Times
(http://www.nytimes.com/library/cyber/week/111097year.html) reported
that 38% of the 1,100 computer industry executives worldwide
interviewed by Gartner Group in September and October of 1997 said
they might withdraw their personal assets from banks and investment
companies just before 2000. I find this statistic, reflecting a
disturbing lack of confidence in the financial infrastructure, rather
shocking, and the more so since so much bad news has been reported
since then (Y2K remediation projects way behind and falling further
behind with each passing month, etc.) Would the figure be 68% now, 12
months later? What will it be in spring of 1999? And what happens
when the general population becomes aware that the computer experts
themselves no longer have confidence in the system?! What happens
when "38% MIGHT" becomes "78% WILL"?!

My advice to everyone is: start getting out of the casino
(paper/electronic) "economy" NOW. Do not wait. Convert "assets"
to real stuff: metals, food, consummables, some cash.

Asher: "The disparity between spot Gold and the action of Gold
Futures on the one hand vs. the coin shortage on the other becomes
more and more mystifying as the gap widens."

Yes, indeed it does. Anyone else care to speculate when the demand
for and pricing of physical might actually impact the spot? Seems
like a bigger disconnect every month now.

Asher: "Y2K may be the straw that breaks the back of the beast that's
been sitting on the price of Gold for the last few years."

It may indeed. In fact it is almost inconcievable that we will get
thru this debacle without loosing the metals from the noose in which
they seem to be held.

For introduction to Y2K, see:


-- Alan

Hi USA Gold. I also missed the Rush Limbaugh radio broadcast. I did however catch the interview with Tim Russert on CNBC a couple of weeks ago, which I enjoyed.
Peter Asher..well put. You're dead on right. Scary, but true. All that is going on in the markets now, and especially with gold is so manipulated. LCTM is a good example. Absolutely, NOTHING came out of that bailout except a time purchase. Inevitably it will fail, I suppose the hope is that the landing will be smoother. Much like Greenspan's interest rate policy over the last few years for a smooth landing. After hearing the employment numbers on Friday, I really shook my head wondering why, he was lowering rates (need I add the items that I purchase that are up in price), then I remebered, oh yes, the LCTM's, etc to buy time and pupmp a little more ressurance into this manipulated party.

Thank you, David Linkley for posting the Spotlight article. This data dovetails with major questions which I and others have about some historical versus orthodox trading fluctuations. The big one was the day after the 540 point drop thirteen months ago. I was online, following the S&P while looking at the monthly graph from 1987 and expecting a similar sell-off which would have taken the Dow another 2000 points lower, to 5000. I figured if things were to turn around, there would be some backing and filling on at least a visible U-turn, but this was the mother of all down spikes. The Market turned around on a one minute chart blip and rocketed up. This was not a free market trading response. There had to be a coordinated or singularly massive Buy decision inserted there.

A lesser event, but more significant to the pondering on "The Forum", was several weeks ago when Spot Gold hit $304. The "Bear Cub" stock market was still threatening to grow up, and even my order taker (the title of "broker" always shows up blank on The Forum), who thought Gold was dead was calling it a power chart. Just after 5:00 AM New York time, the dollar opened up higher against the yen. Gold tanked suddenly and just kept dropping. Total surprise! But not after reading about LTCM's situation and considering the magnitude of their potential to buy and sell.

Will this scandal surface in the mainstream? Maybe not, since, as I pointed out last night, Greenspan, the banks and LCTM were not acting as speculators in that bailout meeting, and therefore how much power do they have to keep a lid on the boiling yellow?

Copyright Peter Asher l998

P.S. In regard to quiet times on the forum, both positive and negative feedback stimulate the weary brain, which then maneuvers pencil on paper thereby creating posts. So R.S.V.P.

Copyright Peter Asher 1998

This is a day and age when conspiracues and secret combinations abound. And men in high places are involved in these things for the same reasons that men have involved themselves in such things through out history, power and greed. Conspiracies and cover-ups with deep government involvement have ran rampant in this Country in recent years, Ruby Ridge, Waco, Oklahoma City, TWA Flight 800 just to name a few. One of the most successful tools of those who lust for wealth and power is a fiat money system. And the most successful fiat money system ever established is clearly our own Federal Reserve. A very good book detailing the history of the Federal Reserve is "The Creature from Jekyll Island" by G. Edward Griffin for any who would like to understand who established our banking system and the conspiracy that took place to make it all happen.

Fiat money systems always eventually fail and ours is about to do the same. I see signs that suggest the powers that be know their fiat money system is about to fail. If Clinton's puppet government is doing an investigation of Gold manipulation, it's only because it was told to do so. As we near the year 2000 we enter the time that the powers that be have patiently waited for and planned for the fulfillment of many events. Their efforts will not succeed in the end but unfortunately many will suffer in the interim.

Typically when fiat money systems fail, people turn to hard assets until the next fiat system is created. If you knew your fiat money system was about to fail the prudent thing to do would be to acquire the hard asset at a low price with inflated fiat money and then allow the hard asset to seek it's true value. Recent events indicate that is about to happen.

American Express puts out a monthly publication called "West Of Wall Street" which covers their view of economic and financial trends. This publication is sent out to many of their 401K plan subscribers. In the November 1998 publication they included the following curious article.

WHAT BACKS THE BUCK?
Many people regard the gold stored at Fort Knox and other sites as a kind of psychic security that backs up the paper dollars we carry in our pockets and purses.

In truth, those gold reserves have nothing to do with the dollar. Since the final tie between the dollar and gold was severed in 1971, not one ounce of gold anywhere in the world stands behind the U.S. dollar. The piles of gold are merely part of the wealth of the American government, as are storehouses filled with soybeans, nickel, and old furniture, but they are not part of the monetary system.

Our dollar is neither a silver dollar nor a gold one. The government will not redeem a dollar bill for anything other than another dollar bill. The dollar is simply fiat currency. Its worth rests on the power of the government and the faith of the people who use it- faith that it will be able to buy something tomorrow, faith that the U.S. government will continue to exist and to accept dollars in payment of taxes and pay them out in expenses, and faith that other people will continue to believe in it. aside from that faith, nothing stands behind the dollar.

Source: The History of Money

I thought it a bit curious that American Express would print the above article in their publication. Maybe we are nearing that time when the powers have agreed to allow citizens to lose confidence in our fiat dollar.

Excellent post. The clip from American Express is very interesting. Since when is American Express, or any large American financial institution for that matter, interested in educating the people about fiat money? This is new to me though I have to say they've done a credible job.

On the potential for a Clinton administration investigation into gold manipulation...If there is one, I don't believe it will be thorough, conclusive or speedy. My first thought when I read the Mann article was that this new investigative team might be another whitewash -- similar to the way the House Judiciary Committee mentioned one day that it would be looking into the Clinton 1996 presidential campaign, as a bone thrown to conservative Republicans, then two days later dropped the issue because there wasn't enough "evidence." Not so much as a whimper came from the Republican right. One wonders why the Republicans are so timid in this respect.

What is interesting about this gold scandal and derivatives investigation -- if it is indeed occuring -- is that the Clintonites sense enough of a groundswell to begin a white-washing operation, or perhaps they believe a crash is imminent and are setting themselves up to pass the blame. (I wouldn't put it past them to be that insidious.)

It would be foolish for us to think that the Clinton administration would do anything to assist gold owners, those preparing for Y2K and the euro, or any other activity not directly associated with advancing the power of the federal government. These are the same people who have told us repeatedly that the euro will be good for us and Y2K is really nothing to worry about.** Their record is all too clear in this respect and those looking into these various scandals shouldn't allow their efforts to be defused by waiting on the findings of the Clinton administration.

** A Survival Expo ( a "ScareFare" as they are called in some circles) in Denver over the weekend is attracting huge attendance and a headline in the Rocky Mountain News today proclaims that Y2k has gone mainstream. "The big bug in the system has soccer moms and computer nerds alike preparing for the worst." There's a picture of a very mainstream looking white-haired grandmotherly type surveying a rack of canned food. The Rocky Mountain News published a list of survival supplies... believe it or not...a very interesting list that I will post if enough people want to see it.

Let us know....POST IT! at the FORUM......

TEST

This is the last day of the posting contest. It goes til midnight tonight. In case you haven't seen the previous announcements, a one tenth ounce Philharmonic will be awarded the two best posts, in our humble opinion, and two silver eagles will be awarded to the runner up posts. You can post more than once.

It's been a hard fought battle so far with several top notch posts. It will be difficult to choose.

The question at hand and to be discussed is:

What is the most often mentioned reason for purchasing gold these days?

1. Euro introduction
2. Y2K
3. Stock market over-valuation
4. Economic breakdown (Asia contagion)

Everybody gets to take a crack at the answer, but we need some reasons why as well.

Those making their first post will be awarded their choice of either THE ABCs of GOLD INVESTING or IN THE FOOTSTEPS of GIANTS. Your choice. Make your post then let us know which one you want by e-mail or by calling Marie Monday 800-869-5115.

May the best posting entity win........Have fun, meisters.

I'll be checking in and out during the day.

I want to thank each of you for your thoughts these last few months. Though I miss reading ANOTHER and FOA's"THOUGHTS!" on the unravelling of current events, we continue on together as a strange but unique community of believers "watching these days together, yes?"

FOA & ANOTHER: If you are listening, your way of speaking through your written words had a profound effect on me even before I was able to break through and grasp the picture you held before my mental eyes warning me of the impending danger ahead.
Your language was "old world" which made these modern world ears perk up and listen because I had been indoctrinated by voices crying out with the preconcieved notion that the "old world, " or Asian cultures, was mysteriously primitive and full of spiritual gurus who should not be trusted.
Ever since I was a child I listened respectfully to my teachers' words and I tried them on but they never fit well. Some of their words felt harsh and scratched against the grain of my life....They were unaccepting of cultures and religions different from "us" and preached exclusivity and superior knowledge of God. This all transferred to everyday life and as I grew into a thinking individual I asked "Why?" And the answer came back, "Because I said so."
Soon it became apparent to me that some of the thoughts behind the wordsof my teachers were only partly true repetitions of previous generations and that I would have to take from them what I deem to be applicable for my life and respectfully leave the rest. Finding my place in this world by experiencing it and deciding the best path to take at each moment along the way was at times very difficult. I think it's called "flying by the seat of one's pants."
It's cold and lonely outside the heat of the crowd and I have come to look for those special moments, as now, when I feel the warmth of friends travelling alongside of me on the same journey through life, who have reached that place in their own time, independently drawing the same conclusions and finding each other by providence rather than by coersion. That's really cool when it happens. I am humbled by the gifts of your THOUGHTS! that you shared here. I am honored to have travelled with you both as well as the others here. You will always be with me in my thoughts but hopefully we will travel together again soon, yes?

USAGOLD & All: The silence that prevailed over this forum after FOA signed off for ANOTHER and himself was poignant. It was as if a death had occurred. I know I grieve the loss of their thoughts. Only a few "voices in the wilderness" were heard for a few days. We should not be concerned with these silences. It is healthy to gather one's thoughts and be able to "rest" with each other to comtemplate as events unfold. It's obvious that we each were still "present" if only to lurk. The glue that holds us together as a "community" does not hinge only on sharing our thoughts with each other but allowing the silence when necessary and trusting that we will each speak when we are led to do so. I do appreciate SteveH's lonely posts on the gold price though. It was reassuring that we might hold together even though ANOTHER & FOA are gone for awhile. It speaks of us as a community. We are strong disciples of this mysterious all-knowing, all-powerful intelligence present in all of us no matter who we are or where we live. This intelligence, this spirit if you will, manifests itself continually in the adding, subtracting, multiplying and dividing ofour thoughts as one body, believing in and speaking our thoughts about our personal freedoms.

So, I wonder what to do with all this knowledge. There is a myrid of influences these days and Michael has so aptly summed them up with his four reasons for buying gold.

A wise father once answered his child's innocent question, "Why, Daddy?"with "Why not?" and became a well of the knowledge of freedom for his children to drink from all the days of their lives.

"Why not?" It's a great question and answer.

For whatever reason one buys and holds gold, consider what one does about surviving the days ahead?

Why not run for the hills?
Just look at Waco for example. Strange behavior attracts attention.
Why not stay here? History bears out that those who prepare are likely targets for others' greed and power. What good is a storehouse of wealth if it doesn't protect you?
Why not do nothing? Always anoption.

What do people do to protect their stash of food, gold and health if their monetary system collapses?

As ANOTHER might say, together we will watch and question and think on these things in the days to come, yes? Thank you. YB.

Michael,
Saw your post just after I wrote these. Scary fare! I love it. Our writings this weekend seem to be converging on a common track. We're all writing and thinking similar things at the same moment.

Does it seem that coincidentally with the Forum Contest/Seminar that a lot of anticipated events are suddenly about to unfold? Lots of talk around the land of Y2K, bank runs, gold manipulations, economies faltering on paper money and irrational stock evaluations.

This mornings post from JA focuses on the real issue regarding gold. Whatever the most pertinent reason for accumulating gold the basic is storage of value. For years I have tried out different one-liners to define money, and the one I like best is, "Money is a form of bookkeeping."

Imagine the early times, when barter was first recognized as not being liquid enough, and also men began to perform services for one another. Keeping records of goods and services on papyrus was only as good as the "paper it was written on." The ability to read and the willingness of others to believe it. Men turned to hard assets to have a way to store the value of their trade and labor.

The earliest money was pieces of iron that looked like molten drippings had been cooled into beads and strips. Once the concept got going, gold was the money of choice, because it did not rust or corrode and had the highest ratio of value to weight.

While on one hand it was being bartered for goods and services, on the other hand it was functioning as a form of indestructible, transportable bookkeeping.

As the ability to maintain data on paper became workable, paper became more dependable. The earliest paper money was receipts for gold and silver which more or less functioned as a medium of exchange from the time of the first Rothchilds until we went off the Gold Standard. Now, as we say, it's fiat money, blips on a screen, and so forth. But it's still bookkeeping.

This is not a problem in the short-term.

At one time and place we had a crew of younger carpenters whom we paid on Monday morning after figuring up the pay cards over the weekend. They protested this, saying they wanted to get paid Friday night because that's when they went out to get the groceries and then had something left over for the weekend. After putting a little in the bank to write the rent and utility checks, it was gone. They didn't have a problem with fiat money.

Now the other end of the spectrum is the situation described by ANOTHER-- the need to record and preserve value for generations. Unique to the planet, his people's assets are only oil. They have no farmland or forests for long-term estate building and storage of value. What else is there but gold?

Which brings us to the great in-between, all those who have something left at the end of the week and want to hold onto it. Fiat money works because it's keeping the books, but only if the value of one's unspent credit doesn't change. And so we arrive at THE PROBLEM. If you came from another world you would think that our global system of exchange was created by lunatics. People's entitlement to goods and services are recorded in various forms of "money." They then put in great time and effort competing with others to increase its value. They let others use their unspent credit in return for more, and large numbers of individuals make a living by administrating this chaos.

Most significantly, bookkeeping is no longer only a record of endeavor and delivery. Credits are created by banks for things not yet produced.

The sum of all this is � unknown. There is no quantitative knowledge or control of the global economy.

Now, even gold has been manipulated as a storage of value, and that is the conundrum that I think we on the Forum have been wrestling with. We know it's the most valid and desirable safe haven, but in the last few years it has deviated from that function more than at any other time in history. Therefore the people who have value to protect will require a greater level of necessity before they will transfer that value to gold, which is, while not as stable as in other times, still the last refuge from the storm.

As to the four reasons to buy gold now, after reading all the posts of data and opinions of the last three days, and after the evolution of my own thoughts while writing mine, I would say that the most compelling reason for the immediate purchase of gold would be the gathering storm around the unknowns of Y2K.

You have a heart of gold. I too miss FOA and Another. Let me say this: I think both enjoy this FORUM as much as we do. I also think that (for whatever reason) both have strong reasons for participating in the on-going discussion on gold. Whenever whatever it was that pulled FOA away clears itself, I think we will hear from them. Until then there is no doubt that we -- including our absent friends -- watch this new gold market together, yes?

Hi Michael. 'Been catching up on the last posts since last night. I really hate to be such a cynic, but the paragraph where you stated that the Clinton administration may feel like a crash is imminent and is looking to pass the blame (re the recent decision to look into the manipulation of the gold price) I think really said it like it is. I read that post last night and called my Dad just howling with laughter (Martin Mann's article). It's either what you've said, or that they can no longer hide the manipulation or even manipulate it at all (Euro launch is 25 days away, and as we've all stated in various ways and for various reasons, there should be a huge effect on the gold price and the USD). This sudden horrid realization, is just a cover up so that they can later say, oh gee, you know we started to worry that maybe there was some manipulation, when more facts became clear about LCTM and others' huge hedge positions and short positions with respect to gold. Pretty sad, when that's what we think of our governments, but it's valid.

I totally agree with you, I miss FOA, and Another as much as everyone here. Not to get too sentimental, but I'm so thrilled that this dicussion group sprang back to life. While I wasn't posting at all for a month or so, I was reading archives, so keeping up, and I was pretty disheartened when it slowed down to almost nothing. This is a great discussion forum. I may say a lot of things that are not too meaningful at times, but I never feel totally stupid, or intimidated (although at times I know I'm out of my league). Michael has done a great job of keeping this together and maybe there was a small lonely period, but thankfully it's come back. This forum is far too insightful informative and friendly, to fall away.

1. We are near the end of 50-60 year debt cycle. History tells us that the end of these cycles is usually nasty even when on the Gold standard. Now that we are on the fiat money standard, thing should be much worse. Fiat money has within it the seeds of its own destruction. Fiat money creates prosperity, inflation and the expectation of further inflation. This last expectation encourages businessmen to keep borrowing money to over-produce the overpriced products that the world seems to demand. This causes excess capacity in many industries which results in the deflationary prices that we are currently experiencing. Governments can save a country or 2 or a few industries, but they can't stop the deflation. The backing for most loans is the products that are sold. As this collateral goes down in value, the loans go into default and this process snowballs. The average businessman realizes that prices are going to keep going down so he refuses to borrow any more. Historically, in times of crisis, people try to protect their wealth by buying Gold.
If you want to see how God tried to deal with this deflation problem, read Leviticus, Chapter 25.

2. It is a coincidence that we are approaching a potential civilization destroying Y2K problem. Just read the papers and listen to the news and you will find out all about it. Starting this spring or summer (or maybe even earlier) individuals will begin protecting themselves by taking some cash out of their bank, buying some Gold coins or bullion, buying a few cases of canned tuna and buying a gun. The banking system doesn't have enough cash and the government won't be able to print it fast enough. They won't be able to mint the Gold coins fast enough either. Businesses will protect themselves by trying to fix their computers and accumulating as much inventory as they can in case there are disruptions in transportation or production after January 1. This will result in a tremendous increase in the demand for loans and therefore higher interest rates and a spike in the prices of most commodities.

3. It is also a coincidence that Europe decided to start the Euro on January 1, 1999. In order to help insure the Euro's success, their central banks decided to take the price of Gold down in 1997 in order to rally it in 1999. The bear arguments in 1997 were contrived but very effective because they were accompanied by orders to sell 10,000 futures contracts at the market. Next year's bull arguments will probably also be contrived, but let's hope they are effective! Once the bull market starts, reasons 1 and 2 will keep the market going at least until December 31, 1999. After that, it could be every man for himself.

I just now read a Sunday feature on the Euro. The one item that jumped out was the claim that corporations will incur far greater expense converting their systems to use it than they are spending on Y2K. But also, many companies are putting off coming up to speed on the currency because they are immersed in Y2K preparations.

It seems that "electronic transactions" must be denominated in Euros only after 2002.

I'm just wondering if my theoretical argument on Friday, that the initial uncertainty might in fact cause the dollar to go up, is what's mysteriously holding Gold down. This is a question, not an assertion.

I think that there will no doubt be plenty of initial uncertainty about the Euro. I, myself, can't believe that it'll go through nice and smoothly at all (ultiamtely if at all). However, the European community has made this decision, and at this point, are determined that it will work. Japan will hold Euros, China has also stated that they will hold Euros as well (to name two). China has also stated openly that US dollars and or US Treasuries will be sold in exchange. Assuming that most central banks will be holding Euros as well as US assets, then it seems likely that there may actually be more US paper put back into the system initially. Supposing, the Euro was really shaky and looked iffy. Personally, I'ld rather hold Swiss francs or German Deutsche Marks then instead of the Euro. I see the Swiss Franc being very strong over the next while for this fact alone. Maybe, just maybe, then another scenario will take place, where in people totally lose faith in any paper currencies. Now that leaves only gold. I still maintain that how can the bastion of safety and stability be virtually bankrupt, as is the US dollar?

There is a possibility that it will take awhile before the full impact of the euro is felt. There is much uncertainty about this new currency on both sides of the Atlantic, and I do not expect January 1, 1999 to be like a light going on in the currency markets. However, when the realization hits that the euro will comprise a significant share of the world's reserves at the cost of the dollar, it will be as Aragorn III says like "Lightning in the Night." This last lowering of interest rates by the Europeans was meant to help the yen...not the dollar, just as the lowering of U.S. rates was to help the yen. This is all meant to deal with the Asian contagion which is still very much a reality. The reality however that disturbs me the most in all this interest rate maneuvering is that for the first time in my many years following the money game, a U.S. chairman of the Fed has moved not to deal with the U.S. economic situation by printing money but the world economic situation by printing money. To my knowledge this is unprecedented. The net result is a skyrocketing money supply that has all the old time market watchers blowing a gasket. It is this money printing -- coupled with euro introduction -- that is so dangerous for the dollar as I mentioned a few days ago. Anything can happen...Personally I think next week and the following will be critical for the dollar. Now with all the moves made that are going to be made going into the end of the year, the dollar to me looks incredibly vulnerable. We will see how this all plays out, but this is not a time to kick back and get ready for the holidays. Anything can happen.....Keep your ear to the rail. If things remain placid going into year end, 1999 might start slow. If they don't, duck.....there's a train coming through the tunnel-- freight train euro...

A very important first post...I hope we will hear much more from you in the future. Cycle theory is something that hasn't been developed so far at this site. You have an open field in front of you........

Just out of curiosity...What is the Leviticus reference to which you refer?

TOKYO, Dec 7 (Reuters) - U.S. Treasury Secretary Robert Rubin recently told President Bill Clinton that he wanted to resign shortly after the Christmas holiday, a Japanese newspaper reported on Monday.

Quoting unnamed U.S. government sources, the Sankei Shimbun reported out Washington that Rubin had sounded out Clinton about resigning his post, but that Clinton had asked him to stay.

Clinton conveyed his "strong desire" to Rubin that he stay in the post at least until a replacement was found, the sources were quoted as telling Sankei.

Linkley Note: Merry Christmas, Mr. President.

Whaaaaaaaaaaat? Any news on Greenspan?

When the insiders start to bail out, you can bet it's coming. This should give everyone here the reinforcement to buy physical now. Rubin must see the event horizon shortening and fears for his reputation. Maybe the "USG investigation into gold fixing" has something to do with it too. I must say, I'm excited! Bring it on.

Leviticus is the 3rd book of the bible.

Wow!!! Unreal...cool! This probably isn't just a bizarre time coincidence at all. The party is almost over. Michael, you mentionned the Fed's policy on money printing now being so scary, it's so true. It's certainly not in the US interest to print it, it ultimately spells disaster. I do believe that there were rumors of Rubin resigning about six months back, but nothing came of it. A couple of weeks ago, after the last interest rate cut, there were talks of Greenspan resigning, to avoid taking the blame for the ultimate disaster. If this all plays out the way we all think it will, even I will be shaking my head in the end. What seemed so obvious for so long, still was denied, and manipulated. Gold seems poised to play a huge role into the next century. Go gold.

I just read our Sunday paper article on the Euro (creating Euroland) and how it will effect pacific NW businesses. Mostly an uneventful piece but one thing jumped at me when I read it because of a similar post here regarding US banks tracking deposits/withdrawls of customers.

The following is by John McAdam president and CEO of Sequent Computer: "Companies out there are going to be buying new software systems and often hardware, too, McAdam said. Banks, for example, have used the euro as a catalyst to install systems that track spending habits and credit-card usage of individual customers across Europe".

You didn't think big brother was only in America did you!!

When I was posting the other night and going on about the massive amounts of money being printed by the USG, I completely neglected to mention yet another disaster in all of this. The massive trade imbalance that the US has with Japan and China. What are those numbers going to look like when the USD dives south. I suppose this is part of answer 4 (I think it's 4) re economic uncertainty, but I think that this is a real cause for concern as well. Huge amounts of money pouring into the markets, huge trade deficits, lower rates, decreasing unemployment (ie a tight labor market), and a new currency that will cause revaluations of world trade. Yikes!

Rubin has been trying to escape the Clinton administration for quite some time, as bmacd points out. The question is "Why now?" The timing strikes me as odd. A week before euro introduction?

The last time he tried to get out, the Asian crisis popped up and he was stuck. Maybe he figures he'll make another attempt now while things are relatively quiet? This could be Rubin's last chance until 2000. Obviously Clinton's not going for it.

I don't think that Larry Summers will be the replacement. He's already playing tag with the Peter Principle and he'll board the express back to New York with his old boss and partner. Clinton knows it. I wonder where they'll turn.

The markets see the Greenspan-Rubin team as the glue that held the bull market together. Now what?

Also interesting that this would come the day before the House Judiciary Committee makes its recommendation. There isn't something going on there that we missed is there?

The markets could read this as a full retreat in the face of everything that's goin on, i.e. the four points of discussion before this FORUM, and react next week -- assuming of course that the rumors turn out to be the reality.

Interesting development as we approach the midnight hour.

Hi all. I've enjoyed all the posts this weekend. After seeing the Broncos defeat the Chiefs (again), I was so disappointed I was going to go straight to bed , but I've thought about the reasons people are buying gold and I wanted to respond. Maybe next year for the Chiefs.

It seems to me that the reason people are stocking up is uncertainty. What we've always regarded as 'normal' now seems abnormal. The Euro, y2k, stocks, the economy are all reasons that have created this uncertainty. But overall, I believe people are detecting the end of an era; the era of unsound money. It is at the root of everything we see around us. The euro would not be created if the dollar were sound. Y2k has bought out in the open the faults of not considering the long term picture. If money were sound, such judgments would be thought out much more thoroughly, not wanting to risk capital on short term 'investments'. Stocks would never have reached these levels. The economy would be based on producing real things.

It is the perception of some kind of change in 'money' that is driving this movement. I believe many people know that the end is near but can't put their finger on it. But this is where uncertainty will drive markets. If we knew the outcome of the Euro introduction and y2k, we would certainly be looking at things differently. If we knew the outcome of the spreading deflation ..., the equities bubble ...

Many events of worldwide importance are coming to a head. The uncertainty of the outcome is what is driving the demand for hard assets.

History shows us the best money is made when things are changing rapidly. It looks to me that things are about to change rapidly and with a magnitude very far removed from most people's experience. This is a once in a lifetime opportunity. My goal is to make the best of it.

ET

I forgot to give my two cent on the Forum's question. The most mentioned reason for purchasing gold these days is . . Y2K, I believe. The Euro introduction hasn't gotten the press that Y2K has, it's (Euro intro) just starting as we draw near to 01/01/99 and most people will find it hard to relate to until it stares them in the face, note many Sunday paper articles today. We've heard market over-valuation for awhile, but activity remains high, (I think they believe it (a crash) can't happen here!). The Asia business breakdown has been about for well over a year and consumers are REALLY feeling and liking the "positive" effects now, lower electronics prices. They feel it in their purses and billfolds and that's not scarey or a reason to invest in gold. I just wonder what Michael is REALLY hearing. I guess we'll all know soon.

Hi all. It is a shame to see Mr. Rubin bailing out of the picture. It pretty much demonsrates the problems the world is experiencing. We've bought this bill of goods and now it looks like those that have sold it are leaving town on the first train. I don't know what happened to statesmanship in government or honesty in banking, but it appears they are long gone. I think we are to blame for the circumstances in which we find ourselves. We'll have no better 'leaders' than we demand. We'll have no better 'currency' than we demand. I say we vote with our cash.

ET

6pm MT. As this contest comes to a close, one last thought for a little comic relief. Maybe the moment of true belief about Y2K will come when the newspaper real estate pages add a category called "bolt holes."

Thank you, Michael, for kick-starting this thought provoking round of exchange.

Thank you, AEL and bmacd who posted replies, and for the agreement and confirmation of ideas. Thanks to Michael, JA and David Linkley for the stimulation to continue writing. And thanks to Aragorn III for giving me at least one issue to argue about (the Euro).

But more than thanks to Yellow Bird. Your post was a beautiful piece of writing. Robin (a Y2K true believer) usually skims the postings I point out to her, just for the nuts and bolts. On yours, however, she was transfixed. And we both immensely enjoyed it.

See you all later.

You got to love this one:









View items related to this story

THE CASE FOR DOW 10,000
Behind the market's rise is a still-healthy economy
Have investors gone mad? Is there anything to justify a 1700-point rise in the Dow Jones industrial average in just seven weeks? Has the economy improved that dramatically? No, it hasn't.

The real story is that, all along, the economy was a lot stronger than the pundits were telling investors. Reports of the collapse of corporate profits were greatly exaggerated. Asia and Latin America did not quite melt down. Add in a dramatIc series of interest-rate cuts--in the U.S. and other major industrial countries--and a recharged mergers-and-acquisitions boom, and you get a market driving toward Dow 10,000.

The market's muscle is astonishing, leaving many pros breathless. "People were too bearish before, so there's panic buying now," says W. Shannon Reid, a senior portfolio manager at First Capital Group in Charlotte, N.C., as he watched the Dow gain nearly 215 points on Nov. 23. "It looks like a melt-up." Indeed, the sheer momentum of the market's comebaCk has heads spinning. Ralph J. Acampora, the market technician at Prudential Securities Inc., whose bearish predictions on Aug. 4 helped slice 300 points off the Dow that day, is again in the bulls' camp. Acampora hasn't finalized his 1999 forecast yet but says firmly that the Dow will be "well above the 10,000 mark" next year.

Indeed, the market is coming around to what Abby Joseph Cohen of Goldman, Sachs & Co. has said all year: "The fundamentals of our economy are good, profits look O.K., business investment is O.K., and consumption's O.K." And with easier monetary policy, "the Fed gave us something of an insurance policy that it's monitoring the global situation. That makes everyone more comfortable." Cohen, who looked gutsy in August when she said that the Dow would finish the year at 9300, still holds to her next target: 1250 on the Standard & Poor's 500-stock index in 12 months. That's roughly equivalent to 10,000 on the Dow.

The economic picture has brightened now that the shape of the third quarter is emerging more clearly. Real growth in gross domestic product came in at a 3.9% annual rate, 1.5 percentage points better than expected, productivity growth beat all forecasts, and even the U.S. trade deficit turned out to be smaller than expected. And the fourth quarter, once forecasted to show a sharp slowdown, could come in at near 3%. "By cutting rates, the Fed is sending a message that it wants the economy to do better," says Thomas V. Reilly, chief investment officer of Global Value Group at Putnam Investments. Reilly says he sees pickups in orders at industrial companies such as 3M and at computer and semiconductor companies.

Also coming into sharper focus, as the last of the third-quarter earnings reports come in, is the realization that they were better than their headlines. Brian F. Rauscher, U.S. investment strategist at Morgan Stanley Dean Witter, says much of the disappointment in the reports were concentrated in a handful of big companies, which pulled down total earnings. General Motors Corp., which suffered the effects of a strike, was the biggest drag on the S&P 500, with a $570 million operating loss, a $1.4 billion drop from the third quarter of 1997. "That's not due to a fundamental weakness in the company, but a one-time event," says Rauscher. Take out GM, and the S&P earnings improve modestly, from -2.9% to -1.2%. Most of the other depressants came from write-offs in the financial sector and a drop in oil-company earnings in the wake of a 20% drop in oil prices.

COMMODITIES REBOUND. In short, much of the downdraft in earnings was concentrated in a few sectors; it was not a widespread affliction for Corporate America. According to Rauscher's analysis, 62% of the 476 companies that have reported their third-quarter numbers made profit gains over 1997's third quarter and 3% matched. And the median S&P 500 company recorded a nifty 9% year-over-year gain. According to Rauscher, the stage is already set for year-over-year profit gains of 3% to 5% in the fourth quarter. With some firming in energy and commodities, Rauscher thinks earnings can go up 7% to 9% next year.

Of course, a rebound in commodities is a mixed bag. Higher prices would boost the depressed energy and natural-resource companies, but lower commodity prices help the economy by keeping inflation at bay. Indeed, that's part of what's driving stocks. From Nov. 12 to Nov. 23, when the Dow gained 544 points, or 6.2%, the CRB/Bridge Futures Price Index, an amalgam of 17 commodities futures prices, dropped 4.6%.

The annual gain in inflation is now 1.5%, the lowest since the 1960s. "If you can get 5% real earnings growth when inflation is near zero, you have an attractive environment for stocks," says investment strategist Edward M. Kerschner of PaineWebber Inc. "Double-digit earnings growth invite the Fed to start raising rates."

The Fed has pushed short-term interest rates lower, and that is a powerful stimulus for stock prices. Just look at the "two tumbles and a jump" signal, an indicator developed by Norman Fosback of the Institute for Econometric Research: When either the discount rate, the banking reserve requirement, or the margin requirement are lowered twice after an increase, the market usually makes big gains.

How big? Twenty calendar days after the signal, the S&P 500 is usually up an average of 4%. (By Nov. 23, just the sixth day after the second discount rate cut, the S&P was up 4.3%). According to Fosback, the average S&P gain after three months is 11%; after six months, 15.9%, and after one year, 29.7%. Fosback says the two-tumbles signal is most effective in the six-month and yearly intervals. In 18 of 19 times, returns have been positive. Even with the signal pointing to higher stock prices, Fosback himself is bearish, mainly because of high price-earnings ratios. Still, admits Fosback, "it's tough to go up against the Fed."

THE "WALL OF WORRY." Rather than acting as a depressant, such bearish sentiment is usually a positive for stocks. Bull markets climb a wall of worry, because bad news has already been discounted, so positive developments send the market higher. There's still plenty of worry about. Asia is not yet out of the woods. Investment strategist Charles I. Clough of Merrill Lynch & Co., bearish on stocks for several years, remains unconvinced that corporate profits will rebound in coming quarters. "Consumption and investment are already well above the long-term trend, yet earnings are weak," says Clough. "With low inflation and no pricing power, how are you going to get better earnings?"

Mergers help, certainly, by allowing companies to slash overhead, build market share, and gain economies of scale. On Nov. 23 and 24 alone, deals worth $70 billion were announced, according to Securities Data Co. Still, this stock market isn't dependent on dealmeisters to keep moving up. The economy's resilience and vitality is likely to keep the market on the march to Dow 10,000.

By Jeffrey M. Laderman in New York






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I want to first of all thank all the posters for a interesting and educational Four Days at the FORUM. I will be reviewing the posts to pick a winner today and tomorrow as time allows. I will post the winners either Tuesday afternoon or Wednesday morning. You have made it very tough on me this time around and I want to have time to review your posts.

I will temporarily close down InfoStream and post news and bulletin information at this site as warranted including the popular After the Close FWN and Bridge News reports when they have something interesting to offer. This will draw more readership to the site for all of you who go out of your way to get your posts up here for all to read.

By the way, the number one reason mentioned by gold buyers for buying gold is Y2K usually quickly followed with something like this: "I'm worried about that but I want something just in case this whole economy collapses." Up until about a month ago, the answer would have been all of the above but the inability of the government, infrastructure providers and the financial establishment to convincingly answer the people's concerns has moved Y2K to deeper level of concern.

I had a good time and know most everybody else did too. Gold is up over $3 this morning. Do you guys think that all the high energy at the USAGOLD FORUM over the weekend is what got gold up and running??

I want to just add one more note: I feel privileged to be in a position in life where I can sponsor a FORUM like this and have very thoughtful and intelligent people like our posters feel they can participate. I also feel privileged that thousands of people feel the need daily to visit this FORUM plus my Daily Report. Let me just say though that the posters over this past weekend have shown me that they are very capable of carrying the ball at this site. Please keep posting. Please keep stimulating each other's ( and my ) thinking. Please keep getting the news up here first before those yayhoos at CNBC get it to their people. Please keep thinking outside the box (as they say in the modern parlance). Please keep developing you own views in your own way. And please keep doing so whether I'm here or not. We need it.

One last thing: I know that there are a number of you out there contemplating posting but afraid to pull the trigger initially. I think one thing you can see by reading over the archives of the past few days that everybody feels the same way, but we are a friendly lot around here -- all with the same concerns and level of understanding. You are welcome to participate and likely to find a whole new group of friends here on the cutting edge of cyberspace.

Michael: Maybe what you said about all that Forum activity giving gold a punt this morning isn't totally far-fetched. If the great manipulators in the sky monitor the goings on of us mortals, they may realize that we loosened the strings of the Gold cat-in-the-bag a bit. The Net is the great equalizer of our time, and what may not be in the mainstream media, still gets pretty mainstream when a dialogue gets churning on the Internet.

Quite a few of this weekend's posts were "forwards" from other sites and quotes from news sources. Who knows what Forum posts go elsewhere. So, you have created a nice epicenter here. A truth and logic quake will radiate outward. Nice work.

Folks, here is an item from the prudent bear (bearish
mutual fund) chat board that may interest you. The author
has digested a bunch of more or less bearish newsletters
and distilled them down to one summary post. Here is the
gold/PM section (and Euro), FWIW.

(The outlook speaks to my one concern about PMs: the possibility of a final deflationary blow-off in prices, before the bottom is finally, positively, IN. Many writers have mentioned this concern. I am collecting notes along these lines and will post them as a web page at some point. PS: it certainly will be interesting to see what happens in January...)

-- Alan (AEL)

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

http://prudentbear.com/bbs/index.cgi?read=15756

Gold and Precious Metals Outlook

This is scary.

Safe Money contributing analyst Larry Edleson believes there is an
oversupply of silver, which keeps it pushed back below $5 every time
it rallies. He thinks silver could fall back down toward $4 - and if
gold tanks, to as low as $3.25.

Edleson has been stating for some time that gold just isn't
performing like he would expect - in spite of all the increased
buying for Y2K, etc, the metal price is in the doldrums. He takes
this as a sign of the deflationary times. Also, he is stating that
the European Central Bank has "unofficially" declassified gold as an
official reserve, and could start selling it off again soon, with the
plan to buy back Euros and create an artificial demand for the
currency, if necessary. He believes that in the worst case, the metal
could fall through its $270ish support, then freefall down to the
$180 - $200 level. He thinks that within the next few months we will
have one last short-term gold stock rally, caused by more fears of
debt default, and he recommends stopping out of gold stocks - they
can be picked up cheaper later.

Before you despair, gold fans, let me add Edleson's last note: He
thinks that even if gold falls this low, the long-term prospects
(several years down the road) are outstanding.

Edleson strikes me as painfully honest - he is not touting numismatic
gold coins or trying to sell bullion.

Essentially, the analysts at Real Asset Investor view gold as an
inflation barometer. In addition, I have previously posted Porter
Stansberry's opinion that gold stocks will not begin to make serious
moves upwards until after the stock market bubble has burst. He based
this analysis on what happened in the 1930's, well after the bubble
burst, and when the Feds were forced to raise interest rates to
defend the dollar.

They are also listing suggested senior mining stocks but stress that
there is no hurry to buy.

Real Asset Investor claims that due to Y2K fears there is vastly
increased demand for bags of junk silver, numismatic gold, etc, and
that they could bring top dollar prices in late 1999. (This might be
a good Y2K play - load up on junk gold and silver??)

So what I (Susan J. Bear) am concluding from all this info is that
right now, because of Y2K fears, etc, there is increased bullion and
coin buying. However, gold and silver, like other commodities, are
going through the deflation wringer, and this is why we aren't seeing
the bullion prices move up from all the increased buying. In the
nearer term, gold may temporarily rally on more debt default /
currency crisis news (like it did in September/October). Further out,
late into 1999, gold and silver junk and numismatic coins may have
appreciated significantly. But perhaps we may have a few years to
wait for a serious runup in precious metals.

The Euro

Larry Edleson reports that there is a very strong political will to
make the Euro work, though he doesn't see how Europe is going to hang
together.

Adrian Day sees many banks initially switching out of dollar reserves
and into the euro. Asia, in particular, wants to switch a large part
of its reserves to the euro so Asia is less beholden to the United
States. Day sees some initial success for the euro, with investors
around the world looking for an alternative to the dollar. But he,
too, thinks that friction/tensions in Europe could eventually destroy
it.

I have a web page that may interest some of you. It has links to most of the goldbug and bearish/contrarian sites on the web -- sort of a one stop shopping page for people who think like us. Heaven only knows we need all the support we can get, as YHOO heads for $300/share... ;)

Enjoy!

The Golden Bear:


PS: please let me know if you find bad links or if anything does not work as it should; or just comment as you are moved to do...

In viewing graphs of the growth in M2 such as the one on page 2 of the latest News & Views, I continue to wonder why no one anywhere, at least that I'm aware of, has pointed out the obvious: that the surge in money supply growth began almost immediately after Klinton cost the Democratic Socialist Party control of Congress in Nov '94 and with the next Presidential election less than 2 years away. But wait, the Fed is independent of political influence, right ??

Regarding the paragraph that the M2 graph is referenced to, I disagree with the conclusion of the Money-Forecast Letter that "You can forget about deflation, recessions, and Depressions. The name of the game will be growth at any price." Yes, growth at any price is the objective, but with debt levels being what they are, there's no way the Fed can increase liquidity fast enough to re-flate/inflate when the bubble pops.

As always, this News & Views has plenty of interesting info.

By the way Michael, a past issue mentioned a Col bank that went under. How was that failure handled ?? I have to assume that depositors had no warning. I wonder how long before their guaranteed deposits were returned ... and were safe deposit box renters allowed to immediately access their boxes ??

We heard an unconfirmed rumor this afternoon that there was a single trade to purhcase 1000 contracts of gold at the opening bell...No details. If I hear more I will pass it along. Keep in mind this is a rumor we are trying to check out.

Here are portions of the FWN and Bridge reports after the close:

New York-Dec. 7-FWN--GOLD FUTURES SETTLED HIGHER TODAY,
after the market surged this morning when physical buying
triggered buying in the futures market, source said. Silver also settled higher, getting a lift on continued profit taking on short positions from last week's sell off... February gold futures surged in early morning trade
after opening the session little changed. The contract got
as high as $299.50, its firmest level since also trading
that high on Nov. 25. "We had a moderately active session in the gold," said Dave Rinehimer, head of futures research at Salomon Smith Barney. "It rallied to test the $300 area on the February contract in the first hour or so of trade.
"There appeared to be some physical activity going on
that prompted some buying in the futures."
___________________________________________________________
Bridge News: Feb gold shot up by as much as $5.20 in early morning trading but slipped back in the afternoon, finding support at around $295. The gold market saw a
rush of bank/dealer types this morning, "catching the market flat-footed," one trader said. "The market was quiet so long, and this was a sharp move higher in a short period of time," said another trader. Most sources attributed the uptick to technically-driven trade buying by large trade houses and to Australian producer buybacks.

Reuters ran a story this afternoon about Bank of England Deputy Governor Mervyn King who told Soros during a debate that "it is crucial that we do not abandon rational thought" -- a clear reference to theories promoted in a new book by Soros entitled "The Crisis of Global Capitalism." He also slammed Soros' education which was in philosophy at the London School of Economics, not economics, saying that "the London School of Economics, where King used to be an economics professor has lots of good courses including philosophy. But I suggest if you want serious courses on these questions, you focus on economics courses." According to the article, The Economist also slammed Soros saying his books are "no good." The article says "Soros was visibly shaken by the attack."

It seems that King has not forgotten Soros' attack on the pound in the early 1990s when King was at the Bank of England. Soros believes that a new international bailout agency is needed to deal with the worldwide monetary crisis. King obviously disagrees thinking the bailout organizations we have now are working just fine.

I have to remind myself sometimes that the house I bought for $80,000 in 1978 was predicted to never go over $100,000 in value because in the monetary religion one cannot "push on a string." It promptly went to $150,000 by the mid 1980s. Then because deflation had certainly gripped the economy, it would never see $200,000 which it promptly achieved in the early 1990s. Then we were told that inflation was forever dead because of a new paradigm. My house went over $300,000. As we conclude the 1990s we are told that inflation will never rear its ugly head again. My house now approaches $400,000. Astonishing? Indeed. The stock market has achieved these levels the result of the same phenomena. Deflation? What deflation? Unacceptable debt levels?......Where? I have listened to these deflation arguments for a long time going back to the early Myer's books. Inflation is the new paradigm. It is also the old paradigm -- mixed with disinflationary mellowing. Historically, deflations occur only after all avenues of inflation have been TOTALLY exhausted. This is a political reality. It just so happens that most of the inflation of recent years has been channelled to the stock market. Greespan knows this and has talked about it ad nauseum. It is a matter of convenience that it is sitting there waiting to be extinguished at the central bankers' convenience. Now, I am not saying that deflation is an impossibility. I am just saying that in my opinion I don't think we are close to being there yet. I think first we will experience the worst inflation in American history. Then we will have a deflationary experience that will make the 1930s look like a Broncos/Chiefs confrontation. (Sorry KC, I had to slip that one in there.) Having said that, let me conclude by saying that gold will protect us against either or both and in what order they decide to visit us. I do understand the intellectual allure of the deflationary argument. There is great logic to it. I think future history books though will head this chapter "The Age of Inflation"....the era when the experiment with paper money failed.

Like many things I write I must point out these are musings not investment advice. In reality I don't have a clue what's going to happen next. And anybody who takes what I say and uses it as a template for anything but a proper diversification into gold should as the very next order of business make an appointment for a psychological profile with a good counselor.

Interesting, Michael. How did you arrive at that order
(inflation first, deflation second)? My impression, possibly informed too much by prevailing thought, is that deflation is the current trend (current as of the last year or so), and is likely to deepen. Further, that the pain of deflating away the excesses will be politically unbearable, and the temptation to "start the presses" (or I should say SPEED them) will be irresistable... leading to inflation and perhaps even hyperinflation. In other words: deflation first, followed by inflation. Please comment as to why you think the reverse order is more likely.

To add, can you imagine where inflation and all it's indexes and measures, would really be if commodities were at respectable levels? Oil back at $20, I think the PPI and CPI numbers would be disastrous. Personally, I've yet to really see anything I (excluding the above) decrease in price. Computers, sure, the brand new model purchased is half the price in six months, but that'a not deflation, that's just the speed of technological advance. Gee, just keeping the lid on inflation alone to keep this party going, is/was reason enough for the USG price manipulation of gold and thus oil. Presto, the Goldilocks economy.

I agree that there's no way that the Fed can print money fast enough once the bubble pops. The question is "At what level does the bubble pop?" A tough question...so far going back to my previous post the Federal Reserve has been able to find liquidity through higher asset values ( which can be borrowed against) in real estate and now stocks. I offer this not as criticism but something for all to consider. Perhaps, what you describe comes as ANOTHER implies, when the United States loses the currency advantage. This is very possible. Thank you for your important post...We process much information for News & Views and I cannot remember the specific bank failure to which you refer. There was one where the depositors were not insured because the bank was not in the federal or state system. It was an industrial bank or something (??) These people are in court, last time I heard, trying to get their money back.

bmacd makes the argument well. We are vitimized by definition -- somebody else's definitions. If there is deflation -- a COLLAPSE in prices -- where is it? For me the cost of living is rising and has been for a long time. Is it different for you? I'm still waiting for the deflationary forces from the Asian contagion to hit. Where are they? It sounded good, but except for isolated examples it never happened.

It's just lying with statistics. Everyone but the refineries is paying a little more each month except for a token break at the gas pump.
Ask someone with all his money in a losing stock what he thinks of the AVERAGES.

I am breaking my promise to only LURK until after the start of the new year, but had to post after seeing the following expert comment on the CBS MarketWatch Mon Dec 7 14:44:14 1998. And I quote: "The market's [recent] price pullback is still quite normal and will lead to another run into the end of the year," said Robert Dickey, managing director of technical research at Dain Rauscher Wessels, in a research brief. "The bigger risk today is being out of the market with the specter of one of those '10 best days of the year' looming ahead of us by year-end." "It is very difficult for the market to make any kind of deep correctiuon when the tech stocks are so strong," he said. "This week will see some more base-building above the 8800 support level on the Dow, prior to the Santa Claus Rally."

WOW -- are we looking at the same data, OR does he have something that we do not ? Perhaps private data base access ?

OK ! My crystal ball shows huge dark clouds enveloping the whole DOW and index's, all but GOX and XAU ! The next few days markets of $INDU and $SPX are going to be brutal. DOWN that is ! I sure hope that no one bets any money on my ranting comments, as I have sometimes, (ok, make that often) been shown to be wrong. BUT on this time, I "am betting the farm".
GW
<;-)

Gandalf, Gandalf, Gandalf.....I seem to recall not all that long ago you bringing up this betting the farm business to Another.....Do you remember what he said?? Now here we are only a few weeks from that momentous discussion and you are betting the farm again...I know that you are a great wizard with extraordinary qualities, virtue and insight and the only conclusion I can draw from all this is that you are a wizard with many farms. Truly Gandalf....you must contain your enthusiasm. It is not good to... well...dive into things like this. One queston: What are nearby INDU or S&P puts trading for anyway?

Just kidding, Gandalf...Just kidding.

By the way, why this vow not to post til January one? Certain members of your family think you spend too much time in cyberspace? Please enlighten.

Hope I didn't ask a personal question.

The gold cat', that is.
So, FMN say's the physical triggered the futures. So nice to get quotes from scources on the trading floor, always unbiased and truthful.
If I were short 400 Tons I just might grab 100,000 oz. on paper before kicking up the Spot. Then let the panic subside and maybe throw back a little hard stuff to help the "Range Bound" believers take thier profits. I'd have some covering done and the metals still affordable. "That spike? Oh that was just the Rubin rumor and denial."

Just guessing ------

Michael, I agree with you that inflation is out there and being channeled into the stock market and real estate. I think the only way that commodity inflation is going to pose a real problem is if the world can stabilize and the US can get away with the endless expansion of the money supply. But the opposite appears to now be happening. Lots of economies are collapsing ... the Fed's panic easing telegraphed their fear of the contracting credit situation. It looks as though the bubble is coming undone now.

The '20's were a disinflationary period (slowing inflation) where technological advances would have resulted in a healthy deflation of prices had the Fed, in the name of price stability, not been inflating. As it were, the Fed did inflate, prices were relatively stable, and the stock market ballooned. Sound familiar ?? When the stock market bubble popped, asset values plummetted, resulting in a gut wrenching deflation, exacerbated by government intervention in the economy.

In the '20's, asset values were the bubble. At that time, the US had a sound currency. Today we do not. With there being $600 B in currency out of a money supply of $6 T (meaning 90% of the money supply is some mutation of credit) and an inverted pyramid of leveraged debt built on top of that (e.g. $140 T in derivative positions), from this person's perspective, the big picture is that today we're in an outrageous debt bubble, with the stock market being a bubble within that bubble. What are the potential pins ?? Well, you can pretty much go down Michael's list of reasons people say they're buying gold.
1) the overvalued stock market - lots of wealth is tied directly and indirectly to the market. If it pops, we have deflationicus extremicus.
2) Y2K - there is the diversion of declining corporate profits to fix the problem that could lead to a decline in the stock market ... plus there is the threat of fear leading to a run on banks, which don't have your cash to begin with. Once again, deflation.
3) the dollar - if the world loses confidence in it for any reason, perhaps with the introduction of the euro or because of a dramatic slowdown in our economy. Here we have the threat of inflation. But if inflation causes interest rates to rise, particularly in a slowing economy, the economy is going to slow even more and the stock market is going to take a hit. So once again you're back to deflation ... but this time in the way they're seeing it in SE Asia: deflation of asset prices along with inflation of commodity prices that comes with the devalued currency. In other words, an inflationary depression.

Others can probably come up with more potential pins.

It would seem to me that reason 3 is the only scenario where one better have gold now. Reasons 1 and 2 will probably generate a huge demand for cash, causing the price of gold and everything else to plummet in an asset liquidation, which means gold could be bought later a better price. But 3 is a real possibility, and if it catches one unprepared, it's going to wipe that person out.

Whatever happens, look at the bright side ... it'll probably put an end to the welfare state.

A classic post, Turbo. I need to consider your thoughts for awhile before replying, but on the surface, I think that we agree. I remember a philosophy professor in college who told the story of two phil professors vehemently disagreeing on just about everything for years until they decided to sit down over a couple beers one evening and define their terms. When the definitions were agreed upon, they realized they had nothing to argue about. They were, in fact, in concert.

Your knowledge defies (exceeds?) the handle you've chosen, Turbo. I hope we will hear much more from you in the future.

Several times in the past I have cautioned myself not be drawn into the inflation/deflation argument as it is fraught with land mines and difficult to resolve. I should heed my own advice. I want to reiterate that gold will protect against either or both in whatever order they should occur.

From what I've been able to gather the Clinton administration is denying that Rubin wants to leave despite the fact that the New York Times reports that three different members of the administration verified that these discussions are on-going. Where there's smoke there's fire.

On the short cover early in the session, you have good instincts. We will see what happens in the days to come, but somebody obviously has some business they need to take care of.

To all: Have a restful evening and a good day tomorrow.

eom.

Utrecht, Netherlands, Dec. 8 (Bloomberg) --
European Central Bank council member Arnout Wellink said European governments must respond to last week's interest rate cuts with continued budgetary austerity, and not with spending programs aimed at reducing unemployment.

Increased government spending to stimulate the economy and boost employment "often fights the symptoms rather than the problem", he said. Such a policy leads to postponement of necessary labor market reforms and makes the underlying problem worse by further burdening government budgets, he said.[...]
-----------------------------

Eleven (and growing) politically unique and sovereign countries...
An independent central bank...
Monetary policy that is by necessity apolitical...
Though gold is often called "the political metal"--a misnomer--it distinctly is NEUTRAL...

I cannot "tell" you anything, but I hope to show by degree the manner of the path ahead. I call it a "gold standard". The denomination of your assests will determine whether you welcome this. Time will earn its allies.

Consider again ECB chairman Duisenberg's statement as quoted today in Michael's Market Report, "To the extent that (ECB) monetary policy can contribute to that stability [exchange with the dollar], it will do so." By its very foundation, the euro shall not toss about on the seas of change.

I have received a private e-mail of great interest and importance from one of our fellow goldmeisters in Australia. According to a report authored by A. Canon Bryan for an e-mail newsletter service, the gigantic Autralian mining consortium (number one in Australia and number ten globally) -- Normandy Mining -- has squared its 4.1 million ounce short position.

Says Bryan, "It all has to do with a chap named De Crespigny (pronounced duh-crap-nee, I'm not kiddin') - CEO of Normandy - who has been painted as the kingpin of the mining industry Down Under, but not necessarily in a good way. Like Bill
Gates, De Crespigny has his thumbs dipped in every possible plumb pie on the Pan Australian frontier. He has a lot of muscle and he likes to flex it often. He has an uncanny reputation for foisting his uncared-for aggression towards all those around him.

I have always felt that a man such as Robert Champion De Crespigny would be most definitely be in the know with respect to all things golden, including the direction of its price. Realizing a giant short position is a clear signal to me that Mr. De Crespigny is a bull on the yellow metal. All this is to say nothing of actual physical ramifications that this acquisition has on the market place. We're talking about 127.5 tonnes, folks."

"The timing seemed rather providential for Normandy." says Bryan. "I chalked it up to brilliant foresight but perhaps there was more at hand. I find that the background of this story, as with most Australian corporate strategy, leaves more questions than answers; the only unmistakable point being that De Crespigny has stepped forward and proclaimed his bullish stance. Can the rest of the herd be far behind?"

USAGOLD NOTE: This interesting report follows on the heels of a meeting in London recently between Anglogold, Barrick and other producers on gold hedging operations. There was some sort of gauzy announcement about more transparency but we have been left for the most part wondering what went on in foggy Londontown that day. Don't forget, as well, the rumor about a single purchase at the open yesterday of 1000 gold contracts. At one point that had moved the market upward $5 even though the sale represented only 3 tons of gold! This gives you an idea what might happen if a scramble among the mining companies were to begin in earnest.

In that same story Canon mentions the Barrick hedge book of roughly 9 million ounces. If the Canon story is true, the DeCrespigny decision could be an extremely important bullish development in the gold market.

"I have always contended that it would take a momentous and very visible event on the part of the mining industry itself to spark a shift in the sensibilities of its following from bearish to bullish," says Canon.

Perhaps this is it. To be sure the gold mining industry will take note. I wouldn't want to be the last passenger off the Gold Hedge Titanic.

Where the name "Canon" appears substitute "Bryan"....One of these days I'm going to get an editor....

Turbohawg -- was that 140 trillion in derivitives or a misprint ? I wonder how much of that is put & call paper. All the potential debt of that is only in play if the markets move past the strike price.
If the "Controlers" keep everything range bound, that quantity would just expire. Of course there is new stuff written all the time but flat markets beget less business; (what's a poor call writer to do ?)
Then there is the T-Rex of all speculations, the Naked Option! Those require the fools, oop's, writers to come up with MONEY if things sneak past the strike price, and there is no limit, except zero on the down side. wouldn't it be nice to know how much of these are around.

Michael - I also noticed the discrepency between this fellow's call sign and content, but didn't I see a photo a few years back, of Malcolm Forbes himself, sitting on a Harley with Liz T. on the back?

Yes, that's $140 Trillion - worldwide. One reference for this figure is the top of page 9 of the November News & Views by way of The International Forecaster. I've seen other figures of 'only' $28 T to $40 T tied directly to US institutions. I'm not sure it matters, though. We are, in fact, in a one world financial order. And remember, for context, the entire asset value of the US is about $20 T.

I assume you're right about those derivatives being time limited. But their bet doesn't have to be very wrong to cause a serious problem. Consider LTCM --- the market declined about 20% and LTCM nearly caused the entire world financial system to collapse.

Regarding Michael's post, perhaps we can enter gold itself as a potential pin to pop the bubble. Imagine what would happen if someone like De Crespigny ran up the price of gold significantly. What would happen to all those hyper-leveraged hedge funds who have engaged in the gold carry trade and/or sold gold call options to finance their wagers ?? What would happen to the dollar ??

I'm happy to know you and Michael like my handle so much. Don't tell me there is pressure to conform among a group of non-conformist gold nuts like ourselves. Incidentally, I don't ride a Harley (yet) ... but I am a serious Razorback fan.

The moment you've been waiting for.

After due consideration, the following are the contest winners:

Goldfly: One silver Eagle for Msg #1144. I really liked the title: "Y2K/2K/Oz?" Very clever. Sorry I didn't respond to your post, Goldfly. I meant to...then forgot. I hope all's well by now. My best to you and your wife and the rest of your family.

Peter Asher: A silver Eagle for Msg.# 1161 "Run for the Hills" Perhaps not the one that you were thinking might garner you the prize, but a good piece of writing. Peter, I want to thank you for your on-going presence here. You stand tall already as an anchor of logic and kindly consideration.

Aragorn III: A one tenth ounce Philharmonic for the "Lightning in the Night" post as it brought a proper sense of urgency to the discussion. We cannot afford to be complacent. This is classic: "Whatever your personal justification for obtaining gold might be, use this to your advantage...You do not have a year." I considered this an important message: "It is seen that Y2K fears prompts many to seek out gold. This (or any other reason) that brings gold into your home is good...While this line of thinking allows a year for acquisition, the watershed event is less than one month distant -- the introduction of euro as a viable world currency." We await your next masterpiece.

Yellowbird for Msg ID 1178...A one tenth ounce Philharmonic to feather that golden nest. This is good stuff: "Another...Your language was "old world" which made these modern ears perk up..." You have a spiritual quality that we have all come to appreciate. You get the gold for being the heart of USAGOLD.

And I'm going to something "out of the box". I am going to award a silver Eagle to Gandalf the White for the kind attention devoted to his fellow posters at the beginning of Msg # 1146 but mostly for the little, smiling wizard at the end of his posts. I think its cool.

So ends a very good time for me and I know for everybody else. If you didn't win this time, don't give up. I wish I could give out more gold and silver but we are preparing too for Y2K and the euro here at USAGOLD. There were certainly some excellent posts that were good enough but didn't get the prize this time.

I want to thank one and all. We'll do it again soon, if I can think of another good question.

I raise my glass to you, fellow meisters. I do believe that we were the real reason for gold going up almost $5 at one point on Monday. I almost expected to see some recognition in the morning Reuters report. The gold and silver go out tomorrow.

Let's keep the fire lit at USAGOLD. POST IT!

Just wanted to say that one of my favorite all time market analysts is Richard Russell, The Dow Theory Letter. He's been known to spend an occasional weekend on his Harley and is considered by most newsletter writers to be the dean of the industry. Highly respected. Regularly quoted just about everywhere. Don't know if he follows the Razorbacks though.

I want to go to something else you brought up though...This idea that gold could become a pin for this equities bubble.

It is ironic, and perhaps a fatal error, that the paper money crowd would use for collateral the only form of currency that they cannot print. With respect to the LTCM situation, some commentators have said that the gold loans to LTCM were forgiven. I don't believe it. I believe the gold will have to be paid back and as I said it cannot be created out of thin air.

I am now reading the new book by Niall Ferguson on the Rothschilds' early exploits. I find it interesting that not just the Rothschilds, but other market players, manipulated the news and market circumstances to accomplish their financial goals whether they were short or long the market as a matter of course. More than once Nathan Rothschild had the family capital fully extended in a single, market bet. Everything was on the line and all was fair in love, war and international finance. I don't know why it would be any different today -- and in more than one respect. At some point profits must be taken and/or losses acknowledged now just as they were then. This is the law of the markets and it will not be abrogated. There will be winners and losers -- powerful winners and powerful losers. As gold advocate Frank Veneroso has put it several times: We are approaching the end game. Nothing goes on forever, and after all, there are parties on both sides of these transactions, are there not? We have received information over the past 90 days of extraordinary changes in market positions and attitudes including today's news out of Australia (if it is true). Something's in the wind, Turbohawg and I think you might be onto something when you imply gold could find itself at the heart of it.

Here is a bit of news about the dow in a place that usually only has good to say:

www.quote.com

Market Wrap: Tues, Dec. 8
After opening mixed this morning, the market rallied into the afternoon on the strength of the tech sector, before selling off late in the session as concern grew that sentiment in Congress is leaning away from the President. According to analysts, the market could experience a severe sell-off if there even appears to be a 25% chance that Clinton will be impeached. If he is impeached analysts are predicting that the market will drop at least 1,000 points. Analysts expect the direction the market takes tomorrow to be determined by tonight's interpretation of the effectiveness of the President's defense before Congress today.

A Saudi Arabian investor, Prince Alwaleed, is discussing taking a major stake in Long-Term Capital Management, raising
questions among the beleaguered hedge fund's managers.

FYI:

IS PRESIDENT CLINTON ABOUT TO ANNOUNCE HIS RESIGNATION?

By J. Adams
December 8th, 1998
Spirit Of Truth Stock Market Update Unreported Truth


Monday's White House Press Briefing was opened with the announcement that President Clinton would give his State of the Union Address on Jan 19, 1999 - unusually early.

January 20th is a key date if the president chooses to resign on this date because, as of the 20th, Al Gore will be eligible to serve two full terms as President on top of serving out the final two years of Clinton's presidency. Therefore, if Clinton were to resign the day after his State of the Union address, Al will effectively be able to serve up to ten years as President.

When Nixon resigned in 1974, he did so after the Judiciary Committee voted for articles of impeachment but before the House actually voted for impeachment. The reason he timed his announced resignation at this point is most likely because, according to the U.S. Constitution (Article II Section 2): "The President shall ... have Power to grant Reprieves and Pardons for Offences against the United States, except in Cases of Impeachment." Thus, in order to preserve Vice President Ford's ability to pardon President Nixon's criminal offenses, Nixon had to announce his resignation *before* the House voted for his formal impeachment. And this, of course, is precisely what happened. Nixon resigned before the House voted for impeachment and later, since no formal impeachment occurred, Ford was able to pardon him.

The odds are that Clinton wants to avoid criminal prosecution and going to jail for his felonies more so than he wants to cling to the Presidency and try and ride out impeachment proceedings.

Even if Clinton succeeds in not being removed from office for his crimes, he can, after his term ends after the year 2000, be criminally prosecuted and incarcerated for his crimes. If the House votes for his impeachment, the next president, and there's no guarantee the next president will be a Democrat, can NOT pardon him since the Constitution forbids pardons in cases of impeachment.

Hence, if it looks like the House is going to vote for impeachment, it behooves Clinton to announce his resignation in order to stave-off such a vote. In this way, Gore will still be able to pardon Clinton for his crimes since Clinton was not formally impeached by the House of Representatives. Although it is still an open question in Constitutional Law debate, the odds are that Clinton can not hold-off announcing his resignation until after the House votes if he wants to preserve a possible pardon by Gore. If it looks like the House is going to vote for impeachment, it appears that Clinton MUST announce his resignation beforehand in order to stop his formal impeachment from taking place.

If Clinton is going to announce his resignation in order to stop the House of Representatives from voting for his formal impeachment, it would be most strategic to announce that his resignation will be effective January 20th, 1999. As noted above, this will allow Gore to serve out the last two years of Clinton's presidential term and still be able to serve two additional full terms, i.e., Gore will be able to be President for up to ten years.

Thus, the reason that the White House has announced an early State of the Union address is because, contrary to his stated promises to never resign, Clinton is planning to announce his resignation - effective January 20th, 1999, the day after his final State of the Union address - sometime during the next couple of weeks in order to stave-off a vote for formal impeachment by the House. (And yes....this would mean Clinton has told yet another lie!)

Further indicating that resignation may be on the mind of President Clinton, a leading Democratic Senator, Joseph Lieberman of Connecticut, has reportedly agreed to receive Ross Perot's petitions calling on the President to resign "for the good of the country, for the sake of our children".

According to Robert Hillman of the Dallas Morning News (12/8/98):


"Petition signatures sought by Ross Perot to persuade President Clinton to resign will be sent to the Democratic Connecticut senator who was an early critic of the president's relationship with Monica Lewinsky. Russell Verney, chairman of the Perot-founded Reform Party who helped coordinate the petition drive, said Sen. Joseph Lieberman had promised to deliver the message to the White House.
He (Lieberman) is the `one person in Washington who would be respected by the president when he delivers the message and has the courage to deliver a tough message to the president,' Verney said. `It's a message directly to the president: that for the good of the country, for the sake of our children, he should resign,' he said."


Most likely in relation to this news, Ross Perot is scheduled to appear on CNN's Larry King Live program on Thursday night (9 PM EST) to make a "major announcement".

The question is, why has Joseph Lieberman agreed to receive Perot's petitions and, more importantly, why does it appear that the White House is going to arrange the spectacle of Senator Lieberman delivering petitions to President Clinton calling for his resignation?

The timing of Senator Lieberman's possible delivery of these petitions to the White House has an interesting historical parallel.

As noted above, President Nixon resigned after articles were voted out in the Judiciary Committee but before the full House voted in 1974. Furthermore, prior to Nixon's resignation, Barry Goldwater, considered the concience of the Republican Party at the time, went to the White House and and effectively told Nixon it was "time to go", that the President lacked sufficient support to escape a vote for his impeachment.

We are currently entering the same time period during impeachment proceedings with Clinton at which Barry Goldwater called on President Nixon to resign in 1974. Hence, it makes sense that Senator Lieberman is preparing to take on a role analogous to Barry Goldwater in the context of Nixon's impeachment proceedings and eventual resignation. Senator Lieberman, per arrangement with the White House, may be planning to receive Ross Perot's resignation petitions and deliver them to President Clinton in order to set the public stage for Clinton to announce his resignation in the face of an impeachment vote by the U.S. House of Representatives.

In this way, Clinton can announce his resignation in a manner that makes it look like he's acting "for the good of the country, for the sake of our children" as Perot's petitions proclaim. Indeed, the White House may be pursuing a resignation strategy that will effectively martyr President Clinton in order to place Republicans in as negative a light as possible.

President Clinton's current impeachment defense is highlighting how, if the House votes for impeachment, it will handicap the U.S. Presidency for months on end until the Senate votes on whether to remove Clinton. By resigning in the face of impeachment by the House, the White House can claim it is acting to defend the U.S. Presidency from a dangerous Republican assault and is doing what's in the best interest of the country.

All in all, it appears that President Clinton and his legal and political advisors have concluded that announcing Clinton's resignation sometime during the next couple of weeks is the optimal strategy for the President, President-to-be Al Gore and the Democratic Party. By announcing his resignation, Clinton can block a vote for formal impeachment by the House and thereby preserve Al Gore's ability to pardon Clinton's criminal offenses. Furthermore, if Clinton's resignation is set to become effective January 20th, 1999, the day after what would be Clinton's final State of the Union address, Al Gore will be able to complete the final two years of Clinton's presidential term and still be eligible for two more full terms. Finally, by having Senator Lieberman deliver Ross Perot's petitions calling on President Clinton to resign "for the good of the country", the White House can maximize the image that Clinton is acting in the best interest of the nation in contrast to destructive Republican efforts.





--------------------------------------------------------------------------------
Also see the following related threads-

ALERT!!! - CLINTON MIGHT ANNOUNCE HIS RESIGNATION THIS WEEK OR NEXT!!!

ALERT!!! WILL CLINTON BE ASKED TO RESIGN????

The New Australian
America: running on empty
and heading for recession
By Gerard Jackson
No. 99, 7-13 Dec. 1998
First the bad news: America will go into recession. Now for the good news: I expect this to happen under Clinton. (I don't hold him responsible, I just consider it ironic justice.) The editorial in issue No. 92 (19-25 October 1998) predicted, using Austrian analysis, that the US economy would slide into recession and that the symptoms were already emerging. Despite claims to the contrary Greenspan's rate cuts can do nothing to reverse the situation.

Let us first take a look at received economic wisdom (otherwise known as Keynesian fallacies). According to this Greenspan's interest rate cuts will stimulate the economy by increasing the level of spending through credit expansion. That the US has been on a spending binge which has helped fuel the stock market is certainly clear. What is not clear to these economists is that this policy laid the foundations for the coming recession. That most economists are unable to detect the true link between the stock market and consumer spending was made apparent when they expected the 20 per cent drop in the Dow between July and December to curb consumer spending. The reason it did not is because both are fuelled by the same source � the Fed. Consumer spending is not, never has been and never will be, a function of stock market prices.

Unable to free themselves of Keynesian thinking, the failure of the Dow drop to check consumption was interpreted as meaning that consumers are convinced that the good times will keep on rolling and so maintained their optimism and spending. Consumers never even noticed the Dow. So long as their incomes appear secure they will just keep on spending. In fact, American consumers are spending so much the savings ratio has turned negative, something that has not happened since the depths of the Great Depression: for this you can thank Lord Keynes and his disciples. Without savings the American economy � or any other economy, for that matter � cannot accumulate capital. And it is capital that raises living standards, not Federal manipulation of interest rates. In other words, the American economy is running on empty. Concentrating on consumption spending is a fatal mistake. Consumption does not drive economies and is only a small part of total economic activity.* This gross error has led some economic observers to speculate that the booming service sector will be the "powerhouse" that will offset slowdowns in any other part of the economy. Austrian analysis comletely explodes this myth and we shall now see why.

The Austrians show that by forcing down the rate of interest the Federal Reserve misleads businesses, especially in the higher stages of production, into thinking that the fund of real capital has expanded. They therefore embark on projects for which the capital goods necessary for their completion do not exist. This makes itself felt through various shortages and bottlenecks. As these start to appear many businesses begin suffer a cost-price squeeze as prices are no longer sufficient to maintain expansion or even cover factor costs. Nevertheless, the so-called service sector, the one closest to consumption, undergoes a boom with rising demand and employment. There is no paradox here.

Factors must be paid. Companies that responded to the low interest rates used the addtional funds to bid up the prices of capital goods and specific types of labor, which obviously raised their costs of production. This additional expenditure translated into factor incomes which were then spent on consumption goods. This in turn raised demand at the consumption end of the production structure. The increased demand made itself felt throughout the structure by bidding factors away from the higher stages. To aggravate the situation savings actually became negative, meaning that the social rate of time preference was leaving nothing for investment. The pool of real funds had run dry. These higher-stage investments will now turn out to be malinvestments, unsound investments that will have to be liquidated. But before these investments are abandoned they will start bleeding financially. Unable to cover their costs of production they will have to cut outlays, sell their inventories for what they can get and institute lay-off.

This is exactly what is happening: manufacturing and mining are beginning to suffer a profit squeeze. Corporate profits are falling, lay-off are on the rise, inventories are being run down and outlays are being cut. Some financial commentators are claiming that the slowdown is already as bad as the 1990-91 recession. And all of this without even a credit squeeze. (The Austrians have always stressed that even without a credit squeeze the crisis will still emerge.) Astute observers realise that the crisis has nothing to do with Asia. However, unable to explain it, especially in Keynesian terms, they are reduced to making statements about the inevitable end of the investment cycle, trade cycles, etc. In other words, they do not know. Even so, many still think cutting interest rates, i.e., expanding the money supply, is the cure. It ain't. It's the disease.

America is a dynamic and inventive country with a vibrant entrepreneurial culture. What it needs is lower taxes, less regulation and litigation, fewer meddling politicians and a healthy savings culture. What it does not need � and this goes for any other country � is Keynesianism.

*The problem is that gross domestic product figures leave out an enormous amount of economic activity on the fallacious grounds that it would be double counting to include it. In fact, the GDP is a value-added concept and is not really gross at all.

Two big stories. Thanks. Have you noticed that Bill Clinton's starting to get that haunted look? Al Gore?? Oh no...not that.

Michael at USAGOLD
Thank you for your kindness and generosity. I feel quite honored, I assure you. Of particular note, I was pleased for the chance to read the many fine thoughts these past days. They are always quite helpful. I hope to offer you more information as I see events unfold.
Recent contact with one european central bank has revealed and clarified much. Recall that 'Friend of ANOTHER' and I had dialog not long ago in which the nature of the 100 euro gold coin was discussed. At the time, there were many ill-informed or premature press releases that gave conflicting information regarding gold content and commemorative vs circulation status. While only time can serve to accurately predict (with hindsight!) the actions of men, evidence is such that the european currencies will hold their relative value with respect to gold, and the 'price' of gold will only be seen to rise in dollar denominated terms. In other words, the exchange rate for the dollar to buy the euro (and member currencies which are fixed in the interim) will change on par with the dollar price of gold. Specifically, a 100 euro coin can be expected to contain 8-10 grams of gold, and 100 euro face value will be inherently understood to equate with that amount of gold. The euro 'price' of gold will be stable, whereas the dollar exchange rate/price of euro/gold will reveal a drastically weakened dollar. Think on this...it has been stated that the gold euro coin could require 1,000 to 21,000 tonnes of gold. Only as money would the latter figure be approached, not as commemoration! You may withdraw money from euro accounts as paper bills or small coins, always knowing that 100 euros can also be withdrawn and held as a specific gold coin. Personal preference will dictate whether the gold sits within bank vaults due to trust and confidence, or whether it is held in a shoe under the bed. So we see 1,000 to 21,000 tonnes, as necessary, rendered into coins!
In all of world history, Americans are unsurpassed in their imaginative craft of monetary affairs. It should come as no surprise that the responsible return to a gold standard is ushered in by the European community. Not in all things does "Might make right". So take a simple lesson from your government, which holds much gold with which it can settle its accounts and move into the future. What do you hold? Think in these terms...it has been a quaint experiment to price gold in terms of printed paper. The analysis supports discontinuation...this is acheived with the euro. Gold shall once again be used to price paper. Be forewarned--not all paper is created equal!

Excellent posts ... possibly intertwined. It's incredibly rare to see an article either from the Austrian perspective of economics or poking holes in the fallacious Keynesian (socialist) perspective. One would never see such analysis in the American press.

Production in the US is really slowing. The NAPM index has been dropping for several months. Paper mills, one example I've witnessed first hand, have built up huge inventories because they can't sell the paper and as a result are having to shutdown, partially shutdown, or merge. This merger acitivity is present on an unprecedented scale throughout the economy.

At the same time, service industries are doing well. How is this possible ?? After all, production (by plants and mines) is what actually creates the wealth that is consumed (in services, such as restaurants and hotels).

The answer is apparent when one looks at growth of the money supply. The slowdown in production is being masked by the expansion of credit.

Perhaps Klinton has realized what's coming and sees an opportunity to elevate his historical stature off the bottom (good luck Willie) by getting out just in time to be able to blame a collapse on his departure.

Beijing, Dec. 9 (Bloomberg) -- China's central bank will hold one-third of its reserves in euros within the next three years, said Qiu Yuanlun, director of the Institute of European Studies in the Chinese Academy of Social Sciences, Agence France Presse reported. Zhu Min, director of the Bank of China's Institute of International Finance, estimated the amount of euros in the reserve would reach about 35 percent compared with 19 percent held in European currencies at present. He said it will hold 50 percent of reserves in U.S. dollars compared with 62 percent currently, and 8 percent in yen against 15 at the present moment, AFP reported.

Yesterday, Joseph Yam, the Chief Executive of the Hong Kong Monetary Authority, said the HKMA may shift some of its foreign currency reserve holdings into the euro.
-------------------------------------

"...will hold 50 percent of reserves in U.S. dollars compared with 62 percent currently..."
Please consider how a future value can be specified, in terms of percentage, when the denominated value is subject to floating exchange rates. This commentary is not quite what it seems on the surface...

An interesting story was released by Reuters late this afternoon sigalling what could be a significant change in U.S. dollar policy. It leads as follows:

"U.S. officials may be backing off their long-held 'strong-dollar� policy, fueling market expectations that the greenback will linger near its recent lows against the Japanese yen. Japan's Finance Minister Kiichi Miyazawa on Wednesday told parliament Washington is concerned about the ever-widening U.S. trade shortfall and may seek to weaken the dollar to narrow that deficit. 'He's being very honest and I think he's right. I suspect U.S. authorities may have already made a quiet policy shift to seek a weaker dollar rather than a strong dollar,� said Takanobu Igarashi, an economist at Sanwa Bank Ltd. New York."

For the full story: http://biz.yahoo.com/rf/981209/bdw.html

The first public admission I have seen that the U.S. may be giving up its strong dollar policy. And guess who has been this policy's strongest advocate?

You got it -- Robert "Please-Let-Me-Go-Bill" Rubin.

If there is a change in dollar policy, currency traders will have an interesting year end trading environment.

I won't post the Bridge and FWN reports this afternoon..... nothing new there.

I doubt that they have much choice. Foreigners own way more US assets thatn the US owns of foreigners assets. Not that this helps the trade imbalance at all, sort of a catch 22 (it widens the deficit because of interest payments), but the trade deficit has been sustainable only because foreigners have wanted and demanded US assets. For that to continue, and the US needs the foreign money to keep this market up, the prices of assets will have to come down-ie a lower US dollar. That trade deficit is dangerous.

Please correct me if I'm wrong, but isn't Al Gore in a bit of hot water too? So if Clinton resigns, which is the respectable thing to do, never mind the pragmatic thing to do, who possible is it that Al Gore will even finish off the rest of the term? I realize he's been distancing himself as much as possible, but I seem to recall that the campaign fund raising problems involved him directly. Please correct me if Im wrong.

on $300.00 (not!), or is it?

I sense an underlying turmoil that from time to time makes its energy known to those above the surface. The $5.20 rise (and subsequent fall)the other day is an example.

If they want to get Gore, there's plenty to get him on, not the least sensational his being involved in selling rocketry secrets (for payment in the form of imperfectly laundered campaign donations) to the Chinese, who happen to be the third largest holders of U.S. debt which they might not have purchased had they not had a mainline on U.S. military technology vis a vis the Clinton administration and its cronies with whom now even the Pentagon is seemingly upset, but none of this matters in terms of impeachable offenses because it's the economy stupid and all of us Americans feel fat and happy just waiting for Pleasantville to go color (and all that that implies).

So...bmacd...my friend... in a word...your analysis is correct. (Grin)

The other thing they could get him on is spending too much time in Aspen (an impeachable offense in itself) -- where people spend two weeks a year in 10,000 square foot "homes" that stand empty the other fifty weeks of the year. Not kidding...bmacd. Gore loves it there but doesn't want his fellow Democrats to know about it.

Sometimes I just shake my head!!!!

Michael -- Thank you again, for a winning post award, & actually I did feel it was my bettor one, as it put (I hope) a new spin on Y2K.

This morning's article by Gerald Jackson has a statement that the 20% Dow drop did nothing to curtail consumer spending. Why should it? A 20% drop means a lot more people decided to not buy stock. So since earnings were O.K., there was more money around. Gold was flat, and most people these days have a perfectly good mattress. So maybe they just went out & bought things.

Mr. Jackson also claims that lower interest rates do not raise consumption or our standard of living. Wrong! Lowering the cost of capital allows consumers to afford more goods and services (except, of course for the lenders of the capital.)
The negative aspect of lower interest is that it pumps up the waste of the Wall Street money exchange. Investment funds flow to the reimbursement of other investors, rather than to usable capital.

------------------------------------------X-----------------------------------------

Aragon III ---- I still don't see how a coin with a face value fully funded by weight can survive a surge in the bullion price ! ----- Please enlighten.

Steve H ---- You may be right. I think a strong chart when Sydney is open is bullish.

All --- I have long harbored a "hunch", that if "They" are controling things, then "They" will buy their Gold before "They" let the market crash. If so, then Gold would run first rather then in response to a negative Stock Market. Again, this is belief and logic, only "They" know the truth.

Your question--"I still don't see how a coin with a face value fully funded by weight can survive a surge in the bullion price ! ----- Please enlighten."

Envision that you, Peter, have the ability to launch a new currency for worldwide use. Call it the Asher. After considering the fate of the Asher at the mercy of speculators (or other market forces) on a floating exchange rate system, you recognize it to be in your best interest to adopt a gold standard, so that one Asher is 1/1000th an ounce of gold, and this you demonstrate by a 100 Asher coin that contains 3.1 grams (tenth ounce) gold. Your Asher currency no longer freely floats. You understand this well.

To answer your question within the framework we've established, today (with dollars valued at 300/oz.), the exchange rate to acquire one Asher would require .30 dollars (30 cents). One Asher, whether paper, token coin, or credit card, can purchase a candy bar anywhere in the world.

Now, consider your "bullion explosion". What is it that reveals the explosion? The 100 Asher coin still contains 3.1 grams gold. The tenth ounce gold coin in your pocket still is marked "100 Ashers". The explosion, you will admit, is revealed by its price in the dollar. Imagine the dollar at $3000 per ounce on the open market! The exchange rate to acquire one Asher would now require 3.0 dollars (300 cents).

The dollar has clearly lost much of its purchasing power, requiring ten times more to buy the same amount in this example. The Asher has in contrast held its value. One Asher would continue to buy a candy bar world wide. Priced in dollars, the same candy bar would cost more. In truth, you may see prices become cheaper priced in Ashers--a stable, strong and reliable currency!

Please advise if I failed to grasp your intent.

Perhaps your fear is that as the issuer of Ashers you would lose money, or run out of gold? Not so. Plummeting values of other floating currencies is of no consequence to you or your currency. The sun remains the sun without regard to the number on earth who look at it or look away. So too with the Asher, which is gold. Recall that a rose by any other name is still a rose.

You may or may not have heard of the FDIC's proposed "Know Your Customer" program. They are suggesting that member banks institute what amounts to a sophisticated snooping and reporting program regarding your financial dealings. They are especially concerned with cash withdrawals, which is likely to be a response to the projected cash shortage on account of Y2K. The KYC program is probably the first step toward explicit cash rationing before the end of 1999.

I say to anyone that I care about: start withdrawing from the electronic/symbolic system NOW, and convert to (physical) cash, metals, food, consumables.

Here is one item about this FDIC thing. There are many others on the net...


Gary North's Y2K Links and Forums

1998-12-08 13:39:45

Federal Reserve Publishes Proposed Regulation in Federal Register

http://www.networkusa.org/fingerprint/page1b/fp-frb-kyc-reg.htm

The Federal Reserve has formally published the Know Your
Customer proposal in the Federal Register (Dec. 7). It says that the
public has until March 8 to comment. This gives us time to ask our
Congressmen to vote to annul this proposal.

This is the largest invasion of privacy in banking history. It is the
equivalent of a continuous roadblock in which the police search every
car and every person every day. Only this regulation is technologically
worse, for it will create computerized profiles of individuals that will
sweep suspects into lists of suspicious characters, and from there into
criminal courts, automatically.

Consider this passage from the text of the proposed regulation:

"Effective 'Know Your Customer' programs will necessarily require
that banking organizations develop 'customer profiles' to understand
their customers' intended relationships with the institution, and,
thereafter, realistically determine when customers conduct
transactions that are suspicious or potentially illegal."

"Potentially illegal." It has a nice ring to it, doesn't it? To which
they add:

"While some customers may view 'Know Your Customer'
procedures as an unnecessary intrusion into their privacy, these
procedures are important for complying with the Bank Secrecy Act
and suspicious activity reporting requirements."

"Suspicious activity. We wouldn't want that, would we?

But won't customers who resent this transfer their money to other
banks? Of course, which is why this legislation is needed --
worldwide. The State must cooperate, in order to take pressure off
the bankers:

"Because such programs will now be required by regulation, financial
institutions will not be prejudiced or criticized for needlessly inquiring
into the affairs of their customers."

What will the banks have to do in order to track us? The FED is not
about to say in print this early in the process. That will come after
Congress has rolled over and played dead.

"In a supplemental document to be provided at the time these
regulations become final, the Board, in coordination with the other
federal bank supervisory agencies, will provide detailed guidance on
specific steps that banking organizations may consider taking as they
implement the regulations. The guidance is not intended to provide
additional interpretive explanations of the regulations, but rather it will
provide concrete examples of proven effective means to accomplish
the requirements of the regulations, such as identifying customers and
monitoring customer transactions."

This program will require documentation from every person who
wants to become part of the non-cash economy:

"The identity of a prospective customer should be satisfactorily
established before a customer relationship with the bank is
permanently established. If a prospective customer refuses to provide
any of the requested information the customer relationship should not
be established. Similarly, if additional or follow-up information is not
forthcoming consideration should be given to terminating the
relationship.

"The best identification documents available for verifying the identity
of prospective customers are those which are the most difficult to
obtain illicitly and the most difficult to counterfeit. No single form of
identification can be guaranteed to be genuine, however, and,
therefore, the identification process should be cumulative, obtaining
enough information and documentation to assure the bank that it has
properly identified the prospective customer."

We have heard all this before. "Your papers, please. Where are your
papers? You must have your papers!"

Worldwide, civil rights are about to suffer a setback that only y2k can
restore. When the banks' computers go down in 2000, this nonsense
will become a dead letter, matching the dead banks. But the text will
be there to remind all those who have kept a printed record of this
document that governments and central banks will do anything to
maintain control.

Understand this will become the law of the land unless Congress
stops it. Mr. Greenspan will no doubt work his verbal magic on
Congress. "Nice puppy. Good boy. Sit. Here's a treat." And
Congress will probably sit.

It will take through summer to get this reporting monstrosity in place.
To do it, there must be training, software, and systems of reporting
set up. Y2K will hit them before the entire system is in place.

Smaller banks will implement this system much later than large banks.

(BRIDGE NEWS) Washington--Dec 9--Phenomenal demand for gold, silver and platinum coins this year has been a "real challenge" for the US Mint, as the Mint grapples with "unprecedented" demand for all 3 products at the same time, Mint director Philip Diehl told Bridge News. The demand surge poses logistical problems which will likely delay Jan silver coin shipments but should not interfere with gold or platinum coin delivery, he said.

... here is what principled Constitutionalist, gold standard advocate, and friend Cong. Ron Paul (R-TX) has to say about it:

Privacy Busters: Big Bank is watching
New FDIC regs require banks to violate customers privacy

"Big Bank is watching." That's the message the Federal Deposit Insurance Corporation, the Internal Revenue Service and an endless stream of federal government agencies are sending under proposed new regulations expected to be implemented within the next year.

This massive new program -- euphemistically called "Know Your Customer" -- would convert our nation's banks into wholly owned subsidiaries of the government-wide movement to invade every aspect of Americans' privacy.

The end-effect of the new regulations will be that law-abiding American citizens will be spending more of their time trying to prove themselves innocent of unnamed crimes before federal agents. For example, an individual decides to sell his car through a classified ad in the newspaper, and quickly finds a buyer, who hands over the cash. Now, our
happy car-seller is still shopping around for the vehicle he wants, so he wisely deposits the large cash into his account. Unfortunately, that simple act could trigger an alarm within the bank's computers, alerting to the fact that this customer never makes such large deposits. The bank
will be required to notify a host of federal agencies, which will likely dispatch agents to question the man, assuming he must be a drug dealer, arms smuggler or terrorist.

Sound loony? It is. But that is precisely what will be imposed on banks if these new regulations take effect.

Under these regulations, banks will be required to first create a profile of all new and current customers. The profile will include such information as their credit history and other standard financial reviews, but will be expanded to include the customer's deposit and withdrawal habits. This information will be gathered over the first few
months of the account's creation. After that, any account activity that deviates from the profile will be considered suspicious behavior.

Not only will "unusual" deposits into your account trigger suspicion, but so too might large cash withdrawals. Let us return to our friend selling the car. Instead of selling his car, though, let us say he saved $100 each month for two years, so that he could by his teenage daughter a used car. On the teen's birthday, Dad goes heads off to buy a
vehicle, first stopping at the bank to withdraw the $2,400 he had carefully saved. Again, such an action would likely put this man in the position of having to defend himself against charges of buying drugs, laundering money, tax evasion or some other crime.

The government regulators defend the new rules, saying that such measures are needed to "combat illicit activities."

But at the expense of law-abiding citizen's privacy? And with the resources of private institutions? While such egregious violations of individual rights are common in totalitarian regimes (Hitler's National Socialists elevated such abuses to a perverse art), they cannot be tolerated in a free society. The regulators say these new banking rules
are required under existing banking laws. If that is the case, I will gladly relieve them of that burden by introducing, at the beginning of the 106th Congress in January, legislation to repeal those laws. Somehow, though, I imagine such action will not stop them, only slow them down.

That an innocent man may be presumed guilty lest he prove himself otherwise is a concept embraced more and more by our government regulators and lawmakers, though in absolute conflict with our national legal tradition.

Despite the warm and fuzzy name, the federal regulators are not interested in the banks "getting to know their customers." Their only interest is in monitoring and controlling every aspect of life, so they can create the illusion of phantom crimes, and therefore justify their
existence. With complex laws and unimaginably obscure regulations, the cards are stacked against everyone, ensuring that at any moment, the IRS or other agency can nail anyone for something.

In a society founded in freedom and liberty, individuals must be allowed to engage in life without fear of their actions being monitored and misinterpreted by zealous government agents. Sadly, that is not the burgeoning legacy of the 20th Century. Big government, big banks, big
everything is watching and waiting.

MR.MOZEL I HOPE YOU ARE LURKING

In response to the posts concerning new,Get to Know Your Customer,banking regulations.The United States Treasury,according to the United States Constitution,is responsible for coining and issuing money.The Federal Reserve System is NOT a part of the United States Government. The Federal Reserve System (A HUGE BANKING COMPLEX) has a MONOPOLY on paper currencies issued,and other forms of paper money with the consent of the USG.Monopoly's are supposed to be illegal in the United States.In My Humble Opinion it is the duty of every elected official in office in the United States of America to read understand and VOTE AGAINST banking regulations which take away a basic freedom.

THE RIGHT TO ENJOY TOTALLY THE FRUITS OF ONES LABOR!!!!!!!!!

enough said...............beesting

Your question--"I still don't see how a coin with a face value fully funded by weight can survive a surge in the bullion price ! ----- Please enlighten."

Perhap I should simply have responded to have you consider this instead:
"How can a FLOATING currency survive a surge in the bullion price?"

Thank you Aragorn III for the basic example of the explaination of why the proposed 100 Euro gold containing coin will not become a melting canidate. I had tried to explain to the Hobbits, but was unable to get them to see the true value of the 100 Euro coin with 8 to 10 gr. Au as they were still thinking of Au valued in $US. This is the main problem, trying to get parties thinking in non-$US methodologies as the non-American oriented folk do.
Sure do hope that the ECU start stamping out them "rather-kinda-pretty" 100 Euro coins soon, and then MK can start selling them to usins.
<;-)

You strike the right note with this... "This is the main problem, trying to get parties thinking in non-$US
methodologies as the non-American oriented folk do."

For all:
Have you ever wondered: "What if they held a rally, and nobody came?" That makes us laugh...it isn't a rally until the people make it one.

Now this: "What if they established a gold standard, and nobody officially announced it?" Please reflect on that for a time. Your thoughts may surprise you.
(I will comment on this later)

By all means, please do!

I've been trying to give some thought to this and I keep getting snagged on how a group of people out in the open could contrive a gold standard and not call it a gold standard..... and not have it generally recognized as such.

I look forward to your Thoughts!

GF

As far as I know,every country in the world has open to the public,weather permitting,outdoor markets.This is a carry over from ancient times where producers brought there products to market to exchange for goods produced by other like minded people.Los Angeles Calif.along with thousands of other cities world wide got its start that way.This system which still flourishes world wide is the true free market system.It flourishes because cash or the equalivent,GOLD'silver,or apples have value.The prices on products worldwide varies considerably for obvious reasons.It seems to me the,New World Order thru the international banking system has gained price control of raw materials in an unprecedented way world wide.Many think the prices of the raw materials are manipulated,thru the paper exchange markets.These markets are an excellent example of a Cashless Society.The international bankers have succeeded in cornering and regulating prices for raw materials worldwide.

Do the people of the United States and the rest of the world want prices on manufactured goods'services performed,and any other wealth producing product,regulated,and or manipulated by the international banking cartel??? If the new United States proposed banking regulations do indeed become laws we as citizens of the world lose a great deal more of our freedom. U.S.citizens please write your congressman/woman on your opinion.Please think long and hard about this.


Related post:The spot price of GOLD is regulated by a small group in London,New York,possibly Hong Kong'setting the hourly price.GOLD is traded in huge volume.There appears to be no shortage of tonnes of GOLD.Hence the spot price remains depressed.At the same time there seems to be a critical short supply of small amounts of GOLD,if the free market system truly is a free market regulated by supply and demand why don't all of us small players in the GOLD market set our own prices.Any other finished product usually is double or triple the cost of the raw material.Japan coin premiums are 100% to 120% over spot price of GOLD.

................beesting

I consider the following article by Liu Shanen important for a number of reasons:

1. It sets out what is likely to become China's policy on gold since this same article was later published in the Chinese Central Bank's official newspaper.
2. It explains how countries view gold reserves in very simple, direct terms from the horse's mouth so to speak without being clouded by journalistic interpretation.
3. It gives us a behind-the- scenes view how Asian economic policy makers themselves view the Asian crisis and how China, at least, is likely to insulate itself from future problems particularly through the use of gold as a reserve component.
4. It officially advocates a policy to expand Chinese gold reserves by 1000 tons -- a significant figure.
5. If China intends to bolster its gold reserves, it is difficult to justify a gradualist approach in that the Asian monetary crisis is on-going and far from contained. The next round of devaluations and economic war could come tomorrow for all we know. The incentive is to act quickly. This raises the problem as to where China is going to get 1000 tons of gold quickly if it should decide on this course of action. Given the arguments presented below, the incentive would be to act quickly, quietly and decisively.
5. It should be noted that to my knowledge there has not been an official announcement on the part of the Chinese central bank that Mr. Liu Shanen's advocacy will become policy.

I thought it would be interesting for all to see that country's by and large do not have a significantly different view from ordinary individuals when it comes to the reasons for gold ownership. In the case of China, as the matter is viewed by Liu Shannen, quite clearly gold ownership is a matter of national sovereignity -- just as ultimately private gold ownership is a matter of individual sovereignty.

Added to these matters of political economy is the market problem. What would such an effort do to the price of gold? MK

Please excuse the length of the post. I hope you find it as fascinating as I did.
********************

China Should Increase Gold Reserves
By Liu Shanen, Deputy Director, Gold Economic Development Research Center

The full version of this article appeared in the May 1998 issue of China Gold Economy


The financial crisis has brought severe damage to many Asian economies and the
negative impact will continue for a long time. The harsh reality has taught us a serious
lesson. As China has not yet fully integrated its financial system into that of the world and has
maintained a relatively independent financial regulation system, we were, in a sense, separated
from the international financial market. This has alleviated, to a large extent, the direct impact of
the crisis. But this financial crisis has greatly changed the external economic environment facing
China and brought a lot of new difficulties. Therefore, we shall keep a close eye on the latest
developments of this crisis so as to draw lessons and take corresponding measures.

Foreign Exchange Reserves and Financial Security

One serious lesson we must learn from the Asian financial crisis is that we should pay great
attention to the security and stability of our financial sector, which is of vital importance to the
stable economic development of our nation. Comprehensive and diversified measures should be
taken to improve a nation's financial security. In this context, foreign exchange reserves are a very
important issue.
(1) They can enhance a country's ability to service debt and protect itself from financial
crisis. With world economic integration and an accelerated flow of international funds, a local
problem may result in global crisis.
(2) They can improve a country's credit rating and help to maintain confidence in the
currency. Thus they can, to a large extent, prevent large scale capital flight and help to stabilise the
financial sector.
(3) They can help to stabilise the local currency, thus contributing to the stability of the
overall economy.

The Current Situation of Gold Reserves in China

From 1949 when the People's Republic of China was founded until the early 1980s, gold in China
was mainly owned by the state. Not until 1984 when the gold jewellery market was opened did
gold become available to most Chinese, who have seen good growth in incomes. Therefore, for a
long time, it was the government's prerogative to own gold. Before the reform, China's external
reserves were at an extremely low level and foreign exchange was in grave shortage. In addition,
the reserves consisted mainly of gold. At market prices of the day, gold accounted for more than
50% of total reserves each year. For example, China's gold reserves stood at 9 million ounces in
1973, equivalent to US$1.6 billion at then price, while the foreign exchange in the form of US
dollar amounted to only US$83 million. Thus gold represented 95% of all the foreign exchange
reserves.

This meant that for a long time gold was the principal component of our foreign exchange
reserves. More gold meant more foreign exchange, and that was why China attached suchimportance to gold output. Since the adoption of the reform and opening up policy, China has had increased opportunities to obtain foreign exchange through trade and has attracted more foreign direct investment, causing a fundamental change in the foreign exchange balance Especially in the 1990s, thanks to the trade surplus every year, China's foreign exchange reserves have increased year by year. Now they stand at US$141.1 billion, ranking second in the world. The increase is a result of the growing amount of foreign exchange owned by the state, while the gold reserves of 397 tonnes have remained unchanged since the early 1980s, thus leading to a dramatic fall in the proportion of gold in our foreign exchange reserves. At the average gold price for 1997 of
US$331 per ounce, gold accounted for about 3% of China's foreign exchange reserves, and China's gold reserves ranked 12th in the world.

In summary, China's gold reserves are marked by two main features: First, we have maintained a policy of long term stability in our gold reserves. Since the 1980s, our gold reserves have stayed at 12.67 million ounces without much change. Even when some European countries sold some of their gold reserves in recent years, the relevant informed sources in China made it clear that China would not follow suit, but would rather maintain stable gold reserves. Second, the ratio of China's gold reserves to total foreign exchange reserves is too low by international standards. The value of China gold reserves is equivalent to a mere 3% of the foreign exchange reserves of the country. This is much too low as compared with many other major economies of the world. Among the top 12 gold reserve countries, only Japan's ratio of gold to foreign exchange is roughly the same as ours.

Comments and Suggestion

China's foreign trade has been expanding more rapidly than that of any other country in the world. In the future, along with the expansion of foreign trade, the country's openness to and dependence on the outside world will also increase. It is therefore necessary to re-examine our long-term policy of keeping our gold reserves unchanged in light of two requirements. One is that foreign exchange reserves must be maintained at an appropriate level. The other is that the current global financial crisis demands greater financial stability.
At present, only gold has the kind of time-tested stability that naturally makes it our primarymeans for avoiding financial risk and increasing financial stability. It is absolutely correct and necessary to increase gold reserves.

My personal recommendation is that we should consider raising the percentage of our gold reserves from 3% to around 10%, thus bringing the quantity of our total gold reserves to between 1,000 and 1,500 tonnes and making China the sixth largest holder of gold in official reserves in the world. This level of gold reserves is commensurate with the pace of growth in our foreign trade. Even then, China's gold reserve ratio would still be relatively low compared with many other countries.

In the past when our economy was weak, we found it very difficult to earn foreign exchange. In those circumstances, it was difficult for us to increase gold reserves. Right now, we have much larger foreign exchange reserves and our production capacity has improved by a large margin. As a result, increasing our gold reserves is not only necessary but also highly feasible.

I might add that the decision in Europe, like the upcoming decision in China, on gold revolves primarily around sovereignty -- something we should remember when we read the misinformation and disinformation in daily gold reports as to what Europe is likely to do with its gold reserves. Mr. Liu Shannen makes it all too clear why nations hold onto their reserves unless they are forced to let go.

What I am about to say, I do so at the risk of alienating a great many good goldhearts. Bear with me.

"Not all bankers are evil and out to get you."

Certainly, there is the business element that exists in many sectors to secure profits to the exclusion of all else. That this occurs in banking too should come as no surprise. But the bankers' bankers, and the central banks, they live in a world apart. They cherish the money itself, not the profits! There is a difference! You do not like to see that which you cherish suffer and die an ignoble death. The BIS and the central banks know gold to be the true money. The fiat of their administrations was not of their personal design (they are not immortal)...it came about as governments did not have the will power, ability, or resolve to tax the populace as would be needed to satisfy their expensive wish lists. Fiat currency was used as a means to an end, and the end is at hand! Already you can see the ECB step away from the politics of many governments. Real money, that which is good for the people, is neutral. And aren't we ALL people? Of course we should use the REAL money! Who are we saving it for, visitors?

The use of money entails nine parts accounting, and one part substance. But do not be disillusioned...that small part, substance, is very important. It ensures that the accounting is kept honest. When you pay with a check or credit card, you do not *see* the seller's account credited with your money, but your own accounting and bank statement verifies that a specified amount of your money is no longer in your posession. And you know that the money you paid was honest--not trickery or counterfeit. The money itself is 100 per cent real. You need the assurrance that when YOU are the one being paid, similarly, the money is of honest origin of known value rather than a fanciful notion parading as money. And do not be confused by money. Understand that just as people speak different languages, it is expected that they have differing names for varying amounts of money. On a gold standard as during 1900, a ruble, a franc, a dollar, a kroner, a pound, were all terms used by different people to describe an amount of gold. This association was rendered meaningless (beyond historical interest) when the gold standard was suspended.

The european central banks suffer no delusion that the gold they hold belongs to them personally. They know it is the property of the people. Many goldhearts fail to accept this reality. Many prefer to embrace "us vs. them". The BIS and CBs know there is no point saving Country, Republic, or Nation Incorporated if the people perish. The people ARE the Nation. They should have their money to use. If the accounts show that enough gold is held such that current market value is a fair and viable ratio at which to fix the gold standard, it can be done with no need for an official public anouncement at all. The initial view to the man-on-the-street is that there has come to be a peculiar absence of volitility in gold priced with his currency.

Recall my Msg 1244 to Mr. Asher. Imagine in issuing his money, the Asher, he decides without pomp and circumstance that he will hold himself to honest accounting (nine parts real money) by ensuring that the final small part is a functioning and viable element should the currency users wish to "test the system" (i.e. he has ample gold reserves). The money is 100 per cent real. This is done, and we might agree it to be the easiest manner of options.

In the Asher example, having made the committment to a gold standard, Mr. Asher does not rush out to purchase as much gold as possible using Ashers, because you don't gain anything using gold to buy gold. If in his vaults of currency reserves he finds dollars, he knows that their value today does not guarentee their floating value tomorrow. Perhaps he should use these dollars to purchase gold so as to enhance his Asher position? (After all, they are not directly useful in the generation of additional Ashers.) Perhaps he has accepted an international agreement with the Dollar-issuing government not to liquidate his dollar reserves under certain, mutually agreeable terms. The exchange rate for this Asher is then set with the still floating dollar based upon the dollar's ability to buy gold in the open market. The dollar will be seen to continue to lose its purchasing power as it has done reliably throughout modern decades--a result of its fiat basis and inflation of supply. Some will flee the dollar to the more stable Asher, (or should I say euro?) or they may buy gold instead. I assure all holders of gold, whether European or American, there will be nothing to be gained by exchanging gold for dollars. They will see this for a fact as the dollar "price" of gold will go only up with each passing day. The Amercian central bank may announce a gold standard when "Enough is enough" and the open market appears disorderly and a cause of general public financial agitation. Or else when the open market pricehas reached the proper linking point for the US to join the gold standard. Suddenly the dollar gold price will be seen to stablize. A gold coin may appear that contains a gold value that is the national monetary term equivalent for that much gold. In Europe, perhaps we shall see 8 to 10 grams called 100 euro on a coin. In America, we might expect a similar 10 gram coin to be labelled 2000 dollars.

Such is the reckoning for past monetary priveleges and abuses.

In summary, due to the valuation involved, there need not be an announcement from euroland, as I hope I have reasonably demonstrated to your satisfaction. The "lightning in the night" announcement would of necessity be heard from America. Prior to an announcement, it shall be interesting to see the open market at work. Perhaps it too will reach the intensity of lightning!

Aragorn:
Thank you for your treatise "...and no one was invited?" You leave us in awe of your understanding, your skill in expressing it and in your debt for taking the time to communicate it to us. Some would call it futile trying to anticipate the "lightening strike in the night" as traditionally, there is no way to predict when and where lightening will strike. Yet at the same time, storm clouds are gathering. But what does puzzle me is how calm the seas remain�with the impending storm clouds getting so close.

I refer, of course, to the tranquil stability that prevails in the gold market of late. If we didn't know better, we would conclude (in your words) that "to the man-on-the-street, there has come to be a peculiar absence of volitility in gold, priced with his currency" (in dollars, at least) which we might interpret as a sign that all is well with the dollar.

The question that won't go away from the back of this observer's mind is perhaps too technical to be conclusively answered yet: But with the signs so clear to thinkers like yourself (and Another), how does the gold market refrain from betraying its future direction by a rise in price, now, just days away from the introduction of the "honest money" of which you speak?

Normally, as financial events unfold, the more astute investors begin to anticipate the course of the future by voting with their pocketbooks...in this case, casting their vote by purchasing gold. Is the system of paper market manipulation of the POG so powerful that all trace of individual gold purchases are masked? Wouldn't you expect, so late in the game, to see the price of physical gold overwhelm the paper futures market? Why isn't the "lightening in the night announcement" already reverberating throughout the dollar-denominated world? You hear it. Another hears it. You have pointed it out to us. Why don't at least a few of the rest of the men-in-the-street hear it, too? At least enough of them to cause the price of gold to start rising?

Was not the central bank invented to lend money to the government? Wasn't the viability of that arrangement based upon the government's ability to lay a tax on the people to pay that debt? (In the United States for example the Federal Reserve and income tax were both established in the same year -- infamous 1913. One could (would) not have existed without the other.) As such, Aragorn, wouldn't it be natural and justifiable for thinking individuals to take an "us vs. them" attitude toward the central bank? After all, it is our labors and profits that pay that debt (and in America our children's children debt to the tune now of over $5.5 trillion), even though it is the vote-buying politicians that contracted it . Isn't it the institution of the central bank that makes it possible? So I have no problem with central bankers as people, my problem is with the 'institution' of the central bank. I do not buy this proposition that "We have met the enemy and he is us" -- that we get the government we ask for. Or that we get the central bank we ask for, for that matter. I know a great many honest, hard-working, thoughtful people who very much dislike big government and have spent most of their lives fighting the battle against socialism and imposing government. They ask nothing of the government except to be left alone which by the way many interpret to be a constitutional gaurantee. I think the central bank was an imposition on the people to satisfy the lust for power on the part of politicians -- royal, republican, democrat or other wise -- and the greed of bankers -- European, Oriental or American. Jefferson opposed it; Jackson opposed it; many thinking Americans oppose it today.

All of this verges on the ancient republic vs democracy argument, and there is no doubt I prefer the republic which I do not think can co-exist with a central bank -- except in its most benigh form(s). A former chairman of the Fed, Paul Volcker, pointed out one time that the history of central banks is very young while gold has been with us for a long time. He went on to say in so many words that essentially the central bank has much to prove -- a position with which I concur.

Sorry to disagree with you, my new found friend. Your arguments are well considered, Aragorn. Perhaps I simply misunderstand what you are trying to say. It occurs to me that what you are saying is that the Euro form of central banking (ECB vis a vis Maastrict) is an acceptable alternative to what we've had. Please continue with your discussion and answer my arguments as you wish. I do not offer this in a mean spirited way but merely as discussion points. I am a reasonable man accustomed to challenging, yet civil, discussion. Please, let me hear your response.

Though we agree on the value of gold; perhaps we do not agree on our politics??

An afterthought: The central bankers might see the peoples gold as belonging to the people but they do not have a major problem giving up that gold to other central bankers when their failed policies lead to a drain of reserves. To wit, Netherlands, Belgium, Australia, Argentina. The central bankers gain but the people lose. Shall I go on? One more the United States which gave up almost two-thirds its gold reserves to defend a fictitious $35 gold price. Perhaps those who defend this system should consider that it is the economic ideology that they embrace that undermines their intent and desire to do what's right for the people?

.If we can work this out to an understandable conclusion, maybe we'll win a Noble. --- If the price of gold 10 Xed, the coin wold be out of circulation. The exchange rate between Dollars, Euros, etc. would be determined by the usual factors of global exchange and of course the " Money Changers", whom we can't seem to get out of the temple. The explosion in the POG would not make the 100 Euro coin any more valuable as MONEY, but it would be worth more as an object of barter. The rise in the commodity value of the coin would not raise Euro currency outstanding, except that existing in the coinage. To do other wise would be "the tail wagging the dog".

A Silver Dollar may be worth $7.00 as a coin , &5.00 as a glob, but still only $1.00 at the gocery store.For there to be a gold standard, every unit of that currancy in existance would have to be backed by gold. You would would have to mine and mint so much you would be digging up the Astroids.

Imagine an expanded version of when gold broke $800. Inflation passes 10% and gold rises to the occasion. People start buying because "it is going up"and just as current Stock Market values account for years of future earnings, fear of even higher inflation compounded for who knows how long, takes gold to 10X. The dollar in the immediate moment is only at 1.1X

Am I making any sense here?

RIGHT ON !!!!!!
---------------


p
|
|OWER TO THE PEOPLE!

Did my own typing tonight, sorry about the mess.

I think you are trying to re-phrase Gresham's Law which states that "bad money drives out good" -- that is when a debased form of money ciruculates with hard money, the hard money goes into a sock then between the mattresses (for well understood reasons) and the debased money is thrown to the market to fend for itself.

Aragorn is saying the same thing in a different way. You guys agree...I think.....My read on Aragorn's post is that we will soon be in a situation soon that in order for the dollar to become that hard currency that goes into the sock between the mattresses, it will have to be revalued so that more of them will represent 10 grams of gold.

The heart of that post was this: "A gold coin may appear that contains a gold value that is the national monetary term equivalent for that much gold. In Europe, perhaps we shall see 8 to 10 grams called 100 euro on a coin. In America, we might expect a similar 10 gram coin to be labelled 2000 dollars."

Beautifully stated. The very heart of the matter between the euro and the dollar, and the issue I agree the euro is about to force.

Just for the record, I believe that a gold standard can be accomplished through the Republican Party where at least two prominent candidates -- Kemp and Forbes -- have made gold part of their economic platform. For a moment there, you had me back on the campus in 1968........It should be said that there is a strong groundswell within the Republican Party for gold-backed money. Perhaps the euro is providing a workable template upon which we can build on this side of the Atlantic.

Michael, Was that last sntence part of the first? Re #1258, Right on, my diatribe will follow!

Come to think about it...You're right...We're talking Gresham's law here -- me, you and Aragorn.

Peter Asher and USAGold: Aragorn can and surely will speak for himself, probably more clearly and eloquently than I ever could. However, I offer my understanding of his words so that he may clarify that, too (if necessary).

Peter: You write: " If the price of gold 10 Xed" (rose by a factor of 10)...etc. In the presence of a true money based on gold, the only thing that could happen would be that the value of the dollar falls by a factor of 10. Gold would remain the same, it would be gold. Any change in its value would be considered a fall in the value of the currency price, not in the gold itself.

We hear your assertion from time to time that to fund a true gold standard "You would would have to mine and mint so much you would be digging up the Astroids." This is fallacious. Most of the gold ever mined is still in existence. Currencies are only a symbol of that value. Right now, with gold valued at $300/Oz. there WOULD have to be more gold mined to maintain that valuation at this price. However, the number of dollars has already been surpassed (at that price) long, long ago. The world economy has been running on empty for years, now. In fact, the reason for abandoning the gold standard in 1974 was because too many dollars had already been printed then (and were being cashed in). It boggles the mind thinking how many excessive dollars have been created by fiat since then. (Another used to say that gold would have to be valued in excess of $30,000/oz for gold to fairly reflect the number of dollars circulating now.)

Of course, there is nothing sacred about $300/Oz gold. Just as there was nothing sacred about a price of $.05 for a cup of coffee. (Been to Starbuck's lately?) It has been only by deception (and miracles) that the bankers have been able to maintain the fiction that the dollar is worth anywhere near $300/Oz of gold. Aragorn is suggesting that gold (with the advent of the gold-based Euro) will be revalued within or without the market to reflect a reality that has been developing for years.

USAGold: I read no acceptance in Aragorn's words for a central bank and/or an income tax to finance it. Rather, I see an idealistic understanding of the function of the central bank along with the understanding that the concept of the Euro will bring the dollar back into touch with the reality of gold (via a much higher price) whether the Federal Reserve wants it that way or not. Perhaps it WILL lead to the resumption of the constitutionally mandated treasury of the US taking over the direct issuance of the currency. However, let's not get ahead of ourselves. Honest money (tied to gold) first, reorganization of the issuing authority in due time!

USAGold: After watching the spectacle of the Republicans' impeachment hearings I will be thinking long and hard about pinning much hope for anything as rational as a gold-based currency on them!

BTW, have you seen any of the recent writings of L. LaRouche, lately? Although popularly perceived as beyond the far-left lunatic fringe, he also advocates rejection of the current debt-based system and a return to gold . He is a trained economist, too (for whatever THAT might be worth!)

Frankly, I don't think any Banker's Banker gives a rat's butt about anyone who is not sitting on a giant stash of tradable commodity or (even today) cash. But this isn't really germane to the topic. (Well maybe it is, but maybe not.)

If the premise is correct that on any given day a person holding a hundred Euro bill will be able to walk into their local (European) branch office and walk out with a set amount of gold, then wow, the times they are a-changin'.

However, such a situation is a long way off, right? No circulating Euros for three years. Does anyone see an immediate impact? Until the amount of gold in that 100Euro coin and the number to be minted is announced, nobody has a reason to get excited as far as I can tell.

Now on the other hand, trading in electronic Euros (Fresh, unencumbered paper) could take off in a big way to the detriment of the dollar. Then all of the aforementioned effects could be seen long before any coinage hits the street, and there would be no need to buttress the credibility of the new kid. Maybe they might just "forget" to mint those gold coins.

Hey maybe this whole thing is another "sting". A sting within a sting within a sting. Zap the dollar, get people panting after your paper (There's gold in them thar� Euros!), and then just yank the plug. (Well, now that we think about it, maybe gold reserves aren't that important......)

GF

yet. VSE and mining index still strengthening. Feb gold now at $297.10.

yet. VSE and mining index still strengthening. Feb gold now at $297.10.

Good to see you back here tonight. I agree. One step at a time. And yes, I think that Aragorn was concentrating on the currency management function of the central bank rather than its lending function to the federal government. I look forward to hearing how he deals with the issues I raise.

Something else to consider along these lines: At the present we have a central bank printing money to distribute around the world to "save the world economy." The dollar money supply is skyrocketing globally. These is not a day that goes by that the Fed is not adding reserves to the system. It is the American people who could very well end up bearing the brunt of this money printing down the road in the form of uncontrollable price inflation. Did Greenspan act outside his mandate? How was this decision made? Was there a political component or did the Fed take off in its own direction? Nobody seems to asking these questions because Americans tend to take things for what they are without looking around the corners. In my reading of American economic history I do not know of an American Federal Reserve chairman who printed money to bail out the world economy. Do you? This will surely come back to haunt you, me, Aragorn, and eveybody else. Greenspan's acts could be (in fact, are) viewed in some quarters as an act of benevolence, but when the bill comes due it is the American people who will have to pay it. With euro coming on line and Gresham's law around the corner, this money printing for global distribution couldn't have come at a worse time.

By the way, I know I'm probably dreaming when it comes to the Republican Party and gold. One can hope.......

I see where you're going with this. Lull em to sleep. Then we can issue a gold backed dollar and undermine those euros .... Good plan!

Well, I hadn't taken that step in my thinking. Strike with the hand they thought was empty. Why not do it now and force them into the open?

Should you:

Issue new currency? or

Peg the dollar $3000-30,000/oz?

Any bets on $300.00 Feb. gold today?

I believe Junior mining companies (gold) are starting to surge. VSE indices up. DOW down -167 yesterday. I win a $10 bet when it hits 8200 (is that a derivative?).

O.K. --- My understanding of a "gold standard" is like this. Right now, today, the U.S. goes on a gold standard , a $100 coin is minted containing 1/3 Oz. of gold, & all paper money is redeemable in gold. If that's not how it works. then all I've achieved here, is to inflate the "Forum" to a one page per hour printout
Currency is the bookeeping of how many gallons of milk one gets for an hour of carpentry, or how many IBM P.C.'s you need, to get a Toyota. Gold, floating in a free market as a commodity, cannot dictate the values of trade between people or nations. A surge in the price of gold would give more Toyota for less gold in Japan and more IBM for less gold in America. It would not, by itself, affect the ratio of the toyotas to the IBM's.

All I have been trying to say is that when the commodity value of the coin exceeds its face value, its "worth more dead than alive". This does not challenge Gold as the most desirable storage of value for the future. When money is only worth the paper it is printed on, Gold will be worth much more than the "value that is printed on it.

"...do you really expect the Federal Reserve system and the
banking community to give us a pessimistic outlook on their Y2K
progress, even if the situation really is pessimistic? For that
matter, it's simply not realistic to expect any senior business
executive to stand up and say, "We've missed every milestone on
our Y2K project, and we underestimated the cost by a factor of
five -- just like the IRS. Our programmers are burned out and
demoralized; they've formed a conga line, and they're dancing out
the door with their last burst of energy ... and the CIO just
quit. There is no way on earth we're going to finish even our
mission-critical systems in time. We're doomed; you might as well
sell your stock now."

-- http://www.yourdon.com/articles/y2kcrystalball.html

See also: http://www.y2knewswire.com/bankchart.htm

After re-reading your post of last night on central banks and my response, I think I over-reacted to your intent which I have a better understanding of today after sleeping on it.
I would prefer a constitutional balanced budget amendment over a political promise to do the same. Likewise, I would prefer a self-regulating monetary mechanism like a gold standard, or even a currency board with strong gold reserves behind it. It is too easy for politicians and central bankers to say that they are interested in sound money, sound fiscal and monetary policy, and sound government and then actually act against these "ideals" in practice. My initial reading of your post was that central bankers had our best interests at heart therefore we should step aside and let them run the monetary show. But I think I was talking about the old institution called "the central bank" and you were talking about a new institution called "the central bank". I hope that ECB vis a vis Maastricht is a step in the direction of self regulating monetary policy and I see that it might be an attempt to move more toward the concept of a currency board, but I see it as "means to an end" and the "end" in itself. Do you agree?

Please forgive me for my direct behavior last night, Aragorn. I truly think I misread your post. After re-reading I see that we have more on which we agree than disagree including the fact that we are at the end of the fiat money era.

The last sentence in the second paragraph should read:

and "I see it as a means to an end and NOT an end in itself"

USAGOLD, PH in LA, Goldfly, and Peter Asher, I was please to reveiw your comments just now. I will respond to all these good thoughts as time allows. Right now there is time for only this.

Peter Asher...seeing your Msg 1275, please reconsider my words. Though if I was unclear my failure is, as always, regrettable. You must see it this way--a nation cannot return to a gold standard at the rate revealed by the open market unless the gold they hold in reserve is sufficient for that nation's money supply and debt obligations. We can see in the U.S. that there can be no "backing" at the rate of $300 per ounce. There must first be a return to a FAIR market value, or an announcement of the official revalution of the dollar. PLease recall that the current official valuation of the dollar is no gold per each. Perhaps we welcome the change?

I see that my trepidation was well founded prior to my choice to discuss the institutional side of money. Michael, I am sure you gave voice to the thoughts of many. I will have more for you soon, but be assured now that you and I are in much agreement! In the spirit of Independence Day I endeavored to recite from memory the Declaration of Independence of the United States to the point where began the evidence of a long train of abuses and usurpations suffered patiently by the colonies under the King. To this day I earn smiles with the oratory on demand. Good words indeed. Consider this also, the Federal Reserve System is but one many central banks. To talk of central banks is not necessarily to focus on The Fed. Your thoughts on The Fed are a good topic for conversation as we share some views and not others--but I have nothing to gain by show of support or blame to this decision and action in 1913. That is the root of our indignation, yet the framers of that action are now well beyond our rebuke. We have inherited the sins of our fathers, have we not? We need not visit our vengence upon the sons, instead we work for change. That the US citizens carry a debt burden of 5.5 trillion, the bank cannot be held to blame--only to account. (Even I must pause to smile at that!) Truly, it is the government that spends. If they spend beyond the will of the people they are wasteful or likely imprudent. If their spending comes only from taxes, at least they are fiscally sound...sins of the father are paid by the father. But if they borrow this money instead, we diffuse the proper accountability if we lay blame at the door of the lender. Consider this also...it was not the bank that believed money to be too important to be in the hands of the people. The most egregious misdeed to the American people in the 20th century was an act of the President (Roosevelt) to take their money away, allowing them to use tokens instead. But again, our sense of injustice or wrongdoing rests with men long since gone, today we wrestle for change.

PH in LA has seen to the good heart of the matter.

More in time...

Michael, I did not have the benefit of reading your recent message (1277) prior to the writing of my last response. I hope that alone is ample demonstration that I did not take ill to your words of yesterday. We stand on common ground!

USAGold:
I agree that "I do not know of an American Federal Reserve chairman who printed money to bail out the world economy" either. At the same time, we must acknowledge that the Federal Reserve system was not set up to supply the world's need for a liquid currency, either. The simple fact is that the US has overreached itself in this regard for many many years. (As Another points out, having to discontinue the gold standard was already proof that the US had inflated its money supply beyond reality, even then...in 1974!) In a bipolar (cold war) world, this was perhaps a necessary evil; but the times they are a changin', right?

As for "this money printing for global distribution (that) couldn't have come at a worse time with the euro coming on line and Gresham's law around the corner," I often wonder if the Fed isn't just extracting the last ounce of blood from an already mortally wounded world financial system. If the world is indeed on the verge of embracing a gold-based euro system with the dollar slated for extinction as a world reserve currency, the Fed could print like there is no tomorrow while the party lasts. Their thinking would be that when the system changes, the debts outstanding on the dollar will just be paid off in hyper-inflated dollars and the world will move on. Woe to those with lots of dollars and no gold when that happens! "When the bill comes due it is the American people who will have to pay it." Yes, yes...yes! After all, they have enjoyed the benefits of the world's reserve currency for years (since�winning�WW II and the cold war). There really IS no such thing as a free lunch! Never has been! Never will be!

good read...

http://www.gold-eagle.com/gold_digest_98/murphy121098.html

"In 'Martin Weiss's Safe Money Report', Larry Edelson headlines to his
subscribers: "CLEAR OUT OF GOLD ON THE NEXT RALLY - DEFLATION WILL
DRIVE PRECIOUS METALS INTO A TAILSPIN IN 1999! - EXPECT $200 GOLD,
PERHAPS EVEN $180! - LOOK FOR $4 SILVER OR LOWER!"
He is not alone calling for these kind of numbers. As I last recall,
Martin Armstrong of Princeton Economics and The Elliot Wave Crowd are
calling for similar, much lower numbers for the precious metals. Some
of the calls are based on technicals and some are based on
fundamentals. The fundamental bears believe that deflation is going
to drag down the price of precious metals. As this is clearly the
issue of the day, I thought we should address it pronto....."

I shall take the thoughts of ANOTHER, Aragorn III, Goldfly, the PhD of LA, Yellowbird, and MK -- long before I follow the high priced views of Murphy, Edelson, Armstrong and the other misguided souls that wish others to sell their Au so that their sponsers are able to pickup the droppings. These remind me of the VSE boiler-rooms of the 1980's where the likes of Galactic was pushed from $1 to $50 before it declared bankruptcy and left the mess in CO for others to cleanup. Can you not see the truth of the future ?
Oh, I forgot, you do not have a crystal ball as I !
<;-)

For the record: my post did not represent a statement about the character of Murphy or anyone else. I said "good read"; I thought so, and I still think so. If you have more and better details with which I might evaluate the character of the individuals mentioned, I would appreciate hearing them.

Do you mind if I post here a post I posted on Kitco regarding Central Fund Canada...CEF...regarding their rights offering? Let me know.

Tom

I will let these words of wisdom penned by Professor Alexander Tytler over 200 years ago while we ( USA ) were still a British colony speak for themselves:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

"The average age of the world's greatest civilizations has been two hundred years. These nations have progressed through this sequence: From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to complacency; from complacency to apathy; from apathy to dependence; from dependence back again into bondage."

Too bad Allen(USA) doesn't post here! Until he does, it seemed worthwhile to repost the following:

Allen(USA) (Gold is not a commodity, per Alan Greenspan. It is a threat to the International Banking System.) ID#246224:
Copyright � 1998 Allen(USA)/Kitco Inc. All rights reserved
Reconsider, for a moment, the testimony of Alan Greenspan on 24th July 1998, in which he said "Several Central Banks stand ready to halt a rise in the price of gold if that were to occure..".

First, why would any Central Banks *_CARE_* about a commodity? Is it possible that they would do the same things to copper or iron or hog jowls? Consider the substitution, "Several Central Banks stand ready to halt a rise in the price of SPARE RIB QUARTERS if that were to occure..". A patently ludicrous reading.

Second, this plainly *PUBLIC* statement is uncharacteristic of a Central Banker such as Mr. Greenspan. Why did he go out of his way to express the intention of Central Banks to throttle the price of Gold??? Gold is part and parcel of the monetary system. It must be 'controlled'. Why? If gold were simply a 'relic of the past', a commodity, then WHY make such a public, contradictory message in a statement before the Congress?

Gold is an entirely different world of money than fiat paper. It is NOT a commodity. You can talk all you want to about gold options this and that, blah, blah, blah. The fact is that gold was rising over the past few days, had gotten past $297 in overnight trading, and was set to continue past the upper channel of its recent trading range when *_AMERICAN BANKS_*, known to operate on behalf of the US Government and the Federal Reserve, cut the legs out from under it by $6 or so dollars.

There are two reasons one would wish for a commodity to keep from rising. One: You are very short and would incure great losses as you tried to cover ( adding fuel to your own pyre ) . Two: You were long other trades which would be hurt by a rise in the price of that commodity. Or both of these reasons.

Fact is gold is not a commodity, it is a monetary system. So far it has been manipulated. Part of that manipulation is the current ascendency of paper money systems trying to supercede it. But it *_WILL_* break out of its confines as the AMERICAN forces and their ALLIES lose this war of economic aggression. Make no mistakes about this; AMERICA has lead a war of economic aggression against the world at large. It has subjugated entire nations and regions to be its virtual slaves in a kind of economic empire building. It stands at the very apex of its adventures and its patrons will literally fight to the death to maintain its position of influence and power. They will destroy the 'commodity gold market' if necessary to their purposes, to forstall capitulation.

Meanwhile other nations have been quietly building a new system based on gold, and independent from the American concept of 'debt' centered money. This new money system will be a 'savings' centered money system which is anchored in a gold standard. In this system money will be factioned as the economies grow, so that early money will become more valuable. Instead of 100's, 1000's & 10,000's in denominations growing skyward in reckless printing press inflation ( or the multiplication of bonds of indebtedness multiplying like a plague ) this money system will invent smaller and smaller denominations to be used as practical currency and will chain the growth in money supply to the availability of gold for a standard of growth.

Gold is the 'new' money. The financial/monetary allies of the United States will abandon it to the fate which has conquered all other failed empires .. and will smoothly transition to the new system without much trouble or care.

$3 Drop Due to One Trading Company; Spike Predicted for Next Week

By Melanie Lovatt and Tina Petersen, Bridge News

New York--Dec 11--COMEX Feb gold futures settled down $3.30 at $292.60 per ounce after extending early morning losses to hit a fresh 1-month low of $291.20 late in today's session. Early this morning, gold fell on selling from a large trade house, with funds then appearing as heavy sellers late in the session. The slide came on deflationary concerns raised by the November US Producer Price Index, which was reported down 0.2%, despite initial forecasts suggesting it would be unchanged.
* * *
GOLD/SILVER
Gold was technically-motivated today, said sources, noting that no fundamental news affected the market. "Nothing affected gold today except the charts," a trader said. "When you look at other financial markets and the fact that the dollar is weaker [against the yen], gold should have been firmer."
Sources said that stops were triggered under $290, although Feb subsequently managed to recoup some of its losses and end above this level. "Gold hit a technical point, and the funds sold it," a source said.
One source said he expects gold prices to spike again next week as the House considers impeachment proceeding against US president Bill Clinton. Late this afternoon, House Judiciary committe recommended the entire House impeach Clinton for perjury stemming from his Aug 17 testimony about his relationship with former White House intern Monica Lewinsky.
"In that event, I would expect there would be a pretty interesting decline for the dollar," said the source. "There's a perception out there that a trial would tie up the administration for a few months, which would not be good for world economic conditions."
Some players also attributed gold's decline to deflationary concerns on a 0.2% slip in the November US Producer Price Index. "The deflation issue is really making the markets nervous," according to a trader. "That seems to
be the focus more than anything else."
Sources said the gold fundamentals are sound, but that the concern over deflation is keeping pressure on a lot of commodities. "Low oil prices means less money for many parts of the world," a trader said.
The trader said he doesn't expect any rebound in gold "until people are convinced that the reflationary action the government takes to lower interest rates will stimulate the economy."
The Commodity Research Bureau Index fell again today ending at 188.90 after slumping to a fresh 21-year low of 188.29.
However, gold seems to be supported by physical buying from certain Asian regions, namely India and China, sources said.
Silver, meanwhile, traded in gold's shadow, with Mar ending down 1c at $4.80 per ounce. "Silver doesn't have a mind of its own today," a trader said. "It's doing whatever gold's doing."

With permission.
For the full story go to: http://www.crbindex.com

I'm sorry T...I would like to accomodate you but we have rules about advertising like this. I have great respect for Mr. Spicer and Central Fund, but if I let you do it, I have to let others do the same. It won't work here. I appreciate your on-going participation here, T...My best to you... Perhaps Mr. Spicer would like to post his views here (without advertising his fund) so that all could benefit from his many years experience and knowledge. People would find him and his fund if they had an interest.

I truly appreciate your consideration in asking before doing. We haven't heard much from you lately. Do you want to tell us the story on delivery on the December contract? GC has been after me for two days to track it down. Monday I will make a call to Bridge to see if we can get some numbers. I'll either post here or get them to you somehow. One of my sources did say that the numbers you are looking at are very big. I will let you tell the story... if you are inclined. (How's that for a set-up?)

We are all aware that gold flows in and out of Comex. There is over 800,000 ounces of gold on hand but only 60,000+ thousand eligible. Notices for delivery, by the 29th, are for over 5,000 contracts.

I've search to try to find if this is normal. All I found was information on August...delivery notices were over 5,000 contracts. It therefore appears that this is a non-event. Unless, of course, the contracts are not settled for dollars or gold does not flow in to cover the notices.

I still look for gold at $280-5 just to shake out the weak longs. Physical gold is good...so are internet stocks. One you hold...the other you trade and speculate with for the funny money you need to buy.....gold and silver.

We watch this old gold market together...for now!

Will post an old ANOTHER this weekend. Yes

Tom

I had never seen that quote before. Says it all.....Thanks

Here's one along the same lines from Taylor Caldwell's The Lion of God that I've always liked:

"Rome's consititution was inevitably eroded by ambitious and wicked and lustful men, in whom patriotism had long died, and who saw their nation not as a Collosus of freedom in the world and a light to the nations, but an arena in which they could gain prizes and eventually crown themselves."

Aragorn...You are a beacon to ships at sea, including this at times storm-tossed version. Your advice that "we diffuse the proper accountability if we lay blame at the door of the lender" is well taken and puts renewed importance on the political process. In a way, your simple message is one of both liberation and hope. I look forward to your extended (and promised) thoughts on that warm up post, i.e #1279.

PH...Your #1287 dovetails with my post of the Liu Shannen argument for higher Chinese gold reserves. If China actually follows up on this, it could be the engine for a bull market in gold. Instead of spending their time talking down gold, the bullion bankers should be working to mainline all that gold they claim the Europeans want to sell to China...and Japan which has even more reserves than its neighbor to the west. We are fellow travellers, PH. I thank you for your presence at this round table of yore.

AEL...When you talk of the Elliott Wave Crowd please realize that this is a diverse Crowd of which you speak. On one side of the spectrum you have gold and stock market bear, Robert Prechter who sees gold in a "c" wave about to descent the depths of hell. But you also have his ex-partner and mentor A.J. Frost who sees gold in the powerful "5" wave that could take it to the stars. Which is correct? We assume the mantle we do for our own reasons. So what are yours? Most Centennial/USAGOLD clientele have simple needs -- to protect themselves against financial disaster. Few seek gold for profits. Most see gold as an insurance. Insofar as their gold holdings are concerned, they care not whether inflation or deflation are the next visitation only that they have enough to protect their hard-earned savings. If gold were to go to $200 what kind of a stock market or economy would we be experiencing? Would you rather at that time have a safety deposit box full of cd's and stocks or gold coins? In such times which would be more important, the advice of these market gurus or gold ownership? Something to think about while you wait for the market to move in one direction or the other.

Gold, that is. --- I think the price of gold is always tethered, though elastically, to the cost of production.. A lot less stretch on the downside of course. Even the sheep can see a real bargain.

Would a mine operate when it would not only lose money , but couldn't even service debt. Also if the mines are as forward sold as we're told they are, they are standing in line with LTCM & Co. to compete for the cheaper gold. To acquire a lot of gold without raising the price, negative sentiment may be most important. Today's price drop seems to be the result of short "Shill" work.

So, back to my ongoing debate. I see us agreeing on blips, paper & standards, I think we're just haggling price. How do you make a 1 oz. Coin be worth $ 2000, when a mine will sell you an ounce for $ 300. It seems what you have there is an indestructible bank note, not a gold standard. The currency relationship between the countries of gold production would be the primary factor, fluctuating according to supply and demand. In the presence of a working system which records trade, Gold the commodity is the dog that wags the tail of coin value.

PH � I understand your statement, but how would that monetary valuation occur ?

If there were a compelling reason to bring global economic parity to the excited states. A way to level the playing field according to the order of the new world, one could hardly do better than by debasing a nations currency and stripping its citizens of their real wealth - gold. To defend the US$ by selling or leasing the gold stolen from the nation in 1933, is a criminal and treasonous act against the nation. Is this happening today through luck or cunninng? Is this what the Law upholds today? Our ancestors would be ashamed of a posterity who had been so long delivered from freedom that the taste of it was as water in their mouths. (apologies to T E Lawrence)

To get the weekend rolling here at the FORUM, I thought I would post something from Robert Chapman's most recent offering. Mr. Chapman has done a stellar job reporting on the nuts and bolts behind the scenes activities of Wall Street's financial giants. He also gets down to the nitty-gritty of the derivatives game and how it impacts ordinary investors. The following is reproduced with his permission:

"From the looks of things most of the liquidity* creation ended up in the bond and stock markets. The Dow moving from 7700 to 8900 in three weeks, which within six to eight months will end up as a trap. The meltdown of Asia and Russia has now hit Mexico and South America and the G7 financial systems. We shouldn't see but a few hedge fund or bank collapses, as long as the stock markets of the U.S. and Europe stay at lofty levels. Once the next big correction takes place pandemonium will break loose. Bankers Trust, which is a major derivative player is said to be in trouble, which is why Deutsch Bank may buy it out. Lehman Brothers has been hit exceptionally hard and could have further problems in a falling market.

The IMF, AID, World Bank and a consortium of banks are trying to save Brazil and Mexico, which will save its neighbors. Each day capital flees both countries. Will financial and drug scandals bring down the Mexican government and will the Brazilian Congress accept the austerity package presented by Cardoso?

What we do know for sure is the world financial experts have been wrong again. All those bankers, money managers, professors and market touts have been an will continue to be wrong. You never hear a real dissident voice in the media. The liquidity that has been and will be injected into the system will go into the banks and into the financial and derivatives markets. The pyramid just gets bigger. The BIS says speculative activity turnover is now $3.5 trillion per day. We sadly report nothing is being created except a bigger bubble."


*Fed pump priming

USAGOLD NOTE: The above was written before the cracks appeared in worldwide equity markets during the course of last week. What Mr. Chapman describes is a financial/monetary system floating on a sea of debased currency, consolidations meant to hide eroding balance sheets, and institutions kept alive by feeding an implacable addiction to gambling.

Mr. Chapman also provides an interesting read on Alan Greenspan which I will try to pass along sometime this weekend.

WHAT'S KEEPING GREENSPAN AWAKE AT NIGHT?
By JOHN CRUDELE

ALAN Greenspan is petrified about the stock market bubble
but doesn't know what to do about it. No, Greenspan isn't suddenly becoming chatty - at least not with the press. But Lawrence Lindsey, who worked alongside Greenspan at the Federal Reserve until 18 months ago, is having more luck breaking through Greenspan's mumbothe other day that Greenspan "wants to prevent a market collapse. But he doesn't want the market to go any higher."

Lindsey believes the stock market is too high in price and
extremelyjumbo. Lindsey, who recently wrote a book called "Economic Puppetmasters" (The AEI Press) told me over a cup of coffee vulnerable. And he thinks that the current
impeachment process, if it actually puts the president in
jeopardy, could be very damaging to stock prices. (I'll tell you what I know later.)

Does Greenspan understand the vulnerability of the economy? "Yes," says Lindsey, who currently toils as managing director of Economic Strategies Inc. in Washington. "He's quite worried about the bubble in the stock market. If the bubble bursts the U.S. consumer will stop spending and the U.S. and world economies will be in trouble."

That, says Lindsey, is what happened in 1929. In his book, Lindsey quotes Greenspan as saying to him: "There are all sorts of parallels to the late 1920s. But you have to be a little careful about the 1929-1932 analogies. The problem is that if actions in 1930 and 1931 were taken differently, we might have had a fairly significant recession,but we would not have had the deep fall that we know as the Great Depression."

The former Fed governor believes - and says Greenspan agrees - that U.S. consumers are being kept going by the exuberant stock market. "We are spending more than our incomes in part, because we are feeling rich" because of the market, Lindsey says.

Lindsey himself thinks the stock market's behavior is
troubling. "I think price-to-earnings ratios are very high and there will be (corporate) profit disappointments over the next year," he says.

If the market were to ignore these bad earnings, "it will
become more and more divorced from reality." The economist also believes that the impeachment process - totally ignored so far by Wall Street - could be a crippler for the market. "If it looked like the president was in a protracted battle for his political life, it would have a very chilling effect on the market," he believes.

"It would raise uncertainty and create doubt about the future course of policy," Lindsey said of the impeachment. "The problem will be one more of appearances, because in fact, policy won't change."

Here's what I know and what I told Larry Lindsey over that
cup of coffee. The Republicans in the Senate know a lot more about President Clinton's behavior than has come out. Some of the information, I'm told by a very reliable source, is coming from people close to the White House. And more information has been delivered by people described to me by my source only as "wanting to do their duty."

I've predicted in this column before that President Clinton is in serious trouble. I wrote those words back when nobody even considered congressional hearings possible, much less
believed that an impeachment process would get this far.

Based on these recent conversations and others that I can't
fully detail here, I'm even more convinced that Bill Clinton's presidency is on the brink of disaster.

Remember, Ken Starr investigated Bill Clinton's personal
behavior, not just his sexual behavior. It wouldn't take the
Republicans long to track down some of this information and
bring all sorts of things up during the Senate trial.

And both Larry Lindsey and I would agree that the political
situation in Washington could be the biggest bump that'll
shake Wall Street's complacency.

Nice to have the Establishment Pundits re-iterate what I & others have been saying on the "Forum". What Robert Chapman say's about the liquidity creation going into the markets, is, I think, the fact that as you lower interest rates, the profit potential for other monetary parking places becomes more inviting. What I wonder is, as for every buyer there is a seller, where is the money going that comes out of those markets ?

It's good to know that Greenspan is planning what I suggested "They" are planning, which is to "flat line" the markets and wring out the derivative liability. They got off to a good start yesterday by wiping out some expiring gold option value just as the holders of $295 calls thought they at least had a piece of their premium.

Thanks Dave for the book reference. My family had informed me that there was no room on the sleigh for another computer and modem to support my "Forum" habit, so I told them I would settle for some good hardcover soothsaying.

After some twenty experts (or more) working for various corporations or as private consultants working in one way or another on the Y2K problem contact you to purchase gold, you begin to get the idea that there could be more to the problem than you previously believed. That is how my interest in Y2K began -- an interest that has developed into a preparations program which I will outline below. I don't have the time to check out and verify the universe of information being compiled on the subject. Nor do I have any intention of becoming an expert in this area. Let me just say this: In each instance I asked the experts whether or not they believed the Y2K problem was "for real" -- a question some would think irrelevant since they were talking to me about buying gold -- but I think many would be surprised at the answer. In almost every case, they said "I don't know...but I am preparing for it as if it were a reality."

Here's what I am doing:

1. Small coin acquisitions, particularly pre-1933 European gold coins

2. Putting away cash (small bills)

3. Food preparations ( I will buy my first stored food "tranche" next week. Two two year supplies for two -- one for home; and one for our mountain cabin.) I will build around these as a core holding. We have two kids as many of you know -- one high schooler and one away at college.

4. Begin an examination of energy source -- I am now leaning toward solar cells that convert solar to electrical

Do I believe that Y2K is inevitable? Yes, but like the experts, I do not know what to expect. If it comes down to not needing any of this, I am no worse off. I will donate the food or we will eat it, and remain comforted by the presence of a strong personal gold reserve.

My darkest fears: Rolling blackouts. Telephone service shut down. No matter what preparations are made to forestall Y2K in terms of software and hardware modifications, they will be for nought if there is no electricity to run these systems. The attendant civil problems need not be under-emphasized.

And no, I do not enjoy having to spend the time on these preparations, or even being forced to think about them. Like you, I have more pleasant ways to spend my time (though possibly not quite as important at the moment), and I'd rather be thinking about whether or not the Broncos can go 16-0.

At the same time, I am thinking about offering a food program through Centennial simply because so many people don't know what to do. We have found an affordable (in our opinion) solid program. It's just a question whether or not an investment firm has any business in the food business and whether or not our clientele has a need or interest. Any forum (or lurker) feedback on whether or not there's a need for this would be greatly appreciated.

These are indeed strange times. I will post this again Sunday and Monday. If you do not have an interest, just scroll through it.

http://nt.excite.com/news/r/981212/09/business-computers

Highlights to Reuters article. We strongly recommend going to the above url and reading the full story. VERY IMPORTANT ARTICLE.

"Even if the "millennium bomb" does not explode in the world's computers just over a year from now, 1999 is likely to see rising panic as people take precautions against computer failure triggered by the year 2000......"

"Next year we will see periods of calm broken by occasional news stories predicting computer systems failures," said Ross Anderson of Cambridge University's Computer Security Research Center. "My own feeling is that around August or September panic will start, with hoarding of food and bank notes. Then the whole thing becomes a self-fulfilling prophecy."....But Anderson is taking no chances: "Personally, I plan to have three months' food, a working well, three tons of calor (heating) gas and 400 liters of diesel come the dreadful day."

Yes asolutely, I got a flyer last week from Don McAlvany, offering food reserves. Robin just told me of someone who went to one of these sources last summer & they were 10 weeks backlogged.

Michael:

You write:
"AEL...When you talk of the Elliott Wave Crowd please realize that this is a diverse Crowd of which
you speak. On one side of the spectrum you have gold and stock market bear, Robert Prechter who
sees gold in a "c" wave about to descent the depths of hell. But you also have his ex-partner and
mentor A.J. Frost who sees gold in the powerful "5" wave that could take it to the stars. Which is
correct? We assume the mantle we do for our own reasons. So what are yours?"

... I am afraid you missed the point of my post, and of murphy's writeup (if you read it). My post directed attention to an issue that I thought might be of interest to usagold folk (potential for deflationary influence on gold pricing), and to murphy's writeup, which argued rather strongly *against* such fears. And, BTW, I am not an elliott wave enthusiast nor a prechter fan, though I do have some respect for the guy, in spite of his having been terribly wrong on a lot of his
(wave-based) calls. His "Crest of the Tidal Wave" is most interesting and useful, IMHO.

"Most Centennial/USAGOLD clientele have simple needs -- to protect themselves against financial
disaster. Few seek gold for profits. Most see gold as an insurance. Insofar as their gold holdings are
concerned, they care not whether inflation or deflation are the next visitation only that they have
enough to protect their hard-earned savings. If gold were to go to $200 what kind of a stock market
or economy would we be experiencing? Would you rather at that time have a safety deposit box full
of cd's and stocks or gold coins?"

Would rather have physical cash (FRNs), gold, and silver, not necessarily in that order, all in my personal posession (no deposit box, thanx!). I am the most conservative investor imaginable.

"In such times which would be more important, the advice of these
market gurus or gold ownership? Something to think about while you wait for the market to move in one direction or the other."

Don't know to which "gurus" you refer. Murphy? He's a flaming goldbug, like me. Prechter? He is a goldbug, too, only he is looking for a last deflationary spike downward before the Big Bull begins. As far as waiting for the market (gold market?) to move one way or the other, I am not. My physical acquisition program is well underway. I am, however, not yet quite in with both feet. I do think that the deflationary sceanario might possibly play out with gold (rather unlikely, but more than a longshot), at which time I would consider gold the buy of a long lifetime, and you'd find me in with both feet and both hands. Call me a dreamer, but I love the idea of picking up some 1 oz eagles @ $200/each. Meanwhile, as that is pretty unlikely, I carry on with a modest but persistent buying program at current prices, which I consider a bargain.

I have an order with Mountainaire, made through Mcalvany on Aug 20 and they are just shipping it now. That's almost 4 months. It was quite expensive. If I get more, I am going to a local cannery and buying the pails, tops, 50lb bags of food, renting a nitrogen bottle and canning myself. Much cheaper and you get what you want. For about 1500FRNs I can feed 4 for a year. You won't get fat on that but you can live on it.

Glad to hear of your thought and action on the Y2K issue. After spending many hundreds of hours investigating the issue, there is no doubt in my mind that this problem is very real and considerably worse than is commonly supposed. Precisely *how* much worse, and what the ultimate outcome will be, no one knows. But my assesment is that there is significant risk to infrastructure and many systems on which modern civilization is more or less totally dependent. This will not be the end of THE world, but the multiple interdependent systems failures of Y2K may mark the end (or the beginning of the end) of many worlds of comfort, ease, wealth, and guarantees, for a great many people.

Might I suggest, for your preparations: http://www.provide.net/~aelewis/gold/y2kstock.htm

Also: I would like some more information on the pre-1933 European gold coins that you mentioned (advantages, etc.; are these numismatics, or another form of bullion?) Do you have a URL for me, or...?

Also: you write: "It's just a question whether or not an investment firm has any business in the food business and whether or not our clientele has a need or interest."

In my view the idea of a food business is complementary and consistent with your investment orientation (hard assets; physical PMs). Really, they go together, as I have taken pains to describe in my own piece urging stockpiling of food and other consumables along with the metals:
http://www.provide.net/~aelewis/gold/realcomm.htm

Thank you for taking the time to expand upon your original post. Seems I misunderstood where you were coming from -- a recurrent problem for me it seems. I'm sorry but I missed the Bill Murphy part of the post.

I am a friend and fan of Mr. Murphy's ( and Frank Veneroso as well ). They have made an important contribution to the gold discussion, particularly the determination that the central banks are lending far more gold than anyone thought previously -- a courageous, ground breaking position by which we have all benefited.

As for Bob Prechter (who wrote a flattering liner note for my book), his analysis is greatly respected here and it takes about three seconds for me to open his newsletter. (I keep hoping he's changed his mind on gold!) He did, after all, call the 1987 crash and was one of the few analysts who did.

As it is, it seems we are coming very close to a day of reckoning wherein we shall see who's right the inflationists or deflationists, or perhaps a continuation of something in between -- the so-called inflationary depressions of Asia. Who knows, AEL.

As Another has said, and has been repeated often on these pages:

"We watch this new gold market together, yes?"

As for gurus, I think you probably know my answer. I have no preferences. I prefer gold. I do enjoy reading these gurus though and discussing their views. Life would be boring without them -- right or wrong.

Thank you for participating in this forum, AEL. I look forward to your future posts. I am relieved that we are on "common ground."

Aragorn & PH; are you saying that a "fair" price for gold is obtained by dividing the money supply by the Fort Knox tonnage & then devaluing the dollar to create that ratio? We'd be paying $200/hr. To shoe stitchers in Thailand if we did that.
Actually, what WOULD the USA be like if we had to use domestic resources and labor for most of our consumption because we couldn't afford to import And as we would be king of the export world, eventually we'd fix the deficit & debt situation. Am I getting this right?

Michael & All: I was bouncing this subject around with Robin and she said (referring to all our posts} "I wish you guys were Congress instead of the Forum".

Thank you for your post on stored food. Do you have a feel for how much space your food will take up? Also, have you checked into the dehydrated vs. freeze dried choice? Do you have a preference? When I first started thinking about this problem I went to Sam's Club to try to figure out what I needed to do. I was overwhelmed. This is not an easy problem to solve. The program I am looking at it is fairly inclusive and the same price you mentioned, seems like same amount of food. Right now I am told delivery is three weeks. Hoping that holds up as we progress on this thing. I will be making my personal order next week and we will see. Anything you can pass on to the group would be greatly appreciated.

Also have you looked into a medicine/medical package? What have you found out there.

Never thought I'd be worried about this sort of thing, but when you read the Reuters article I referenced earlier, it seems we are not alone in these concerns.

I am a supporter of term limitations for that very reason...I would like to see a Congress of citizen politicians some day. That would indeed be interesting.
The problems we are embroiled in today stem principally, in my opinion, from politics having become a profession rather than an avocation. Please tell Robin that we are setting up a FORUM Election Committee and we would like her to be the chief fund raiser. Position includes plane tickets to China and file full of military secrets.

I wish to extend to all my best wishes for a happy and profitable New Year. To all that hold US dollars I suggest that you use them now, while they still have high value, to purchase other "things".

What, pray tell, causes these THOUGHTS? Simply an opinion of the future of the US$ in 1999. Could I be in error? Yes. However, you decide if what I suggest is folly.

US dollars are heading home. The Euro will cause a displacement of massive proportions. AG is printing like no ones business. America will soon be awash in its own currency. Foreign money will exit the US share market and the bond market. The US dollar will fall in value and rates on the long bond will go sky high. The market, not AG, sets these rates.

The US economy will contract and bankruptcies will rise to unheard of levels. Unemployment will be massive. Financial institutions and banks will fail in a derivatives nightmare.

Oh, the good news? The falling dollar and rise in long bond rates will foretell all this. Gold will react by being priced in US dollars at a much higher level.

Happy Holidays!

Tom

Here's another URL on this outrageous FDIC "Know Your Customer" thing
(Gives me a literal *chill* every time I see that happy-face KYC
phrase! A masterpiece of spin... Fascism with a Friendly Face...)

http://www.wired.com/news/news/politics/story/16749.html

A few excerpts:

When a bank detects any "suspicious activity," current regulations
require that the company complete a five-page report that includes
the customer's name, address, Social Security number, driver's
license or passport number, date of birth, and information about the
transaction.... The banks are required to telephone law enforcement
"in situations involving violations requiring immediate
attention.".... The bank sends the information to a computing center
in Detroit, where it becomes part of the Suspicious Activity
Reporting System, a mammoth searchable database jointly administered
by the IRS and FinCEN that went online in April 1996. Over a dozen
agencies -- including the FBI, IRS, Secret Service, bank regulators,
and state law enforcement -- share access to the data.....
Congressman Ron Paul, a Texas Republican who serves on the House
Banking committee, plans to nix their plans. "This massive new
program -- euphemistically called 'Know Your Customer' -- would
convert our nation's banks into wholly owned subsidiaries of the
government-wide movement to invade every aspect of Americans'
privacy," Paul wrote in a recent column.

Repost by FOA & Pete
...........................................................
Pete (10/9/98; 14:54:05MDT - Msg ID:465)
ALL, WHAT IS THE GAME PLAN AND HOW CLOSE ARE WE TO THE BIS
COUP?
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.
NOTE: (This is a point I believe many are missing)
...........................................................
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".
------------------------------------
You can refresh your memory of the article by John Dizzard (NY POST) by returning to post #465, 10/09/98

If they are not unwinding(pretty obvious by the action of commodities lately), and as PH in LA kindly pointed out to me that the BIS will not allow the POG to break the $280/oz barrier by buying at that point.

What will be the consequences?

1) These banks and funds will continue to dig a deeper hole for themselves because to keep the POG low they will have to keep shorting at or below this $280/oz level in order to keep the scam going. (Means the BIS will be scarfing up the physical at bargain basement rates)

2) Because of the imbalances that will be created between an immovable object(PAPER GOLD) and an all powerful force(PHYSICAL GOLD), something will have to give.

3) The fundpigs and bankpigs are now at the point of no return. Who will win? That point is pretty obvious also.

4) The US$ strength is decreasing slowly but surely which under normal circumstances should make the POG react inversely, yet the POG has not. Sooner or later this anomaly will be corrected. The question is "WHEN"? Any comments appreciated.--Pete.

Let's reconsider Long Term Capital Management.

You are now an international financier with very deep pockets.

You are approached by some very big name people representing big name financial consortiums like Citibank, Chase Manhattan, Merrill Lynch, et al. You are one of those erratic, sometimes detached geniuses, who occasionally get very rich, but at times lose touch with Wall Street and the rest of the world. You never however lose touch with sound business principles.

The question (guardedly): Would you be interested in buying a controlling interest in LTCM?

Your response (naturally): With all that money you people have, why would you be looking to me?

Consortium (now coolly): Well, we need to lay off some risk. We are in up to our eyeballs as you probably already know and are kind of living day to day. This thing needs a big injection of capital. You may need to feed it for awhile, but someday it'll turn a profit for you.

You (perplexed): Well, what does this LTCM do for a living?

Consortium (fidgeting): They play the derivatives market. They are one of those hedge funds you probably heard about. They are a not business that sells a product or service. They...well...ahem.... They... uhm... "invest" in markets.

You (starting to get annoyed): You mean they're like a mutual fund? Not really a business but an investment fund? They don't have anything to sell?

Consortium (trapped): Yea they're like a mutual fund...sort of...except they take bigger risks.

You (chuckling): Apparently they haven't done too well "investing" or you wouldn't be talking to me. What positions are they in?

Consortium (now getting nervous): Well...you see they got these Nobel prize winners and developed a computer trading program that ran some econometric models on the world markets. The computer generated a stragegy for them. They then went out and borrowed a bunch of gold and yen at very low interest rates, sold the gold and yen for dollars then leveraged that up about 500 times or so in Russian bonds and a short position in U.S. Treasuries.

You (now knowing you are not interested): A computer. Interesting. What did you say their name was? Long Term Capital Management. Funny name for a gambling outfit. Correct me if I'm wrong. I've been a little out of touch recently. Aren't those big time losing positions? Excuse me...Did you say 500 times?

Consortium (now knowing you aren't going to bite): Oh yea. Could have even been 1000 times. We still aren't sure. They've already been bailed out once. A bunch of the boys got together over at the New York Fed a few months ago and chipped in some big bucks to keep these guys afloat. Alan Greenspan told us if we didn't bail out LTCM that the whole economy might belly up, so we did what we had to.

You: So...How are you going to get your money back? Doesn't seem like this LTCM has a way to make money except to do some more gambling. And these guys apparently need some new software. Where did they go wrong in the first place?

Consortium: They didn't have the Asian crisis computed. It wasn't included in their model. So when it hit they didn't know what to do. They got blindsided. They were already committed. Then the Russian market started crumbling underneath them. Greenspan lowered rates to save the world which we understand since that helps towards us getting back some of our emerging country loans, but he killed us on this LTCM thing. It was a damned if you do, damned if you don't type of situation for Alan. We don't blame him, but you can guess what things look like over here. The smoke still hasn't cleared.

You: Don't expect it will for awhile either. I appreciate your candor, but if I want to gamble in the markets I don't need to buy somebody's elses losing position to do it. I'll just start my own "hedge fund" and start out even if I want to do something like that.

Consortium: Well what about Soros? He's a friend of yours. Do you think he's flush right now?

You: Give him a jingle when he get's back from his book tour. Gotta go. Keep me in mind for the next go around.

ALL: Discussion Points: Do you think this fictional account is approximately the way recent conversations went with Warren Buffett and Prince Alaweed over purchasing LTCM? And...Are we talking about an entity here that cannot be bailed out? If so what are the short term consequences in the gold and equities markets particularly in light of Japanese finance minister Myizawa's recent announcement that the United States is now interested in "quietly" reversing its strong dollar policy? If the yen appreciates is LTCM looking at some major margin calls? Is LTCM about to be back in the news?

Thought I'd try something different to blow out the cobwebs and get those synapses cracking for the upcoming week.

Good to see you here today...Ask and you shall receive...How did you know what was on my mind? And how did I know what was on yours? Great post...Seems we are headed in the same direction.

Once again we are reminded what a valuable presence FOA and ANOTHER were on this FORUM.

Hey Michael,
You did'nt tell me when. If you can with accurracy, I will split 50-50 with you, naw, on second thought, if you knew you would'nt need my lucre. You're a great guy.

Pete

PS: ANOTHER & FOA, if you're lurking out there, where are you when we need you? PLEASE RETURN ASAP and hope all is well with you both.

I think what you described in the first post of the day was the Asian Contagion American style -- the inflationary depression. Some Japanese economist said that once you take away the dollar reserve currency advantage, you have a currency and an economy that looks very much like the Asian economies that were devastated last year, that is, an economy awash in imports, with high balance of payments problems, and the inability to pay its debts through exporting. In other words a country ripe to devalue its currency. Yes?

Thank you, Bottom$, for posting this quote in your Msg 1286. It is one that I read many years ago and immediately saw the truth in it..."as though a recollection from memory". It is one of the few distinct examples I can cite for a prominant role in the development of my fundamental ideology. To paraphrase-- "[a democracy] can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy". This is the root of the problem we face, and is the hand that nurtures germination and growth of fiat currencies. Ignorance or tolerance on the part of the willing seller to accept fiat money as payment is the hand that forestalls the weeder's hoe. Only a firm hand on the pursestrings can prevent the release of all manner of money (both real and dubious) in such an environment as described in the quote.

It comes to this, (which is the fashion in which I should have chosen my words on Thursdays Msg 1256) as a goldheart--I do not care for the term 'bug'--you should look for allies from an unexpected quarter...the central banks and the BIS. There is indeed a rich history of creative money, from the mischeivous actions of blacksmiths, early bankers, and governments themselves. In the absence of popular will of the people as reflected in the efforts of politicians, the only hope for a return to sound money rests in the hands of those whose function it is to try to maintain the integrity of the money they find thrust upon them by the history books. You surely do not dispute that a goldheart is in the minority, as all others vote for "largesse".

European central banks have now taken the pursestrings with intent to assure that only sound money passes through in either direction. A demand of gold in payments spells the end of the American "free lunch", as well characterized by PH in LA. This lunch we will see does come with a bill served that interrupts the desert!

As mentioned before, the efforts and alignments for the return of the gold standard have not come about easily. There is an approximate path to be taken that is not apparent to those not looking for it. Look again at PH in LA's repost of Allen(USA)'s reminder of important words..." the testimony of Alan Greenspan on 24th July 1998, in which he said 'Several Central Banks stand ready to halt a rise in the price of gold if that were to occur'." Understand two things...1) that this is not gold that is being controlled but rather the perception of the dollar's value, and 2) that this was out of necessity in the short term, a necessity that ends with the smooth launching of the euro within three weeks. At that point, the ECB would indeed like to see a stable dollar, but do not care what the final exchange rate becomes. You will recall that no less than ANOTHER himself wrote that the dollar's value vis a vis gold was finding its support in Europe...a means to an end. On the point of exchange rate stability, I posted this one month ago:
--------------------------------
Turning to a debate in progress about the possibility of global foreign exchange target zones, Greenspan said: "It is a desirable goal. It's just not feasible."
"The presumption that we can create exchange rate target zones is an illusion," he added. Greenspan said intervention to stabilise currency levels in such a system would simply be unworkable.
--------------------------------
This is indeed the gold-advocate part of Mr. Greenspan closing any hope that might be entertained by politicians that a stable "floating" exchange rate could be maintained among fiat currencies. Essentially, when Europe goes gold, the U.S. and all others must follow.

A follow up to this post is to come soon.

The Dollar is down but so is the gold.

We wonder why the metal's being sold.

Advisors are printing distortions so bold,

That holders keep doing whatever they're told.

It should be easy to appreciate the reality that Mr. Greenspan cannot state frankly "Buy gold or otherwise flee the dollar."

All good readers of this forum know well by now that our current money is only illusory. Though the details may differ, the US dollar is fundamentally no different than the many southeast Asian currencies that were last year essentially "revealed as a hoax", and the list includes the ruble, and the oft devalued south and latin American currencies. It should be clear to see what takes the brunt of the "reality check"...the savings of the people. Real things remain real things...houses, furniture, inventory, etc. But a lifetime of savings becomes instantly incapable of buying what it did during the grand illusion. Money (or should I say puchasing power) lost when the reality check arrives begs the question of blame. In the US, no-one wants this blame--better to have the people blame themselves if possible, agreed? Statistics reveal that Americans hold very little cash savings. Money has been largely spent on real things. Even shares in company stock are real things. But as the market is prone to its own eventual "reality check", the losses of wealth there might well exceed the iminent losses suffered by cash savings. Yet, those market losses can more appropriately be blamed on one's self, while losses to cash savings (purchasing power) will result in outrage directed at the government and monetary institutes.
You can see why the prominent individuals in these institutions would prefer to steer the course as needed (in response to having no other choice but return to the gold standard brought about by Europe) but have the series of events appear to be less by design and more a result of inevitable market forces. If direct and obvious intervention comes to ve viewed as the least volitle of options, it will be exercised. This would take the form of a gold standard announcement wherein the dollar is officially guaranteed a value in gold at a price much higher than we see in the open market these days. You can be sure that even today this value is known to good degree. This direct intervention will not be necessary if, upon suspension of the European assistance propping up the dollar (as discussed in my post this morning), the return of a FAIR open gold market for the remaining fiat currencies results in an orderly dollar price adjustment to reach this expected value. Likely, the advancement in gold price would be so swift as to incite panic as the price would know no upper limit, and the government would be viewed as heroic to step in an lock a guaranteed dollar value versus gold. This would appear a natural and desirable thing to do, and there would be little for the population to point at that they are not already pointing at. PH in LA picked up on this in my Thurday post and provided an eloquent summary for which I am in his debt--"gold will be revalued within or without the market to reflect a reality that has been developing for years." Yes. And at the end of the process is the standard of gold. No currency will buy another currency without first demonstrating its equivalence with gold.

I mentioned that upon reacing this standard, the unaware man-on-the-street would notice no volitility in gold as priced in his nation's currency. I was asked, as we are men in the street seeing a year of stable gold price, is this a sign of the unannounced US dollar gold standard? No! This is the calm before the storm. This stability can be attributed to the operations and preparations in Euroland where they must for this time stand with a foot in both worlds. They shall soon rasie the foot from the fiat world as they cross the gold standard threshold, thereby also lifting the restraint upon the number of dollars priced into equivalent gold!

What happened in SE Asia was a cake walk. Please remember, this if from a person who holds gold and has a liking for internet stocks. I'm no gloom and doomer. We are talking about the financial system of the world. Not just the USA.

None of the other major counties would attack the US dollar or send our dollars home if they have a choice. It is suicide. The problem is it is a question of survival. I do not suggest that this will occur right away. What I do suggest is that the current state of affairs is such that Europe and Japan will be forced, by conditions at home, to send our dollars back to us. Just as the oil states may be forced to accept the Euro to raise the price of oil.

Once dollars start to return to the US there is no stopping the flow. As of now all counties are still holding. Who, pray tell, wants to be last to send US dollars home? No one. Once the trickle starts the flood gates will open.

Watch for some type of crisis that will cause a foreign government to sell US government debt and the US share market to lower. At that point in time we will see the bond and stock market fall together while the US dollar is sold off.

This will be rather fast...capital moves swiftly now days. One caution...if AG has cut a deal with the rest of the world to revamp the world currncy system all bets are off. Of course, the dollar will not fall and the bond market will not plunge. We watch and wait.

Gold and internet stock...what a combo...one has to be correct...I hope!

Tom

Some people I talk to have a difficult time seeing value--as their own knowledge works against them. Because they speak their own language well, and have some knowledge of other languages, they attempt a standard translation yet the simple truth is less than what they expect.

Monetary terms are nearly a foreign language within a language. Not only do they not translate well into the realm of conventional conversational speech, they suffer double jeopardy when talking about money between different nations.

First, the US dollar. It is itself undefined except for its physical appearance (when printed or coined) and its process of creation. It has no definate value until it is demonstrated with each new transaction. If it is not being spent, its value is uncertain. With that as background, it should not be difficult to envision any range of prices for all manner of products, goods, and services. Minimum wages could as easily be one dollar per hour as one-thousand dollars per hour. Any country under a fiat currency system has the same situation, only that the names are different. To transact business between two countries, an equivalent exchange rate must first be established between the currencies. Because the the nature of the beast as I've just mentioned, an exchange rate established last month or last year is not valid for a transaction today. The snapshot of the currencies' values must be assessed. The local "price" of gold is a commonly understood point of reference. If the historically demonstrated value of a currency falls precipitously, those currency holders find that they can buy less with their money. This is true for companies also, who discover that they must pay more for their overhead and labor force. Eventually, day to day existence appears the same as before the fall--but savings accounts have been rendered for naught as all prices rose.
As goes one fiat currency, so go them all. If a country opts to stand clear of the domino effect, it builds its money anchored to a firm foundation. Rather than rely upon an uncertain, undefined value, the money itself is a precious monetary commodity, gold. Allow me to demonstrate the fallacy in conventional thinking and translations. To do this I will describe the unfamiliar so that your own knowledge will not work against you as it might if I used pesos or francs.
Consider a Republic that has selected its currency to be lats. Each lat has a local value equivalent to 100 santims. As economic conditions develop such that each lat has an increased purchasing power, would you conclude that it is worth more than 100 santims? You might, but in a similar case in the U.S., would the dollar--in finding its general value to be greater than before--be worth more than 100 cents? Of course not. Such is the corresponding relationship between santims and lats.

Now you are told that the lat has a purchasing power of divpadsmit dzeltens abolus (a dozen yellow apples) or that simt latu (100 lats) has an eqivalent value of sespadsmit grams zelts. What would you assume about abolus and zelts if you were once again told that due to economic conditions the lat had an increased purchasing power? You can safely guess that its purchasing power would buy more abolus (apples) because you were directly told it could. But having learned your lesson with the equivalent value of santims, you hesitate to answer.

Now, what would you expect to happen in this Republic if the value of the dollar either rose or fell significantly? It does not matter what dollar price you might pay for apples in your local shopping market to the yuan cost of tea in China or the cost of abolus in lats within this Republic. Or to put another way, the cost of apples in the U.S. does not affect the puchasing power of OTHER world currencies.

Lets wrap this up--assume the purchasing power of the dollar fell dramatically. The dollar price of everything increases tenfold, including gold. Wow, $3,000 for gold! But seeing that this is a phenomenon no different than the apple example, we don't expect the yuan or lat to take much notice, barring of course, some domino effect in which case what holds for the dollar might eventually hold for the yuan and therefore the yuan price of tea in China and the yuan price of gold...but this would not hold true for the lat--it is immune to the domino effect. This is guaranteed by the currency definition that includes a step not taken in the U.S. such that 100 cents equals one dollar equals...X(?). You see, simt santims equals viens lat; and simt latu equals sespadsmit grams zelts. Or to put another way, 100 santims = 1 lat; 100 lats = 16 grams gold. The price of gold fluctuates in the U.S. because the dollar floats in purchasing power. The lat is defined by its gold equivalent, and a dollar that falls against gold falls as far against the lat. The dollar exchange rate with the lat reveals an equivalence such that the dollar is shown to be worth only $335 per ounce, currently. You may recall this to be near the target range ANOTHER suggested the BIS would likely view the dollar at this time. It is essentially done, yet not where easily viewed, and not revealed by the open market that has an inertia of technically inspired trading to work through. But that is only a step from here to there, a "foot in each world" as I said earlier. The dollar has far to go! Pehaps 3,000 dollars will equal sespadsmit grams zelts. This will affect prices in the U.S., but not Euroland, and not "the price of tea in China".
This was not an act of "war" against any particular country, only an effort to return to independent fairness and stability. A nation's gold will be the tool to reveal the value of its currency. Such is the ultimate designs of the Maastricht Treaty, the participating countries, and all those which choose to participate in spirit if not as an actual signatory.

Hi MK. Sorry to hear of the Broncos loss. I saw you asking some questions concerning preparations for infrastructure collapse/depression. My wife and I have been preparing for 2 years now and our preparations are complete with the exception of purchasing items that don't keep well such as gasoline, cooking oil, and vitamins. We purchased dried food from Emergency Essentials, www.beprepared.com, and I can highly recommend them. Ask for Angie, she's a sweetheart. A one year supply in #10 cans amounts to 12 cases of 6 cans each and is about the size of a small desk. A one year basic supply of grains and legumes comes in 11 large buckets. We've supplemented our dried food with canned meats, vegetables, and fruits mostly purchased at Sam's Club. We also can our own from the garden.

When we started we divided our preparations into 4 categories; residence, equipment, supplies, and food. We prioritized the lists as we went along according to money available, relative scarcity if panic ensued, and basic needs. It has served us well. I now have a whole new appreciation for what it takes to get by. I will never take anything for granted again. If I can be of any help to anyone, please feel free to drop me an email at gears@idir.net. Since we've already attempted this saga, I might be able to give some ideas on what to include in your preparations.

BTW - we've tried some of the food and it tastes great. Don't forget to get a cookbook that centers on cooking from home storage. Good luck.

ET

What a nice day! If AG is leasing/selling our Nations' gold, then it would be the prudent thing as a citizen and the imperative as an individual to buy that gold up before it gets offshore and lost. We've all got to pitch in and save our Nation by saving ourselves. Buying gold for safety is kind of like that saying "He who(se) (currency) dies with the most(gold)toys wins." We will be beaten by the gold standard. We can do it the hard way or the other way, by buying gold. The more gold we buy, the more wealth we retain. The more people buy gold, the wealthier the Nation will remain. Good reason to buy gold!

I want to thank all for an extraordinary week at the FORUM. As we gather 'round this ancient round table to exchange ideas, information and philosophies, I can't help but think that 1999 is going to be an unbelievable year and this FORUM even more important to all of this than it already has been.
Those of you who are thinking about posting your ideas but can't take the big step, please note that these FORUM participants are a chivalrous lot. You have nothing to fear but fear itself..........And perhaps you have that one idea or thought process that might make a difference to somebody else. All of you who go to the trouble to share a part of yourself on these pages, you have my gratitude and the gratitude of your fellow posters. We go forward as fellow travellers and friends.......My best to all.

$293.40, now $293.20...

Euro 18 days and counting....

Placer Dome and Getchell Merging....
http://biz.yahoo.com/rf/981213/cd.html

Euro optimism tinged by doubts

By Noah Barkin

LONDON, Dec 11 - After manoeuvring deftly through a political and economic minefield in 1998, Europe's nascent single currency bloc is confident -- just three weeks before the euro's birth -- of another nimble performance in 1999.

On the face of it, there is ample reason for optimism.

Inflation in Europe is at its lowest level in almost half a century and growth, even among the 11-member zone's weakest members, is expected to exceed two percent next year, according to official forecasts.

Europe's left-leaning governments have pledged to toe the line fiscally and Europe's new central bank has rewarded them with an early Christmas present in the form of across-the-board interest rate cuts.

Even those critics who questioned the feasibility of pulling together 11 distinct economies under a single interest rate have fallen silent as Europe's economies have aligned themselves in a manner not seen in decades.

Why then, have Europe's top political and monetary officials spent much of the last quarter fending off fears of confidence crises and credit crunches?

The truth, experts say, is that beneath the bloc's thin veneer of economic stability lie a host of new landmines that could blacken European prospects in the euro's crucial first year.

"Our central outlook is for reasonably buoyant growth in Europe next year, but obviously there are large risks," said Jonathan Coppel, head of the Organisation for Economic Cooperation and Development's European desk.

"The main risks are external and associated with the effects of recession in emerging markets spilling over into Latin America and into the euro zone."

OFFICIAL AND PRIVATE GROWTH FORECASTS AT ODDS

Political upheaval in Italy, a nasty fight over the presidency of the European Central Bank and a heated debate over the proper level for interest rates all raised questions about the credibility of Europe's ambitious project in 1998.

And the effects of emerging markets turmoil, largely absent for much of 1998, have now begun to cloud the outlook for next year.

The European Commission still expects growth in the euro bloc to come in at a solid 2.6 percent in 1999 after a healthy 3.0 percent in 1998.

And these forecasts are roughly in line with those of the OECD, which, in its recent World Economic Outlook, called for euro zone growth of 2.5 percent in 1999, following an estimated 2.9 percent in 1998.

The OECD's outlook, however, provided alternate forecasts in line with a hypothetical "downside scenario" which highlight the ongoing risks for European performance next year.

Under this scenario -- which assumed a deepening of the financial crisis in Asia, a widening of the crisis to Latin America and another correction in global equity markets -- growth in the European Union was seen slowing to an anaemic 0.7 to 1.0 percent in 1999.

Many academic and private sector economists believe the pieces may already be in place for a significant slowdown which could pull growth under the two percent mark next year.

"Growth is slowing a lot quicker than people expected," said Bruce Kasman, managing director and head of European economic research at investment bank J.P. Morgan, which is calling for 1.6 percent growth in Euroland next year.

Diminished demand from emerging markets is expected to put a sizeable dent in the contribution of net exports to European growth in 1999.

And recent data have shown a marked decline in European business confidence, sparking fears that firms will scale back their hiring and consumers their spending.

Worries about this crisis of confidence, European Central Bank President Wim Duisenberg revealed this week, prompted the recent ECB-led decision to push euro-zone rates down to 3.0 percent.

STRUCTURAL DEFICIENCIES, EURO STRENGTH BOTH CONCERNS

J.P. Morgan's Kasman said goverment policy in Europe's new left-leaning capitals will be key to the economic outlook, warning that attempts to redistribute income from high-income tax payers and businesses to middle and low income households could backfire.

Labour market reform will also be crucial if politically-charged unemployment rates are to improve over the long-term.

"If governments push the corporate sector too hard it's a real danger," he said. "And these governments don't get high marks on their reform content. On the structural landscape Europe is still weak."

This week, Germany's Labour Office reported that unemployment in Europe's biggest economy rose for the first time in almost a year in November, raising fears that recent advances in the fight against joblessness could be coming to an end and raising concerns of more tension between politicians and central bankers.

Another worry is that the euro could prove too strong at a time when European exports have already been hit by declining global demand.

A Reuters survey of foreign exchange forecasters, released earlier this week, showed they expect the euro to enjoy a robust launch next month and climb steadily against the dollar throughout the first half of 1999.

These forecasts are based on the expectation that the U.S. Federal Reserve will be more aggressive in pushing rates lower next year than its new European counterpart.

"If the ECB is reluctant to relax monetary policy and the Fed moves faster, then there is a chance of serious appreciation of the euro and that would hurt," said Charles Wyplosz, professor of economics at Geneva's Graduate Institute of International Studies. "That is a major risk."

ECONOMIC WEAKNESS - "IT MAY STOP HERE BUT IT MAY NOT"

Economists are quick to acknowledge that the dangers inherent in merging 11 economies under a single currency should not obscure the benefits that the euro will offer.

The bloc's 290 million people will reap the rewards of lower transaction costs, increased price transparency and the promise of a greater economic voice on the global stage.

But clearly, Europe's policy makers will have their work cut out for them in the euro's early stages with a slowing economy and uncertain outlook in Latin America and other emerging markets hanging over their heads.

"My own concern is that every week now we get darker forecasts for next year and Brazil is still hanging over our heads," said Wyplosz.

"We may not have seen the bottom of the slowdown. It may stop here but it may not."

Previous from Reuters UK

http://www.yahoo.co.uk/headlines/19981211/financial/0913397457-0000008718.html

Some support for your theories below...Ran into it looking for something else. Thought you would be interested.

Full text of press release from Canada NewsWire)

Merger agreement reached between Getchell Gold and Placer Dome

(all dollars in U.S. currency)

VANCOUVER, Dec. 13 /CNW/ - Placer Dome Inc. and Getchell Gold Corporation of Denver are pleased to announce an
agreement and plan of merger that will result in Placer Dome owning a 100% interest in Getchell Gold Corporation which
operates the adjoining Getchell and Turquoise Ridge gold mines in Nevada.

Getchell shareholders will be offered 2.45 Placer Dome shares for each Getchell share in a reorganization that is tax-free to
United States shareholders and is planned to be treated as a pooling of interests under U.S. GAAP (Generally Accepted
Accounting Principles). Based on the closing price of Placer Dome's shares on the New York Stock Exchange on December
11, 1998, the transaction values Getchell at about $1.085 billion or $34.45 per share.

Getchell's Board of Directors has unanimously approved the merger and will recommend to Getchell shareholders acceptance
of Placer Dome's offer. Getchell's Chairman J. Kelley Williams and Chief Executive Officer G.W. (Bill) Thompson will be
invited to join Placer Dome's Board of Directors following the merger.

Based on the findings of its due diligence study, Placer Dome intends to implement an aggressive exploration and development
program to increase reserves and resources at Getchell's property to 20 million ozs. of gold by the end of 1999. By completing
development of the new Turquoise Ridge Mine and expanding the mill to 6,000 tonnes per day at an incremental capital cost of
about $230 million, Placer Dome expects Getchell to produce more than 800,000 ozs. of gold per year at a cash production
cost below $200/oz. starting in 2003. Placer Dome also sees significant potential for more than 20 million ozs. through
exploration of Getchell's 130-sq. km. (50-sq. mile) property that has all the geological parameters for major discoveries.

The Getchell property contains two operating underground mines and a mill facility that includes a pressure oxidation plant. In its
second quarter 1998 results Getchell estimated its total mineral inventory to be 14.7 million ozs. of gold contained in 37 million
tonnes of material grading 12 grams of gold per tonne. The mines are expected to produce an average of more than 400,000
ozs. per year from 1999 to 2002 at a cash production cost below $230/oz.

Placer Dome now estimates it will produce 3.2 million ozs. of gold in 1999 at an average cash production cost of about
$170/oz., with a rising production profile thereafter to above 3.5 million ozs. by 2003 at an average cash production cost of
about $190/oz., with 60% of this production from North America.

John Willson, President and Chief Executive Officer of Placer Dome, said: The Getchell property provides Placer Dome with an
opportunity to use our financial strength and exploration and project development skills to optimize the potential of an
extraordinary property whose development has been constrained by recent market conditions. The transaction strengthens our
North American base with the addition of quality ounces, making Placer Dome, with its Cortez and Bald Mountain operations,
a major Nevada producer. And with our recent joint venture in South Africa, this puts Placer Dome on track to become a
long-term 3.5-million-ozs.-per-year producer with reserves of 80 million ozs. of gold."

Bill Thompson commented: I am delighted with this transaction. Placer Dome has an excellent reputation for mine development,
and is well-positioned from a financial and management perspective to develop this property into a world-class mining district."

With 31.5 million Getchell shares outstanding on a fully diluted basis, Placer Dome will issue about 77 million additional
common shares, which considerably broadens Placer Dome's United States shareholder base. Upon completion of the merger,
Placer Dome will adopt U.S. GAAP as its primary basis of communicating financial results. This will provide a more
appropriate accounting emphasis for an international gold mining company reporting in U.S. dollars, and provide better
comparison with its peer group.

The transaction is subject to majority approval by Getchell shareholders and customary regulatory approvals. No approval by
Placer Dome shareholders is required. Placer Dome and Getchell plan to mail their joint proxy statement and prospectus to
Getchell shareholders upon receipt of regulatory approvals. The transaction is expected to close by the end of March 1999.

For the transaction, financial advisers to Placer Dome are Credit Suisse First Boston, and for Getchell Gold, Nesbitt Burns Inc.
and Salomon Smith Barney Inc.

I thought it a good article that showed the weaker spots of the ECU potion. I believe that in spite of those issues, the EU will perhaps partake of an extrordinary windfall in their new currency. Dollars will be sold and the euro will take off. When they get close to their magic 15%, it will take gold to buy euros. The EU will enjoy a plethera of cheap imports from the rest of the world who can't shake the US$ standard. Gold will rule the future for awhile, again.

Christmas is swiftly approaching. Tax loss season also closing fast. Euro soon to be launched. Somebody is turning up the heat in the kitchen and nobody has noticed -- yet.

After some twenty experts (or more) working for various corporations or as private consultants working in one way or another on the Y2K problem contact you to purchase gold, you begin to get the idea that there could be more to the problem than you previously believed. That is how my interest in Y2K began -- an interest that has developed into a preparations program which I will outline below. I don't have the time to check out and verify the universe of information being compiled on the subject. Nor do I have any intention of becoming an expert in this area. Let me just say this: In each instance I asked the experts whether or not they believed the Y2K problem was "for real" -- a question some would think irrelevant since they were talking to me about buying gold -- but I think many would be surprised at the answer. In almost every case, they said "I don't know...but I am preparing for it as if it were a reality."

Here's what I am doing:

1. Small coin acquisitions, particularly pre-1933 European gold coins

2. Putting away cash (small bills)

3. Food preparations ( I will buy my first stored food "tranche" next week. Two two year supplies for two -- one for home; and one for our mountain cabin.) I will build around these as a core holding. We have two kids as many of you know -- one high schooler and one away at college.

4. Begin an examination of energy source -- I am now leaning toward solar cells that convert solar to electrical

Do I believe that Y2K is inevitable? Yes, but like the experts, I do not know what to expect. If it comes down to not needing any of this, I am no worse off. I will donate the food or we will eat it, and remain comforted by the presence of a strong personal gold reserve.

My darkest fears: Rolling blackouts. Telephone service shut down. No matter what preparations are made to forestall Y2K in terms of software and hardware modifications, they will be for nought if there is no electricity to run these systems. The attendant civil problems need not be under-emphasized.

And no, I do not enjoy having to spend the time on these preparations, or even being forced to think about them. Like you, I have more pleasant ways to spend my time (though possibly not quite as important at the moment), and I'd rather be thinking about whether or not the Broncos can go 16-0.

At the same time, I am thinking about offering a food program through Centennial simply because so many people don't know what to do. We have found an affordable (in our opinion) solid program. It's just a question whether or not an investment firm has any business in the food business and whether or not our clientele has a need or interest. Any forum (or lurker) feedback on whether or not there's a need for this would be greatly appreciated.

These are indeed strange times.

************************************************************

http://nt.excite.com/news/r/981212/09/business-computers

Highlights to Reuters article. We strongly recommend going to the above url and reading the full story. VERY IMPORTANT ARTICLE.

"Even if the "millennium bomb" does not explode in the world's computers just over a year from now, 1999 is likely to see rising panic as
people take precautions against computer failure triggered by the year 2000......"

"Next year we will see periods of calm broken by occasional news stories predicting computer systems failures," said Ross Anderson of
Cambridge University's Computer Security Research Center. "My own feeling is that around August or September panic will start, with
hoarding of food and bank notes. Then the whole thing becomes a self-fulfilling prophecy."....But Anderson is taking no chances:
"Personally, I plan to have three months' food, a working well, three tons of calor (heating) gas and 400 liters of diesel come the dreadful
day."

Funny, I've reached precisely the same conclusion! -- AEL
see: http://www.provide.net/~aelewis/gold/y2kstock.htm

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

http://reports.guardian.co.uk/articles/1998/12/13/p-38148.html

Sunday December 13, 1998

Millenium bug panic warning

Start hoarding now government tells families

By Nicole Veash

Britons have been warned to stock up with two weeks' emergency food
rations in anticipation of millennium bug-related shortages.

The statement by Gwynneth Flower, head of the Government's millennium
bug taskforce Action 2000, is certain to cause severe embarrassment
to Labour, which has repeatedly assured the public that food and
power supplies will not be affected by computer problems at the turn
of the millennium.

Action 2000, however, is advising every household to take sensible
precautions against the millennium bug by buying in an extra supply
of long-life foodstuffs in the direst warning yet of a potential
millennium meltdown.

In an unprecedented statement indicating the level of panic in
official circles, the Department of Trade and Industry-funded task
force, charged with minimising potential damage caused by the bug,
has said that contingency planning for a worst-case scenario should
start as soon as possible.

"We are talking about people having a judicious amount of surplus
food in their kitchen cupboards. Anyone sensible would plan for
this," said Flower.

"Because we don't want to see panic buying in the weeks leading up to
next Christmas, consumers should think about this in advance."

Flower's warning has emerged amid increasing concern over the impact
of the millennium bug - a computer code anomaly that will not allow
many of the world's computers and a substantial percentage of
computer chips to function properly when their internal clocks reach
2000.

Despite repeated assurances that the bug will be ironed out, it has
now emerged that large numbers of government, utilities and corporate
computer systems that control every aspect of our lives will not be
ready for the turn of the century. According to Action 2000 the
Government will issue a leaflet either next spring or summer,
explaining what sort of food people should keep in their stockpile.

"Tins, dried foods and grains will be very useful," Flower said.
"Cans of soup, maybe half a dozen curries, tuna and packets of
biscuits. Long-life milk would also be a good idea, although we
wouldn't advise people to stockpile water.

"We are talking about the sort of common sense provision that you
would automatically do to ensure against any potential emergency."

Despite Action 2000's advice, most of the major supermarkets are not
planning to buy increased stocks of long-life products.

A spokeswoman for Sainsbury said: "We feel fairly confident that
everything will be normal next year. Much of our millennium
preparation is going on alcohol because we think people will be
drinking more. We are renting an extra 400,000 sq ft of warehouse
space for all that surplus booze."

Jon Woolven, research director of the Institute of Grocery
Distribution, said: "The millennium is going to be a considerable
logistic challenge for retailers and manufacturers."

British pressure groups, including the Conservatives' own Taskforce
2000 and the Institute for Social Inventions, are also advising the
public to stock up with dried and tinned food, toiletries, households
products and cash. And they suggest people should save large plastic
drinks bottles to fill with water nearer the date, in case water
supplies are affected.

A spokesman for the Cabinet Office, which co-ordinates millennium bug
prevention, said: 'We are very surprised at the advice from Action
2000 and the Government disagrees with their analysis.

"The food and electricity industries are among the most prepared
sectors in the country and they are investing heavily to ensure that
delivery and output of their products will not be adversely affected
by the year 2000"

� Copyright Guardian Media Group plc.1998

Hi Michael. I'm curious. In your 1331 post, your #1 security mentioneed was pre 1933 European coins. Why? In bad times-would they be worth more than gold or silver bars, or other coins? I know very little about coins, but my worst fears would lead me to look at melt down value (ie just the gold or silver), so I'm missing something.

WHy would someone want a controlling position in LCTM? I don't get it. The money would either unwind some losing positions, and so what's in it for me sort of thing, or buy up losing assets. Well if someone believed in those assets enough, they could purchase them themselves on the open market couldn't they, and for real cheap as LCTM is forced to unwind and perhaps have the proces fall further with extra supply. LCTM itself isn't an asset, so where's the deal is what I'ld like to know. As usual , I will qualify my remarks with...but maybe I'm missing something! (I often do)

I agree with you on LTCM. But I guess you never know what attracts a buyer. I've been surprised before but if any of these big hitters, like Buffett or Alaweed, buy this thing in the current environment they are looking at substantial losses in my opinion -- the equivalent of buying a black hole for their capital. I'd want to transfer the risk myself if I owned the mess! Especially with the latest yen/dollar news and the purported end of the strong dollar policy.

On the pre-1933 coins I like them because they survived confiscation in 1933 as collector items and have been treated as collector items ever since. I think they are worth the extra 10%-15% you pay over same sized bullion coins. Let's just say they are a personal preference for MK. I don't expect everybody to agree with me though.

So where've you been, bmacd? We had quite a week here. What did you think overall? What did you think of AEL's post about the British government warning its citizens to put up two weeks of food for Y2K tonight? Meanwhile the silence from Washington on Y2K is deafening. Also, the Reuters story that the dollar could depreciate steadily against the euro in the first half '99? When FOA and Another were first talking about this month's ago, I'm sure the mainstream media would've skewered them on the very idea that this new currency would put a dent in U.S. dollar hegemony. Aragorn III's over the weekend posts were major...(one man's opinion.)

By the way gold is up 40� in the overnight market.

Bmacd --- I wonder what "THEY" know that we don't? Maybe there is some cute deal cooking to make "The Boys" winners at the expense of those who invest "logically".
I think to figure these things out we need to think more like detectives than economists .

Michael --- The coin arrived , Thank you again.

Hi Michael
Oh I've been lurking mostly. I sometimes miss a day or two, but then I print out the archives and read them while I'm on the stairclimber!! I think I posted a few times last week or two though. Gotta be honest. Lately, I'm almost glad I've been so busy. I'm finding this whole market/world economic thing really frustrating. So it's almost a small blessing that I have less time to watch CNBC, or read up on the net or papers (which I don't trust amnyways). Michael, doesn't it make you feel like screaming sometimes? If I'm in a good mood, I just laugh at it, and say, give it into 1999, and that's it, the party's over. Then there's other days, where I think, well they've lied, played games, rewritten rules so that fundamentals don't matter because the mainstream amd the average person is so easy to manipulate that maybe this can just keep going on.
But you've asked for my opinion, so here goes...
The current situation should end like now. 1999 is 2 weeks away. The euro is the same. I agree with the Reuters release you mentionned that the USD will depreciate significantly against the Euro in the first half on 1999. I did not read the article however)I maintain that the USD has to depreciated just to keep it's market propped up at all. THe US needs those foreign buyers of their assets. To keep them attracted and to attract new ones, the price of those assets has to come down, ie a lower dollar. Otherwise, the market is dead. I think it's headed south anyways. The next 1000 points down will scare enough people this time that if it doesn't recover quickly, they'll panic. On a selfish note, I care about this as long as the price of gold is the benificiary, which it has to be. Fiat currency is dead. THe Euro is just another trade tool, but if it also finances itself on debt, it'll never gain too much ground. To date, it seems that gold will play a part, so there may be some stability, also a reason that the USD will fall.
I'm not entirely sure how I feel about Y2K. Mind you if my government actually told me to stock up on two weeks worth of food and supplies, I think I'ld be pretty scared. Governments rarely say oops, we can't cope. THey usually lie their way around a situation. I have heard that Europe has been putting so much energy and thought to the Euro that Y2K problems have been neglected. Not that this helps us, we're all connected anyways. Much as we do have it together for this thing, it'll still foul up. My husband is on the Y2K board where he works, and they say they're ready. He does however caution that his company is ready, that's not to say whoever they link up to....I hope the worst that happens is that I have to reprogram my VCR. I have little faith that it'll be pretty!
Another and FOA, sadly, would still be slaughtered in the media if their thoughts (read wisdom) were widely published. No one wants to hear it. They want to believe the governments, and hide their heads in the sand. I had a great discussion with a friend this weekend. He said that intelligent people are so because they read. I challenged that anyone can read, intelligent people use their intelligence and learned facts to interate and question, and thus learn not to believe all they read or hear.
Man- I can imagine the typos!!
Thanks for the coin information.

Totally embarrassing!! I'm sure you get the idea though. (So do I, I need typing lessons!)

You just gotta love manipulation and bailouts. I think I finally get it. Being honest and hard working and thinking, is not good. (I'm kidding of course) What ever happened on this planet to people taking responsibilty for themselves and their own actions? Too many games and easy money. Yes Peter. "They" do know soemthing we don't. "They" know how to call in the Fed, or get a government policy to bail them out because there is so much money at stake. This never works. I really doubt that Main Street cares too much about Wall Street when it comes to bailing out a huge hedge fund, and it becomes a government matter, which in the end trickles down to tax dollars. I hope I don't sound confrontational, it's more just head shaking and eye rolling!!

You just gotta love manipulation and bailouts. I think I finally get it. Being honest and hard working and thinking, is not good. (I'm kidding of course) What ever happened on this planet to people taking responsibilty for themselves and their own actions? Too many games and easy money. Yes Peter. "They" do know soemthing we don't. "They" know how to call in the Fed, or get a government policy to bail them out because there is so much money at stake. This never works. I really doubt that Main Street cares too much about Wall Street when it comes to bailing out a huge hedge fund, and it becomes a government matter, which in the end trickles down to tax dollars. I hope I don't sound confrontational, it's more just head shaking and eye rolling!!

$293.60.

VSE index and VSE mining index took a good beating today, but so did all the other markets too. Oh boy...! :-(

It seems that Professionals and foreign investors lead the last selloff in stocks. Households would appear to be the net buyers. Corporate buybacks were buyers. This next downturn could be accelerated by household and reduced corporate buybacks.

This seems to support the theory that professionals are using this latest rally to sell into and exit their positions. Anybody see something else here?

http://cbs.marketwatch.com/news/current/baz.htx?source=htx/http2_mw

New York Fed Chief Says Hedge Fund Control May
Be Needed


By Isabelle Clary

NEW YORK (Reuters) - Federal Reserve Bank of New York
President William McDonough said Monday he hoped that banks
dealing with speculative investment firms or hedge funds will
enforce enough internal controls to prevent risky strategies that
may threaten entire financial systems.

But McDonough also warned that if such market discipline cannot
be achieved, there may be a need to overcome complex legal
issues and to regulate the hedge fund industry in the public
interest.

"It is clear from the Long-Term Capital experience that if any
hedge fund, or I prefer to call it any highly leveraged institution,
becomes large enough to have the possibility to create a systemic
risk, such institutions have to be subject to control in the public
interest," McDonough told the Economic Club of New York.

McDonough presided in late September over the eleventh-hour
rescue of Long-Term Capital Management (LTCM), a
Connecticut hedge fund led by high-profile market players who
financed large-scale risky investments with far more credit than
the industry's norm. The demise of their portfolio threatened
several of their well-established lenders, mostly Wall Street
brokerage firms.

The LTCM crisis raised the threat of systemic risk -- or the
domino effect one financial failure can trigger -- and prompted the
Fed to lower interest rates three times between late September
and mid-November to give capital markets a respite.

"They (hedge funds) cannot become as large as that particular
fund (LTCM) if their counterparties do not provide a great deal of
credit to them," McDonough told the audience of commercial and
investment bankers.

Nearly three months have passed since the LTCM crisis erupted
and no other hedge fund has encountered problems of the same
magnitude. Analysts said LTCM woes are not symptomatic of the
industry because the firm enjoyed a unique status in the investment
community in terms of the exceptional size of the financing it was
able to raise.

One difficulty in regulating hedge funds is that there are private
firms that often handle wealthy individuals' capital under secrecy
rules or operating offshore.

McDonough said the best way to avoid LTCM-like problems is
indirectly, by supervising more closely the hedge funds' lenders --
banks and brokerage firms -- that are regulated.

"We should use the indirect method by dealing with counterparties
that are regulated," McDonough told reporters.

If this fails, the New York Fed president added, "then we may
have to use direct means... like very clear transparency
requirements or through some institution in the country where they
reside."

LTCM woes occurred on the heels of Russia's default in August.
The two events led to an unprecedented reappraisal of risks
attached to all debt beside safe-haven U.S. Treasuries and
translated into historically wide spreads.

McDonough noted those spreads had started to return to more
normal levels. He expected a continuation of that trend early next
year.

http://www.drudgereport.com/matt.htm

Why double click above? Find out.

An interesting post on hedge funds...The dirty deed is already done though. If the yen gathers steam or gold or both...lookout! The Fed won't be able to print money fast enough to bail out the row of dominoes lined up across lower Manhattan.

"A new exclusion will be attached to your renewal policy. It will apply to the following parts of your policy: Commercial Property, Boiler and Machinery.

The endorsement specifies that the following will not be covered:

The failure, malfunction, or inadequacy of
(1) computer or certain electronic equipment due to the inability to correctly recognize, process, distinguish, interpret or accept one or more dates or times (such as the Year 2000 and beyond);
(2) advice, consultation, design, evaluation, inspection, installation, maintenance, repair, replacement or supervision provided or done by you or for you to determine, rectify or test for potential or actual problems to computers or other electronic equipment.

However, if loss or damage from certain causes of loss results, there may be coverage for that resulting loss or damage, subject to the terms and conditions of your policy."

Looks like the Hartford Insurance Company is taking the Y2K problem seriously!

FWN (12/15/98) Gold futures were propped up early in the session on bank buying, with the market awaiting any fallout from Thursday's House of Representatives consideration of a call for President Clinton's impeachment... December gold settled $1.50 higher at $294.30.

"A couple of banks did some buying on the opening,"
said Don Tierney, precious metals analyst with Pell Brothers
Trading.

The market then steadied as it remains "sensitive" ahead of the next step in the effort to impeach President Clinton, related Tierney. On Thursday, the House of Representatives is scheduled to begin debating articles of impeachment, with a vote possible the same day.

Tierney said he does not believe the market has factored in any particular outcome so far. "I think people are going to wait to see what happens," he said... A key feature for the metals in the next couple of weeks will be attempts at "window dressing" books ahead of the year-end, pointed out Tierney.

"When we get into the last couple of weeks of December,
both gold and silver will probably see some unusual gyrations because of year-end book squaring by the funds and
money managers who have positions in the precious metals and
want to take advantage of those paper profits on the year-
end statements," he explained.

The same will likely occur in other commodities, he
added.

Reprinted with permission of FWN.

***********************************************************

Bridge News (12/15/98) Feb gold settled up $1.50 to $294.3 per ounce, unfazed by a stronger stock market. Mar silver was unchanged at $4.892 per ounce.

Gold was up overnight on followthrough from higher levels Monday, in a thin and technically oriented session, said sources.They said gold was pushed higher as the dollar weakened against the yen, with a couple of big dealers featured buyers. A trader said he had expected gold
to rally Monday as the dollar weakened and the Dow fell 126.16 points, but Feb had settled up a mere 20 cents at $292.8.

On Monday, Feb gold "had every reason to go up, but it didn't, so people decided to sell. And when they saw gold didn't go down, they're turning around and buying again it today," he said.

Nevertheless, Feb is reluctant to break from the $290-296 trading range "and that is keeping the market steady," said another trader. He predicted short-covering could push the market up another $2 over the next couple of days.

Most sources attribute the fluctuations lately in the precious metals futures markets to the thin trades. "When there's light trading, anything can move the markets," a trader said.

Sources said they are surprised by the lack of movement in commodity prices in general. "There is an abundance of commodities, and we are consuming more than ever, but
the prices are not reflecting that," he said. "You can either buy crude oil or a case of Budweiser (beer)--take your pick."

Reprinted with permission of Bridge News.

eom

The following by Martin Armstrong of PEI was counter to many expectations on this forum. I would be interested to hear any comments.

Will Leverage Cause The Financial World to Blow Up?
By Martin A. Armstrong Copyright October 9th, 1998
Princeton Economic Institute
-----------------------------------------------------------There has always been the question of leverage that enters into the process of any financial panic. The degree of leverage within the system is a key factor in determining just how severe the panic will become. However, the degree of leverage may also have a neutralizing impact upon government's ability to manage and control the economic forces at work. In short, even if government reduces interest rates, increases the money supply and passes sumptuary laws to deal with the effects of leverage, all such efforts may have little impact upon the short-term while increasing the amplitude of the next business cycle. It has always been the degree of leverage that ultimately dictates the fate of mankind and his political economy. Today's financial turmoil has shown precious little evidence to suggest anything otherwise.

The amount of leverage within the system has always dictated the degree of the overall decline in combination with the desire to move toward liquidity. Whenever these two forces move together, the degree of panic is raised exponentially. For example, let us say that we have a lending ratio of 16:1, as was the case during the Great Depression. If the desire to move toward liquidity causes a contraction in leverage from 16:1 down to say 8:1 in combination with at least a 25% decline in asset values, the net effect of these forces upon an economy are magnified considerably. If a central bank seeks to reduce interest rates, there will be little or no effect during a period where the desire to move toward liquidity dominates the trend. A reduction in interest rates will ONLY have a positive impact upon the marketplace if there is a credit crunch and NOT a desire to simply liquidate positions.

If we assume an overall leverage of 16:1 on the actual money supply through the course of bank lending, then a contraction in leverage will tend to be more than the ability of any government to implement counter-trend measures. If the money supply were $1 trillion, which has been leveraged, into $16 trillion, then a modest contraction back to 10:1 becomes a reverse leverage of 600:1 insofar as the destruction of paper wealth is concerned. Therefore, even if the central bank doubles the money supply, such an increase will not be sufficient to overcome the deliveraging effect. This is the situation we currently find ourselves in as some of the big hedge funds liquidate positions in an attempt to meet margin calls.

We have warned that intervention is a dangerous game. It has been used by politicians in recent years to support their own agendas that have been counter-trend to the free markets. In the case of massive liquidation that is causing a panic within the currency of a nation, this is perhaps the only justification for government intervention to sell back its own currency. The failure to do so on the part of Japan now may put at risk the entire world economy thanks to the hedge funds. There will be no way to stop the effects that will now spread due to the shock in the currency markets. Yet over time, governments will attempt to intervene in the process by controls, regulation and sumptuary laws. All such efforts will risk a further contraction in economic activity raising the risk of a prolonged global meltdown.

The large hedge funds have placed vast sums of leveraged cash on the line in trades that they thought were liquid, such as dollar/yen and mark/yen. The problem that we are currently experiencing has to do with the crisis in liquidity and not a flight to quality. There is a subtle difference. A flight to quality is where capital is rushing from one investment to another. What we are witnessing is a crisis in liquidity caused by the liquidation of positions seeking to move to cash. While hedge funds like Tiger have made no public comment on their losses, they continue to make the headlines of even the evening ABC national news. The manner in which these positions are being liquidated is amatureistic at best because they are being thrown on the funeral fires in a manner that says, "just get me out!" However, if we assume that these portfolio managers are NOT amateurs, then the only explanation for such massive and relentless selling must be due to the fact that they are under the gun in order to meet margin calls or face forced liquidation by banks.

In any event, liquidation by one fund causes action to be taken by others. We have argued for decades that ALL Panics are NOT caused by short selling but by long liquidation. This is precisely what is taking place and it is perhaps more visible now because those funds that are liquidating are so few. As liquidation begins, others are also forced to liquidate. The danger, is when this vast leveraged hoard of cash forces normal economic flows to take action. In this manner, the deflationary influences expand rapidly spreading from economy to economy until the entire world is engulfed in financial pain. The low comes about only when the liquidation finally ends.

The damage now caused by the liquidation of yen positions against the German mark and US dollar filter over beyond the mere currency markets. This sudden drop in the dollar means that whatever profits the Japanese banks did have on their foreign investments was just wiped out in 2 days. There cannot possibly be many Japanese banks that have a remote possibility of earning a yen. The higher yen results in a collapse of the Nikkei as foreign holders of Japanese equities rush to take immediate profits in the face of a sudden 10% gain in currency. Domestic Japanese selling comes in due to those who now see any earnings of the corporates vanishing due to foreign exchange. Everything begins to feed upon itself with one domino pushing into the next.

The US bond market was sent rushing upward due to Long Term Capital Management (LTCM) who had a big bet on higher interest rates. Their rush to cover positions sent the bonds from 125 to 135. However, the collapse in the bonds most likely came from others like Tiger Management selling in an effort to meet alleged margin calls on yen and equity positions. A third hedge fund is said to have 30,000 long positions in the S&P 500 futures. If that is true, then this liquidation panic can also crush the stock markets. We have already seen relentless selling of the European markets earlier without the slightest sustainable rally while the US market held its ground. This was caused by other hedge funds, perhaps including LTCM, who had been betting aggressively on the coming Euro. They were long European markets and short the US market.

The Euro has effectively been wiped off the face of the earth. LTCM was the biggest player on the Euro. They were short the German mark against just about every Euro currency through the bond markets. LTCM was responsible for the miracle convergence throughout Europe. Now the trade appears to be long marks and short ECUs as the ERM simply blows up. In reality, Europe was a giant emerging market play as fund managers were betting on coming reforms to bring about "Euroland" as it was being called.

From here, this plague of liquidation appears to be spreading around the world. We are witnessing the massive deleveraging of our global financial economy. The degree of leverage is not known at this point and we certainly cannot see any relaxation in confusion or volatility. We can say that each market appears to be turning on its own investors with the intent of creating as much havoc as our human capacity for endurance can take. This means that the stock market decline is NOT over. We will see a rally first as the market attempts to squeeze out all the short positions. However, lacking fresh buying, the markets will then turn south with the speed of a thunderous crash. There will be NO flight to quality trades that survive in the global mess short-term. Forget about rushing into the metals. As reported on Reuters today, the new German government will no longer oppose IMF gold sales due to the fact that they need their own cash for home. This will lead to more selling from additional central banks as well as they themselves become caught up in the global liquidation crisis.

Even the silver market fell like a stone today. Selling in the cash market of more than 12 million ounces already has sent silver down from $5.45 to $4.76. Those who have taken issue with our computer models on this market will curse the day they ever bought silver. Dealers continue to talk about possible Buffett selling. Tiger Management has also been a big player in the metals markets, which could now lead turn into another wave of liquidation. Everyone is now running out and buying puts on metals for fear that the next wholesale liquidation will hit this group sparing no one around the financial world.

There is no place to hide other than cash for the moment. We are in the final stages of a global liquidity crisis and not a flight to quality crisis. In this atmosphere, cash rules.

Your post re: insurance companies excluding Y2K raises a mort important point that you might think.

As an example, consider the oft-mentioned "airplanes falling from the sky" scenario. Airplanes must BE in the sky in order to FALL from the sky, no? And let us assume that the airplanes are made compliant, even though we know that is an impossible task. Especially given that 747's have some 16,000 embedded chips and the chipset is not standard. Let us also assume that the airports will be compliant. Again, do I need to remind anyone about the state of the Sea-Tac or Denver airports? And the fact that there currently are no compliant airports in the world (but they're all working on it!) Let us also assume that the airlines (delta, american, etc) will have their systems ready. Again, there is absolutely no evidence for us to make such a wild assumption, but let's do it anyway. We must also assume that air traffic control will be ready for the crisis. Again, they are not, and the FAA has already been caught lying about it, but let's give them the benefit of the doubt.
Oh but I'm not done, not by a long shot. How about travel agencies? How about the assumption we make that airports will have access to banking, jet fuel, telecom, and electricity? There must be quite a web of perfectly working systems for that to be the case. But let's give it all the benefit of the doubt. Let's assume that it will ALL, BY MIRACLE OF GOD, be fixed and ready to go for the new millennium.
But the insurance companies will not insure a crash that is Y2K related. After all, insurance is for unpredictable events, no? Y2K is perfectly predictable. Insurance will NOT cover this, they are going nuts trying to escape responsibility for this. So let me ask you guys...will the airline executives take personal responsibility for a Y2K related crash, knowing that insurance will not cover it?
Even that might be a moot point, because there are no compliant insurance companies.

Nevertheless, those planes will remain on the ground. Any stories you hear about how the FAA commissioner has booked the first flight on 01/01/00 are just that: stories. Those planes will not leave the ground. Or do you expect your senator and banker to warn you? "Dear citizen, the web of society will collapse, panic and save yourselves." Not bloodly likely.
Those planes will remain on the ground.

I don't want to sound dumb but if anybody out there understands what Martin Armstrong is talking about would you please explain it to me? This is Keynsian gobbledygook that academics like to read and ivy league economists throw around to try to make the rest of us feel inferior. I don't know how much it's going to do for me in the real world. So what does it all mean? I stopped at the point that "the euro was wiped off the face of the earth." Difficult for a currency that doesn't even exist yet. It seems to be that a more legitimate concern would be whether or not the dollar was going to be wiped off the face of the earth.

Comments? If I'm out of line here please let me know and I'll try to spend more time with what was posted. jinx, what is he trying to say? Can you get it down to a paragraph or two? If he's saying we should have all our money in cash, I don't buy that, do you?

As for Germany no longer being opposed to IMF gold sales because it needs its cash at home, I don't even get how the two concepts go together? What does German cash have to do with IMF gold sale? Is he saying that if the IMF sells its gold, that Germany won't have to participate in the international bail-out game? If that's what he believes, he lacks a real understranding of the depth of the problem before us. At current prices the IMF couldn't have bailed out Brazil with its gold -- and Brazil is just the tip of the iceberg.

So what is Martin Armstrong saying of benefit to the rest of us?

Man, I'd love to hear FOA's take on that one.....

I'm glad I checked before I posted...... I was going to ask what YOU thought Michael!

Just attended a 3 hour Wade Cook seminar this afternoon, one of those free-bees just to get you to signup for the big $ one. Someone asked the speaker about Wade's take on Y2K. He said Wade has a NEW book coming out in Jan/Feb time frame specifically about Y2K. He said one thing Wade is recommending in the book is diversification with a postion in GOLD, a good investment now. Soooo, there seems to be much more gold investment advice coming in the coming months from those HEAVILY involved in stock market investing. Thought someone besides me would find this encouraging.

Got my coin today- Beautiful! I was already primed for my silver purchase now I'm ready....can't do that 500 oz. minimum though MK.

What does everyone think? When it comes crunch time, is anyone going to care if the coin is a silver Eagle or a generic round? Can build up a bit more silver if one buys generic.

Also Michael, I'd be interested to find out what you learn regarding the Y2K supplies, even if you don't launch a site for it. I'm investigating some local supplies and so far I've not been impressed w/ what I see on the infobahn. Let us know.

GF

I might add a small addendum to my previous post:

The Germans will not be that easily misled. What would be better for Germany -- to allow the IMF to sell its gold, part of which is owned by Germany, for a swan, or repatriate that gold to stand solidly in the reserves of the Euroland he so casually disparages.

A prediction: If IMF gold is sold ( and I doubt that it will be, but if it is ) Europe will buy most of it for reserves. What they don't buy Japan and China will.

If there is an IMF auction, there is a possibility that competing nations will bid up the price. Perhaps that is one reason why we may never see such an event.

We go out of our way for posters. Please call Marie with your needs and we will get you what you need. One problem with silver Eagles...The mint will not deliver until at least February. They are backed up with the Y2K rush. We will do the best we can to help you out though.

As for the food I'm working on it. When you buy gold, you take it and store it and it keeps forever and it will always do what you want it to. Not so with these soft commodities. A different world, my friend, and I'm trying to understand it. It might not be for CPM/USAGOLD. We'll see. If it seems right, I'll offer it.

There's a distinction I'm finding out between storing for the initial onslaught of Y2K and storing more for the long run. For some of us, the best solution might be canned foods (properly canned) and bulk foods (beans, rice, etc.) I've discovered that canned foods with the proper internal lining will last for quite some time -- up to two years. That might be enough. Here you are also trading off taste for longevity. As I say, a tough problem. Don't forget, as a good friend and client, mentioned to me today when you have gold and cash quite a few possibilities open up to you. After the initial onslaught, even in the worse case, my faith in human nature is such that an economy of some sorts would poke up out of the rubble. If we have something to buy with, I think we will be able to buy. One man's opinion.

By the way, I too would love to see FOA's reaction and Another's to the Armstrong post.

Michael:

I remember the first time I ran aground on Martin Armstrong over at Kitco, rumors were rife that Princeton (and Martin as their spokesman) was VERY heavily short in the Silver market. That was during the slight runnup brought on by the Warren Buffet revelations. It was painfully obvious then that he (and they) were scared sh*itless and had abandoned all pretense of intellectual integrity in favor of outright deceptive advocacy. Now that silver has returned to a more quasi-deflated level, he is probably feeling a little braver and willing to sling the academic mumbo jumbo around more freely and let the muddy waters speak for themselves.

I second your call for anyone who thinks he can translate the article into something even faintly intelligible. Until then, I take it with a grain of salt, too.

I think the word gold will be on substantially more lips in 1999 than ever before, and that number will grow geometrically as the year progresses. I just worry what that is going to the supply.

I was worried that I might be losing my ability to understand what other people were saying. Somebody in our office brought up the same situation with silver that you just mentioned. I didn't have to the time to research whether or not it was true, so I thank for bringing it up. I simply mentioned his name and this individual said "Isn't that the guy who lost a bunch shorting silver when Buffett was buying?" Thanks for the verification.

RE- Gobbledegook; it is now time to post the "Great Joke".

Sherlock Holmes and Dr Watson went on a camping trip.
After a good meal and a bottle of wine they lay down for
the night, and went to sleep. Some hours later, Holmes
awoke and nudged his faithful friend. "Watson, look up
at the sky and tell me what you see."

Watson replied, "I see millions and millions of stars."

"What does that tell you?," enquired Holmes.

Watson pondered for a minute. "Astronomically, it tells me
that there are millions of galaxies and potentially billions of
planets. Astrologically, I observe that Saturn is in Leo.
Horologically, I deduce that the time is approximately a
quarter past three. Theologically, I can see that God is
all powerful and that we are small and insignificant.
Meteorologically, I suspect that we will have a beautiful
day tomorrow. What does it tell you?"

Holmes was silent for a minute, then spoke. "Watson,
you idiot! Someone has stolen our tent!"
So regarding that tent.
In chemistry, one studies first, quantitative analysis, which gets into what reacts or combines with what. Next comes quantitative analysis, which covers the exact weights and measures as these processes transpire. This post made "qualitative" sense to the degree that I knew his last line just before I scrolled to it, however "quantitatively" it could be meaningless. The only logic I could run with, is that in a true, across the board deflation cash wold be king. In 1929, "Gatsby" Estates on Long Island were going for $10,000.
Gold becomes supreme when the dollar itself deflates, or when the whole system comes crashing down.

I think what Armstrong is doing is first calling possibilities truths, then claiming those "facts" prove other things that are really only conjecture. It flows like logic, but actually, its just allegation.

On Oct 14, I posted the link to that article by Martin Armstrong as recommended reading. I've copied the part of a post by FOA that dealt specifically with that article. His reference to Msg 556 should be Msg 566, an article that states the Japanese are moving to eurobonds.

>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!

The only thing that was of interest to me in the Armstron article was his allegation of a liquidity crunch that would not recognize the value of gold. He is another gold-as-a-commodity type that over analyzes economic theory. That's what you have to do to get that advanced degree, come up with some BS calculation that says what your doctoral advisor believes. Just buy gold, OK?

The major point of the Martin Armstrong article to me is that, like Peter Asher suggests as one possible scenario (good joke), a major deflationary debacle is close at hand due to the super leveraging of the financial markets. This goes directly to the discussion we had the other day. Liquidity can not possibly be created fast enough to stop it when the bubble pops. Cash will be king because it will be in such short supply relative to the total demand (thanks to our fractional reserve banking system and the inverted pyramid of leveraged debt built on top of it). This scenario falls right in line with what Bob Prechter is predicting as well.

Now, if the dollar crashes(perhaps vs the euro), dollar holders better have gold. But it may not ... people may flock to ANY cash, as wealth (such as stocks) will have disappeared in a flash, and then there will be a massive liquidation of assets (including gold) to raise cash.

The euro may serve its function short term and sap strength from the dollar ... but I have no confidence in it at all over the longer term. The euro countries are much more socialist than the US. Their good times are recessions !!! They are going to get hit hard too, still more people are going to be unemployed, tensions will likely rise, and the EMU may come apart at the seams.

Somewhere along the way, gold should rise from the ashes.

And I consider myself an optimist !!!

Anyone care to speculate on the prospects for a rate cut by the FED. My vote says they might pass this time in order to protect the dollar from a further slide. The Dow Crash index is at -8 these days, but the DOW is still relatively high at 8823. Even though the tansports are down money is still churning within the paper markets from one sector to another. I don't think the DOW will really start moving south until the second or third week in January, If at all. If AG cuts in January, the dollar is liable to come under serious pressure resulting in more money out of bonds into equities. If the equities do come under pressure at that point for liquidation sales then the metals will make a significant move. We saw an inkling of this earlier this week as bonds, stocks, and the dollar were down while gold was pretty steady. I think Pt will show strength as result along with Au. Pd is headed south when the russians announce the release for sale of this stuff to the west. Silver is just too cheaply produced to move seriously beyond $5.4 even though demand for it is solid.

I believe one of the reasons you're seeing this unusual activity in the markets is the tax implications of y2k. If a 'lot' of investors and the Wall Street Community (which I have heard is very well aware of y2k), have decided to wait until the first of 1999 to sell, this could explain the situation. If this bunch believes the government is going to be totally screwed up, why take a tax hit now and have to pay up in 1999? Why not wait a few more days and then be liable for your taxes in 2000. By that time, who knows how we'll find the government? I tend to believe many investors have figured this scenerio out. I think we'll see massive rate cuts from the Fed come Jan 1999.

ET

This and the Steve Kaplan and the Bill Murphy camp make some of the most compelling reasons to consider the pretty yellow stuff as an alternative and monetary store of wealth.

When all have read and all has been said, place this 101'st reason to this list:

When oil bids for gold per Another vis a vis the Euro and provides a second major currency that will vie for the "reserve currency" position, gold will strengthen in value.

Here it is:

100 Reasons to Buy Gold
Upgrading Barrick, Normandy and Prime Resources to Outperform
by Douglas M. Cohen,
Morgan Stanley Dean Witter, New York

Part II - 100 Reasons to Buy Gold and Gold Equities

I. Good Times Don't Last Forever



1.MSDW strategist Byron Wien Dow forecast 2H98= as low as 7000; market presently 17% overvalued.
2.MSDW global strategist Barton Biggs forecast= a possible "ice storm" ahead, with 1998 as a year of "sack cloth and ashes" amidst an economic slowdown.
3.MSDW chief economist Steven Roach 2H98 forecast= 30Yr bond rate of 6.5-7.0%, inflation around 3% ( increasing to 3.6% in 1999 ) .
4.MSDW strategist Peter Canelo= recent expansion of U.S. money supply and credit is highly reminiscent of 1993 ( when the XAU doubled ) .
5.The 1980 gold price to Dow ratio was 1:1; now 30:1.
6.Gold stocks have very low betas and have tended to outperform in market declines. Insurance for your financial portfolio.
7.For the true fatalists, remember that Homestake was the top-performing stock during the Great Depression ( up over 700% ) .
8.Worried about deflation? Gold has tended to outperform in periods of severe deflation, when public faith in the monetary system erodes ( usually following a speculative bubble ) .
9.$250 billion flowed into equity and bond funds in 1997 alone. Total assets of gold-oriented funds are roughly $5 billion-potential avalanche of funds into the gold sector when the 15 year-plus bull market finally cracks.
10.The funds are becoming scared to stay short given the amount of bad news "successfully" absorbed by gold since late 1997 ( e.g., Asian dishoarding, Belgian gold sale, low inflation consensus, record run in equities ) .
11.Several unrecognized inflation factors ( e.g., MSDW above consensus oil price forecast of $18.75/barrel in 1998, Steve Roach's output-gap and wage-related arguments ) .
12.The strong dollar won't last ( trade deficit, fear of Asian over-reliance on the U.S. ) . 13.Commodities beginning to come back into favor, including oil from its $13 per barrel low.
14.Gold's decline is cyclical, not secular. No better buy signal than the recent plethora of "Is Gold Dead?" articles.
15.The blood is already in the streets-the seemingly "irrational exuberance" in stocks has been offset with "irrational despondence" toward gold.
16.Gold has served essentially the same role in the world for over 2500 years. Tigers, Spiders and other species for a lot less.
17.Faith in alternative safe havens such as U.S. Treasuries won't last forever ( perhaps not even the summer ) .
18.When the next crisis hits ( be it something "unpredictable" or something already lurking such as the Year 2000 problem ) , investors will put some of their debt and equity profits into precious metals.



II. The Central Bank Picture is Brightening



19.The "big 3" of EMU ( Germany, France and Italy ) are strong gold supporters. It's possible that gold sales from the ECB will be "prohibited" for several years at the insistence of these three countries.
20.Eighty-five million Germans are concerned that their currency is disappearing and want a solid Euro backed with gold.
21.Most gold not contributed to the ECB will likely not be sold, but will be held as insurance in case the ECB fails.
22.Total official gold holdings are down by 10% in the last 30 years; 1% in 1997.
23.Jean Claude Trichet, a gold stalwart, is a potential ECB head.
24.The countries most often considered "at risk" for sales, the Dutch and the Portuguese, may have already sold. The market has already acknowledged this and won't be surprised if/when a sale is announced.
25.The Europeans want a strong Euro; gold still perceived politically, if not economically, as a source of strength.
26.It is highly uncertain that a proposed Swiss sale of up to 45 Moz will go through; a sale would require a public referendum in 1999/2000 and support is not high. 27.Consensus view: ECB gold backing of the Euro of perhaps 10% at most; our view is 15% or higher ( recently supported by an estimate from the Bank of Italy of at least 30% ) . 28.More central banks have bought than sold the last two years.
29.Asian governments are underweight gold-do they want to be dependent on the U.S. dollar?
30.China and Russia have been true to their word in escalating their gold purchases. 31.The U.S., the world's largest holder is unlikely to sell ( especially with Greenspan in charge ) .
32.Only Canada and Argentina have had programs in place to sell virtually all their gold. 33.The silence of the central banks during the 1997 plunge in gold led to losses of over $50 billion for the gold holding countries; they have learned their lesson.
34.Central bank selling has been a regular feature of the gold market for the past 20 years, averaging around 400 tonnes per annum; virtually identical to most estimates of the amount sold in 1997.



III. The Worst is Over for Asia ( for Gold Anyway )



35.The Southeast Asian crisis may well have stabilized, less currency devaluation-inspired dishoarding of gold.
36.The economic crisis took almost $60/oz off of the gold price by some estimates ( we'd say more like $20-30 ) ; the impact should be temporary.
37.South Korean collection program largely over ( after raising over 230 tonnes ) . 38.Thailand's collection program has reportedly met with little success.
39.In the long term, the Asian crisis will re-establish gold's role as an unrivaled store of value; gold held its value while currencies plunged 70% or more.



IV. Increasingly Positive Supply and Demand Balance



40.Gap between physical supply and demand was 500 tonnes in 1997 ( and growing ) . 41.Markets don't continue in deficit forever-similar enticement as silver.
42.Gold demand is running at record levels ( up 9% in 1997 ) , even with the Asian dishoarding that now seems to have its course.
43.Demand in India, the world's largest gold market rose 52% in 1997 and continues to sizzle according to the World Gold Council.
44.Liberalization of the gold markets in India and China continues to increase, providing increased access to populaces with a high gold affinity.
45.A possible rally in oil prices= increased income in the Middle-East= increased spending on luxury items such as gold.
46.Mutual funds may be all the rage, but they can't fill a cavity ( dental use of gold holding up well ) .
47.The rally off of 18 year lows of $278/oz in January has revived fabrication demand-fabricators had been running down inventory in anticipation of lower prices. 48.Production from the largest gold producing country, South Africa, is mired at a four decade low; average cash costs of $300/oz are the worlds highest.
49.Environmental and permitting restrictions are becoming increasingly burdensome in North America and Australia; lower supply in the future.
50.Up to 70% of the world's gold production is uneconomic on a total cost basis at $300/oz gold; lower supply in the future
. 51.Word-wide exploration activity is down significantly; lower supply in the future. 52.Mine closures/reductions increasing ( e.g., Mount Todd, Lupin, Homestake, McCoy Cove, Paddington, Colomec, Hope Brook, Freegold ) .
53.Mid-1997 labor accord in South Africa has cleared the way for labor reductions and shaft closures.
54.Record mine supply was artificially high in 1997 due to high-grading-the high grading was done at the expense of mine lives and is largely unsustainable.
55.There have been few major technological breakthroughs in gold mining since heap leaching in the 1980's; none appear to be on the horizon.



V. Producers are Beginning to Take Action



56.The gold producers emerged from the World Economic Forum at Davos convinced that their message got across ( for both selling and lending ) .
57.Former Canadian prime minister Brian Mulroney and former Bank of Canada governor John Crow are actively lobbying on behalf of the producers for central banks to stop selling gold.
58.Peter Munk now bullish after having correctly predicted gold to $280/oz in early 1997; ABX share buy-back program announced, Munk replaced ABX shares sold by TrizecHahn shares with fresh purchases.
59.A potential millennium coin, presently under consideration, could raise investment demand by over 1000 tonnes, according to some estimates.
60.Producers have hinted at a new gold advertising campaign modeled after DeBeer's "diamonds are forever" ( our early nominee has Dana Carvey reprising his role as Saturday Night Live's ChurchLady with a "gold, isn't that precious?" tag line, but we're working on others ) .
61.Junior miners and exploration companies running out of cash; joint ventures with seniors on the rise.
62.Producer buy-backs of hedged positions have increased ( e.g., Western Mining, Newmont, Kinross, Western Areas ) �
63.� with 30 Moz more as future possibilities from Ashanti, Barrick, Newcrest, Normandy, and Placer Dome alone.



VI. Good Value in Gold Equities



64.Consolidation opportunities, especially if producers get nervous that prices are headed higher.
65.Valuations now reasonable for several producers on a cash flow and asset value basis. 66.XAU still 50% off of 1996 peak; S&P 500 is up 85% from its 1996 low.
67.Possibility of a major Arequipa or Diamond Fields-type discovery to remove the Bre-X stigma and revive interest in junior's.
68.The decline in gold equity values in 1997 was largely indiscriminate; each of the 40 major companies we track lost value, with most ( hedged or unhedged ) down 45-60%. 69.We believe many gold-oriented producers ( e.g., Prime, TVX, Placer Dome, Barrick, Echo Bay ) could benefit significantly if silver resumes its 1998 rally.
70.TVX- Should go from 400 koz at $223/oz in 1997 to 1000 koz at 180/oz in 2001 if Greek mines meet expectations.
71.Freeport- World's best mine ( in our view ) at 45% off of 1997 high, 30% below implicit asset value before any future reserve additions.
72.Newmont- Lowest cost major producer at present, major long-term growth potential in low-risk Nevada.
73.Prime Resources- Trading at below fair asset value in existing reserves, major "blue sky" growth potential from highest-grade ore body in North America.
74.Normandy- Largest Australian producer has cut costs significantly, looking to grow with support of $625 million hedge book.
75.Barrick- Marquee name in the sector; growth about to resume after four flat years; declining costs as well.
76.Cambior- Eight key projects, seven of which require higher prices; gold is 80% of revenue, but stock trades at a base metal multiple ( 5 times 1999E CEPS ) .
77.Nine of the 14 stocks in our gold universe show good value based on 1999E reserves and a $325/oz gold price; 13 of the 14 show good value at $350/oz.
78.Gold equities are a call on the gold price; typical beta of around 3 relative to bullion. 79.The viscous cycle of tax loss selling, fund redemptions, panic selling and more fund redemptions that peaked in late 1997 has been broken.
80.As bad as it's been for the majors, it's been pure carnage for many juniors; 28 of the 40 juniors we normally track were off more than 60% in 1997 alone.
81.Several companies could benefit from the elimination of litigation risk within the next 1-2 months ( e.g., TVX, Normandy, Newmont, Placer Dome ) .
82.Good value in several Australian gold stocks which were beaten down excessively ( and illogically, in our view ) due to Australia's proximity to Asia.



VII. Wildcards/Miscellaneous



83.Possibility that a Buffet-like figure could go long gold and trigger a rally as Buffet did for silver
84.Much of the world wants to minimize the pain felt by South Africa.
85.Potential political instability ( Middle-east, Russia, FSU, Pennsylvania Avenue ) . 86.Technical breakout possible ( $300/oz gold, 80 on XAU were key ) .
87.Comex short interest is 10-15% off its 1997 highs, but�
88.�funds are still solidly short; they'll rush to cover when the tide really turns. 89.Don't let Bill Gates take over gold too; Microsoft market value=$200 billion, cumulative gold equity universe = $40-45 billion.
90.Gold is the only major financial asset that is not the liability of another party.
91.Gold is far more liquid than many alternative assets ( e.g., real estate, timberland, most commodities ) ;bid-offer spread for bullion is as narrow as the trading spreads for stocks and bonds.
92.Historical adage that an ounce of gold could always be exchanged for a high quality men's suit; either Barney's is about to have a heck of a sale, or gold must go up. 93.Statistical evidence compiled by the World Gold Council ( ok, perhaps there's a bias, but we'll take their word on it ) that gold is a more effective asset diversifier than emerging markets investments versus the S&P 500 and most other asset classes. 94.Can't, or don't want to buy derivatives? Substitute gold for S&P 500 puts.
95.Gold serves a major role in portfolio diversification as correlations between stocks and bonds have increased markedly in recent years.
96.Limited downside risk; a classic technical "double bottom" at around $280/oz. Average cash costs of around $260/oz the probable point of "maximum" downside risk. 97.Beware of conventional wisdom: "We'll never see $1.00/gallon gas again" ( late 70's ) , "never buy airline stocks" ( late 80's ) , "gold is dead" ( late 90's ) .
98.George Bernard Shaw: "you have to choose ( as a voter ) between trusting to the natural stability of gold and the natural stability and intelligence of the members of government. And with due respect to these gentleman, I advise you, as long as the capitalist system lasts, to vote for gold."
99.Alan Greenspan- "Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of that insidious process."
100.Charles de Gaulle- "There can be no other criterion, no other standard than gold. Yes, gold, which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence.

Doesn't this mean that gold carry is very unprofitable at this rate??? Isn't this one of the first times that the one-month is well-over the longer-term rates. For comparison, the one-year rate is 1.43. Thoughts? What does this mean????

Sorry, previous message got away, before I could get my foot on it.
I was talking to a local Asian investor the other day and he was trying to tell me that the ordinary Asian punter was losing interest in buying gold; because, he said, how far can you run with 200 ounces of gold ! He had a point, I thought, except that for every would-be runner there'd have to be several armchair types happy to take their profits / insurance payout in the more traditional manner. In other words I still think that Asian buying will come back in force as soon as their circumstances allow. Those who held gold at the beginning of the crisis have done very well, thank you. Those who didn't would rue the day.

Jinx 44...Please understand that I directed none of my annoyance with Armstrong toward you. I think we all appreciated the fact that you posted that.. if for no other reason than it gives us a chance to refute it. No use letting those things lie around out there unanswered.

Turbo...Thanks for digging up the FOA response...Classic FOA. I didn't know that that Armstrong piece had been around for awhile.

Rich Bea...Good post. Q. How fast can you run carrying 200 ounces of gold?...A. As fast as is required...

Peter Asher...Great story...

Thanks for posting all 101 reasons....I intend to respond to each one in detail.


Just kiddin'....

Michael, you suggested:
"Small coin acquisitions, particularly pre-1933 European gold coins"

Please elucidate briefly on these particular coins.
Another form of bullion?
Numismatic?
etc.
or give me a URL or two so that I can read up.

thanks!

-- Alan

I posted this to a similar request by bmacd on 12/14:

"On the pre-1933 coins I like them because they survived confiscation in 1933 as collector items and have been treated as collector items ever since. I think they are worth the extra 10%-15% you pay over same sized bullion coins. Let's just say they are a personal preference for MK. I don't expect everybody to agree with me though."

For details please call 1-800-869-5115 and we can get you started. There is quite a bit of info on this subject and it better handled over the phone or by sending you an information packet on the subject.

Don't know of any url's on this.

Have you noticed the "disclaimer" on this mornings War Game from Blair abought not being able to launch "at the click of a finger" and Ramaden starting in a few days ? Is this another stage show to detract attention from the Clinton hearings ? Will France or Russia pull Saddam out of this one ? ---- 14 months ago, redirecting a Carrier shot Gold up $10. Now with a lot more likelihood of action, we're looking at + $2.00.
The following was written last night but still seems applicable. E T, good point, got me thinking about tax losses re- Gold. If one has taken 1998 profits on Stocks and has been holding gold for well over a year, It would make sense to sell that gold. I wonder if there is enough of that situation around, to explain golds most recent spate of performing contrary to how we astute Forum analysts think it should. If this conjecture has any substance, we could see an abrupt turnaround on the new year.

US/GB strike Iraq with cruise missles and bombs. Price of gold has been rising all day. Volume on contracts overseas seems higher than usual. Higher short-term Lease Rates must have meant gold carry is nil. Answered that question. Gold seems to be reacting as it should to crisis -- something wrong here, no? Read this:

Exclusive to the Spotlight -- By Martin Mann

New York City, New York - The White House is quietly assembling a task force of
federal investigators to look into reports that a back-room syndicate of Wall
Street's largest banks and hedge funds has been engaged in vast and risky
speculative maneuvers that involved, among other tactics, rigging the market value
and global supply of gold. ....Date: Fri Dec 04 1998 19:53
LazloT ( Reprinted from The Spotlight ) ID#316200:
Copyright � 1998 LazloT/Kitco Inc. All rights reserved
Wall Street's Golden Egg Is Scrambled

Borrowing gold dirt cheap, a leading hedge fund used the gold to finance its
investments. Then the house of cards came tumbling down.

Exclusive to the Spotlight -- By Martin Mann

New York City, New York - The White House is quietly assembling a task force of
federal investigators to look into reports that a back-room syndicate of Wall
Street's largest banks and hedge funds has been engaged in vast and risky
speculative maneuvers that involved, among other tactics, rigging the market value
and global supply of gold." ... ( MORE - Go Back to the original post. - Mooney )

This was borrowed from another forum:

What about know your banker? How about know your regulators? The S&L
savings crisis proved that the regulators are incapable of monitoring
suspicious activity of a few thousand savings and loans. Who paid? The
taxpayers! Now the regulators feel qualified to monitor suspicious
behavior of a hundred million taxpayers? Get real!

This is illegal search and seizure at its worst. The fourth ammendment
provides protection against government searches without just cause.
That you are proposing that the banks provide you with just cause does
not circumvent this. By mandating that the banks do the government
spying just makes the banks agents of the state. The criminal case law
is very clear that any evidence collected without a search warrant,
evidence which leads to investigation or prosecution, evidence which
would not have been obtained otherwise, is illegal and will cause said
evidence and all related information to be thrown out.

On a practical note, this law will cause unnecesary suspicion from the
consumer towards the bank which will result in a larger cash market.
The whole point of deposit insurance is to promote faith in the bank.
If customers suspect the bank is watching them, distortions in banking
practice will occur.

Ed Kelly, if you ever see this, turn back from this oppressive path you
have started down.

Sincerely,


Send your own comments to: commentsoes@fdic.gov

5:30 Pac. Gold just dropped $3.00 in 20 min. ???? Beats me!

you get it? I am monitoring www.quote.com.

Shows a $3 drop at 1950 NY time on the Aussie exchange.
Kitco chart has been known to be wrong before.
Steve --- what symbol are you using for Feb. gold on Quote.com ?
<;-)

USAGOLD's MRCI link shows Feb. gold at +.80.

The Kitco site has been going thru gyrations for days.

$297.00 and jumping around. $300? Maybe.

www.quote.com, live charts.

Good question. GC9G.

Steve

The Hobbits have checked it out Steve -- and took a vote -- the majority thought that watching ceiling paint dry was better than watching the GC G9 action on Quote.com
<;-)

Now was that gold-based paint or was it white paint?

If it was gold-based paint then its value will indeed be proxied (don't you just love the effect of Internet talk on common language) to the GC9G, which btw is now $297.00. But I will admit that when I mentioned it it was trading hot and heavy. Ho-hum, it is back to its tricks. Lets melt some more for that paint on your wall. Watch the precious.

$295.90.

Thank Danny Deadlock for the reference below:


American Petroleum Institute
Briefing



If Iraq is subjected to an air attack, because of its refusal to allow United
Nations weapons inspections, what could happen to world oil supplies and
prices? How could American energy consumers be affected?

During the last several months, Iraqi oil production has contributed a modest amount to world
supply at a time when supplies have been abundant relative to demand. Therefore, by itself, the
potential interruption in Iraqi oil production does not appear large enough to cause any significant
disruption to world supplies. However, Iraq is located in the oil-rich Persian Gulf. Should military
action against Iraq somehow lead to reductions in oil exports from Kuwait, Saudi Arabia, Iran or
other Persian Gulf countries, then a major disruption in world supplies� and crude oil price
spikes� conceivably could occur. Even though Persian Gulf oil accounts for only about 10 percent
of the oil products that Americans use each day, the price of all oil is determined on world markets.
Therefore, changes� up or down� in world oil prices affect energy users in all countries

Here are some of the important factors for American energy consumers to keep in mind in making
an assessment of what might� or might not� happen:

Iraq's oil sales on world markets� under U.N. sanctions� have averaged about 2 million
barrels a day, or somewhat less than 3 percent of the world's daily supply of about 74
million barrels. Under present U.N. sanctions, Iraq is allowed to export $5.2 billion worth of oil
every six months to pay for the humanitarian needs of its citizens. In recent months, Iraq has been
exporting about 2 million barrels a day. [The U.N. Security Council on February 20, 1998 more than
doubled the amount of oil that Iraq can export� from $2 billion worth of oil every six months to $5.2
billion.]

Each day world oil supplies total about 74 million barrels, with 18.8 million barrels� or
about 25 percent� provided by the Persian Gulf. Should military action be confined to Iraq,
world oil supplies would not be significantly affected. If such action, however, somehow disrupts oil
supplies from other Persian Gulf countries � either because of physical damage from hostilities or
by reductions in output for political reasons� then a major reduction in world oil supplies is
possible. Such a reduction� should it occur� could leave daily world demand well above supply,
creating strong upward pressure on world oil prices.

The United States depends on imports to meet about 55 percent of its daily oil demand of
18.6 million barrels a day; about 20 percent of U.S. imports (or about 11 percent of total
U.S. oil supplies) comes from the Persian Gulf. According to the latest data available from the
U.S. Department of Energy, Venezuela supplied the most of any single country for the month of
August�15.5 percent of U.S. imports. However, Canada was the biggest exporter of oil to the
United States through the first eight months of 1998 (at 15.5 percent) followed by Saudi Arabia
which is located in the Persian Gulf. Kuwait was this country's next largest supplier from the
Persian Gulf but only the ninth largest source overall. Of the top four suppliers of U.S. oil supplies
through August, two are located in the Western Hemisphere� Canada and Mexico. The delivered
prices for oil from these countries� including transportation costs� tend to be lower because
these countries are closer to the United States than is the Persian Gulf. However, several European
countries, Japan and many other countries in Asia are heavily reliant on Persian Gulf oil. A
disruption in that oil would cause the countries to search for alternative sources� bidding up the
prices on oil Americans now import from Canada, Mexico, Venezuela and other countries outside of
the Persian Gulf. Americans would have to meet those higher prices or else lose their access to
these supplies.

Both oil-exporting countries and oil-importing countries have strong economic reasons to
avoid a disruption� and to make any disruption as short as possible should one occur.
While military conflict can cause a disruption in oil supplies from the Persian Gulf, it is also
important to recognize that both exporting and importing countries would be hurt economically by a
disruption. American energy users readily understand how higher prices for oil would hurt their
family budgets and ability to earn a living. However, the exporting countries also need the money
they receive from the sale of their oil to meet financial obligations, including spending on social
programs.

Furthermore, countries with especially large reserves� such as Saudi Arabia and Kuwait� found
that demand for their oil eroded steadily following the price increases of the 1970s that followed the
Arab oil embargo and the Iranian revolution. The higher prices stimulated production outside of the
Persian Gulf that reduced the number of barrels Saudi Arabia and Kuwait could sell at the higher
prices. By the mid-1980s, Saudi Arabia was selling only about one-fourth as many barrels as it had
during the early 1970s. To gain more revenue, Saudi Arabia had to increase its number of barrels
sold, even though this meant a sharp drop in the price per barrel.

The oil exporting countries with large reserves want to avoid another extended episode of higher
world oil prices that would threaten their sales in the long term. Such prices would encourage more
sources of supply� and more competition� to appear elsewhere in the world. And, these oil
exporting countries also know that a disruption would strengthen the political position of
environmental groups in the importing countries who want taxes and regulations to lower the
demand for oil (including oil from the Persian Gulf) and other fossil fuels for a variety of reasons,
including the risk of potential climate change. Therefore, even if hostilities in the Persian Gulf should
lead to a disruption in oil supplies, powerful economic forces would soon come into play in that
same area of the world favoring an end to the disruption.

Oil inventories have been rising during recent months and government-controlled
stockpiles� such as the U.S. Strategic Petroleum Reserve (SPR)� provide an important
measure of security. Petroleum industry inventories in countries belonging to the Organization for
Economic Cooperation and Development1 (OECD) are 6.5 percent or 170 million barrels higher than
a year ago. Stocks can be drawn upon should a major disruption occur. Furthermore, the SPR�
which did not exist at the time of the Arab oil embargo in 1973� contains about 563 million barrels
of oil, the equivalent of 55 days� supply of oil imports. (Under the U.S. agreement with the
International Energy Agency [IEA], the SPR is supposed to contain a 90-day supply, but that level
has never been achieved.) Many other countries also have strategic oil reserves. According to the
IEA, government owned or controlled stocks of petroleum total almost 1.2 billion barrels.

Other oil-producing countries could increase production if Iraq's exports are disrupted.
Other OPEC and non-OPEC producers, including Mexico, Norway, Russia and others, that tried to
cut production earlier this year by 3.1 million barrels a day�in an attempt to raise crude oil
prices�possess the ability to step up their production quickly. But there is no guarantee that these
countries will choose to produce more.

The United States is now much better able to adjust to a disruption than during the 1970s,
as 1990-1991 demonstrated. Iraq's August 1990 invasion of Kuwait removed about the same
amount of oil from world markets, as did the 1973-1974 Arab oil embargo. Both episodes saw a
sharp, rapid increase in world crude oil prices but this country adjusted much more successfully to
the higher world oil prices during 1990-1991 than it did during 1973-1980 when the market place
was hampered by oil price controls.

Shortly after Iraq's invasion, world crude oil prices rose to about $40 a barrel. The top world oil
prices of the late 1970s and early 1980s also approached $40 a barrel. (Adjusted for inflation,
however, $40 in mid-1991 was substantially less than $40 in 1980.) With domestic prices free to
adjust throughout 1990 and 1991, producers were encouraged immediately to work as hard as
possible to find alternative supplies while consumers were encouraged to step up efforts at
conservation. As a consequence, the increases in retail prices for gasoline and other refined
products lasted only a few months with a minimum of adverse economic impacts and no shortages
or long lines at the pump. Retail prices never went up as rapidly, or as much, as the spot prices for
crude oil (from which gasoline is made) faced by U.S. refiners. Furthermore, retail prices fell just as
rapidly as they went up. Shortly after Iraq was expelled from Kuwait early in 1991, average U.S.
retail gasoline prices were lower than they had been just before Iraq's invasion in August 1990.

In contrast, the price controls of the 1970s actually increased the U.S. demand for foreign oil�
helping foreign oil producers sustain their high prices� by discouraging domestic production and
encouraging more consumption. Furthermore, instead of helping end the problem within months,
controls helped perpetuate it for years, contributing to a harsh recession and double-digit inflation
(and interest rates) in the process. U.S. motorists faced long gasoline lines in 1973-1974 and again
in 1979 following the disruption in world supplies caused by the Iranian revolution. The controls also
did not protect U.S. motorists from paying higher prices. From 1974 (the first full year after the Arab
oil embargo) through 1980 (the last full year before President Reagan ended remaining controls
early in 1981), the average retail price for a gallon of regular gasoline went from $1.73 to $2.38
measured in 1997 dollars.

World oil supplies remain abundant. Adjusted for inflation, world crude oil prices are near
historic lows, indicating that supplies� relative to demand� have been growing more abundant.

While military action in the Persian Gulf could disrupt a major portion of world supply, oil's
underlying abundance would still remain� just as it remained after the 1990-1991 Persian Gulf War
ended.

Within the Gulf region itself, oil production facilities have proved surprisingly resilient during past
hostilities. Retreating Iraqi forces set fire to Kuwait's oil wells in early 1991 yet Kuwait built its
production back up to pre-invasion levels with surprising speed. Iraq and Iran continued to be major
oil exporters during the early 1980s, despite fighting an extended, vicious war with each other.

Furthermore, oil supply has been becoming more abundant relative to demand because of
developments occurring outside of the Persian Gulf� and which may continue even should
hostilities occur in that region.

On the demand side, financial and economic problems in Indonesia, Korea, Japan, Thailand and
several other countries continue to put downward pressure on oil prices, countering the upward
pressure placed by continued economic growth in the United States.

As a consequence of growing supply and stagnant demand, world oil prices on spot markets in
early November 1998 were about 30 percent lower than a year ago, despite tensions caused by
Iraq's repeated refusals to allow U.N. weapons inspections. In early November 1998, crude oil
prices were at the lowest level since the 1940s after adjusting for inflation.

Lower crude oil prices have meant lower retail prices for consumers. According to the U.S. Energy
Information Administration, the average retail price of gasoline in early November 1998 was 16 cents
a gallon less than a year ago.

In brief, air strikes against Iraq may� or may not� cause world oil prices to rise. No one
can know at this point whether military action against Iraq would lead to a sequence of events
resulting in a major disruption of oil supplies from other Persian Gulf countries, and therefore to a
substantial price increase. If only Iraq's production is affected, then world oil supplies would be
reduced by only two or three percent at most. Other oil-producing countries possess the ability to
replace that oil quickly, should they want to do so.

Whatever happens, the United States is in a good position to adjust quickly in the directions
needed. This nation would now be in a still better position had the U.S. government filled the SPR
with enough oil to equal 90 days of supply, as originally intended.



1 These countries include Australia Austria, Belgium, Canada, the Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg,
Mexico, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey and the
United States.

.14 is the rise in one-month rates now at 1.65 vs one-year rate at 1.51. The plot thickens. Seemingly then something doesn't want short-term gold leasing to be, making it nigh unto impossible to fathom or do.

I admit that I have not done my research homework on this question but would like some comments from anyone who might have some hard evidence or opinions about what forces or persons affect and control the gold price. It seems to me that the free market is definitely not allowed to operate and is being manipulated for someone's private purpose.
1. Is it the hedging gamblers? Are they organized as a group enough to manipulate the gold market so well, trying to stay afloat?
2. Is it the ME oil producing countries who are selling their oil at bargain basement prices and wanting to buy gold at bargains prices too to make up the difference? Isn't this what ANOTHER has been saying? Is it just me or does the price of gold go in the same direction as oil more times than not. I admit that I don't watch the correlation everyday.
3. Is it the European alliance that controls the price of gold, keeping it down for the introduction of the Euro?
4. It is not logical that all three forces could be working together in an organized way to control gold for some "One World Governmment" objective is it?
It seems that the sections of the world that are involved in each of the first three question are too diverse to cooperate with each other. They all have their own agendas so if one section doesn't control it another steps in and there you have it....market manipulation. How can this practice be outlawed or disposed of if the entire world is at war manipulating each other's markets?
Can anyone shed some light on this? Thank you. YB

Are the markets rigged ? Who causes the up and down spikes in the metals and WHY ? The Hobbits are getting dizzy from watching the metals charts since yesterdays close. DOWNSPIKES and UPSPIKES are common. Do we really need that much Volitility ? Anyone else note that the $PREM on the S&P have been up by about 1,000 points from last weeks level, since Monday. Could this be the PPT at work ? Is this really happening or am I just getting paranoid along with my senility. Perhaps I should just go take a nap !
<;-)

I have no particular stats to quote, just my ideas from following this site and others for some time. I think there are several groups that are effecting the price of gold - the ECBs, the USTreasury, LBMA/Soros, Asian markets. Some fight for the precious and others(UST) against it. I think that we are in a redistribution phase that will see gold flow to those who know its value. Buying gold is a patriotic move IMHO that will help the country retain some of its' wealth. I am amused that the gold players have kept the price down so long. They must have very deep pockets. I am suspicious that the USTr. is "leasing" (selling) our gold wealth to defend the dollar. What will we have left when it is gone? Only the empty and hollow promises our corrupt leaders have made. It is an interesting time we are living in. Too bad that there will be soo much blood shed in the near future to bring the current order into line with reality. Gold Guns and Guts(to do the right things) pax vobiscum

Newsweek has recently published a special edition volume that is subtitled 'Euroland'. Its focus is the introduction of the euro, how it came about, and what it likely portends for world commerce. The many articles are well written as you have come to expect from Newsweek...not entirely without bias, but well written, nonetheless. Throughout the entire volume, you will see gold mentioned in only one article, the only article of any import, and of such construction that a young child would recognize this forest while all others have a view confounded by trees. The 'article' to which I refer is essentially a colorful and historical 'frontispiece' that highlights monetary events over the past 2,500 years. Pared down it reads as such...gold is widely used as the standard for money, corruption of the golden money, the gold standard returns, disruption of the gold standard, the gold standard returns,...etc etc,... the gold standard returns (via Bretton Woods), the gold standard is abandoned in 1971,...the euro is conceived and born...

Like plucking the petals from a flower, she loves me...she loves me not...
And so we tug upon the next petal...

USAGOLD or STEVEH I don't have the computer capabilities to transfer the postings on the below site,but it ties in to what ANOTHER & FOA have been telling us for a long time. Please post the entire message to this site if you can,for educational purposes only. Thanks In Advance!!

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


....................beesting

You have brought us back to the basic aspect of the Forum; the market price of Gold.

As I see it, the primary issue is that gold is treated as a commodity, as money and as a possession, and each of these aspects is then individually subject to supply and demand. So, there are a multitude of flows at work even before the games of Trading wreck their havoc.
The first stockbroker I knew wore a button that said BLASH. Buy low & sell high. Traders take profits. A floor trader doesn't even have to cover a commission, so any trend has to absorb this first level of counter action to the movement of the moment. Then there is the second level which is in & out traders who have a commission to deal with & are then satisfied with a quick profit. Next, I would think, come the Fund managers who have to produce substantial profits in order to hold their jobs, and that's the third level. All three "levels" are constantly hoarding and then dishoarding back into the market.
Beyond this, are the trends set up by the supply and demand factors of the metal as affected by mines, coins, jewelry and currencies. Finally, there is the factor of manipulation for political purposes or market cornering.
To me, the first maxim is "The Tape Doesn't Lie". It may not make sense to us when Gold goes against our analysis, but there it is. So we must look to all of the factors & attempt to glean some truth out of them. This is not an answer to a lot of the questions being asked. This is an attempt to give us tools to do so, along with Gandalf's Crystal Ball.

The first two "levels I mentioned is where,I think, the spike phenomena are created.

The first two "levels I mentioned is where,I think, the spike phenomena are created.

The first two "levels I mentioned is where,I think, the spike phenomena are created.

The first two "levels I mentioned is where,I think, the spike phenomena are created.

If you are on Forum and then go to Forum Post, The Forum W'ont show your post unless you call it up again.

picked up off of an email newsletter that I get:

READER MAIL
"I spoke with my bank (US Bank in Portland) and asked them about
buying gold and silver coins. The bank employee looked at me and
asked, "Y2K?" and I responded "Yes". She told me that I was about
the 150th person this month to inquire about the conversion on
assets to gold. She advised me to call the brokerage division of
the bank."

OK...We're coming up to the end of the week here and next weekend most are going to be tied up with family (myself included), so if we are going to have a contest in the near future it's going to have to be this weekend.

So.......Here we go. I think you can sink your teeth into this one.

This morning's London Reuters report reads as follows:

"Gold dropped more than a dollar during late European trade on news that Switzerland's lower house of parliament voted for a constitutional amendment to sever their currency's peg to gold and allow gold reserve sales.

The National Council in Berne adopted the amendment by a vote of 95 to 57, the latest step in a process which could lead to the eventual sale of 1300 tonnes of excess reserves.

The amendment now moves to the upper house for a vote next year and could face a popular referendum in 2000...

Gold had already drifted lower through European hours shrugging off any idea of safe-haven buying after the U.S.-led air strikes on Iraq overnight."

***************************

USAGOLD NOTE:

Here are the facts that Reuters failed to mention about the Swiss referendum:
1.An opinion poll commissioned by the World Gold Council earlier this year showed that 69% of the Swiss public "believes that (gold) reserves are an important element of the country's monetary system
2. If the referendum measure passes the upper house and then somehow miraculously passes a vote of the Swiss people -- among which many are gold owners -- the gold will be SOLD ACCORDING TO THE REFERENDUM OVER A TEN YEAR PERIOD! That amounts to 130 tons per year. It will have a negligible effect on the market per Swiss intentions when they drafted the legislation right from the very start.
***************************

If you question Tomahawk Clinton's intentions with respect to the multi-billion dollar bombing of Iraqi desert fauna and flora in this latest episode of Wag the Dog, consider why it is that, whenever something happens in the international arena that would cause nervous investors to flock to gold, these worn out, stale stories about gold sales are trotted out for public consumption. Last week when the impeachment proceedings gathered steam, the potential for International Monetary Fund sales was trotted out. Before that there has been an endless stream of bogus gold sales stories including the almost steady cacophony over the past year about European central bank gold sales, which by and large, have never occurred. The story above is an excellent example of what I am talking about. The Reuters story could very well have included the rest of the story on Swiss gold sales; they cannot beg off that they didn't know about it. If they had an interest in being fair, they would have pulled out the file on the Swiss referendum and the rest of the story would have been there.

The question is this:

Why didn't they? Does the mainstream media have a bias against gold? If so why? What is it about gold that offends, or worries, the people who are charged with passing along the news?

The winner gets a one-tenth ounce Philharmonic. There will be two runner-up one ounce silver eagles awarded as well.

All first time posters will receive either of the following books: The ABCs of Gold Investing or
In the Footsteps of Giants free of charge. Your choice. Post and its out the door to you. We will be monitoring the e-mail .

An interesting factoid: Did you know that in the first day of the Iraqi attack 200 tomahawk cruise missiles were launched against Saddam Hussein at approximately $1 million each -- a sum approximately four times what special prosecutor Kenneth Starr spent to put together his impeachment case against Bill Clinton?

Just want to say that the contest doesn't preclude posters form posting whatever you feel appropriate. If the post is off subject but useful to all, you still have a chance of winning. Also, we will be checking e-mail from time to time for new registrations. We'll get the passwords out ASAP.

Rejoice in low gold prices. It is like feasting on spring clover. Do not worry over whether or not a group has decided to sell to you at these prices. Eventually, gold bears will run out of gold or money, or they will reverse the strategy. If you need the money tommorrow, maybe gold will not be your choice, but if you need the value for the future there....

The only people who should be troubled now are those who must sell, and not trade.

For those of you who think gold prices are high, I welcome your sales. Just look at Amazon.com, it is headed for $50 (or so); gold will not be that low ever again. Gold may never see $250 again. The risk/reward is your own equation. Solve it, and buy somthing real, substantial, and out of favor. The favor done will be your own.

Typoed in real time for real money.

Here's my Golden Essay ....

It is my strong belief that the Price of Gold (POG) is being held down through unfair market practices. Something is wrong with the free market when you consider the money supply has been growing consistently year after year for quite a long time.

Now I believe that Gold is money and a store of wealth.

Gold can be thought of as a commodity when you consider that there are some industrial uses for gold such as gold plated cables for your VCR. The key word is SOME uses. The simple fact is that such industrial uses for gold does not create a high demand for it because there are cheaper substitute products out there.

However, Gold is money as represented in gold coins and bars. Similarly, Gold in jewelry applications is a store of wealth. This is where the demand for gold is most significant. That's why the smartest Central banks around the world hold gold. In fact, the smart ones HOARD IT!

So, when the money supply represented by paper or represented by "numbers" in electronic form (electronic money) has been growing astronomically, SIMPLE LOGIC dictates that the purchasing power of gold must also increase. That is, if the free market was working properly, the POG would increase proportionately with the growth in the money supply.

You don't have to be a rocket scientist to understand the POG is being manipulated.

The question is why keep the POG low. My answer is that the "masters" who are manipulating the POG to very low levels simply want to accumulate more of it. Holding "paper" gold is not what I mean when I say accumulation of Gold. It is physical gold, that must be accumulated. "Paper" gold is the part of the mechanism used to lower the POG. "Paper" gold is like a gold certificate, a promise to the holder that physical gold is truly in a vault or warehouse being kept safe for you.

Now, I believe that "paper" gold is created by Central Banks through leasing. Hedge funds pick up the paper and they themselves sell it, knowing full well that they must re-purchase the paper back in the future to return the paper to it's rightful owner, the Central Bank . This selling of paper gold forces the POG down. In the meantime, the "smart" Central Banks accumulate the physical gold from other sources such as other "dumb" Central Banks or from Gold Miners. Why else would Korea plead with its citizens to donate Gold, not paper, but Gold to solve its economic woes.

When the hedge funds default, the Central Banks won't really care cause all they loaned was "paper" in the first place. They have already been accumulating Gold at low prices. But then, they would be very happy to receive physical gold from the Hedge Funds in return for the paper they loaned out and that's what may really happen because the masses believe they sold REAL Gold. So then, when that happens, the POG shoots up. The little players like small to medium sized banks get burned because they were the end purchasers who now hold the paper gold.

The media has a bias towards gold because too many investors (especially baby boomers holding out for retirement) have been suckered into holding bonds and stocks. People want to hear their investments are doing just fine and better than planned.

Know that much of the mainstream media around the world is owned by the "masters". However, the internet is breaking the reign of these spin doctors. Forums like this one at USAGOLD is a great shinning example. Understand what would have happened to Monica Lewinsky if she did not keep that blue dress. She would have been classified as a stalker and of course the masses would really have believed it.

Thus typical reporters in the business media who attempt to report both the pros and cons of holding gold would be forced out of their positions. The press, at this time, is being forced to print bad news towards holding Gold. At a future time though, when the Central Banks have accumulated enough Gold, the role of the media will change to pro Gold coverage.

So, buy more gold now when the price is low.

Perhaps someone can explain why short-term increases in the gold lease sets up the shorts to knock gold down. Apparently this is what it means to have a divergence of short and long-term lease rates favoring the shorter cycle. Go figure.

The URL (network address) that you gave didn't bring up anything. This one will.

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

USAGOLD....Gold story from the non-Western press....Economic Times/New Delhi, India

Y2K adds lustre to the bright metal in USA, sales soar
by Sumit Gulati

NEW DELHI 16 DECEMBER

NOT MANY would take the name of Silicon Valley, and Fort Knox in the same breath. But, according to some analysts bits of computer code, and bits of gold do have a relationship. It is nowbeing seen that the Y2K problem is contributing to, believe or not, higher gold sales in the United States.

Gold demand is up in the US in the current year. As per the statistics revealed by "Gold Demand Trends", a quarterly publication of the World Gold Council, the offtake in the US is up by 19 percent in the third quarter of 1998 over the same period in 1997. While year to date jewellery demand is
up six per cent, investment demand as measured by coin sales is up a massive 133 per cent at 50.3 tonne.

This massive increase in investment demand has occurred due to a variety of reasons. "There are three reasons for the increase," says George Milling Stanley - manager, gold market analysis, at the World Gold Council, the organisation of the world's gold producers.

"One is the low price in US dollar of the metal which is making it an attractive investment opportunity, secondly, gold is receiving greater appreciation for its role in a diversified investment portfolio. Its quality of having a negative correlation with almost all other asset classes is serving to lower portfolio volatility," says Mr Stanley.

The third reason is, however, the most bizarre. A reason which Mr Stanley himself initially had difficulty accepting. "I don't know the truth of it, but Y2K problem seems to be contributing," he says. "From coin dealers in the US we learn that there is a lot of imbalance in their deliveries, a lot of coins are going to Silicon Valley, the heart of the computer industry in the US".

The conclusion seems to point towards fears of financial turmoil in the post Year 2000 period when computers are expected to go berserk, and tries to point to the fears of computer professionals themselves. Whether computers do forget their zeroes and ones will only be known in the next
millennium, but such occurrences do raise the debate on the value function of the yellow metal.

Protagonists of the metal do make a case for it. In the recent past it has been observed that some of the South East Asian countries faced a dehoarding of gold on account of the currency crisis which drove local gold prices up. "Brazil too has seen sales of bars go up due to the heavy currency depreciation, and fears of the country following the Asian contagion," says Mr Stanley. Vietnam is another case.
"Gold is still finding use as a medium of exchange there," he adds.

While Silicon Valley may prefer to invest in gold, India's position is quite the reverse. At the end of the third quarter of the current calendar demand was down eight per cent, at 172 tonne, from the levels of the third quarter of 1997.

Sanctions, money gobbling events such as the VDIS and Resurgent India Bond (RIB) issue, and the recent inflation have been blamed. The categorisation of investment and jewellery demand in India is, however, not possible, as consumer behaviour suggests that gold jewellery also doubles up as an investment.

Your post will be a tough act to follow, felt like you were looking over my shoulder. I have to scrap half my notes. That "Blue Dress- Stalker" item was very astute.

Kitco spot has gone nuts again. check it out

Sorry about that.Thanks for the good URL:

Try this:Use search engine Inference Find.Type in space The BIS and the price of GOLD,hit browser on search,wait 7 seconds then scroll down to misc. European Commercial sites.

Thats how I found it again. Good Luck!!! If you can post it for everyone else at this site.I'm sure most will appreciate it................beesting

The investing public has come to believe that by going Right into Wall st., they will get from Main st to Easy st.; while being Left on Gold, will lead to the River of No Return. This is why real men, whoops, I mean Gold bugs, never ask directions.

I think a hacker with a morbid sense of humor is playing tricks with the Kitco Gold chart,just to give Goldbugs a hard time,probobly works graveyard shift for the Wall St. Journal,nothing better to do!!!

The BIS and the Price of Gold
If you benefit from the information in these pages, and/or you would like to support a worthwhile childrens' charitable cause, please take time to consider Aid For Autism, an out-of-school centre for children with Autistic Spectrum Disorders (a registered charity, please follow link for more information).


Past, Present & Future...
"He who has no past, has no present or future..."�
- His Highness Sheikh Zayed Bin Sultan Al Nahyan
The past tells us that gold has played a major part as a medium of value exchange and stabilisation of currency exchange rates and financial systems. For instance, as a result of the Bank of England printing money without full redemption in gold during the "Restriction" period [1797-1821], Sterling (i.e. the British pound) collapsed in 1809, and it was eventually concluded that too much money had been printed, resulting in the restoration of the gold standard on 1st May 1821. There then followed a long period of price stability.

The present shows us great financial instability in Asia and elsewhere, while the use of gold as currency is everywhere discredited (except, perhaps, in Switzerland). What of the future? Ask someone with a crystal ball. This article seeks to show that, through its influence on the Bank for International Settlement (BIS), gold is inextricably linked to the international banking system and there are good reasons for that system to ensure that its price does not fall below a certain level.


Gold Price - Scraping the Barrel
Market analysts have mentioned several gold prices for support or bottom, and one that has been mentioned by various sources over the last year or so, and has become a focus of interest recently, is US$280, which was a low point in 1985.
In the week starting 12th January 1998, the gold price dipped below US$280 by a few dollars and later in the week recovered to levels in the US$280 to US$290 range. More recently, London gold fixed at $273.40 an ounce in the afternoon of August 28th, which was a 19-year low [May 30, 1979 at $272.60]. Spot gold was quoted briefly at $270.50 in early European trading but recovered before the morning fix.

"Thursday, August 27, 1998:... the price of gold retests its January 1998 low of $276.50."
"At 8 p.m. EST on Monday, January 12, 1998, gold touched $276.50 per troy ounce, its lowest spot price since June 28, 1979..."
(From Gold Mining Outlook by Steven Jon Kaplan)

There have been reports that demand for physical gold is very strong, and gold coins have a substantial premium over the gold spot price, and a lengthening wait for delivery. By the beginning of October 1998, the spot gold price had recovered to above $300.

The lower the spot price goes, the greater the strain on physical supplies- there is a big question mark here about price versus supply and demand. It has been suggested that the price of gold is determined by the alleged trading of "fractional reserve gold", i.e. organisations are trading claims on gold in amounts greater than actual gold held, so that the supply and demand of this paper gold results in a price reflecting the supply of "paper gold" rather than real physical gold. This leads to a "great sucking sound" as buyers of the physical take advantage of the depressed price (depressed because there appears to be a plentiful supply of gold). Of course, this is just a theory- evidence supporting the "fractional reserve gold" practice is lacking. How low can the price of gold go? In seeking an answer to that, I noticed some interesting facts about the Bank for International Settlement.


About The BIS
The Bank for International Settlement (BIS) is essentially a gold-based central bankers' bank, which acts as clearing-house for the balance of payments between countries. It enjoys immunity from "censorship, requisition, seizure or confiscation, in time of peace or war, reprisals, prohibition or restriction of export of gold or currency and other similar interferences, restrictions or prohibitions."
(See http://www.bis.org/about/proto-ex.htm)
Gold is not a "barbarous relic" at the BIS, which made it an attractive stock to an investor quoted in a Forbes article of 1991:

"Having this stock is like having gold at below 50 an ounce,... its vaults are filled with gold, it has no junk bonds or real estate loans, and it sells for less than eight times earnings while yielding over 4%..."

A longer excerpt may be read in an online posting here: http://www3.techstocks.com/~wsapi/investor/s-11346/reply-27

Its Committee on Banking Regulations and Supervisory Practices (made up of central bankers) recommends Capital Adequacy guidelines for banks- currently, this critical factor determines the point at which Japanese banks become insolvent because of their dependence on the valuation of their stock assets.

The BIS is owned and controlled by central banks and aims to "foster international financial stability" and aims for "complete confidentiality and discretion." Central banks coordinated interventions in the gold market between 1961 and 1968 (the "gold pool") through their contacts at the BIS. Alan Greenspan is one of the directors of the BIS.

The BIS is subject neither to the Swiss Federal Law concerning Banks and Savings Banks nor to the provisions of Swiss Company Law.

The Committee of Experts on Gold and Foreign Exchange "monitors ongoing financial market developments with a view to their implications for central bank policies and operating procedures"
(See http://www.bis.org/about/prof-gh.htm)

Here are some financial statistics about the BIS, from their own web site [figures for 1997 in square brackets]:

At 31st March 1998 the BIS balance-sheet total stood at 62,450,174,630 [66,792,964,322] gold francs (US$ 121.2 [129.7] billion at that date using the BIS accounting gold price).
(See PRESS COMMUNIQU� 8th June 1998)

With gold priced at US$ 208 [unchanged] per ounce (US$ 1.941 49 per gold franc at 0.290 322 58 g fine gold) for accounting purposes, the net operating surplus of 259,160,599 [203,289,449] gold francs represents 0.415% [0.3%] of the balance sheet total.

Let's assume that the price of gold is $280 (i.e. around the level in August 1998). This is 34.6% higher than the accounting value $208. If the BIS were to use this value to calculate its balance sheet total, they would have a net operating surplus of 34.6% of the current total minus the 0.4% surplus mentioned above, which would be about US$ 46.4 billion. This is a nice healthy surplus! It is clear that the surplus vanishes at an accounting price very close to US$ 208 per ounce. However, the question of whether the surplus is affected by the gold price depends also on whether the liabilities are denominated in gold francs or US$. If the liabilities are in gold francs, it makes no difference what the US$ value is. If the liabilities are in US$, the surplus vanishes near to US$ 208 per ounce.

Since "The BIS employs the gold franc solely as a unit of account for balance-sheet purposes, assets and liabilities in US dollars being converted into gold francs at the fixed rate of US$ 208 per ounce of fine gold..." (See Profile of the BIS) it would seem likely that most of the liabilities are in fact related to the US$, because most international trade is done in terms of US$.

On the one hand, if liabilities are calculated at a fixed $208 per ounce of gold, it is irrelevant what the real price of gold is. However, if the real price of gold falls below $208, the BIS would not be able to settle their liabilities by selling gold, and the act of selling would itself depress the gold price further. Therefore, the real price of gold must be given some consideration at the BIS.

If we could calculate at what level the price of gold would have to be above $208 for the BIS to settle all its liabilities by selling gold, taking into account the depressing effect on the market price of that very sale, I wonder what the price would be?

Official holdings of gold by the BIS are lumped into "International Financial Statistics" as reported by the IMF:
http://www.gold.org/Gedt/Gdt24/Official.htm


A reader writes:

62,450,174,630 gold francs with an gold franc at 0.290 322 58 g fine gold would represent more that 18,000 tons of gold! That is more than half of all official state and international institution gold holdings of ca 33,000 t.... The total *including* the BIS [from the WGC IMF gold holdings table] is only 6130.5 tonnes as of MAy 1998.
The BIS uses the gold franc as a "unit of account", so some of the assets are likely to be paper assets, such as government bonds... and almost certainly US Treasuries, considering their popularity as a "safe haven". There is something of a dilemma here if the BIS were required to liquify assets. If they sold gold, the price could fall... this would include a substantial psychological effect on the markets of the BIS selling gold- like the Queen of England selling the Crown Jewels. How could they justify their unit of account being $208 if the price of gold on the open market were substantially below that? They would have to change their unit of account, and then they could be showing a loss. On the other hand, if they sold their Treasuries- and the BIS does not deal in small beer- this would also have an undesirable effect...

Recall Japanese Prime Minister Ryutaro Hashimoto's speech on 23rd June 1997:

"I hope the U.S. will engage in cooperation to maintain exchange stability, so that we will not succumb to the temptation to sell U.S. Treasury Bills and switch our funds to gold... There are many countries in the world which conduct the management of their foreign exchange reserves in Treasuries. These countries continue to hold on to those Treasuries, even when the dollar plummets. And to some extent, it is this continued holding of Treasuries which supports the U.S. economy."

"In a matter of minutes, the NYSE collapsed and the Dow Jones closed down 192 points in a mini panic" [Dennis Birch]

The BIS, as the Central Bankers' Central Bank, does play an important part in the international foreign exchange system. If the BIS were seen selling Treasuries, might that not spur others on to sell their holdings?

According to the McAlvany Intelligence Advisor, December 1997, open sales of US Treasury bonds would depress the price, and would also threaten to crash the stock markets, because the yield on bonds would increase (bond yield and price always move in opposite directions) making them an attractive investment alternative.

To support its profitability therefore, should there be a need, the BIS must either buy gold to maintain the price, or sell US Treasuries "under the counter" through the Fed so the sales don't go through the open market and depress the price; or the equivalent for other countries' bonds.

According to Dennis Birch's Resource Stock Digest, Feb. 1998: "A definite coolness exists between the BIS and the United States. This goes back to the Bretton Woods Conference in 1944, held to set up the machinery for resuming world business after WWII. Even though this conference established the gold-backed US dollar as the only reserve currency, the US did everything it could to torpedo the BIS and give sole power to the US sponsored IMF"

Therefore, the BIS may not find it acceptable to engage in cooperation with the US Fed over sales of US Treasuries. The BIS and/or others may however find it more acceptable to sell Treasuries at a later date, when the US$ rises, perhaps as a result of a take-off in the oil price, following an outbreak of hostilities in the Middle East (and noting that there is a technical "triangle" in the price of oil since the early '70s that suggests a take-off of about $22 up ahead). There are other possible triggers for a rise in the US$, such as a breakdown caused by hedge fund failures, as nearly happened with Long Term Capital Management, should that cause a rush from bonds into cash; with everybody seeking dollars their price would rise. We know that Japan does not like to see "yen weakness"; they too would be tempted to sell dollar denominated assets when they see the US$ rise. A collapse in the value of US bonds, whose yields have fallen to record lows, for whatever reason, would cause a rush to cash and the whole process would feed on itself.

Since the price of gold tends to fall in US$ when the US$ rises, this would be an appropriate time for the BIS to sell US Treasuries both as a source of liquidity and to manage the US$ downwards to protect the price of its cherished asset, gold.


A capital adequacy ratio for the BIS??
If the BIS surplus were to be 8% (the same as the capital adequacy ratio imposed by the BIS on central banks) then the price of gold would need to be about US$ 225.

I doubt whether the BIS would wish to have its operating surplus turn into a deficit. The question then arises, of whether the "powers that be" could intervene to support the price of gold as it falls towards $208 and what would happen to the BIS and the international bank settlement system if the BIS could no longer show an operating surplus. It would seem appropriate for the BIS to prefer the market price of gold to show an appropriate "safety margin" over the value used for accounting purposes.

According to the following link:

"The Swiss central bank's gold reserves amount to twice the volume of Swiss franc currency in circulation. This forces the Swiss central bank to maintain a slow and stable money supply growth. Swiss law requires a minimum 40% gold reserve for every franc in circulation [this may change if a public referendum supports proposed changes in the Swiss law releasing the requirement for gold backing, but no earlier than 2000, but if the global financial system melts down before that, I doubt if the Swiss people will assent]. Actual gold reserves amount to over 50%, and are valued at only $70 per ounce. Even if gold reaches historically low prices, such as $280 per ounce, 50% gold backing at $70 an ounce amounts to 200% gold backing."
(See http://soilandhealth.org/03sovereigntylibrary/0301investlibrary/030101jml/030103jmlbkch1.html)

We don't know if there is any official requirement for the Swiss currency to have a minimum 200% backing at gold's market price. However, it does tie in nicely with the $280 price level in that the minimum 200% gold backing referred to by the above article, happens to work out to a $280 market price for gold, coincidentally with the level mentioned by various analysts.

Here is another line in the sand labelled "$280": According to Wayne Angell, Chief Economist at Bear Stearns [WSJ, Dec. 6 1996], new gold leaching technology allows gold to be produced for between $225 and $280 per ounce- so profitability is likely for most of these producers if the gold price is above $280. However, he does suggest the price should be lowered gradually:

"That does not mean that the price of gold should fall to the upper-end of the cost of production-around $280 per ounce. Such a drop in the price of gold would be a cold-turkey route to price stability..."

Where have we seen the lower-end figure of $225? Ah yes, it was the BIS accounting value plus the BIS capital adequacy ratio! Is this a coincidence?
(See http://www.fame.org/factfict/FF-001.htm)


And Here's a Funny Thing...
A simple digit transposition turns the analysts' $280 price level into the BIS's $208 accounting unit value.
The BIS's telephone number is
(41) 61 - 280 80 80

The telephone number of Standard Chartered Bank in London is
(+44 171) 280 7379

The BIS dividend for FY end 31st March 1997 was 280 Swiss francs per share (300 in 1998).
(See http://www.bis.org/press/p970609a.htm)

January 16th, 1998, London [revised 5th Oct.]


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Now that your giving him attention, he's showing off. Or maybe the Hong Kong segment of those floor traders I mentioned on post #1393 are having a two day Christmas party.

In this post I will try to directly address the contest question of why journalists "have it in" for Gold.
First, look at that Reuters report that Gold dropped a dollar and change. "Big deal." And then there was the Swiss vote announcement. By combining the two and leaving out the qualitative background data, they just barely eke out a bulletin.
Journalists function by finding [or creating] something special to write about. These days there is a common thread of copy-cat journalism where they all comment on each other's data. I think that what we have in Gold is that an "event" has been created; the event being that "good old gold," the historic bastion of wealth & power, has lost its place in the world. These guys have to agree with each other or they are not part of the event. The sensationalism comes from creating a band wagon for all to jump on, and therein lies the excitement.

In 1964 I had occasion to "hang out" in a bar in Berlin frequented mostly by students from the university: They had everything from philosophical arguments to a good poker game. Two guys get in a shout-and-shove, and by some unobservable cultural signal, everyone there decides one of them is the bad guy and they ALL jump up and beat the ----- out of him and throw him out into the street.
So it seems to be with journalists and gold; the woes of the metal have become good copy.

It has been said that the price of mining gold with the heap leach method is $280 or under. Don't you find it odd that the price of gold is measured in dollars and dollars are measure in gold? So, which was first? The price of gold in dollars, or, the price of dollars in gold?

Didn't we see the South African mining companies experience a profit in a declining dollar-price-of-gold market because they paid their expenses in their native currency and not dollars? Yes.

Doesn't that then mean that those who pay their bills in US dollars wouldn't experience the same exchange advantage?

It seems that if the SA mines could sell gold for US dollars and pay their bills in Rands then this holds true. So, as the dollar rises against other currencies, other currencies fall against the dollar and against gold. Except if you happen to own or mine gold in that other currency then you have the advantage.

So, the chicken and egg question of "life, the Universe, and everthing," seems to connote that the US dollar and the price of gold are inoxerably tied at the hip. It would all seem to really stem from some "a priori" or "that which is given as a self-truth" and upon which all other truths are based. In other words, gold and the US dollar measure each other. Thus the dollars status as the world's reserve currency. Yet, this dollar-gold combo seems to experience a periodic attitude adjustment about every 20 or so years. Time is near for such an adjustment. The evidence is abundant that the dollar-gold relationship is strained. The couple shows signs of needing counselling. Friends of the dollar say that the other partner has no real friends, that the dollar can survive on its own. Friends of gold say, "no, you are just trying to break up the marriage, gold does have a purpose. It does belong a member of the marriage." (quotes are for effect). In the meantime, other suitors enter the relationship but no one seems to be able to catch the eye of the dollar as gold has managed to do for centuries.

The fact is that the dollar is the one who insecure in its relationship with gold and is making stories to try and discredit gold in the eyes of the world. The more strained the relationship becomes the more the dollars tries to discredit gold. But, like in any good marriage the two will have to work things out and accept each other in their marriage, even if it means a reevaluation of their relative merits to each other. If, on the other hand, gold and the dollar can't make it then they will each go their separate ways, but the stronger partner will remarry and find happiness in its new relationship. The other partner, the weaker, may have difficult finding a new partner, because it may not get over its insecurity and be able to attract a suitor.

Should the break up occur then the question of which values gold or the dollar will be answered as I believe that gold will stand out the dominant partner. But, there is one thing the dollar could do to strengthen its marriage with gold and that would be to tie itself even more to gold, showing its sign of faith to its partnership. So instead of berating gold all the time, it could bolster gold's self-esteem by recognizing their value with each other. Meaning, they would allow each other live their separate lives within the marriage instead of one partner always trying to control the other.

History has shown that gold has actually had many partners and the dollar only one. History also showed that the dollar separated from gold in the early 70's but recently the dollar has shown that it can't do without gold. We await the outcome.

FYI: clipping from another newsgroup:

Looks like the biggest short squeeze in gold's history is upon us. I
don't see any way that investors holding these Dec 99 calls will
ever see their potential profit. The gold market would close way
before the expiration. The speculative short position in gold is
huge. Now we've got a date certain, that investors seem to have
picked, where this short position must be unwound. My guess is that
this position is starting to unwind now. The new currency out of
Europe will put tremendous pressure on the US dollar. This can only
help the dollar price of gold in which most of these contracts are
denominated. Couple this with highly increased demand for physical
and we've got the makings of an explosive market. Unfortunately, it
may become 'too' explosive forcing the market to close from lack of
liquidity. Contracts entered into or held today are highly
speculative as to whether you'll get paid.

It will be interesting from this point forward to watch the more
nearby contracts for increased activity on the call side. The
options market generally leads all the other markets. If suddenly we
see huge hedging of short positions say in the February contract,
then it's probably time to count how much gold you've got in your
pocket. This gold market at the Comex is a very thin market compared
with the currency markets. Buyer beware!

STEVE --- I believe your last paragraph has uncovered the reason gold is under attack. Had " many partners " has she ? Not everyone admires a gorgeous lady who is hot stuff; courting around all over the world, forming secret relationships, and selling herself to princes and kings for the fluids that perfume the air of our planet.
Though the Dollar has encouraged this by spreading himself so thin and himself gallivanting around to all corners of the earth, public opinion will not condone her current debasement. Only when she ceases to cheapen herself in relationship to her mate and reestablishes the marriage to its true worth will the world return to bestowing the praise of former times

Hey AEL - if you're going to post my stuff from comp.software.year-2000 at least give me credit. :)

I do believe there is no way the paper gold market will remain liquid enough for those long to ever see their profit. ANOTHER is right - it will happen so fast that they will be forced to close the market. Your 'profit' is only as secure as the counterparty's / clearinghouse's balance sheet. As I said - buyer beware!

ET

ET, that snippet was from the kitco board! no credit was given,
or I would have been glad to repro that, too!

"We are hearing more and more about a revised, increased gold backing for the euro that might come about in 1999. The number bouncing around is 30 to 35% up from 15%. Most hot on the idea are the French. There are two reasons for this sort of talk. The first is that a big portion of the euro reserves are denominated in dollars. Many high echelon Europeans think the dollar is tapioca for some time to come. They want a strong euro, not a soft euro. The French, among others, think a more significant gold backing for the euro would be a big plus."

Bill Murphy/Cafe Metropolewww.lemetropolecafe.com

*******************************

"One source in gold bar sales said increasing numbers of consumers are looking at gold as protection against a computer meltdown that would have serious ramifications for Canadians -- things like making it difficult to get money out of the bank, or a foreign bank default that could disrupt the Canadian banking system.

Mr. (David) Madge (of the Royal Canadian Mint) reports that consumers are swarming for the small fractional Maple Leaf coins -- particularly a 1/10th of an ounce coin retailing for $38 (U.S.). Still, he knows of one U.S. resident who plunked down $15-million for 50,000 ounces of Maple Leaf gold coins. "That sale was directly related to Y2K," he said. "It's pretty serious [business]."

*****************************************

"Derivative trading in the financial community was then scrutinized by the Fed and top management of financial institutions. A horror show was probably revealed. It certainly is the case that the Long Term crew, who managed to suck in central bankers as investors, was not the only financial entity in trouble. Gold lending by UBS and Merrill Lynch helped foster derivative schemes over the years. They know what they helped wrought. They also know how big the gold loans have become ( probably 7,000 to 14,000 tonnes ). It is important to remember that the gold loan area is a shadowy, secretive one. Very few really know what is what in this area. UBS and Merrill would have as good an idea as anyone would. Sensing serious potential danger that the gold loans have become to big to cover in a crises, they have recently said sayonora to the gold lending and derivative game."

Bill Murphy/Cafe Metropolewww.lemetropolecafe.com

****************

Hello, to all. Checking to see if I have access to begin posting messages.
:) Critical Mass

The primary recommendation in this forum for "wealth insurance" is the purchase of pre-1933 gold coins, however, shouldn't silver be seriously considered, too?

When gold was at its historic high of around $850 oz US, silver was at its high of $50 oz US. Currently gold is around $300 oz and silver around $5 oz. To return to their historic highs, gold would have to increase approximately 3 times, while silver would have to increase 10 times. Therefore, silver appears to have proportionately more upside potential compared to gold.

Various "experts" belive the "correct market price" of gold to be somewhere around $600 oz, $2,000 oz, or $3,000 oz. How do they come up with these numbers and why are they so varied? I read one experts assertion that if the US had to take all its currency and convert it to a gold standard, backed by current US gold reserves, the result would be gold valued at $30,000 oz USD, 100 times current US gold value! If silver were to maintain the same ratio with gold as it did when both metals were at their highs, silver would increase to $1,765 oz USD, 353 x current value!

To believe gold and silver could ever hit these numbers requires one to believe in the utter destruction of the US dollar due to its impending battle with the Euro. These dollar amounts do not represent the current purchasing power of the US dollar, but rather, a US dollar so severely devalued that no one would really want it (however, homes with fixed rate mortgages could be paid off with these severely deflated dollars, making a case for locking in as high a mortgage one can presently afford and buying gold and silver to use to pay it off at a later date -- but I digress.)

So, my question to Michael and all in the forum -- why is gold the better play compared to silver? (Maybe there's a reason George Soros purchased so much silver instead of gold?) I look forward to your enlightened responses.

Sincerely,
Critical Mass

DEC.9,1998
The Bank of England which holdsthe reserves of more than 70 countries,is one of the most secretive institutions in Britain.As the Bank's committee meets to set new interest rates,Alex Brummer(Reporter for U.K. newspaper The Guardian)offers a rare insight into life behind the foreboding walls of Threadneedle Street.(first journalist to be admitted to the vaults in anybody's memory.My own comments are in parenthesis.)
Here,beneath one of the busiest junctions in the city of London, The Bank of England stores the official Gold reserves for 70 to 80 Central Banks around the world,but not,ironically,our own.Most of Britians Gold reserves are held for us by the Federal Reserve Bank of New York,where they were moved during the second World War.(Now we know the real reason why Great Britian and the United States are such close allies in times of peace and war.)
The Bank of England acts as a settlement agent for deals made on the London Gold Market,the biggest in the world.--Much of the existing Gold never moves--If the government of Uzbekistan(a gold producer)wants to repay a debt to Germany,then the Banks allocation system simply reassigns a tray of Uzbeki Gold to its new owners,for which it charges a fee.The role of the Bank as custodian of much of the worlds Gold-a sort of giant safe deposit service. Since May1997,when the Bank WON(????author of articles word,not mine.)the right to set interest rates from the treasury(About the same time Gold went to $300 per ounce and about the same time London Based Metals Exchange started reporting daily Gold volume to the public.)-pallets of Gold ingots stretching as far as the eye can see(Wish he was more specific 100ft.or1000ft.or10000ft.)I am invited to cradle a bar 28Lbs. of Gold sitting in my arms(28troy Lbs. at 12 Oz. to the pound equals 336 Oz.)Each tray holds 350---430 Ounce ingots.
John Townsend is the Banks Mr. EURO,he must insure Britians Banking system,(and the worlds)will be fit to deal with the arrival of Europe's first Transnational currency since Roman times. (The reporters words,no mention of The Bank for International Settlements located in Switzerland,for the complete story:

http://reports.guardian.co.uk./articles/1998/12/9/37435.html

...............beesting

Seems to me a range for golds' revaluation could be based on currency in circulation for the low range and total M1+2+3 for the high range. That would be without recognizing the TRILLIONS of unfunded liabilities and off-balance sheet items the USG has created with promises and lies.......let's see........

260M oz x $300 = about $80B , with about $500B currency in circulation (globally) the multiplier for gold is 500/80=6.25 6.25 x $300 = $1875/oz That's the low end!

Total debt admitted is $5,500B so, $5,500B/$80B = $20,625/oz
which could be argued as the high end. If Jude Wanninskis' recent article is correct about the role of liquidity on the gold market, AG and the FED shouldn't have to do anything!

You bring up a central and extremely important point.

In my view, the Europeans upped the number of ounces in ECB reserves as a result of China and Japan coming out during virtually the same weekend to say that they would convert a significant portion of their foreign exchange reserves from dollars to euros. The following week the ECB conspicuoulsy and tellingly followed with an announcement that they were looking into increasing the weight of their gold reserve. However, I do not know what formula they are using, and it would be good to find out. If any of our posters out there have a feel for this formulation, it would be an important contribution to the on-going discussion.

The euro, as I have said before in my daily reports and our newsletter, is the first modern currency...the model currency for the Twentieth Century monetary system -- as such it is a pilot program for the rest of the world. To keep their currency from being attacked, they put gold behind it -- a ingenious use of the yellow and appropriate for the modern, highly computerized financial system. I believe that the Orient will follow hence the rumblings of increased gold reserves from China, and the advise by Japanese monetary experts to their Eastern neighbors that they begin to look at gold as a reserve asset.

Someday the United States will have to do the same necessitating an accounting/audit at Fort Knox to salve international concerns and a re-establishment of a dollar price more in line with the international dollar float (M3). To get an idea what that price would, we need to analyze what proportion of reserves Europe will keep in reserve vs. its currency float (M3). (By the way this will also give us an range of expectation on future euro/dollar exchange rates.) Eventually, these percentages will be solidified vis a vis an international agreement so that the internatioanal monetary system can function with all parties having the same expectations. As the United States constitution was a political beacon for the establishment of republic/democratic institutions throughout the world, so the European monetary model first embodied in the Maastricht arrangement will be used as a beacon and model for the new international currency system.

It should be our goal here at USAGOLD FORUM to define the fundamental nature of this new system for our own benefit as well as all those who visit here to learn something. In my view there could be no more important undertaking and it needs to be undertaken seriously -- befitting the type of people we have posting here.

A starting point, in my view, would be determine what formula the Europeans intend to use. In other words, what percentage of their money supply (M3) will be in gold reserves by weight. Unless I misinterpret their response to Chinese and Japanese euro demand, they do have a formula in mind. Perhaps it has been published and I am unaware of it. (??)

In the end, we may find that a 25% backing of our currency would be sufficient to stem speculative attack, thus a $5000 gold price, but we need to do our homework. It could be crucial. I do not doubt for a minute that Maastrict is the direction in which the world is headed.

In the second paragraph, first sentence I meant to say "the model currency for the 21st Century." If this post and picked up and posted elseshere please include the change. Thank you.

We have had a good response so far to the contest with some very worthy entries posted already. This is just to inform those who are unaware that we have a contest going for the weekend. Here is a repost from Thursday providing the details:

This morning's London Reuters report reads as follows:

"Gold dropped more than a dollar during late European trade on news that Switzerland's lower house of parliament voted for a constitutional
amendment to sever their currency's peg to gold and allow gold reserve sales.

The National Council in Berne adopted the amendment by a vote of 95 to 57, the latest step in a process which could lead to the eventual sale of
1300 tonnes of excess reserves.

The amendment now moves to the upper house for a vote next year and could face a popular referendum in 2000...

Gold had already drifted lower through European hours shrugging off any idea of safe-haven buying after the U.S.-led air strikes on Iraq overnight."

***************************

USAGOLD NOTE:

Here are the facts that Reuters failed to mention about the Swiss referendum:

1.An opinion poll commissioned by the World Gold Council earlier this year showed that 69% of the Swiss public "believes that (gold) reserves
are an important element of the country's monetary system

2. If the referendum measure passes the upper house and then somehow miraculously passes a vote of the Swiss people -- among which many are gold owners -- the gold will be SOLD ACCORDING TO THE REFERENDUM OVER A TEN YEAR PERIOD! That amounts to 130 tons per year. It will have a negligible effect on the market per Swiss intentions when they drafted the legislation right from the very start.
***************************

Why is it that, whenever something happens in the international arena that would cause nervous investors to
flock to gold, these worn out, stale stories about gold sales are trotted out for public consumption?

Last week when the impeachment proceedings gathered steam, the potential for International Monetary Fund sales was trotted out. Before that there has been an endless stream of bogus gold sales stories including the almost steady cacophony over the past year about European central bank gold sales, which by and large, have never occurred. The story above is an excellent example of what I am talking about. The Reuters story could very well have included the rest of the story on Swiss gold sales; they cannot beg off that they didn't know about it. If they had an interest in being fair, they would have pulled out the file on the Swiss referendum and the rest of the story would have been there.

The question is this:

Why didn't they? Does the mainstream media have a bias against gold? If so why? What is it about gold that offends, or worries, the people who are charged with passing along the news?

The winner gets a one-tenth ounce Philharmonic. There will be two runner-up one ounce silver eagles awarded as well.

All first time posters will receive either of the following books: The ABCs of Gold Investing or In the Footsteps of Giants free of charge. Your choice. Post and its out the door to you. We will be monitoring the e-mail.

Off subject posts will also be considered.

WARNING ! WARNING ! ! ! First time poster. All that follows can be taken with a grain of salt, - - - but, then just maybe. . . .

My most profound thanks to all who have been posting to this forum during the past several months that I have been monitoring it. 'Specially to Another and FOA ! The old brain has been in overload trying to absorb the wisdom in the postings. Thank you all very much.

With much encouragement from MK, it is time to join the fray.

The issue that just seems to continue to rear its ugly head is the proposition of the price of GOLD in US$'s. Going back over the past few months, there have been sporadic postings as to the 'value' of gold in US$'s ranging from $35/oz. to $3,000.00 and even more in some wild 'what if' scenarios. This whole discussion is fascinating.

Regarding the relationship between GOLD and the USD, whether it be $35, 300, or 3,000; tying the two together begs the question of just what is represented by each and in what ratio. I.e. If five hours of productive work is worth one twaddle and ten hours work is required to produce one oz of gold, then the value of gold would logically be two twaddles. The common denominator being work, or productivity, if you wish.

(Definition of work and/or productivity is a topic for a totally different discourse.)

Back to the issue at hand. Politics, economic controllers, etc. can arbitrarily set the relationship between gold and twaddles, Yen, US$, and all other currencies that would represent some sort of production. Setting the relationship between gold and any one of the is really not that difficult. The hard part is trying to build a relationship between the various currencies which have been set at different levels as regards to work or production. Ah, yes. Now the devil is in the deal ! How might this be done ?

A relationship between numerous different items absolutely requires one thing in all circumstances ! That one thing is: a common denominator.

As so eloquently expressed by others in previous posts, GOLD possesses the qualities that enable it to become that 'common denominator'. In brief, it is constant, has unique properties, is readily recognized, and serves well in coinage.

Specifically, GOLD becomes the stake in the ground (or constant) to which everything else (monetarily speaking) can be referenced. When everything is allowed to float to whatever anyone wants it to be, chaos results. Just look around at various currencies that are not tied to anything for a wonderful example. THEREFORE - Is not GOLD 'THE' reference point ? Regardless of kingdoms, economic systems, politicos, goods, services, or commodities; SOMETHING has to serve as the absolute (or reference point, or stake in the ground) whereby everything else can then be properly compared to each other.

Viva la GOLD.

Thank you for your patience. PEACE.

Disinformation, often timed to counter or obscure the public's understanding of the monetary role of gold has been a policy of our government and the Federal Reserve for many years. Any questioning of our fiat monetary system is not desired by them. The biased reporting in the media originates here. They lobby in the same way that trade organizations, as the medical and military industrial complex do. Well researched reporting in the media is hard to find. It is actively discouraged and discredited, while a flood of information from academic and financial institutions supporting the "approved" policies is disseminated to the media. As drug companies support medical schools and scientific research; and lobby Federal agencies , so do interests favoring fiat monetary policy support their cause. Media control is just one aspect of the war against gold.

Regarding the sophisticated campaign against "gold as money," the case of the American Institute for Economic Research is instructive. They were harassed and attacked by various government agencies and the founder, E C Harwood, virtually slandered in the media because of their splendid research and many publications concerning the role of gold and the fiat dollar. At one point, in the early 1970's, the IRS took control of the gold sovereign holdings of investors held abroad through an investment company, American Investment Counselors run by the principles of the American Institute for Economic Research ( AIC was not legally affiliated, for the AIER is a non-profit, educational institution). This was justified to protect investors from a possible scam. After a lengthy investigation, the charges were thrown out of court by Judge Gesell in NY, and the frozen sovereigns were distributed to their owners. There had been no scam and nothing disreputable done by AIC.

Great first post, backslash....I think Marie got you entered wrong. Isn't it supposed to be "backslash"? Let me know. If so, we'll get it fixed.

As for "the stake in the ground"...a strong metaphor. Per my earlier post, all nations may be forced to tie their future's to that stake in the ground...and sooner than we might think given the ominous rise of Europe....

I think you will add much to this FORUM. Happy Holidays my fellow traveller. As Another says: We watch this gold market together, yes? With this FORUM as our meeting place............

"We seek the free flow of information...a nation that is afraid to let the people judge the truth and falsehood in an open market is a nation afraid of its people." John F. Kennedy, Feb, 1962


To use an old axiom, "follow the money". To start let's use the three major media networks in the USA; NBC, ABC and CBS as examples. All supposedly independent and in competition and it is this very competition that is part of the independence which ensures we enjoy unbiased news. Sounds great doesn't it? Let us look at the true facts;

1) NBC is a subsiduary of RCA, a media conglomerate with connections to many members in the CFR, Trilateral commission and Bilderburgers. NBC directors, John Brademas(CFR, TC, BIL) and also of the Rockefeller Foundation; Peter G. Peterson(CFR) and former head of Kuhn, Loeb, and co.(owned by Rothschilds); Robert Cizik, chairman of RCA and 1st City Bancorp; Thornton Bradshaw, chairman of RCA, director of The Rockefeller Bros. Fund, Atlantic Richfield Oil;

2) ABC directors, Ray Adam, also director of J.P.Morgan, Met Life and Morgan Guarantee Trust; Frank Cary, also chairman of IBM, J.P. Morgan and Morgan Guarantee Trust; Donald C. Cook(CFR, BIL), general partner of Lazard Freres; John T. Conner(CFR) of the Kuhn, Loeb(Rothschild) law firm; Alan Greenspan(CFR, TC, BIL) chaiman of the FRB. ABC was taken over by Cities Communications whose major director is Robert Roosa(CFR, BIL), senior partner of Brown Bros. Harriman with ties to the Bank of England.

3) CBS directors, William S. Paley(comm 300), Harold Brown(CFR) and executive director of the TC; Henry B. Schnact, also a director of Chase M. Bank; Newton D. Minow(CFR), also director of the Rand Corp. and Ditchley Foundation with ties to The Tavistock Institute, a think tank with research into how the public reacts to news and information.(In other words, PROPAGANDA)

The above is by far not a complete list of directors. There are many more with the same or similar credentials with interlocking relationships that begs the question, are they truly independent? Methinks not!

Let us extend this further by considering that these organisations are interlocked on a world wide basis of the media, banking interests, governmental and political influence and multinational conglomerates. Farfetched? Methinks not again!

One can not deny that there are many interlocking relationships between these organisations that makes one wonder, is it just coincidence or is it by design? One can assume that because of these relationships that many coordinated plans by and between these interests are hatched to their benefit.

The fiat money system, which is a bonanza to these big monied interests, can not endure unless GOLD, a threat to their very existance, was controlled and manipulated. These are the reasons for denigrating GOLD at every twist and turn. IMHO.

Can you explain how "big monied interests" reap a "bonanza from the fiat money system"? Would they not reap a bonanza from a gold backed money as well?

Mike, Marie got it right. 'backlash' (small letters for me, but it will be all Captital letters later when IT happens) as in what is going to happen when the public finally wakes up and figures out what is going on with the US Govt., Politics, etc.

There are a few other subjects that deserve some attention as soon as time allows. Cheers

Dear Mike,
When someone can lend you money that doesn't exist(credit & fractional reserve) and charge you interest on it, what more can one want. This is precisely what constitutes our present banking system. If they used gold, then they would have to lend you true wealth. Which would you prefer if you were in their shoes?

Many people, governments and corporations are drowning in debt. This gives them the power to determine who lives and dies by credit and thereby control of the economic and social system.

Best regards,

Pete

Since I'm too lazy to do the research, I thought I'd make a suggestion to classify the calculation for the increase in ECB gold backing to handle euro creation from expected Asian demand.

The Asian CBs should have published or approximated data on their FX reserves. The ECB and member CBs have certain gold holdings that allow for XXXXEuros at 15%. That is the potential number of Euros that can be issued. Whatever a "substanial" portion of $US connotes times 15% (assumed fractional multiplier) times POG yields gold to be bought to keep the 15% fractional ratio. That will give you one point in the range--don't forget the euro conversion rate.

Any takers???

With many apologies to Clement C. Moore


T�was just weeks before Euro
and howling 'round the nation
Were the dogs of war
and the winds of inflation

The markets were sleepy
and stood unawares
of all the harsh turmoil
that soon would be theirs

My wife took the checkbook
she unloaded the cash
Whilst I took my strong-box
and counted my cache

When from my front porch
there came such a roar
I reached for my pistol
and dashed to the door.

I flew as I ran,
my feet scarce touched the ground
I undid the latch
and I chambered a round

But who to my wondering
eyes should appear?
But Alan Greenspan
With a six-pack of beer!
[Illustrator note: St. Pauli Girl]

"Goldfly," said he
"I've been at it all night
I was just cruising by
When I spied-out your light"

He stepped in the door
looked me straight in the eye
Saying "Things are a mess"
I could make no reply

Putting a hand to his forehead
much furrowed with care
With a sigh of relief
he sank down in a chair

His eyes had no humor
as he passed out the brews
He put an end to the small talk
and gave me the news

He told me of meetings
and word going 'round
The price of the Dollar
would soon slump to the ground

"Those boys with their Euro
they're coming on strong
I fear that our money
will soon equal the Yuan"

But a wink of his eye
and a nod of his head
Soon told me much more
than any word he had said

"I can win this" he muttered
rising to the occasion
"I'll give it a standard
make the Dollar's foundation--

"Not paper, not palladium,
but something to hold
Not platinum, not copper,
not silver, GO GOLD!"

Like a man on a mission
he sprang from his chair
In his eye was a sparkle
while fairly floating on air--

He went to my kitchen
and he ran a great bill
Calling all the Fed bankers
to make known his will

When at last he had finished
quite pleased, I could tell
He went out the front stairs
and he bade us farewell

As he ambled into the night
his voice came to my ear--
"A merry Christmas to all,
with an exuberant New Year!"

-GF

THIS SEEMS TO BE THE WEEKEND OF THE "NEW POSTERS"--HERE'S MY SHOT.

I have been "lurking" about this Forum for about 3 months now, and given the intellectual horsepower involved here, have been quite content to just try and educate myself, compliments of the players that make up this unique family. To your credit, my friends, your input is somewhat overwhelming. I have condeded that I will never attain the international understanding of the interactive principals of the IMF,CB's, and BIS's that make up this monetary "Phantom Of The Opera", however, if I may, I would like to offer a "street level" view from an international oilfield consultants perspective (maybe that's more information than you care to know--in that case, I apologise)
My view comes from what would make up a major populas that constitutes a multinational, large (very large) group of people that acquire and hold gold for one reason and one reason only. It is the only stable element (save Lunar cycles) in their, and their forefathers lives.
I can recall, while envolved in a siesmic operation near Bandar Abbas, Iran, finding myself hopelessly lost with a Landrover devoid of fuel, trying to trade 10,000 Rials (at that time, as I recall 200-300 US$) for two jerry cans of gas. NO DEAL!! However, when I produced a British gold coin (which I had won in a poker game--and which I was later informed was counterfiet--and had a total value to me of about 30 bucks US),--I was topped up on the spot, along with my two jerry cans. As a bouus, I also received a gallon of mast, which I was informed was a buttermilk version of goat's milk. $US200-300 cash in local currancy versus $30US in counterfiet gold--what's wrong with this picture??
A similar situation occured to me in Huff Huff (pronounced Hoof Hoof) Saudi Arabia when I had the misfortune of sending a Bedouins' prise ram to the promised land due to a MVSA (motor vehicle/sheep accident). Of course, it just had to be the stud ram of the fleet, so again, negotiations prevailed. The options were: go to jail, my new company Chevy pick-up, or the 1 oz. 99.99% Suisse wafer that I had hanging on a chain around my neck. Now, I admit, that was 1982, and gold had become a significant player in the world's commodity arena, however, still not worth a new Chevy pick-up!! So again, I was off the hook, with 1 oz of the international bail money known as gold. I had to throw in the chain (nearly 1 oz itself) just to keep the local Ahmir (Mayor/Judge) out of the picture, as I felt it was still a pretty cheap pick-up, although damned expensive mutton!!!
I have had several similar experineces over the years, in which "old yeller" has bailed me out, but enough for now. The point I'm trying to put in place here, is that this gold thing has been around for just a whole long time. It is constant. It is consistant. It's just everything else that changes. To the people who live as their ancesters did hundreds of years ago, it is their "stake in the ground" as "backlash" eluded to.
Perhaps, in a later post, I'll explain how in Angola, I traded 1 Troy oz. of gold for my life (or at least the 110 grains of 9mm lead that was destined to end it)

regards
North of 49

Just want to take a moment to acknowledge our new posters. Backlash and Critical Mass; lots of good points and North of 49; great adventure tales, I'm sure we are all waiting with bated breath for that last story to unfold, especially as you apparently found the first successful Alchemist; he turned lead into gold!!

Michael
This is actually my third post but apparently my timing has not been such to make me eligible for one of your free books.

Here are a few thoughts on your media manipulation question.
The Mainstream media is not independent and has a bias in favor or international bankers which means in most cases they have a bias against gold. I would agree with Pete's post which shows the relationships between the major networks.

John Swinton, Editor of New York Times @ American Press Assoc. 1914 said
"There is no such thing as an independent press in America�. Not a man among you dares to utter his honest opinion�.You know beforehand that it would never appear in print. It is the duty of New York journalists to lie, to revile, to toady at the feet of MAMMON, and to SELL his country and his race for his daily bread. We are the tools ant the vassals of the rich behind the scenes. We are marionettes. These men pull the strings and we dance. Our time, our talents our lives, and our capacities are all the property of these men, we are intellectual prostitutes."

The following would indicate the powers that be thought about how to control the media a long time ago.
In March, 1915, the J.P. Morgan interests got together 12 men high up in the newspaper world and employed them to select the most influential newspapers in the United States, and sufficient number of them to Control generally the policy of the daily press of the U.S.
These 12 men worked the problem out by selecting 179 newspapers, and then began by an elimination process to retain only those necessary for the purpose of controlling. They found it was necessary to purchase control of 25 of the greatest papers.
An editor was furnished for each paper to properly supervise and edit information regarding the questions of prepardness, militarism, financial policies, and other things of national and international nature considered vital to the interests of the purchasers. (International Bankers- Ed. Note)
Congressman Oscar Callaway - Congressional Record, Feb 9, 1917
(Unseen Hand p 200)
In our day the major media is even more centralized and controlled by the international bankers, and they are thanked for their cooperation as we see below.

"We are grateful to the Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meeting and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been Subject to the bright lights of publicity during those years. But, The world is now more sophisticated and prepared to march towards a world government: The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries."
David Rockefeller, CFR, & TC, International Banker, speaking to the Bilderbergers Conference June 1991 in Germany
(see H du B Reports Sept 1991 Issue)

In our day the media has been very successful in discrediting anyone who attempts to expose world what is going on.

What the Trilaterals truly intend is the creation of a worldwide economic (World Banking) power superior to the political government of the nation-states involved. As managers and creators of the system they will rule the world.
Senator Barry Goldwater - With no Apologies 1980 pg. 229

The most powerful cliques in these elitist groups (Council on Foreign Relations, Trailateral commission, and others) have one objective�to bring about the surrender of the sovereignty and independence of the United States of America.
A second clique of international members in the CFR comprises the Wall street international bankers and their key agents. Primarily, they want the world banking monopoly from whatever power ends up in the control of global government.
They would probably prefer that this be an all powerful united nations organization; but they are also prepared to deal with and for a one-world government controlled by the soviet communists if U.S. sovereignty is ever surrendered to them.
Rear Admiral Chester Ward - former CFR member, Review of the News April 9, 1980 pg. 37 (Unseen Hand pg. 197)

The Trilateral commission's most immediate concern is the creation of a new world monetary system to replace gold and the dollar as the international exhange with a new currency called special drawing rights (SDR's) (It looks like that may be the euro in the near term?)
Jeremiah Novak, American Opinion July 1977 pg. 12 (Unseen Hand pg. 238)

"The Trilateral Commission doesn't secretly run the world. The Council on Foreign Relations does that."
Sir Winston Lord, President of Council on Foreign Relations, 1978
(see Aid & Abet Vol 2 No. 2 pg. 7)
If a small group of bankers can create all the money in the world our of thin air and make everyone pay interest on it they basically can control the world by financing all worldly events including wars. As we see below others would agree with this concept.

"Whoever controls the volume of money in any country is absolute master of all industry and commerce."
Pres. James A. Garfield

The people must be helped to think naturally about money. They must be told what it is, and what makes it money, and what are the possible tricks of the present system which put nations and peoples under control of the few.
Henry Ford, Sr. - American Developer of the Automobile

Permit me to issue and control the money of a nation, and I care not who makes its laws:
Mayer Anselm Rothschild

Unfortunately governments allowed the Rothschild's and a few of their closest friends do just that!

The aim of the international bankers is " nothing less than to create a world system of financial control in private hands able to dominate the political system of each country, and the economy of the world as a whole. The system will be controlled in a feudal fashion, by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences."
The individual's "freedom and choice will be controlled within very narrow alternatives by the fact that he will be numbered from birth and followed, as a number, through his educational training, his required military or other public service, his tax contributions, his health and medical requirements, and his final retirement and death benefits."
Professor Carroll Quiqley - Tragedy and Hope Pg. 324

When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here. A super-state controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure. Every effort has been made by the Fed (Reserve) to conceal its powers but the truth is - The fed has usurped the government:
Congressman Louis McFadden, Chairman of House Committee on Banking & Currency
from 1920 to 1931 (Shadows of Power, pg. 23)

The world is governed by very different personages form what is imagined by those who are not behind the scenes.
Sir Benjamin Disraeli, England's Stateman

The rulers in Washington are invisible, and exercise power from behind the scenes.
Felix Frankfurter, Justice of the U.S. Supreme Court

The real menace of our republic is the invisible government which, like a giant octobus, sprawls its slimy length over our city, state and nation. At the hear is a small group of banking houses generally referred to as "international bankers". This little coterie of powerful international bankers virtually run our government for their own selfish ends.
Mayor John F. Hylan, of New York city - March 26, 1922 (Shadows of Power Pg. 3)


The real truth of the matter is, as you and I Know, that a financial element in the large centers has owned the government ever since the days of Andrew Jackson.

Pres. Franklin D. Roosevelt, Nov. 21, 1933 (Shadows of Power, Pg 4)

So the world bankers control and manipulate both governments and the media to protect and keep their fiat money system safe from the light of day. However there are times when I think the internet may possess the power to shine the light of day on their system.

Sorry about the typo's, I would correct and repost, but since it was a rather lengthy post I will refrain from using the additional space. I will try to be more careful next time.

I think that we on the Forum have come to agree that: 1) to achieve a Gold Standard, the metal must be revalued, and 2) regardless of what is holding the price of gold down, the media is not an impartial observer.
If the price is revalued upward, however, where does the mining of new gold fit in? Would it be a windfall for the mine owners, or would the gold nations have some form of price control? Otherwise what is to prevent the mines from undercutting the declared rate and debasing the currency? If there was a price control, what about private ownership? Even if there is no confiscation, it could be made criminal to exchange gold at more or less than a legally fixed rate.
This of course would upset the owners of the precious metals, and elected officials might be turned out of office. But Warren Buffet with all his silver has only one vote, and that Tycoon who just bought 160 tons of gold, has his one vote. However each of us who have only a few coins also has one vote, so it comes down to how many of us there are.
If the majority of people don't hold any gold, there will not be enough outcry to prevent confiscation or control. Therefore there is another very big reason to have the media disparage the ownership of gold! Not just to keep the price down, but to prevent the ownership of gold from becoming widespread. If Goldbugs are a minority it won't be the voting masses' ox that is being gored.
So, every convert we win over to the logic and need for survival in owning gold strengthens the citizenry in maintaining their financial independence. Remember, the secular version of the golden rule!

WHOEVER HAS THE GOLD MAKES THE RULES!

I feel it a real privilege to be in the cyber-company of this group of posters. I have been reading since MK started this site and feel I have learned much and also failed to grasp much but it sure has not been boring.

Y2k was not my original reason for wanting physical gold but my awareness increased soon after. Moving isn't an option (my spouse doesn't believe) so I continue to add to my store of supplies here at home. MK, I think the freeze-dried variety would be the best as bugs don't develop if grain products are frozen for 48 hours before storage (per Heloise). Power is a concern (rural midwest won't be a priority) and we have generators. Long term, fuel could be a problem.

My personal opinion (for what its worth) is the POG and the markets will continue to act in their usual pattern as long as the "powers that be" are able to maintain control. Maybe it will be something like y2k or even critical mass that will burst the bubble and who knows what will give gold a boost. I do know that whatever the price, once you receive your first coins, no need to ask "why gold?"

God bless all and thanks for allowing me to lurk here.

Your #1439 post was more eloquent and informative than mine.

Pete

Sharefin has just put up a huge (300k) file of old ANOTHER posts; I have
not reviewed it or anything (do not know how/if it is edited);
here is the URL, FWIW:

http://www.cairns.net.au/~gunbury/ANOTHER21.html

all: very interesting post on kitco this AM; a repro of an
issue of Gary North's "Remnant Review" (search for
"(THE RE-MONETIZATION OF THE PRECIOUS METALS) ID#288115" on
http://www.kitcomm.com/cgi-bin/comments/gold/display_short.cgi)

It is a very long post.

Here are some key passages:

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

Q. "WHAT DOES THIS COST?" A. "WHAT HAVE YOU GOT?"

It is January 4, 2000. The typical person, all over the world, goes
into a store, assuming that stores have anything left to sell. He
sees something he wants to buy. "What does this cost?" This question
is the heart of every economic transaction. There will be no single
answer. Price is negotiable.

His bank is closed. If it's open, there is a long line in front of
it. People are holding last month's printouts of their accounts. But
those accounts are a month old, and Christmas has taken place since
then. No one can prove to a bank teller what he has in his account
today because the bank's computers will be down or inaccurate or no
longer trusted by the bank's officers. "Our computers are down." The
paralysis spreads.

He has currency, but not much. He has a credit card, but it will be
rejected by the card machine: "borrowing limit reached" or "expired"
or "bank closed." He has a checkbook, but the store owner will not
trust his checks. Has he spent everything already? Is his bank
solvent? Will the store owner's bank be paid by the check writer's
bank? Has a bank gridlock occured? For that matter, is the store
owner's bank solvent? Will it pay him?

The risk of nonpayment skyrockets in 2000. That kills fiduciary
media--promises to pay. That shrinks the money supply by about 90%.
Maybe more. "Houston we have a problem."

The problem is this: transactions become possible only for cash. But
what will people accept as cash? YOU HAD BETTER GET THIS QUESTION
ANSWERED ACCURATELY EARLY IN 1999.

GOLD. How many people own gold coins? Not many. I would guess, no
more than 3% of the U.S. population. On what basis do I make this
estimate? By the seat of my pants and the fact that there are no more
than 100 local coin companies in the U.S. that sell bullion coins
regularly, and probably it's closer to 60. Since 1980, gold coin
sales have been declining. Only a comparatively few die-hard gold
bugs have invested in gold rather than stocks. The anti-gold
sentiment has been strong in the U.S. since about 1933. That is two
generations.

In 1997, a Chicago coin store, Harlan J. Berk, Ltd., which has been
in business since the 1960's was selling less than $500,000 in
bullion gold coins a year. Sales in the third quarter of 1998 were
$3.5 million. This is obviously y2k related. I called the store. I
asked if this reflected lots of new buyers or higher-ticket orders.
The salesman told me it's the latter. As he put it, the average size
of each order is "astronomical."

So, gold coins are owned by a small percentage of the population. The
general public has never seen gold coins, surely not in transactions.
People buy and sell gold coins for fiat money, not goods. The coins
are not money today; they are investment assets. Gold remains
de-monetized.

The question is: How will gold coins move from investment assets to
money? How will they move from the portofolios of eccentrics and
suspicious investors into the marketplace? The answer is, slowly.

Think about it. Will someone with enough money today to have been
able to afford a portofolio of gold bullion coins go into the local
market and start buying items for gold coins in 2000? In the midst of
a breakdown? Not if he's smart. The guy on the other side of the
transaction will think, "Gold coins, eh. I'll bet he has a lot more
of them." This is not good. Gold coins in a crisis are for buying
absolute necessities from people you hope will not kill you. You
become the goose that lays golden eggs. You may recall what happened
to the goose in the story.

Then when will gold become money? When will it be re-monetized? In
the rebuilding phase. When the life and death nature of the y2k
crisis has passed, men will look for sound money. That's when the
person with the gold will become a buyer of capital assets, such as
houses, or will become the local lender.

I spoke to Burt Blumert of Camino Coin Company (800-348-8001). I
asked him how he thinks gold will move into the marketplace. Here's
what he told me. "In Russia today, there are flea markets and
farmer's markets. These are the real markets. At these markets, there
will be one or more coin dealers. The farmer who sells produce
doesn't try to figure out what some foreign coin is worth. He doesn't
want the risk. He sends the coin holder to a moneychanger. The
moneychanger buys it for currency, probably paper dollars, and the
coin seller goes back to the farmer to pay currency for the food."

If there is a breakdown here, the same thing will happen. The local
flea markets will provide oppurtunities for somebody younger than I
am to go into business. He will buy and sell coins and currency. He
will integrate the local market's money system with the markets
outside. If he does a good job and operates on tight commissions, he
will prosper. If he doesn't, he will get competition. If he cheats
too many people, he will disappear. This scenario is market-based. It
makes a lot more sense than my previous mental scenarios on how we
could re-monetize gold and silver. This one begins with real people
making decisions to buy and sell.

But the problem remains: How will gold become a common currency? This
will happen only after law and order have been restored. If every man
with gold coins is a marked man, other currency units will function
as money in the vast majority of markets. Gold will be a black market
currency, or a hidden market currency. Those who sell it for goods
and services will have ways of protecting themselves. Gold will mean
guns--or guns will mean gold!

That's because of the present distribution of gold: narrow. It is
owned by people with money to spare, meaning middle aged people or
old people. These people do not defend themselves with their bare
hands. They defend themselves with police officers. If there are no
policeman, these people will be armed. If they aren't they will not
remain visible owners of gold for very long.

SILVER. Silver coins are common. People who attend gun shows are
often silver coin owners. They are good old boys. (If you attend
these shows, you'll notice that some of the women are, too.) They
do deals in cash. A silver dollar is still recognized at gun shows.
You can buy guns and ammo with silver coins.

Silver coins were still in circulation 35 years ago. They looked like
today's antimony-plated copper coins. There is some continuity. But
not many people know that a silver dime is worth more than a dime. It
will take experience to change this opinion. If the price of silver
falls far enough in the next great depression, a silver dime might
only be worth a dime in 2000.

The price of silver this year has fallen from over $7 to under $5.
But the price of a bag of silver coins has fallen from $5,100 to
$4,500. Silver dollars have gone up. Since February, there has
emerged a 25% premium for silver coins over silver bullion--even more
for silver dollars. Why? WE ARE SEEING THE PRE-MONETIZATION OF SILVER
COINS. The government isn't making silver coins anymore. People know
the original producer. The original mint was not a now-defunct
private mint. The INFORMATION COSTS of using these coins is lower
than using privately minted silver coins.

Will the price of silver bullion fall in 1999 and 2000? Yes. It's an
industrial metal. Demand will drop in the recession. But the demand
for U.S. silver coins will increase as the price of silver falls. The
premium for silver coins over bullion will increase. Can it get to
100% or more next year? I doubt it. I expect y2k panic money to go
into gold coins if the price of silver bullion falls to less than 50%
of the price per ounce in coins. In any case, as I discuss later, the
big money will go into gold coins in 1999.

There are very few people who own silver U.S. coins. The coins have
been melted down for years as they have come onto the market. That is
because they have not commanded a monetary premium. This has changed
only since early this year. The monetary problem is the same as for
gold coins, namely, how to get these coins into general circulation
as currency. It will take law and order. But, initially, it will take
more and more exchanges among good old boys. These people are in
larger numbers in the country than the city.

What I say here I do not know from personal experience. I surely
don't know it because of a scientific survey. PEOPLE WHO EXCHANGE
SILVER COINS FOR GOODS AND VICE VERSA DO NOT PAY TAXES ON 100% OF THE
PROFITS THEREFROM. Do I need to spend a lot of space defending this
statement? This is another way of saying that silver coins will
function as money earliest in those circles in which respect for the
government is quite low. Put another way, members of these groups do
not today grant full acknowledgement of the government's claims to
sovereignty. They still use silver coins, not because they are U.S.
coins, but because they WERE U.S. coins, and they aren't being
produced any more. They use silver coins because these coins are
money within a subculture that doesn't use bank accounts for all of
it's transactions. These people have not left a "paper trail," or
more accurately, an electron trail. They are outside the conventional
monetary system.

When electronic money disappears in 2000, those people who have been
on the fringes of the electronic money system will have many
advantages over the rest of the population. First, a low percentage
of their wealth had been in a bank or retirement fund. Second,
personal contacts with others of like mind: a personal division of
labor based on cash. Third, a lifestyle based on a lower division of
labor. Fourth, skills in making cash transactions. Fifth, familiarity
with firearms. Sixth, an unwillingness to be pushed around. (Have
you ever been at a gun show, that free market so mistrusted by
President Clinton? Visit one sometime. Take a careful look at the
attendees. There is something about them that says, "don't go up to
this fellow and say, 'I'm really interested in environmentalism. What
about you?'")

FIAT CURRENCY. I include here paper money and token coins. I call
token coins Teddy Kennedy coins. The 1964 Jack Kennedy halves were
40% silver. Teddy Kennedy coins are different: gray on the outside,
pink on the inside. I think they will be very valuable in 2000.

I have discussed this before. First, they are widely recognized.
Second, if electrical is off and/or the banks are down, both of which
I expect, today's fiat money will be nearly in fixed supply. You will
be able to get new paper money--if any--only from a government agency
on a face-to-face basis, such as a military office, or through an
agency licensed by the government. This could be a local coin store.
Burt Blumert tells me that in 1968, as the deadline approached for
redeeming silver certificates for silver coins, the coin stores
became the primary agencies for the exchange.

There will be a massive deflation in 2000. Electronic money will
cease to exist, or at least it will not serve as money for most
people in common transactions. Transaction costs among will rise too
much for electronic money: the verification problem. It will be like
credit cards when the card's computers get jammed up and the
phone-based verification system stalls: no store will accept payment.
People will then use any form of money they can, which means today's
fiat currency. What I expect is THE DE-MONETIZATION OF ELECTRONIC
MONEY. By default, this leaves fiat currencies.

People will make do with what ever they have in 2000. New monies will
appear. Money has these features: scarcity, high value in relation to
volume, recognizability, and divisibility. Fiat currencies will be
scarce. Because there will be tremendous demand for money, prices
will fall. The value of fiat money will therefore be increasing. Fiat
currency is recognizable. But it will not be divisible, so you had
better have small bills and coins. People will not be able to make
change.

In a breakdown, canned tuna will serve as money. In the country,
chewing tobacco in tins or sealed pouches will be currency. In
cities, cigarettes will be money, until they get too stale. Pipe
tobacco in sealed cans will function as money. So will dip. You
probably don't know what dip is. Dip is smokeless tobacco that is not
chewed. It is also called moist snuff, but not by it's users or
salesmen. Skoal Bandits is one brand. Another is Renegades. Expensive
whiskey in the original bottles will be money. ("When I say jack, I
mean Jack Daniels.") Bags of white sugar will be money. Coffee will
be money. These commodity monies will appreciate over time because
most people who want to exchange anything for them will consume them,
and supplies will not be replaced that easily. As they get more
valuable, fewer people will give them up in common exchanges. This is
why these commodities will not serve as money for very long. They
will be transitional currencies in 2000 and 2001.

If the politicians are looking for the spirit of America, it is right here -- at least a good cross section of it. We've proven that you can have a meaningful conversation in the United States this weekend without it centering around impeachment.

Goldfly -- "The Night Before Euro" is awesome....simply awesome. Right down to the season's greetings at the end.

Pa kua -- We must remember the past as gold advocates and I thank you for your important contribution to that end...Col. Harwood along with Dr. Franz Pick blazed the trail in those days right after the collapse of the London Gold Pool and the Great Dollar Devaluation that followed. Their lives were acts of courage. We are all in their debt. I do not know the details of the Harwood case so I will refrain from comment. I will say though that, in the early 1970s, gold ownership was illegal and the Pick's and Harwood's of that day were subjected to all sorts of criticism and harassment from every direction imaginable, as the enemies of gold took advantage of an economically ignorant general public (no offense intended). Times have changed. Gold no longer struggles as a boutique industry. Now dozens -- make that hundreds -- of Harwood's and Pick's specialize in and write about gold and there is not a day that goes by that dozens of articles about gold are published all over the world. Harwood, as a trailblazer, stood isolated against the fiat money tide. The story you tell however illustrates the importance of taking delivery of your gold.

Jinx44 -- I'm going to leave your formulation on the table for general discussion. All those interested please see Msg #1435.

North of '49 -- I think posters should interject a little about their life experience in their posts. It gives a sense of perspective and validation that adds much to the discussion. I encourage all posters to add some background to their posts. I think we will be surprised just how strong a team we are fielding here at the FORUM. Your post will be read, appreciated and retold by many. I created this FORUM with the hope that we could all share our life experiences, ideas, thoughts, etc. Yours is priceless...I am sure I speak for many when I say that I look forward to the Angola story. Please keep posting. I've had a few field geologists as clients over the years and I've always enjoyed their stories -- something that the general public by and large has not been exposed to. I bought a gold trade unit from a field geologist one time that was used to pay for oil by one of the conglomerates way back when and had made it into circulation. It was minted in Philadelphia by the U.S. mint especially for use in the Middle East. One side had the U.S. Eagle stamped on it and the other a bunch of dots and the weight.... I still have it. We welcome your presence here.

J.A. -- E-mail me your address and we will send you the book of your choice. Please reference the Msg # 1439. Strong post. Sorry, no comment. I leave that discussion to the rest of the FORUM.

More responses later. This contest is heating up. We have about 15 hours left. May the best post win!

Remember, more than one entry is allowed.

First since it is a Sunday where I live,and close to significant spiritual times in many spiritual lives worldwide,I pray for the safe return of ANOTHER and FRIEND OF ANOTHER to this forum.
Second I'm unable to express in words the gratitude to "all"the posters here that have illuminated the mind of this person of simple thought.

Nitty Gritty is an American expression which means:To the core of the matter.So to try to answer USAGOLD'S original question:"Why is mainstream media so negative on Gold?"

A short and to the point answer,as many posters have already stated,mainstream media is much like the military,a chain of command.All reporters have to submit their work to a higher up usually an Editor,if the work is constantly not to the Editors liking,no more paycheck!!Equals no longer able to provide food and comforts for themselves and their families.Editors have the same problem,they have to answer to whosever name appears on their paycheck.Which brings us to another point,most mainstream media have never held or in some cases seen real Gold.When I got my first 1ounce Gold Krugerrand(sp?)All my friends who were not coin collecters,told me they had not held one before'some offered to safeguard it for me.Back to reasons!Media bases are located in urban areas.Paychecks and paper money are issued and redeemed in urban areas.The scope of mainstream media's physical world is the place they are confined to at this point in time.Paper money,electronic money,etc. works well in urban areas,hence satisfied mainstream media doesn't want a change in there own self justified lifestyle.Back to the chain of command'seems the top man in the public eye,at this time is Mr.Allen Greenspan talking head of the Federal Reserve,he along with hundreds of others make up the "official news sources" whose carefully thought messages are freely given to the newsmedia,in the hopes they will be publicized.This all may change because of cyberspace,the real thoughts,ideas,and news of the masses can be freely exchanged"unedited"thru the computer.Well those are my reasons.

One other point we have it from a very unreliable source that Mr.Greenspan chairman of the Federal Reserve and member of the BIS agreed to hold this position only under this condition:Because of strict tax codes inforced in the USA one quarter of monthly innumerations will be paid in US dollars to be deposited at the US bank of your choice,the other three quarters of said remuneration shall be deposited in Gold to be held on deposit in the vaults of the BIS.

signed, A. Greenspan

...........beesting

I thought that this might be germane to our discussion this weekend:

According to a New York Times article by Sarah Lyall (published in this morning's Denver Post), Richard Tomlinson, a renegade MI6 British intelligence agent, disclosed recently that Dominic Lawson, the editor of the Sunday Telegraph, was a paid British spy. The revelations came forward when a member of Parliament requested an investigation into the matter from the floor of the House of Commons. "That seems a very odd thing. It would be very damaging for the press if it were true," said the representative, Brian Sedgemore. Lawson denied the charges.

"In theory," reads the Times story, "the charge is not as far fetched as it would seem in the United States. In Britain, journalists say, the intelligence services have enjoyed cozy relations with a select group of editors and reporters, who provide sympathetic coverage in exchange for special access and exclusive stories."

Most of the anti-gold reports originate early in the U.S. business day with the Reuters reports on the London gold market a major influence on subsequent reporting. Whether or not Reuters is involved in this "select group" is not for me to determine. I only point this out as a matter of interest with respect to the discussion at hand. My interest has more to do with the vulnerability of the press in this respect than anything else. A reporter or editor does not have to be influenced by MI6 to spin his/her story. The influence could originate elsewhere. The important revelation is that this sort of outside influence is present in the British press.

that it is an odd twist of fate that the story below would come to light on this particular weekend as we were engaged in a conversation on the press' anti-gold bias.

Forgive me if part of this post seems like a boastful Christmas letter, but I want to get across the character and image of a writer who was not interviewing, reporting or speaking out for any ones agenda. I hope this will put a little perspective into the convergence of the topics of our concern and the impending holiday.
My daughter, Megan, attended a private school which we struggled to pay for. To help us through that period she worked for the school part time and summers. Its format was based on completing study programs as fast as one could go, so she set herself to graduate at 16 years of age to keep our costs down by saving us two years of expenses. That summer she traveled to Europe by going to work camps where young people help on worthwhile projects. She encountered cultures and viewpoints from many lands and decided to stay on. She worked three jobs simultaneously to save enough to go around the world. She became intrigued by stories of Outer Mongolia, where the Russians had pulled out, taking the meager infrastructure with them. Tourists are not allowed in the country unless they are part of a guided tour, or have an invitation from a citizen. So, she told the Embassy how much she admired what she had heard about the perseverance of their people and basically talked them into giving her a visitors permit. In order to do this, the embassy official gave her the name of a personal friend of his, so she would have an "invitation." While in Mongolia, she bought what seemed to be the only horse for sale in the whole country and traveled 500 km. alone through the Steppes. From there she went into China through the back way, through Inner Mongolia. In one area, she was the first American they had ever seen.

April 1993 --- Moscow to Mongolia.
.
I'm on the train, still. I'll get to Ulaan Baator day after tomorrow. It's mostly Chinese smugglers and the most embarrassing Western tourists. One of the Chinese gave me a carton of cigarettes in exchange for keeping some boxes of perfume in my bag at the border, because the customs officers are less likely to check mine. (It's not illegal, it's just that they take what they like.) I've brought many things for presents because I've read they're better than money. (There's nothing to buy.)
Every time the train stops, the Chinese rush over and hang out the windows selling T-shirts and sunglasses to the Russians, the Russians crowd the platform selling raspberries or chickens or bread, and the westerners take pictures of the whole thing.

October 1993 Taishan Mt., Tai'n, China.

I asked one group of students I met half way up to explain what they knew about the mountain. They said it is not a very high mountain, but it is the only one in a large flat area and has been holy for a long, long time; that the emperors used to go there to pray. And some "old people" still believe in it. I asked if they believed. They stated quite simply that their government had taught them from a very young age that there was no God, and therefore they don't believe in God. They said the government allowed them to believe if they wanted, but you can't change your mind about something the government's always been telling you, can you? I said (twice), "Yes, but do you believe the government?" They laughed nervously and looked at each other, continuing the conversation as if I hadn't said anything, and then laughed nervously again. They said that 97% of America's population is Christian, and if they were living somewhere where everyone around them believed in God, so would they. "Well, I think for myself," I said. This appeared completely incomprehensible to them. Well, this is China, not Russia, not Mongolia. No wonder Communism has lasted so long here.

Summer 1993 --- Mongolian Steppes.

Yesterday, I climbed the hill with the children to a place at the top to put prayer stones. Partway up, while resting, the Russian-speaking girl (a thirteen-year-old, 2 years ahead in school) said, "My sister wants to sing you a song." Her sister sings this song, big smile on her face, voice sharp and clear over the silent town, and I think, "Where do these fairy tale children come from? They are happy and full of laughter and all the good things people think of when they think of children, and none of the bad. They live here in Tosonstengel, where nobody has a job because the furniture factory closed down, nothing works anymore-- electricity, radio. Nobody has any money. The woman I stay with weaves carpets now to sell, because there is no work. I think the man fixes clocks. Everyone has taken something up at home. But they have such poverty and such difficulty - no gas for cars or barely any, etc. Yet they are the happiest people I have ever known, despite the hardship. Not that they don't mind. They do. But how come the Europeans have so much and aren't happy? The children always amaze me. A two-year-old child pours herself a cup of tea from a heavy teapot. Seven-year-olds tending the fire, helping with the cooking. They wash the clothes, dig up the potatoes at lunchtime, go to get the water from the river, never have any problem with it. And they are incredibly capable, riding around on horses. (Lamp oil running out. Good night.)

Best of holliday time to all of you,

Peter & Robin Asher

Forgive my naivity. I believe reporters get assignments from editors, who get stories from leads and mostly press releases. In fact if a press release is written well, it may just be passed through with little or no editing. When an official or non-official source recognized as legitimate produces a legitimate news release it may well be just passed through. So, when Reuters, or other news agencies see a gold-topic news release they look at their source, check the relevency of the topic, and pass it through. In the case of an assignment, an editor might tell the reporter to write an article about "this" news release or tip. The reporter, to save time, calls their source, conducts a telephone interview, gets a corroborating source and writes the article. As gold and precious metals are an investment or commodity or monety unit (take your pick) the article probably falls into the hands of a more experienced reporter-specialist.

Reporters, like scientists, can't write an article or conduct research for an article without influencing the subject they are researching. In phenomenology, they are said to co-constitute their environment, which is the same as saying they affected by their research and their research affects them.

The twenty some years of negative spin and downward spiraling price of precious metals has left a bad taste in most of our mouths for the "investment-side" of gold. It doesn't seem at all strange for a reporter to find out from an interview that gold is being sold off, gold is no longer considered money, that gold has gone down for twenty years.

That gold takes every twenty years to spike 10-times or more in value requires a reporter with excellent research skills and a motivation to find out the "real" story behind the story. Only near the cusp of the spike would a reporter hope to find out that gold is about to surge again. If they choose a positive story about gold in the middle of the twenty years than we could only expect to hear the same heeba-hobba that we have seen lately -- that gold is demonitized, that it is in disfavor, that it is a commodity, that it is going to go down as it has for the last nineteen years. In other words, there would be nothing positive in the middle of a twenty year down cycle, except that it might have cycled up a bit before cycling down a bit.

But, imagine the reporter who picks up on the three-fold increase in gold coin sales. Imagine the reporter who sees the gold-carry trade and understands it and looks beyond the paper-carry of that paper-gold. Imagine the reporter who speeks direclty to the wait for precious metals that is getting longer and longer, while the paper market makes the PM's seem like they have no value. Imagine the reporter who realizes that gold paper and gold metal are NOT one and the same but rather two beasts -- one that represents the actual market conditions, the other a hoax designed to hold down the 20-year cycle just a little longer. Well now is the time for the gold afficiandos of the world to send out those press releases taughting that the story with gold has indeed changed. Now is the time to explain that the gold-story is a paradigm about to be shifted and that the reporter who reports on this first wins the brass ring.

Forgive the widgies. They came with the paste.

Bullion may return to its glory days Intrinsic Value the Key: $2,000 (Us) An Ounce Seen as a Feasible Price

Ian Karleff Financial Post

Economich chaos and internationalk conflict arek ai boon forc gold,g that refugeq of panics money,a sol itn is no wonder the metal and gold stockse haven fared miserably inv the face of relativer stabilityc andl a seeminglyn unstoppablek equity bull.

The recente reversal of markets'h upward trend, emergingh market currency devaluations andp fearsi of recession managed toj lift thed Toronto Stockn Exchangev goldz and preciouse metalsv subindex 55% in September.j But thef metal itself hast founde it difficult toj break through an ceiling oft $300t ans ounce (all figuress inh US dollars) .

"Gold mining shares usuallym move anticipatory tod theo pricel of bullion'm on upsideb oru downside,u suggestingw that thes steep rise in gold miningm sharesj mayf well bej anticipatoryp toi a rise in theh price ofl gold bullion,"i says Philipg Spicer, presidentp ofg Central Fundg of Canada Inc. andc long-timeg believerl inv the monetary importancec ofn goldm bullion. "Itx appears there is aw tidald change inu the priceo direction ofi gold bullion."

Mr. Spicer saysz the 18-yearg equitya buyingc mania andi simultaneousi gold-selling mania arek inn thet midsth ofh reversing ast investorsg re-establishw ank interest in fundamentals,z returnp to assets that preserveu savings and seekp investmentsu rather than other people'si liabilitiesa (stocks andx bonds).

"Asa financiala assets becomev jeopardized and financialt asset structures falter,p historicallyk peoples look to putv hard savingsg intor somethingi withx intrinsic value thatq won't falter,"q says Mr.u Spicer.

And hea saysi only two suchl assetse exist - gold and fertile land.

He believes a feasible priceq foro gold is $2,000t ant ounce,n taking into accountp the decline in the U.S.s currency's purchasingf powerb sincet the U.S.v Federal Reserve boardn was created in 1914.

Many analysts question this forecast,g butp then he wash alson called a "goldi nut"d inp 1971c (wheng the U.S. abandoned thef goldw standard)l forp saying theb metal shoulda risen fromi $35 an ounce tog $200.

Inz mid-January 1980,k gold hit a recordc $835u an ounce,b in response toh high inflation, risingh east-westi tensions with the Sovietk invasion of Afghanistan, and reports ofn surplusn oili revenuesk among Organization ofo Petroleum-Exporting Countries membersh beinge used top hoard gold.

Media reportsg from late 1979o showt gold mania hadf spreadm tob ordinaryv investors:g peoplez were calling inj sicko fork workl to line upe to buy golds andw brokerage housesx wereo extendings their hoursx tou takeo telephone orders.w Sincen then, however, thep metalt has lost much ofg its attraction asp a safel haven.h Deteriorating Asianp demandr hasn't helped the metal's prospects.

But Robert vana Doorn,g gold analystq at Loewen, Ondaatje, McCutcheon Ltd.,g says the sentiment isf changing again.d Heo says forwardn selling by producers is holding theh golda pricec down, asr is as central banker mentality that assetsc underf managementb should generate returnsg and goldt reserves shouldk therefore be replaced withi investmentss ini interest-bearingn bonds.

"Overi the past twoc years,x people haved forgotten about riskz andy said, 'Noe return,f som let's forgetf about [gold]'," saysg Mr.w vane Doorn. He views thes metal as insurance, whichh "hast been the counter-cyclicalr assetg that comes in handy when things go wrong."

Otherb goldu analysts'd includingt Douglasw Cohen,h ofk Morganc Stanley Deano Wittery & Co.,i arej skeptical about ai sustainedg gold recovery, sayingk theg metal shouldh havej reacted more stronglym to recenta upsetsh in emerging economies and Russia.u Onee of the reasons gold hasm not regainedf itsz lustrej isg "thee factr that thereu are otherw alternatives available forr thosey whod wantg insurancew � many typesy ofe derivatives now existc and are popular�u Nowh the world's safel haven isr U.S. treasuries," says Mr. Cohen.

However't inw then pastm two monthsh institutions have started to look at gold and goldo stocks't sayse gold analysto Chad Williams atw TDh Securitiesb Inc.g Hef says this is a reversalb from previous months whens short sellersb capitalizedf onf the threatr of centralp banka selling, borrowing goldb inx thej hope thatv the valued will fall andh it can be replacedh at ay lateri date for a lowerp cost.

"Short sellers and central bank influencer has beenz mitigated �y nowk creditx isd morej difficult toj obtainr for shortsi son it's difficult forb shorts to take theiri big short positions," saysi Mr. Williams.

Sincea 1980, thee Bankg ofd Canada is reporteds to havem slashede itsf gold reservesv by morex than 85%d to 88 tonnes'm followeda by similarx destabilizing sales byl Belgium, Australia,c Argentina and thex recentt proposal byy Switzerlandi toc sell upf to one-thirdq of itst reserves'd pending ar referendum.i Longv term's Mr. Williams says,b gold would continue tou be al monetaryp assetb ands theb pricez willt risem - producers havej cutr back on explorationn andw development; thed European central banko reserveso willq havej a 15%l gold holding; and countriesv liker Russia arex talking aboutw creating gold-backed currency ratherw thany printing moret money.

Patricia Mohr, vice-presidentr economics atu Bankp of Novax Scotia,p the world'sf largestz trader ofn gold throughu Scotiay Mochatta,r says goldn has found at bottom and willk movey slightlyy higher, averaging $325anc ouncen inq 1999q compared withb an expected $298 anz ouncek thisw year.y She saysm if they US dollar continues to weaken,c investors mightw startk tof rethink theq value ofw goldy despitey them lack ofm inflation.

"Supply-demandb is actuallyz fairly tightu and physical demandp forh gold is good,"o says Ms.e Mohr.

Forgive the widgies. They came with the paste.

Bullion may return to its glory days Intrinsic Value the Key: $2,000 (Us) An Ounce Seen as a Feasible Price

Ian Karleff Financial Post

Economich chaos and internationalk conflict arek ai boon forc gold,g that refugeq of panics money,a sol itn is no wonder the metal and gold stockse haven fared miserably inv the face of relativer stabilityc andl a seeminglyn unstoppablek equity bull.

The recente reversal of markets'h upward trend, emergingh market currency devaluations andp fearsi of recession managed toj lift thed Toronto Stockn Exchangev goldz and preciouse metalsv subindex 55% in September.j But thef metal itself hast founde it difficult toj break through an ceiling oft $300t ans ounce (all figuress inh US dollars) .

"Gold mining shares usuallym move anticipatory tod theo pricel of bullion'm on upsideb oru downside,u suggestingw that thes steep rise in gold miningm sharesj mayf well bej anticipatoryp toi a rise in theh price ofl gold bullion,"i says Philipg Spicer, presidentp ofg Central Fundg of Canada Inc. andc long-timeg believerl inv the monetary importancec ofn goldm bullion. "Itx appears there is aw tidald change inu the priceo direction ofi gold bullion."

Mr. Spicer saysz the 18-yearg equitya buyingc mania andi simultaneousi gold-selling mania arek inn thet midsth ofh reversing ast investorsg re-establishw ank interest in fundamentals,z returnp to assets that preserveu savings and seekp investmentsu rather than other people'si liabilitiesa (stocks andx bonds).

"Asa financiala assets becomev jeopardized and financialt asset structures falter,p historicallyk peoples look to putv hard savingsg intor somethingi withx intrinsic value thatq won't falter,"q says Mr.u Spicer.

And hea saysi only two suchl assetse exist - gold and fertile land.

He believes a feasible priceq foro gold is $2,000t ant ounce,n taking into accountp the decline in the U.S.s currency's purchasingf powerb sincet the U.S.v Federal Reserve boardn was created in 1914.

Many analysts question this forecast,g butp then he wash alson called a "goldi nut"d inp 1971c (wheng the U.S. abandoned thef goldw standard)l forp saying theb metal shoulda risen fromi $35 an ounce tog $200.

Inz mid-January 1980,k gold hit a recordc $835u an ounce,b in response toh high inflation, risingh east-westi tensions with the Sovietk invasion of Afghanistan, and reports ofn surplusn oili revenuesk among Organization ofo Petroleum-Exporting Countries membersh beinge used top hoard gold.

Media reportsg from late 1979o showt gold mania hadf spreadm tob ordinaryv investors:g peoplez were calling inj sicko fork workl to line upe to buy golds andw brokerage housesx wereo extendings their hoursx tou takeo telephone orders.w Sincen then, however, thep metalt has lost much ofg its attraction asp a safel haven.h Deteriorating Asianp demandr hasn't helped the metal's prospects.

But Robert vana Doorn,g gold analystq at Loewen, Ondaatje, McCutcheon Ltd.,g says the sentiment isf changing again.d Heo says forwardn selling by producers is holding theh golda pricec down, asr is as central banker mentality that assetsc underf managementb should generate returnsg and goldt reserves shouldk therefore be replaced withi investmentss ini interest-bearingn bonds.

"Overi the past twoc years,x people haved forgotten about riskz andy said, 'Noe return,f som let's forgetf about [gold]'," saysg Mr.w vane Doorn. He views thes metal as insurance, whichh "hast been the counter-cyclicalr assetg that comes in handy when things go wrong."

Otherb goldu analysts'd includingt Douglasw Cohen,h ofk Morganc Stanley Deano Wittery & Co.,i arej skeptical about ai sustainedg gold recovery, sayingk theg metal shouldh havej reacted more stronglym to recenta upsetsh in emerging economies and Russia.u Onee of the reasons gold hasm not regainedf itsz lustrej isg "thee factr that thereu are otherw alternatives available forr thosey whod wantg insurancew � many typesy ofe derivatives now existc and are popular�u Nowh the world's safel haven isr U.S. treasuries," says Mr. Cohen.

However't inw then pastm two monthsh institutions have started to look at gold and goldo stocks't sayse gold analysto Chad Williams atw TDh Securitiesb Inc.g Hef says this is a reversalb from previous months whens short sellersb capitalizedf onf the threatr of centralp banka selling, borrowing goldb inx thej hope thatv the valued will fall andh it can be replacedh at ay lateri date for a lowerp cost.

"Short sellers and central bank influencer has beenz mitigated �y nowk creditx isd morej difficult toj obtainr for shortsi son it's difficult forb shorts to take theiri big short positions," saysi Mr. Williams.

Sincea 1980, thee Bankg ofd Canada is reporteds to havem slashede itsf gold reservesv by morex than 85%d to 88 tonnes'm followeda by similarx destabilizing sales byl Belgium, Australia,c Argentina and thex recentt proposal byy Switzerlandi toc sell upf to one-thirdq of itst reserves'd pending ar referendum.i Longv term's Mr. Williams says,b gold would continue tou be al monetaryp assetb ands theb pricez willt risem - producers havej cutr back on explorationn andw development; thed European central banko reserveso willq havej a 15%l gold holding; and countriesv liker Russia arex talking aboutw creating gold-backed currency ratherw thany printing moret money.

Patricia Mohr, vice-presidentr economics atu Bankp of Novax Scotia,p the world'sf largestz trader ofn gold throughu Scotiay Mochatta,r says goldn has found at bottom and willk movey slightlyy higher, averaging $325anc ouncen inq 1999q compared withb an expected $298 anz ouncek thisw year.y She saysm if they US dollar continues to weaken,c investors mightw startk tof rethink theq value ofw goldy despitey them lack ofm inflation.

"Supply-demandb is actuallyz fairly tightu and physical demandp forh gold is good,"o says Ms.e Mohr.

"The lower house of parliament in Switzerland has approved a plan which decouples the Swiss franc from its backing in gold. Whether or not this will lead to future Swiss sales of gold bullion is uncertain; the U.S. did a similar decoupling (of gold and the U.S. dollar) in 1973, and has not sold any gold since that time; virtually the same situation exists in Germany as well. Given the long history of fiscal conservatism in Switzerland, it is unlikely that there will be any major sale of Swiss gold." Steven Jon Kaplan


This foregoing version of the Swiss news puts a slightly different spin on our topic. Note the emphsis that the Swiss action mirrors the controversial step taken by the United States in 1973; the decoupling of the dollar to gold which ushered in the floating gold standard we have today. This action was actually a de facto admission of inflation. Already having printed too many dollars to be able to back them with the gold in Fort Knox, the US acted to forestall the Europeans' (mostly French) converting of dollar currency reserves to bullion. Price inflation followed and the price of gold eventually soared (but not until 1979--six years after the admission of excessive money creation).

What we see today is massive money creation in the face of world monetary deflation as exacerbated and/or reflected by the Asian crisis. Reports indicate that present money creation by the Fed is running at 20%. Much of this new money flows into the US stock market. The normal expected reaction in the price of gold is either waiting for widespread public perception or is being manipulated by credit markets to preserve the status quo. Or both. Whichever explanation we embrace, the result is the same:

A flatlined POG that refuses to react to any external event; neither attacks on foreign countries nor historic impeachment enactments in the Congress. Not even both occurring together! Manipulation in some form seems undeniable.

Since we are encouraged to examine the media's motives this weekend, I would offer the following: From Hollywood, California I assert that the role of the press as informative is mostly an illusion. It is the same illusion seen in the movies. Everyone has had the experience of seeing the movie version of a favorite book. They always make changes; sometimes radical changes, sometimes subtil ones. But it's always different in the movies. "It makes a better story that way", they say. The same thing happens when they make a movie about something we know well. The expert trout fisherman laughs out loud when he goes to a movie about fly fishing; it is obvious that they (the producers) don't know anything about fish, trout flies, rivers, etc. The musician guffaws at the movie about music. The sailor at the movie about sailing. Et cetera, etc., etc...

The news media is really about entertainment. It's show business. Just like in the movies, giving us what we want to hear. "It makes a better story that way", they say. The public wants to be assured that "the stock market will always go up" and that "they" are in control. Suggesting anything else would be treason. The mere suggestion could cause a collapse all by itself. And the real purpose of reporting the news is to attract viewers to the advertisments and the commercials. This is our system. It woudn't work any other way. The media cannot report what would damage their own bottom line. It is a self-fulfilling catch-22.

And so the negativity spins on:
"Gold is subversive."
"... a barbarous relic."
"Even the Swiss plan to sell theirs."
"__ _____ ______ __, ______!"

And so it goes. And the flatline continues. "And gold is down (or was it up?) $.50 this morning," reports SteveH. And the attack on Iraq is over. And the government of Iraq will no longer allow UN inspections. And the President of the United States has been impeached. And the DOW is up 150 points... And we can only imagine the extent of the effort expended maintaining the flatline. Will the launch of the Euro be the keystone that once removed will allow the reassertion of natural market forces?

At USAGold "we watch this gold market together, yes?"

Curency devaluations from emerging markets are largely responsible for today's global financial crisis. The natural question to ask is, "Where is all this heading?" The second question is, "How do I best protect myself and my family."

There is an advantage for countries to devalue their currency to the US dollar. Consider that many countries, prior to devaluing their currency, have the opportunity to first purchase other countries currencies for their "reserves." They take 10 million ringits and buy (for the sake of easy numbers, not reflecting actual exchange rates) 1 million US dollars, then devalue their curency to the point where it would now take 20 million ringitts to by $1 million USD. Why do this?

First off, these countries need a competitive advantage for selling their products abroad, particularly in the US. By devaluing their currency to the USD it makes that same product cost less in the US market so they can sell more product here. Likewise, devaluating their currency makes it possible for these countries to repay foreign debt with a curreny that is worth less (and possibly worthless).

The net effect of countries taking this approach is that other countries must devalue their currencies, too, in order to remain competitive and repay their loans. The US recently devalued the dollar compared to the Japanese Yen. At one point, one US dollar was worth $143 Yen, and over the past couple of months it dropped to the point where one US$ was worth $111 Yen. This essentially means that Japanese products cost almost 30% more in USD than they did approximately 3 months ago! It also means the currency reserves Japan held in USD are now worth about 30% less! This creates a problem for Japan which sells a majority of its product to the US. Japan must either wait for the USD to be revalued higher compared to the Yen or Japan must begin devaluing their currency to return it to a level that is once again healthy for the Japanese economy. This could "look" as if the USD is increasing compared to the Yen, when in fact the Yen is being devalued compared to the USD.

The main problem with all of this is that each countries currency is worth an arbitrary amount determined by the amount of currency in the market and the demand for that countries currency by other countries. In reality, each countries currency is only worth what it costs in raw printing materials (paper, ink and the labor / machinery to actually manufacture money).

Russia is faced with the problem of owing billions to foreign govenments and not being able to generate the necessary taxes to repay these loans, much less Russian workers, many of whom are 6 months behind in receiving their wages. What is Russia left to do but buy as much foreign currency as they can and devalue their own currency to the point where it is worthless (hyper inflation). They could create two currencies that exist side by side -- the Ruble, which is severely devalued and used to repay foreign debt even though it is worth nothing, and a new Russian National currency, used internally within Russia only, which cound be linked to a gold value (or even be minted in gold) in order to restore the confidence of the Russian people. After repaying foreigh debt with Rubles, Russia could eliminate the Ruble altogether and replace it in currency markets with the new national currency backed by gold, which would have been "proven stable" within Russia itself and should make foreign investors more confident with its fixed value to gold.

The United States currently owes $5.5 trillion, about half to foreign governments and half to US investors. This "money" is backed by nothing more than the paper it's printed on and the US promise to pay it back, with interest, but there is no promise what the money will be worth when it is paid back. This, also, makes the Japanese very nervous, considering Japan and China are the two largest holders of US debt.

It is logical to assume that the introduction of the Euro will be largely supported by Japan and China, since they will finally have an alternative to US dollars as a reserve currency, and the value of the Euro will be much more stable than other currencies, due to its gold reserves. The US has the largest gold reserves of any country in the world, the problem is that the US hasn't tied a specific gold value to the dollar since the early 70s.

Really, every country stands to benefit by a return to the gold standard because it gives every country the ability to start with a "clean slate" and not repay their debt obligations with anything worth more than the replacement costs of its fiat currency.

Who really gets caught in the middle of all of this? The citizens who are supposed to be protected by their governments. Most citizens hold the currency of their countries and have no personal gold reserves, which means when the currency armageddon moves toward critical mass their personal wealth could well be all but eliminated.

An interesting side effect of the currency wars is a lack of purchasing power from many countries and the deflationary effects this has on commodities. Whereas gold is a store of wealth, it is also traded as, and considered to be, a natural resource commodity. The effects of currency devaluation is reduced demand for raw materials because of the reduced demand for end product -- this causes prices of raw materials to go down instead of up. Because of this, we could well see the prices of gold and silver continue to drop until governments are forced to abandon their currencies and return to a gold value. The effects of the Euro's introduction may be felt overnight, or it may take months or even years before its effects on all currency are recognized. The Euro is, in its most basic form, a way for Europe to replace the national currencies of 11 different countries with one multi national currency in order to reduce the daily currency fluctuations between each country and make it easier for tourists and businesses to comparison shop prices. It's a way, also, to reduce the daily shifting of national currency values. The Euro may well serve as a model for a one world currency to replace ALL national fiat currencies and prevent a currency meltdown from happening again.

For your consideration and comments,
-- Critical Mass

Way to go Critical Mass, in my opinion you have summed up what 1999 is all about. A volatile transition (currency war) to a one world currency and eventually a one world central bank! (ie one world government without really identifing it as such.)

Dec 31/98 - 12 currencies will be pegged-valued to the Euro, 11 are paper & ink the 12th is yellow, shiny and heavy! (No need to see gold to up before then.)

Let the games begin.

Keep Well!

FLASH****FLASH

Just reported on local news in Los Angeles: Salvation army bell ringers in the state of North Carolina have reported finding gold coins (Krugerands) in their kettles this holiday season.

Amid all the negative publicity about gold of late, Salvation Army officials say they are pleased with the generosity of the donor(s).

All right! Who did it?

Give to a good cause and stir some interest.

It was you, wasn't it PH. You have contacts in NC. Come on, you can tell us.

Think I'll pitch in a couple of sovreigns, what do you say guys?

Hmmm.....wait a second. Then people are going to say: "See that gold isn't worth beans.... giving it away, blah, blah, blah....... Hmmmm.

Or am I being cynical? What do you think?

GF

Well she is stable. Pass the suchers(?), sponge, you sew her up, I need a drink.

Gandalf, it may not be pretty and it may be boring to watch, but it catches your attention below $290, no?

The VSE mining and VSE stock index fell strongly today. I guess this means that we may hit new bottoms before the juniors are ready. I suspect we are seeing year-end selling and preparing for the spring bounce.

The dow started of strong at the start but started to loose steam at the end of the day.

Here is a post from that other board. Definitely worthy of a read:

Date: Mon Dec 21 1998 22:32
fergie (Another new high in the S&P 500/Gold ratio) ID#303230:
Copyright � 1998 fergie/Kitco Inc. All rights reserved
No surprise here. Another new all-time high of 4.168 reached today, in the ratio. It truly is shocking how manifest this mania is. The ratio is now 22.5% over year-end 1997; 48.7% over 1968's peak day; 169.4% over 1929's peak day; and, 3,057.5% ( not a misprint ) over the 1980 bottom of 0.132.

I'm beginning to doubt my sanity, which sometimes has been a good indicator of a buying opportunity. ( 'Course my ever-lovin' would be quick to assert that such a condition is omnipresent. ) Seriously, though, actually going counter to that feeling of insanity, when I have despaired of being entirely wrong, has turned out to be a good time for me to invest.

A section of Peter Lynch's book, "One Up On Wall Street" may be appropriate here:

"A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your performers and your laggards that show promise. "If you can't convince yourself 'When I'm down 25 percent, I'm a buyer' and banish forever the fatal thought 'When Im down 25 percent, I'm a seller,' then you'll never makde a decent profit in stocks."

Another quote, this time from Bernard Baruch, responding to a query on how he made all his money in investments: "I never bought at the exact bottom, and never sold at the exact top."

Listen, folks. We are being afforded an incredible opportunity here. We all know that gold and gold equities are exceedingly cheap. Conversely, we all know that we are in the blow-off stages of an amazing mania. Could the market go higher? Sure. Could gold go lower? Sure. But don't lose sight of where we are in the bigger picture. Gold is amazing cheap RIGHT NOW, and the stock market indexes are amazingly expensive RIGHT NOW. It will not always be thus. Just about the time when you think it may remain this way forever, it'll change.

Hang in there. Buy gold and gold stocks and HOLD THEM. Forget the daily gyrations of a manic and manipulated market. Our time is coming.

One last quote. Sparky Anderson, the voluble and former baseball manager kept a sign on his desk: "Every twenty-four hours, the world turns over onto someone who thought they were on top of it." The converse is also true.

IMHO, Fergie

Hold on to your beanies, (NOT Beanie Babies, you youngsters)as the Bubble is getting ready to burst ! If the Japanese Banks start selling those US Bonds the game is over. AG will have to pull a rabbit out of the hat again.
(And I am not sure he has much left in the hat.)
SteveH is watching the Feb Gold for all -- seems to have lots of support at 189.5 and lots of overhead at 290.2
BUT is verrrrry slooooooow trading at night. Hang on all, as there are only a few more days until the new age of reason begins. Love to see the newbies post ! Come on in all you lurkers, the water is fine.
<;-)

of course that is 289.5 on Feb Gold suppport
NOT 189.5 ----- never could type !
<;-)

article in washington post:
Dead Ahead -- Monetary Meltdown
by Judy Shelton
Monday, December 21, 1998; Page A29
http://washingtonpost.com/wp-srv/WPlate/1998-12/21/008l-122198-idx.html

SteveH, you posted this yesterday:

SteveH (12/21/98; 06:49:06MDT - Msg ID:1453)
Forgive the widgies. They came with the paste.
Bullion may return to its glory days Intrinsic Value the Key: $2,000 (Us) An Ounce Seen as a Feasible Price
Ian Karleff Financial Post

... would you PLEASE give the URL on that financial post article?
I want to send it to others, and I think I can handle the "widgies"
better from the original. Thanks!

This was the best contest yet. The posts were top-drawer and I wish I could award all of them a gold or silver coin. This Forum grows in stature by the day and it is because of the extraordinary thinkers who post here.

I couldn't decide on the two silvers so I'm going to award four silver eagles this time:

Steve H....For MSG #1451 particularly the last paragraph which reminded me that our fate is still in our hands. I also want to thank you, Steve, for your consistently strong contribution...for the benefit of all who frequent this site.

Goldfly...For that incredible poem, MSG #1436

JA....For getting the "theory" on the table for all to consider. MSG #1439

AEL...For MSG #1445...The Remonetization of Precious Metals.
Though you didn't write it, I considered an extremely important message that now sits safely in the FORUM's archives for anybody to visit. There is much merit in finding important thinking for all of us to review.

AND THE GOLD GOES TO........

North of 49 MSG 1437....A Great Adventure Tale...and I hope not the last we'll hear from North of 49.

All in all, as I said, it was the best contest we've had in terms of content, quality of writing -- the works...

Those of you who posted for the first time, please let us know which book you want before we adjourn here Thursday noon for the holiday. We haven't heard from everybody yet.

My best to all....

References keep flashing around on the net about a dispute threatening between The US and the EU over bananas. Reported details are sketchy (see: http://biz.yahoo.com/rf/981222/ea.html) but it appears that 100% tariffs on EU exports to the US are being threatened unless the EU modifys its stance on banana imports from certain South American countries (via US coumpanies).

Is this the direction the US government intends to pursue in the coming confrontation with the Euro? With the debut of the Euro, major weakening of the dollar is expected as countries sell their dollar currency reserves. This weakness will be felt by the US economy mainly in the international arena and specifically in terms of trade with the European Union. We here at USAGold take it as axiomatic that gold will be affected. (Naturally, since gold is really the only thing that defines the value of the dollar.) Dollar weakness against the euro would be masked to US consumers if there were large tariffs in effect on imports from Euroland since price inflation of imported goods in the US that also included 100% tariffs would be distorted as those imports became virtually unavailable in the US.

ANOTHER remarked that as the situation unfolds propaganda will be used by the US government to discourage the holding of Euros by US citizens. "Be patriotic! Hold gold...the currency of history!" etc. Restricting trade with Europe through punitive tariffs would have the same effect.

Just a thought. What do the rest of you think about this?

Imagine trying to earn and represent/hold your 'wealth' in the zloty...
---------------------------------
Warsaw, Dec. 22 (Bloomberg) -- The Polish central bank and the
government agreed today to change the basket of currencies the bank
uses to devalue the Polish zloty to include only the dollar and the
euro, the single currency to be adopted by 11 European Union
countries on Jan. 1, the Polish press agency PAP reported. The
central bank currently devalues the Polish currency against a
basket that includes the British pound, the deutsche mark, the
French and Swiss franc and the U.S. dollar at 0.5 percent monthly.
The basket will now be weighted 60 percent with euro and 40 percent
with the dollar, the agency said.

The central bank last lowered the pace of the zloty monthly
devaluation, or the so called crawling peg on Sept. 9 from 0.65
percent.
----------------------------------
You may recall Poland's recent gold acquisition of 70 tonnes. Every successful journey requires these many steps in the right direction; and so we see another step...

" Dollar weakness against the euro would be masked to US consumers if
there were large tariffs in effect on imports from Euroland since price
inflation of imported goods in the US that also included 100% tariffs
would be distorted as those imports became virtually unavailable in the
US."

"Tariff" as potentially used here may be just one of several new additions to vocabulary that define the dollar's 'weakness to be by institution rather than weakness by design', used as a tool to prolong the intraNational viability. Citizens not of your mind will say "The dollar is good; the policy is bad." You (and I) know better.
These tools and works are to be expected. This is a cold pool to jump into, and the informed leadership has a responsibility not to shock the system. The goldhearts, alone wearing wetsuits, of course would prefer to dive in!

You sir, are a true connoisseur of the Arts� or is that a
connoisseur of the True arts? Well, whichever- you're a
great guy! (A softy too!)

Thanks for endowment. Have a great Christmas!

GF

Critical Mass - - - Thank you, Thank you, Thank you ! ! !

You so eloquently explained what I so poorly tried to set forth.

Gold is indeed the 'stake in the ground' for reference. All currencies will ever float with reference to each other so long as there are variances in what constitutes value within each one of those currencies. You know, political manipulation, economic manipulation, speculation, irresponsible handling of assets, etc., etc., etc.

Don't you just love all the ramifications of available 'manipulations' ? Buying other foreign currencies for reserves and then devaluing yours in order to pay back loans and trade at a great advantage. What a deal. This is to say nothing of the next possibility. - - - - How about buying that awful stuff, Gold, with that foreign currency and holding it in your reserves. WOW 1

It is now time to start a new country, set up a currency backed with gold (but not very much), go to war with the US and surrender promptly, get aid from the US, and then start the process outlined above. ! ?*@%()

Yipes, just who are the morons running this ship ??? Uncle Bill has absolutely no clue what is going on, but it is certain that a.) Something is definitely going on behind the scenes and b.) Someone knows exactly what they are doing.

This brings me to the point (finally).

The USAGOLD Forum has allowed uneducated persons like myself to finally have a place to go to get an education regarding not only Gold, but how currencies work, how countries interface monetarily, and what fiat currencies really are. Thank you mavens of knowledge in all these areas as well as others not specfically mentioned.

As has been my penchant, I tend to cut to the chase without setting up the background, the whys and wherefores, and explanation of what led me to the conclusion. Therefore, to set up a bit of background about myself:

Being an engineer and coming from a poor (monetarily) childhood, it is sometimes difficult to comprehend the large scale scope of finances as relates to countries, international markets, and such. There must be millions out there in the same situation. We do want to know and have an understanding of true economics and not the balderdash that comes forth from the 'establlishment'.

Having been a small businessman through the 70's, 80's, and 90's, many economic changes have blindsided my efforts. Surviving the business ups and downs of three decades without guidance speaks of a degree in the school of hard knocks. Rest assured, the lessons have not been wasted. With nominal success in business; a wonderful wife, children, and grandchildren; and an abiding faith in The Creator, I count myself truly blessed

This is posted (though long winded) because it surely represents the situation of a vast number of individuals. Those who have worked hard, committed themselves to family, community, and country, and strived to lead honest, upright, and moral lives are the true assets of any society. The very fact that whatever nominal success each may have achieved could well be taken through actions beyond their knowledge is the true tragedy. Knowledge being the operative word in this.

Each poster to this forum operates from a different plane of knowledge and contributes according to their life's exposure. The postings from Another, FOA, and USAGOLD represent the epitome of wisdom and understanding, yet the postings from Mr. Asher "from the mouths of babes" reminds one that understanding dwells in us all. ( From that posting, I would be glad to invest in some 'Ashers' whenever they become available.)

MK, hope this is what you ment by wanting some background and insight into we new posters.

'backlash' represents what I feel is the position of the average person in this time. Unsure for certain which way to go, but coiled and ready to move when the time comes. Those in positions of self directed 'sanctimonious' power may be well served to be very careful. I have much faith in the common man who makes things happen where the rubber meets the road.

Oh, yes, Some of us are indeed stocking up on the yellow.

Cheers, BL.

That was the kind of post I thought would eventually come out. That's why I worked so hard on you to get you to post. Now everybody else knows too. Yes, backlash, that's exactly what I was talking about. My best to you and your family for a great Christmas...and, backlash....As the Texans say.."Now don't be a stranger!"

That wierd post with the widgies was taken from www.kitco.com forum on the 20th or 21st. I am looking for it but haven't got it yet. If you don't hear back maybe you will have better luck. I think in the future it is best to post the URL with the text as it easier and won't get lost.

BTW the POG in Feb. is now (is this an oxymoron?) $289.00.

Apparently I had it backwards. For some reason I certainly don't understand, when the gold-lease rate for one month is higher than the yearly gold-lease rate this makes the gold futures business shorting-fodder (good for shorts). It was reported earlier that the one-month lease rate was above the one-year rate again. And look what happened to the price of gold in February now.

For some reason it did not transfer properly this morning, but it where it's supposed to be now.

Steady Fed seen aiding smooth transition to euro

By Marjorie Olster

NEW YORK, Dec 22 (Reuters) - The Federal Reserve's decision to keep U.S.
interest rates steady on Tuesday reduces pressure on Europe to lower
rates for now and should aid a smooth transition to the euro by keeping
currency markets tranquil.

Both the Fed and the European Central Bank met on Tuesday but neither
provided any surprises on the interest rate front at their last meetings
before the January 1 debut of the single European currency.

As expected, the Fed's policy-setting Federal Open Market Committee left
the key federal funds rate at 4.75 percent at the final meeting of a
turbulent year in global financial markets. The ECB governing council
set the refinancing rate for the euro zone at 3.0 percent.

"(ECB President Wim) Duisenberg doesn't need any extra volatility as
they embark on this brave new world of the euro," said Paul Kasriel,
chief domestic economist at Northern Trust.

"If the Fed were to ease now, it would put pressure on the ECB to ease
very quickly because of the likely appreciation of the euro," he added.

Though the euro was probably very low on the Fed's list of
considerations in the latest policy decision, steady rates will inject
an added note of stability into foreign exchange markets before the euro
launch, market analysts said.

Because currency values are closely tied to interest rate differentials,
a narrowing of the gap between U.S. and European official rates could
strengthen the euro against the dollar and hamper the competitiveness of
European exports.

The Fed slashed the fed funds rate three times in quick succession from
September to November to prevent a credit crunch and offset other ill
effects on U.S. economic growth from the global turmoil.

With financial markets on a much firmer footing than they were before
the recent rate cuts, the Fed chose to stand pat and await evidence of
an expected slowdown next year.

Robert Sinche, currency strategist at Citibank in New York, said the
currency market expects the difference between U.S. and European rates
to widen in the next six months in favor of the dollar.

"Markets see the Fed as having less (easing) to do than they might have
expected at one point while the ECB might have more to do," Sinche
said.

But even before the Fed's decision was known, Duisenberg left no doubt
after Tuesday's ECB meeting that Europe did not intend to ease monetary
policy further anytime soon.

"The only signal that we do want to give at the current stage is:
'Markets, don't expect a change in interest rates in the foreseeable
future'," he said.

Duisenberg also voiced hopes the euro would hold its strength against
the dollar and the yen.

The ECB raised concerns on Tuesday about uneven liquidity in the euro
zone in the early phase and currency analysts here said liquidity
problems could add volatility to the market.

However, analysts said the Fed stands ready to provide all the liquidity
needed for commercial banks if there is a shortfall in the supply of the
new currency.

John Rothfield, international economist at Nationsbanc-CRT, said there
has been a degree of cooperation by the central banks to smooth the
transition to the euro and he expects that cooperation to continue if
liquidity problems arise.

"There is a significant amount of concern about internal liquidity in
the euro area around the time of the launch and that might be reflected
in some volatility in the exchange rates," Rothfield said.

"The Fed may be asked on behalf of the ECB to do some transactions" to
provide liquidity, he added.

".....the Fed stands ready to provide all the liquidity needed for commercial banks if there is a shortfall in the supply of the new currency."

Does this translate into "SPRAY MORE DOLLARS OVER THE FACE OF THE EARTH"????? How will that help?

"The Fed may be asked on behalf of the ECB to do some transactions" to provide liquidity?????

Hah? WHAT??? To quote backlash: *$&^%+@^**$&#*!!!!!!!

What is going on here? Are the people of the US just so wrapped-up in their 401k's that they don't care what is happening? What is happening?

Maybe I am missing something and this is a Really Good Thing?

-GF

Do you have a handle on what this means:

"However, analysts said the Fed stands ready to provide all the liquidity needed for commercial banks if there is a shortfall in the supply of the new currency."

Do they mean the U.S. Federal Reserve? How does the Fed do that? Buy euros? Wouldn't that drive the euro up?

If anybody else can interpret this for me, I'd appreciate it. The old antenna went up on that one; seems like it might be important.

I went to see my post come up and I had to blink a couple times before I figured out what happened. Oh well...you know what they say about great minds............ho ho ho.

FWN (12/22/98) February gold fell $1.20 to $289. The session low of $288.10 was its weakest level since $288 back on Sept.9.
"This looks like a little bit of a continuation to the
downside, with follow-through from Thursday's and Friday's
weakness," said Tim Evans, senior commodity analyst with
Pegasus Econometrics.
"You've got two angles weighing on the gold market
here," he continued. "We rallied Wednesday into Thursday
because we were going to bomb Iraq. It was buy the rumor and
sell the news.
"That also occurred in the oil market. And the decline
in oil prices to a new 12-year low is bearish (for gold) from an inflation standpoint."
Recent strength in the equity market might also be
still another factor influencing gold lately, Evans added.
"It tends to reinforce the bearish psychology for the gold
market."
The analyst put initial support for February gold
around $287.50, then $286. If the market were to dip much
below this, he continued, there is a chance to retest the
$277.50 low from back on Aug. 28.
Evans put initial resistance at previously failed
support at the Dec. 11 low of $291.20. More resistance lies
from $293.50 and is tightly scaled up to last week's $297.40
high.
"We're going to have our work cut out for us if we try
to rally back to the upside," said Evans. "Probably a more
likely scenario for the coming week is perhaps we drift a
little bit lower, but perhaps trade in a fairly tight range
of maybe something on the order of $286 to $291. Maybe we'll
just go sideways through the holidays and see what's going
on come Jan. 4 (the first day of trading in 1999.)"
********************************************
NY Precious Metals Review: Feb gold hits 3 1/2-month low

By Tina Petersen, Bridge News
Washington--Dec 22--Feb gold, after dropping to a 3 1/2-month low of $288.1 per ounce on technically-oriented selling and a stronger US dollar, settled down $1.20 at $289.0. Some sources said this latest dip may spur some end-of-the-year buying, which could possible help Feb recover to near $300 an ounce. Mar silver settled up 1.3 cents at $4.918 per ounce on light buying from India.
* * *
GOLD/SILVER
The combined effects of poor technicals, a firmer US dollar and a stronger US stock market pressured gold to its lows today. "Those factors are more than enough to weigh gold down," a trader said.
Some sources said they foresee gold prices experiencing a gradual breakdown to about $280, while others said this is a good buying opportunity as they thought gold has bottomed out.
Another trader said he thought the market will test these lows for a while and see if they hold. "There is a lot of pessimism in the market with thoughts that gold will go several dollars lower," he said. "But underlying physical
demand is good. I don't foresee any collapse in prices by any means."
One dealer commented that gold has been "crushed under the weight of better (performing) markets like equities and bonds." She said the negativity stems from the Dec 17 approval by the Swiss lower house of a constitutional amendment on the Swiss National Bank's monetary reserves, removing the Swiss franc's peg to gold.
This is the first move towards the adoption of legislation that would permit the sale of a proportion of Switzerland's gold reserves.
This could cause a domino effect where other banks may begin selling off reserves, the dealer said.
One analyst noted that gold prices are "slowly eroding" and said that while the decline will not happen quickly, "it is on a definite downward path."
However, another analyst said he thinks this latest dip will spur buying, bringing gold back up to about $300. "All of the political and economic uncertainties on the horizon in the near term should support prices to about $300-304," he said. "You can't rule out a spike above that."
The fact that many traders are squaring their books heading into the holidays also contributed to today's bearishness, sources said.
They said there has not been much dealer activity and they don't expect any until after the first of the year. They predicted the markets will grow increasingly thinner as the week progresses due to the Tokyo holiday Wednesday
and the Christmas holiday Thursday and Friday.
In Europe, gold was reasonably flat today, holding support at $288 per ounce, dealers said, while silver was steady and quiet.
Silver "has a better tone," according to an analyst, with light buying out of India.
******************************

Reprinted with permission. For the full articles, please go to:

FWN: www.futuresource.com
Bridge News: www.crbindex.com

Posting the article was to show yet another 'tool' that could be applied in a cooperative spirit in addition to the adversarial spirit of the tariff-type tools discussed this morning. The key passage at the end...
---------------------------
John Rothfield, international economist at Nationsbanc-CRT, said there
has been a degree of cooperation by the central banks to smooth the
transition to the euro and he expects that cooperation to continue if
liquidity problems arise.

"There is a significant amount of concern about internal liquidity in
the euro area around the time of the launch and that might be reflected
in some volatility in the exchange rates," Rothfield said.

"The Fed may be asked on behalf of the ECB to do some transactions" to
provide liquidity, he added.
---------------------------
You two took interest in this last line, as earlier stated "...the Fed stands ready to provide all the liquidity needed for commercial banks if there is a shortfall in the supply of the new currency."
I think it would be safe for you to read into this as much as you are inclined to. Understand that adding liquidity is assuring that they stand ready as a buyer at reasonable prices/rates under any wave of selling. Understand also that what is being bought and sold here are the euro-denominated bonds.
Consider, if left to ill-informed, uncertain, or adverse speculative open-market operations, a flight out of these bonds without willing buyers (or even adequate cash for purchase among many willing buyers!) would result in purchase prices that are inappropriately low, resulting in interest rates (yeilds) that are high and undermine the true strength of the currency. (You may recall many months ago I posted that weak money REQUIRED high interest rates to remain "interesting" enough for people to continue its use--witness the ruble, for example, or any other failing currency)
At the end of the day, the Fed holds euro-bonds. Good as gold, perhaps...? Better than a dollar?

We stand one foot in the fiat world, one upon gold. An uncertain balance and much arm waving to take the next sure and certain step.

We've walked this path before it seems, yet I don't think so.
Analysts...seeing with eyes closed! Consider this, as typical from the news:
"One dealer commented that gold has been "crushed under the weight of better (performing) markets like equities and bonds." She said the negativity stems from the Dec 17 approval by the Swiss lower house of a constitutional amendment on the Swiss National Bank's monetary reserves, removing the Swiss franc's peg to gold.
This is the first move towards the adoption of legislation that would permit the sale of a proportion of Switzerland's gold reserves. This could cause a domino effect where other banks may begin selling off reserves, the dealer said."

I wish you could join me here in laughter! Words on paper...legislation old and new. For what would this gold be 'sold'? Not dollars! Exchanged for a transactional gold currency perhaps? 'Sold' for euros! Like trading 100 santims for one Lats...its all the same. Switzerland can't eventually participate in the European currency union if its old words on paper (legislation) do not allow for its gold to be denominated in euros, rather than acting as reserves for the francs. Eyes wide open and enjoying the view.

I want to thank backlash for the wonderful validation of being grouped together with Another, FOA & Michael as a poster, It is far more valuable to me than another award would have been. Megan's odyssey was a fantastic experience for us, even though I spent three years vacillating between ferocious pride and abject terror. By the time I bribed her with a plane ticket home for her 19th birthday, she had crisscrossed China and the " Shangri-la" area of Northen Pakistan. Her experiences showed that the world is not the dangerous place the Journalists would have us believe it is. I was overwhelmed by the many people in strange lands that befriended and protected her. I would like to post other excerpts from her journals, significant to our global study on the Forum, as time and context permit.

Now, abought Y2K. This afternoon, I took some blueprints up to the Engineer we use for structural and geological certification. He has decades of experience, testifies as expert witness etc. I mean to say , he's not a technical greenhorn. He lives up a remote road which I had to wait for sun melt to get up even with 4WD. So, I say "this is great for a Y2k bolt hole" He and his wife look at me blankly , I say, "you know, year 2000, computers!". Pause---, he says "oh, the software people sent stuff saying everything I've got will keep working. I say, "what abought the Banks ?. ---- "Oh, hmm".---- "What if people are afraid of not having cash and pull their money out in November ?". ---- "Oh uh" ---- I say "The system can only handle 4% & then it crashes" -- --He says "Oh gee".
.
So I'm wondering, Is this just a phenomena of rural farm and timber country, or is there a huge majority of America out there without a clue ? If so, "Watch Out"!

It seems we have been here before -- an anticipated development long before it happened.

Perhaps the Bill Murphy (Cafe Metropole) prediction is correct -- ECB may have to go to bigger gold reserves to accomodate the mushrooming demand for the euro. Not bad for a currency that hasn't even been launched, wouldn't you say?

Let me pass this along, Aragorn. I was going to save it for tomorrow's Daily Market Report but I will pass it along now for the benefit of all. ( The timing is right.) It is from our like-minded colleague at Money Forecast Letter, Adrian van Eck, whose most recent offering (January, 1999) is a brilliant piece of work:

"You may recognize the name Fred Bergsten. If you have been with us for any length of time we are sure you know him. In highly influential circles of education, government, journalism and international business, he is recognized as perhaps the most visible face from the Trilateralists, the enormously powerful globe spanning organization that has supplied so many cabinet officers to U.S. administrations over the past 21 years. At a meeting of of Chicago business leaders Monday night, Fred Bergsten predicted that the euro will rapidly move up alongside the dollar. He told business leaders that as a result of the euro's emergence AT THE START OF 1999 THE DOLLAR WILL WEAKEN SUBSTANTIALLY VERSUS THE EURO, which as you know will replace the German mark, the French franc, the Italian lira, etc. The reason the dollar will weaken, he said, is that it has been dominant largely because it had no competition. By that we are sure he means that the dollar has become the reserve currency of choice in well over 100 nations, almost by default. Bergsten does expect the Fed to cut interest rates by another 50 basis points in the next 6 months. This story is not over. It will grow."

I'm with you Aragorn:

"Eyes wide open and enjoying the view."

You can reach Money Forecast Letter at 1-800-542-5018. This past issue alone is worth the price of a subscription in my view. Mr. van Eck has been doing this for a long time -- he's one of the deans of the newsletter business and, in my opinion, the best Fed watcher in the business.

Thank you, Aragorn. You make an interesting and important argument. Van Eck also talks extensively about the tarriff situation. I can only say (so as not to infringe on copyright) that he expects higher dollar prices for Japanese goods and a stronger yen to go along with his views on the euro already advanced above.

I wanted to say that I found your daughters account fascinating and look forward to reading more of her adventures. That's some daughter..........and you are right, the world is not nearly as dangerous a place as we are led to believe.

and that leads me into this comment. I get the Coin Dealers Grey Sheet newsletter weekly. In there they list the bid and ask of common and rare gold coins. They list the maple leaf, the double eagle, the panda, the kruggerand, and more. Simply put, gold is above $300 per ounce.

Where Feb. gold gets off telling us that gold is $289 isn't based in reality. Has anybody reading this ever taken delivery of February gold in any year? How long did it take, how was it delivered, what was delivered, who carried it to the door, what happened when you dropped it? What month did February gold arrive in? How did you resell February gold? Who bought February gold and what month did they buy it in? How much did it cost to ship?

Fact is delivered gold is $300 plus. So says the grey sheet. Because that is where the delivered gold is priced.

One more thing. If spot gold determines delivered gold's price, then why doesn't delivered gold determine spot?

Thoughts to ponder.

Good points all.

Technicals are very important. The one leading indicator that you missed is the one-month lease rate. For some reason I haven't figured when the one-month lease rate is higher (as it is now) than the one-year lease rate, this opens the door to the shorts (thos who sell gold high and buy it lower). Keep your eye on the lease-rates as this is a good leading indicator of this.

Frankly, "...Gold is a political metal," according to Bill Buckler from the www.the-privateer.com. He refers to the obvious (to us) manipulation that the metal succumbs to. I recently predicted gold would hit $306 on its technical merit. It didn't rise above $297. So, just as the technicals show gold will fall to below its current level, it may not do that either. Fact is when you watch the daily gold futures market you get a strange feeling that there are two main camps at work. Right now the camp that wants gold below $300 is holding its ground. When February gold got close to $298 the one-month lease rate rose above the one-year rate and gold was knocked down in short order to under $290. The camp that wants gold above $300 has lots of hurdles to overcome. Most of these hurdles have to do with the hedge funds trying to unwind their gold-carry trade before any appreciation in the price of gold. Apparently, per Buckler gold can not be allowed to rise above $302 and when it does the powers that be have lost control of the price of gold. He sees $302/303 as the number to beat.

In the end, the market will win -- simply because it will cost too much to hold it back. Just as in the movie Juraissic Park where Ian said, "life will find a way...." referring to the dinasaurs all being female. As you know they did find a way to procreate and so it is with gold.

You can find the lease rates on the www.kitco.com gold discussion forum. Search for the Dabchick (spelling not certain) posts. He tracks these daily.

READ THIS...only partial post:


NOW IS THE TIME TO BUY GOLD AND ITS SHARES: Four good reasons follow.



GOLD AND JAPANESE GOVERNMENT BONDS: The Japanese government announced Tuesday morning that they would cease purchase of Japanese long-term government bonds. In essence, they have decided to allow their long-term interest rates to approach those of most European countries. While still below nominal yields on U.S. long-term bonds, the effect of higher Japanese rates will serve as significant competition for U.S. Treasuries, since the yen generally appreciates against most currencies over any extended period of time. Also, the Japanese themselves, historically substantial buyers of U.S. Treasuries, will be more inclined on the margin to purchase their own country's bonds. The multi-year recession in Japan combined with the euphoric U.S. stock market has dampened the speed of the yen's appreciation, but the uptrend is still clearly intact. Therefore, yields on U.S. bonds will have to increase to keep pace, thus increasing the costs of corporate borrowing. The net effects are as follows: 1) higher long-term U.S. rates; 2) lower U.S. corporate profits, since all U.S. corporations will have to borrow money more expensively; 3) since short-term rates are not affected, there will be a greater spread between short-term and long-term U.S. rates. Because of the continued concern over worldwide recession, short-term rates will not be able to rise, thus keeping the spread wide. 4) As a result of lower corporate profits, equity prices will eventually decline. Over the short term, P/E ratios can expand to compensate for decreasing profits, exactly as has been occurring in recent months, but this game can only be played for so long. Inevitably, lower profits must mean lower stock prices. 5) With short-term interest rates being lowered around the world, time deposits serve as less competition for precious metals, since there is less interest to be lost by being invested in gold, which pays no interest. 6) With long-term interest rates on the rise, both stocks and bonds will perform poorly, thus increasing the attractiveness of alternative investments such as gold mining shares. 7) As corporate profits fall, U.S. equities will decline, which will bring down the U.S. dollar. A falling dollar combined with a historically wide spread between short- and long-term rates is the ideal scenario for gold. 8) Therefore, the Japanese government decision is very bullish for gold, both over the short and the long run. A similar increase in long-term Japanese rates caused a sharp gold rally in late 1989. This time the rally should be much greater in percentage terms, since gold is starting from a far lower base. Expect the average gold mining share price to increase by at least 50% over the next six months.

INDIAN INNOVATION: India is the world's number one gold importing country, with the U.S. a distant second. The state-run Unit Trust of India, that country's largest mutual fund, has tentative plans to implement a gold deposit scheme. The aim is to tap India's vast reserves of gold in private hands by accepting gold as deposit and as collateral to lend funds, according to Ravi Vasantraj, vice president at Mecklai Financial and Commercial Services Ltd. Such a scheme will encourage Indian consumers to buy the yellow metal as buyers will be able to effectively earn interest on their gold from the Unit Trust of India.

PRIDE GOETH BEFORE A FALL: Managers of U.S. bond funds registered their lowest ever level of cash as a percentage of assets, according to MCM MoneyWatch's Investor Survey, the company reported on Tuesday. In the week ended December 21, cash represented only 2.45% of total bond fund assets, an all-time low. Historically, abnormally low cash levels correlate with major tops in the bond market. With stocks at a record high P/E at the same time that bonds are at record low cash levels, it is possible that both will decline in tandem, which would spur mutual fund investors to seek out alternative fund choices such as gold mining shares. (There are other alternative investments besides gold shares, of course, but money market funds and GICs cannot provide the potential for double-digit returns that some investors seek, while most other investments that correlate inversely with stocks and bonds are not nearly as liquid as gold mining shares and, more importantly, are simply not available for most mutual fund investors.)

ONE LAST REASON: Before each of the major gold rallies since 1973, gold made a false move lower, accompanied by steady commercial accumulation, immediately before the rally began. The XAU, an index of gold mining majors, is now at its lowest point since September 9, 1998, while the traders' commitments continue to improve.


In order to buy low and sell high, first you have to buy low!

THE JANUARY EFFECT: Market analysts are virtually unanimous in their conviction that the stock market will rally in January, merely because it usually does. Anything that is so "certain" to happen usually doesn't, since buying has already been done in anticipation of its "inevitable" occurrence. The January effect has, in essence, been transformed into a December effect. Look for the unthinkable to happen: the stock market will drop in January 1999....

These actual gold delivery prices (not including shipping) from www.monex.com:

Coins Ask Price Per OZ. Open High Low Last Change
Gold Amer Eagles 304.30 304.80 302.70 303.80 -1.00
Gold Maple Leafs 302.30 302.80 300.80 301.80 -1.00
$310 Mountie 1/2000 319.40 319.60 318.80 319.40 -0.20
Gold Philharmonics 302.30 302.80 300.80 301.80 -1.00
Platinum Amer Eagles 358.20 361.20 358.20 359.20 -1.00
Platinum Maple Leaf 357.90 361.00 357.60 358.60 -1.30
40% Silver Coins 5.56 5.63 5.55 5.59 +0.01
90% Silver Coins 6.12 6.19 6.11 6.15 +0.01

Where does it say gold is $289.00?

It begins (or ends), yen-carry trade over?

From Reuters:

Tuesday December 22, 8:23 pm Eastern Time
Who will take 'em? Japan has the bonds, no buyers
By Andrew Morse

TOKYO, Dec 23 (Reuters) - Who's going to buy 'em?

That's the question the Japanese government bond market, currently the second-largest in the world, wants answered.

Traders are so nervous about the deluge of debt -- the government plans to issue a massive 61 trillion yen ($525 billion) in bonds to the market in fiscal 1999 -- that long-term bond yields have risen nearly 60 basis points in two days, and more than doubled to 1.90 percent over the past two months.

Why interest rates have risen is no mystery.

In what is seen as a snit with politicians, the Finance Ministry said on Tuesday its trust fund bureau will no longer absorb the extra bonds the government prints to pay for stimulus packages to spend Japan out of its worst post-war recession. The ministry's purchases of government bonds had in effect paid for the country's own bail out, keeping interest rates low while providing funds.

Not any more. Worried about runaway debt that has already cost Japan its AAA rating from Moody's Investors Service, finance mandarins told politicians they needed to find someone else to pay for their profligacy.

The problem is, no one seems willing to step up with an open checkbook.

Banks have already indicated they won't buy them, selling bonds heavily over the past two days. Although fixed-income portfolios have been one of the few bright spots on their otherwise dismal balance sheets, rising yields are beginning to erode the capital gains they've made on their holdings.

Individuals, who hold close to $10 trillion in personal savings, may pick up some of the extra paper. After all, 1.9 percent seems a lot better than 0.1 percent they can get on regular deposits at the bank.

But economists say that sooner or later the Japanese government is going to have to make the parochial JGB market more accessible to foreign investors, turning it into an Asian equivalent of the massive U.S. Treasury market.

Economists estimate that as much as 50 percent of the Treasury market, including short-term debt, is owned by foreign interests. By contrast, less than ten percent of Japan's debt is held abroad.

"It may take five years or so," said Soichi Okuda, senior economist at Nippon Credit Bank. "But foreign money is going to have to play a larger role."

Already, the government has taken steps to make the market more attractive to overseas participants, who can always take their money to the U.S. market -- the world's most liquid and creditworthy.

On Tuesday, the Ministry of Finance said it would reform the method in which it issues financing bills, selling more directly to the market. It would also induce foreigners by scrapping withholding taxes on interest income for non-residents and exempting all holders of Treasury bills and FBs from withholding taxes on bond profits.

While the moves were welcomed by the market, economists said they may no be enough to salvage bonds, which in January will have to compete not only with Treasuries, but also with the new Euro bond market opening up on January 1.

They say with higher rates available abroad, foreigners might be making a mistake to park their money in Japan, where a currency risk could prove more dangerous and yields -- despite the recent rise -- remain low.

The U.S. 10-year Treasury note yields 4.7 percent, compared to the 10-year JGB's 1.770.

"Exemption of the withholding tax on profits earned at redemption of financing and treasury bills could be a factor to lure foreingers to invest more in JGBs, but it's not enough," said Takeshi Naito, senior market economist at Daiwa Securities. "It all depends on coupon rates."


($1=116 yen)

The price of gold is tied to oil. How much energy do you think it takes to process a ton of gold? Shallow pit mining is said to be profitable at .04oz per ton. That may be our indicator to build this line-of-thought. $11.56US is the cost of one ton then. At current diesel rate of $.88 per gallon (in the US anyway), that makes the cost of processing one ton of ore at 13.1363636363636363636363636363636 (I left it as it calculated as it is cool looking number) gallons of diesle fuel per ton of ore processed. Skip the cost of labor and the overhead of administration, simply the cost of energy to bring one ton of ore to bear .04 oz of gold is $11.56 or 13.etc gallons of diesle. NOW.

Raise the price of diesle such that it costs $1.30US per gallon. Not an unreasonable expectation in view of the past. What is the cost of mining that same .04 ounce of gold. That is 13.1363636363636363636363636363636 X $1.30 = $17.0772727272727272727272727272727 (got to love these numbers). So, let's make the logical leap. If it then costs $17US per .04oz gold, the cost of one ounce of gold now becomes $426.9318181818181818181818 per ounce!!!

Yes, it is an oversimplification. But my point is made, no?

So, oil does the price of gold make.

In our discourse on fiat money, devaluation of currency, storage of value & inflationary wipe out; there is a common denominator. Man produces, and if he does not immediately call in his exchange in goods and services, then later he may not be able to have all that he earned.
The "New World Order" claims to be creating a "Global Village," but if it is built on paper currency, then it will be "Global Pillage"! The storage of value will continue to be diminished by the manipulations & profiteering of fiat money.
Just as the EMU seeks to achieve equality of trade between its countries, gold can play the vital role of insuring that fair exchange exists in trade throughout the world. Gold is honest money!

Decades ago , movies were proceeded by a "Short", often a documentary of 15 minutes or so. .There was one where someone had gotten a camera inside an egg and filmed the formation of a chicken embryo. When the heart was only a barely visible diaphanous form, it was already beating. The rhythm of life was there.
In recent days, as posters have opened up about their thoughts and about themselves, there is surfacing a feeling that Gold is not just a common interest, but also a common bond.
I see something incubating in this Forum, it is still nebulous, but the rhythm of its life is beating.
Maybe it is some futurist vision of the peoples of Earth exchanging with each other equitably, through the medium of Gold.

Rather than a New World Order ---- An orderly new world!

He said, "Steve, you are really brainwashed." He is referring to my penchant that gold is the buy of the century and that the DOW is extremely overbought. He says, "You need to buy Cisco. I bought it at $52 and more on the way up. I am up over $30 now."

I told him, "And now you should sell half and buy gold. Lock in some of those profits."

He laughed, "Steve, Steve, Steve, ha, ha, you think the sky is falling. They (Cisco) is growing at 30% per year."

I said, "That is because the companies they are selling to have been doing well too, but all that is about to change. Aside from that you too are brainwashed. The only difference is that so are a lot of others too."

So he is in the glass-is-half-full camp, and I must be in the glass-is-half-empty camp. In a sense we are both right. I with my penchant for gold related investments am leaving money on the table by dollar-cost-averaging my investments at their all-time-historic lows. He on the other hand is resting his laurels on his recent decision-making acumen. And if one were to measure profits I suppose he is right except I say you don't make a profit until you cash out. So I tell him, "Well, you know, you won't make a profit until you sell those stocks."

"Well you should follow your own advice on your penny stock too. Had you sold half you would have made a profit too," he said.

My partner and I actually do see eye to eye on many things but it is ironic that he is fully vested in this macro-bull market and I won't touch it with ten feet of pole. I believe the rush to the door will fully incapacitate the exiter as they try to pounce the doors.

That brings up the "chaos theory." As strong as this bull is it will be brought down by an event, known or unknown at this time, that will unplug the bull's drinking water. The whirl pool it creates for the drain will suck most small investors down with it. That event will have the negative impact that a battle, an impeachment, a falling gold price, an announced resignation of Bob Livingston, haven't been able to muster. It will likely come out of the blue. I suspect it will have something to do with oil as this would have the largest contributing factor to inflation and the world economies. Or, it may be the Japanese bond rates or the bid of gold for oil. But whatever it is, it is looming out there waiting for the right place and time. Perhaps it will be little nothings that add up finally. (This must be why my partner calls me chicken little by the way). But the random action of events will come together to reverse the fortunes of those in the DOW. No one wishes that upon anyone but it is time to grab hold of our sanity and look at the market historically. It is by all previous definitions overbought and continues to be overbought.

But then by this piece from the www.quote.com main page says it all for the DOW investor. My only question is do they ask Wall Street pundits these questions or are they asking the janitor who closely follows their 401K portfolio? I just laugh when I read these predictions, but then I have been wrong so far.

"The markets continued to move higher today as traders took the Fed's decision yesterday to leave interest rates alone as a bullish sign that the economic recovery is on track. The tech heavy NASDAQ continues to pace the gains, led today by Intel and AOL. However, the DJIA(sm) was not far behind receiving strong support from financial and retail issues. According to analysts, today's rally was in part the result of bullish economic indicators released today which reassured traders that the economic factors will not hamper the January rally most analysts are anticipating. According to traders, the DJIA(sm) should trade through its old highs around 9300 before the end of the year, heading to 10000 by the end of January. Tomorrow's session will be shortened for Christmas Eve with the market closing at 1:00 (ET)."

Finally, when my predicted naysaying event does finally come to pass the ugly thing will be that my partner will say, "If you say something long enough surely it will happen just as a dead clock is right twice per day."

I guess you just can't win...or can we?

To add encouragement to your sentiments, Bill Murphy who is lepatron at www.lemetropolecafe.com says that this is the most interesting time that he has seen for resource stocks in the last 25 years. At his James Joyce table he holds forth about twice a week and expresses his sense of the markets as well as some specific stocks. His other tables literally cover the world. The past two weeks I have seen many Canadian institutional brokerage houses dump blocks of shares into thin markets. One small silver producer with a market capitalization of only C$8MM dropped from 22 cents to 13 cents in a few minutes at day's end to close at a quote of .13-20. The following day it opened at 20 cents and has not been below l7 cents since. They raised US$2 very recently, a loan not stock dilution, to boost present production and positive cash flow is expected shortly. Bill discusses it, naturally. Another growing producer was a $22 a share darling in l996 when their their three new mines were still exploration projects. They raised equity capital in mid-August at $2.10 per share and today their underwriter was a seller as the stock, down from $l0.50 this past year, opened at $1.45 and closed near the low at $1.30 on nearly a million shares. Production is increasing and they are reputed to be a low cost producer. Could it be that institutions are afraid to show it in their portfolios at year end? I am not! Volumes are light and I sense bidders being careful to lowball when they can. You have to have your bid in ahead of time because you can't see a big drop and then get in before it can run up again. Buyers will often take out bigger offerings close above strong bids to get stock they want. Tomorrow is the last day of tax selling north of the border. When the metals pick up, you will see some action here on these exchanges. It could start next week when the tax pressures ease off. Good hunting, Woodsman.

I am disappointed that no one challenged my cost of energy to mine gold theory. You see I keep seeing how producers admit that their cost to mine an ounce of gold has dropped from around $280 to now $230ish. That got me thinking. Why? In a business you have fixed and variable costs. The fixed being rent, wages, loan payments, etc. The variable are those monthly charges that vary by virtue of needs. One month you need less, the next more, e.g. fuel, software, consultants, etc. The word fuel popped up. At first I thought that their costs dropped due to efficiencies or mining their easier to get to resources (which I suspect is the other cost reducing measure. That would mean that they will use up the easier to get to's and saving the harder to get to's for later. That will mean higher gold prices later. Anyway, the cost of fuel to run the machines to process the ore gets my vote for the most significant reason for the drop in mining costs. Lower fuel costs, lower mining costs, lower production costs. Conversely, higher fuel costs, higher mining costs, higher production costs. Thoughts?

Regarding junior golds. Yes, I believe as you do that this will be where fortunes are made. The seniors may double or triple but the juniors (the right juniors), those with good properties and JV partnerships, with good funding, will be 10 baggers or more -- one gold turns north -- from current levels. Dollar cost averaging is the way to go imo. I just hope my partner isn't right on the timing of this turnaround being three or four years out. The turn-around indicators seem to be increasing in numbers and intensity. It really is just a matter of time. But when?

Steve

I guess when one-month lease rates beat one-year lease rates the shorts have it.

borrowed this from the k. forum... but it is a must read as it explains it all. Very good post:

Date: Wed Dec 23 1998 14:18
rhody (@ Aldebaran re. your 4:09 am query about lease rates.) ID#411440:
Copyright � 1998 rhody/Kitco Inc. All rights reserved
There are various interpretations for the lease rate cause and
effect. Steve Kaplan is of the opinion that when one month lease
rates for gold are 1.72% ( up .07% today ) while one year lease
rates are 1.65%, this indicates an inverse yield and is extremely
bullish. The problem is, the pattern of behavior of POG
relative to one month leases does not support this.

Lets say leases are demand driven, that the more the demand for
borrowed gold, the higher goes the lease rate. I watch the one month
leases particularly. If that rate goes up, then the demand for one
month leased gold has increased. So what can a borrower do with a
pile of gold in just one month? The only thing he can do is sell it.
He must replace the gold in one month, but hopes he can do so by buying
it back at an even lower price. If enough speculators do this, this
wish is usually granted, and has been for 10 years. So I have concluded
that one month leases are indicative of a short attack on gold that day
and the next. This is almost predictable in the Xmas season as trading
is light, so that even a moderate volume of sales will have a big impact.
This scenario is called the gold carry. But it breaks down ( and Steve
Kaplan's kicks in when lease rates rise to a point where the spread
between one month treasuries ( 4.55% and lease rates @ 1.72% ) is reduced to below 2.25%. This spread is called the forward rate. Right now
the forward rate is 4.55-1.72 = 2.83%. If we subtract the 2.25%
forward rate threshold which may represent the costs of the
gold carry, we get 2.83-2.25 = .58% This means the gold carry appears
to have a profit margin just based on interest and lease rate spreads
of .58%. Any combination of a drop in short term treasury rates and
a rise in one month lease rates that eliminates this .58% ( as of today )
would snuff the gold carry, and establish Kaplans bullish scenario.
This is all IMHO. I agree with Steve Kaplan, but not until lease rates
rise to about 2.25% or short term lending rates drop to 4%. If both
of these things happen, we may very well have our gold bull.

This is the last thing Alan Greenspan wants of course. I think we
shall see a great hesitation to drop short term rates, and if he must,
we shall see some tampering with one month lease rates to force them
lower. If the gold carry ends, then the main mechanism to control
POG also ends, and that ignites a bull as we really do have a shortfall
of supply. But a gold bull unwinds the short overhang, and hedge funds
are exposed to a good portion of that, and that means, hedge fund failures, and that means bank failures, and that means even more POG rise and so on. This means an upward price spiral for POG and POS, all at
a time of bank failures. Default default default. Steve Kaplan also
says the Fed has only a marginal impact on the gold market. I wonder.
There seems to be a lot at stake for the Fed to sit dreamily by while
the American Banking system implodes, and all just because speculators
sold a few thousand tons of gold short. Yea right.

I hope Steve Kaplan is right, and I am wrong, because if I'm right
then this situation scares the cr*p out of me. So far the pattern of
POG supports my hypothesis. Gotta go.

Strengthened a dime from last night....

One Month is 1.36, one year is 1.57. Inverse yield gone. Based on latest post by rhody should mean gold goes up.

Your fuel / production cost ratio makes all sorts of sense. If you read my posts, you know I worship "Quantitative" analysis. The record lows in the oil price may well be why that Australian could pick up 160 tons during a short squeeze without raising the POG. Maybe LTCM & co. Can square off now without breaking the pillars of the temple.
If the POG were to rise on the back of an Oil price surge, Mines that have large forward positions could be in deep trouble. [Pun intended.]

Boy Steve, you have been on a tear the past few days. Thanks. Good stuff.

As an addendum to the bit about your partner vs. you on profits, "You never count your money while sitting at the table, there'll be time enough for counting when the dealing's done." (wonder where that came from?)

Second, your observation regarding pricing Gold in terms of oil is most apt. Does it not fall within the concept of pricing Gold in reference to anything one might chose. All that is need is a tangible relationship. Ah, yes, relationship again comes to fore.

Hours of work to produce an ounce of the stuff, gallons of oil to produce it, tons of ore to get it, and on and on and on. Just pick which one you may prefer at the time, but know for sure that all of these elements, as well as many other not mentioned, play a part in the results.

You picked the one, oil, that currently is the most volitile and therefore should have the greatest short term impact. Please leave room for a few other elements that have greater impact, but for the moment are far more stable. For instance, how about accessability to the ore?

Though you analysis is excellent, there is room for some other factors to likewise have tremendous impact on the future price of gold. You know it can be mined without the aid of oil - - it will just be worth a whole lot more because some of the other elements will make a larger impact.

Sorry I can't make observations regarding stuff like carry forwards, carrybacks, short and long covering and so forth. It is well beyond my understanding regarding the relationships of what goes on in the 'manipulation' game as I am want to call it. In fact that is exactly what that portion is, MANIPULATION ! !

Must run for the seasons festivities. Best of Season to all, and may God bless.

bl

and best wishes for a prosperous New Year to great people such as backlash, SteveH, Peter Asher, PH in LA, Woodsman, Goldfly, Aragorn III, AEL, Gandalf the White, and anyone else I may have inadvertantly missed and last but not least to Mike, our gracious and special host.

May God Bless you one and all,

Pete

Thanks, Pete for the Holiday wishes. All my best to you and yours!

And let's not forget ANOTHER and FOA. If they are lurking and read these words, may their holidays be happy and peaceful wherever they might be! "We watch these gold markets, together" and THEY are never far from our thoughts.

Peace and prosperity to all in '99 here at USAGold!

PH in LA (Dreaming of a white Christmas!)

Seasons Greetings from all of us at USAGOLD to all of you...

I thought I would post this article from comp.software.year-2000. Happy Holidays to all.

Article follows;

Subject:
Re: Is Fort Knox empty?
Date:
Thu, 24 Dec 1998 17:58:32 GMT
From:
jbernier@microtec.net (Jacques Bernier)
Organization:
GlobeTrotter
Newsgroups:
comp.software.year-2000
References:
1 , 2




A web search has produced very little on the subject except this 1975
report that tends to confirm Tony Brown.

JB
==========================================================



http://www2.l0pht.com/pub/tezcat/Beter/Beter02.txt

From the Radio Free Michigan archives

ftp://141.209.3.26/pub/patriot

Hello, my friends, this is Dr. Beter. Today is July 15, 1975, and this
is my monthly AUDIO LETTER(R) No. 2.

snip

Another fact which is throwing off the dynasty's timing is the Fort
Knox Gold Scandal. Even though it is still under wraps so far as the
American mass media are concerned, it dealt the Rockefeller interests
a staggering blow last month, June 1975. Speaking through the United
States Treasury, David Rockefeller expected to persuade the IMF
(International Monetary Fund) to sell its gold hoard, and the
Rockefeller interests were poised to buy it secretly, thereby
completing their world-wide corner on gold. To depress gold prices so
that they could then buy the IMF gold at bargain basement rates,
arrangements were made for the United States Treasury to sell off
another pittance of gold on June 30, 1975, in a so-called Dutch
auction. Under this arrangement all successful bidders buy at the same
price as the lowest successful bid. Many financial articles have
pointed out that this curious set-up was a prescription for pushing
down gold prices, and that the Treasury has for some time been
campaigning to do just that. Now you know why.

The June 30 gold auction was held as scheduled, but it did the
Rockefellers no good. The reason: at the IMF meeting in June they
failed to get the IMF agreement to sell its gold--and for only one
reason. The French Government, through its own Intelligence sources,
has now been able to confirm my charges that America is gold poor.
They know that the United States does not have the huge gold hoard
which is officially claimed, and therefore that the Treasury threat to
use it to hold gold prices down is a gigantic bluff. Therefore they
refused to play ball--that is, the French--and now the Rockefellers
are feverishly seeking a way through accommodation or pressure, to
remove the French obstacle to their gold corner. In the meantime, they
will try to hold the price of gold down and the dollar up. All of this
is also helping to delay Nelson Rockefeller's seizure of the
presidency of the United States.

snip

And now, Topic #3.

Topic #3--In a moment, my friends, I intend to lay bare part of the
story of the way in which our gold was stolen from Fort Knox. But
before I do, I want to remind you of why I am doing it. As I explained
in my AUDIO BOOK on the FORT KNOX GOLD SCANDAL, the theft of the
nation's gold was an economic Pearl Harbor perpetrated on the American
people by the Rockefeller dynasty in their drive to seize total
control of America. As Lenin said, "The only way to destroy Capitalism
is to debauch their currency"--that is, to reduce it to worthless
paper. And that is exactly what has been done to the United States
dollar by the theft of our gold supplies.

Even though the average citizen might never know about it, this
disappearance of a nation's gold reserve does become known in the
powerful world financial circles where national economies are shaped,
and the result is always economic disaster for the gold-poor country
where money ceases to be trusted.

All we have now is fiat money--pieces of paper that are only playing
the role of money because the Rockefeller-owned Federal Reserve System
says it is money. They can have more printed at will since it is no
longer tied in any way to gold or anything else of generally accepted
value. Over a period of several thousand years, my friends, people
have from time to time tried fiat money over and over again. The
propaganda you hear today from the Treasury and elsewhere that would
lead you to believe otherwise, is pure hogwash; and every single time
the result has been economic disaster and disintegration for the very
people who tried it. This is why I keep hammering away at the Fort
Knox Gold Scandal. It is not only the most stupendous theft in all of
history, though it is that too.

David Rockefeller and his brothers expect to make a
half-trillion-dollar profit on their gold corner by the time gold
reaches $2,000 an ounce less than two years from now. What is more
important is that if we do not get the gold back now and restore a
sound footing for our dollar, we will go the way of every other
nation. And history has shown that anyone who has relied on fiat money
will lose, and the Rockefellers intend to pick up the pieces.

With that background, I just want to read you an affidavit which was
obtained by one of my associates from former Congressman Frank Chelf
of Kentucky. We have distributed this affidavit to many influential
people as part of our effort to pry the lid off the Scandal, and
recently it was published in part by various financial Newsletter
writers which penetrate financial circles world-wide. This affidavit
is as follows:

" A F F I D A V I T State of Kentucky, County of Marion

I, Frank Chelf, of 216 East Main St., Lebanon, Kentucky 40033, being
first duly sworn on oath, hereby depose and say:

(1) That I was a United States Congressman from the 4th Congressional
District of Kentucky for 22 years, ending January 3, 1967.

(2) I have always felt that the gold supporting our currency is a
vital component of our economy and should not have been sent abroad
nor anywhere else. We are giving money we do not have to people we do
not know in order to please people who hate our guts.

(3) In August 1963 I charged that the United States Government was
moving gold quietly as a church mouse out of Fort Knox, and that the
gold was constantly and surreptitiously on the move.

(4) I learned of the Fort Knox gold shipments from my civilian friends
in my native County of Hardin.

(5) In January 1965 I made a new request for information regarding
gold shipments out of the Government's storage vaults at Fort Knox. I
sent this request to President Johnson in a telegram. Fort Knox is
located in my 4th Congressional District.

In response to my previous requests for gold removal information,
Treasury officials had been courteous and most friendly, but always
noncommittal or evasive. As a member who had entered into his 11th
term in Congress, I felt I had the right to question those Treasury
appointees who have to do with our gold in Fort Knox in order to
ascertain the figures of the gold supply of the United States. I
believe the press and all American citizens are entitled to know the
facts pertaining to our gold shipments.

(6) I retired from Congress after 22 years of uninterrupted service,
but I was interested in the United States gold supply because most of
it was stored in my Congressional District.

The Government was taking gold out by twilight in trucks, and I
accused them of it and proved it on them because I had people who were
posted who are friends of mine. They were telling me in the Treasury
that they were not taking the gold out, but I had friends who told me
the hour and the minute when they'll come out for another load. Oh
yes, they've taken a lot of gold out of there they won't admit. It's
terrible.

(Signed) FRANK CHELF

Subscribed and sworn to before me this 7th day of April 1975."

And there follows the seal and the signature of the Notary Public,
Dessie Kessler, the Notary Public in and for that County of Marion.

The recent final emptying of Fort Knox, you see, was not an isolated
GOLD FINGER-style heist, nor was it remotely similar to any of the
other ridiculous gold theft movies you may have seen lately. It was
simply the final phase of a very long-term project culminating nearly
15 years of gold removal from America. The hemorrhage of America's
gold was begun in 1961 with the initiation of the so-called "London
Gold Pool Agreement", but the stage was set for all of this over 30
years ago during World War II.

What I am about to tell you is more of the FORT KNOX GOLD SCANDAL than
has ever been revealed before. Every bit of it is backed up by solid
evidence and information from reliable confidential sources. I stand
ready to present all of my evidence, including authoritative witnesses
who will testify under oath.

Over a year ago I publicly challenged the Government to test my
charges in court, and offered to go to jail as a rabble rouser if I
could not back up my charges. Their only public response was to stage
the so-called "Fort Knox Gold Inspection Visit" on September 23,
1974--and that, too, was a total fraud as you are about to hear. The
time has come to make these things public because we have now
exhausted our administrative remedies. If you are not a lawyer, you
may not realize that you cannot simply walk into court and sue someone
at will, especially if that someone is the United States Government.
You must establish that you at least have a valid basis for going to
court, or the court will not hear the case. The purpose of this is to
prevent abuse of the courts through frivolous lawsuits, suits for
harassment, etc.

In the case of the federal government, suit cannot be brought until
you have exhausted your administrative remedies. This is the general
rule--that is, until you have given the appropriate agencies of the
federal government an opportunity to redress your grievances. This we
have now done. We have now gone to Congress, we have gone to the
Treasury, we have gone to the Justice Department, we have gone to the
General Accounting Office (GAO), and we have gone to the top of this
Administrative Accounting Office, the Comptroller General of the
United States. We have corresponded and we have held meetings, we have
petitioned, we have pressured, we have asked for answers--and we have
received silence, evasions, and half truths. We have given
information, and it has not been used. We have explored every avenue
available to us for more than a year; and, my friends, the FORT KNOX
GOLD SCANDAL has not been cleared up in any way--just the opposite.

To give just one example. There is an official document obtained by us
from the United States Mint with great difficulty some time ago
entitled: "GOLD SHIPMENTS FROM THE UNITED STATES BULLION DEPOSITORY,
FT. KNOX, KENTUCKY, January 1, 1961, to June 30, 1974."

Based on our own strictly confidential information, and with pictures,
we were able recently to ask the following question of the United
States Mint under circumstances in which they were under great
pressure to give us a reply. Our question was, quote:

"What was shipped in the four tractor-trailer loads on January 20,
1965, from Fort Knox to railroad yards across the river to
Jeffersonville, Indiana?"

This shipment does not show, my friends, on the off icial listing I
named a moment ago, yet here is the astonishing answer contained in
the letter from Mrs. Mary Brooks, the Director of the United States
Mint, dated June 19, 1975, and I quote:

"On January 20, 1965, 1,762,381.353-fine ounces of gold from the Fort
Knox Bullion Depository was shipped by way of rail from
Jeffersonville, Indiana, to the United States Assay Office, New York,
New York."

There is no explanation as to why this nearly 2-million-ounce shipment
does not appear on the official listing, but this violent conflict
among their own statements is only typical of the entire Fort Knox
fiasco.

A year ago, the Chairman of the privately-owned Federal Reserve
System, Dr. Arthur Burns, admitted in a letter to Congressman John
Rarick that the assets of the Federal Reserve do not include gold; and
yet, at the same time, official statements of the Federal Reserve did
list gold as a prime asset, and they still do today. This discrepancy
has never been cleared up, Congress taking a ho-hum attitude about it
all. The only concrete result so far is that Congressman Rarick, who
had been very popular with his constituents, was washed out of office
last November with a sea of Rockefeller campaign funds which went to
all of his opponents! It so happens that the aforementioned private
owners of the Federal Reserve System are the Rockefeller interests,
and they react very vigorously whenever anyone dares to poke around at
this keystone of their economic empire.

Yes, the time has come to go to court, and while I must still save my
actual evidence for court, the time has come to let you--the American
people, the jury--on exactly what has been done, and how.

The foundations were laid for the FORT KNOX GOLD SCANDAL during World
War II when extensive hush-hush modifications were made to the Fort
Knox Gold Depository. Originally the Fort Knox Gold Depository
building was designed around a huge vault with two levels, the ground
floor and the basement. One entered the building through the front
entrance you have probably seen often in pictures, passed through a
vestibule, and found himself in a corridor running to left and right.
This same corridor went all the way around the building on all four
sides of the huge vault. To reach the vault door, one would enter the
building at the front entrance, follow the corridor to the right, and
then continue on around the corner and along the right side of the
building. Part way down this corridor one would come to the vault
door, which was on the left or inner side of the corridor. On entering
through the vault door, one found himself in another corridor inside
the vault. Fronting on this corridor were a series of storage
compartments about the size of jail cells (I call them bird cages) but
with solid metal doors with individual locks on them. These cells or
compartments were arranged in a sort of cellblock with the vault
corridor passing all the way around it. That is, one could head off
down this corridor inside the vault, walk around a center cellblock
with compartment doors facing onto the corridor on all four sides, and
finally wind up where he started. There were 20 of these
jail-cell-like storage compartments inside the vault on the first
floor of the vault. There were also stairs with which one could walk
down to the basement level of the vault; and the arrangement at the
basement level was the same--a square cellblock of 20 compartments
fronting on a corridor which went all the way around.

What I have tried to describe so far was the main or Outer Vault,
however it was not where the gold was kept. These small compartments,
40 in all, were for the storage of all sorts of other things--secret
documents, precious metals other than gold, and a variety of other
things.

But these were not where the gold was kept--instead, there was a sort
of vault-within-a-vault known as the "Central Core Vault", which was
reserved strictly for the storage of gold. Access to the Central Core
Vault, which was located centrally and below ground, could only be
obtained from a point at the basement level inside the Outer Vault
structure I have described. Moving gold in and out of the Central Core
Vault was, therefore, a relatively slow and tedious process.

But in the 1942-43 time period, major modifications were made to the
Fort Knox vault structure under the direction of a mechanical engineer
named Stanley Tatom, who was serving as an Army Major at that time. A
rapid retrieval system for the gold was built in the rear of the
Depository building where there are a pair of huge doors into which
trucks can back for loading and unloading.

First, the six bird-cage compartments running along the rear of the
Outer Vault on each floor were deleted. The vault corridors, which had
formerly gone all the way around the cellblock on each floor, were
then walled off where the row of compartments along the rear had been
deleted. Thus the vault corridors no longer went all the way around,
but now formed a "U" configuration with the base of the "U" turned
toward the front of the Depository building. By lopping off the rear
portion of the Outer Vault in this manner, space was created in the
rear to accommodate the rapid retrieval system. In this space, in the
center adjacent to the truck doors, was installed a powerful
screw-type elevator passing from the ground floor down and to the
level of the Central Core Vault into which the elevator gave access.
At the top of the elevator--that is, at the ground level in the rear
of the Depository building, a massive vault door was installed. In
effect, this vault door serves as nothing but a very elaborate
elevator door since the only thing you can enter in, when you open it,
is the elevator which then takes you down to the Central Core Vault
where all gold is supposed to be stored.

Finally, the original access to the Central Core Vault from a location
in the two-level main vault where the compartments are, was deleted.
The building's interior walls and decor were then restored to
something like their original appearance.

But now, thanks to the secret modifications, there is no longer a
vault-within-a-vault arrangement. Instead, there are now two separate
and independent vaults. One is a vault with all the jail-cell-like
compartments in it, which was shown to the visitors last September.
The other vault, which cannot be reached from within the vault the
visitors saw, is the gold vault, the Central Core Vault, which can be
reached only by the elevator in the rear of the building.

The compartments in the vault shown to the visitors were never
intended for storage of gold; and, my friends, what the visitors saw
last September were not gold bars--not even junk gold! It has now been
confirmed to my satisfaction that what was seen by the visitors is a
commodity known as "show gold"--lead bars covered with a layer of gold
that is just thick enough to stand up under handling. This even helps
explain the high alloy content responsible for the strange redness
which many of the visitors last September noticed. Pure gold is
extremely soft, and a thin layer over lead could all too easily be
damaged and reveal the lead underneath. Highly alloyed gold--that is,
impure gold--was therefore used that it would withstand handling. Thus
they saw "junk gold" all right, but it wasn't even junk gold all the
way through!

The visitors of Fort Knox last September of course had no way of
knowing that there are two vaults, and no one told them. They were led
to believe that the vault they entered with all the compartments was
The Vault, and the Treasury had seen to it that none of the invited
visitors were experts on gold, much less on the mysterious legendary
place known as "Fort Knox."

The closest brush that the visitors had with stumbling onto the truth
came when a reporter asked Mrs. Mary Brooks, the Director of the Mint,
why the compartments were numbered in such a curious fashion--1 to 14
on one floor, and 21 to 34 on the other. Mrs.Brooks helpfully replied
that she didn't know. Well, Mary, if you haven't figured it out by
now, I'll tell you. The missing numbers--15 to 20 and 35 to 40--are
those of the cells that were deleted in the secret modifications
during the 1942-43 time period.

After the wartime modifications to Fort Knox were made, over 10 years
were allowed to pass before the next major step in 1954. At that time
a super-secret complete inventory was taken of the Fort Knox gold.
This was not the same as a relatively cursory audit, so-called, of the
gold which was done in 1953. The project in 1954 involved a complete
count with weighing and assay sampling of all the gold there--about
three-quarters of a million 400-ounce bars worth a total of 12-billion
dollars ($12,000,000,000) at that time, and that was at the old price
of $35 per ounce. That's twice as much as the Treasury ever claims to
have now, and even these claims are complete lies. In addition to all
the weighing, counting, and checking against records, the 1954
inventory included the extraction of a plug of gold from every
one-hundredth bar for assaying, and these samples were sent to Assay
Offices all around the country to minimize the chance of any collusion
to falsify the results. This seemingly enormous job was kept
completely secret, and was completed in only nine weeks. All of the
gold was, of course, in the Central Core Vault at that time--none was
in the bird-cage compartments.

The contrast with the so-called GAO audit of the Fort Knox gold last
fall can hardly be overstated. The alleged gold stock in 1974 was only
half as large, and they can only claim to have examined about 20% of
that. Assay samples were only taken from only about every thousandth
bar--they were not plugged but merely small chips were taken which
could be taken from a corner, say, without cutting through into the
lead underneath. All the 99 samples were sent to a single location,
the New York Assay Office, and only 54 of these have ever been stated
to have been returned--with undefined results.

Finally, the results of the alleged 1974 GAO audit--which was
performed, by the way, by 13 Treasury employees and only two GAO
representatives--have never been published. The closest thing to it is
a ridiculous little document printed in February 1975, which presents
no findings of fact concerning the gold and timidly says only "We
believe" the gold is there!

But returning to the 1954 gold inventory, the question arises:

"Why was it a secret? After all, the law requires an annual physical
inventory of the nation's gold reserves."

This law has been generally circumvented and ignor

Well, I guess there is a max cache size. I won't leave you hanging. Here's the rest of it.

Article follows;

But returning to the 1954 gold inventory, the question arises:

"Why was it a secret? After all, the law requires an annual physical
inventory of the nation's gold reserves."

This law has been generally circumvented and ignored; but one would
think that when its requirements were satisfied for once, in 1954, the
fact would have been made public. The reason for the secrecy of the
comprehensive 1954 inventory, my friends, is that its purpose was not
that defined by law. Instead, the Rockefeller interests were simply
taking stock of the American gold reserves which they intended to
start spiriting away a few years later.

In about 1960 after those who had worked on the secret 1954 inventory
were safely gone from Fort Knox, the next step was taken. A system of
record-keeping was set up to allegedly keep track of the gold by means
of special ribbon-like metal seals on the doors of the compartments in
the main vault--not where gold is supposed to be stored at all.

These seals had been in use on these compartments ever since 1937 when
the gold was initially stored at Fort Knox. But gold was never in
those compartments, just other things as I mentioned earlier.
Nevertheless, attention was cleverly shifted to the old Outer Vault
with the compartments, as if that was where the gold was. Seals were
put on doors of compartments with gold alleged to be inside, and these
seals were thereafter checked by the so-called "Annual Settlement
Committees" in lieu of actually opening the locked compartments and
checking the contents. Of course for all any Settlement Committee
thereafter really knew, the compartments could have been empty since
there was no way to see in through the solid door of each compartment.
United States Mint personnel have recently stated, for the record,
that the peephole through which the 1974 Fort Knox visitors peeped
into, an unopened cell was drilled especially for that occasion. Thus
they were at last ready for the looting of America's gold. The
record-keeping system of the United States Mint now reflected only the
status of the compartments in what remained of the original Outer
Vault!

Meanwhile the gold was actually still stored in the completely
independent Central Core Vault, reachable only by means of the
elevator in the rear. And in 1961 the looting began under the cloak of
the London Gold Pool Agreement initiated that year.

Gold began flowing like water out of Fort Knox and the other
Depositories, arousing the concern of Congressman Frank Chelf and
others, but all attempts to stem the tide were brusquely waved aside
by Rockefeller agents within our government. By 1968 this gold
hemorrhage was used as an excuse to set up the two-tier Gold Market in
place of the London Gold Pool. Further details of the recent events
surrounding gold have been given already in my AUDIO BOOK tapes on
"THE COMING DEPRESSION" and the "FORT KNOX GOLD SCANDAL."

So here we are--our economy mortally wounded by a scandal bigger than
"Teapot Dome" and "Watergate" combined, and our government is sitting
on it with all the power in its command!

Our great Justice Department refuses even to examine our evidence
about this biggest theft in history--an act of treason and economic
war on the American people. They have more important things to do, it
seems, like finding ways to disarm the people in violation of the
CONSTITUTION they are supposed to defend. The Treasury Department
continues to defraud, mislead, and lie about their criminal
activities. The General Accounting Office generally refuses to account
for anything about our gold in any meaningful terms. And our elected
representatives, with very few exceptions, have so far found every
excuse in the book to look the other way about the whole thing.
Meanwhile Fort Knox has been completely emptied of its gold, and the
American dollar is about to die, according to Lenin's words.

Therefore, my friends, I continue to appeal to you to make your
collective voices heard and your will felt. I have believed all along
in this fight that the madness that now grips our government can still
be rooted out and our freedom saved; but I am also convinced that only
if you and I do our parts, as citizens, will this happen. As the
toolmaker philosopher Tom Wilson says:

"We, the people, need to collectively shake our elected
representatives like disobedient children and get them representing us
again, instead of the powerful special interests dominated by the
Rockefellers."



On Thu, 24 Dec 1998 04:45:33 -0600, email@domain.com (Rev Tom) wrote:

>
>I don't know if the gold in Fort Knox is there or not. The last time it
>was inventoried was 1953. Since thaen, no one with a camera has been
>allowed to come close to the place. The only way to tell for sure is to
>count the gold, and nobody has been allowed to do that either.
>
>Rev Tom

LONDON (December 24, 1998 1:45 p.m. EST) - Chicago-based Griffin Trading Co. was declared in default by London's LIFFE on Thursday and was said to have gone out of business after a dealer lost more than $8 million in German derivatives.

First the Wizard must admit that he has stolen Gollum's "precious" AGAIN ! I sure wish that Gollum would come and join Aragorn III and the rest of JRRT's offspring at the USAGOLD forum. Here is Gollum's "precious" Study from the Kitco Board. ---- Lots to think about herewithin.

Date: Sat Dec. 26 1998 10:32
Gollum (A Study in Scarlet) ID #43349
Copyright 1998 Gollum/Kitco Inc.
---
"The Dow Jones Industrial average has not only recovered from it's autumn lows, and even for a while in late November surpassed it's July highs."
---

Hereinafter is setforth a "Study" supported with numberous links to online board charts which support the treatise.
The Wiz is sorry that he does not have the knowledge to paste this "Study" to the USAGOLD Board together with the links. Perhaps someone with such abilities would be so kind to do so, after reading the "Study" and concurring in the value of content. Also perhaps one knows how to reach Gollum and invite him to also join us all at the FORUM.

<;-)

Gandalf:
I also noticed Gollum's fine article this morning and thought it worth a repost. I don't know what special knowledge you might�think you lack to post it here; all I did was clean up some of the extra line feeds in the text. The URLs don't come ready to click on like they do at that other site; here we have to do it the old-fashioned way by pasting them inyo the "open" window on our browser.

I would also like to see Gollum join us here. Perhaps appealing to his better nature as "Sme�g�l" would help? Anyway, his "Study in Scarlet" follows:

Date: Sat Dec 26 1998 10:32
Gollum (A Study in Scarlet) ID#43349:
Copyright � 1998 Gollum/Kitco Inc. All rights reserved
The Dow Jones Industrial average has not only recovered from it's early autumn lows, and even for a while in late November surpassed it's July highs.

http://www.bigcharts.com/quickchart/quickchart.asp?symb=26099401&sid=25300

To some this is a bullish sign,

http://www.securitytrader.com/daily/DJ30%203.gif

but a more carefull analysis reveals that all is not as it seems. The rise in overall prices has been much influenced by the inflation of computer/internet technology stocks. Indeed there has been a surge as the tax strategey season has approached. No one wants to take their profits and have to pay gains if they can wait a few more weeks or days and not have pay untill Y2K.

http://www.bigcharts.com/quickchart/quickchart.asp?symb=XCI&sid=565

Meanwhile, due to the rapidly deteriorating global economic situation, as well as tax write off considerations,commodity prices have tumbled while inventories build and forward sold production continues to flood the markets with excess inventories.

http://www.crbindex.com/crbspot/spotcalc.htm

Indeed if we look at a broader based chart of the markets we get a clearer view of the actual situation.

http://www.bigcharts.com/quickchart/quickchart.asp?sid=&o_symb=RUT&symb=RUT&time=12


It might be noted that this chart, while not quite so dramatic does look suspiciously like certain configurations seen in the past.

http://www.lowrisk.com/image/29crash.gif

http://www.lowrisk.com/image/nikkei.gif

Today, of course conditions are somewhat different than in 1929, but not all that much. The markets today are highly influenced by the mutual funds and the inflow of money from retirement accounts. Fund managers, even while themselves at time selling from their personal accounts in anticipation of market down turns, have to keep these funds invested. During the current situation they are putting funds mainly in high cap defensive issue which further distort the indices. Many of them looking for year-end performance are also taking their chances with the "tulip mania" internet issues while hoping to get their profits out after the beginning of the year.

But the funds, having put thier bets on the high flying expensive issues, have just about used up all their dry powder, and will not be as significant a factor as we begin the new year.

http://www.marketgauge.com/charts/cmfcash.htm

I could go on and discuss how foreign flight money and various carry trades had created a "credit bubble" which further inflated equity prices in certain sectors, but we can already see that the current market has just about run out of steam. An examination of broad based indicators show that we are on the verge of significant decline.

http://www.marketgauge.com/charts/cmacd.htm

Note, how each succesive instance of negative sentiment has had a more dramatic impact on price levels, and how with the latest cycle, tax season highs have failed not only to regain mid year highs but have not even regained year ago lows.

Becuase of the commodity situation and the timing of market events, the precious metals have reached a point where they are ready to once again move up, just as the money is retreating from stocks, bonds and the US dollar during the Senate trials

http://www.bigcharts.com/quickchart/quickchart.asp?symb=HUI&sid=16794

http://www.midam.com/ecb/md3dxbh9.htm

The gutters of Wal street will soon flow with red ink.

Recently it was announced that President Clinton had initiated a study into irregularities and "manipulations in the gold market". It was not specified just which "manipulations" and/or irregularities were to be investigated but it occurs to me that the thread introduced to this board by ET on January 24 (Msg ID:1502) would be a very good place to start.

Delving a bit unto the URL supplied by ET I discovered a site maintained by a group of hackers whose research claims to be designed to uncover security weaknesses in both hardware and software and to bring it to public attention via their site. It includes a vast amount of archived materials including something called Radio Free Michigan. Included here are numerous files by someone identified and described by the hacker site as "The Super-Patriot: Tezcat". No info is given as to who Tezcat might be, but his files include such controversial subjects as: George Bush and the Kennedy Assasination (http://www2.l0pht.com/pub/tezcat/Spooks/CIA_and_Bush.txt), pre-impeachment allegations about Clinton, the danger of derivitives to the international financial system as described by Lyndon LaRouche as early as 1994 (http://www2.l0pht.com/pub/tezcat/Financial/Collapse.txt), and many other provoking topics including treatises on the subject of common law vs. political law that would warm the heart of Mozel. Each essay includes a standard invitation to forward similar materials from readers for archiving. In this way, it appears that a vast amount of material has been gathered, although most of it seems to have been posted in 1996. (Only one or two files were seen dating from 1998).

Included in this material are written transcripts of a series of audio tapes recorded between 1975 and 1982 by Dr. Peter D. Beter. Beter is presented as a Washing-based lawyer and insider with a penetrating and non-conforming point of view. It is mentioned that his work included service on the US Supreme Court but I do not recognize his name. Perhaps it was meant that he argued cases before the Court. Dr. Beter died in 1987 but his regularly produced audio tapes seem to have functioned as a newsletter dealing with political issues and behind-the-scenes analysis of public events. The transcripts are extensive and include 80 numbered issues. ET's excerpt is from episode N� 2.

From the overview and table of contents, Dr. Beter appears to have interpretted current events of the time from a highly individualistic point of view that included several notable themes. One of these was an unmistakeable bias against the Rockefellers whom he associated with the Bolsheviks, the Rothchilds and the New World Order movement. Another seemed designed to take advantage of public widespread fear of the Soviet Union. Yet another was an ongoing interest in the gold in Fort Knox. He refers often to the loss of value in the dollar which he associates (in accordance with popular thinking of the time) with its dissassociation with gold and obvious loss of value as reflected in the price inflation raging at the time. Of course, many events appear to have moved in other directions since then. The dollar strengthened (although ANOTHER confirms Beter's view of the time when he notes that many expected the dollar to disolve as early as the late 1980s and now seems to be poised for events to overtake as Beter predicted), the Rockefellers faded from political prominence and the West won the cold war. Some of the events he claims to describe have never become public knowledge, such as a Russian military victory resulting in the destruction of the Americans' secret military base on the moon, and another US/Soviet military engagement that was interpretted at the time as a UFO incident over St. Petersburg. He describes the then-classified stealth technology that later became public knowledge during the Gulf War and claims that, in addition to rendering planes invisible to radar, it made them invisible to normal sight and to laser and particle beam weapons.

But for our purposes, it is his preoccupation with the gold missing from Fort Knox that most merits our attention. His claims seem compelling and include such detail as his claim that several truckloads of gold were admitted in writing by the director of the National Depository as having been withdrawn from the depository yet never included in offical logs. Beter and his followers managed to exert enough pressure on various officials and Congressional leaders to have generated considerable response in the form of replies (mostly conflicting) and even managed to get a tour of the facility. He offers proof that the depository was secretly altered before that official tour (that included several Congressmen) to conceal the existence of the basement repository, which formerly had been where the bulk of the national gold had been stored, and claims that the bars observed by the rather informal formal tour were fakes. Supposedly, no complete and credible inventory of the gold has been done since the early 1950s, a fact, which if true, would seem highly suspect. He also offers the incredible theory that the CIA at one point used the basement vault to store illegal stolen plutonium in unsuitable containers that began leaking, thereby contaminating the facility. At one point, gold shipped to London was even returned because of radioactivity.

The URL which introduces all this material is:

http://www.l0pht.com/pub/tezcat/Beter/0BeterIntro.txt

The adventerous among us might be well-advised to look into it. If it seems interesting, it could possibly serve as the basis for bringing pressure to bear on Congress to demand a proper and long-overdue inventory and accounting of the gold in Fort Knox. It may well be that the Clinton administration's rumblings about an investigation into irregularities in the gold market are hints in this direction. They might just as well be the first suggestions of a move to further cover up and/or deflect attention away from the matter. In any case, we at USAGold have the interest to pursue it, even if only to satisfy our curosity. The gold in Fort Knox could well become an issue of international import as the gold-based Euro becomes reality and international interest in gold spills over into the far East and the proposed Dinar of the Moslim world.

I know I'm a day late, but hope everyone's Christmas was great. My New Year's Resolution is to post more!

PH;

"Recently it was announced that President Clinton had initiated a study into irregularities and
"manipulations in the gold market". It was not specified just which "manipulations" and/or irregularities
were to be investigated but it occurs to me that the thread introduced to this board by ET on January
24 (Msg ID:1502) would be a very good place to start".

Yes, it goes to the heart of the matter. If the dollar is to compete with the Euro, it appears the amount of gold that will back the dollar should be made known.

PH;

"The gold in Fort Knox could well become an issue of international import as the gold-based
Euro becomes reality and international interest in gold spills over into the far East and the proposed
Dinar of the Moslim world".

Well, you would think so. I don't know whether we will see an 'official' accounting, but the markets will likely tell the tale. It's getting interesting!

ET

I'm not much of a writer, more of an observer trying to think my way through these complex issues.I also may not be aware of all the information I need to know, but this forum is helping on that account. I just had to respond to "ET"'s 12/24 post. It was intriguing; I was glued to the screen. It seems to fit in with other information I've seen on the BIS, CFR, and the trilateralists.Then again it could be just an over active imagination.I have noticed other trends which seem to be a repeat of history, including: the re-emergence of the desire for tariffs(steel,bananas),a TV report on the possibility of another dust bowl, margin buying of stocks(internet type) and speculative derivative trading,the Dow trading at an all time high then a much publicized correction and a new high.This is similar to the 1920's and 1930's.That was the begining of the end for the British Empire and the start of the US "empire".Will the Euro precipitate a change like that and Europe will succed th US or will it be a catalyst for an Asian recovery to succeed the US as the dominant force.

Thanks for responding. It is a bizarre world. You should read Davidson and Rees-Mogg's, 'Blood in the Streets'. They concur with you about the British Empire's downfall being the cause of many problems in the first half of this century. They also agree that it was the US in 1946 that restored 'stability'. Great book, and I highly recommend it.

ET

Thanks ET I haven't read "Blood In The Streets", but I have read "The Great Reckoning" and "The Sovereign Individual".I found them to be very informative , historical and forward looking.Major events are hard to pin down timewise but they seem to identify the trend.

The addition of one more friendly view is a positive addition to broaden the knowledge of all. WELCOME !
<;-)

I to have been pondering for two days ET's post of 12\24,and how to find out the truth. What I came up with,because this is a political issue,and Gold issue,usually the two don't mix at all,is: Could we here at the forum or someone we know with influence in the highest places get soon to be impeached and publically disgraced,CLINTON HIMSELF to check the valadity of the 12\24 post.If the story is indeed true what better way to redeem his own status,he also has nothing to lose. Trouble is will main stream beleive him no matter what he and his panel uncover.

If the post is indeed true this is indeed the earth shaking event that will not only make the price of Gold skyrocket it would change history itself,once the public accepts it as a fact.

I'm off to the South Pacific for two short weeks vacation trying hard to figure exchange rates in unlisted currencies,without the aid of a computer,oh how I wish we were on a world Gold standed.

............beesting

The conservative thinkers feel that Y2K will be a " bump in the road". Computers will crash and systems freeze up; but after a short while, everything will be up and running again. Simultaneously, we have a global economic system teetering on the brink of overladen debt.
I don't think I've been alone in stating that with improved monetary discipline and lowered costs of debt service, the Global Village could produce its way out of the mess and absorb the excesses. However, if the means of production are crippled by Y2K, then supplies don't flow, machines don't go, and earnings cease to be created.

In a system built out of bricks of debt, a crash in earnings triggers DEFAULT. The financial dominos will go down the line, and that "known or unknown event" referred to by SteveH, will have occurred. The debt laden system [if it is still intact], will have been stretched to the limit by the cash hoarding of the Y2K preparations, and the collapse will be upon us!

Was it my equipment, or did posts #1499-#1501 on 12/24 PM get knocked out for a few days by the large "forward" posting of #1502/03? Michael! � Would it work to have a "go to" page for commentary not specifically created by Forum posters ?

I also thought I saw the same phenomena occur on the 12/20 AM session, when the large Gary North item was put up. I am now wondering if post #1441 got lost for awhile, as I had some queries there to which I hoped I would get some response. I'm taking the liberty of re-posting it, with the question emphasized by asterisks.

THE GOLDEN RULE
I think that we on the Forum have come to agree that: 1) to achieve a Gold Standard, the metal must be revalued, and 2) regardless of what is holding the price of gold down, the media is not an impartial observer.

*If the price is revalued upward, however, where does the mining of new gold fit in? Would it be a windfall for the mine owners, or would the gold nations have some form of price control? Otherwise what is to prevent the mines from undercutting the declared rate and debasing the currency? If there were price control, what about private ownership?*

Even if there is no confiscation, it could be made criminal to exchange gold at more than a legally fixed rate. This of course would upset the owners of the precious metals, and elected officials might be turned out of office. But Warren Buffet with all his silver has only one vote, and that Tycoon who just bought 160 tons of gold, has his one vote. However each of us who have only a few coins also has one vote, so it comes down to how many of us there are.

If the majority of people don't hold any gold, there will not be enough outcry to prevent confiscation or control. Therefore there is another very big reason to have the media disparage the ownership of gold! Not just to keep the price down, but to prevent the ownership of gold from becoming widespread. If Goldbugs are a minority it won't be the voting masses' ox that is being gored.

So, every convert we win over to the logic and need for survival in owning gold strengthens the citizenry in maintaining their financial independence. Remember, the secular version of the golden rule!

WHOEVER HAS THE GOLD MAKES THE RULES!

P.S. � The corollary of this Golden Rule may be more applicable these days. "Whoever Makes The Rules, Gets The Gold!"

Today's readings get me this:

Funds didn't sell in 98' to avoid capital gains. Will sell in new year, maybe. Good posts this weekend all.

Last 282.2
Bid 282.2 vol 1
Ask 282.5 VOL 25
Open 282.6
High 282.7
Low 282.0
---
Looks as if there is lots of OVERHEAD resistance.
<;-)

Euro intro starts Jan 4, 1999.

The Independent Treasury Act of 1921 suspended the de jure (meaning by right or legal establishment) Treasury Department of the United States government. Our Congress turned the treasury department over to a private corporation, the Federal Reserve and their agents. The ownership of the Federal Reserve System, a very well kept secret from the American Citizen, is held by these banking interests:

Rothschild Bank of London
Rothschild Bank of Berlin
Warburg Bank of Hamburg
Warburg Bank of Amsterdam
Lazard Brothers of Paris
Israel Moses Seif Banks of Italy
Chase Manhattan Bank of New York
Goldman, Sachs of New York
Lehman Brothers of New York
Kuhn Loeb Bank of New York

Thanks SteveH
for the sketchy info on the US Treasury and the Federal Reserve. I wonder how that figures in the question that was raised here this weekend about the US gold that was at one time stored in Fort Knox.

It seems to me that I have heard mentioned that the US Government gold is no longer stored at Fort Knox but rather is stored at the NY Federal Reserve (along with the national gold of many other countries).

Yet there seems to be considerable confusion about the ownership (if indeed even about the very existence) of the United States' national gold reserves. Since, as you say, the Federal Reserve is a private corporation owned by the entities you specify, if they also own the United States' national gold reserves, that would suggest that it is no longer the property of the American people. As the world moves towards an international gold standard, these questions become fundemental.

For the sake of our gold education, can you (or anyone) address these basic questions? After all, they deal with facts that should be common knowledge among all citizens.

Just over one week ago we had a conversation here about the mainstream press' antipathy for gold and the reasons for it. As one post after another came on the board, one theme seemed to dominate -- if the press was anti-gold, it was acting in behalf of an outside source that had a vested interest in controlling the price of gold. Most of those who posted here did not take the knowledge of an effort to restrain the price of gold as a reason to throw in the towel on the yellow metal. But that was not the case universally. Others elsewhere have begun to develop a logically inferior argument that because very powerful institutions wish to control the gold price that the advancement of that agenda cannot be overcome. Hence the price of gold is destined to be mired at $300 until the end of time. This position is little more than the old "you can't fight city hall" argument, or pejoratively, an attempt to advance the spectre of an all-powerful government, or central bank, or conpiratorial group, (or whatever) unrestrained by the free market. This simply is not the case. Though socialism (including Marxism and Nazism and its lesser cousins falling under the umbrella of "market socialism"), in most of its manifestations attempts to discredit, or control the forces of nature or God (depending upon your belief system), history has told a different story. I will provide one example, although if you were to take this case to the von Mises Society they would provide many more. It is an example near and dear to our hearts.

Beginning in the mid 1960s, the United States and Great Britain formed the London Gold Pool. It's sole mission was to keep the price of gold at $35. Thousands of tons of gold were expended to maintain this fictitious price including 12,000 of the 20,000 tons of gold that were held at Fort Knox. The U.S. and Great Britain threw in the towel in the late 1960s, Nixon devalued the dollar in the early 1970s vis a vis gold, and free currency exchange rates were established. By the 1973, the price of gold had risen nearly six-fold to $200; by 1979 it had risen nearly 25 times the London Gold Pool $35 figure making up in one decade for the "unnnatural" restraints of the previous decade.

We are in a similar period today. The London Gold Pool was an overt attempt to control the price of gold. More and more, a whole new group of analysts are beginning to realize that the past nearly 15 years have encompassed a similar attempt to control the price of gold. This time it has been easier because the whole exercise has for the most part occurred covertly (and more affordably) through the use of derivative and leasing packages of which the public has only recently become fully aware. But the victory for the other side has been pyrrhic for all they have done is replace the sale of hard yellow metal with paper instruments. The hard metal must still move and when it does, we will have our day of reckoning.

The free market will have its way with respect to the price of gold and if you listen carefully to what Alan Greenspan has had to say about gold in recent years, you will detect the fears of a central banker who believes that precisely to be the case. Ironically, he finds himself in the personally untenable position of being one of gold's enemies -- against his better nature. (That is worth a Shakepearian tragedy in itself.)

So it is not always that wisdom comes with knowledge. Sometimes a little knowledge is a dangerous thing. Those who feel that gold cannot break loose from its "all-powerful" opponents might be well served to re-acquaint themselves with the Greek classics and the meaning of the word "hubris" and the fact that its consequences are usually assumed by the crowned head. In other words, we all answer to a higher order.

In the meantime, if you accept the rationale above, the only remedy, since you cannot know when this paper game will go up in flames, is to convert your own paper promise to hard metal before that day comes.

Well put Mike. If the powers that be are making settlement of gold transactions with cash in lieu of physical, as seems to be the case, this charade will continue for a long time. I just hope that we can outlast them before we're all dead or broke.

Happy New Year,

Pete